EXTN - Earnings call transcript Q4 2017

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

Operator

Greetings, and welcome to Exterran's Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only-mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host Greg Rosenstein. you. Thank

begin. may You

Greg Rosenstein

welcome me Corporation's and today CFO Way; and earnings CEO, quarter call. and Barta. With are David to morning fourth Exterran XXXX Andrew Good Exterran's President

and Andrew regarding actual G, of this U.S. and future I'll Commission. the Company's and management's During call. Company's Securities could Management for turn or considered the law statements website. operations reconciliation of the Company speak other In materially this in measures filings due Exchange to matters. described future Company's may The With the forward-looking refer that, management call. and make financial statements provides plans earnings expectations yesterday non-GAAP the within a Securities date trends Company's Way. issued and differ measures press release may call, of about during results several available the business, These are to these as uncertainties factors, Regulation important similar only with its risk statements the meaning with of factors in to on now this the accordance over including

Andrew Way

award signed million million, than Exterran. sequential excellent Thanks, terrific revenue for a was the more of was gross margin. EBITDA, during and contract on revenue quarter. Operations with $XXX $XX we Greg. $XX as Contract an finish of each segment, year segment adjusted higher The quarter fourth to recording new our In million

reverse East were segment outlined trend achieved early gross times better the sales the I segment new awards. In as addition since am years. percentage highest gross project announce margins a the of was the result to versus backlog fourth now of awards XXXX, year, added a previously a the also of of in XXXX renewal three XXXX. margin re-scoping. that we over at For Improved revenue announced productivity segment, productivity The operational. in cost through our was the initiatives business this continued to pleased higher couple product through two that quarter a XXXX project over this past Simultaneously, of also Middle backlog higher improvements. are X.X project and revenue fully level execution drive

a For in margin the of year, we segment gross product sales percentage achieved double-digit our XX%.

gross a margin of Our fourth end. XX% with quarter, posted which X% back of quarter quarter pulled lower bookings $XXX following flow the during fourth XXXX. the of favorably a the nine XXXX revenue Bookings margin year. first with Customers industry sales in reported in compares strong the is percent were at of the million consistent XX% order of year across approximately product the months

as spend absorb North a and we Marcellus orders to the additions. drive and in their Permian to the customers midstream this activity of bookings in in However, Inquiries first believe pause is focus these total quarters Customer continues took America. suggest building the budget and XXXX up infrastructure XXXX three start to on would quarter. first transitory higher during capacity the

Contract processing is with be Services the well, plants Aftermarket award for And trend plants and scale. we're the record this treating segment, when gas secular it fact, with In year progress to plant for you treating our global as I Operation were was which combine a making. and processing a demand pleased In in order. primarily internationally, project truly continue

to in global We direction, one seek to XXXX. commercial had off We was and some enquires AMS This about with where noteworthy and the our drives some is of in paying signs X% each service business revenue revenue wins. critical by activity accomplishments completing model leveraging I'm strategic fourth our restatement. streams. financial event XXXX, that started it prior Our on important the focus recurring several quarter we year made was Aftermarket In showing other in levels. and year, strides than the evolving encouraged higher model

cash We focus high of cash a continue to to increased a improve resources internal our liquidity our commercial areas. new global safety invested and on several performance, structure management capital and strengthened relentless significant and operational, offering, yield our amount in with

a growth Additionally, solutions us a we deliver developed which our to strategic regional plan operating customer model with will allow level. on local

for the not the the from impact strategic families Dave. what call results, I'll remaining held XXXX on fourth our products took business in strategic exit our our Belleli we which our changes financial some term returns first focus EPC making After as longer non-core moving direction. East, business classification of additional product XXXX certain by assets both substantially discusses Middle quarter quarter outlook, by from production-related our portfolio on to seek to steps the now core on to to fit for also I'll do product to enhance turn we of provide our strategic sale and operational over decisions lens. commentary We see sales our product and some completing David and an exit

