Welcome to the Second Quarter 2019 Frank's International N.V. Earnings Conference Call. My name is Sylvia and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduict a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Erin Fazio. Erin you may begin.

Good morning and welcome to the Frank's International conference call to discuss second quarter 2019 earnings. I'm Erin Fazio, Director of Finance and Investor Relations. Turning to slide 2, as speakers on today's call we have Mike Kearney, Chairman President, and Chief Executive Officer; and Melissa Cougle, Senior Vice President and Chief Financial Officer. Joining Mike and Melissa for the Q&A portion of today's call will be Steve Russell, President of Tubular Running Services; Nigel Lakey, President of Tubulars; and Scott McCurdy, President of Cementing Equipment. A presentation has been posted on our website that we will refer to throughout this call. If you'd like to view this presentation, please go to the Investors section of our website at franksinternational.com. On today's call, Mike will take you through an overview of this quarter and certain technology highlights. Melissa will then review the financial performance of the quarter and we'll close with a question-and-answer session. Before we begin commenting on our second quarter 2019 results, there are a few legal items that we'd like to cover beginning on slide 3. 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 if 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. 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 second quarter 2019 earnings release which was issued by the company earlier today. I will now turn the call over to Mike.

Thank you, Erin. We appreciate everyone joining us today for the call. Frank's excellent second quarter results highlight our differentiated market position which has driven both top and bottom-line improvements. We are seeing increased customer spending in key markets and are continuing to experience growth through market share gains and improved pricing. The company's focus on customer service and developing industry-leading technology has been key to improving our financial results. Turning to slide 4 and the summary of our results, in the second quarter, we generated $156 million of revenue which was up 18% from the second quarter of 2018 and up 8% sequentially. Adjusted EBITDA was $17 million in Q2 and $27 million for the first half of the year, demonstrating a first half year-over-year incremental margin of 34%. In the second quarter, we generated positive free cash flow for the first time since the third quarter of 2017. We are dedicated to entering the market recoveries in a position to improve returns on capital and optimize free cash flow. Now, I'd like to review some of our segment and technology highlights in the quarter. Turning to slide 5, the TRS segment's second quarter revenue increased 16% from the prior year and 9% from the prior quarter. Increasing customer activity in key markets such as West Africa, the U.S. Gulf of Mexico, the Caribbean, and Asia-Pacific drove our top line improvement. It is also worth noting that the second quarter was the 12th consecutive quarter of growth in the U.S. land market for the TRS business. This was achieved despite the recent decline in rig counts. Our technology accomplishments in the TRS business were noteworthy this quarter. We were awarded the 2019 Hart’s E&P Meritorious Engineering Award in recognition of the TRS patented Collar Load Support System. This technology…

Thanks, Mike. It is an honor and pleasure to have joined the Frank's team. My first two months have been fruitful and immensely educational. And I had developed a newfound respect for the unique position Frank's occupies in our space and the committed workforce who're devoted to the Frank's vision. And looking at the quarter's financial results, we are reporting revenues this quarter of $156 million. Our top line has grown 8% since the last quarter and 18% since the year ago quarter driven by better-than-expected growth in our TRS offshore business as well as a large tubular product sales order completed during Q2. And looking at adjusted EBITDA, we finished the quarter reporting $17 million, which is up 78% sequentially. Our business is generating strong leverage from our top line growth. As a reminder in Q1, there was a one-time insurance charge of $2.5 million. And looking at our first half collectively, we are seeing incremental margins of 34% year-on-year, and feel good that this trend should continue and improve going forward. And turning to cash flow which is at the forefront of our minds and our investors mind we ended Q2 2019 with $173 million in cash and short-term investments which was flat to the first quarter of 2019. Our free cash flow generation totaled $3.3 million for the quarter, and this reflects our first quarter positive free cash flow since 2017. We are focused on managing working capital requirements through the remainder of the year, with a large focus on reducing our DSOs. We do expect to continue to generate free cash flow for the remainder of the year. We spent approximately $9 million on CapEx in the quarter, which continues to be in line with our expectations of approximately $40 million total spend for the year.…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Sean Meakim from JPMorgan.

Thanks. Hi, good morning.

Good morning.

Good morning.

So maybe to start, I was hoping we could just talk about how you're seeing changes in competitive dynamics. So, picking first international offshore markets, many few of your competitors, one is going through a period of transition and so as the market's improving, how are you seeing changes in competitor behavior? And then maybe you could just contrast that in the U.S. where lots of small competitors, much more fragmented marketplace and a more challenging near-term outlook in terms of activity. Maybe just to get an update on competitive landscape will be helpful if you don't mind.

Sure. I'll take it off and then turn it over to some of our business unit presidents we've got here. In terms of the competitive profile, we are in a very competitive market and we have as you know on the TRS side one large competitor. But when you go into individual markets, there are usually a handful of smaller sometimes local competitors that can be quite good and strong competitors. So, the competitive landscape is still competitive. I think we have picked up market share selectively for a couple of reasons. One is we're really pushing our higher technology offering and secondly and this gets sort of the people plank of our strategy. We've invested a lot of money in sales training over the course of this year and I think we may be starting to see the beginning results of some of that training that we've had in our sales force. But I'll start by turning it over to Steve on the TRS side. Maybe you could give little more granular on the TRS competitive situation.

Yes. Thanks Mike. As Mike mentioned here, we do believe we've gained some market share on the international markets. We have some capacity and ability to deliver the projects as they come up and we think that's attractive for the clients. On the U.S. Land side, obviously, we've -- the market is seeing some headwinds coming. We've been growing in U.S. Land now for 12 consecutive quarters and we know we believe that's primarily a function of our quite wide footprint and our ability to redistribute resources as individual basis pickup and drop. The other thing we've seen as a trend here is the big IOCs coming into U.S. Land. We've seen that as an opportunity for us to pick up those clients. And again, we believe they've an interest in our technology portfolio in U.S. Land which differentiates us from some of the smaller competitors out there.

