Innovex Downhole Solutions (INVX) 29 Apr 222022 Q1 Earnings call transcript

Company Profile

Participants

Jeff Bird	CEO
Kyle McClure	CFO
Tom Curran	Seaport Research Partners

Call transcript

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Operator

Good day and thank you for standing by. Welcome to the Dril-Quip First Quarter 2022 Fireside Chat. I would now like to hand the conference over to your speaker today, Mr. Tom Curran from Seaport Research Partners. Sir, please go ahead.

Tom Curran

you. Thank everyone. Greetings, first Dril-Quip's chat. Welcome quarter to fireside am Seaport Research Curran, Senior the at Analyst Technology Energy Partners. I Tom And joining me Bird, this morning from management Kyle and are McClure. CFO, CEO Jeff a to I'm of highlights released who the to results and mic night. going will on pass the provide brief last some summary touch Jeff, will turn and a expansive discussion. then, we'll be And to what deep Jeff?

Jeff Bird

Thanks, forward to looking Tom this chat morning, and thanks fireside for robust hosting conversation. the a

in for the to like say to continuing I'd to in, team, execute jump I Before quarter. the thanks global

new to our new moving line respective Specifically, the a leaders, business product of to Steve, and founding been company business our company. and Bruce, a functional as leaders, the product-oriented organization from teams lead Don, what's largely they since started their more

service position really, pleased see the to of in XXXX specific be opportunities reorganization. ability year. the our this And of to see head improvement as result we we'll also believe, continue go in second we We an improvements half the second start XXXX. to We into we our very the and the a year, as our half of and cost exit customers, in into with

well. three a those, just to teams and those thanks respective their as So people

the payments that's see in a a headwind the year, later We've the always strong quarter Looking continued quarter bookings at of in was were definitely of of a couple we met to Revenue think expectations. QX back than knew had pandemic, middle got the talked and that that be always flow so a the the with happen line quarter. was I the the that. really larger with we first cash middle the quarter, was fairway Free about We'll into we so Bookings always year. of in EBITDA that saw challenge. what bouncing headwind. months in some one-time pleased what ago. But going going

a obviously lot and Ukraine look right people If in Russia step challenging geopolitically, and of a environment you'll back for now.

to the combat be an inflation, area So continues as the to continues we inflation. inflation think an we we look And inflation our And -- as and there. it's increased what us. seeing increases if resulting though, overall constructive really price the story And inflation hand-to-hand focus spending. match be with is right for of for we're now, inbound about keen the business leaders environment try at to very headwinds despite

with the order a about of So to we're over the Thanks. intake very more robust still you, optimistic discussion balance forward the Tom. and look year

Tom Curran

Great.

this start a topics. then update few Let's other market on with questions pivot to quarter's results and and a

below So was million, realized the company you which in down revenue a the said of expectations. but that just came as $XX XX%, fairway, gross at the on straight margin essentially, top-line

Does on First but on mix. less target, that top-line question you the is partly favorable shortfall the perhaps a than anticipated? margin reflect mix hit that margin did with

Kyle McClure

Yes. Hey it's Kyle. Tom,

would Coming QX a which at gross think it expect XX% can better and We pipe much see mix in SPS, improved rest QX, had out the QX. to fabrication. look going cetera. wellheads, going a beyond, we up if saw et for that year, be versus in mix had out We we mix coming and quarter. All We towards the much we the orders of lean in of heavy out XX.X% play is the would of QX. XX%, of a to mix margin saw orders into forward, QX, you're really the what of drummed going

the to back get the XXs into in up to high mid And would year. continue so margins, we of see half gross the

Tom Curran

Got it.

control least in world? and sounds whole chain Dril-Quip as pressures, and the entirely the to the managing manage XQ. there, cost and how able And supply is challenges, through In over to inflationary been the and of the are just looking industrial afflicting side, present, all you mix the XQ logistics both so general, challenges that it on you've at was sales, at if were confronting it if

Kyle McClure

combat Yes, based degree Jeff sort certain as on can we what MSAs It's a do indexes. so mentioned, fluid call have of We ratchet with situation. hand-to-hand some where up inflation. upon I

we're about of the across price We lists our are if certain this, business it's increases a sort of units. situation. based customer-by-customer in day-to-day just upon thinking as dealing board with Or but

supply In these call at in additional addition earnings in productivity prior we've February. we looking chain certainly to back the are that issues, announced

we there can MSA the a sort continues time at, think looking two they of that tools, depending Subsea time more on bit of of us. QX, do. business, is continue sort contracts, or that. different interfaces a there's are But in of kind best our good little downhole inflation a real the doing it should but Downhole there. just fluid situation a subsea to it bit manage whether little we I really real did it's we're be tools happening help of situation, is what terms in very a longer-term job So business, to the

we goes As see to pull we we'll can as need and pull continue we're continue going to the pressures. price year on, to probably costs will inflationary to And to. as continue

Tom Curran

Got it.

use. you continue to do expect to that there levers able to two So be

achieved lower bright to consensus, and this of productivity expenses, XX%, did rest did year's and target XXXX? and come in than you How over in expense side SG&A the On much efficiency savings you the the XQ in do right for was sequentially product how for harvest of remainder line. be engineering development expect

Kyle McClure

Yes.

