EXTN - Earnings call transcript Q1 2021

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Operator

Greetings and welcome to Exterran's First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn this conference over to your host, Mr. Blake Hancock, Vice President of Investor Relation. Thank you, sir.

You may begin.

Blake Hancock

to first welcome call. XXXX and morning Exterran quarter Corporation's conference Good me and Barta, and Officer. President are Exterran's, Executive Financial With Exterran's, Way; Chief today Officer, Andrew Chief David

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

Andrew Way

first Exterran execution safety, good robust activity quarter and in to on backlog company on capitalize our Thanks, Blake pipeline. as a and bid focused performed global operational well remain morning, of everyone. we strong the employee efficiency, positioning the

the as with company The solutions award first won XXXX million. Exterran operations to first have a $XXX in of for start was approximately our begun contract multi-year quarter commercial strong and we execution water

challenges is said are the we suppliers having of work our our the the to and felt of the eastern positive advance timing could ramifications. to with as COVID-XX That being effects part globally, While projects. have rollout outbreak that additional vaccination of the to are vendors create starting virus hemisphere still the pandemic

recovery market. outlook demand in our customer the is the of the strong at needs we Looking paving oil on improve international which continue for products our remain and opportunities, for for production, and bullish to The way commercial growing pipeline traditional services. gas prices our natural global

look gas billion over I of for at and we addressable $X.X opportunity the project $X for see years, water. over the over project award As billion next the market opportunities several

As that we've in we global ongoing Water said of continue energy this the transition. to an Even is believe ecosystem opportunities to part see demonstrates to gas excited own natural and of important before, the business. will And come. the demand Solutions years integral thesis. our grow to We're the more advance our pipeline energy we help Exterran clearly, be transition

to had want first and water today when the line really market multiple on what provide I in we covering I growth its have underpins also and see do progressing. industries. little our spend we more an our this continued value and across So a to quarter on time how we the creation. in outlining bright update business we total product business addressable for confidence prospects the it want

solution treatment, customers Innovating the we and using water refined different and mass volume. water the application large and with [ARIAT] and market provide high applications of in across The reactor. primary, oil municipal iron covering management. gas that which removal the now built half product lines opportunity. of secondary large present segment focus, through Our oil water and scalable a ranges the technology pond in technology of was for volumes extensive was The bacterial environmental conditions address for sands a of was was growth initially concept growth required. a inherently tertiary transfer water an produced volumes of have our family for translated developed further treatment water the of then a The microbubble complete is to industry of where

fully-integrated commercially-proven challenging mining, proud a fluids We are over a developing space applications desalination. and extend solution. we this our translates wastewater and now to that in produced with leader be are XX utility treatment With into into flow technology and patents, well and high core water

as next For the parts being the attributable oil, applicable Contrary growth water growth see cuts industry, the the in production and significant XX% is roughly by expected XX% in to a oil as of serve, company. over see oil gas But XXXX. growing oil EWS part where as To $XX water water. flat was compelling value be we annual insight that, Clearly, water the market. rapidly total mature. norms. although $XXX forecasted opportunity over years. the of than Translating this produced XXXX. provide for to total EBITDA are will of is which million. years Industry is industry to petroleum, Ultimately, production pipeline revenue until flotation of with has waste. increasing, confident of a still to by the are gas mining, water, few, several that stated more well production we creation. the we contribution certain up world performance name are applications sources microbubble gas larger targeting, to grow. XX% we our to some drive to our we of volumes and it ratio, by another look originating this and could that earlier, municipal Dave. a the dollar company's in with growth and potentially as oil the given and adjusted XXXX, into are billion But developing assess produced $X our we And opportunity exceed see to of natural It To see for operate, water that this discussion expect tremendous from and now addressable drive margin. turn presenting poised over to water across now enhanced want next technology financial to how many XXXX, XX% including an we several we rapid opportunity water I the market is opportunities, increase had water wrap to of is a XXXX meaningful revenue confident we billion a as I all coming then the markets produced In than are out small our being our could industries this technology technology with the I'll flat and business business our water and

David Barta

Thanks, Andrew.