David Barta

$XX discuss online Revenue the a contracts segment contracts and other performance. as million coming the Starting on gross and we to XX%. with to million. revenue ongoing recoveries. scope will Operation with of X% To gross the were higher million I gross reflecting our X% quarterly Contract changes margin Andrew. dynamics $XX and results, segment, was revenue higher $XX sequential segment, Thanks comparisons maintain Aftermarket again increased at margin of increased simultaneous contractual make new percent margin In to

in increase a Sales margin or due gross margins to margin revenue margin increase. gross was than $XXX Product Productivity to Our to treating was QX. orders or revenue continue in processing XX% international Latin and XX% segment in in in Revenue higher $XX North gross in America I'll of while translated gross improvements. basis the QX of the XX% gross higher America. from rate drive at orders. and in highest million its segment million points XX% XX%. in increased was XXX revenue parts margin percent of spend mix percentage activity was resulting and million XX%. of year split markets. reason services and also ratio X% dollars The add Product with $X million the flat of percentage terms the budget resulted was total. a Andrew This from our a and loaded the lower and from bookings cited for were of customer sales primary $XXX into from base the book-to-bill front-end X% Geographically, as improved

we sight to a of a QX. range As have you noted, for also line higher

QX. the was the quarter, end in the Our expense at $XXX QX $XXX end compared $XX million fourth SG&A from was $XX quarter. third product of backlog million of to up the million million sales at in

including gears a core optimizing discussed product maximize shifting our returns on planning our strategic Andrew XXXX, lines. Now initiative portfolio product to bit, throughout

Going in for fourth exit back mechanical to as we assets quarter the as fourth discontinued and as does the sale margin, structure to on contribution prior within our represented reclassified a far its as financial completion plan held service current expected part reached and our intent our EPC and make assets sheet the those of customers, quarter sales as as operations. results they not assets period nor our material classified business quarter and In our certain balance in product business. such the to to of line optimize XXXX. product to for contracts, all business are In offer first XXXX, not we Belleli solution sale held our of announced XXXX. XXXX, on of XXXX, we remaining Furthermore, the we they're

a also We of million took assets. non-cash $X.X those related pre-tax to impairment

CapEx was going Turning the most to capital towards total $XX quarter, expenditures million fourth projects announced Middle water in previously the East. was in

including to and plan prior of spend million awards. timing expenditures million, capital. XXXX, and $XXX million on gains equipment We to was approximately For contract due primarily growth $XXX $XXX productivity below million approximately were in million to capital approximately $XXX capital to on $XX capital currently to during operations, our maintenance expenditures million expenditures, million $XX project $XXX which XXXX guidance

a reimbursed as net $XX treated will year we CapEx revenue. the lower anticipate to be number, CapEx do of However, as will the reimbursement up resulting during million in deferred growth be

contingent XXXX Included project As in million is is $XX approximately upon the timing growth contract variable, the spending. example awards. is for operation the carryover past, in plan of CapEx of

working noted we call, pipeline project our in last are of we on about As $X billion.

year at the balance total of credit was with Looking million undrawn of debt and available $XXX end the sheet, million. $XXX

times Our agreement compared to our year-end debt adjusted end times to leverage the which of as at net EBITDA ratio QX. in is X was defined as X.X credit

end the Our net million of the end $XXX $XXX from million quarter, $XXX the debt from up at million, million end down at stood XXXX. of QX and the third the of at but $XXX at

enacted net you our a the impact taxes provisional Cuts resulting of discussion income into on Tax the for Jobs XX. from the of soon more and to December which of provision quarter filed U.S. $X.X tax refer fourth I'll included $XXXX U.S. Act for regarding be law detailed reform. a will million from benefit XX-K Our

turn outlook. Now XXXX I'll the to

year offset we of see to with margins stops QX. Latin our margin continue and benefit revenues expect in QX We the in the project project revenue operations, flat progresses. starts contract partially America. the XXXX, gross East first remain expected quarter Middle by in in are mid-XXs Project of to The starts would new to the as the should

in should QX. the gross $XXX The should our $XX revenue our margin SG&A Latin For the the taxes be decline be expense anticipate be the I which in In $XXX to savings Product will from $XX first I'll $XX in the of to range million should And mid-XXs mention, is We flat related to new in sequential to in approximately our the turn Andrew, segment, to effect range back margin million $XX quarter XXXX. should Depreciation versus of it Aftermarket anticipated be interest million America. going Sales primarily seasonal range for range and to XXXX. of in $X to million. sequentially business, will recognition just QX. $XX million. percentage to higher million the revenue be and be revenue year the Services in factors be in XXXX cash million the and before is standards million in revenue significant low

impact not estimate XXXX turn of our now, materially the the Our our impact of this it the guidance. implementation standards results. At I'll reflects guidance Andrew. new preliminary back did And of potential this will time we believe to QX

