EXTN - Earnings call transcript Q3 2018

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Operator

Greetings, and welcome to Exterran's Third Quarter 2018 Earnings Call. At this time, all participants are in a listen-only-mode. A brief 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 Blake Hancock, VP, Investor Relations. ahead. go Please

Blake Hancock

Girish welcome call. and CEO, Corporation’s quarter Officer; third Way; Operating Good me to today conference and Financial Chief With Barta, and Exterran’s is XXXX Chief David Officer. morning Exterran’s Exterran Saligram, Exterran’s Andrew President

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

that, found We the our conference be provided along Company’s go with over have that turn can website. a also call the now presentation to I With call Andrew. will on to

Andrew Way

another E&P our was water we million a with completed a and bookings Good North of strong rate $XXX revenue on trial cash margin quarter operating Thanks, was EBITDA everyone. producer on produced quarter of had with the Blake. for successful million $XX as solid million. Exterran expansion. Net for morning, and quarter, many by America adjusted fronts, with continued a It XX solution. provided pilot activities large

quarter would our orders that. belief illustrated concerns continued remain the that and have U.S. product We despite the strong Permian the to in reiterate

win with of was had sales, XX% and consecutive XX%. remain our at quarters have QX QX coming segment important in product a now X.X a expanding Vaca we Our for Backlog very Argentina. XXX seven operations growth in This win for In Muerta the at strategic with margin margins and we foundation eco when in and in operating customer country. on million, the improvement remained the up In in to segment, an billion. XXXX. compared focused we is sets the future expansion, had contract significant bookings

our see in activity within closed Over awards additional of had the within overall for the line internationally, with several was and Pacific pipeline future AMS, Latin in sales have XXX our product to continues line past project expectations in with we the a months, region. near eco top Asia and we million along increased as healthy In projects. continue America the strength

success and a coming in times. managing due our advanced last same We we and OEM sheet are From period expanded year, over are perspective, cycle for despite seeing balance the internationally items working lead continued years. capabilities further to America driving capital, on the which showed times expansion North to continue of focus the in commercial developing liquidity longer a buying XXX-basis-point lead improvement

improvements improving the drive who Girish over and and focused discuss to and products remain in we operational global will ability financial our in markets the on call services. for to our will confidence I have We the pass mix. and and our operating now efficiencies metrics, demand

Girish Saligram

momentum period the and year. strong U.S. our demand compression same North There is variety a start doubled will with customers. I America compression we orders wide on from demand Andrew. of last signals from where in Thanks, see continued our the strong

From we be cycle seeing did to in Utica plant the locations. seeing with Scoop/Stack, be We same is of Permian Marcellus strong continual the continue. will wins of are in largest a that continues and QX also but perspective, of the order. for basin couple there inquiry the flow plants, a and we along demand longer the we inquiry multiple that time to trains Nonetheless, hopeful to are likely cryogenic secure also are significant a notable source, fractionation but a at and in from is the a Bakken first uptick

short-term the constraints that incremental other in XX%, the fractionation from overall on the increased propane in outcome Permian increase Mont We Powder and Basin the in Niobrara Basin the With ethane and Henry orders capacity River translate Belvieu, Bakken prices due be was and activity to X%, from DJ that Hub there in XXX into XX% emphasis increased to capacity up up gas saw Colorado. we of dependent U.S. expect and somewhat with Proposition takeaway areas constraints August will in September, demand. will

there in While times estimates to revisions been subsequently longer portfolio. and price the upward OEM solidify softened, our has customers of supply/demand the this phenomena which sensitized XXXX, should our are the impacts, overall demand more with midstream lead price for dynamics have Coupled gas industry. for resulting product

a result, a is in are and for As already greater XXXX. on planning deliveries emphasis inquiry ahead seeing we there

improve and drive efforts returns. improved We opportunities the to profitable our segmentation on and to are targeting to focus continuing more strategic

we declining LNG with international feed the domestic customers global portfolio, that seen activity substantially the fields pickup believe and we breadth to drive the as longer front, the practices and continue than the exports, to Overall, grow replenish U.S.; growth. cycle international need On of have times we of steady gas continues. demand, continues procurement be can however, our to

