Welcome to the Q3 2018 Frank's International N.V. Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. And please note the conference is being recorded. I will now turn the call over to Blake Holcomb.

Thanks, John. Good morning, everyone, and welcome to the Frank's International conference call to discuss the third quarter 2018 earnings. I'm Blake Holcomb, Director of Finance and Investor Relations. For today's call, we have pre-recorded prepared comments from Mike Kearney, Chairman, President and Chief Executive Officer; and Kyle McClure, Senior Vice President and Chief Financial Officer. Mike will not be joining us for the Q&A portion of today's call, as his wife had surgery yesterday and he's understandably wanting to be there with her today. Joining Kyle for the Q&A portion of today's call will be Steve Russell, President of Tubular Running Services, and Scott McCurdy, President of Blackhawk Specialty Tools. A presentation has been posted on our website that we will refer to throughout this call. If you like to view this presentation, please go to the Investors section of our website at franksinternational.com. Before we begin commenting on our third quarter 2018 results, there are a few legal items we would like to cover beginning on slide 2. First, remarks and answers to questions by company representatives on today's call may refer to or contain forward-looking statements. Such remarks or answers are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date or as different as of the date specified. The company assumes no responsibility to update any forward-looking statements as of any future date. The company has included in its SEC filings cautionary language, identifying important factors that could cause actual results to be materially different from those set forth in any forward-looking statements. A more complete discussion of these risks is included in the company's SEC filings which may be accessed on the SEC's website or on our website at franksinternational.com. There, you may also access both the third quarter 2018 earnings press release and a replay of this call. Frank's International uses its website as a channel for distribution of material company information. Such information is routinely posted and accessible in the Investor Relations section. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in the third quarter 2018 earnings release, which was issued by the company earlier today. We will now play Mike and Kyle's pre-recorded commentary and then move to Q&A.

Thank you, Blake. We appreciate everyone joining us today for the call. Beginning on slide 4, I will go over some of the key drivers of our third quarter results. On our last earnings call, we discussed our expectations of lower third quarter revenue, primarily due to the completion of a number of international projects during the second quarter and operational changes in customer schedules. The slight decline we saw on our top line results was actually better than we had anticipated. But more importantly, we grew sequential adjusted EBITDA from the second quarter. Adjusted EBITDA for this year's third quarter was the highest level we've seen since the first quarter of 2016. A lot of work has been done within the organization to improve the company's financial performance. I want to once again thank our employees for their dedication, hard work and diligence through these challenging times. The main driver of our growth in adjusted EBITDA was our U.S. Services segment. Revenue for this segment increased 9% from the second quarter due to strength in both our onshore and offshore business. As a reminder, this segment also includes corporate G&A where we saw important cost reductions from the second quarter. U.S. onshore TRS continued to benefit from increased activity and higher pricing. We also saw growth in the Gulf of Mexico through increased market share as we displaced a competitor on two rigs during the quarter. Results for our International Services business were impacted by the completion of certain projects in Canada, Latin America, Asia Pacific and Africa, as well as a decline in ad-hoc call out work. This impact was partially offset by new projects in Africa and Europe. Our Blackhawk segment saw continued growth in revenue and margins for the third quarter, driven by record product and…

Thanks, Mike. Let's go ahead and jump into segment results on slide 6, starting first with our International Services segment. International Services revenue in the third quarter was down roughly $5 million or 9% sequentially to approximately $54 million. The decrease can be attributed to revenue slowdowns in Latin America, Canada and Africa as services on a number of projects completed during the quarter. Partially offsetting the sequential revenue decline was the commencement of new projects, primarily in Europe. Adjusted EBITDA for International Services in the third quarter was $7.8 million, down roughly $6 million from the second quarter. Adjusted EBITDA was impacted by the previously announced completion of projects during the second quarter. In general, the International segment performed about how we expected in the quarter. I would add, however, that this segment will likely be back closer to Q2 levels in the fourth quarter as new work on in Europe and Africa will materialize; as well, I would offer that international offshore markets heading into 2019 are poised for a nice recovery, specifically in Africa, Europe and South America. We continue to see tendering activity build to a level we have not seen in many years in each geographies. Turning to U.S. Services on slide 7. Third quarter revenue increased 9% to just over $38 million. Third quarter U.S. offshore revenue exceeded our expectations, up roughly 9% sequentially. The growth was due to market share gains and a move to a more completions-based work in the Gulf of Mexico. The U.S. onshore business also grew revenue during the quarter, rising a little more than 9% due to increased activity and improved pricing. This marks the ninth consecutive quarter the U.S. onshore business saw growth. Adjusted EBITDA for U.S. Services in the third quarter was a loss of $0.8…

Thank you. We'll now begin the question-and-answer session. And we do have a question from Ian Macpherson from Simmons.

Hey. Thanks. Good morning, everyone. I wanted to ask on Blackhawk. It seems like the international growth story there is clicking very well. How much of your first nine month's revenues in Blackhawk this year are now from international?

Sure. I'd say – how much are now from international, I'd say, this quarter, we're looking at kind of a low 20%. That's gone up over the course of the year. On average, probably 17-ish percent for the nine months.