Andrew Way

is in increasing the incremental the products on in see the remains Service customers renewed and North important be Africa more multiple the country's to in gas want strong see continue capacity XXXX from and the and of significant midstream And auto-cycle into Middle exports but innovation. East midstream sales follow Reforms of processing broader but power infrastructure Mexico to region, part to on opportunities a year. we In Argentina a driven to base. play of opportunities resources. which offer East in North growth From should years liquid by presence regional that our enquiry become by market line should using Latin sharing markets technical opportunities leverage help for and full our have And our Pacific strong develop The Increase natural available growth for and customers areas expected standpoint, Thanks in gas build products provides expect of several natural to drive solutions, time Dave. and could and complement making will treating our or facility monetize and Exterran the our competitive manufacturing growth their relationships takes strategic region cost we this to expand emissions Vaca technical we Asia is midstream in drivers a exports, with region. efficiency capability the our install. drive need see plans beyond We is often I can services. infrastructure lengthy a of market and additional Muerta markets and to American grow and provide we you an and international Texas, products The Brazil for is demand West advantage. a penetration customer shale and of us increasingly America view largest influencing outlook production larger giving remarks region will will our Dave's opportunities of see allow to of required in Mexico. regions. and service with in they which we desire to in services, to to service business. pipeline thoughts market the expertise be region. then aftermarket gas gas partnerships our in growth hydrocarbons different Bolivia, equipment the petrochem With in could local both us Take drivers plants. and quicker Local to natural basis. believe refocused away than and lumpy, a demand sight

of call to it, For Contract execute Exterran, and In a Operations XXXX is fronts. or ECO positioning, new evolving segment we the now year era. our for we several win on as must continue Exterran

with First, delivering on the announced time have that's start-up. on all projects we critical with previously budget our

win, scaling to efficiency, cost our in business continuing to investing this East. to drive the several class us speed to position the year. will CapEx Second, and market. large position lower capabilities complete Middle third, And The win awards

repurposed a facility the of January are We recording have and made milestone hours year, our Exterran future. manufacturing newly XXXX start excited about in Al XXX,XXX an in we excellent over Hamriyah. In completed this at

larger existing the anticipate and drive world, be continue excited global as the pipeline strategic project award should around direction. of we opportunity we our supportive growth earlier, new said I customers for which markets remain about and investment growth to As

cryos, customers look productivity in is are over plants In gas also largest key U.S. market to for infrastructure. a lay backlog. We operational maximizing XXX major has U.S., of the help than and and midstream us Exterran maximize opportunity offer to install other be the With the to existing sales, of will efficiency. solutions more service sold, which in execution market the XXX which of forward to productivity product base plants foundation

design differentiation orders. win We will through continue to new times, delivery drive lead to and

our in foundational of its model with revenue service strides new reflect as backlog build-out and new win scale. anticipate Our markets continues make a we to and to approach AMS develop projects we business a recurring

to for better Exterran, As era returns. we focused growth our move pivots into new the and

through We technology water into systems win while generation. pull-through. increase on gas, family, water and products with services are developing We to offerings and new to process power. and evolving power into focused integrated and We a intend oil, product our and existing plan company in midstream innovation differentiated

Our change, go-to-market excellence. global thing customer evolve. demands standards focus and that model regional a competition by we operating growth will to Markets will operate We is strategy new continue our change, our the only will so be that's Exterran's by market executed will supported and recognize that constant will in change, of change. the

to about pull-through. as involve a we ready the and believe is and differentiated services path new core product mission become infusion process organic the be will our with adapt future may all both capabilities We to Technology company. to of offerings inorganic systems and

by teams progress we'll enter new new interaction focused report will with customers. enable to of and regions, We markets updates our as pillars a and year are give strategy the global street's as profit our empowered model expectations. focus, product existing the key progresses, development Those EBITDA with to adjusted closer four we products on with the at three our a by our this focus new to pace service summary, points; our revenue grow and penetration. expect and upgrade, similar as In year measured you growth

