EXTN - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the Exterran’s First Quarter 2018 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. It is now my pleasure to introduce your host, Dave Barta, CFO of Exterran. begin. may you you, Thank

Dave Barta

Good morning, conference and first XXXX Exterran Andrew welcome With me to call. President Corporation’s today Way. quarter and is CEO, Exterran’s

two share Before to has IR, recognize I you a to as thank you wanted company begin, position us Rosenstein, for to Greg a CFO we that VP and I left after his want a years, take of in Greg our Orleans. with contributions. of New

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

Andrew Way

paused quarter the trendatory, customer during as number call sales first order continued of solid million, margin of segment. and everyone. another of with product Exterran We our quarter morning, and strong a was million as last Good XXXX. had on months bookings in our nine expansion ECO bookings higher following the $XX flow $XXX that many Dave. felt we revenue on adjusted fourth Thanks, rate noted orders EBITDA product on wins fronts,

of line the our Our million, the expectations fourth QX in from start a the $XXX increase year. quarter, with bookings were for XX%

We ultimately, our North demand midstream and expand for in continued robust service infrastructure which as our region. America, we to business, the benefits sales business experience product into

and need new customers demand. discussions both incremental both quarter, enter continued of compression to Marcellus the they in and and sales to modular and these Bakken drivers adding scalable to Greenfield The solutions assets. flow. gas basin our dynamics plants, delivering also and to and as trains of positioned product increase to inquiries During expansions Ford, as these Customers growth specific in existing developing incremental incremental with this of well Permian see we’ve processing of of in the is capabilities received cryo DJ basis. each we remains In first markets AMS Utica, clearly treating new also the different projects, we on growth capacity treating remain market. driven part focus and our our SCOOP/STACK for basins tailoring by active recent and demand Eagle Nebraska. we’re and location basin, North process process philosophy trains satisfy The are a strong unfold. Marcellus, this and on customers very continues our With in we’re additional by and the America weeks, seen and In are The each NGLs. our our

that to leading story all In support the the their continues to to required processing petrochemical for able the scale addition, design the and the we added, needs. we’re Permian, liquids. be deliver equipment about need see additional to In to capacity being

compression to additional allows to The opportunity new is capacity equipment in trains However, East to oil customers their this continue announcement and processing and an continue drilling us to drive to monetize output. affords transport the them investment there’s to of enable gas and customers and generate large provide of off to additional a have region, both amount their Middle thereby enabling gas customers more Africa produce associated and us gas. supply, pipeline This coming position that wells. In which projects.

that demand announced are volumes of for seeing projects associated for need that We oil suited produced treatment for our resurgence and Iraq processing a coupled well capacity, discoveries the Oman, and typically is are as new such Countries water others solutions. and the to and need capabilities. with gas have Kuwait, additional

are customers renewing activities monetize rapidly our gas well-positioned, to are concepts. projects in new their discoveries, with and with faster-to-market moving while We oil forward smaller

extensively for and calls, quarter inquiries own, facility Bolivia and and a signed revenue segment, we and continued strong beginning is like the demand in-region fundamental be of product contract we two that the over $XX million last to cryo our million $XXX in awards and past Africa six with go offer another Inclusive strong announced operate in newly operation gas and Brazil In cycle. inbound region, up our our design competitive operations now have to recently the very second a plant the a from for build, talked we project into nations. years. to East projects midstream a will signed new Middle natural this complete are over of within contract of for months. earnings operations operate we Our an orders. in on by differentiator. one service benefits our the over contract globally as maintain own anticipating and of contract we’re maintain at execution a the solution customers economics We’ve Latin about feels centers build, Hamriyah Argentina, not ability growing driven purposed gas brings initiatives to The but by past that America

the operations and cost anticipate year third, talked execution first, and Middle we delivering continue win to I’m more our progress three the entire efficiency, a project fronts pipeline continue projects make about to East. pace areas. wins businesses the I as second, and steady to at then the of our win we project continue pleased with three in progresses. backlog; in long-term from organization quarter, speed; with scaling that we focus We all in capabilities Last the around; our have to positioning and