XX-Q. release, and deck a press investor file later have issued We the the today we'll

through usual outlook the of I'll Rather, the years. the recap XXXX next in So, of talk our financials. about I'm go not going for to couple

stability While still activities, the next several of years. there global our the strong us the backlog, business ECO a pipeline industry and business confidence in outlook gives around uncertainties relative commercial are providing for and an

XXXX at with along year in release, we see our rate million. the XX% this, for realized begin into with over EBITDA we and to XXXX two adjusted improvements years. flow. gas to updated outlook business earnings the expect productivity we and This improve in Andrew As past revenue guidance year over water also the growth this beginning and as we of recognition with the incorporates This product press and $XXX EBITDA drive for cost million also provided, have later the impact outlook cash this stated savings increased adjusted $XXX incorporates least XXXX several to to as next compounded years help of bookings the view

free cost volume the only structure. With $XX have handle our can small flow changes cash to $XX meaningful operating million. for for outlook, negative increasing will XXXX We million with leverage cash is flow as guidance we regard to our

reminder, this deferred uses, capital a and is working CapEx. the As driven by revenue

East with CapEx, an we given expectation one of similar the into higher project. to next year to Working at will meaningful as project get capital be XXXX more usage expect sizable the Turning higher for construction and current to revenue the we'll XXXX, for ECO-win. phase this further least be deferred backlog Middle

margin high years, over invest although chosen sustainable several XXXX transition the in generate to energy these to and focused a capital further return requires flow to will in cash and and next high beyond. projects have significant company We more

deferred we to positive to decline of flow expected adjusted, and above level. the As capital conclusion project. will as Middle EBITDA, million expect East with we is to as be expected is $XXX normalized to XXXX, more working move strong the start contribute revenue a cash free to

However, the years. the to several realized working full offset capital will over build be

XXXX We will growth cash for ensure both all commenced of to also decreasing strategy million. XXXX, funded improving in and maintain ratio Thinking $XXX CapEx. in expect of success. additional outlook, long-term our significantly to structure over XXXX could to not with of leverage in terms assumed similar This Even this about with forecast result in XXXX. capital have this level flow leverage we any free a review a we near-term leverage company

our process for are All to for financial relevant remarks. included project financing, that creation. believe and strategy with we we we stakeholders a on to works As consistent structure developed closing in table shareholder with the are Andrew options performance several the about potential before, commitment back have and longer-term this the capital this turn his as that, call improved And talked with discussing have providers. our value driving I'll external

Andrew Way

Dave. Thanks,

world. value tying metrics the result aligning aligned which leadership again as long-term longer-term of and is that ESG us leadership further make We've the right also energy direct believe choices the improving goals incentivizing in EBITDA, to return is and of which make in create for in sustainable margins strategy stakeholders improved our We're all backlog important with our compensation returns with our balance the improving and help long-term both sure it also to for near-term value. cash and including in managing objectives, total we and shareholder sheet compensation flow our our is to progress our drive transformation, a important our total to our will into ties we So, part a our teams added shareholders. many by should

over transformation we of we're structure, the I pipeline. can that the want commitment believe our time. As really that, excited business, we and the to I underpinned moment back operator. needs. capital take away Exterran I'm strategic value. support our customers accelerating And review this of see our opportunities in stakeholders, driving or about to growing solutions near-term for upon company's And employees, vendors hear all our today, turn you and water committed now our a commercial their we to thank I'll to call conclusion by solution our that our a the with potential our come longer-term longer-term both to are with to

Operator

of question Capital Securities. One from Our Instructions] May Kyle with line [Operator first the comes

You may proceed with your question.

