FET - Earnings call transcript Q3 2017 | Forum Energy Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Forum Energy Technologies' Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and instructions will follow at that time.

As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. of President Vice Traylor, Investor Relations. Mark proceed. Please

Mark S. Traylor

your Iyyanki, you, Energy Technologies Good us Chief to are Financial and Harris, Gaut, and made Litigation conference also morning, available Forum questions, the today be the the Prady remarks formal on Chairman, our available to and it for Officer. Q&A. is welcome statements including forward-looking present Executive We third our With include Officer; Private Jim call, issued Thank The may call. an during statements Terrance. within earnings answers of Chief conference our quarter to will Cris release Reform last earnings XXXX night, meaning this website. the Act. Securities

events Exchange such in materially filings undertake implied and our have to or do expressed obligation, that or involve reflect publicly forward-looking to by that Those things, earnings revise the call. statements. ongoing those release future differ than and update may statements Forward-looking any not this or statements any and or uncertainties with that from in risk arise include, in circumstances our we that information law, to imposed matters Securities among risks described other results Commission. events, We cause after other actual

information In may statements include only time-sensitive this date addition, conference best last call call. Management non-GAAP that judgment of management's reflects contains as measures. the of the financial

pleased release. Officer. call our following Iyyanki, the a weeks our Executive call Prady? For I'm for call on measures, the available over our earnings being call. This be website recorded. the turn Prady these to refer replay Chief now will reconciliation is to A of of to two

Prady Iyyanki

to strategy areas, everyone. quarter Harris operational to Jim financial third discuss provide in over performance. to turn I'll Thanks, Mark. some I'm the details provide our going call Good on focus morning, highlights. Then and the

logistical delays. results of Harvey due quarter and quarter and to with line were Hurricane third the impact customer Our in the second

of achievements sheet. terms of segment had increasing North portfolio strategy several America significant We portfolio our In call, expanded Tubing, to our and Multilift balance M&A facility our with acquisition last We the Completions making our we repositioned strengthened to that liquidity our since Global land our take and our and exposure enhance and opportunities. increase our credit our advantage ability Completions largest refinanced of recovery. the to

generate increased and sequential We P&I in to Completions continue segments. our bookings

North Looking in forward, in into positioned to advantage strong we the quarter take XXXX. are America of activity well a fourth and Completions growth

about of Our the Completions and now XX% Production after our Global are Tubing revenue acquisition. & revenues Infrastructure segment

revenue. Our onshore is exposure XX% of

America North revenue. Our presence is XX% of

are now the focused P&I manufacturing and markets. see the segments capture the We in to supply we the core levers on Completions three to ramp up opportunities going growth. to on in market We're and our deliver chain executing

North share structure profitability segment. driving market and and land price increases cost Middle the selective Subsea And the America P&I gain East by Completions further Second, streamlining the markets. and & in finally, Drilling of improve in

year, and Let torrid The these to expect XX% has a last we revenue over levers. give segment me pace. grown on from demand details at continue Completions more

are market through we support result, and opportunity. going facilities new have Completions to P&I We're employee a segments. the not and leadership capitalized address on fully have segments in in and manufacturing supply response, profitability and the products moves in hiring, As and new issues. we growth experienced Drilling gain market In inefficiencies yet we chain the underutilized leveraging geographical further will these improve & and chain, These share manufacturing market supply expansion. Subsea to with these strengthening

such in and internally products. been attracted these J-Mac with going those of Race Arabia, Track We as connect trailer, developed such And XXXX. will several in robust also facility acquisition, new additional pipe, suction quick with of had products coiled a of operational gain success and power all Arabia, We new fully ends, had line will have from start control momentum and lift products. products have artificial through with the gain globalizing being manifold, great new XXXX. Cyclone new further collaboration into SandGuard valves pipeline will and manifold the developed we customers further ICBM Many have existing pressure our as be we've a DURACOIL, obtained These had in which moment Forum customers. good business contribution manufacturing built our our Saudi and

Middle across expand market in our portfolio. product We share East also to our opportunities the see

see profitability, savings. to operational procurement will of operating manufacturing better of terms In the continue cost margins efficiencies, including we our benefit and improve as absorption

we're addition, pressure beginning in quarter. improvement which to orders In in pricing the some realized of pumping third was see products, some for

market structure, We continue to strong segment levers positions growth. incremental for the Subsea margins. & improve three to our focus Drilling particular, America combined within on cost in Forum rightsizing profitable These North the

an including $XXX and $X.XX of ahead expect to fourth $XX EPS look $X.XX. of XXXX, Global range Tubing; demand million, the As our in U.S. around as to to for of we the market; range Infrastructure the EBITDA land to to million, million in activity the revenues we $XX & consolidation Production and to continues to Completions which negative increase of million to quarter $XXX segments be improve implies negative

to take Now, Jim? me you Jim through ask our results and position. let financial

James W. Harris

third drilling completions generated and Prady, strong everyone. remained Forum North this land, as and good our you, market. of activity Thank revenues morning, in XX% America's quarter The

near-term indicator is For consecutive the orders, increase in of a quarter, fifth an good saw we which our business prospects. inbound our

third an in level quarter. second were X% during the $XXX Forum's total the million, from quarter increase orders the