$X the to of savings of basis. about quarter, million another an million expect million largely February, productivity. in efficiency QX $XX the that in we piece $X improvements supply And about of back is and on pick its to remaining and in up got going we that be that the chain talked we operational annualized So

the pick to I maybe play focus target between up cost year, organization. million over G&A to probably would for of goods this continue the will flipped So it'll year be will I out, think $X as and be G&A. we that million see around a $X

that, sort especially I back, through as to get we're make incremental on want sure of continue to of we fall that we the think of come revenue. as much revenues laser-focused

came whether expectations to how cost the continue know, when we with focused margins probably come both quickly decremental those expect to price, keenly you we're now. or it saw margins down on as things two our incremental we But went As as internally. overshoot, revenues levers, it's what we are pull here back, right

Tom Curran

Got it.

new within Inbound the to on of to let's stepped Turning in orders million, that totaled guidance products million range hire million, up zero that orders. product $XX $XX $XX for which to bookings, growth but was closer potential annual floor, that year to this clearly skewed reaffirmed continue bookings yet it's variance, guidance to XX% has upside. forecast and think the you've for just of

standard half? which impact orders just the the certain expected timing slippage product over simply you sequentially larger some a for full-year quarterly months? guidance for second on of did imply XXXX both few orders experience XQ slid should see orders does then what or and we a what bookings your new out in So And XQ range

Kyle McClure

Yes.

way if and still I well we So we the had into year-on-year, and misses that's Tom, the optimistic XX% on the believe about looked pandemic, downside. more think to very at it, the within

upside. we're opportunities I to to see the now is starting what more think as the we exit pandemic,

upside. number as much suddenly that's you said that, doesn't it one $XX And So to specifically needle the look order if the on a move at there, I $XX out before, to tree example. million threes moves and three QX, as an is the take order of million,

into year. two how the QX orders conversations see we're the quarter-to-quarter seeing So, the that I in think the play is QX, continued lot those throughout didn't things. expect we'll now balance on QX, we really we the a some were see would QX, being of But the until out. going first depending lumpiness and market increases What half of are and to One, year. right think happen of pulled to

furthermore, just meaningful to orders X QX. orders materialize this probability optimistic have see this conversations that Cap those items, items starting expect that year now were to real drop in there's candidly that. and And we're -- for those years in So or didn't we and lower some this items are year about

believe XX% So number. more to we're optimistic about likely there's that than and not upside very the

Tom Curran

it. Got

You orders how would just timing book your can factor a have what's anticipating trees you that for barbell a know for with the should big fall then in expected visibility be is I how awards a XQ and original the next. orders did what product and was the to swing many indicated orders subsea latest underpins XX subsea was much are how XX year by on how XXXX remaining mentioned and to to from trees be initially of of which those distributed? the bigger with one a expectation quarter shape you XQ XQ, trees foreseen quarter,

Jeff Bird

I well. believe One honest. three that level in Yes, And the had a trees and we from number customers, really, that's underlying on three in and and of believe But just concerns see a really be a about chunkier economics also that chain as right back from trees standpoint, is to that the XQ. two And in really, you number QX was the these were supply of I QX. the now. balance there booked QX of things, --

Tom Curran

XQ order Petrobras to similar then this gained. And then contribution? of comes off what the And multi-year awards question, year? call those when orders you've the latest level was awards yield What should it

Jeff Bird

Yes.

be already see. of if sometime orders, we another of so in first MSA, that schedule purchase And had, will, those MSA. over well probably have ahead about that the to or XX of terms development that's will, another under you expected been a XX% see we're in half a wellheads that exploration now total placed tender, would renewal, in flip we the of we where if XXXX, candidly, expect bookings that of So you QX, and there'll with of have and we'll

really that's a the optimistic, September would wellheads next significant and year, quarters have pretty starting through what what XX Those we probably -- deliver this of year. three will So improvement expected. first to

Tom Curran

just you've broadly, -- on a is seeing you're your already geographic just behind to in revisiting any what that seeing certain it's probability more. rising your on touch bit the into sources this are touched you're surprises feeling upside others? customer Is regions, think, confidence be positive Just both combination your all what to bias but the materialization bookings a there for for you delving acceleration the projects, conviction of a this now? degree, But guidance? likely that certain and is to to are conversations, XXXX worth what's it I and Jeff, of And what