I continue to to focus our earlier. in of of we'll all for investments the Together, evolving lenders is again Thank reflected of will The be for Exterran real operator. you value line a orders the open and Q&A. of now and beyond. numbers wins, be capital our existing wining up great and told their execution support. would positioning, will year our of implementation of and to and in and shareholders XXXX. outlined story the however, new you, I the the strategy in XXXX, our like for Beyond XXXX pace Thank project employees creating where

Operator

One. from conducting question is we session. Capital a Instructions] time, question-and-answer [Operator first ahead. go will Our be Gibney Joe Please this At

Joe Gibney

Good Thanks. morning.

first on on sales question as pace into we order a products Just look quarter.

was things a exhaustion there there be have guys to helpful would abetment pull-through inbound first pretty been quarter-over-quarter saw XXXX quarter. XXXX. pocket sense a the bolstering budget Any We higher clearly first of of saw magnitude think baseline air than in some the clear You about as and curious more fourth the am in the came about that we quarter set the if into bit the there in help of recovery just indicating it. in the pace I you're stop. some to you quarter

Andrew Way

It's Appalachian, strong North Yeah. a throughout seeing still in specifically activity still Northwest lot continues Delaware, the Pennsylvania, Eastern of Marcellus Permian create America, a to from Joe. We're also demand and shale us, for opportunities Virginia.

what the So fourth quarter we with seeing we we still are say pretty was quarter, to not I'd into expect on come the consistent opportunity so were tremendous fourth inbounds. surprised. pulls a

the month than quarter-to-date we seen the that in fourth to greater have what commitments another go. so orders quarter We have saw already with or that's

don't is I are this strong. highest say, run back to which our still we but and leading in stage, inquiries the at in rate indicator are think America both would and XXXX, full demand here of things So, quarter the North overseas

And will so, on we that year hopeful shape booking. are up product to be great us for year another the

Joe Gibney

as extensions Okay. the view sounds still CapEx could encouraging some as we its It the million contracts, figure. ICO, That's On quarter, guidance expectations $X new there there into and targeted contracts is intact. XXXX, sort look referenced $XX of helpful. $XX wondering you view between It I your of like just sounds was for of if that in growth. in billion million like your you some the of there project its pipeline extensions. of parse the

in XXXX just talked Middle timing that LatAm is about am you accurate? the from I are the So, scoped before and shift larger still XXXX, potentially queue East and to assuming some project of and

Andrew Way

between first Asia split also in actually awards One LatAm. and Yeah. actually new Middle the the for was $XX a accurate. small one while the update, contract all It's million East,

this encouraged come nevertheless relatively but and in so small will the in fourth beyond by on sometime they value, the quarter activity. year, So

are number through We it's contract. because work large Middle East both seeing encouraging, we CapEx LatAm. you opportunities when and pointed as rightly to our for CapEx new the adjusted still book the out, opportunities to put and year we We've see only

still balanced a we see very so, And opportunity.

next that are and a already few these we'll months engineer awards. We here feed lot in on hopeful the some preceding awards. of studies We've have released

internally we've are and we facilities to in excited both actively the East Middle developed already also elsewhere the working about that so that with workload. help And very and

same the is still So a it We have timing topic. visibility.

And since the seen are activity. very, is early call, by We the coming additional which in funnel last very encouraged inquiries through our even we've earnings stage.

obviously So of we XX the portfolio, see revenue very are that. our so of in up solid internal of we're and handicapped balance our by line billion total But XX to the $X a the sight picked encouraged over inquiries have very months. we significantly, next

Joe Gibney

Okay, helpful. Thank you. it. I appreciate

Andrew Way

Thanks Joe. Great.