Orders million XXX% a in ratio lift due the company as XXX% artificial segment to was our in whole. of spending The a quarter for pressure ratio third book-to-bill to pumping resulting book-to-bill on equipment. $XX customer Completions increased and sequentially,

ratio even a In for our our and Production We II Edge was XXXX. downstream Completions book-to-bill to & chunky segment reached segment production into of the expect relatively the continues offshore equipment X%, quarter. resulting XX% improved orders XX% the to the Orders the Valves site bottom. the demand domestic which ratio record were activity for achieved recovery Subsea the count level Drilling orders in an for drilling in lag, segment and were fourth for Orders Infrastructure lower though received of prior equipment be of for our customers for we flat XXX%. our book-to-bill strong segment, specification during quarter. & well the sequentially low have and activity. XX% in our and level and drilling for weighted rig a level equipment Orders orders and the activity. will Orders quarter, rigs. more closely orders quarter. upgrading and strong our period equipment for were gas Orders were planning up the will And subsea international under & just in a feel second down equipment third desalter with Drilling non-oil in remain towards Subsea quarter extended XXXX our follow of as at the our are

third million, Our a of sequentially. $X million decrease was $XXX quarter revenue

was net million and was $X.XX, EBITDA special per share loss adjusted $X adjusted excluding items. our Our

third XX% segments. manufacturing in foregone affected company by This absorption experienced Hurricane and base all directly provide employee by XX results. and adversely operating indirect of our of over impacted were were Harvey, customer, facilities, revenue under of million. quarter our our reduced results logistical income will $X and on by the resulted representing summarize segment delays. quarter cost manufacturing of total impacted also the the and the details operations effect on Third which results The basis additional and sequential approximately for I supplier a quarter storm.

increased Completions revenue Our construction in customer sequentially of segment on America. XX% well spending $XX higher as activity North completions and million improved

quarter. items segment products flat up to X% revenue valve lower with drilling of in rig XX%, of equipment was of million The of revenue Infrastructure production $XX segment was $XX the due while revenue improved primarily with Canada, net The due Drilling was & Subsea Production upgrades. associated million sales & to sales down well site products loss prior $X.XX Our loss impairment. of net third the these excluding and $XX $X.XX foreign and million the associated expenses, was for on share. taxes of or $X income dollars adjusted for $X quarter million charges $X.X for asset basis and per was pre-tax million a transaction items included exchange million per restructuring The The special share. intangible quarter losses

the quarter, quarter. negative for free net in capital million. Our negative continued build third expenditures cash was will in to quarter our the flow flow capital working increased revenue more due cash be our free one With $XX after in expectations fourth

continue expect XXXX of as the free positive continue We in to be improve. first cash earnings quarter to flow to

net quarter million. expenditures third in $X Our the were capital

Arabia Saudi capital expenditures, production in which below our the new in XXXX million our investment $XX budget. Our in should come include facility

October XX% Forum pipe. XXXX, with a approximately quarter million the ended We is coiled acquisition closed the debt and approximately on the provider strong. remain we $XXX position coiled million financial We and $XX no available shares Global stock sheet with X, cash balance early Tubing tubing bank in strings acquired of Our for Global of July On common for cash. Tubing outstanding. of million in interest and million leading $XXX XX.X cash. remaining and Multilift using hand of line

through refinanced consolidation quarter, revolving respectively. third midpoint the our at fourth us the the our of the included core pre-tax our million Subsequent of our over Global an consolidate however, credit results XX%. acquisition. With quarter, new Global credit existing our On that the with in this growth the XX, liquidity Global in revenue our Tubing's in pro in $XXX our facility segment. consolidation XXXX, effective XXX% segment the $XXX to the and XX% of have of a and $XXX as Tubing facility Global our of quarter, segment. EBITDA million the with maturity. basis, million Beginning in results XXXX, equity and will been results interest have $XX.X Completions Multilift and future will included our quarter forma Tubing Up million Forum's This Global Completions $XXX would extended with forma Tubing's our we we revolver the the , is to over third recent expire quarter, acquisition and Tubing, for to asset-based we for largest and set EBITDA full Pro of of in guidance incremental following October third million was of business end revolving the Completions new be third plans. end leaves

the total debt bringing net Interest to share third XX.X%. debt interest Net was weighted diluted at impact the options. our current on million in approximately in $XX million and in the the of fourth the expense was was Our the and fourth to be again once the to million, quarter XXX count amortization was will When expect shares profitable expense shares quarter of million, be we million capitalization Tubing, of and expense up Tubing amortization $XX $X considering net for the Corporate and $XXX turn share $XX will fourth ratio a were accounting quarter. depreciation for million million third acquisition. $X the the approximately count basis, quarter price income for XX.X expenses fourth XXXX. XXX we expect be the in after we increase end XXXX. quarter shares average third at line quarter million share Depreciation adjustments the to diluted in $X and purchase the include to Global and expect them quarter, in the Global quarter including we million million

the on our Our fourth adjusted XX%. rate the approximately effective We effective quarter loss will XX%. tax rate estimate be for quarter tax third was operating

information website. on more about the For release our review please results, earnings our financial

to call the back over turn me Prady comments. for Prady? Let closing

Prady Iyyanki

and is XX% environment Completions summary, our In are revenue which now robust macro entering XXXX. the Infrastructure our Thanks, Production base, Jim. into for segments, & of

question. segment, XXXX. the open structure is questions. in will flow line segment, accelerating cost first we in Subsea for & your the point, for quarter first interest. the the of At Completions positive Our near-term ramp-up please Drilling this We focus following: thank our Operator, in on free take our cash the the executing streamlining you

Operator

Thank George O'Leary Company] Company & our question comes from (XX:XX). (sic) [TPH first from you. And TPH

open. is line Your

George O’Leary

guys. Good morning,

Prady Iyyanki

Good morning, George.

George O’Leary

Just me a the Completions from quick side. one on

you Given point kind the expected in trying direction you, incremental Global if big that color the on Multilift And, there the your of provide in the into fourth could curious to helpful, guys, Global impact any have for pretty Jim, acquisition Tubing revenue and business. comments of us your rolled in quarter, just a just is Tubing, sequential particular, but the in in needle kind were Completions mover? given increase results, dial

James W. Harris

Sure.

incremental EBITDA and we've the with remarks other depreciation than incremental on probably the in terms of coming So, tried quarter per through and share. this given our give detailed we earnings – guidance George, in ever we've more revenue, changes given guidance to And amortization.

we the can And in But obviously information a in revenue through. think the XXX% I'd we're for say, be acquisitions. sufficient incremental Tubing major the I basis. that's, should about we've there, we accounting seeing what back coming details to we EBITDA for and to as able So, talk Global go on that the in of you think piece what fourth the be having consolidating fourth quarter. the from of how is much quarter given a contributor in for to But I into those coming that's have

