Hello and welcome to the Ranger Energy Services Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation , there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference is being recorded today. I would now like to hand the call to Joe Meath, Vice President of Finance. Please go ahead.

Thank you and welcome to Ranger Energy Services Third Quarter 2024 Results Conference Call. Ranger has issued a press release summarizing operating and financial results for the three months ended September 30th, 2024. This press release, together with accompanying presentation materials are available in the Investor Relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measurements may be disclosed during this call. A full reconciliation of GAAP to non-GAAP measurements are available in our latest quarterly earnings release and conference call presentation. With that, I would now like to turn the conference call over to Stuart Bodden, Ranger's CEO; and Melissa Cougle, Ranger's CFO for their prepared remarks.

Thank you, and good morning, everyone. We are pleased to welcome you to our third quarter 2024 earnings conference call. This quarter's performance continues to demonstrate Ranger's differentiated business model that enables strong performance no matter macro conditions. Drilling rig count declines, completion activity decreases and gas market pressure have all contributed to challenging market conditions since early in 2023. Despite these conditions, Ranger's financial performance has been markedly more resilient than the broader OFS complex. And we have once again validated our production-focused business model and set a new high watermark for some of our service lines. Our High Specification Rig segment continues to execute at a very high level, setting another quarterly record for revenue and adjusted EBITDA. Ancillary Services also achieved near-record results with our coil tubing business posting a new quarterly revenue record and our Torrent brand showing exceptional growth. Encouragingly, we saw positive rebound in our Wireline segment, giving us an indication of the future earnings potential of the business. These results are a testament to our teams and crews in the field. Ranger was able to deliver the second best quarterly results in our company's history with sales of $153 million and adjusted EBITDA coming in at $25.1 million. Adding a few details around our segments, in our High Specification Rigs business, we achieved another record quarter with revenues of $86.7 million and adjusted EBITDA of $19.2 million, resulting in gross margins of 22%. This performance highlights our scale and targeted basins and the investments we have made in our partnerships with core customers. Over the past year, we have worked diligently to showcase Ranger's commitment to quality assets and personnel at every well site, partnering closely with our customers and making strategic investments alongside of them as well. The results of those investments…

Good morning, everyone, and thank you for joining us today to discuss Ranger's third quarter 2024 financial results. We take great pride in the progress we have made as an organization and particularly in our differentiated performance. While we have faced our share of challenges, our trajectory has been undeniably positive. Our slow and steady approach has allowed us to build a business that delivers consistent, resilient performance with notably less impact from broader market conditions. When we have felt those effects, we have rallied together as a team and worked to streamline the organization according to market conditions and tweak strategy as appropriate. Starting with the top line, revenue for the third quarter was $153 million, an 11% increase over the second quarter and down 7% year-over-year due to Wireline completion activity declines. In fact, every service line in the company showed year-over-year growth in the third quarter, excluding Wireline completions. Net income for the quarter was $8.7 million, resulting in earnings per share of $0.39 which represents an improvement of 86% from the prior quarter, representing both our improved performance and the accretive impact of our share repurchase program. Cost of services for the quarter was $122 million, representing 80% of revenue. This is a 200 basis point improvement from both the previous quarter and the prior year period, reflecting the operating leverage we achieved by effectively managing white space on our calendar, capitalizing on favorable summer weather conditions and longer days that optimize utilization, while also closely controlling operating costs. Ranger is operating more efficiently than ever, focusing on the highest quality service lines, customers and assets. Adjusted EBITDA for the quarter was $25.1 million, a 20% increase from $21 million in the second quarter and a 5% increase over the prior year period of $24 million.…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Don Crist with Johnson Rice. Please go ahead.

Good morning, guys. How are you all this morning?

Hey, we're good.

Good.

Good morning, Don. How are you?

Doing well. Stuart, you touched on this in your opening comments, but the theme coming out of this quarter for all the OFS guys has been industry consolidation and the slowdown that they've experienced. You all have really bucked that trend. I know you touched on it in your opening comments, but can you give us a little bit more details of around what you all are doing to actually grow market share in a market that's actually slowing a little bit?

Sure. Thanks for the question, Don. I think there's a couple of things that I would highlight. I mean, one is, as I mentioned in my remarks, the consolidation on the A&P side has been a net benefit to us. We have and through our investments have spent a lot of time really trying to partner with the best customers. And as we've done that over the last several years, that's really benefited us, again, because the consolidation has helped us and has tended to give us more potential work. I think the other thing is if you look at some of the other service lines and the broader OFS complex is things like fueling efficiencies and frac efficiencies really hit them pretty hard, but because of our production focus, it hits us a lot less hard. And I think that's also helped us cut the trend quite a bit as well.

I appreciate that. And obviously, fourth quarter is going to slow as normal with seasonality and weather. But can you touch on '25 and what gives you confidence today that you should see growth next year? I mean is it more P&A work or is it just the total addressable market for workovers, et cetera, growing in the '25 that gives you confidence that you'll see growth next year?

