Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to Dril-Quip's Second Quarter 2023 Earnings and Great North Acquisition Update Call. At this time, all participants are in a listen-only mode and there will be a question-and-answer session opportunity at the end of this call.

As a reminder, this call is being recorded.

At this time, I would like to turn the call over to Erin Fazio, Corporate Finance Director for Dril-Quip. Please go ahead.

Erin Fazio

morning. good and you, Thank We appreciate call. on joining us today's you press under have tab with An Great and presentation posted acquisition. the announcing the North release along updated investor website been Investors the company's on earnings release the

on with the and have the details be a be during replay Great We call call. This available may on today's that will additional call. investor the acquisition is posted following an referenced also company's deck website North being made recorded,

second like to include quarter actual would of financial results results released for you that of that discuss Before financial operational or may I yesterday XXXX we cause should results variety we expressed announcement remind measures. anticipated reconciliations full statements forward-looking Dril-Quip's comments materially and from that expectations forward-looking forward-looking the disclosure statements. non-GAAP non-GAAP Dril-Quip's begin, differ factors on could a these a and statements to and the be to measures. It in noted Please refer

on and Speaking Officer; Vice from McClure, Jeff have Kyle and Chief we President President Dril-Quip, and Financial Bird, Executive Officer. call Chief the today

would to now call the to Bird. I turn Jeff over like

Jeff Bird

us Thank you thank Erin, for all you, joining and today.

our saw of QX As we the earnings releases, in as you Great as well yesterday's XXXX announced acquisition North.

welcome effort expand to our We Dril-Quip team portfolio. to our strategic significant to North are and excited a the well Great in this acquisition step is construction

a year a for shareholder at found a creating our terms. strategy We've North to the put allocation of to high-quality the now are Great been opportunity cash very value. example purchased discussing inorganic our that right is right about and asset excited we capital perfect work

touch I financial acquisition Kyle and on operational for quarter. into details, deeper results the will dive second we the our Before and both first

by upcycle QX. out to expectations million, of quarter, line ongoing the key strong market is We markets. coming revenue of which the delivered the we the in communicated $XX.X offshore produced results supported in During second we with

quarter to to second quarter year-over-year. and however, cash organic gross we flow continue quarter, EBITDA the Our remains operational flat on greater $X.X was organization flow and Kyle for second XX.X% drive free Adjusted sequentially our healthy on across sequential execute will efficiency. margin million, during of the initiatives we Notably, generated into go movements. improvements. down year-over-year strong free detail and $XXX,XXX showing cash the the positive

be The quarter $XX.X XX% Products shipped were of as Bookings and Great XX% acquisition sequentially our an our with of the with segment booked, X.X was Subsea the primary our of our more billed Products line backlog North, ratio in should and revenue is for increase our within times. now noted million, Subsea prior guidance. in business. QX that It than segment book-to-bill

of growth second backdrop for with representing our X% in that sequential. positioned confirms backlog quarter XX half backlog, we well and $XXX a million Strength of During existing the called saw end, off from open XX second MSAs ended wellheads in We underlying quarter we the market our combined strong as had XXXX. MSAs. are approximately we the quarter, of confidence of with approximately

We operational second in had also the several milestones quarter. significant

qualification when mindset Brazil. passing Our in and is project second Petrobras outlook. These growth the exploratory driving it customer-first comes new some anecdotes fueling success incredible of innovation a stories half wellhead the requirements to include for testing

the stringent Petrobras' growing the Brazil. markets excellence who in excited only I'm of our customers provider we continue are requirements, We such level to about and wellhead very key as provide has met

the our X operator. hangers De we of from the to an MSA first off XX Namibia liner were XPak segment, Well qualification Big systems, of major of Additionally, in a quarter there XX awarded a of the wellhead attributable which In in were call was directly success. Bore Construction

growth previously related of We dormant first are region. very optimistic to this this tranche the is

extended liner team in in operator one installed Alaska. the well The well The longest lateral the liner install and miles, overall construction hangers is locations. world that and major its of over of reduce carbon a floating a production drilling footprint operator a for wells reach minimizing link X.X to ability successfully the cost hanger length allowed a by also with surface the to of its

investment Finally, bit in inject energy team. storage transition purposes in a second over quarter about Denmark. a our the used for equipment was spoken past to We've permanent for the COX in project year of our an

excited are projects. early very contributing important to these We to be

our I'll turn that, Kyle? financial over With call the for on results. color some Kyle to