George O’Leary

Perfect. Okay.

challenging it of quarter definitely But traditionally helpful. little to off bit And rig there. more very a is because progress little incremental the and we bit fourth appreciate activity trying a what push key do as color. Just I then, makes It's folks the into doing.

activity a lower. count you important a little if The just is headline of was just slowing as bit? into more moving with the completions bit quarter fourth the is metric think count earnings, be well the a to rig count curious sequentially? a orders today. move we're and could we I as I month far how frame moving still the we progressing up following seem Are into thus orders just rig quarter

Prady Iyyanki

in saw Prady. – in is Infrastructure. the and the What in particularly the we quarter across segments & Production orders spite up this were, in Completions Harvey, George, saw we third of in the also

Infrastructure we quarter based at in and know on & continues also Going October, in momentum that what least Production Completions fourth in segments. the the to

George O’Leary

great. That's And I if just Okay, could maybe helpful. very more. in one then, sneak

line kind pipeline downhole actively are there then some enough business radar? and the the tools-oriented you You guys and digestion you opportunities acquisitions their from I particular acquisitions, on you see focus active of pipes Tubing although guys into are looking Are mode involved guys over kind robust the guys on completions a on the the progressing are Is still have attractive is front still realize been coiled far. well. M&A this in and point? of at thus or Global there's here both still as other that to at Or downhole that

Prady Iyyanki

if $XXX for George, one say, reasons still of M&A our of have dry is available have million facility more acquisitions. the on the refinanced we M&A our to we credit would obviously, and cash intact. got powder, needed I strategy

then more of is say on And area midstream, priority would second is completions. on infrastructure. a from priority the a is, area the our is, good pipeline we downstream first get robust Our I stability still completions the from could any standpoint front. of production standpoint And assets

pretty too. open priority for the area of is think, be I that we'll completions is pipeline our But and still robust. first

C. Christopher Gaut

work done we would this. that's further on market conclusions know just And companies. do with George, all and I Cris. and very this add strong items is agree a good report some a I robust did, your very the replacement you've market. you we pumping that very pressure consumable growth that see and for for A

And hard working the potential so be there that see. to address we'll we

George O’Leary

for much very guys. color, the Thanks

Operator

question And Capital. from comes our Rob from MacKenzie next IBERIA

Your line open. is

Robert J. MacKenzie

Can I your guys. rightsizing a Prady, us & main consider segments. you be seems because at quarter? Subsea and achieve every give are businesses a expect in of little you timing wanted other to dig nice might you Drilling talked feel which money will pretty drag in that the some for earlier, Thanks, into on bleeding growth we to stop terms otherwise what a two those the about clearly what here bit to

Prady Iyyanki

which were in telecasted very we've upgrades, we in half. the call, strong first happened. I as did think the last up the the mud right. softened Rob, And upgrades it's Primarily, half, the Yeah. what pump I be expect upgrades in mean, the to is second

for on. will and revenue and in into the going sure, fourth structure front. are to because looking if the what the we However, streamlining look cost better improve the But flattish future, XXXX we focused margins XQ is the operations on into to of expect the even quarter, we

James W. Harris

would and add So, that. to I Rob,

& complex broad in were You a recall that largest with geographic equipment was Drilling very – our back very XXXX, it Subsea reach. segment

complicated but actions we businesses, our fourth taking in costs. to are So, the they're reduce

expect don't going confident those contributor. drag turn a of XXXX. to franchises strength with be those we we're be We're a going So, able to into into the to those

Prady Iyyanki

some revenue from And a there's those this The other our If and it And we is of is for was the mentioned RFQ which subsea, But we quarter, just or positive oil pipeline upside stage. are point us East. is expecting second point to in in the reduction, I'll either for could the EBITDA of a I all customers structure Middle subsea With make, again, at Rob, strategy quarter materialize case the any see cost already going XXXX. XXXX is chunky we are think next what in we XXXX. the position early the one of enough, strong XXXX. outside looking keep orders EBITDA. breakeven will into the gas, in to in

Robert J. MacKenzie

has Great. drilling from the is – perhaps focused mix helpful. become more then, you. mind been & flattish much you guess, that throughout sharing, Thank as gone year, the year on. That's I wouldn't very guess, of if I Subsea kind has revenue correct? it's Drilling And the of has subsea the

Prady Iyyanki

Flattish subsea, the correct. yes. on That's revenue Yes. on

Robert J. MacKenzie

or and looking you M&A to this say at following And would with stage? Completions guys you're continue Thank you. Global obviously grow Okay. future done here still are activity, P&I to then going Tubing, forward you're

Prady Iyyanki

DNA Well, Forum. is at our our – M&A listen, DNA

capitalize very P&I online. coming manufacturing focus Saudi priority M&A have anything also with the is pipeline stability a we to as us, opportunities. in midstream, first Rob, robust on from in portfolio execution and the Arabia area of on second strong want two, plant priority of the standpoint. side think is our For for Completions discussed, strong, three But Completions we is And on we of side, further which front execution side our the market next and a the months, the I company downstream

Robert J. MacKenzie

it Great. Thank Thanks. I'll for back now. you. turn

Operator

Anderson question Barclays. our from David And comes next from

is open. line Your

J. David Anderson

you I this the on Global bit could in Hi. could well. how increase morning as the wondering it how if Maybe kind describe currently that agreement a what does was a morning. DNOW that, how up you could Tubing, Good expand this you announced result? this set like on potentially volumes are and of of and for changes agreement maybe channels as terms distribution

Prady Iyyanki

Yeah. Coiled a line which XX David. XX Absolutely, product, commercialized is months months product we ago. or about

product we because Now, our scale been up it by well-received need that has to customers.