Operator

question go from ahead. David next Bank. is Deutsche Our Please from Havens

David Havens

Good the just Andrew, makes coming years? of about activity keep of can you what to the and technology. said. Exterran morning. we've better that share is get What with capture? about is in it excites then next what also evolving couple talked think you can your in that you the the and probably us know market differentiates that Can you and you grow portfolio portfolio share your most, that What is, you talked market it see pipeline think you discuss about that

Andrew Way

Yeah.

are we announced things of think we've that year. I some wins couple there seen that a the last with of already

integrated put to project together. the ability our it's First,

side, ability – impressive. build to what compression the have be the the means to traditional and processing and both that XX a market focus the able we've than the side, faster months modular side, take would the on operate really the on to been done And product so, over be it has work treating to past system we to the

area. so, one certainly And that's

our rented lot that operations mentioned a the process – can some and would is we been to have the so think that East capabilities working developing. that side water been we space a large first as North today America, which seven that and a expand been thing units North into up in time, I the making trying have to to our been other pretty we've the technology a nameplate. that in the on a excited now small of been or and in Water we to that segment put capacity on U.S., has that about opportunities productivity and Middle for out The those have really We the nameplates, project we already have water spend lot six offer of really customers is sure of the and we time can finishing have water a In a our a those we've been the of in us able and our from units the first picked been more the in We've very when also service significant out segment. we were be drive more we've America the spend base new we we've to same Exterran repurpose some fill. and about bottlenecking in months customers for on the get install help say to the without have on lot contract you to six focused hard of in pace CapEx. segment the last I albeit assets, having focused efficiency, of

those are And on. time things that spending so, we've been our

on some when from areas are with We an both road. we'll right down working you additional get we we have now adjacency that share technology that that

David Havens

talked about mass became heat it also just longer. engines you Cat give Okay, you an update and on on see? what you fingers update transfer Can thanks. that and us Then, longer

Andrew Way

Yeah.

things So, those couple on today. relevant think like this there's a I mention of to I'd for I is that listening topic think

workforce. that and last in the to you few run order maximize variable months, drops we over to planning we've timeframe product efficiency dramatic introduced XX really manufacturing our had We've in facilities. a order about dramatically we launching a the our dramatic Very business last changed all, years environment the into have think when that way an internally. that have have of First hard in increases the slot you

meet So, the the from order of to as the moved we opposed slot have slot OS. kind meets

allocate slot customers to We in follow by we a engines we've We and year now up the it ITO right engines So, bought slots phase. got to launched forward out. advance. in commercialized

I'd has that be the certainly first quarter So, in chain say we've stabilized. major delivered had the will supply that's orders bottlenecks XXXX.

think the sure stabilized of some had engines to times but will that and I us and it's but we so as we've the anticipate that sure to frame Cat advance as Caterpillar the lead a it's For and mixture lead don't long of continue improve that year, delivery bought working and customers. times time a our in we together throughout we be bring so to those making understand pain that XX-weeks, that

critical I months. XX so, that's been to to over develop able been that the the last And think together relationship we've nine

Operator

Daniel from Please question is from Our Rice. ahead. Burke Johnson next go

Daniel Burke

down you you U.S. plant taking have from? gas who there think do share are who with back that based tasks? or is about Andrew, opportunity, Are then presently service those on install you performing if the you taking customer opportunity, any managing, stream and otherwise revenue responsibilities

Andrew Way

in we a weeks first our North and America so, treating, albeit win processing ago small. celebrated So, for AMS few very and

I the been as a cubic build more to the sort last over that million quantity more we of different think we and space output, infrastructure that you been it's that challenge has know out demand the of of plant, that part talking in regions we today, is when there the of a a of to gas feet months, well our of customers extent probably as so plants sold say have plus. plant that plants rapid, that XX has sold, XXX lot a operating it's of XXX let are of

a our to opportunities through adjustments nameplate in hardware our certain working so, are with And upgrade. and today help some we're and some some software, configuration operating to customers

we equipment for of in that plants. we I lot So, mentioned, as have have a store, the

I opportunity that have effort think a and started today. that's terrific already we

that providing small OEMs to want. wide the regional that and course you you sure, capabilities maintenance customers and there others from require of have have of players can help integrators of some are For – if have and spare from our teams some large you equipment the, some will are part the know know of others, a facilities variety processing the as feeding parts that of

own level for I reliability and that's we Exterran is world plants world around class. think the it efficiency and the to and we know already that drive the operate advantage takes to what all

And have own so, internal schedules, environment. really our of have about to the analytics us preventative changes think maintenance we that helps and in maintenance we kinds