Kyle McClure

call. morning, everyone and Jeff, the Thank joining on us good you,

decrease Second coming million, we revenue we out what quarter X%, revenue is which of slightly as at down $XX.X was achieved. revenue reminder, Sequentially, flattish QX, guided a was of year-over-year. X% a

a flat the was Subsea results. services year-over-year by driven X% was Taking tied the Subsea Subsea Products QX. decreased declined shifting the to customer of to compared X% of segment and revenue timing sequentially, the sequentially, XX% look and delivery. quarter year milestones timing within prior the into which was which at Product certain

sequentially, year-over-year pricing in Construction the past over the and and grew impacts Finally, segment Latin reflecting in America, strategic increases Well deepwater market activity X% XX% share year. advances

Gross initiatives margin is points was and organization. to pricing product across in due XX.X%, ongoing mix, the during our XX the year-over-year. margin improvement up largely This in gains quarter second basis favorable gross

Adjusted what $X.X million, which ago. reduction year was the increase $X.X timing Versus was adjusted Products million, driver of The for of coming EBITDA of guided was to for customer revenue out last EBITDA from was quarter. decrease of Net a flat, year-over-year. X in Subsea we million quarter was quarter due the delivery. the year-over-year $XXX,XXX income $X.X QX an

now bookings. to Turning

market, for uptick and an $XX.X quarter. Brazil, America for as year-over-year especially in East, XX% in Middle versus up see Namibia. prior Latin to continuing the the re-emerging million, are such the offshore demand were markets, quarter We some second drilling and XX% Bookings

flow $X.X This Free the driven quarter operations working the capital by at positive a of sequentially. quarter, Cash related to in second normalization reduction came by million second $XX.X DSO. the cash provided for $XX.X of was improvement receivables through million. in significant million was in a a

we period finished year. mentioned related anticipation second the in $XX.X of as our to was Inventory million, was growth manufacturing in for previously down investments rental majority a CapEx the in already cash quarter the staged was of which of the in work half wellhead second tools net the goods use and of secured.

closing of to received we refund North. add long-awaited Additionally, Great sheet IRS will of a only early July, strong during $XX which approximately post our balance million

turn over I'll talk Jeff through to acquisition Jeff? Great North now back the detail. in more to it

Jeff Bird

these into why acquire to are more There reasons have Great each decided in detail. key of we Thanks, Kyle. five I'll North. go

expansion market. addressable is an of our First, wellhead land-based this

Second, it metrics. accretive to is financial immediately all

industry-leading revenue, balance through and reputation synergies. Third, And our retain with Fourth, North capital identifiable cost Great and of and flexibility the Dril-Quip. uncompromising finally, financial sheet. working client-first their matches achievable we mentality an

completion provider mission-critical, differentiated brings with and a reputation customized of and for a diverse Great employee proprietary solutions. North Great wealth engineered leading a products blue-chip of to expertise a delivering solid highly base of wellheads is North a talented base customers.

and services, level is thermal on include existing well Dril-Quip's an of our Great to services, existing include within products, on time while earlier. as excellent which applications a service North's be mentioned construction segment, quality. well will engineered and rental integrated solutions products land-based products North's field construction offerings segment, maintaining conventional similar focused Great I very delivering and model which highly

comes which of from engineered wellhead the include of and Approximately XX% sale customized products revenue applications. surface and services,

hydraulic of solutions, efficiency fracking. improve to the and is rental comprehensive XX% during operational a revenue to of safety Another related suite are which products designed

