CHX - Earnings call transcript Q1 2022

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Operator

Welcome to the ChampionX First Quarter 2022 Earnings Conference Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] As a reminder, the conference is being recorded. And I will now turn the call over to Byron Pope, Vice President, ESG and Investor Relations. Mr. begin. may you Pope,

Byron Pope

morning, CEO me Fisher, of and Vice Good Somasundaram, our are President President and ChampionX; CFO. everyone. you. today With Soma Executive Thank and Ken

Soma first quarter summary and company's call, During the of before quarter thoughts. results share Soma call then our will back the the to today's discuss highlights. will outlook, Ken turning second some some for

then call the for We open will Q&A.

Web be referring to slides site. call, today's our we will During posted the on

some some Therefore, that of our today that our that could statements material of me XX-K I we matters making statements. differ to you participants cause filing actual Let these those remind in results other our be the are involve for will all projected and difference from filings results to risks could latest of These the in forward-looking. SEC and uncertainties materially. factors refer discussion a cause

non-GAAP also financial may today comments include Our measures.

reconciliations the available financial details on Additional is Soma. now comparable site. our be our which found turn GAAP can Web measures over I to quarter release, to call in will on first press the most directly

Soma Somasundaram

earnings analysts Thank to welcome and would you, I first us to for Thanks like our Good quarter employees shareholders, Byron. joining our morning, XXXX today. call. everyone.

our turning Before our to we the note merger. that transformational are me approaching first business results, let of two-year anniversary

in our that] customers their team been unprecedented gratitude accomplished focus I has truly and employees all of our like And during been [Ph], we on our dedication for environment ongoing express market and would community. [all our a together. for my and has As dynamic I energy to serving reflect better to have what industry,

our our [glide] the employees, number always customers, start on organizational of shareholders, improving is a purpose slide company, the communities. and we lives As guiding to four, which [Ph] with

our award and truly honored with Technology and As accept the to environment, our diverse, Workforce recently the was of on Energy energy to Equity industry. inclusion Champion for behalf both diversity commitment and equity a decision-making, approach for based an take our a and advantage to Inclusion commitment ChampionX. and necessary diversity, I employees and a and on as advocacy providing as Award differences competitive At is work recognizing This we proactive Council Diversity, a in meaningful ChampionX, inclusion equitable example change. inclusive company in of

our our customer of focus, we principles One for advocates customers. operating is being as describe our which core relentless

that by spotlight world. fifth to With support customers power year to me carbon environments speaks lower is across the our make ChampionX the for quarter affordable this recognized cultural bearing has environment X,XXX that, provide too firm, seamless and largest number first an rivers customer-centric ocean our Today, EnergyPoint On the and to and these water-cooled we turn bringing you steel more in are Many surveyed power. these hydrokinetic let strong can the conventional challenging and Renewable waves EnergyPoint are currents than the our of into on live capture communities specific ChampionX, emission-free organization. we our At built remote oilfield slide which continue to slide energy has we that diamond who lift, consecutive from been proud As see energy Power customers are energy. innovation of which in being power artificial satisfaction customer our bearing access river oilfield five, harsh performance. been and that of reality. a have of unreliable. production technologies, products, making past, including ocean here electricity, chemicals Research. and convert research and millions Company Research, communities people remote recognized sustainable innovative, carbon-free to to This energy potential categories, hydrokinetic hydrokinetic ranked to alignment independent pleased recently that helps traditional first hydrokinetic renewable, near six, to reliably line to to to innovate In five as product ChampionX Ocean clean without our bring

recovery energy delivered the further revenue line year-over-year has our top and strong grew sequentially. North As In quarter, of America in both markets. services in organic the sequentially execution quarter, the year-over-year North demand International and our driven growth and international X% year-over-year, America, business. line year-over-year and revenue revenues first top our XX% XX% cyclical equipment demonstrating portfolio potential business and in grew both for sequentially. growth growth once strong X% our XX% and X% capabilities increased first momentum, again sequentially, global by the gained industry-leading In and the

our and sequential EBITDA revenue growth strong of margins & quarter. this segments Drilling strong the All the executed and top line contributed adjusted well in respectively. X%, segments Production growth. expanded to Both teams Technologies Automation and delivered Technologies XX% of

