Good morning, and welcome to the Q1 2020 Frank's International N.V. Earnings Conference Call. My name is Zanera, and I'll be the 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. [Operator Instructions] I will now turn the call over to Ms. Alison Greene. Alison, you may begin.

Good morning, and welcome to the Frank's International conference call to discuss first quarter 2020 earnings. I am Alison Greene, Manager of Corporate Communications. Our speakers today, as shown on Slide 2 of the earnings presentation, are 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, Senior Vice President of Operations. A presentation has been posted on our website that we will refer to throughout this call. If you'd like to review this presentation, please go to the Investors section of our website at franksinternational.com. On today's call, Mike will provide an overview of the first quarter, our response to the COVID-19 pandemic, the substantially lower oil and gas prices and reduced industry activity. Additionally, he will review technology highlights and provide a brief update on our profitability improvement project and our efforts to further reduce our cost structure. Melissa will then review the financial performance of the first quarter and provide a more in-depth review of our cost reduction initiatives. We will close with a question-and-answer session. Before we begin commenting on the first quarter 2020 results, there are few legal items that we would like to cover beginning on Slide 3. First remarks and the 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 first quarter 2020 earnings release which was issued by the company. I will now turn the call over to Mike.

Thank you, Alison. We appreciate everyone joining us for the call. I want to begin my remarks by acknowledging the challenges we’re facing across our industry, along with our industry peers and customers, we’re experiencing the unprecedented impacts caused by the COVID-19 pandemic and falling oil prices. These events have affected our first quarter results and will continue to impact us for some period of time. Our current actions and those we plan to take over the next quarter will prepare us to respond to a number of potential recovery scenarios. We're focused on controlling every aspect of our business, continue to be very proactive as the situation evolves. Turning to Slide 4, as the severity and the geographic spread of the COVID-19 outbreak became more apparent in early 2020, Frank's implemented a series of actions to ensure the safety of our employees, their families and our customers, while maintaining business continuity. We also moved quickly to find additional ways to control our costs. I want to congratulate our employees for their ability and willingness to adapt to new ways of working, including rigorous safety protocols while at the same time meeting customer requirements and commitments. Our laser focus on safety has brought about the welcome result of just one recordable injury during the first quarter, which is a company record. In the Gulf of Mexico, we recently celebrated one year without a single recordable incident with over 1.6 million man hours of work. In Abu Dhabi, we recently celebrated 1,000 days without a recordable incident. These remarkable records demonstrate the company's commitment to all aspects of ESG. I'm proud that the Frank's team has risen to the occasion of working in these challenging environments. Despite the strong headwinds, Frank’s continues to be in an excellent financial position due to…

Thank you, Mike. Referring to Slide 6, during the first quarter of 2020, we generated $124 million of revenue, which was down from both the previous quarter and the first quarter of 2019. As discussed on the last call, we were anticipating a decline this quarter with new contract start-ups planned later in the year. In addition to this anticipated decline, we saw some early impacts of shutdowns related to COVID-19 that occurred during our March period. The most significantly impacted segment was our Tubulars business showing a 41% decline from the fourth quarter of 2019 as customer pipe deliveries that were planned for Q1 were delayed. Our Q1 adjusted EBITDA totaled $7.1 million and was impacted by several factors including contract ramp-up cost for work that was anticipated to begin during Q2. We also had reserves associated with our current expected credit losses that were significantly higher than anticipated in light of the current market conditions. These reserves totaled $1.4 million in the quarter. Given the significant macro events occurring during the first quarter, it was necessary to revisit our core assumptions supporting the intangible assets on our balance sheet. The results of our analysis concluded in various impairments to both long lived and intangible assets, the largest of which was a $56 million impact of goodwill. These non-cash impairments had a significant impact on the net loss reported of $86 million for the first quarter and looking at our liquidity, the company used $22 million in operating cash flows during the first quarter. This was due to a combination of factors, including outlays for bonus payments, property taxes, and severance as well as poor customer collections during the month of March. During the month of April, we placed strong focus on re-engaging customers to ensure payments were once…

[Operator Instructions] And our first question comes from George O'Leary from TPH & Company. Please go ahead. Your line is open.

Melissa, I thought one of your last comments was interesting. And Mike, you touched on this a little bit too but there are some pockets of resilience based on kind of contract awards that you guys already have in hand. I wonder if you could share more on what geo markets you actually think will prove the most resilient as we look back in the rearview at the end of 2020. And what some of those geo markets are that are specifically driving growth for you guys. I know you mentioned Oman is one but, in the deck, but any others would be super helpful.

