DRQ - Earnings call 3 2023 | Innovex Downhole Solutions Inc

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Operator

Good morning, and welcome to Drill-Quip's Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. At this time, I will turn the call over to Erin Fazio, Corporate Finance Director for Drill-Quip. Please go ahead.

Erin Fazio

Thank you, and good morning. us call. joining you appreciate on today's We An Investors along tab presentation has with under the been posted on earnings updated release. investor the the company's website available a This call. will recorded, is company's and call be following being made on the the website replay

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

call now we and the Vice to McClure, Bird, on have and Executive would today President call Chief to Speaking Bird. Drill-Quip, I Jeff like Officer; Officer. from and President Jeff Kyle over turn Chief Financial the

Jeffrey Bird

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

During line XX% results the year-over-year. that strong top delivered and XX% up sequentially were quarter, we third

the to strength East specifically a we Middle saw African America, addition key end In from markets, Great in Latin strengthening further and the revenue market. North, continued

in and This some timing. with service directly guidance, consistent and do very rebound impacts a expect a segment expected. was lower We both ability our revenue as While revenue QX. rig in result, segment delivery delivered our as we our customer-specific service did our a see headwinds availability of higher-margin market customers, than certain result tight to FPSO service to rig

the and the Middle call-offs more quarter timing we of which in certain of tree timing will East adjusting orders. slightly in directly Kyle XXXX, as impacts Latin bookings, certain availability for into as outlook the specifically our later. also are go subsea detail fourth Accordingly, of well MSA the America The

the result rig sequentially and $XX $XX.X a Bookings decrease FPSO of were a in the as of timing. million million, quarter

Master up million, third the we agreement call-offs which quarter. Agreement $XX as development bookings is to we most occur of also award the valued were pre-salt their quarter, in the the soon and notified the of for the of months. This included During at first Petrobras against tender expect couple as is supporting Petrobras Service to the wells of an incremental in project next not

and We our ended long-term with The market our approximately MSAs the million with underlying supports the have confidence $XXX XX over in of quarter open backdrop, our backlog, in strength backlog. outlook. growth combined

or current of and many XX% ship a book lead times. as given against we've call-off and is approximately As product reminder, MSAs business across our lines reduce standardization

was XX% $X.X healthy, quarter and for Our million, gross Adjusted continue the our remains operational second to up initiatives million across million second execute the margin quarter of sequentially and on EBITDA organization we efficiency. to drive up $X.X organic $XX.X year-over-year.

Saudi improvements the progress recently XXXX, quality this of service enter made the their in the quarter Arabia. of A of I believe we awarded quality and final As is and operational Congrats position with in for has terms excellence. excellence. example to service team our service both #X Aramco continued good team excellent

has the to has and with completed team plans supply great exposure top a producing addition done this North North integration job back Great region. the been with largely close, underway. North quarter. since we results the acquisition but not Strategically, team with Adding chain the Great since well accretive, first of to our Great office financially portfolio complete work now excellent XXXX a producing optimization The also adds only

early initial chain have utilizing year. business been created in first deliveries occurring orders purchase Great The our next supply with hanger liner North

recognized starting chain $XX million, We which of synergies supply late annual drive continue be to approximately total will to XXXX. expect in

establishing coming on sets. framework our North seeing a diligently given technology is North a we excitement look Great customers surpassed our the The across cross-selling result. team customer the Drill-Quip as also revenue Great to from globally incremental forward white about opportunities for expectations, and working products and space and The managers our has country

to investment The the expected third footprint approximately year simultaneously optimization sale announced equipment the last initiative close we year. initiative Houston the has These progress quarter are run a while more to pay campus. proceeds expenses in for expected million, Houston to our late from to of $XX year. the reducing this the continued operating for in building with than of in be proceeds cash fourth Total manufacturing

was existing production machine drive anticipated first are for time will machine wellhead machine spring the The deliveries final we currently and announce lines. late to testing both to in that excited which occur delivery lines. improvements and delivered this cost next quarter, subsea product our our I'm year, alongside are

commercial and Africa growth agreement our Coast we country, where products Ivory signed in service markets the base key delivery player. been the quarter Simultaneously, have several of also underway, rental the subsequently first in of is our by wins. We supported key investing new and and new in recognized a recognize tools this