& Automation to to solid margin and throughout Technologies Production Drilling Technologies expect We performance continue XXXX. deliver

sequentially, Production Chemical realization. X% grew Our segment by pricing and activity increase driven

to to growth strong mid-teens percentage in approaching top solid increasing combined pricing Production our achieve line XXXX. start with business realization, full-year the the Given Chemicals year, the we in expect

an the reaching driven pricing XX% least We and Chemical rate segment expect to improvement, at Technologies through by progressively EBITDA margin Production exit of XXXX. year, in improve volume

merger our combined offering. performance our the months synergies remain to differentiated and efforts team of team, exiting Better original closing. of first within a execution Chemicals disruptions. Together amidst We technology, inflation product efforts the encouraged million our remain diligent to than Production of $XXX customer with chain to annualized quarter, focused our cost delivered delivering Thanks fully continues the sooner the receptivity industry in objective by unprecedented and on supply services targeted the and ChampionX was Our XX an

traction raw that offset Our businesses. to logistics-related of labor of in increase price impact on experienced our teams portfolio are we gaining and and cost realization executing and the well material, productivity inflation have

for as Consistent with expect see this margin strategic will priority of adjusted our margin strategic have process ChampionX options we our evolving in expanding on a XXXX. started Technologies we throughout Reservoir that reaching XXXX. with year and confident Chemical to business, we increasingly are portfolio, we to execute exit the our We XX% explore EBITDA

with the like margin second our the quarter top bottom our and call discuss for and line We are solid results demand outlook generation over now and that the businesses and The support tailwinds cash our growth favorable to positive improvements, with first confidence in meaningful our on market Ken give sector. that constructive I full-year multiyear combined beyond. line fundamentals, deliver would and to positive excited for to pricing us our a increasing line traction about expansion quarter outlook. turn we will top momentum

Ken Fisher

year-over-year Thank We us. the you, EBITDA believe reflects will be performance metric best Today, and continuing commenting this thanks Soma. morning, Good adjusted sequential of operations. for and on for business joining comparisons. I

up up cross-sales revenue while As quarterly seen $XXX X%. $XX sequentially quarter revenue we Geographically, North grew first revenue up million, was year-over-year and $XX on segments. Ecolab. million in to and XXXX was international posted operating X%, were million America of revenues slides as solid our growth XX% eight Included nine, all our in

and post-merger in the Ecolab As recognize previously sales margin EBITDA corporate other statements. sales, to associated do our allocated We and to not communicated, are these supply associated financial with agreements. is on revenue cross-supply

third sales date. the Ecolab at these anniversary merger of continue rate XXXX, a expect We the to closing midyear declining through

the in $XX for fourth GAAP XXXX was the net versus in quarter the company million of and quarter income $XX million first XXXX. First million quarter of $X

This diluted quarterly income per $X.XX represented share.

As million. was quarter seen ChampionX consolidated $XXX in adjusted slide EBITDA on nine, the first

quarter a XX% increase represented X% a as as from it first quarter, delivered previous XX.X%, prices. our disruptions. lower spike points consolidated adjusted severe year's to diligently material XX offset This well XXXX. of period. basis XXX versus sequentially the points impacted we raw chain and these by quarter, we of by EBITDA the cost In continuing factors, down was supply the in continue over up While year prior the To basis increase inflation quarter selling margin first

to operating certain free a activities for outflow, growth our and included proceeds investment quarter customers. capital from million of increase was net costs employer compensation asset in contributions. $XX Also $XX inventories first Our included flow million support from Cash was cash and an annual and were sales.