is important contract of renewal for focus and fields, extensions us for term, of to changes an are us success operations While XX%. significant contracts new reflected the in is projects, our portfolio critical at are existing and new these come also mature to our least are as and production in fields portion developments A naturally in lead our important. rate

and given and growth the conditions more In some in customer in deep provide and gas compelling imbalances, a us country. Latin on that are facilities Muerta field the dynamics optimistic this builds Company Brazil, the upgrades Strong in in contract-operations and for Bolivia. onshore the opportunities improve the domestic foundation win changes for in for changes allow make we Argentina scenario. to region our Argentina, Additionally, scope demand, incremental basin, in about long-term value. mentioned America, a Andrew and Vaca need interregional

as We our solutions employees run available providing daily of services the multiple with prospects growth expertise see continue fleets in us domain region and countries we to have past region, East progress Iraq, deep largest to for over more those XXX with in about Oman, United in In America, the compression coupled one in and countries gas Africa invests position develop. In the States. the good expertise have other Kuwait in a talked and outside Latin infrastructure. Middle the we readily strong puts and operational installed

a in we big live ability regional design hub region, value leverage. to Key in and deliver spectrum oil, is combination proposition to the the spanning can gas, our and customers. UAE we that with where network. As make product of customers the develop further for and integrated and to our water, manufacturing power can continue an our a will is the operations we facility it progress develop offerings to that attractive extensive advantage we the Having enhance field seeing of believe that

past region are organization infrastructure, in We few some we and have this significant continued executing invest to capability, quarters. and in over that have project our the won

the facility our advantage signs in seen we for to to our of FPSO our in base leverage well develop with Asia-Pacific, capabilities offer us will with Singapore in At our market. We I the believe new our competitive relationships discuss AMS FPSOs. the resurgence region. Finally, upgrade services financial diversify in growth, on same to to pass quarter ability have customer time, Dave we results. and are will third now continuing over to the it position

David Barta

of FX additional that XX stabilized in AMS, million XX while during Brazil in resulting of and due operations X Dalton the would XX%, million was were product the to have gross guidance FX in-line these to call, all XX% QX. devaluation recently gross sequential result in our gross from Argentina margin second with was last up quarter. Revenue which rate segment, margin of margin revenues revenue gross impact. million to in and mix in quarter reflects Thanks, which as the I note of the million continuing. with on were margin was and a improved which increased gross We cost to of well was expectations. allocation top-line million, expect million and our steady was discussed contribute XX% to in and margins due for The Latin contract our Girish. eco XX to the in XX% change somewhat XXX longer gross stability revenue to XX% our increased was resulting In sequentially, the and Starting the margin aligned currencies margin translation flat with segment the percent headwinds contract a sales the rate contract primarily America, our initiatives, that as out latter largely compared The basis. and operations XX cycle products. Margin and the and due accelerated mix to on we revenue hours the recoveries.

compression. was saw we strong quarter, for revenue treating quarter as we the on backlog execute During increase another and an in process

quarter. Andrew the third million the we to million product XXX our strong quarter million, the the compared noted, backlog at end as at XXX of As sales another of had was second quarter at bookings XXX end

potential the to a As SG&A based initiatives development. to mentioned the press as water we such the decision. convert customer's new is eco and product while were cost manage revenue a on will our continue XX project million product sales we producing as as has business our to other in in investing in product backlog remain release, expenses

segment. was be expect growth to is our projects and CapEx million XX be currently maintenance to to in Turning million. estimate other CapEx around with Growth to to total XXX full-year in investing primarily CapEx capital now million driven for XXX contract and XX million by million operations growth expenditures, XXX the

XX receive expect for account to to for million full-year, payment revenue. advance we deferred XX which the million as We of

total end of debt which unchanged to adjusted quarter. agreement to is the with as times, third at in was ratio, was of which XXX debt our second XXX million our defined the X.X the quarter from Moving EBITDA balance leverage the is credit million available credit sheet,

capacity outlook been should mid regard we XX% opportunities for discussing. QX will in range. operations our cash, of flat advantage quarter. XXXX XXX million adequate and XXX increased less the stood In capital million debt Our with the at lot net XXX look be pipeline the the us positions revenue QX million long-term with a well contract or the the in gross to accordion like with extended the have to until to at with the debt, October, quarter high Extension XX fourth With range level, in feature. million we revolver a high margins take second QX

