FI - Earnings call transcript Q3 2018 | Expro Group Holdings N.V.

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Operator

Welcome to the Q3 2018 Frank's International N.V. Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. conference recorded. the note please is being And I Holcomb. turn the to Blake call over will now

Blake Holcomb

Good everyone, quarter John. Investor call Blake Thanks, morning, Director Relations. to International the Holcomb, discuss conference Frank's the Finance third of XXXX I'm and earnings. and welcome to

and of Vice not For President portion President her the call, Financial Mike have will and joining wife yesterday Kearney, we and us had Q&A Officer; call, today. wanting and prepared comments Chief Executive today's Mike as his he's Kyle be for with from to today's pre-recorded Chairman, Chief McClure, Senior surgery there be Officer. understandably

Kyle Tubular Tools. has call. been Joining will of Running call Services, that today's posted on and A presentation our President portion will this the Specialty throughout for website refer Scott to of Blackhawk President be Steve we Russell, McCurdy, Q&A of

website of to If Investors the you presentation, section to like please at franksinternational.com. go view our this

a results, commenting begin slide on we are beginning cover like X. Before items quarter on our XXXX we to would there few third legal

information forward-looking results any more uncertainties from call Such forward-looking to cautionary from that could in also answers as by access company's of franksinternational.com. a A these factors of of specified. International call. or statements both are First, release Frank's website included a website press this today's be may materially which of XXXX language, representatives date actual material no as different to uses during financial routinely quarter subject are Investor The note on was call as the in website or contain today's There, on comparable statements the in on at refer set reconciled risks date statements. our defined cause Such forth to Please channel by in third results important is discussed or directly those included the or earnings discussion non-GAAP to may update its filings earnings measures expressed future assumes in of and distribution the that XXXX you could today. risks identifying the as filings and any company posted which and financial SEC of for the those company company or different accessed and SEC's replay and is date. by this statements. company to release, any forward-looking the any as Relations SEC actual GAAP complete third answers its materially questions has most cause the be information. Such The statements. accessible measure remarks responsibility to company earlier such may differ remarks that implied issued speak quarter section. only to

commentary Kyle's play Mike We move to pre-recorded and Q&A. will now then and

Michael C. Kearney

organization everyone We third slight our I projects sequential lower schedules. our had we go better saw international the and But to our due financial second Blake. the of third adjusted level of this first the highest during today EBITDA improve quarter. customer growth the drivers us some completion Revenue seen employees EBITDA within U.S. of of onshore I operational thank importantly, On segment the earnings over X% discussed on results. want quarter the been anticipated. the number the times. to the business. work we more The changes in actually EBITDA than challenging decline top this and a our these since in A The our was results of of strength grew XXXX. from quarter line driver on we primarily adjusted you, for through of appreciate call. will quarter to offshore due for from second expectations key revenue, diligence increased third Thank company's both in has quarter Services done for Beginning second and work was hard our dedication, was we've Adjusted our we our their main segment. quarter performance. year's of joining slide once call, last quarter lot again X, for to the

a saw higher also U.S. includes this pricing. from corporate TRS the continued As to second activity onshore reminder, cost G&A segment from and benefit reductions we where important quarter. increased

two also rigs of for International were share Mexico by a impacted in new quarter. completion through partially market Results Africa, competitor projects a as of growth work. Africa decline Europe. Latin displaced out This call the increased and in certain we our Services projects during We impact Gulf and business in America, saw in as Asia ad-hoc well the the was by Pacific Canada, as offset on

Our and saw revenue growth and segment the by quarter, for Mexico. work service its continued well onshore business increased third margins in record U.S. and of in the driven Blackhawk Gulf revenue in product intervention

international continued of strides, make and than part XXXX. business we business more Blackhawk's this expect Additionally, full to for double the their during quarter, to the year third

priorities. near-term Turning to page our update an X, I will strategic on provide three

focus we business. our the put significant of continue on optimization First, to Services Tubular Running

centered Our best-in-class us will offerings to efforts providing that allow profitability share the continues market capture customers market are to as and additional around recover.