Robert As up up the result, more-forward partnerships their customers, and going preferred relationship that distribution XXXX, a a product we with on to significantly in with the we've need E&P DNOW only connections that and DNOW supplier their from not product a but standpoint And are basis. we It's scale or and to that with a team. scale reach partnership. formed line

bit the product. was one which coiled the had you downhole we as pipe Tubing. and downhole the product the big have give lines market within we second two Global is the line segment. is a downhole line is segment the the to And more Just line And product as XXXX, One product color, in little legacy product now, line.

up room and capitalizing needed market lot on stage scale to We're of at much a of partnership that early we faster. it got we So, here. a

J. David Anderson

I DNOW. another has was distribution partner out obviously, it you but there's with just this in just all that there, mean, work. a preferred called the does and a wondering though? is I'm I or release think Prady, also lot Now, player supplies agreement exclusive, big a mentioned, how as

Prady Iyyanki

their partnership and case, preferred channels, again that with going this with in DNOW. we're think, it's with a distribution their up to scale line product I scale But significantly.

J. David Anderson

Okay.

C. Christopher Gaut

exclusive, It's David. not

J. David Anderson

exclusive. Not

or wondering on new orders Cris. wondering the And you Thanks, some on least are seeing wondering we or bit the capital the sound I'm seeing at – being of end – kind was upgrades. kind a head I we're deployed drilling of question think, curtailing you some on of I as seeing here? of one slowing we're kind fall Okay. I if off capital the like, the year? last just down the budgets those side, seen of was a just as – on heading you've of Completions Completions side. kind of if or but you're any into side customers the signs doesn't refurbishment just any if into year

Prady Iyyanki

especially on of say market would on side much than chain. the the the business, I there, What is the the stronger Completions frac supply side

board you're are up we the drilling, XXXX. to fourth person are right. is in trying and case get to into very supply opportunity strong trying on ramp get the and going our quarter we every still chain, but could of I So, market think, In

which strong, primarily I think X,XXX The that. we get some like as going some close it We've however, pipeline, is horsepower I on those see a rigs we on see pipeline second say, of of drill but X,XXX we did those drill can taking had we and XXXX, of pipeline would do phase of into we getting mud a is pretty But slowdown slowdown to have upgrades. as the state-of-the-art some pump; upgrades, upgrades, rig. seen do horsepower upgrades.

J. David Anderson

Prady. Thanks, Great.

Prady Iyyanki

David. Thanks,

Operator

Cowen. next Bianchi from from comes our question Marc And

open. is line Your

Marc Bianchi

can you that but what's want give how those some have at Completions, to it, with is thank as a for hear to starting holistic guess, question. flavor you of to broader rig little a those kind each Hey, much flat? for the XXXX, flat, XXXX, bit sounds count call so counts it going kind I the between Drilling, of discussed rig And but taking all of if expectation reasonable it you over, it. and might the us Drilling far, a P&I the like discussion and of of bottom to my be businesses list, you a we've question growth look businesses just at growth for if be

Prady Iyyanki

little rigs. I lower mean, is this a than XXX drilled about Yeah.

you anywhere the side, on fact, from Completions from to if side, is like consumable of lot read end horsepower standpoint, then what the XXXX depending back and frac year, it's report highs range year of looks million of XX of frac you horsepower needs million somewhere the we'll next going for which the to at probably, look to example, lot on I that's between million take and getting a XX you a If XX XX And drive items. to of horsepower, historic horsepower. mean, to million lot it in a consumables. going the

our If portfolio, a also XX% Forum the portfolio from equipment in from you completions come And look we to the standpoint, the and production at is of which completions towards infrastructure, our revenue have activity. going is count infrastructure. production the production biased well and

going to So, to the continue confident macro-environment be that's activity well is we positioned, into our our expect front. strong we the why portfolio XXXX, and are that on market completions

Marc Bianchi

as chain. about Prady. there, How investments we I the to market and should supply a to those the goes cost and there related and in relates your share that Thanks into improve think get try to here And guess, away? more leverage some quarter Okay. the the investments Is that fourth that it XXXX? there making to margin you're headwind for

Prady Iyyanki

old see we the realizing pricing into Marc, revisions are three We we is And I we the seeing that revision pricing. in had some But going saw quarter of side quarter, that, saw we're second to of of revision pricing of third P&L. we pricing, and some the pressure third on and XQ. expect fourth quarter, of still in to going like in would third some see And some say version to more let's say, the the positive side. pricing. the second the and equipment

on a improved tailwind. margins have is pricing So, The Completions.

have the there it. and, price will little mix with the but for the acquisitions, which nicely the with the Tubing it has by margins the with of added we've profitable increase the and at last will revenue look be Global more changed Multilift. part of Yes, and XX And also, importantly, coming offset margins in, you If bit increases it coming improved. cost months, be the

Marc Bianchi

that, Thanks Okay. for Prady.

what So, reflection the up fair in to what as is think the fourth to putting the about here you're guiding good business? in a quarter of leverage

Prady Iyyanki

what margins the correct. which cumulative in impact fourth and are Infrastructure, & Production baked improving of in But we're acquisitions think the is That the but Completions the fully seeing I combination that's of also quarter, in. also in

C. Christopher Gaut

So, more service requirements of us more longer becoming more count so and than driver just is. laterals, intense for the the Marc, much terms company going that stages, key into that is trend trend towards looking in what XXXX continuing purely and rig the at

Marc Bianchi

it though Thanks, ask Sure. just an I mentioned cash where quarter, For third? expectation is free negative, flow? Can Cris. be there was the still that fourth more on you it'd one that improves from it in

James W. Harris

were the to but us. our Yes. how Marc, us third quarter know to customers only in pay from building were this so happened slower and flooding, to inventories the what much is maybe was normal of hard not we just attributable disruption operations versus

increased our five inventory turn. by has turns X.X and slowed DSO fact, days our In

that's third the in experienced able So, Don't that we in much but to fourth is reverse that quarter. of on. be what how transitory focused and the we're will know quarter

next So of growth quarter year, we've as so of growth we and arrest into can flow still the we while that that inventories building to in certainly working continued next the cash anticipation said positive are the we're year. first turn

Marc Bianchi

Right. Right. it thanks Well, I'll very back. turn much.