We’re making previously We very engineering, on million progress across achieved milestone site hours environment. teams. one recently over of harsh and our safe good a man on projects the projects X a the announced construction on-site of from in these manufacturing

sharp regional take continues company operating faster locally, Our organization, with and complex times. positioning progress, productivity projects teams, on global supply make the along our to delivering to cycle excellent more

manufacturing quarter same continued Middle over will continue our in in our segment through At and efforts Our East of our hours to time, within not sites purposed first region, U.S. expansion the during delivered our transportation in and product beyond. out the margin we’ve while logged the shop significant directly XXX,XXX time, product shipping newly the product XXXX by facility, Hamriyah saving costs customer cycle improving

both lines, advantage Our key Exterran, P&T Middle support. service manufacturing and East for the become compression facility design, and and product competitive for offering detailed service a full from application providing has quickly configuration to

service these our not I’m but seasonal off, of aftermarket detract results efforts continued of signals our looking factors new expanding all areas. expectations paying our anticipated into lower does Latin effectiveness to markets. due forward It on projects winning America. of in and with operational these All in we’re our sequentially new and In making from are line seeing were the progress in improvements segment, to in

the success deliver commercial our back to of After capabilities continued over financial call seeing are a high customers our results, expertise turn Dave our are with responsiveness. and further I’ll additional first now to I’ll provide outlook. on developing Dave. discusses some degree quarter to We commentary

Dave Barta

Thanks, Andrew.

quarterly sequential As comparisons I segment results, discussed I our to again performance. will make

starting aftermarket with of points. lower operations a services revenue prior million, XX%, In So This gross revenue segment, of margin segment, was contract was million, gross increased percentage from in of at $XX margin margin XX% at $XX million margin the while X% X% to decreased the $XX gross gross XX%. flat up XXX basis $X in while quarter. resulted million, the percentage resulting

while was to in quarter up in we XXX sales. margin in million, transactional Revenue XX%, South in the margin America margin segment a or QX from QX overhaul percentage in up in mentioned, a holidays, million period gross XX% X% to points product was improved reduction part revenue and and projects maintenance was and in up as $XX strong Compared resulting resulting of however, ago. in Andrew As gross to year a sales see from AMS summer XX% was higher, as well XX%. basis the XXXX, traditionally due slight points up $XXX a repair, for same decline basis gross XX It compression.

of improvement higher treating again compression highest Andrew second split In revenue product from at was reflecting and North orders in solid once bookings backlog. fact, Revenue and markets. the dollars $XXX from The to net execution the America orders also of product XXXX. international million. X% our in of since terms from sales sequentially, quarter processing and XX% conversion for revenue were its was noted

product as Our million XXXX. while to product end continued new expenses SG&A were such at million, million the to as end was at QX manage backlog flat of compared of investing we as development. $XXX sales at initiatives the $XXX costs in $XX revenue-producing

XXX, a implemented new not gross in impact material or revenue QX. to revenue accounting standard, recognition also ASC The We margin. was

and including with notably see Also the our commission obtainment segment. some you disclosures demobilization other contracts within find our XXX, operations However, will backlog. of in as will most liabilities costs, capitalization associated sheet, and fulfillment on sales the balance of the contract you adoption cost of related regarding changes filings recording and the and enhanced part contract

operations time, understand It’s of $X.X first backlog. you For definition we segment. important are the find backlog reported is contract for backlog the The our will reporting to billion.

executed estimate for realized Our any periods in occur. revenues that no be amount of matter contracts renewals, how future include to the and an backlog likely assumption based does expected of is on is to not

equipment a material manufacturing to Production Form Titan consideration the month-to-month will will at would Additionally, affiliate included not worth Equipment certain exclude the variable our the associated included financial the impact equipment sale America of constructs, inventory The value company will have XXXX, be today agreement XX-Q, and Inc. LLC, surrounding Acquisition, production also details April this the Harlan, of into the to Castle sale the will facility North for a in an of filed or allows months’ as and of gas, America. entered adoption us market any, definitive company to manufacture power. and production growth will strategy a for one company if elements. our be after company similar a the continue Further which other backlog close. to North bit. contracts The gears On and process be backlog focusing systems by revenue and of standard oil, XX, outside in water Shifting accelerate

production offering offer to compression continue and through and customers complete equipment continue as North treating solutions America will in well processing, We our we as Titan. gathering, gas will