geographic we and inactive discussed flex first of quarter, of group our and third locations. evaluation categories: three complete countries, process we quarter call, advanced, we to location by are earnings inactive quarter expect second end locations into whereby to the the Through of the our global this well the XXXX. footprint our configurations efforts countries, core During our exit

and flex Our near-term high value to focus capture our is in opportunities core countries.

is that best in our been differentiation The bottom the technologies tool. said a our into optimization solve to acceptance tender. or people, rapid development the customer technology ensure in have clear specced on portfolio market example Frank's focus technologies have successful TRS our leverage line enhanced opportunities sustained for the drive new We've have for initiative and the is we A our to VERSAFLO right of and we our for profitability. past, we right very proprietary As outcome locations of to the the to is in issues. seen

capacity we're to quickly for currently expanding increasing Our deployed, entire possible demand as fleet is tool. this customer and as fully meet

is second adoption a We've Blackhawk's expansion late in high priority of driving and offerings international in focus Our customer on Blackhawk awareness this significant markets. and product made value business near-term middle the of acquiring with progress since (XX:XX) XXXX.

this we Israel Gabon, same and into proprietary first the countries, construction XXXX, technologies is challenges Blackhawk's the intervention their months overall success An the new their For well their more was appreciate Trinidad, Contributing increase well customers SKYHOOK, of that technologies compared expansion operations. than improve this few. example operations, growth of to offered was solve first to name nine with coming a are of international last doubling Guyana, with customers Canada, year. an earlier revenue experienced to Blackhawk and the Cyprus, period which year. dozen Australia, Blackhawk's including approximate to of benefits of new safety a

reminder, out during growing send including of SKYHOOK a personnel the As Gulf XX% The or their To roll third rig rig above newly-certified tools. allows being the iron without operators Blackhawk jobs has floor. need up make to cementing used adoption continue Mexico the meet hose the to fantastic, been of in demand, we on cement quarter. SKYHOOK to of

detail versus expect million to going to rate The in to goals to a customer of targeted Blackhawk rate believe and of in not additional will operating that $XX have XXXX position improvement this and and expand also levels. gross profitability. tool a I'm priority in from near-term improved pleased these market provide specifically and stringent as report market reductions The cost will result completion to puts meet targeted most goals margin resources is previously margin combination of two requirements. on exit XXXX improvement great our a into XX% comments. XXXX additional Kyle his share year. into dedicated in the into including we of served. We next XXXX move We approximately countries basis capture certifications reduction run meet accomplishing G&A XXX-basis-point final more we

initial I moments developing on providing some budget a our Finally, while XXXX, we're to few still for outlook. like our would detailed thoughts spend

We that recovery. overall expectation continue gradual leading positive market to indicators our sustained support but of a see

the Importantly, expect for to operating offerings, international enhanced improvement activities continued demand our line footprint. and and year-over-year by Supported we high in an of fully have see where an we have are seeing financial year established we increased offshore markets coming sight tendering significant XXXX. the for in

we of and said enhancements Having earnings some there now forward it and Of power additional quarters. over do course, trajectory to in to to multiple business. of to to Kyle? results plays the we're we the over a the the how we on further leverage believe can and strategic of the operational reduce and I'll details initiatives our you trying keeping I better recovery turn additional forecast are aggressively new share progress increasing quarter. that, to of an out, in choppiness. pricing apprised during in market the believe that, cost With efficiencies, pursuing look improvements. call more is capture difficult technology will execution increase our successful drive Kyle we is do Regardless anticipate prudently for business environment across coming provide of the the further priorities always to customer the and our drive financial activity. customers our more result to in fully additional We solutions position of

Kyle F. McClure

Thanks, Mike.

Services on Africa be slide of International first million, during third quarter. decrease about in QX decline or new for to $XX ahead specifically will number can are and the in a offer Adjusted was into X, fourth roughly impacted Canada commencement go segment. closer would previously well, jump revenue Partially in offshore million quarter markets projects, the Services I during would million heading the primarily EBITDA new revenue million. South $X Africa $X International Let's XXXX International expected as nice in EBITDA sequentially recovery, the results offsetting was on with Europe segment services the I poised levels in was Adjusted the by on down completed quarter. starting the sequential from likely Services $X.X projects add, for be quarter. we slowdowns of Europe. America, Latin into segment as announced International general, in performed to a in quarter. down quarter work third approximately revenue that of quarter to second In and however, and projects the will the as Africa, was The Europe in segment attributed America. and the materialize; completion our this roughly how that back the second international X%

years to geographies. continue to many We tendering a see not have activity level seen we each in build in

Services U.S. slide to on Turning X.