Yes. This is Scott McCurdy. I would say for the Cementing Equipment business, I think, we are a new entrant on the international offshore market. So, a lot of that is proving our technology and basically the value of our tools and as rig rates go up that value goes up because of the efficiency and then safety benefits. But one of the things I would say, I think we're changing the competitive dynamic because as we come into a country or an area and we work for new customer that customer operates in multiple different jurisdictions that were spreading and we're seeing good adoption of tools within a customer around the world. And so, that's been a very positive sign for us.

Yes. Thank you. This is Nigel Lakey. I want to echo everybody's comments, but I think Mike identified a principal issue here. We have better customer engagement than we've had in the past. We're able to get the voice of the customer, understand their challenges and to Scott's comments particularly, rig costs are now very, very much foremost in our customer's mind. So where we are improve in efficiency, where we provide some technology differentiation solve some customer's problems, I think that very much sets us apart from the other players in this business.

Thank you for that detail. I appreciate all the different perspectives. Mike, I was hoping you also just maybe drill in a little bit more into the opportunity set for TRS specifically in Latin America as we look maybe in the next year and the year beyond. I mean I think historically Brazil is a market you guys are focused on too much, just given pricing and margins have been more challenging in that market, but with IOCs potentially looking to ramp up activity next couple of years, the success that we've seen in Guyana's Suriname along with even the Mexican side and the Gulf looking better. Just maybe how you look at the broader Latin American opportunity set next couple of years? And how that could contrast with how you participated in Latin America historically?

Let me start with Brazil. Petrobras historically has of course been the significant player in Brazil. If you look at the rig data though and the forecast going out two or three years, you can see that Petrobras -- the rig forecast for Petrobras going down and for the IOC is going up and that's good news for us. Petrobras is very, very tough on its vendors price wise. And I think the -- on Petrobras though, we do have an opportunity to bring in some of our specialized tools to try to up-sell and kind of get into the Petrobras story of that way. On the IOCs, we work for them in many locations over the world so -- all over the world. So we've got a very good route to try to sell our story to the IOCs. They're ramping up in Brazil. Other parts of Latin America, the Caribbean is very strong for us and the Mexican side of the Gulf of Mexico is increasing also, but I'll turn it over to Steve if you want to provide little more color on Latin America.

Yeah Mike. I think the Caribbean market for us is being dominated by the growth in Guyana and the adjacent countries, where we've had a first-to-market advantage and that's been a good growth story for us. I think the story line on Mexico and Brazil both IOCs are accessing the deepwater market, which is a sweet spot for us. So we see them as opportunities going forward.

Thank you. I appreciate that feedback.

Our next question comes from Byron Pope from Tudor, Pickering, Holt.

Good morning and congratulations Melissa. I was just wondering Mike or Melissa realized the business is naturally lumpy from quarter-to-quarter, but as I think about the Q3 guidance results, it's slightly sequentially and implies top line and degradation in Q4. And so just wondering if you could provide some incremental color and context on whether that's just the timing of projects in one or more of the business segments and -- but again, any context there would be helpful.

Yeah. Good comments, Byron, very observant on your part. But if you take the straight 15% revenue growth and then you look at our first half, the implication is that our revenue is going to be, if you say flat in the third quarter, it definitely implies a fairly significant downward tick in the fourth quarter and that's really not our expectation. So when we say, 15% year-over-year revenue growth, that's really a bare bones of minimum. But I have to say, I'd be very disappointed if all we did was that, because that would target as the $600 million revenue for the year. So look at 15% is kind of a low watermark. It's not really our current expectation. So I don't know if that helps any, but we certainly think that the second half of the year revenue -- because we do have some projects kind of winding off in Q3, we depict that our kind of minimum would be flat revenue in the third quarter. Of course that would imply a pretty strong fourth quarter. So that's kind of the trajectory that I personally see is flattish third quarter and a pretty good bump up in the fourth quarter.

Yes. I…

That would get us over the 15% bogey so to speak.

In addition to what Mike says, maybe some additional color around the lumpiness. There's several things that can drive out top line, the tubular product sales and these tend to coincide with if you will customer delivery date. So where a customer pushes out a well even a month or two, if that trips the quarter that can move our top and bottom line pretty meaningfully in one of our segments. So when we look forward, we see additional growth trajectory in total for sure. And I think as we look at our what I'd say is our burgeoning market segment theme ,the Tubular segment as well as Cementing, when we look quarter-over-quarter we may see a project slip, and that could be meaningful impact to that segment in a particular quarter, but when we look overall at the landscape, we see a very good growth trajectory. So I might suggest that when we're looking at Tubulars and we're looking at Cementing, we're looking year-over-year and sequentially, but year-over-year and the total trajectory is very important. And then when we're looking more at TRS, we're looking more sequentially as to how we're continuing to move forward always up into the right to the TRS business.

That's really helpful. Thank you both. I’ll leave it at that.

Thanks, Byron.

[Operator Instructions] We have no further questions at this time. I'd like to turn the call over to Mike Kearney for closing remarks.

Thanks, Sylvia. So to conclude, we expect a solid second half of 2019 and have an optimistic outlook for the continued outflow recovery into 2020. We continue to evaluate ways to improve our operational and financial performance to drive higher returns on capital and free cash flow. We look forward to keeping everyone apprised on our next call. Thanks for your continued interest in Frank’s International.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.