As and providing the products line PEQ service we maximize PEQ review and concludes the the occurred and recall, our year business Belleli completed now mentioned power oil, on which all our of and product we several solid can customers CPE our that including feel X.X well-positioned call we water offerings. We you quarterly we’re returns. applications has of times services the rationalization transaction the past Belleli a transactions, gas, to the the The product while strategic business, value exit last offer positioned EPC – the years. provide over may investors the sale to undertaking and that across as multiple of to business the services efforts, we’ve now were company’s

expenditures. million, products in capital operations by CapEx first in In segment. growth investing Turning contract quarter, to primarily our $XX the was driven total

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

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

from the Our or increase result in at CapEx. net stood of the and end of up debt $XXX long-term XXXX debt million, growth investment the less was at a cash million $XXX

progress discussing. adequate capital. we with to to pipeline with advantage take working to continue been we’ve opportunities make We’re And well-positioned respect of capital of the

margin America QX temporarily gross versus is to X,XXX the percent In have Lower revenue capital be turn slightly a lower than revenue contract points a Latin QX capacity flat QX. now for in improved $XX with outlook in decrease improvement to for as and should a the basis operations, low I’ll year will fact, range, the quarter. sales in million compression we ago QX. QX. In requirements of again working percentage

slightly-higher-than-QX we the run in However, to as rate our second expect to a half levels we year. with return enter the of line

the initiatives. For expansion product on Latin million, be in approximately and our due million. revenue be our with margin sequentially continued to mid gross CapEx the business, we interest XXs, add, $XX be new improve, should lower be improve productivity the margin second cash our XXs should to due call. into than $XX QX, our sales will incremental as investments back year high should product million levels, and quarter Depreciation Andrew. America expense QX should QX call and in in our and initiatives. aftermarket will services will and higher slightly and to activity slightly gross In I’ll cost-out QX. the segment, to $X I revenue will the forecast provided maintaining as for are turn in full going taxes over to focus the flat low SG&A between be

Andrew Way

Dave. Thanks,

plan. of investment of come growth Investment Exterran as expenditures capital noted So new last the form product we on development our XXXX and initiatives. call, will year our a in execute for as be we will

this to efficiently stewards we it maintain high-return process markets The approach invest good product maintain focus capital and equipment of feel a continue midstream increasing great amounts of assets working of will as sale production. on global production capital of and an The We equipment be ideas our is projects example the appetite continue new lines. and cooperative of receptive and and to for focus. gas to in our the

last our systems company strategic I Exterran’s plan During and more towards call, talked process about and company. growth our positioning earnings a

be R&D, to have seen our looking integrating offer our efficient of optimized our these and dedicated being organic as created contract to believe and as with value grow comprehensive strategy our solution the The will various As and this ways product inorganic favorable additive differentiated a well growth to regional to customers, to deliver is optimized concept to and both plants part products customers. development efforts propositions of operations. at company. We team a provide we to

value. working currently are pilots that few We a on demonstrating is this

our have water resources R&D enhance to invested we Additionally, processing business.

lot seeing is disposal the water interest America, a are produced becoming major We both a in customers, and North East in from of Middle problem. where

We our positive de-oiling companies have several have continents, technology in of had results. with seeded and both patented very various

call. the earnings will progress update on you in We next

last four the the I’ve regions optimistic traveled Over all few and from have months, our to with customers. of excited away feedback extensively come and our

pre-feed believe investment in their plans, with well-positioned we objectives. worked on to we are feed their As studies, early look them at meeting them and we support

for in Our global those driving turn enabler Thanks. footprint is back I’ll over With a now relationships. call that, strong the questions. to the operator