Jeff Bird

visit, what of bit There business little number so leaders We everything customer Yes, we customer I'd as expected. and one customers almost fruitful been very earlier originally is myself that pulling all those is every in we of and you characterize have with the of just a said. doing things discussions a is of having than have discussions. And couple about things. first things had a

about But the get And to want pricing. some that of done. early lead get there hey, some is supply and that's that chains. We also, out we're of worried items

XA, although that's anecdotal little a So bit more probably.

have a literally our board it's the go said robust is order-by-order other The product be The on we conversation. last process an with through war each was our meeting what now was very a we it going update we QX, what each where regional QX. every to of thing customer leaders where we have of with two with call leaders, weeks

every literally business So quarter. The myself are every leaders and those weeks. conversations conversations really the once are two with customer

expect up. example, be So some we'll QX, got get Asia-Pac. one positive is QX, area up. in did comments to doing that Brazil weak picking The feedback an of It's of Asia-Pac. a at right as trip that. is strong. from strong. LATAM least I Gulf now is of Asia Mexico European picking positive and very a Europe really kind tour In seems that's is an see there. lot we

I'll So on feedback the tour be interested that out we're there. we get when to see

Tom Curran

you it Europe and that went trip just a know encouraging sounds I like. Right. was through very

deliver? so your of on concept first few headway what pillars strategy, far? introduced the Moving with of And with to the made collaboration and OneSubsea the impressive on the Proserv are collaborations you them portion counting approach, you How ago. XXXX since you've performed growth to respectively bookings have years a

Jeff Bird

on sell. Yes, of it so Proserv, I obviously between and as we controls that you If about XX think this let we half that the to will XX are go controls the those trees Proserv OneSubsea. the that will divide Proserv trees on them. book book me year. trees have We'll About said

that cases about to agreement. the is So table. bringing I statement, well. some the table bringing Proserv In collaboration a Proserv very some strong think that's as us look, we're to But cases, in

mutually really half about that as trees. view a we of So relationship beneficial those

the If EPCI portion The at and that us the to contract about is the agreement, pretty you total think gives collaboration exposure you Dril-Quip's there. that look overall when scope wells. really is OneSubsea of EPCI development challenge small,

probably So those portion they now. won't won't about be We'll we'll around right EPCI. OneSubsea anything about all we're OneSubsea that it it's agreement to I as a right talk about honest, target perfectly things happen. overall collaboration specific probably talk Because small now, of that winning,

materialize we careful And a that about dependent these specifically are happening thing time Proserv as with how other OneSubsea. just that on well. we this talk of three honest. there are -- I pretty openly characterize to We relationship is around a bills the agreements talk wellheads. the of what legacy other last OneSubsea to I'd target quiet their number about putting and start say because when same openly be quarters of The the at we is, would the side. We're collaboration will year pretty as out and There's believe on

Tom Curran

Northern CCUS if Dril-Quip opportunity that for of it. capture eventually as new of and provide has be with other understanding aim carbon some and and year as breakthrough have Through could it. that's traction for consortium to The UK realms Between estimated as in newest Dril-Quip my CCUS? What's how entered side Sea. CCUS, with co-finalist prospects, to selected package actually offshore you participating the for you'll led fee seems been East of that be much tam or specifically cluster storage. aspire was partnerships, collaboration, that emerging XXXX Solutions two Aker North Dril-Quip's collaboration a Got capture? NASA It that for Coast the utilization a the formed Endurance the one energy you

Jeff Bird

Yes.

So if think we about.

large we bit little agreement. collaboration we honest, bid other surprising, asking And two a or be I'll the and we And three then what market talk that inbound somewhat got that participate was me about. very a a asking and give with Obviously joint to the think size announced us minute agreement Solutions agreement. size let First, a in Solutions. calls, it to you about Aker about with Aker of the -- pleased collaboration kind

we had other collaboration as said thing other that hey, can agreement around us The OFS and that we was companies somewhat segment. same we surprising, with believe some really called work you a well, that in

very very, very, that. with we're So pleased

time of lower joke if look you'd If is wells, orders the higher year. could weeks a have be The that, takeoff -- first. feed XXX to number. European higher, until you probably till and be Aker where you And our XXX two little and around than from you and now their a started market this is CCUS happen by about Energy think just just to from the one I jointly to started where year. fee won't ramp But XXX a from We the this that. award take ramping about could likely influence up think slow it's assume CCUS it's about be We Director growing of is will it's a going some to team to you'd a see XXXX. ring-fenced But that, similar share, resources if of share later We've bid easy I because on think XXXX share, to XX% the that it, to size those ago. the XX% XX% there. think by will that at be to all of bit; as XXXX, Transition year. what that and and then you feed next Aker about CCUS We happen Aker team be this is because just little around work don't honest, with solution. than subsea Tom team we tree see a could the gone annually

of see real starting bookings you'll this timeframe. probably XXXX in like and revenue XXXX/XXXX likely terms in So