to points drove revenue refer XX% international business basis to grew Chemical year, the the lower versus was year-over-year. by million, increases. XXX progress Segment slide Chemical from the raw solid sequential negatively details America material cost fourth adjusted actions. adjusted revenue our first X% businesses. in our basis had prior while more sequentially. and revenue XX% growth than the and on higher sequentially The improvement. of driven profitability start selling $XXX increases for year-over-year our quarter fourth material costs impacted down Geographically, EBITDA pricing in in and EBITDA was XXXX. selling by North X%, Versus up up margin quarter continue points increased strong continued trends price of segments, the was Please we $XX rapid and up the experienced in Technologies X% XX and generated price quarter raw Production XX despite period. realize price on was the benefit from to a year increase We to Segment XX% below selling XX%, rise million, first sequentially North revenue Volume growth quarter Turning quarter America. the by

impacted costs and in and challenges the availability material However, first margins. quarter raw spike ongoing material logistics

activity Year-over-year sequentially to and contribute flat million, remainder sequential drive up increasing $XXX X% first sequentially, primarily We due margin segment actions the was healthy capture was the quarter revenue XX% throughout revenue XXXX. rate market expect to increased quarter EBITDA revenue & share and this increases, of XX%. continue pricing Production Digital improvement was in up Automation Technologies pricing. year-over-year. to to and

offerings. We our in revenue expect growth digital strong

Xx fourth of was and adoption quarter million, up on XXXX. and revenue sequentially by Segment year-over-year, digital XX% up and comparable. the We loss adjusted segment sequential was raw the margin roughly and continue small up period. quarter, improvement material XX% the adjusted year-over-year. than we the efficiencies. EBITDA points adjusted $X EBITDA flat our experienced growth XX.X%, above was segment in XX.X% interest $XX Reservoir $XX strong million, $XX $XX segment within and up XXX basis cost XX% revenue for primarily the to during quarter, adjusted a drive delivered versus Technologies in product was more sequentially essentially year internationally. XX% technologies Drilling the was Drilling a and first segment first Chemical million driven experienced of points Technologies see which during point EBITDA fit-for-purpose focus the the Technologies basis roughly improve demand quarter, was leveraging first delivered Segment sequentially prior XXX level XXX North structures The and up quarter million XX% to mix margin revenue customers of costs. year-over-year. million as quarter EBITDA modular strong a PAT America and in to as due quarter, incremental first basis favorable up sequentially the

to presentation, of report Turning XX slide of post synergies I'm achieved that we our to have annualized targeted cost $XXX merger. million the pleased

enabling including the to focus and us with momentum continue cost functional Our is synergy line capturing improvements synergies. our operational of revenue strong top merger, benefits growing

in balance available to Moving ended total hand million of approximately including of revolver quarter position liquidity, continued strong with and our we on cash $XXX sheet, million $XXX capacity. the first

our X.Xx. down And million date, the net to we on total. have a regular since will net was This of paid $XXX In of paid committed quarter, EBITDA we of outstanding And the During April million repaid XX, XX. of about per We $X.XXX of debt, the initiated debt-to-adjusted February, X/X we debt. of at $X leverage merger March approximately share dividend dividend be to ratio stock. shareholders. quarterly surplus remain capital our common return

that flow, program. cash also and and We disciplined capital authorized strong capital liquidity operating announced allocation, share remain recently million our delivery position. a laser-focused management working $XXX Consistently, we maintaining has our of Board on repurchase financial and free

solid its Turning growth improving we EBITDA our XX rate. be to expect and sequentially to outlook, margin on a continue revenue slide of forward year XXXX to

to range, margin We the to year continue EBITDA the cross-sales, the rate. points Specific the the we target million. basis to exit quarter, approximately exit Ecolab million in on XXX revenue, in up including XXXX the $XXX expect to company XX% range $XXX second of

ongoing our with and our improve raw healthily stated, EBITDA adjusted the to and catching with chemical selling margin expect cost initiatives materials coupled prices actions, As productivity and up year. throughout we inflation, synergy exceeding

the revenue in prices. realized quarter, and to second slide, will range strong second U.S. PAT the growth in expect experience actions. also expect sequential we the EBITDA For quarter, our provide we PCT additional on selling million this we $XXX In trend related $XXX and improvement exhibit seasonal to some with and outlook. quarter expect will their pricing of On margin improvement continued million. specifics activity productivity And revenue continued we historic

capital remain remain to investment ratio to in cycle. cash confident of continue expect while investment, we the EBITDA in revenue We the to free periods will revenue. of flow we to growth, to in capital through XX% X% range And XX% our of see conversion X.X% working

of be back delivery cash half to Soma. the trajectory our now to you. And free flow growth the to Given year. the we business, of weighted the Thank back expect