Operator

[Operator is you. open of Thank questions. Our Joe Please first from now The One. floor ahead. question coming for go is Gibney Instructions] Capital

Joe Gibney

Thanks, good morning.

relative on your question is curious last ops – pipeline a from year. outlook, the Andrew. if contract Just unchanged to The project expectations

You about a project talked out million pipeline $X there.

look like. securing You’re work, it some

startup these then Just curious side, And on also up. curious from how just contract on shaping the some that’s of with the of inbounds, recent them. revenue

a of of this thinking quarter we you that that today? referenced revenue. more be it was benefit sort Would XXXX I early that think be should last XXXX or for so $XX late about booking of that million to the you referenced incremental kind

Andrew Way

Yes.

us, strong demand So already – very the demand the robust. and quarter to first of did highlight and continue second in have The see I we pipeline for a in resulted contract very continues that both to on is orders all, product in seen we be in operations. release earnings some the also ECO. in script strong that’s on

that see how the seeing, feel into The was work so Latin some in before, Oman, strength, continuing strength orders Iraq. operating we in them again. that’s real in America, about And on. we’ve starting to we in very recently convert countries already seen the shoots We’ve in to we’re that Bolivia can in talked good we’re green East, Middle with along continued real that and Kuwait and in Brazil, countries

pipeline And strong. so is the

Some a to of longer these by definition, little take projects, close.

in been customers. the we’re that think talked I have our read about projects number of publicly, recently, well-positioned. We’ve press from a

XXXX, to we startup – of see second ones projects in The we’ll quarter. yet half and so we towards the The here the And that booked quarter as referred that on-track. wins wins more And And and facilities, just first out towards the fourth building probably as quarter. fourth third we prior the hope back-end XXXX. those to, we’ve then, our they’re second we of to, announced successfully those continued are customer speak, XXXX, early projects see and we’re location. recent I that quarter, at mentioned, this quarter of of fourth

on product running and now. depending we take of right of what application up little a longer. But get current specs, earlier, So see these the some the that’s framework others facilities and

Joe Gibney

just helpful. sales, And curious. product Okay, then, on

Your I in driver. in has I’d know bit trends been on you on the could trying But perspective and particularly in interested treating a Maybe little or that, more disposal U.S. here your to And demand, you’re certainly be there. just what is about nascent to some seeing bring this the little a processing product-wise, maybe side, like compression But a you’re on there, markets. perspective growth in some sounds I’d hearing to it table curious – the what main speak it. particular bit produced appreciate in stages. be then, certain water

Andrew Way

sure. Yes,

So strong. the year on started things very really the side, have off compression

quarter the now, we and we’re inquiries continued my on in that mentioned I right basins. the saw and Permian to in seeing of Marcellus. inbound reflected in the fourth across most that pre-remarks to strength the with see regards have demand, the Our what we quarter first inbounds

we’ve that feed put we’re We’re the coming quite think large is, of and new compression one processing today, And the lot starting seeing in clearly to one facilities horsepower required to the of have gas. each that’s in of through. we’re that a a demand those correlations capacity putting I few a regions installed see of or

And kind on we’re so working we’ve this, seen this – of morning. just

quarter which compared I quite we’ve of about world, in to high inbound the seen the America think some XXX,XXX-horsepower is run North the inquiries rest between rates first the previously. and of

So there’s strong horsepower. still heavier the in a demand very

really on from activity, the to manufacturing take We’re that done, clearly focusing with ready positioned we’ve volume. that benefit work facilities, to that