For be is little will be AMS, mix million a XX% the in likely the our margins. mix should XX in a sales toward the SG&A weighted product and million result segment sequentially, margin high XX to more bit compression impact in for should be In revenue be flat low should segment, the mid range, slightly be million. on to range. negative XX revenues

We briefly XXXX. outlook our also comment wanted for today to

We are are to not plan in today. able and our provide the of middle completing specific guidance

comfortable call And EBITDA other about effect X, driving before We that The standard will feel revenue expectations focus conditions as with of Chris do sharing result cash global thought developed. operating additional over plans lease more to on topic. and touch back to in talked about Andrew, on has would January XXXX. sharing insights forward the one we look for our Andrew the mentioned capital I I and market continued new another into look. strategy turn XXXX the I and go year and will the a focus working However, improved

have assessing still are We will standard that on the the impact us.

leasers. payments we those sheet. be new million. balance assets for lessee, and this to be estimated presentation The Currently that revenue may also record future liabilities on for between $XX is are million long-term to a standard required As lease the $XX of related and our will impact

X, for contracts We the standard evaluate this back have Andrew. after impact January on might XXXX. the over to turn signed call continuing I us relation will now are in any to to

Andrew Way

Thanks, Dave.

discussion Before the very we I the trial a to you customer the up, for we wrap are on wanted large place that are in our the quick in was discussed operator update was with following water I taking the business. trial the quarter, Permian deployment. we announce happy successful, give pilot and commercial that very to now Last with

business the provides of remain opportunities scope We continue value our the who of to our deep new broaden customers. team, work about strengthen our bringing which on water us, enhancing to our included a domain market director excited development to very expertise. we brings We look while of

E&P the East. for off kicking the another pilots, company are two We one Middle large and U.S. second additional the in in

a company be within Our returns. by not flow strategy only between become forward on truly segments, cash mix, going free focused processes products and is profitability, systems achieved to that This execution, improving and is will but segment. each between our

focused our integrated believe are fully can all We facility, also execution in of value integrated we of delivering to on greatest customers the we where the cycles and output. plans add improving costs pieces

equipment increase well midstream global ideas gas that we excited We We of oil will good macro the in stated, product maintain within The and build high of growth cooperative positioned and new for to we and continue projects our business. out we and production. organically lines. within there continued capital amount space water capitalize approach on will inorganically. stewards receptive the landscape demand investing as look for and And to process to continues and of our remains new in we for opportunities to focus be are are gas as and developments feel return the the efficiently on feel our increased have both that

operator We and that, offering peers. product to view industrial view closer metrics are help an reflect company our industrial With turn call will and to more ourselves the financial that to as now focused will questions. our over further in back wins beginning energy I our drive areas, for the with

Operator

Kyle One Please Capital Securities. May Our Instructions] Thank with from you. go ahead. question comes first [Operator

Kyle May

was in existing you business morning. could fits and expansion provides. more little about if we maybe the if us a opportunities water with give bit or Good I talk a sense wondering maybe pilot, it how maybe the could, your this of

Girish Saligram

produced technology where we essentially Girish. that to the is the took that where amount of demonstrated water a was this that customer significant and had we our that The can lasted North the a we really they water a pilot about efficacy amount of pilot produced to pilot America reuse. Kyle continuously are able of month, to Sure. ran therefore substantial in in prove get improvement a water,

progress liberty was. this point, specifications, So at those too are with the the that around At be we what really cetera, pilot we as et discussions. the not disclose but to much will really forthcoming

lot is if it, geologies describe drills the look generally the customer technology today be oil, well, have you really way when of that come geologies associated lot In of I streams gas, the terms produced have water itself, needs you treated. you you a a would it is and there a that at to a some of the three of out have

part really a for it's So complementary us, the of business.