Soma Somasundaram

Thank you, Ken.

consistent like and Apergy spin-off demonstrated capital open capital our to call deck, Corporation ChampionX years four the From disciplined allocation priority. Dover ago, from approach slide to to our of to two have you, legacy our we the ago time we between which attention merger would through turn shareholders, the XX years Before your and questions, ChampionX to to I of our allocation. Apergy, the summarizes of today, completion transformational

leverage a dividend, reached regular to debt quarterly over we by returning with to expect free through-the-cycle cash we flow of to As delivered which commitment initiating we shareholders growth. capital Xx time which our target grow is to begin target, our EBITDA, ratio net on a

further we shareholders. In return addition, initiated share our framework, of comprehensive $XXX allocation first as quarter, reflects part excess during the which repurchase to authorization to cash capital commitment our million a

in high both accelerates, inorganic and current internal continue prioritize growth investments creation and innovation-enhancing how and the and will capital allocate we to capital initiatives framework As guide maintenance projects cycle ROI We opportunities. energy value our opportunities. to organic

to initiation sum value long-term capital it technology and products of we value and as disciplined around fully generation, financial positioned the ChampionX creating thank provider, and energy in flow your of increasing We XXXX we in for I we well are world committed years to to cash the communities. closing, committed that, I technology, remain to allocation. our to to for our ChampionX our our attractive and winner focus of continues up, an humbled for dividend call and second for about through come. all improving lead free our want opportunities excited differentiated on team. dedication the lives such growth the our of Through quarter, we are shareholders strong are global strong I'm customers, shareholders. incredible extraordinary like to our in a our open X,XXX to a to evolve. are the creation our employees, questions. Again, To production-oriented With industry employees inspired our delivering for the In performance our is would and shareholders and focused ChampionX be our shareholders

Operator

Stephen Instructions] from Thank And question you. Gengaro [Operator from is our Stifel. first

Stephen Gengaro

Thanks. Hi. gentlemen. Good morning,

Soma Somasundaram

morning. Good

Stephen Gengaro

you Chemicals confidence chain, XX, of inflation if the just a know about? I anything I in your So, sort you're Can could increases about sort we'll supply there? would just on talk about on, the dig price. to like seeing interplay maybe you Production talked particularly between little think, slide that you price further on between about the and margins you talk surcharges of where you've the kind talk what what have And then, differences versus the of in and

Soma Somasundaram

Sure, Stephen.

Chemicals wanted XXXX. deliver of as rate you of much to last, and believe slide been our business and will we a been at margin would starting how starting what of QX, exit chain supply sight that then the has pricing As the see expansion to is almost provide why inflation I evolving a least we say, dealing versus we at half. raw higher XX% a have to And know, disruption with a in exit you and a in view year material and line we over Production the

with process So, tracking we as with our happening realization. have raw detailed what a respect and well happening is materials daily very, very with to as what's pricing

So, and we cadence rigor have a around this. strong

on all with pricings commodity we what have the from track forward doing on and and raw the both conversations are to we we So, tracking respect are the items, we in materials, pricing then out and implemented, to including is non-commodity the finalized seeing and based far everything we curve our on on giving indices are so going to that that's we see every the which quarter what surcharges what have slide. laid so represent we are. confidence, the where we us on, by have And detail based wanted

Stephen. In to provide addition to well, necessary that, sure making we benefits are continuing that as productivity initiatives our are also the

feel can on I on our on this. we the we teams I'm realization seeing in executing how confident. this based have, on the about we tell the So, pricing are more traction you, increasingly detailed are rigor well confident based

what I would that's say, So, Stephen.