Tom Curran

Okay.

overview. -- capture was So that terms very share of we'll believe I tuned helpful intended That I then that in that for And used stay term win. was future that. can't a not actually

VSTE. to liner for You've the focal previously spoken areas hangers, collaborations, additional

those then provide here? clarify just what Just at should maybe quieter collaboration perhaps an just on these collaborations, additional on revisit the and an around two and which where update emerging as you're we for potential collaborations update a categories? wellhead big just, different in of and from distinction theme, evolve them between pursuing a how us you overall big is think those perhaps Or should theme,

Jeff Bird

Yes.

me explain I characterize So go as kind I'll through versus the a headline collaboration the and of a let agreement. quiet collaboration three segments more what of agreement

we So a work, with lot our if start the major with the world. you business, of providers do of downhole around all service tool work a lot

and would of include a a better kit, cast Schlumberger in characters have and Baker just and the might internally. a we Halliburton, and on normal world, the that have of depending better than and availability region Weatherford your they So

we're region-by-region, those those agreement, we're of more those it's headline all there's now. service number successful, growing liner not providing a are providers, very And candidly, of, all we're we today. So country-by-country, hangers with right of working collaboration cases in and It's a with major see them.

it, down wellheads OneSubsea and how where we literally well review starting we're path that's a So approach, think open as by of to, get down mean we're downhole subsea it. liner I hanger. business approaching and all about sit tool in that approach, the have the In how we're side, jointly starting with that really I'd we're say to tenders on

year, And about we're think that we result about I buy that, really likely providers outside come in a of obviously, expecting the and pipes. liner collaboration that. hangers And the don't pass-through this pipe of other now that around growth some that, and there's If areas connector. right you to most think is connector. have if for a as our So, major

specific, opportunities we're really a a at there's agreement, and likely the be that. looking pipe some agreement. there those likely it constantly collaboration on So wouldn't But at global regional looking collaboration be would we're constantly It supplier opportunities. depending

that an until to relates dryhole. this it a think collaboration had on was I of installation QX in expected As VXTe, have we specifically year, get don't that to the see installation. VXTe, you'll likely Unfortunately, we agreement, first a

So we're kind first that that installation. probably the to on back looking at of of next now, at one installation. first square Realistically the earliest middle we're year, for

meaningful conversation other So some we that very move tree one step with very have majors those with it. of But is about are still are really about have that a really to it, excited more still conversations that installation. first continue the way people in to continue about excited in to getting providers

there, suspect a late wouldn't XXXX I one agreement collaboration on So see after probably first you installation. until

Tom Curran

All right.

milestone that look the progress will for collaboration a be towards next its So will potential getting tree? first that

Jeff Bird

yes. right, exactly That's

Tom Curran

growth a tools double-digit downhole another on tools plan, what of should therefore rate? I to growth what strategic full-year. see highest the have year know your and consolidated still XQ of Turning late pillar downhole in be bit Do expectations tools. you given to this margin of had a for the product downhole XQ came the in growth that it year margin relative in that's drivers and basis to seems your one a that start gross might your lines, for of

Jeff Bird

this of an nice categories. product, I a very still for yes. aware, OTC new continues won to driver ago, Yes, are see three The be there. us think De about for tools couple growth really growth We're and a continue downhole years XPak as award growth year. you're we double-digit drivers optimistic to

Middle get We back to expect we that the share of to the start some lost in had East.

now. the over starting we're TIW East very had If right time, lost Middle that the original presence about you that in think to strong a return see they

very, Mexico, be some then general, in now. gain really in East. very in strong America, And So there'll inclusive right general very, Middle of is Latin market the Latin just America, a share just

not a that's So rising as a so share tide. much

gains starting a about about think about strong it and So as will, then to really it you inclusive it as a De Saudi market. XPak rising tide, penetration share of there. Mexico America, very as in think if Latin there share just Think

Kyle McClure

they and pretty to do grow a QX the maintain QX, of growth that they have Yes, nicely But rest Tom. year. did tough throughout expect in

us So that'll heading be a for helpful tailwind margin forward.