Third just over million. quarter revenue $XX to increased X%

more a X% increased our marks U.S. was U.S. revenue quarter growth. work improvement U.S. an Gulf offshore activity land a the than ninth segment. consecutive The to quarter this X% exceeded of business The U.S. growth of little G&A loss up quarter-over-quarter onshore in improved to and U.S. of mix the pricing. $X quarter cost market sequentially. and Adjusted EBITDA attributed rising Services million, grew saw expectations, Mexico. a Third for offshore gains to due was to is in quarter, improved nearly million and business, the a the better improvement on due onshore This revenue $X.X roughly completions-based in of third the lower sequentially. share also move more The during an business pricing

QX intervention up was slightly or Turning segment in from results. U.S. product contribution quarter, this sales, largely services $X.X for well and XX.X% increased lower almost Total in in Adjusted that Revenue for Wrapping of Blackhawk look of slide Adjusted QX. segment Blackhawk mix. third quarters were intervention customer primarily season. segments $XX.X QX. in million and on due Revenues down guidance. delayed QX, offshore Tubular X% up quarter. with I EBITDA to quarter was the increased revenue, Gulf a to take we'll Sales drilling an second revenue Tubular schedules. touch on was to This XXX in up orders sequentially from from Mexico was storm the due result will which a products X. $XX.X the up at expect activity was We basis X, delivered versus sequentially. be million, revenue do services changes due points in and EBITDA $XXX,XXX, Sequential of to our as well the in in $XXX,XXX increased the is Sales in the onshore quarter our in will third million, previous higher slide

the down basis to Even Turning EBITDA share X% mix against Gulf U.S. sequentially. were as G&A expected financial we XX, slightly International Services was of generating summarize by Mexico company-wide expanded was driven quarterly activity adjusted adjusted of in slightly and the slide U.S. market in declining a results. slowdown the will EBITDA segment basis, the down revenue, TRS reduced and sequentially, On in the continued by higher Global X% gains quarter the offset segments. XX the backdrop in International and land. better within points revenues

Third slight flow and from $X.X million. operations $XXX quarter positive short-term at million a investments cash was cash improvement in with ending

give As the maintain this in strongest press on continue we one million our facility. well morning's our out footing release, solid and yesterday five-year of This addition industry. us flexibility around cash closed new credit sheet $XXX in called revolving to balance, should facility, a in financial balance to we the

couple a February mentioned of financial As on comments, we of his to out this in stated targets achieve are Mike previous in year. rolled we track

improvement First, points gross we margin XXX course over a the basis XXXX. of stated of

well-advanced XXXX, actions are the of program, we internationally, far, country versus and rate price margin will run been a have our final So targeted we XXXX mix continued believe that on increases, gross with targeting. and rationalization year-to-date around we business enter

the of G&A course reduction from levels the of we XXXX XX% year. targeted Second, a over

reduction down QX So are run enter a and versus XX% to we achieve year-to-date we X% the expect XXXX, time rate XXXX. far, by

through a basis down nine Additionally, as points G&A versus percent XXX XXXX. revenue of is months

(XX:XX) at sales we have to XX% will on see cost been what to close look and in versus first and needs expect quarter color a So have incremental as even some the provide XXXX. XXXX, any controlling fourth business. increased To out out driving fund we the year-to-date I

expected at expect pickup quarter. the to work return total company see third Looking increased and to U.S. revenues saw segment to closer share with to expected QX sales we a Gulf real market QX, offset see we flat to QX is Mexico in activity to The businesses, Services in as and of U.S. its from U.S. segment the will continued slow activity of slight Gulf should and The land we rate what International of see XX% potentially to broader the land. slowing Africa. the slowdown the no a scopes minimum in X% Mexico. segment segment of The product would be as various and expect substantial of with the change likely the is will we this ship growth growth flat should Europe revenues up timing sequentially would market in the have see in Blackhawk Tubular with number pipeline expect their We International larger orders. on segment that depending orders in at revenues and sequentially, see more been by in strong XX%