Kyle May

and XXXX impressive number to the the EBITDA see I'm outlook. pretty

you see can and if improving over its business around to provide years? us and wondering how changing the things of color couple Just you any frame-up next segments help the additional

David Barta

I and significant on, really a project we again for won, those sales the ECO water product were said, then think gradually project environment. improving Yes, outlooks based as another we assumption

again we the first XXXX, through one that Obviously, So the not probably today signed the of go half the we water in start executing, details by project XXXX. deal contributing contribute. back will segment, in all but ECO quarter, will the began

for So, sale then the this of big contributor sales project. to provided certainly ECO water will be product the product terms in in and addition a outlook Andrew

Kyle May

wondering table mind? review, time maybe options have capital on you frame if about strategy in more also was you talk the were structure I could what the and what

David Barta

side, teams think These think, those same all that's a a that the engaged those speculative customers, on things obviously type talked see in our by I are consistent, and project, are are and our aren't have, guys Andrew engaged we dollar in projects very pipeline pretty out. continue pipeline. of time lined first provided multi-billion story. of customer product And then about I We've Yes, the those customers on are pipeline to lined we and for things. by project, These gas significant total some a the things capacity. got with the that real out are opportunities water

doing that maintaining leverage And of want to engage we significant currently forward. terms sure type and and we're in that leverage a better think pipeline make sure shorter opportunity us of short-term right certainly longer-term we're term as going have to view - we of in things the from grow leverage make a then these term of balancing products a position. that I I we're that kind front of into So, on the both long success - to working

and that to of go options, makes not have to we value sense lots terms into stakeholders. options I'm biases does We're going to serve create but of our details, In would going don't any nor our I Board. to all consider say, of

say going we're timeline engage this resolve our point, a range not and other I opportunities. pipeline to to predict say, to company So, at get Board is we a And than actively. I'm just to customers our and would looking probably at as for with a our of priority this this how

Operator

with Our next of Doug question Northland line comes Capital Markets. Becker from the

You may proceed with your question.

Doug Becker

you that of billion wondering percentage if billion just pipeline more a timeframe around term. of and was could longer I projects the $X.X little win the out gas, over you of expect $X context water of give

Andrew Way

Yes.

I next timing Variant locations countries, of think couple stages. certainly the in are guidance the handicapped at that So, projects different gave the today projects. of the we in years different over different

the application. we're early specifications some actual So, the on feed and on designing equipment

first train. these projects a of would we second the Some train have where already be

and operate, currently of projects are built, we Some of own. what currently designed, we've we already and these replication

so as we we've built the plan, local the have local in are our question of timing. a with - but currently our working much applications, And customers that designs pass tests. And certain others it's it's into in to still various through expected were

a real difficult it's So task.

said, order guidance we've in rate in absolute we're certain the within bookings win pipeline size I've every confident very tough, and with to have the our that locations the but we're product the really and been countries has But of the we provided. lines. applications the predict that confident with As trying quarter, certain

places. from we're a chain. And product months our going the way of then look a the been the an supply at allocation tend and of that interact resource overall to through overall in over build of how we or globally we're to working to our application, interacting have starting into to the we all hard global lot So with pipeline, six as engineering from past ultimately manufacture how going to customers teams the nine lot

build what planning into longer-term planning applications and constantly call that pipeline. that and our in we run we takes into S&OP will So, medium-term near-term, process consideration the

but through, we'll the course start that provided. on posted next - but of the pipeline keep that couple forecast months, size some and the wins over that see we in you comes So the few to to the allows hopefully putting of the realize of of months next to continue and into scope backlog the both just us

David Barta

opportunities sale and would type pipeline includes add that I both And maybe, ECO-type opportunities. product

horizon, to the projects be provided XX-year XX% business Andrew so, And water XX-year on ECO, like on of but again out be some be we XX% it years. a with projects horizon view rate, type some XX% the XX% number that in could that some and But of rate win - in it'd could there's quite there of probably projects there's then XX% for that again win a kind of provided. go these rest to and the

Doug Becker

to upgrading something is U.S. going targeting? be portion That Is include Exterran in for infrastructure makes sizable water seems sense. It this the infrastructure U.S. the like build that a aging might

David Barta

I'd Yes. and implications on have with in technology working level potential we We've state customers - what solutions. provide various started we some of regulations that say the started, and certain of terms actually can pre-Biden,

is are say water wouldn't America. larger overseas. those And they've They're pretty and see here the say that see so projects our the We I accelerated. level business at discussions certainly the North of for in progressing. feel we we intensity I'd Clearly, pace good progressing.