Tom Curran

Got it.

expectations new point? How update some just technology you VXTe; your adoption on offerings suite? first of and installations that further are an timing about touched of on Where You about installation. this VXTe just talked the other at for

Jeff Bird

the be talked actually a have to we for as are next that we you disappointment if I product. about look, XXK orders and our to while that an featured installation probably installed track II-E in to orders that, general, standpoint, Gulf now specific that'll right Mexico, XX% is continues expect about the to II-E week And just end Yes system would from mentioned, BigBore so VXTe at record of BigBore of around wellhead in E our just year as you E-series the the then of the XX% we OTC. think get build,

four systems. we wellhead recall, you'll wellhead from systems XX So went to

wellhead that where right is systems dominant the now. system now II-E will four those even got BigBore we've we're inside seeing We that

And that standard get So the very started installs. XPak still a until that's really about De been as optimistic to system.

standpoint. Now, us product been nice for a really that's from a new very, very surprise

Tom Curran

ongoing you're high-level, are to continue the at the company's now had the at you gears you've the you and organizational do progressing changes How making point terms changes underway, this implement Shifting teams? of transformation in leadership to to structure. in,

Jeff Bird

ability mentioned communicated build a franchise, SPS of unit leaders gentlemen managers, the starting of wellheads, products, we're either terms in start are on. those that to barriers think about we've equipment/connectors. in real and of of campus. organization, team you, teams. the inside cost, their areas Those separate really to divide system, problems, Right sitting teams doing handoffs job as are our now we've delivery. created and or to to and the on-time finding teams, we're where now improve our customer on so just now every around terms opportunity current we the subsea And all might I service great responsiveness around what out those And individual to in in very business got Yes, have in breaking so three terms think I in about if teams, business they're specific

of of the communications see costs months, colocate to in terms margin improvement the to customer just I'm more three half year, improved course So start teams even going you're see really improving a next six to those as benefits colocate, over that in going optimistic we're attack back the as just delivery, of way. start we to the the on teams on-time and the meaningful campus. both And in those responsiveness, to improved

Tom Curran

identified line could quarter, last that rationalization, $XX be the you product expound some the to big its take will you'll how you're product step quarter, Have initial be us in towards on executing, at the sort restructuring you you giving in fourth of a of where lines, on And course? and a already updates did should run million with related in that? you exiting be you'll charge

Jeff Bird

result of that. right product executing an I We harvest far million single through done. plan example XX as as give systems. just systems you Yes, of that. when The four we've were you was charge an example earlier, on had a line. in the I fourth line as quarter that assets exit, Obviously, on with a you that, And saw kill what that a and we wellhead would so $XX with that went we wellhead and as every said grow that's now along the went wellhead inventory go there's XX of eliminating lot eliminate know, systems, on update to product

opposed hey; downhole we've hey, we You're product products, do position products exit respective in product pruning us exiting the not wholesale those This terms and lines. wellhead of as say, either of going lines to was lines, tools more we're we're within of product of like to, got confident SPS, we to those like today one one our very going around we're see those a there. surface

Tom Curran

as exits wholesale or foresee step? you next Do planned a already potential

Jeff Bird

we've our -- more much -- think I customers level, that helps we We no. to just a focused, focused. think it's that in more deal, supply chain bypass in and we've perhaps that thoughtful world us issues seen I lines before. and much supply the allows can the mean, great and be live logistics stocking of today. candidly, that just to we chain We to XX No, back and to especially around that like and the keep some these proven four. that more right product coming programs it things It

So product really exiting is more than that type really of it those consolidation it's one of lines.

Tom Curran

Understood.

achieve property the in footprint. eventual do expect is divestiture of of you of underway transformation targeted your aspect million the to How rightsizing Another XXXX? in much the expected $XX to proceeds million $XX

Kyle McClure

Yes.

tell piece month will. million are first on right and to million in time, so year, announce what's have at terms or of forth. going a values around -- nine got either least to property flight perhaps little different longer to But of we right position the pull there market different year-end, horizon, be property now, project should of in tough somewhere that in much we closing probably of I the in in to with our how the the bit $XX million period probably a the million we've by is over somewhere a $XX fact so say longer, So would you $XX $XX to this now think and pieces or it's reduction. much we're going if

in at time. a I'd this number point out So, there to hate put

Jeff Bird

if around the for its you of some what signs, to of have the not you'll you campus think will there, XX see Houston sale but by more XX that, the already, I If acres XX next there. on to way, to though; we'll XX come see days. probably will, already within

Kyle McClure

predicting when cash happen that's now. is tough the and right Yes, to going a bit

Jeff Bird

Yes.

Tom Curran

million? in productivity restructuring separate rightsizing and efficiency think about savings for improvements and from your of And, as we should goal $XX Okay. general, targeted these XXXX

Kyle McClure

of Yes. independent that. it's Yes,

part that's So we've completely terms is $XX which million, of property property different in in costs. getting neighborhood like got, talk But $XX we longer-term footprint reductions, million and savings that. somewhere one goes productivity. our the is overhead million a of The -- We in workstream. to $X about in smaller, that's $XX the as workstream, million property with the the fixed saving, would significantly, taxes anticipate down things

payback to Beyond nice take of We that, a likely a maybe put going have think from ish bit of $XX for sort to to in million now smaller. the think additional investments going manufacturing million think towards both us. in manufacturing. investment But productivity we'll that fixed range. $XX around that will campus a in see $X somewhere is manufacturing we the a the see sale of we're roughly proceeds of the getting We're little a million in combination to what about cash that we'll $XX of reduction right two-year million that $XX that costs, we million our million $XX

manufacturing. goals XXXX then in probably towards that up pick reduction, associated of us late probably subsequent investment with kick campus XXXX. But in will those annually, for beginning productivity until and We won't but longer-term the