So I've got Steve Russell here also to help us with the Q&A. And since that's a great operational question, we'll let Steve take that one.

Yes, thanks Mike and good morning, George. Yes, as we've been forecasting forwards here, we've seen a marked difference in the various geographies of what we see. Particularly we see some pretty decent resilience in the Middle East, not just through contractual awards, but we've picked up some additional market share in Saudi there in addition to the noted win in Oman. The other place where we see some strength is the Caribbean, we've had some activity reductions due to COVID disruptions here in Q2, but we see those rates going back to work here at the end of Q2 and more rigs coming into that market. So those are a couple of bright spots in a generally challenging environment.

All right, that's, that's helpful. And then I wondered if you guys can compare and contrast what you're seeing internationally in offshore markets versus what you're seeing in onshore markets and kind of the delta and velocity of reaction to the lower crude oil price and kind of COVID impacts? How that's all played out, just how offshore is behaving differently versus onshore markets thus far in 2020?

Yes, so it's a quite complex picture, as you can appreciate out there. What we've seen internationally in the offshore markets is a distinction between what I would call the remote markets and the core markets. So we've got a number of sort of remote markets. So the African markets again, the Caribbean that I just mentioned where there's been some short-term disruption around COVID primarily related to getting crew and equipment in and out of these countries that are closed because of COVID restrictions. We do see a lot of those projects going back to work here in the latter half of the year. On land, I'm not sure if you were referring to U.S. Land or International land. I think International land for us is very focused on the Middle East which again, I mentioned has been a strong spot for us for looking forwards for this year.

Okay, great. That's very helpful color. And then just one more for me. You guys talked a little bit about working capital management and the improvement in accounts receivables collections was quite impressive. I wonder if there were any in April that you mentioned, I wondered if there were any kind of bogeys, or benchmarks that we could watch for as the year progresses from a DSOs perspective, from an inventory work down perspective, any kind of guideposts you guys are trying to achieve for the year?

Yes. I'll start on that, George, and then let Melissa pick up on it. DSO is reducing it’s really quite a complex issue, without belaboring it, it all starts with the contract, you sign invoicing term. We invoice in a number of locations globally. And you've got customers that are changing their payables systems, it seems like almost monthly. And sometimes we get delays where an operator says, yes gee we can't pay you for the next 30 or 45 days because we're controlling the system. So it gets really, really complex. But I can tell you, I personally over the next few months, I'm going to be working with the rest of the management team to really focus on working capital management, particularly our AR collections. But as I said, it's a continuum of activities, from contracting, getting your correct invoice out the door, and then making sure if the customer pays. And they can be slow and sloppy sometimes. So it's a complicated continuum. And we're going to work every piece of that along the way. Melissa, I don't know, if you want to add something from your side.

I think I would reinforce everything that Mike said, I think largely the work from home paradigm greatly impacted the collections in the month of March. And we were able to really kind of mobilize a task force to try to reverse that trend as quickly as we could in the month of April. I think we will be faced with needing to continue to apply a lot of resources to stay on top of it. But I think there's a lot of optimism internally that if we apply a lot of the resources and we keep the customer engagement level high that we can further improve from where we're at and free-up further working capital on the DSO side, if you will the receivable side. You also asked about inventory, I'll sweep that out even more towards the CapEx to say, I mentioned in my remarks around the pipe inventory, which is a big piece of commitment for us. So we feel like we've really sort of looked at all of that and took that away for the year. But as it relates to the rest of the inventory, the PO task force that I also mentioned, that's part of it. And what we really do is we look at any equipment needs, right? So Steve was in my office today saying, "Well, hey, could we space and we freed up this piece of equipment from this location?" I think that applies to inventory where it makes economic sense to try to deploy it between regions, as well as just our CapEx. So taking and utilizing our tools more efficiently. We were planning for a very different year than the one that has come to pass. And so we've tried to be really nimble and every time a need for a piece of equipment comes up that we look everywhere in every and every location to see what is available. And I think that applies for our larger pieces of inventory as well as our CapEx.

Thank you. [Operator Instructions] And I'm not showing any further questions at this time. I would like to turn the call over to Mr. Mike Kearney. Please go ahead.

Yes, thanks very much. And I'd like to thank everyone for joining us today on the call and your interest in Frank's International and we look forward to providing another update next quarter. Good bye.

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