East. plays side, the water into not what certainly We're signs America, various in working technologies we on only water see just both use in early seeing legislations, come quantity gas solutions and of And prepared and on on a output, also can new I that in which additional on side here gas we're about the the narrative the so we the forward. volume we but we're and the play production, help environment it with and real I certainly see side, that equal cuts that we're gas and parts of my of Exterran and strengths that certainly overall of in side comfortably we seeing Middle drives remarks, very need water finds, have the a new correlation some talked additional North that think of does. seeing - But for into water the

Doug Becker

release the in Iraq. there was force been that press lifted majeure a [indiscernible] And had

for about context the any implication Just Exterran?

Andrew Way

Yes.

majeure within internally, time. aspect we've one So chain, here been months three team the made customer the a This and being that with both about is Houston. couple monitor of hand-in-hand and It's world. and cautiously, guidance we a that seeing the still that I various that Middle We're parts is in out with with logistics force as company reading the to we've say, comes people, into comments seeing incredible everything of that the regards and not news working engineered daily. to various important supply that remark countries parts a be the opening from and planning. - the project, we're that on that and an need the important happen and team as relates over COVID our them support my for managed in continuing global say, and we in we've logistics reviews, built I'd designs, of and the COVID to our chain a from that implications global reading to of challenges supply outlook with see what built we're read for parts, progress the project East in see. could we're some all it made overall we're we perfect project. a today on will as will our that into can control we last of the managed we've been The really user, our of end also relation working parties headquarters the with that world I

can the we we have whilst has things on invested technology in what a anticipated that force control to confident the internally majeure and about that visibility we made and and at project of it the we I I engineering really talked progress line projects globally. in the been allow And our comes of where in with place. some a is we've back with So feel seamless and everything previous calls stage to good infrastructure think lifted, us ton this

way. an our this engineering able So manage project really have to teams been incredible remotely in

that about come. excited project hope more we're we So, and the are there to many

Operator

of Our with from Tim comes ATB. next the question Monachello line

with You may question. your proceed

Tim Monachello

taking for question my Thanks here.

to the the that outlook, couple of providing growth with much how do need allocate over capital by is which over years, would that. within EBITDA in Curious XX% Just you get million $XXX XXXX outlook for encouraging to growth thanks get next for you and XXXX, to there? definitely to

Andrew Way

assumption, Yes, that I the think And the that. in project - made we has we've for one first ECO we more one year announced said, we this project and as got the in capital assumption next. quarter, spending then

is there that's is to - a - the going we on specifics but So not it. be, capital by don't project give what

beyond self-fund, will So, there's so. ECO terms assumptions other in that no other that of

Tim Monachello

you're do commentary And of alluding would in like sort but negative. assume cash free for the on I free Okay. to you be could have XXXX XXXX sounded where levels, based any the could cash improvement it your fall EBITDA? guidance out from also flow on your commentary, Dave, XXXX some

David Barta

Yes, the. so

project this of water quarter details, of change increased its on the have for all next capital will we and in projects the but will actually ECO use versus and the then discussed more capital be go we Doug. an that side we first the with variables the spending working through just year this the of some big think year I again didn't won

on on level a similar of revenue based this as to schedule similar just that. year. bit the a we will little be will this use Andrew taxes, level larger fluid project, calculate a still that year. debt be balance Deferred working capital. again Interest that - actually the and it's will mentioned So depend at Cash to

next it So, versus type number. year working capital similar a an use this and probably actually increased of be CapEx year

higher use of earnings. be So, the this year - cash a than actually larger next year it on