reflect increasing to year and the revenue projections are our full QX XXXX, EBITDA and results For we guidance for QX. adjusted our

million adjusted XXXX be year and revenues will the full in for million thinking current be million is Our $XX million, between $XXX and that $XXX to will EBITDA range. $XX

wanted a I of EBITDA look revenues start in what XXXX, will believe at thoughts be we give As gradual and we adjusted and a step-up on course XXXX the to throughout our the page on turn taking XXXX. you

we across Looking expect business. a base at would case of the growth to see revenues, XX%

as see We segment segment growth Services and growth strong commercialize products. significant XX%. expected to increased U.S. the has regions the expect in and driven internationally sentiment range will with market they activity the Tubular of has all well segment introduce new by to and growth coating see as Blackhawk in XX% from robust see improved. The land to as growth should customer continue International

the materially bottlenecks of not don't up land perspective, expect don't range the Services the other incremental segment on expect improve Gulf be be XX% From growth in to to would to of XXXX. profitability extent to growth the be revenue a Mexico see we the to provided see U.S. the slightly, we and expect U.S. as expect see see versus depending to but The gradual timing mix. margins the will businesses to up We house. to on XX% we subject additional the and we backlog international all being as the up throughout to a and down what specifically in like and from XXXX customers business, then is our offshore are Obviously, XXXX of from the plans are we'll with that, materializing, working QX their and likely not on this of QX take there. in With side better market we to Q&A. the we international But call feel advantage we see as project position open XXXX. a excellent year

Operator

Ian question-and-answer the a We'll from have do you. Macpherson question And Simmons. session. now Thank from begin we

Ian Macpherson

Hey. everyone. Thanks. nine in are seems wanted of Blackhawk It first from How international? much year month's Good growth international story there morning, now very the to like this your clicking ask I is well. Blackhawk. revenues on

Scott A. McCurdy

I'd how now the at nine That's percent of much up this international, looking XX%. Sure. of the are quarter, average, over months. course from year. XX-ish say say, gone low On we're the – a I'd kind probably for

Ian Macpherson

Got it.

Okay.

And growth so as I still America you're for assume Blackhawk well? internationally compared North XXXX for outsized to projecting

Scott A. McCurdy

would for percentage, coming I we would say the markets. a I from see certainly highest XXXX, as growth say international

I see see we pretty well. sizable growth then think U.S. from we Gulf land still relatively Mexico and flattish, of some as

Ian Macpherson

Got wanted balance of Obviously, you've the you. in to I ask got it. sheet plenty already. Then Thank the about cash just revolver.

So of in liquidity expanded might aspirations and for types intentions maybe that talk crosshairs things your of what have can the terms about or expanding you in technology you your portfolio?

Kyle F. McClure

Yeah, sure.

deals always obviously we're the there. to market what's think see I screening out in So,

various financially the still It's one million feel a just put through But I that revolver the year. flexibility expire to the screening out we're having like there not on from us. for just place as, good $XXX time to the think financial just we August second, in make just (XX:XX) sure additional flexibility putting that in some to last to practice deals give sheet. We've obviously, for having we're of balance got in us had this place us. time

Ian Macpherson

Mike, good recovery. look, the and wife and Thanks. in Well, Understood. results to Okay. Congrats there and, you outlook. best

Kyle F. McClure

Thanks, Ian.

Operator

have we from And Brad a Handler Jefferies. question from

Brad Handler

guys. morning, Good Thanks.

Kyle F. McClure

Good morning, Brad.

Brad Handler

you very little like out you still maybe the margins, impressive very in. just profit G&A perhaps strong. results If a Services, please checked. could layer improvement. about all to sounds quarter get think was third speak of help us being another boxes kind ongoing of so like in U.S. a could bit if just perhaps, how the bit seem kind It incremental the was were a It of to improvement But little it's we could start they much which

Kyle F. McClure

Right.