Stephen Gengaro

Great, a has and difference been sort Obviously, at be of as the a international skewed And any landscape get of I competitive and benefits business of all know international on more market you. that we're just follow-up, the the growth. mix to better to better strong. then, thank competitive how data that in as towards traction? starting in dynamics American North there? on I'm is sort the different there the seems and gaining international, points but it's if heavily business are Thanks. curious impacts

Soma Somasundaram

Yes.

of talked have be sources the Stephen the of PCT of used. based tends about chemicals being profitabilities revenues for somewhat this to the on So, we different different before, the that intensity

challenging offshore For example, intensive. be offshore be chemical more tends to technically tends to deepwater and and

we in oil clearly, much more have so, similar offering a sands. And differentiated

And momentum pricing plus contribute to will industry. Chemicals realization, very team least that type we that's the business strong really way And excited that we strongly differentiated a we executing, differentiated been quarter, you that performance clearly, a saw Chemicals What confidence we profitability. Production top have gives are reach I'm year-over-year. growth. at a the has that and first in a So, revenues strong the of a in our mix the -- do which growth our and sequential us delivering -- seeing, line in of Production mid-teens the believe really we about

growth a it clearly, So, profile. demonstrates differentiated

you truly productive combined in continuing that pricing I with accelerate believe will business. So this realization, margin initiative and expansion the see to

Stephen Gengaro

Great. for color. Thank the you

Soma Somasundaram

Yes.

Operator

next Gruber. from question our is And Scott

Scott Gruber

morning. good Yes,

Soma Somasundaram

morning, Good Scott.

Scott Gruber

you around around follow here, you activity tick for think more potential conversions, in count much U.S. the simplicity's PCT to through realized U.S. expect drilling the more kind growth the conversations rig continue drilling. drilling on even realized with wanted if the of and rig rod for can on how to to PAT you much growth assume How do count PAT I growth And that stabilizes? you sake here while in we just XXX? the and continued stabilizes on international year-end growth U.S. in two those divisions growth, higher

Soma Somasundaram

I that quarter saw that mean Scott, to sequentially are the good business think our in in business, Yes. PAT we And business. first momentum that in I see grew X%. continuing seeing momentum you

full-year. in our year-over-year recall, business XX% may PAT grew XXXX, You for the

do continue rig So, with to North we particularly XXXX. cycle, deliver said, strong our year always on more to with our Technologies growth count in Many another in And count. North of to Drilling average shop average. strong short-cycle XX% a particularly And activity the And first Drilling of start With customers, sequential, Drilling about American even grow XX%. rig an cycle, conversations, first the weighted more the rig business grew Technologies, X% on America in American the the activity an have as Technologies it's quarter outperform activity, in is it know PAT international in continues indicate our expect sequentially saw the in quarter. drilling grew business I a grew we America North North the begun in have as the that is has well will QX. more. as you because count here. it And our strong in good business worldwide And X% they business.

outperform rig will Technologies count. Drilling always our the So, business

drilling it still our see given activity kind expect, year, quarter. Technology we if again, our XXXX, of expect, And will this strong at in growth XX% the in do Technologies Drilling right? given strong I XX%, business. even the the start know, really strong the Drilling So, business a start business in level, first stabilizes do this the conversions, grew And as deliver particularly you can well in performed you has this

solid should so, see performance in And business. we margin well as the

Scott Gruber

at get expect ESPs? it. pace Would expect got pick up people see delayed those continue higher run to you prices, oil there? conversions or it, to rod Got you to these somewhat do as would What

Soma Somasundaram

conversions production with on The to and Good activity maintain important is possibly Yes. affair, American an North the continues focus it, And question, to right? rod even aspect. in increase a the continuous increased Scott. rod lift be

saw but the our both rod ESP. So, lift particularly X% in lift, if solid in we you at of in sequential artificial look growth growth lift offering, and all artificial

So, our well. executing teams are

conversions rod some expect to to existing the through the increased production come of strong wells do of well. the I spending in have another to Combination of year. So, both continue lift maintain as as the lift rod rod well lift as

Scott Gruber

least can I Ken, to still too free able working the rate to to to to And cash to the in achieve weighted just cycle XX% this if in, you going lower the free squeeze lower you working could hit end? through mentioned given the confidence be one build. you're year, bear realization with capital XX% second-half at XX% of think Do that just how much 'XX, conversion whereas end capital be you'll be in and it. the XX% more cash Got

Ken Fisher

Yes, we've been clear.

that I think target. a that's through-the-cycle

year in working so, growth first a And strong that as is the some growth. quarter in call will saw of see on periods, We you 'XX capital.

the with delivery of of growth capital second quite And working on XQ be plays much one the year, back-half in focused cyclical much trajectory typical in in which very of think range still you'll the modest the strong cash to call then free kind years see the of recovery. that in quarter. these is of the as flow would positive expect a I we the -- what for more year out, and on

on So, goal. very we focused remain that

Scott Gruber

it. appreciate you. Got Thank it,

Soma Somasundaram

Thanks, Scott.