Tim Monachello

that's terms do pressures? you're of you issuing at be ruling for would in supportive sure. the Okay, of And since then equity just Board structure helpful review, these out anything, not think capital the

David Barta

pipeline stakeholders. that Yes, to Board again Board think of us our not And it's about a I'm just answer to customers executed not they're scenes. you will just for going comment stakeholder capital when committed the When is but flawlessly our be know I would even structure say project that investors, the and behind group, customers as its a well. like serving want obviously our XXX% absolutely a like to review, important to this, and all got the you our look

and said, So stakeholder I that just makes true. group. is Board and of anything would But for type ruling open our very would would we're any that that say, as not be consider sense out option we

Tim Monachello

for All commentary right, turn the and I growth impressive will Thanks it back. outlook.

Operator

Our next question should line Hoh of be with from ISI. Evercore Samantha the

with You question. your may proceed

Samantha Hoh

be just time line of talked project on place to driven the booking of this is It to last going a of for hindrance stay on like sort ECO water this us project creative of put Curious books. to be work some had finance to that with that these maybe in it. ways of lot was holistic of the second in sounds in a maybe now. terms have Dave, you you're terms thought a different when or I trying pre-emptive approach that to - out structure you need going more if questioning. to guys sort do

David Barta

more that that we one the remarks project ourselves. No, we in fund would ECO said it assumes

or So that's water gas a contemplated project we project gave. related the already in a that's guidance whether

of the certainly or process is financing, in deal. an a of So extra ongoing that not water provide going solution it to to to - us a terms to current longer-term resolve potentially capsule. be project hindrance And tender important

a look it. we certainly that's So at priority if

Samantha Hoh

maybe just then And Okay. go back to outlook. to the

heard gas, $XXX think prior Curious the different but where just I are sort rank terms what was customers. of piece, sounds opportunities? market billion you is other that in markets mean, you guys opportunity the it coming opportunities or from? oil billion end markets from you of I'm in rank within it of opportunity like and end if curious of are the what Just I expanding water targeting $XXX various in their definitely I or could terms how with kind guys like

Andrew Way

Yes, to Samantha, very hard hear. it's

I some on think there's background noise end. your

maybe seeing So have will I that. opportunities in that in We're I try I of to various think prepared mining. answer technology of was and areas We're number water remarks, markets my mentioned that a looking what municipalities. in the markets segments different are arise going to at as originally applications developed in in back

And people technology that we we've productivity to that customers the gas been that out. space oil benefits very and we've so for industry, can to the really bring as also it we're talking in and left excited technology, have industry started the original been the play that with just and developing about but

here North our we've customers predominantly already And using we the the so Middle in able spaces. but the technology, to also that in from we're see, to that seen America, that's back reapply East, benefits those the benefits productivity

I going the a number but going that quarters, few of be a and the wanted we'll I discussions segments. talked in to transformation on. back to mentioned water business back say industry the and as technology for line with an prepared we've multiple what a margin forward. we remarks, today so that this significant a my the forward over like about exited to the the least the product putting some it's in as at next of water very on early had, is started segment into initial perspective, get a sold bit low success commodity see of today absolute And underway look lot success that the we're from company will of focus confident course lines, really and customers, going XXXX, with as give with part other product what We quarters to application And too of started off a color I've little we're because

and which even So Exterran in space reliant is making less this gas. predominantly today that oil in we're

And so multi-region. very by that's the taking the place team. by It's excited work

working in that We have opportunities we're America. Latin

We very future Asia and currently obviously be market us have in the course the to East as the and continue has been to we'll of a that we're in well. we've applications XX capabilities for working come that both the that fruition And big those we're over in and some regions, about months, confident the we Middle and prospects will excited last as technically, see. applications commercially the our built