I'd an we're now approach what more that's to trying assurance outcome. an say, selling interest the place. some real parts seeing certain selling we're to in So, a different of And right take from

drive So, at and to it's to efficiency our as this in time, view an we plants more do start internationally. on we'll forward, then move help we customers how we upgrade focus, their through work based leveraging what

Daniel Burke

$XX on could it is or million pointing Middle That's is the opportunity. project be up that one helpful. East another great. so specific to the reimbursed, that CapEx, maybe Okay, third to to And

specificity Just what was wondering the to? there, referring it

Andrew Way

opportunity. additional It's

no, announced the building that of some are opportunity have the lot So a facilities, is that we project, it mentioned described that last facility, equipments seen be net will we in the we initial the in. of with script, on impact, a and we milestones new at third of through we there's so well on opportunities significantly in we've reimbursable. are his building Middle And that Dave East the this but the as as year

for year. the new that's raised So, why CapEx we've opportunity see and we this

Daniel Burke

last maybe one. just one And then, it. Got

inbound margin you to is Archrock higher the slightly lower for equipment supply the and it I fourth year. have for QX that agreement that concluded a think a with the in compression contributor all XXXX? quarter contributor to Was of last forecast

Andrew Way

Exterran When a fourth Archrock. look saw inbounds overall quarter, the us, I for Archrock really Well, we from that continues run on the rate. as I first mostly kind have know we're of supply customer to an enjoy in orders be agreement important of we rollover and all, at what to dramatically November. Archrock for from was the mean it continuing P&T impacted you did from slowdown the

in QX. So, still pretty a took quarter, the in really that's we've rebound solid and was seen P&T fourth dip compression where the a

So we'll business we be compete Archrock in are Archrock's enjoying now to with we to hope and continue orders from for and others supplier important to Archrock. an

Daniel Burke

Thank great. Thank you the for Okay, you. time.

Andrew Way

Thanks.

Operator

And John ahead. Company. from question Please go from [Operator our next Watson & Instructions] Simmons comes

John Watson

Thanks morning. my Good taking for question.

Andrew Way

morning. Good

David Havens

morning. Good

John Watson

On do much this is have this horsepower to as of industry, rental ball bit but compression to you crystal a how guess expect across question, build a year? the you

Andrew Way

in have front I that do of me. not

the listing been about, I think compression have a demand we've as, inquiries. that are seen companies lot and doubt we continue that demand no still talking you, of and that

And it's is in which right of with year. would all say so, what higher I horsepower, consistent last we saw now

And enjoy if that in front North to planned volume. absolute for continues, Not of our demand an horsepower are capacity positioned got I very But year. you we've from that me. I we what that couldn't so, tell America well think this

John Watson

Okay. unit? Has horsepower predominately been to on but horsepower I No thought now smaller larger in the problem. smaller uptick demand anything report? for there any it's horsepower,

Andrew Way

seeing basements, we've And over another of X,XXX more of uptick. some opportunity the around kind last head of number higher uptick. been of of little of has a smaller been a seen to of a bit Yeah. more well range pace balanced, has seen horsepower horsepower also are horsepower continued that has and we kind the compression. inquiries that saw we X,XXX It of the the year. kind We've an regions There in while world same

So, I horsepower the lot times the good more consistent. the lead are and better are on think smaller is news

asking plan. The which year think And a their that had that out. I easier we for are I think make not that's that's to decisions we is so that challenge before. the requirement do something people over really given And is customers industry, to unique to on we

where plan working and may everyone we'll we inquiries to were available they how But half make to with having more to inbound So, is readily are the learn that today. efficiently were past so hard in are they and we lead that, to from that sure been see times everyone they of continue when today. more inventory have understand

John Watson

Okay, great. Thank you.

Operator

over concludes any like to the for This you. session. floor management Thank question-and-answer the turn comments. back to closing I'd

Andrew Way

to And updating it. execute our forward the appreciate look you again, thanks We today. strategy. year on in we throughout dialing for as everyone so continue Thanks to

Operator

your concludes Thank teleconference. This for today's you participation.

may your time. at You lines this disconnect

Exterran (EXTN) 27 Feb 182017 Q4 Earnings call transcript