And of, hands. choice will it’s that into owning making and the now just that a so that rental asset. play Exterran’s customers And between question clearly hopefully,

market And future, to compression. foreseeable continue confident significant and, the about we certainly so on for see a very demand the

water that’s this place that took Exterran’s We’ve it’s while the that that which a we’re large-scale core that and patented to into projects. On a have, produce seeing and play. business from of technology tackle to today success problem little bit a enhance that the we the technology really the mechanical integrated challenges of de-oiling taking chemical water we’re this the We the different while a approach some treatment side, owned through for to work produced treatments board. the across had order we’re shale in our to seeing in and a started customers seeing some ago relative really is customers, our little help everyday technology some

technology with frame. we’ve solution pretty several spectacular can And America it’s portable. some some on also and units integrate to these started players market overseas. in barrels these of all that units, processing They’re handling North used. how in time up capable into number XX,XXX day, a built major are and so currently this of a we of And technology, the We’ve water conversations of the being in the customers

and both the real a in of great of invested being in segment quite And talk also in on think an more we we’re it hopefully later to early and that hope I about concept operations, year. sale Exterran’s and key area contract think as in so, the component it’s as you updates the product speak so a on future And it’s a we testing bit, give the can we’ve a this innings I opportunity success. has and a

Joe Gibney

Andrew. Okay. appreciate Thanks, that’s it, helpful. I

Dave Barta

from This going up Instructions] as have All off alarm their Spicer [Operator in the for Wells. building. step a Okay. is think Dave, they operator, I’ll right, James I fire

We will take question. your

James Spicer

Yes, hi, good morning.

financial Just the you was know production negligible. sale impact of North assets, American mentioned on the the equipment I

sale and North whether your of of trying what market. you opportunity view versus at reflective understand Just from international it’s to the gained in all America the that

Andrew Way

So James, a couple things.

of Q material value. wasn’t First issue our evening. all, this it We a really

fit of a seen see a in product little really of to one of intend is It doesn’t demand You’ll what Exterran, continued disclosure a there that It was do bit product really we building. lines the processing our terms a we’re to in system. value. in with service generates really which We’ve build really the from that a in product of smallest revenue development terms revenue.

an allow and it we to can opportunity with fit a that else so as that great someone needs. take their And to saw run business it

meeting aspirations allows it the way. in more But we the us the it a so better wants to the what to organization a want place do. where capable fit didn’t facility in And sold buyer focus really – of take which that’s We than the we company. of to want

we And We’ve a was mentioned, business. sold as looking been for business We portfolio, ran generally. We’ve CPE EPC. terms deck of no down of PEQ care Dave the so, the while on the service year. last took there in and surprises,

just the so And that is left can time the what generate also not cycle. a through life the but product, revenue, really ship you portfolio we’re

ultimately we’re so where And heading. that’s

nothing than really more it was that. so And

Dave Barta

the And frame to maybe, add, just James, side financial I’ll of it.

our we going sales. inventory. business and serving Titan, in the a and because to Q, America again, that PEQ some products. we sold XXX, see $X North mentioned for sales run the – we Andrew million in the quarter our disclosures under it of because sold the be facility, As around to doesn’t customers still first from partner enhanced those lose equipment mean, business. you’ll Again, manufacturing the need They’re us in And the

to We’re manufacture and those internationally. products sell able still

assets. them felt to have something bit use impact P&L. discussion, a Again, a articles facility hand, focus those on further, really wanted seem was only and and the some they know processing of the So and carry I we anything the change little but on, selling merger-type PEQ in their the regarding to magazine doesn’t it very of little may treating. assets it inventory. compression And it’s better also some

Andrew Way

do and team Titan, in great. great a they’ll to strategic, Purely so from moved Exterran

James Spicer

Okay, just revolver I then, balance housekeeping end missing the that of quarter? Do just the great. I you sure there. make wanted could. if makes anything I at I to sense. a just your quick – wasn’t And have one

Dave Barta

Revolver balance off – it’s $XXX was million, around $XXX hand. million,

James Spicer

terms In of outstandings?

Dave Barta

Outstandings? so million Yes, total in $XXX debt was $XX total, million note, million. long-term minus so the $XXX of

James Spicer

Okay, perfect. Thank you.

Dave Barta

over [Operator Instructions] it hand I’ll to Andrew. back

Andrew Way

the Okay. the thanks, Well, that for and at remarks today, interest you everyone, the of Thank and the end concludes dialing look of in. appreciate quarter. And I updating to you. forward

Exterran (EXTN) 6 May 182018 Q1 Earnings call transcript