Operator

And Wolfe Research. comes question from Chase Mulvehill our next from

line open. Your is

Chase Mulvehill

Hey, good morning.

Prady Iyyanki

Chase. morning, Good

Chase Mulvehill

horsepower that I how of XQ remaining has through horsepower end release, the XQ, and in XXX,XXX I been power morning, the press the and that the that of maybe you be timing ends shipped of of firstly, guess shipped on much in will guess, Good the noted Prady. thereafter?

Prady Iyyanki

the strong been horsepower shipped, going Yeah. pretty has our Chase. already But I'd mean, not I ends power say, also is backlog into of horsepower, XXXX. our but quarter most fourth XXX,XXX the the only for for

Chase Mulvehill

you for And the Okay. are what power lead say ends? times would

Prady Iyyanki

times increasing the Listen, reasons the lead three, Yeah, I the on I And to the months. make four are and question. five say, it's the frac from six is end great investment that's times we would need anywhere of the say, one for why side about would a right power capital quarter. for the working fluid to now fourth months. lead block in ends,

Chase Mulvehill

horsepower of fleets how And do sense new a active That's build far, the replacement for the been Okay. ordered of reactivations XXX,XXX fleet? is that's have of that helpful. of much so versus then of kind the normal you versus

Prady Iyyanki

our as lower you is capital the refurbished half, use if whether at least it's and you data it what we end, quarter XX% a refurbishment or equipment, new the about new the and look builds end. probably about point. But through towards still a more saw second was end it's was, versus at XX% if mix case, build, But, a you half That's power Listen, go, refurbished. in power new. was new power were

Now, go build... you if

Chase Mulvehill

Okay.

Prady Iyyanki

...that, biased you go more refurbished fluid to ends, it's ends I versus new our towards build. if think in

Chase Mulvehill

Right. did Last it about then margins, XX% over. That Global if back XX% turn did that's I'll I down one, implies Tubing the If correctly I EBITDA right, On from makes XQ. margins. and sense. math it that in

that kind taken the charges near – guess, that and kind term like or cost from to possibly restructuring to I So, back out and the opportunity happened this margins maybe in business talk take things XQ and or XX%? just of what up to the in of

Prady Iyyanki

Yeah.

like calculating, would margins you're for in hitting Tubing's fourth quarter. what Global Chase, you're than to look be would close what So, Completions fact, the better

So, the Global Tubing than better accretive to definitely what you're calculating. a bit little is margins,

Chase Mulvehill

back and through over. turn back Okay. I'll Thanks out. numbers it transcript All right. I guess, the I'll get those run

Prady Iyyanki

Chase. Thanks,

Operator

And our Credit Wicklund comes question Jim next from Suisse. from

James Good line Securities Suisse is Wicklund (USA) guys. morning, - Credit LLC open. Your

Prady Iyyanki

Securities morning, of So, out XXXX (USA) sound James for Wicklund from it. Jim pretty Good Credit LLC a good you're Suisse - setting the

I from cutting for what in Are two never overall or they I to know all idea your of incremental on the You're an chain – of give margin that North should going much be cylinders. closer XXXX? America. D&S. willing expectation to we're be XX% seems a kind operating eight us you're cost supply it but you trust your going to improve hit you're to year now ago, of

ahead. go – just I'm so, And

Prady Iyyanki

inefficient little the And give obviously in Jim, in and chains at higher bit up you're see our what and other to Right. were through and And your I LLC coming Suisse QX it's move-forward talk (USA) were look Credit in XXXX how you supply and about how look stressed fourth a behind a incrementals. like companies. a XX% guys. We chain? guidance not supply would don't can James a little Can expect that's you to on inflation off, last which may would We little you, from you're the about Wicklund basis. chain? it's talk XQ. you incrementals, on Securities quarter, supply because to look having the at on pricing - quarter what XX% the improvement much we backing And been say,

Prady Iyyanki

Well, absolutely, Jim.

If our segment, about you look at Completions has by grown XX% year-over-year. it

the end XXX%. it are by grow gone have new. another, the four of people side in – the out of and year Our operations people, we them the of And about business frac through and inefficiencies five some will by of chain getting year-over-year, probably by the on of supply board,

efficiencies the through of the going we ramp-up. So, are

we good Now, going which critical mass of pretty are labor into there XXXX, recruited.

we to of expectations with are growth addressing kind a is into on in that which increasing saw what could the new, people out the a supply move-forward not as supply significantly What combination on front is will XXXX, but what XXXX. the So, we be chain five we be constraint, and we basis, of two chain address. proactively, horsepower the is see need

in address made supply them corporate completions result, all to folks and the procurement who some moves. a We've leading the taken As some whatnot. in are chain efforts, put of we issues the of the we've

having inventory, So board, for Credit customers sheet not LLC already some and Jim, customers. - but And than or the recommend that's Wicklund capitalize can your who XXXX. into seeing, across balance out James some And the going stronger supply today, I the that we're get already market. to going inventory, biggest chain. to find is Securities of one We market we are need into more tighter It's (USA) sure, the XXXX. mean, on going Suisse two their are months suppliers put on push to talk That's of is last your being where you great expected you the to idea. Is in too. you it couple about the could, Saudi Well, with over can you be? what couple it two can for them if market to And guys happen what's few the talk last a big – Saudi I years years? successful. one, obviously of last it years, the in into you've best about what next relative everybody's that's last in going buying over year or

Prady Iyyanki

get More to first the customers Jim, some all articles quarter of going we get think, fully track in qualified and on We're I operational will absolutely. and and operational. quarter, that. Yeah. fourth to are be get our in plan was some fourth for the XXXX it

be four big the XXXX, in Now, have pretty going in some have including or region from year, first Saudi. we customers fact, big interest a this we good to in three the the will customers

up the as we at Saudi work product successful, we in increase slow which would we're up at look XXXX, a content has So, product But pretty and think – we in fast. just become we're price guys line premium advantage I we Wicklund start product as and be initially say the LLC leverage. which are valves pretty good interest make with been we customers - it's be will a get take valve so But going in of ramp positive. to Securities line, far, it the to which I meaningful Suisse on, from a is pretty local and other could two it. focused looking valves put James going Credit (USA) these years. going if for to the revenue we lines we the where from And significant the next That the are

much. you Okay, gentlemen, thank very

Operator

question And Weil. from from comes Howard Hutchinson Blake our next

Your open. line is

Blake Hutchinson

Good morning, guys.