piece plant us integrated and for this gas then to oil a build the customer. water as the do on monetize capability the fence, to from stream. to entire a as add now And is a standpoint compression us both to processing. integrated power piece, the have allows definitely drive a when We you well within from integrated processing We so have generation, totally allows complementary standpoint, fully capability very and solution produce a the to it customer and hydrocarbon facility the entirely therefore to their treating

Kyle May

Got it.

is X. believe not your question with I one that on Archrock I'm mistaken, non-compete other I really Okay, had, helpful. November And expired if

any the now changes strategic have that you Just if has expired. non-compete wondering in mind

Andrew Way

Andrew. Kyle, this is

different we the build number focus mentioned, one in ways. we America, the way, a working that been which think how that I provided no focus. big is a in do immediate have today we is announce on product Girish and that operations have capabilities North our we had contract to fully that perspective. also be in of have and is change and both of sale in news There a a integrated via terms plant can

and the organically will operations to on the to working believe We interest, over we commercially that scope, quietly avenue continue AMS short-term have together success opportunities is and But that to upon are been and in of operations next we and become is sitting We but we gears market customer plants a contract there both that. are view, of have AMS, we build to had work, of our not that with the to a company opportunities couple continue we work inorganically, and with will rental number will switching is opportunity work to put opportunities. where build where and put that. a there will have we where we some to months hopefully continue the

Kyle May

Okay, I appreciate color. the got it. additional Thanks guys,

Operator

with Capital. comes question AltaCorp Tim next Our go Please ahead. Monachello from

Tim Monachello

expect noticed just that percentage how good in around about margin how segment, curious mix is to you quarter, is of do how You that is of in mix, XXXX sales mentioned just substantial product much Hey XXXX? guys. through stay question margin think but elevated? that much My fourth higher that forward, just Looking pricing? targeting and uptick was there, that products much pretty margins impact we morning of and should margins should the

Andrew Way

Yes.

those three all of directionally So are correct.

terms more been us. returns better certainly have have segmentation input on been products target the we In focusing of we on, generate margins the for particular doing that to areas

where eco hours up proportion assets, for almost in over to six chain better be we a exercise We drive next able saw be half allocated certainly better you will products XX was driving there the the was delivered What for of then of and projects a we to tied a about components that better a and the if a have the within And leverage in the quarter to lot think equipment eco, that factories in the mix drive about that referred larger you quarter within of we is hours of eco, if months. through. even to more steps further talked third coming to so both the manufacture that we that. to about we obviously our what the we component, coordination factories, served. handoffs seen take of each to I supply to sort ability saw prepared to factories, profitabilities productivity, my that year and range the third are going think and out we have within laid between have remarks different ago, also utilization product continue path the a of to just our the in productivity,

a to aren’t we We a forward. So, a mixed continual go point quarter those but mixed to last going may are guided it, this But quarters quarter-to-quarter something with that hence least a make of in we going bit view, quarter see certainly of volume, just a the guidance down with or it’s understanding sort XX not basis we the some that up at range in of implications XXX even in year, ago there the quarter. a will on sure go-forward to where there place manage may couple be to the saw of quarter, that that significant and is backwards there overall from and be coming basis terms, point that one we but fourth have. every margins be and mixed we for little input implication hours we we track between

Tim Monachello

Okay.

say that XX.X% going where see gross So to third you basis the expect quarter, forward? of that margin, is on a would normalized sort you

Andrew Way

certain we we just the a a the higher different number margin couple in if than of the over we than products look where history certainly third some would pre margin have next higher at what we the slightly Yes, but have years downturn, that seen of we certainly be I target and product said configuration you of quarter. have done times think aspects, of in the

both think or to continue that profitability So in we is we of AMS. I and have us front that a I’m products intention that not cost our saying normalized, good robust peaked to drive is in

Operator

no the comments. closing I Way like floor to over There you. Andrew Thank for turn questions. are would to further

Andrew Way

your Okay, so We appreciate updating very dialing to and Bye-bye. this the participation thanks look at everyone much. in year-end. you morning. for Thanks forward

Operator

conference. today’s concludes This

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

Exterran (EXTN) 6 Nov 182018 Q3 Earnings call transcript