provides to exposure our emerging largest portfolio market expands enhances Great service our North onshore to America the service Dril-Quip's locations acquisition carbon This expand markets its This also North position shorter in globally. further which throughout the access Canada, us market. through and and geographic capture, storage production is utilization the land-based presence. cycle technology fourth

expansion. will temperature extending pressure, Dril-Quip's Great products Great to and and technology extensive North offerings, services expand metal-to-metal footprint product further international new global combined their Dril-Quip's and This to accelerate higher-end high allow enhanced serve existing high will with customers. sealing to North's

our annual $XX global to enhance million and it Not land-based synergies market this significantly anticipate the international to range. addressable revenue our opportunities need, million will expand meet for $XX wellhead. We customers' only transaction total total in will ability our

be estimated through supply Additionally, Dril-Quip. cost Great $XX approximately North chains annual synergies million regional of and the cost combined best both to are

in As transaction the the key we work organizations. through The balance gain efficiencies company to accretive both that combined sheet, year. has to measures integration, financial a debt-free capital we in working also first anticipate expect we will and all be

the introduction the acquisition in a high-quality mentioned that highlights terms. at the of merits right asset this I finding

a and continue on XX% cash We to additional offer inorganic the adds flow in this transactional to combined approximately year. free organic be our first allocation return capital capital strategy. flexibility expect The invested

our acquisition in Great step offering, significant a we for an construction our flow. capital, Dril-Quip, free taken differentiated we've North, effort Great opportunity customers return a adjusted EBITDA of through of cash This will addition portfolio. and improved expand our the confident is are on With product to that and both the shareholders benefit exciting strategic invested and North well

new win. from review turn forward welcome would team I again over stakeholders terms of once to the Great early before I to Finally, transaction, our year look the updated the all on integration members of our the to call progress to We back team's like the and Dril-Quip. North to Kyle the full updating outlook, Kyle?

Kyle McClure

Thanks, Jeff.

basis are we for North price on upfront terms consideration $XX the which of cash-free of for acquiring adjustments. million, total to As is a debt-free deal, approximately Great customary purchase subject the

of are growth the North. to revenue to the course be potential as earnout $XX XXXX paid are met consideration, approximately of there and XXXX by over addition Great million certain In targets upfront payments

We ample evaluate allocation high operations capital incremental liquidity and our continue to to to return upturn. have fund

cash day flow will adjusted mentioned accretive base. X, on an North on be return As EBITDA, Great earlier, and invested capital free

I our like XXXX. note some that outlook would said, for to changes to With

remaining from We acquisition revenue to XXXX previous account Great North the up our raising contribution the XX% of [ph] XX% growth, the are in target five XXXX of months. in our guidance, to

million. expect in be to We range revenue second million $XXX the $XXX of half to

to XX% We XX%. million growth expect approximately EBITDA We over XXXX are $XX maintaining second now XX% XX% We product year CapEx to bookings XXXX. expect adjusted for in half [ph] to full margins be

elevated reminder, close in overall is CapEx Houston. this in million Subsea a mentioned wellhead manufacturing investment As $XX as we our out year previously

run X% Going revenues. forward, CapEx we needs, X% including around to to to of expect Great should overall North see

positive the be to flow in cash free third quarter. expect We

and we paid of For the the to flow working be net being build require out business manufacturing use in will our capital year. investments $XX will free this a Subsea anticipate of continue Products wellhead as growth cash in XXXX, majority year million the a full

remain capital Our the allocation priorities same.

investment are such high-return prioritizing in wellhead manufacturing. our initiatives organic We as first

construction continue well expand and will to deliver our evaluate portfolio significant we Second, opportunities accretion. incremental that acquisition

cash free will we flow. Finally, our continue returning buybacks shareholders to via line cash in evaluate to stock with

our concludes commentary. That we'd the questions. Operator? for line to this point, Okay. open any prepared At like

Operator

As and questions we time, you we thank at have this this conference, no lines participation. you may at And for your your today's will conclude this time. disconnect

Innovex Downhole Solutions (INVX) 1 Aug 232023 Q2 Earnings call transcript