I think it's really across the board. And if you start off with the well service space, our High Spec Rig space, again, I think just back on our discussions with our customers, we have a lot of confidence going into the year. But I think that's really across all the service lines, right? As Melissa touched on, we feel like we've probably hopefully seen the bottom in Wireline. We think that as you move into spring, that will really start to improve as well. And then in Ancillary, P&A has been strong. The coil has been strong. Torrent has got nice tailwinds behind it. So it's not really one thing. I think it's multiple things. But again, I think, the core is based on our conversations with our customers. We have a lot of confidence that we'll see some modest growth next year.

I appreciate that as well. And just one further one for me. I know, Charlie has been on the Board for a long time. Is there anything else around his stepping down that you'd like to highlight?

Well, I appreciate the question. The first thing I would just say is that when I reiterate my appreciation for or our appreciation for Charlie and the CSL organization, they've done with the organization since the Actio in 2014. They've really been instrumental in kind of getting where we are today. We maintain a good relationship with them. Melissa and I are going to be in Boston later this week to talk about the -- there's a case harder business case study on the Ranger IPO that's going to be there. Regarding his shares, as you know, as you probably recall, Don, CSL has agreed not to sell any stock until the end of '24. Beyond that, we don't really know of any specific plans that he has or CSL has. We'll obviously maintain a relationship with them and obviously try to be supportive down the road when we can be, but we do not know of any specific plans right now.

I appreciate the color. I'll jump back in queue. Thanks.

Thanks, Don.

Thank you. The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Thanks. Stuart or Melissa, you all highlighted the margin improvement in the quarter compared to pre-pandemic. Can you talk about any specific areas going forward where you think you can further increase margins, and then as a follow-up to that, in a fragmented industry, are there certain acquisition opportunities that you think could present themselves that will be margin accretive and support -- further support your capital return to shareholder plans?

Sure. Thanks for the question, Jeff. I'll -- why don't I -- I'll touch on the M&A and I think Melissa has a chance to about some of the margin improvement things we're working on. On the M&A front, we continue to be believers that M&A would benefit the company. That's part of the reasons that we maintained a very conservative balance sheet. We think it gives us a lot of optionality. We have been in a number of discussions. There's still just a bit outspread is what we've been finding. We are again that's -- it doesn't mean we're not talking to a lot of folks. We do think there's some attractive opportunities for the company that would make both companies stronger on the back of M&A, but again, right now, the bid ask has been a bit of an issue.

Yes. And maybe on the internal side, I guess, I'll just say, I think it's -- I use the term slow and steady whenever I made my comments and I think that's really how we think about further margin improvement. Further revenue dollars and particularly last year, margins came under a little bit of pressure because we talk a lot about white space. When we have an opportunity to manage our calendar better, we can really plan our business better and sort of optimize labor and optimize a lot of our expenditure profile. And as we look forward in the future, barring consolidation, which would bring about, we could scale up facilities a lot better and bring synergies in that way. I think on standalone basis, we would see incrementals really from operational efficiencies. So we're sort of just continuing to chip away at the edges in terms of well site planning and things like that, would probably yield some results. We also are seeing some of our other service lines that are growing. We mentioned Torrent, again, very small, but those margins are just generally higher and so we're getting better fall-through on those as well. So everything is helping a little bit, but I don't think we're expecting huge differentiation in terms of margin until we probably look at getting another deal under us. Thanks for your question.

Thank you.

Thank you.

The next question comes from John Daniel with Daniel Energy Partners. Please go ahead.

Hi all. Thanks for including me.

Hey, John.

You just touched on this in the prepared remarks, I missed it, so I apologize. But as you look to '25, where would you most likely allocate growth CapEx?

So, right now, when we look at '25, and it really goes back to our biggest customers and we touched on it, if you kind of look at our growth CapEx even this year, there were some in coiled, but a lot was worth additional equipment around our well service rigs on the well site. And we think that, that will likely continue as well next year. What we're finding John is the biggest customers don't just want the well service rigs, but they want to complete packages around that. They can include pipe handlers and power swivels and pumps, et cetera. So I think most of it would likely be around that because that's where we see the biggest demand from our customers.

Okay. Are there any lead time issues associated with this product at this stage?

There are. So you've touched on something that we're debating a lot right now at this moment. There are some issues depending on what the equipment is, some things have kind of six plus months of lead times. So you do have to be pretty thoughtful about when you want the equipment to show up to marry up with additional rig deployments.

Okay. That's all I got. Thanks for including me.

All right. Thanks, John.

This concludes our question-and-answer session. I would now like to turn back to management for any closing remarks.

Thanks, operator. Thanks, everyone, for joining the call today. I appreciate your continued interest in Ranger and we will be reaching out to many of our investors shortly and we look forward to speaking with you. Have a good day, everybody.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.