Good morning, ladies and gentlemen and welcome to the Forum Energy Technologies Fourth Quarter 2021 Earnings Conference Call. My name is Liz, and I will be your coordinator for today's call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the conference over to Lyle Williams, Chief Financial Officer. Please proceed, sir..

Thank you, Liz. Good morning, and welcome to Forum Energy Technologies’ Full Year and Fourth Quarter 2021 Earnings Conference Call. With me today is Neal Lux, our President and Chief Executive Officer. We issued our earnings release after the market closed yesterday, and it is available on our website.

Before we begin, we would like to caution listeners regarding forward-looking statements. Our remarks today may contain information other than historical information. Please note that we are relying on the safe harbor protections afforded by federal law.

All such remarks should be considered in the context of the many factors that affect our business, including those disclosed in our Form 10-K along with other SEC filings. Management's statements may include non-GAAP financial measures. For a reconciliation of these measures, refer to our earnings release.

This call is being recorded, and a replay of the call will be available on our website for 2 weeks. I will now turn the call over to Neal..

Thank you, Lyle. I want to start off this morning by thanking our Executive Chairman, Chris Gaut. He's been a great mentor to me and the executive team. Chris [Technical Difficulty] company since its inception and his leadership has positioned FET for success. On behalf of all employees and shareholders, thank you.

As I begin this new role, it is an opportunity to step back and reflect on the many reasons why FET is a great company and investment. Our employees, strong industry fundamentals, Forum's innovative products and solutions, our access to growing markets outside oil and gas, and a leaner, more focused cost structure.

First, FET's employees are our greatest differentiator [Technical Difficulty] and focused on [Technical Difficulty] here at FET, [Technical Difficulty] a positive impact on our results. We will continue to retain and attract talented people. Next, looking broadly at our operating environment, the world needs more energy, a lot more.

This will drive sustained investment into our industry and FET will be called on to deliver solutions our customers value. This leads me to another reason why FET represents a great investment opportunity. Our key components and consumable products enhance our customers' long-life assets to make energy production safer, cleaner and more efficient.

We don't make drilling rigs. Our iron roughnecks allow them to efficiently handle large diameter drill pipe, which is needed in today's demanding applications. We don't make electric submersible pumps, but our sand management systems keep those pumps running longer. We don't make offshore support vessels.

Our ROVs enable those vessels to work effectively in deepwater. We don't make coiled tubing trailers or wireline trucks, our high-strength tubing and greaseless cable allow those trailers and trucks to complete more stages per month. These are just a few examples of innovative products and solutions that our customers value.

In addition, through our broad portfolio and global reach, FET is well positioned to capitalize on energy transition and decarbonization opportunities. This is already happening today with methane emissions control, carbon capture use and storage and offshore wind. Many of these markets are in the early stage of development.

and our exposure to alternative energy currently represents a small portion of total revenue. However, this contribution is expected to grow as demand increases and new technologies are commercialized. Regardless of the source, we are positioned to meet the energy needs of today and tomorrow.

Finally, FET has achieved a leaner cost structure through organizational restructuring and the execution of our portfolio optimization strategy. To highlight, the operating leverage gained from these actions, it is beneficial to compare 2021 results with both 2016 and 2020.

Those are years that had similar rig counts and approximately the same level of revenue. In 2021, our profitability, as measured by EBITDA exceeded 2016 and 2020 results by $24 million and nearly $40 million, respectively. FET is now a more focused and profitable company. Turning to our balance sheet.

Because roughly half of our debt converts to equity at a fixed stock price, we have an opportunity to significantly delever the company and expand our enterprise value. Given the current industry dynamics and FET's position, the conversion of our debt is reasonably achievable.

In a few moments, Lyle will provide details on our fourth quarter and 2021 results. I want to highlight a few key points. Our bookings remain strong and our products and solutions are in high demand.