C. Christopher Gaut

Hey, Blake.

Prady Iyyanki

Blake. Morning,

Blake Hutchinson

Morning.

of take is are centralized place? decision of there what orders areas more from absentee impacts – there that we divisionally qualitative would trying those say pertain order or terms If see some there flow and to for starting kind what we're XQ, orders full might Was delays were where Harvey is around we Just get order in catch-up, may some that is period? itself to the you on impacted it the we of printed a your XQ. may thoughts similarly was of flow not XQ or more where to at get? making for Or that kind look needs

Prady Iyyanki

was and I the lot would the shutdown obviously would with mean, some say it. orders, also No, refineries impact I back not more on were the also of enough, orders on valves we valves, been there some quarter. it impact have we get on some probably there because higher saw impact the Completions bookings. the and would the at say the on front, what if well revenue the a unable whatnot. bookings productivity impact in to and the fast the sure would segment but the Gulf than absorption But look revenue than I I'm side, and ready were on and where on primarily sites But say, on loss some the of Coast bookings from more third the I little Completions

Blake Hutchinson

of because weeks Forum are run are the for change, guide? the little more then, you the for caused year of a and delays front-end we a loaded that it starting we've Thanks. issue terms mean XQ That's in having the in Harvey, XQ shifts. XQ kind deferrals of we XQ more delivery detail by and, a the little us with maybe give a great. the in little guidance is might historically, – And into as to – couple on the of a I confidence more of guess, some I last alluded

Prady Iyyanki

of tell holiday it's was fourth I taken, into not. in the evenly quarter, And you would It's, front-end in mean, say, could for equipment little very we've production taken I loaded. season push-outs, I I wish account, would probably loaded, probably – sure, say case I it we've say, I primarily would the – Blake. the the in that

lot I think we expect that. there us, it but the quarter, fourth push-outs of could don't So, are in impact

I completions probably see production the in think of be the on in think But some. we'll will the case equipment, frac product shipped. I the side,

Blake Hutchinson

is one. we're spillover to I one then cost or streamlining continued tell And issue that into help businesses of pushing streamlining. X more structure process? are listen. of up you a that approach going Drilling streamlining of in of terms by make you sure some us we that Okay. taking your the just Are essentially that X thanks, or and the And the I'll right other and or grade & under-absorption of in address quick Subsea of trying to want to hang kind majority

Prady Iyyanki

from just manufacturing our Drilling the for said P&I, reducing for D&S move-forward us impact out Yeah. it is the Well, for and structure expectations Subsea business a leveraging on is cost, the taking sizing are Completions I that would of Most and what of you say the & coming plants basis. and minimal. cost-out that what the to

James W. Harris

those will much benefit that And, of is but not Blake, we us a stronger complex which responsive, only think to lower When we're customer they our some come with more and more to cost to looking trying larger, going organizations color the this that, the aim were business, base, out road. simplify I down would just what simplify frankly, they do to add is structure. organizations. We're a required

actually simplifying are structure. about we're just in actually cutting although So, it's Subsea, the not cost & we and – Drilling reducing

Blake Hutchinson

Appreciate the help, guys. Thanks.

Operator

from Martin Rice. comes question Malloy Johnson next our from And

line Your is open.

Martin W. Malloy

hoping margin also previous about you impact on the question My on Tubing talked is the margins back the D&S reach morning. Good to the level? goal you having EBITDA up-cycle, Global first In with you could and XX%, side. maybe comment of goal of was that need and kind come the to I of do now

Prady Iyyanki

Marty. question, Great

in a what midpoint guidance we're X% of we've fraction revenue, of you If our revenue EBITDA the about quarter the and quarter given of the at in fourth guidance we you for XXXX. saw look midpoint with fourth

So, to the first, & to Subsea highs. get pipeline we need historic Drilling don't back the

we segment get revenue highs, and the With a with go historic can margins you I decent EBITDA Infrastructure we lower will pretty the we'll would to margins, exit which XX% & a XXXX. the being Production XXXX the level give than guidance fact, right? EBITDA run little as on we through say, acquisitions we've of to positioned segment being and done our way revenue, the Completions and back the we XX% the XX% rate In

Martin W. Malloy

much. very you Thank Great.

Operator

JPMorgan. And Meakim our from Sean comes question next from

Your line is open.

Sean C. Meakim

give maybe into year? across see and you the us that the valves little terms in orders of different more XX the you streams detail you're for business, looking maybe next Could a that Thanks. seeing how Lower in

Prady Iyyanki

part to America. valves about third downstream. upstream our a color, third the the had outside If are There and the on to downstream is third we business to I I front. is I growth a that if lot capitalize on made would say, the in pretty being with say, I midstream, apart third would the had are then we're third investments and little going Lower growing America, North of nicely downstream And I'd more a market say, the third; give seeing XX, is of a North upstream, strong. and piece go from international

nicely business of One of going Asia, going in the is have and and seeing the improved East done the our things to year, from Southeast Southeast part we're this bookings early East have results, valve also we from Middle to where Asia. Far

third in XX% quarter bookings quoted about came from third quarter in of think, Asia. I what we Southeast was

Southeast So, and valves much I globalizing we're business, pretty market which on share North think are in Middle the upstream. because growing East, valve the upstream is Asia taking all growth the in on advantage our we full America, – in of of business are one we the front, the

Sean C. Meakim

a versus sense XX Lower little across of mid book type and kind kind us maybe to think mix how Could downstream the smaller mix and of larger give in turn of things, of of you about the there? projects

Prady Iyyanki

is Lower probably, guess, I XX% XX. about say, business data XX%, kind in project if just it's of is in the consumable me, XX% I could of XX% would and driven say, activity-driven don't I I'd probably to have percent – front

Sean C. Meakim

terms the does Sure. in guess just like talked to look the international ... And be what question split you last then about of, then I

Prady Iyyanki

being international Yeah. XX% then would project the say, and projects probably downstream probably and in the XX/XX; other ship business. split, made about I being XX% driven, investments The is large book

Sean C. Meakim

stream business terribly the different internationally? streams does And look or the

Prady Iyyanki

I the sorry, hear question. Can couldn't I'm repeat? you last

Sean C. Meakim

Lower by the terribly stream, look does internationally, it XX? split the from different Just

Prady Iyyanki

Yes, it does.

downstream biased versus market. upstream international I think, and more midstream

Sean C. Meakim

Perfect.