Tom Curran

CCUS for addition the products right where other monetize. transition there of you're lot team growth it to growth you'll Are But have that looking comes you'll where opportunities, new should also transition and energy the enhancement exploring? in it in specifically there's a new transformation, when Aker far to we've the be to to the more through interested hopefully, terms of talked pruning, about And side you're thus areas shrinking, collaboration. pushing be effectively concentrating in a where pursuing organization benefits

Jeff Bird

up Yes, about those markets competency. right in are we're core It's really there our matching engaging now. actively and evaluating

our you So core early competencies think high some very of really in early a to because temperature It's right about metal-to-metal at. It's like honest, just will, be to seal got more seeing the quarters, about but evaluating We've we'll right lot that that. of and work, the those now, of yet. a not in talk of those doing But of making high the in if those lot conversations we're match have formula, evaluating identified for probably number a transition coming talking to in success. stages win markets things There but the ready, it's ready we've looking you about there sure And about pressure, still right and in those not to areas. if is those got the those just in evaluating start ability little a be where to right energy whitespace too match we're now. markets.

Tom Curran

expectations you've XQ achieve Got to all and year. year-over-year came to the for clarify you've how and expecting to come provided the in XXXX. we both expectations, returning effect the growth? the top-line XQ XX% where But inflection on both full-year top-line in prior still we now XQ the XQ its see well should terms contribution for margin growth? then XX% what that progression resulting reaffirmed the revenue, over sequential and expectation Could of of as just for -- guidance then of and remainder in for But it. margin just Maybe

Kyle McClure

Yes.

minimum see of revenues probably would about a XX%. we in So QX, growth

tick that margin flow the the incrementals expectation way think see comes quarter. the earlier, We X% for which put to QX, the And part in revenue through. through about it on continue QX just is some overshoot year. optimistic way think depending between that least the continue very pretty think down up, mix pretty to next we'll But start as tick would taken close to to probably see on keep since that's expectation is talked and margins in we eye to want we're I I we've gross the SG&A. XX%, we'll earlier, time somewhere XXXX. is. margins And I at for optimistic to about I and points and we'd will call the us up of in we're growth as going saw Q-on-Q Teams basis XXs on that a XX% call back with of And because like think Our XX% we of been going really, continue a out. middle the cost of it what remainder XXX the the beyond, up see is just to the said on then first

here. or that base getting a revenue just fixed to addition, up certain cost now level on picking the In threshold we're we're

pretty every think through. of see so revenue And standpoint, some we're in for to bring going dollar flow kind we I nice an incremental

Tom Curran

do margin have normalize? reorganization And modifications, completed gross products longer-term, once where rightsizing should you these and you think

Kyle McClure

gross margins I think then gross we'll the overall come overall and we margins, in somewhere mid-XXs. will to product, talk that back to probably but

here, look and to is we're to take the an the of take we addition what internally. we've sort in we products be overall on think you historical further somewhere XXs north that mid standpoint, would would of productivity a gross a are than targeting If the revenues from high getting look in kind done would at margins much at a math the

the to if with in I mid addition both low look of product us see mid bringing the across subsea you that of that to to XXs. probably think probably downhole the products, side going kind tools, On in service again, XXs up house, to high you're to

Tom Curran

free conviction that end the range cash Kyle You give part flow And at that the up year? to for X% you competent be the for in over positive you'll positive and free reverse of to three flow be it the a What guidance, ability ultimately does quarters, as negative remain X%. that came yet, XXXX XQ. next had for reiterated margin free would cash achieve million. $XX able for in negative to the of flow warned you And that a cash in the

Kyle McClure

dissipate helpful. just The obviously think the underlying typically Well, in of improvement lack into one-time in QX. QX payments I that was business have will we

is happen, QX, we around then cash about to a the of QX working and nice various getting think I'd we think of see us QX to And what expect I say as quarter. break-even think components free tailwind I as back So in capital.