Got it. Okay. And so I assume you're still projecting outsized growth for Blackhawk internationally compared to North America for 2019 as well?

I would say for 2019, I would say as a percentage, we certainly see the highest growth coming from international markets. I think Gulf of Mexico we see relatively flattish, and then we see some pretty sizable growth still from U.S. land as well.

Got it. Thank you. Then I just wanted to ask about the revolver. Obviously, you've got plenty of cash in the balance sheet already. So maybe you can talk about your intentions or aspirations for that expanded liquidity and what types of things you might have in your crosshairs in terms of expanding the technology portfolio?

Yeah, sure. So, I think we're obviously always in the market screening deals to see what's out there. I think putting the revolver in place we had one expire in August of this year. It's just a good practice financially for us. We've still got $215 million (20:36) on the balance sheet. But feel like just having that out there to give us some financial flexibility as, obviously, we're screening through various deals from time to time just to make sure we're not having to put that in place the last second, just the additional flexibility for us.

Okay. Understood. Well, look, good results and outlook. Congrats there and, Mike, best to you and the wife in recovery. Thanks.

Thanks, Ian.

And we have a question from Brad Handler from Jefferies.

Thanks. Good morning, guys.

Good morning, Brad.

If you could please just speak to the third quarter results in U.S. Services, maybe get another layer in. It was a very impressive profit improvement. It sounds like it's a little bit of kind of all the boxes being checked. But if you could help us out a little bit perhaps just how much was G&A improvement perhaps, so we could start to think about kind of the ongoing incremental margins, which still seem like they were very strong.

Right. So, this is Kyle. I'll take the first part of this question. I'll let Steve kind of fill in some of the color commentary that's going on in the market. I think from a top line standpoint, we obviously saw the mix in the Gulf of Mexico have a nice tailwind in the quarter, and got on a couple of new rigs and more of a completions-based work. (21:59) incremental margin flow through. The other half of the coin here is really on the G&A side. The segment absorbs the large majority of our, call it, $37.5 million in the quarter, G&A fits in this particular segment, and that was down substantially in the quarter as well as our cost-reduction initiatives continue to work their way through the P&L. And I'll let Steve kind of take you through some of the color commentary on U.S. land, as well as Gulf of Mexico.

Yeah. Good morning, Brad. So I think on U.S. land, we've had some market share gains over the last few quarters, and I'd also seen some pricing leverage in the market. Now, going forward, I'm always nervous to give guidance on U.S. land in Q4 with the holiday periods and the weather and whatnot. But we're still seeing robust demand for our services in the underlying market. I think in the Gulf, again, we've seen some market share gains during Q2 and Q3, and they're pretty robust from a contractual perspective. To reiterate Scott's comments earlier, I would say the Gulf is looking sort of flattish activity year-on-year. So I'd think we'll be more in a sort of a hold and sustain mode in the Gulf rather than continue growth going forward.

Okay. Fair enough. And I appreciate the extra color. But if I dig into both of those ideas a little bit, I guess we have certainly seen in other companies as well other businesses there can be a mix shift quarter-to-quarter in terms of what the rigs are focusing on in the aggregate. But would you have us think that this was perhaps an exceptionally favorable quarter skewed to the completion side and therefore there is risk at just the underlying activity in the Gulf of Mexico? You're on the same rigs but the underlying activity quarter-to-quarter can shift pretty meaningfully, and we've done like double-digit percentage kind of ships up and down, or is that much more muted than that when we're talking about hold?

Yeah, Brad. I mean, there is some movement within the Gulf depending on whether the rigs are in completion or drilling mode. I wouldn't characterize it as double digit, so less than that generally.

Okay. All right. That's helpful. And can we assume that – you're not suggesting there is – some of the pricing gains you've had, if I shift to the U.S. land side, some of the pricing gains you've had, is there any reason to think that that falls under pressure or that gets challenged as maybe competition tries to sort of claw back share or any concerns you might have in terms of holding the pricing gains you've been able to realize here recently?

Well, in the short term, we're not seeing huge pressure on that. Obviously, we're watching particular basins and specifically the Permian activity levels going forward and we will adjust accordingly. But right now, we're not seeing that pressure at this point.

Okay. That's helpful. And then I just want to make sure on the G&A progress, I heard your comments correctly. Sometimes you type away and you don't always hear everything. There's more progress to be made, you think, by the exit of the fourth quarter, right, so we might, all else equal, expect to see some continued improvement in the – what is – are in for G&A line in the fourth quarter and then on into 2019, correct?

Yeah. That's the expectation here internally. We've gone through a number of efforts internally throughout the year to kind of contain that cost either just sort of being from an attrition standpoint, reduction standpoint. We're now at a point where it's no longer that we're doing reductions. It's more of a sort of concerted effort to control that cost, either through folks leave the company. We're not going to backfill positions in certain cases and we've got I think a pretty good handle on at this point, whether it be professional services or headcounts. So, I think that would continue to be going down from this point would be our expectation.

Okay, very good. All right. Well, I've asked my more than my fair share. I'll turn it back, but thanks for the answers.

Thank you. And I have no further questions.

Okay. Well, it looks like that concludes the Q&A portion of today's call. Thanks everyone for joining. Have a great rest of your day and get out and vote. Take care.