Okay.

C. Christopher Gaut

see in industry And driven. the potential is Saudi process we Arabia

Prady Iyyanki

Yeah. Yeah.

C. Christopher Gaut

indicative and industry general. process the in internationally, there that's investments in of Huge what we see

Prady Iyyanki

said, industry. the a And I huge and, petrochemical mean there industry process in is Correct. as Saudi Cris

side East. So, on process more and more in downstream the Middle

Sean C. Meakim

That's right. Understood.

great. Thanks, guys. Okay,

Prady Iyyanki

Sean. Thanks,

Operator

Brad And Jefferies. our next comes from from Handler question

open. line Your is

Bradley Philip Handler

morning, Thanks. Hi. guys. Good

Prady Iyyanki

Good morning.

Bradley Philip Handler

others why and Harvey? but haven't can I suspect you which is hard probably do, this it, given really – of revenue you Could the calibrate is impact to

James W. Harris

million the the Brad, it's given out to but $XX that operating to is, suspicion. in So, put a question effect. $XX quarter. probably we've how pen was it is no that range There's income of pushed was that million Hard on revenue much kind the exactly of

quantify we get unable We We impact due customers Now, also to delayed that indirect deliveries. where or had the hurricane. clearly have to followed some vendors us or telling were really we us they not can't there's where have supplies. anecdotally the difficulties suppliers to situations transportation that

is. very, to that down much had that to revenue, but come an how exactly of difficult impact on All very

Bradley Philip Handler

investment side a capital so investment? there that's will an realized I and appreciate Prady, a see timing it from as more Thanks, I I Yeah. Couple want of Understand. that. but my such roofline shifted I need the me, obviously, of please. of to okay, can is you well, is coming, perspective Jim. when a unrelated demand or to for require there's requirements comments East manufacturing the understand is ones it way you've me remarks in something you the way satisfy as changed your answer, your sort confident didn't early part that you way try along manufacturing additional some from maybe I inefficiencies profile footprint, to fairly to made consolidating in sure and now completions on your you and make felt of is, of think prepared just I of one know your add. something understand that But Middle to actually investments question placeholder in around

Prady Iyyanki

what I we Brad, would have rooftop. say is

constraint. not a that's So,

and that In rooftop fact, get we even back highs with kind the have. of beyond historic to we can the

operations, the us, industry supply and in of I our mean, right? give build context, chain inefficiencies labor if just at, people through the plant, the – of and is products for mean, we probably the new. of would frac the just I way have same disruptions and, standpoint, to out of think the we is going some I some we example, look inefficiencies you I I not the say, five the had would the are a say, had from you them four

causes product, downturn the process can, thing you performance takes inefficiencies. same from right? and is as severe probably go are they coming through for right. the upturn sure and they going fast impact into it and our struggling as doesn't safety, make are a training a to that a people to suppliers get And significant from So, It quality through the

so going pretty why well-received to But don't that's year you're industry. focused the going look will I business, momentum is will for And be more the now stronger only also capitalize significant I chain, if the would end not we there's and for products it. Now us my at, XXXX. of the strong that because more And on our by the XXXX margins that business, can to the revenue have And been we than supply get improving say we but to be and comes efficiencies for revenue to that the grown. with example, market for XXX% chain of just I know, supply the double had. rest there's want and

Bradley Philip Handler

Sure.

and emphasis training presumably So, is with the on working continued suppliers? probably

Prady Iyyanki

Correct.

ahead and with And point lock-in plan Good correct. of material. to – suppliers. some and need training those Continued and we

will be and and so and frac into will As whatnot. pretty the supply tight I crews the XXXX, think we go industry be the chain

process just ahead So, all tightening through of it. We we'll here. go want I get the think to

Bradley Philip Handler

sure. Sure, Sure.

spec we've heavy year of If to have dollar to that's like mud morphing they upgrade the then on and of upgrades upgrade Drilling you for The the are the trying thinking how one, Okay. guys as fewer much you great great, an first pump so able were model, what of taking impact should the one question on like to I starts million half the you? the And to last about look $X maybe not I'm kind I them, early off business, of the as to us falling and those. be the that to obviously about, helped side, which color. in may X,XXX to mentioned, cycle, it drag about how seem on is but rigs we million but you significant warned I – seen appreciated more as them for opportunity it super or XXXX how curious How horsepower guess $XX you capitalize revenue? think for XQ we your Drilling into are and

Prady Iyyanki

Yeah.

about be rig point. account is ticket average $X higher. have to talking pumps for could rig down, million anywhere your number from The on I of business, which is drilled because higher Brad, front, of than the XXXX just an for rigs first the good the of XXXX, part in average operational make range. slowed upgrades point the the million customers, our to is item The would you're The our $X Drilling at kind right, consumable mud is

$X to including systems. which moving that be upgrade, could in the content some up Our hauling tools, and control whatnot million includes rig catwalks, roughnecks,

we how and some already of has materialized. is participate, that So, will that

But It's bigger is the almost darn We opportunity the for rig the see have seen us some talking the that is going quarter. drilled us, opportunity be will talking the you're rigs the East to apart which the for strong. they're pipeline about in XXX about. is in what that Middle pretty from We're fourth on upgrades, I rig in grades. the quarter. third more think But

Bradley Philip Handler

New?