Revenue was within our forecasted range and would have been higher, save for logistics delays in a late December slowdown, for a few of our completions-driven businesses. This also had a negative impact on our mix and margins.

Furthermore, our supply chain costs, both freight and materials and employee medical expenses due to COBRA and COVID were higher than anticipated. We must overcome the negative impact from these inflationary headwinds. Our teams are actively raising prices.

Also, they are qualified alternative supply sources and are building strategic inventories for key products. While these efforts present near-term cost and cash flow pressure, they should drive improved quarterly results through 2022.

Once the benefits of these efforts reach equilibrium and assuming steady industry activity growth, we forecast 2022 EBITDA of $50 million to $60 million. I'll now turn the call over to Lyle for more detail on our financial results.

Lyle?.

Hawker Well Works and Reach Production Solutions. The Hawker acquisition serves to consolidate our Little Tripper drilling capital product offering with the industry leader. In addition to expanding our customer base, and increasing operating efficiency, we think we can incorporate the best features of each product into one.

With Reach, we acquired early-stage multiphase compression technology with potential applications in artificial lift and emissions control, along with the acquired assets and intellectual property, we added great talent to our company. Combined total consideration for the acquisitions was $5.7 million in cash.

In the quarter, we paid approximately $4 million of the consideration with the majority of the balance to be paid over the next year as working capital true-ups are finalized. We expect these acquisitions to add roughly $2 million of EBITDA in 2022, and we are excited to welcome the Hawker and Reach teams to the FET family.

From a cash and liquidity perspective, we ended the quarter with total available liquidity of $174 million. This is comprised of a cash balance of $47 million and availability under our revolving credit facility of $127 million.

The $3 million cash balance decrease this quarter was driven by free cash flow of negative $8 million and cash consideration for our acquisitions. We also repurchased approximately 56,000 shares of stock or 1% of our outstanding shares for $1.1 million.

These shares were repurchased under our $10 million stock repurchase plan announced in our third quarter earnings release. In addition, we collected an $11 million note receivable associated with the 2019 divestiture of our ownership in a joint venture.

Looking ahead to the first quarter, we expect our supply chain challenges will continue to impact us directly and growing challenges that are impacting U.S. activity, such as sand, labor availability and last mile trucking could also delay our revenue. These supply chain challenges and our mitigation efforts will continue well into 2022.

We, therefore, forecast first quarter revenue to increase modestly to between $150 million and $160 million and adjusted EBITDA to be between $5 million and $7 million.

We also expect free cash flow in the first quarter to be substantially impacted as we build inventories to mitigate supply chain constraints and make annual payments of accrued incentive compensation and property taxes. As with others, we are closely watching the conflict unfolding in Ukraine, and our thoughts are with all those affected.

While we do not have any facilities or employees located in Russia or Ukraine, we do derive a small amount of revenue from sales into the region. Our guidance does not account for any negative impacts that may result from the conflict including trade sanctions. Before concluding, let me provide a few details for modeling purposes.

For the first quarter, we expect corporate costs of $6.5 million, interest expense of $7.5 million and depreciation and amortization expense of roughly $10 million. We expect full year capital expenditures of less than $10 million and cash income taxes of roughly $4 million. Now let me turn the call over to Neal for concluding remarks.

Neal?.

Thanks, Lyle. To conclude, I want to once again thank FET's employees for your hard work, dedication and perseverance. You are among the best in the industry, and I am excited to roll up my sleeves alongside you. We will take advantage of the strong market opportunities that FET is uniquely positioned to capitalize on.

Together, we will continue our mission of developing products and solutions that make energy production safer, cleaner and more efficient. Through the efforts and priority deals detailed today, we are positioned to delever FET's balance sheet and deliver long-term stakeholder returns. The table is set, and we will succeed. This concludes our call.

Thank you for your interest. We will speak with you again next quarter..

This concludes today's conference call. Thank you for participating. You may now disconnect..

End of Q&A:.