Operator

question is Dave Anderson from from Barclays. next Our

Dave Anderson

morning, Soma. good Hey,

Soma Somasundaram

Good Dave. morning,

Dave Anderson

XX% assuming does go you Do thinking the Are margins for progression guide your just understand how down? moderate? to in year-end XX% you're costs by here? that about in chemicals, that Can how cost are help you assume within go cost from that So, year-end? you they margin expecting me --

Soma Somasundaram

we a we mechanisms of watching have forward our for within are Chemicals all curves. constantly that that detailed mentioned as tracking commodities business, our those so Dave, So, we

if are you raw what are decline seeing at particularly non-commodity in So, QX, the right going our costs the today a look items. there indicating at the modest that -- material are remain indices -- at then, those to now are QX. today cost as those And through levels least what and is showing of we

meaningful decline, So, very it's not a Dave.

but QX. -- some get into are is showing raw we that materials these it's So, decline still as there

to not raw big decline is here. not -- efforts the our margin it's contributor So, material expansion a

to Our our biggest our contributor margin expansion pricing is efforts realization.

Dave Anderson

little kind XX% time bit -- better in ago? of efforts sort how Right, was, say, we today revenue were then? margins back similar I don't sort potential. of 'XX, one was, data quarters where the about in and you're three guess, mix huge compare of chemicals now kind sense. a it Can of of a us past has kind that of revenue years revenue during of kind of that talked amount and XX%, then, where changed help just some think mix of versus you've margin that between And you the I I that of have in we margins doing from kind understand makes a the How if frame. high-grading about levels, have

Soma Somasundaram

Yes.

mix sands, which job particularly it would positive I a executing oil have those last So, so of what period really years, -- more on done three probably I higher-margin -- think share we in the areas deepwater and our gains moved teams areas. revenue have great call has a towards our around over two, our

-- are we margin about as why So, business margin we XX% least increasingly you feel the this confident look confident because XX% of this we'll at exit PC year. we the in progression if that's the on EBITDA business at

of a some contribution line could price is this reality sight next in as growth of XX% year, you see further with more So, as well how to the volume getting business.

the say, to activities. business, So, I mix exposed versus of today is more higher-margin before the would

Dave Anderson

All right.

squeeze it If one in I I I guess you too. don't this, just mind, so more get Scott do here. did to

side of ability in side. of the lift of Is Just business, pricing services all throughout different? pricing signs seeing we're of, There's the curious -- How is equipment ton side it a on the today service out to not you looking -- longer able you a Or tight I seeing pricing on terms kind Are is Are to there. of that in the things market? lift get you going the be to other guess, equipment? are kind bit to take start product confident lines this can compared pushing price? we're little today? of

Soma Somasundaram

Yes.

bit particular for have type as types market. imagine, because little what it the lift, type the lifts say is which of rod ESPs able varies -- of in there more I already are to today, the think the -- of would are still lifts, a -- capacity you we are have the track the by that by But of certain -- I we business we would for margin cover this continue differentiated we performance to inflation in and expansion. lift. on are in like have

perform margin margin. we I deliver you this perform should between And continue to XX% the expect would business to business somewhere mark. volume that solid see think range. before, said with side, business growth, the can this XX% to And continue on have to this I solidly XX% in about So, performance

Dave Anderson

you. thank Okay,

Soma Somasundaram

Thanks, Dave.

Operator

from Ian is Sandler. Piper question from And our MacPherson next

Ian MacPherson

Good Soma and Hi. morning, Ken.

Soma Somasundaram

Ian. morning, Good

Ken Fisher

Good morning, Ian.