big wellhead we hangers well region. Brazil, notable team our complement by customers, bore in a market In to to entrance sold two technology construction different making our leading our liner to this first offshore the

this with X-month increasingly equipment. adopt connector North total time the cost-saving had line Great record multi-well revenue Canada, as In and customers a frac

project used in Finally, was New the third our quarter in a equipment in Zealand. geothermal energy

their about steady these the we early the still in our growth potential While of are projects energy and transition achieving. stages, is team successes type of excited commercial very are

a growth enter the a These strengthened systematic, on continuing deliberate upcycle. of adjustments foundation ability and and Drill-Quip to investments with have set up capitalize to XXXX

as return product confident some refine are that provide our customers schedules, mix drilling near-term long-term we While be their we our there to on will challenges ability may in capital. navigate profitable

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

Kyle McClure

and Thank Jeff, everyone. you, morning, good

and driven of Great by and strong organic Q-on-Q. with was sequentially, Products As of XX% added quarter revenue another led Jeff sequentially, addition XX% which XX% million $XX.X mentioned, third million, growth the increase an XX% North, or of by Subsea $XXX.X year-over-year

Services the Taking the milestones a Subsea Products Europe. grow which X% in the but, year-over-year schedules look drilling year up segment the double digits sequentially. delivery compared XX% in and revenue XX% quarter customer by prior expected right. for X% to and results. was was increased has certain Jeff mentioned, sequentially, of segment sequentially driven customers moved This to at as increased availability certain rig the Subsea was revenue to

offset some and Increased and schedule delays Gulf in of activity Pacific. customer Brazil in Asia Mexico the weather

of reflecting Saudi activity Well Construction the and XXX% Africa. addition Finally, Great the increases Brazil and year-over-year and West XX% Latin sequentially, America, North segment Arabia, grew in

installed future hanger liner which Brazil a in a mentioned, we our first going platform As for we for is bore big be great growth. Jeff think to down customer, deepwater

ongoing during Great the to margins were our basis North second XX%, and due addition Gross improvement drive across efficiency. in approximately largely the up year-over-year. the XXX is organization of points operational gross to quarter initiatives The margin

Selling, flat general higher and million, debt and compared roughly by sequentially Great North at million. an were of slightly administrative Engineering $XX due and prior reserve was increase addition year expenses XX% expenses to to the which expenses the sequentially in to up activity. increased $X.X driven our bad

year was $X.X quarter X the EBITDA ago sequentially. increase from and $X.X Adjusted million million, $XX.X of up million for an

excess quarter, quarter, totaled these All and to the three obsolescence would debt, we discrete liquidated a expenses we of million During and not the related recur. few incurred which in damages. approximately $X to inventory expect bad

the improvement by quarter consecutive cash quarter second in prior was IRS $XX.X is of came provided cash flow the we Free Cash DSO million and an $XX capital and an year. in million which third through positive working refund for $XX was our received million third XXXX. the of the for the sequentially flow in operations reduction $XX.X quarter, the highest This by figure at of and normalization positive receivables quarter approximately in a a driven million. $XX.X to from related free since million,

Inventory North, approximately adjustment. use was in work utilized materials in We the upcoming the bound quarter to period of in quarter million working the capital anticipation Great inclusive tools of acquisition to rental largely of secured. driven growth. in already was of third million, we $X.X normal a $XX CapEx as complete stage for net continue by the cash

investments to quarter continue fund liquidity and Ending to operations end, to ample we and evaluate were at incremental and high cash, $XXX opportunities. million equivalents return our have cash allocation capital

to outlook the our I of note fourth for that With would like XXXX. quarter said,

quarter to to We expect million of million. fourth revenue be the $XXX in range $XXX

end X range million. in be of bookings that over size, mentioned, We significant $XX expect in includes that, as to fourth subsea fourth quarter. top The be Jeff in potential quarter $XX million the range to bookings million the of comprising can trees in $XXX