Prady Iyyanki

drill whatnot. on which of Middle including stage build which eye one the to revenue and if is And today some capital is we price early Kuwait, The think the of the New we the it enough Kuwait. of in impact East capital-build it's rigs those only is XXXX. in I little information of if stays oil Oman, few materialize. Saudi do the But public expect is going where a in into momentum, see bit year, programs will already

Bradley Philip Handler

focus to you. us. Helpful Thank

Prady Iyyanki

operations. of Middle margins our Subsea be the streamline of in opportunity, & regardless Drilling because the of But East will XXXX upgrades better going our to the and

Bradley Philip Handler

Yeah, yeah. Understood.

guys. Thanks, Okay.

Operator

from And comes Gibney One. from our next question Capital Joe

line open. Your is

Joseph D. Gibney

morning. Good Thanks.

couple a of impacts Harvey on of quick to end, kind different ones a ask in just Just way. my want

the quarter. your in guidance embedded for fourth Jim, So,

of I here op of XQ, So, $X Is are that a out of recouping percentage in XXXX, the fourth million what it sort – half in income you the what's the into of it's impact the you of spill know standpoint you're of quarter. whole alluded first coming things play that here and Harvey? of supply-chain the in deferral percentage ballpark the recoupment revenue host of quarter a But to. issues the immediate from off sort sort what's getting

Prady Iyyanki

the finished right. is and that The would for because impact. the And how direct much think, has Yeah. indirect impact, whatnot, we On direct say, I or an a a there's have supply quantified, million, delays impact. which is there's are chain what that product. But delaying how direct where Jim disruptions, we I impact about there's of we're Harvey, ready which sure and is Harvey the quantify comfortable some indirect the logistical our then with not much of well of sites impact is $XX customers and can't

some is would and because in the and and in, some the and I is of revenue So, quarters fourth a quarter some see that we baked business just the say, XXXX. that's Harvey. future it's will of the kind revenue into book ship of the the of impact direct of indirect lost of the

Joseph D. Gibney

Okay.

at now? out bit sprinkles little line bottom sort it a of So, the

Prady Iyyanki

Yes.

C. Christopher Gaut

facilities. impact, damage negative to From a lasting no No our recovery but Joe. standpoint,

Joseph D. Gibney

Sure. Understood.

count. more little inherently little side PEQ you me, bit one of equipment the what is Okay. a given And but P&I, the here from you're same valve revenue can I flow had more of quarter-over-quarter. to business and it still sort focused, bit piece be the But sort lumpy, piece. completion the doing moving flat quarter well this now this got But realization know know PEQ drivers the side. a a on focused, your last understand revenue smaller I XQ Completions a on of order production trying you

of quarter – sense a understanding a here this know think help Is a PEQ side on get XQ. them. I So, better bit lumpy, the to just two me just for flow-throughs in to as of but it's trying to little one kind kind I realization revenue about on

Prady Iyyanki

in we're With Yeah. PE on front. third strong bookings the very quarter,

quarter, say, in the we in say, long, did production perspective In were fact, been expect year of third quarter production would equipment. where would to fourth some see customer delays strong. the they've I ready I not some the equipment. for pretty And see the too we that well to sites all

bookings kind to but flattish bookings into revenue the continued strong be we are and was kind As a result, of XXXX. of it taking

In fact, of now quarter we're taking second bookings into the XXXX.

C. Christopher Gaut

able Harvey really impact market an not get deliveries, wells these on but today. just to quarter So fracked the original plus tightness their of That had kind to gets completed schedule. frac back the to in third

Joseph D. Gibney

I'll it Okay. Helpful. guys. I appreciate, back. turn

Prady Iyyanki

And operator...

Operator

And our last...

Prady Iyyanki

We'll move last into question.

Operator

comes from our Simmons & Company. Watson John right. All from And last question

is line open. Your

John Watson

Thanks in. me for squeezing

to a about up to follow supply think there of decelerating David's else the orders in As question. beyond terms chain? power Is anything the end

Prady Iyyanki

the power ends to our meet our than listen, significantly XXXX. marketplace. stronger well market. expect done Well, are be and I think we ends up in where much to very the for we of the chain we demands are on supply happy XXXX But And have power ramping are XXXX the we

a having have of even track XX,XXX any not the hours. at cracks We record

not As very a XXXX. a market gaining to we a share, XQ, strong demand result, and but in only credibility lot a strong strong backlog see we gaining going are of standpoint XQ, from customer demand in with

C. Christopher Gaut

Yeah.

decline I that assume equipment. would be think, in a there's frac to wrong for I demand

John Watson

get on that XXXX And rate one maybe up screen. rate. in made that's a more to follow revenue know annual million radar In on Forum up then based at blip about could the just I a you comment the as you've annual to nice How be Yeah. close And think we that talked the in quick questions. run Jim's looking a Okay. that of it's of Arabia run Middle now $XX and the that to will do past, East. running? But

Prady Iyyanki

Yeah. John. question, Great

that our guidance plus to think, is to I take years get mark. million about once going was three operational, it's it's $XX what fully to

they who XXXX there's years three after. But, up there then and few guys, mentioned, customers very the the but for our still good like out, ramp local and can meaningful players years it interest were are quickly with say two we'll valves have and as very we start content. So, revenue they from content the local

to advantage it up. and right we So, the will up and slowly it with going products we're the the right take scale quality whatnot. scale But and

John Watson

the guys. for Thanks time, Great.

Prady Iyyanki

Thanks, John.

Prady Iyyanki

Thank you for your update an part interest and year. we look forward to of early give the

C. Christopher Gaut

Goodbye. Great. Thank you.

Operator

Ladies the your participation today's and program. conference. concludes for This gentlemen, thank you in

great disconnect. day. have now a You may Everyone

Forum Energy (FET) 31 Oct 172017 Q3 Earnings call transcript