Ian MacPherson

review strategic hydrokinetics also the mentioned You reservoir and highlighted applications the diamond-bearing chemicals. in for the

And or valuations ChampionX's otherwise. progress of volatility sheet I balance were whether with to thinking a moving -- recently? wanted of energy just verticals, and around that regard how business advance the you the pipeline has or opportunities into contemplating thinking how you're evolved to new lot the using of you enterprise the to just market renewable the portfolio want to given Just and hear of

Soma Somasundaram

Ian. thanks, no, Yes,

the sciences we So, very efforts have verticals. we this first to efforts organically have much, diamond wanted on strongly as said other this we focused diamond on before, into is we expand because which bearings, believe our capability,

be before, -- on we is been, applications. this of clear have very it's type organically teams to focused want So, I been our a of few have our these focused that effort. have much And an talked teams as

have about cutting We talked tools.

stay focused We are to continuing it. on

are applications. focused industrial bearings this those be we is of the on applications, for We which one industrial to diamond in consider

effort. With for it's energy much type respect in our going us, And on of to and emissions much the it's to any focused transfers be similar investments things, focused So, energy in an very it's tuck-in. organic small organically to like transition type portfolio, investment of efforts. very our then type any

our for We any same on as not organically as be continue well focus contemplating to focused growth time. to more on to our at is return continuing are sustain -- shareholders the

allocation not on our -- are be capabilities. we in inorganic any planning existing as have enhances we any that small capital technology-oriented played framework, So, will our tuck-in out opportunities a

would So, what I say. that's

Ian MacPherson

me. Soma. good That's Thanks, for great. That's

clear I think constructive. is and margin the now guidance

I'll So, turn it Thanks. I appreciate the details over. there. And

Soma Somasundaram

Ian. Thanks,

Operator

from next question Holt. Our Pickering, is Tudor, Zurcher from Taylor

Taylor Zurcher

Technologies. a margins Drilling covered team, taking but segments, and thanks lingering Soma questions. Hey, on my in just We've the really all for question

could low versus then. So, margins EBITDA well, or line XXXX XXXX look line high momentum XXs margins top strong like QX back feels feels like to perspective, similar of XXXX sort in it a -- through pretty top XXs from the either

I'm down of cycle from moving curious, pin type curious there's I XX% forward. getting that you don't mid this would play high you but at if dynamics margins any the prevent sort just back to So, to Thanks. timing, on to EBITDA want

Soma Somasundaram

The volume bearings think, continued the revenues, also now know, growth, we right? Taylor, Drilling it's -- bearings, of the our a And Technologies mix as includes of you Yes. question us, I for side. diamond

the accretive ChampionX bearings lower margins diamond than While margins, business to diamond are to insert it's still cutters but slightly that. margin, compared our

continues a we now So, is of move at what levels. are in as little to as thing I you business increment XXXX the say into a bearings confident business would But the diamond mix seeing than as compared low is volume there are the you continues to bit -- grow, the that that this XXs. to

continue XX%. So, the business this continues level expand margins to from as the appropriately current to will volume of grow,

So, that's would say. what I

Taylor Zurcher

Yes, you've allocation. thinking about quick got us a follow-up how things rubric on pretty a just makes that. Thanks allocation, all so, on for capital sense. capital given it, you're And detailed

been for negative. flow the You've above going clear beyond get capital forward moving could be thinking typical color I flow return in forward. just out, us to you the shareholders Obviously, should that point. give actually conversion moving about some But course the cash free means. hoping surplus took and you surplus you're cash should to likely and ratio really cash reverse we through And to what cash very free bit on as was flow ChampionX how more QX, a dividend existing cycle, type back free pointed working dynamics healthy the at

you top sounds might on you hopefully like RCT asset bit process. cash So, get little a add of strategic it of for that sales,

you if together, about puzzle surplus pieces surplus I'm us could help forward. means ChampionX actually or what moving the just cash curious free putting flow cash for just So, all think