CapEx And come we next our fourth in investment Houston to be XXXX fourth expect in approximately EBITDA We of margins equipment, $XX announced online in XX% we wrap XX%. expect quarter will which million quarter manufacturing as to previously up our year. adjusted the

cash free to anticipate expect the XXXX, the quarter. fourth a positive net And We flow full flow. use in slight to free continue year we for cash of be

revenue below results growth a direct a mix, quarter on and our to our which due Great in with business. largely our impacted expectations strong of Subsea were impact QX, In delays, expect summary, into ramp profitability. full we a which higher-margin sequential QX rig Services revenue had Heading North

add free out In cash to we as addition, solid balance flow clean another we sheet. quarter close year anticipate the our to

open the any for to like we'd that, line questions. Operator? With

Operator

is coming from Eddie with Barclays. question [Operator Kim Instructions] first Your

Edward Kim

Just light this orders wanted to on quarter. touch the

to You expand timing I this I get just that's experienced? there's apply of have timing. I comment? going the FPSO mentioned would FPSO And each one a the But production rig upon delivery and to, bit could which take no customer thought makes if, you this you first mean, guess, FPSO sense. the availability place. regions other. the rig, if be drilling delivery But can't independent drilling curious and that would

Jeffrey Bird

Yes.

about order a general. in trend just bit little So

that there around we're availability of of where tree there and where we're rig and some The might some the that. availability. more call-offs We specifically also seeing So that to our seeing Brazil, like rig that. in as is customers some around result orders a delays fighting challenges things FPSO related on see Middle smaller for be specifically be would East,

if addition our MSA. right now, I But Eddie, North, call-off look the of trend, against step bill broader and just XX% at Great and and/or book with order the business is about back of

and really that bill, an little business. all MSA. Well a almost now Subsea business, MSA, Products from Construction of is and one obviously bit book Well and the or backlog that about Construction Services think a our that from of book call-off is leaves business is call-off business bill, order really you all maybe So and as

have wellhead even largely now And are that, well. the of that as inside we call-off

of about into only Petrobras would million the $X million backlog. the award Petrobras, have into $XX Traditionally, that $XX we bookings million the all of and Of million you $XX about mention and have to recent on bookings that up think million, goes $X would backlog. million. or would So that on gone been have goes gone into or actually $XX the got

an model just So different we very seen now might order a standpoint. have before than from

the bit on to construction, call-off. But million fourth something the the of the as about those to then tree $XXX,XXX Obviously, order $XX Those $X it small Kyle Trees as well as scope at orders. little have project. depends could be earlier a largely million million, relates trees. scope in quarter X you million are the small size from the and large of to and of size are $X and a talked $XXX can anywhere And the trends. end

you a have X, pretty set just even. XX ago us than products might of So now for years remembered diverse

Edward Kim

And you bookings quarter of that range? just million, levels. third $XXX to in a it. guidance $XX gives that quarter the fourth Got is on big confidence of that kind step-up What from million bookings

delivered, preliminary I the bookings would think rigs separately, and increase become book as kind And XXXX? year-over-year. get of more thoughts your would any that available for on FPSOs

Just any bookings? on preliminary thoughts 'XX

Jeffrey Bird

yes. Yes,

will X customers. So are ramp. the visibility trees in that largely timing of That's good for dependent the number ramp on. based we've be FID to QX, got what a It on

that on a customers little probably rig a you are rig, high tend probably rate higher our be tougher availability customers SPS and environment. rig for As more to smaller in know, interest fighting rate, Eddie, reliant the

inbound will and X the end range of question whether just up So in in a be around that in we QX It really timing or it's confidence the will the QX QX, have dictate kind quarter. trees, we where that in orders.

pretty I constructive next If pretty out to a look optimistic. see year, we year, next market

Just from number there all getting year of customers our cycles right indications early are year. their a and gauges right next now, budgeting another now strong early but

Kyle McClure

up we years, got and QX ends It's for at QX. us. The out looked I what of back to QX we've X step-up go coming know, always Also, you almost if don't look, this XX is doubling as to there well.

expect So QX. pretty we for flow a decent would order

back, go we -- we typically at effectively or back, the case. what back, have a that's always you it If is least seasonality X if to and we been X years see, went

Operator

question-and-answer our conclude does session and today's This concludes conference.

lines disconnect your you time. your may at You participation. Thank for this

Innovex Downhole Solutions (INVX) 27 Oct 232023 Q3 Earnings call transcript