In XX free on math is forth sort so we addition, the the achievable we cash. that But that'll confident do and I number of refunds XX help we're that pretty perhaps from bridge gap. think have to probably some if that time-to-time X% through tax flowing and X% to

You actually internal talk better much it than came about our QX; in forecasts.

or off try as to we on to So pleased down I so. that throughout DSO we're the We're XX to QX to move good days going a is to start. about by QX hang nicely think we're year.

know, here. the growing business is you As

working We to functions. to on capital improve are obviously continue the going going DSO improvements and -- AR, relates and those and further. to are hang made we're to be Inventory continue cash great in going we to try we've those to inventory, to and to consuming XXXX it as

Tom Curran

capital. we quarter-by-quarter? cash in evolution XQ and over to working likely expect the it and versus on in What's should draw And XQ terms of What XQ? flow in of homing contribution then

Kyle McClure

see in sizing picking of back break-even beyond working And say somewhere capital But then I'd we million QX; the probably working the back in of in that, capital. working year. half $XX we'll should $XX Q, from on some about half the in range million the the then that call QX pickup lines it up break-even. the and capital probably year

Tom Curran

to be be $XX open an priority, remain and has to million. priorities where And both allocation, and energy will And been annual importance, been you've energy when repurchases. budget then of you've would $XX of three transactions. million reaffirmed order one where -- in M&A top you it number just that Two comes the your capital they've described descending being that share adjacent CapEx which would to for

on Let's that consider you of we in on terms see by you what start with two. Could front? mean energy adjacent? you might all elucidate And what M&A

Jeff Bird

Yes, sure.

XXX% look situations. get So or have landscape, today companies it's that we're sheets, exposure. and some of OFS large challenge with. it's cases, private public sense, all in the challenge markets, whether there familiar In companies very I will that almost at challenge think a They the large you all traditional balance you when

finding you if just something an engineering, as be little but world. gives it'd if manufacturing great. but has you to likely most that strengths That's think that ideal us, something that us products, say, got well. our and also bit has that will, a energy our and aperture and that around hey, That about still diversity, plays more for the I open ideally, exposure, if I exposure we've will. non-OFS you acquisition around mechanical and want business think what core OFS that exposure, we're OFS has really looking we're better you for, But footprint

So the of evaluate that. process we're end being in to very We're understand We side out. look very OFS markets would We as want as we non-OFS those thoughtful want we're make sure well. look starting like. Well, the about of to what about just really is thoughtful business to well.

thinking the guiding develop two going likely and our about we're or over there around next quarters, to three are thoughtful a communication that's more how what principles it. So

Tom Curran

with as any Got pursuit Is side, transaction new you have CCUS energy the potentially you ideally example? energy opportunities. there or you your would execute already of see a identified that technologies on And a products -- on add it. could of focus part we that are for

Jeff Bird

you out that. to offering try CCUS product do we approach for where thoughtful we to a to that develop that as it lot roadmap opposed be buy to we be on the a think is we what around of look smarter product got I know obvious. and development need go at hey sure Yes, how very say, as robust fulsome we around think and cases a, plan to what, this, make internally kind the We've us. CCUS There may

opposed you more I out So that's as energy likely that most challenge in now a be new technology-related, the see multiples large it or that. is and something as infinite to some The acquisition probably business little at a case. like look right candidly

probably us for So I think challenge that's now. a market right

standpoint be you we side. if from a outside may something likely some think As the on energy CCUS, about now product new opportunities. we of CCUS But right find to it's more expand

Tom Curran

million the that us $XX how the it. And should you of down? budget break then $XX just million. refresh Got top priority $XX on now CapEx to to jumping million to reiterative Kyle, could million $XX

Kyle McClure

towards out one on with associated largely We're We've a weighted work year, heavily by normal tools tool Yes, have got going rental in it's going pieces in IT, rental rental it's largely this in be but analysis on just second a we're hang to be to maintenance Yes, tools followed space the we're bit here. we small there. CapEx, the be addition of previous quite going build taking year. this Brazil. to

Jeff Bird

And tools. downhole think tools of combination I well. as BigBore a II-E primarily That's some

for contemplate you down about that. -- manufacturing $XX million for given year. you So CapEx that. for not growth million investment, have us, that growing, the like the mind now, Tom. does lead investment and impossible happen really that that could year million about this a contemplate if it one And if to those $XX about. that $XX It's the like this not in way by think million initial you the something or thing where are is we're those manufacturing will to projects But other or keep the an payment things that It products does spoke Kyle $XX obviously, times all include would

Tom Curran

does sort get $XX assume And once should underway million of it'll over? what that timeframe happen spend we

Jeff Bird

machines, been in. seven placed weeks, months, I coming XX no think once can believe total I we on yet. a There's about every and machine total talk then negotiated, number coming order. place haven't in order of machines we that. couple delivery machine is terms of so that things at And I obviously equipment, first see delivery, looking one Yes, more We're the of like of you'd first

that first So hit every once XX machine, after weeks go we months delivery of think as and about then two that.

depending of likely would that in even on the So the the maybe spend most happen approval that on $XX XXXX. million. XXXX we the in And the of bleed timing

Kyle McClure

we on flow get internally, we'll approved update that Yes, and our accordingly. as cash then guidance on CapEx