Samantha Hoh

And anything operating about it revenue there more last little one, a East, quarter. just normal there one looks sequentially this step had Is a like the out nice up now? Middle on basis

David Barta

Yes, I didn't catch question. the first part of your

Samantha Hoh

the East is I there. Middle sequential actually the was all improvement that operating if revenue and a nice Just - normally sort had COVID? everything of work wondering from just now, like has recovered

David Barta

COVID the India, facility ultimately base good and coming engineering challenges, the well, like as our where supply aren't in to we're that. question, The face resources to frankly but news challenges say and manufacturing still I areas in facility the in response UAE think continue maybe and reaches engineering well from some over. Doug's I like performing we would recovered that we places no, said the Yes, Andrew has is have

has At getting to that far affecting getting there. all would our continue I ready a of those. our far challenging the it large India project and is So, operations? seen, through this it's think for that some in say say is we've situations. and provided I still of East. with regionally real become some are terms Is affected in manufacturing the but I would we're It engineering the challenge to something news, a better, of predominantly to dealing pretty yet. feels little as Middle been and that's and we're There But past kind still than caution point, challenges hasn't has that across being think from I part the time - countries over radar some our things past, Andrew have we're are probably under world through this the but from control. work U.S. going are But that seeing it

Operator

question next of the line DiRubbio from with Baird. Our Brian comes

your You proceed with may question.

Brian DiRubbio

of cleanup questions. availability What's your the on Just a couple current revolver.

David Barta

I $XXX million million. I don't have of like, approximately. in front me Yes $XXX it's know, but that over

Brian DiRubbio

going we're recovers. And to Okay. see as increased availability Correct? EBITDA

David Barta

Right.

So year-over-year nice second improvement. nice that's for gave a thing we the with is outlook quarter

going that's EBITDA to leverage - which growing higher was is point going this EBITDA, that's part outlook terms year, to help. that higher So year for our continue. certainly I at certainly where to of growing availability. debt a similar but, help next is that's level to EBITDA would yes, levels of mentioned in now imply on we're going And certainly

Brian DiRubbio

That helps. Okay.

I'm have it at give take, you approximately as So or of right liquidity. $XXX million total now, about looking

You're this year. million burn to million going about $XX to $XX

David Barta

Yes. the... And we then got

Brian DiRubbio

challenge XXXX of your as in review the structure. about strategic sort So the times of capital multiple you becomes hinted really

David Barta

levels Yes. leverage as next year I And said similar this to year.

consider if dire also a So anticipate bigger to think we challenges, as the extreme. company not much of having those it's challenges. I as any looking just the solves growing of that again really pipeline we currently EBITDA But billion to motivation be to But all trying obviously but at It's we're opportunities we we're more. that prepared things prudent or on be have a not see - sure $X.X for again forward as that over make working. some

Brian DiRubbio

and you you generating in terms try of mismatch you mismatch. you're going your guess EBITDA to your And You're here to that look of that I to of all U.S.? outside Are the all review. this address in as EBITDA to U.S. the resolve some interest where the Understood. expense have going think about

David Barta

review. I mean, again would I encompassing say very

will with on foundation just the thoughtful everything's options working solidify So through the all thinking the the bank company. of table, that and our partners being

is you consider will imagine we if of kind again, of can solution. look than a the and into that it So, things see range fits there part quite as and of at the

Brian DiRubbio

Okay. That me. you. does for Thank

Operator

closing Ladies for to have session. the end reached we back call like this Way would over of Andrew question-and-answer remarks. turn Mr. and to today's gentlemen, I

Andrew Way

quarter dialing operator, be the look out at you, updating Thank in to today. and there. for you end the everyone of We Thank you. thanks and forward safe

Operator

This today. conference. Thank concludes you today's for joining us

at lines your disconnect may time. You this

Exterran (EXTN) 4 May 212021 Q1 Earnings call transcript