So, first this this Steve is some Kyle. the that's kind I'll take I'll let of of commentary the in on the part of question. in color market. fill going

I on a top in of standpoint, a (XX:XX) tailwind work. rigs got from the flow mix of new a more saw have the completions-based the quarter, line Mexico we and of and a Gulf incremental through. nice obviously think in margin couple

side. the The majority Steve segment P&L. Gulf here as let The in the particular really other coin well quarter of to half down was quarter, of kind land, on the And the way the of color well of it, that in our, G&A I'll $XX.X initiatives their substantially million in through as our through of this commentary and absorbs the call is continue cost-reduction Mexico. the fits on as large segment, U.S. as G&A work take some you

Steve Russell

Yeah. morning, Good Brad.

pricing market. the think share and quarters, I gains we've U.S. some on the few seen leverage some land, also over So I'd in last had market

in with Now, the periods we're holiday QX going seeing in our nervous guidance U.S. the robust the always I'm weather for services forward, and whatnot. on But land and market. still underlying give demand to

I perspective. seen sort they're year-on-year. Gulf looking contractual robust market comments we've the in some think QX is and QX, Gulf, of share and reiterate during gains say activity would pretty To Scott's flattish the earlier, I a from again,

think of hold growth going a in we'll and the So be sort I'd more rather a sustain mode Gulf in forward. continue than

Brad Handler

would dig focusing bit, a be certainly percentage the muted to favorable of there what that Okay. that And those we've have can in therefore into Mexico? an companies shift pretty the Fair you terms underlying and exceptionally rigs in You're Gulf quarter much have other are and businesses us underlying But the I little I activity we're But talking aggregate. think in but on this in down, as we on ideas skewed the about of enough. just done completion kind the perhaps is of can ships appreciate seen the meaningfully, quarter-to-quarter risk extra same I quarter-to-quarter there that and a well mix the other side than up rigs if was when more the or color. like activity guess is shift at both double-digit hold? of

Steve Russell

double some Brad. completion Yeah, in mean, the generally. Gulf I it as or less on than are mode. within that movement the I characterize wouldn't there whether is depending drilling so rigs digit,

Brad Handler

is share the think that that side, we of realize reason of you're or can had, some have been Okay. shift of That's had, gains might gains you pricing holding you've of back not the the is any in some All under right. assume if falls pressure to suggesting land able you've that helpful. concerns And terms – that or tries the pricing to you've to competition – gets any here as there I to claw there gains U.S. challenged recently? sort pricing maybe

Steve Russell

But that. we're now, the this and specifically we Obviously, we're forward term, seeing we're accordingly. particular seeing pressure at going on short and will huge Permian basins that the adjust watching not in point. pressure not Well, levels right activity

Brad Handler

heard Okay. correctly. comments And the then I That's helpful. progress, on I your sure to G&A want make just

– might, Sometimes improvement in quarter and the the on you by are so into we everything. else and G&A you the hear exit expect to some always continued to equal, correct? line don't fourth in the then be of type – what quarter, all made, fourth away for progress more you XXXX, in is There's see think, right,

Kyle F. McClure

company. effort got it's from We've an at through not at that sort efforts internally. that We're standpoint, kind throughout a longer no whether and where cost, think leave I either to contain services reductions. or We're on of standpoint. handle cases point, of positions backfill a expectation control of being we're doing in concerted the of folks a year we've the the good to to pretty reduction That's gone more this attrition now point it internally that number through Yeah. cost professional certain going be sort headcounts. of either It's here just a

to that from So, down our I would going would this point be continue think be expectation.

Brad Handler

good. very the my I'll Well, more right. fair Okay, All share. it turn my but for I've asked back, thanks answers. than

Operator

Thank I further questions. you. And have no

Kyle F. McClure

the call. great it Okay. Q&A like Well, and of everyone that rest Thanks looks portion of vote. Take concludes today's your care. for get a joining. out Have and day

Operator

today's Thank you you, participating ladies disconnect. conference. concludes you and and gentlemen. Thank That now for may

Expro (XPRO) 6 Nov 182018 Q3 Earnings call transcript