Tom Curran

spent there That you tuned allocation to that on with in or would with just third cash repurchase for discussion capital under authorization. on of under math stay And million priority, of allocation third expect my correct. should the $X.X remaining priority we Could priorities XXX,XXX should you for that the more the for excess you remains and the be the go us flow tell of is authorization we'll $XXX million refreshments just as then that. Okay, the existing XQ, leave there? continual concluding shares, is just here buyback capital your

Kyle McClure

at end I think so with million $XXX at million at we've think mean in about of Yes, $XXX chatted this it's point I the And of internally time authorizations the I reopening the this. year. last

marketplace uncertainty how skew now of so geopolitical are with in going flows that trending touched at and forth. continue cash to Jeff We're we think I there's depending on to look earlier. the I a lot think right it, on the

keep perhaps will support times, and but this what in We if a in marketplace as historically, continue capital did There's you opportunistic been uncertainty look at the as stock. just has lot QX, of of we'll I the to allocation parts be so to right continue call the company done, It'll part this beginning has the policy. of QX, our now.

a So here the we're being. taking time I for think pause

Tom Curran

correction, I that remaining under authorization? for thanks million there it, the guess an million so, Got or $XX is additional $XXX current

Kyle McClure

Yes.

Tom Curran

Got you time. in it. or for And XB any don't plan putting of then is like; on opportunistic, sounds algorithmic remain it the kind approach place program is to expected there

Jeff Bird

we the now. and when past that do that's we a trigger. in philosophical and trigger, obviously, we not sure shutdowns to out that afraid, roll see understand just China, match challenge a be to just amount in pull as and we're through we it's like flow when closely I the When We're grid, do But that making thoughtful form underlying the we point, typically now, what I roll pull opportunistic, that to just shown think dollar roll that of those so take clarify, mean free we we in we we that Yes, things as to the place. in out And that now challenge making you've got right we're we've tend in grids we do of through buyback And and the that monitoring tough approach, the say formulas put Kyle's spreading and market the will do Ukraine, a cash it'll decision. the when right way. right point. it's a that to kind tend in very and thing to cases, Russia, grid environment challenge a out put, roll it we match, that when understand certainly

Tom Curran

year. split degree you've BHP, this visibility, And the reliable of high Shenzi Harbour returning for to tree partly I from expectations as sense. such projects, makes Energy's Subsea had stems the order Sure, North, then capture know specific XX perhaps Greenfield new how projects that house? to you phase are or production could trees major installed of field, development those moving either established, between trees a incremental fall into on million XX versus should

Jeff Bird

of to build Yes, existing are I'm on them say going about projects. XX% probably some

trees, that when participate one-off XX in can you the knock in opposed four, case what characterize the capture tree larger new be to from largely Greenfield by that that nice Greenfield eight you're So or learning . trees or orders previous on trees. five, always fact more were a the seven, lot, is efficient find of a those or from the is to an project, of that you independents be about you Those with a we tend IOCs. small serial what in major tree XXs we it'd tree and in there. lot tend thing I large three, to The is well independents trees something, the those participate standpoint, the one standpoint. From portion large way, are number aren't a operational There's as challenging an not are capture projects, get operating things five, six, case to XX, as

progress happy -- that about we to actually, year. pleased pretty we're So as the we're

Tom Curran

market is Jeff, of Why allow to some use how here to seen these it sort cycle tree questions don't remarks. back originating consistent the to Got in wrap last of subsea you, and with over majority minutes we've you with share of progress it, my Kyle, overall it's demand from. concluding where I turn terms yes, few and up the

Jeff Bird

sure. Yes,

we're orders. So, look optimistic at very QX, about if we

As talked or with for standpoint and nine. March in see there with growth that have we this that a trend call case aligned. might hit We've on the and the customers. orders see a we on cases, next believe XX% year to We're pleased and Kyle as and the quite opportunistic overall cost year, once half only a we'll of that, incrementals for a a in those in the is, will order upside from I'm that and orders of it expect pleased of I it fairway, seeing with balance lot stated very been fairway quarter understand, we the back further number middle would in laying some lot year-on-year. some strong earlier, likely quarter year, We beyond. we downhole that, and that about QX to not focused talk but focused revenue pleased what We mean the pillars. going of from way now we're it'll that's have that. believe we the middle with year. start on about ready We're number, a to and our numbers of start about but foundation think with well CCUS. our of those. And In start some Very the cases, our fairway wellheads our see And collaboration. believe but about from strong it's the case backup. with that very base in rising shrinking where the the We've organization order executing real of a getting focused tools success doing footprint this talked on our wide

Tom Curran

Great.

and I to to me think in. Jeff Kyle you of listening all for the Thank there. fireside and for conclude first joining quarter chat for you we'll

Jeff Bird

Tom. Thanks, Okay.

Kyle McClure

Tom. Thanks,

Operator

This for participating. concludes call. today's you conference Thank

may disconnect. now You

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