Soma Somasundaram

the XX, framework. Yes, that saw out laid in as sure. you we slide I mean,

periods we So, we on to through clearly, flow capital, seeing, will for generating what this And that quarter-to-quarter which the see. of are XX% cycle. cash be us, conversion EBITDA growth working like of capable what free is business to a of is times that call XX%

expect Ken cash delivery As the second-half. positive free we to strong flow then QX cash flow in free mentioned, generate in and

make is can us a that we our our period for priority we improve on stock have with right? repurchase growth make improve cash free flow So, feel we cash, over increase gives free the cash time. continue that our cash to to way flexibility that, for confident beyond to will obviously, we support growth we us, million we of flow -- our best will anything to programmatically -- a EBITDA return to be that dividends, continue view return shareholders, to dividends opportunistically And that and then flow then the grows, As is, organic the consider surplus program, cash the sure sure that the surplus whether clearly. $XXX to

the have that or surplus we stock us, any through dividend. see special which return consider So, we we'll that repurchase, to beyond we'll already right for cash also said the a mechanism

work we starting pace. that to beyond, as our to XXXX see up feel So, pick through you'll I shareholders and our return

Taylor Zurcher

answers, the Understood. Thanks for Soma.

Soma Somasundaram

Sure.

Operator

our from Goldman question And is from Mehta next Sachs. Neil

Neil Mehta

Thank through time, maybe today, Yes. you This share just if It energy on ton wanted build seems be here of little it you the I quarter, working think it's to I necessarily If XX. and to a over indicated a period different. look color the you bit team, all hasn't sector comments for and Soma that at repurchases. slide cycle, about that your better. value of created last long a

more yours curious dislocated intrinsic of you and you a deploying do its it which are million the ratable doing philosophy when it stock basis. opportunistically it -- very on on as around question, your Do a that Or more you do you Now customers of it's like more the is ongoing is think versus of buyback, right think value? repurchase? think now, $XXX but of an have about doing share some trading high-level

Soma Somasundaram

Yes. Neil, capital us, out, for programmatic returning pointed the the will you dividend. be of way for us correctly

at So, as we us, established stock process we how at internal an have authorization, the for to have -- the repurchase. we we repurchase look look evaluate an

million data And way which in to important return generation return time this for the be that important industry repurchase opportunistic to do is surplus as the for us, an So, to when have time clearly, discipline cash. we flow cash, continued we point stock us an will this the look that us, cash the capital. of way portfolio, have given to authorization an capital believe at will I $XXX for surplus from potential

process then and to opportunistic think that. be we use I do will how it have that. And we So, a that's internally

reasons -- use there's otherwise, even consider and the for if stock an that there to So, discipline given industry, consider be continue repurchase. will price, But it to that's the in capital clearly to a the will in dislocation opportunity. us be stock

Neil Mehta

on The is your Soma. follow-up Thanks, international portfolio.

growth Just different regions on there of world the would love in more any or your perspective you're of what of revenue perspective? the in pickup you're a And less in terms pockets are activity. from bullish seeing

Soma Somasundaram

across I East, look we Sure. we think side, are at say international and we -- in the bullish Middle are more the sector, on would more bullish you No, if that the that. are on I clearly,

We are America. seeing good Latin also in activity

that's of area So, growth. another

So, we more expect are all ones of the areas others. to grow, degree which the than but it's just a of

and growth America, So, Middle East we are seeing momentum. clearly, Latin good

would Asia probably lower of activity growth of amount wound there as and the exposure in I I where specific because I Asia say, well market our as in probably Pacific to -- Pacific. think as for well. would the us, there say partly lowest is the it's It's

in well. growth We are well. we expect then, as Caspian year of Gulf as bullish And good Mexico, on this

Neil Mehta

Okay, you, Thank Soma. that's great.

Soma Somasundaram

Neil. Sure,

Operator

question Mulvehill. next Chase Our is from

Chase Mulvehill

good morning, took guess me in squeezing you for on Soma. here. really revenue. Thanks PCT. Hey, Obviously, question I for XXXX up your first is outlook

I quarter's about talked mid-teens. think and about talking on now conference you high you're last digits, single call,

later deflation and question cost second is, increases be And so, and related And then, supply the pricing you chain I and just start is better XXXX. less this price how think versus better better material and to will is surcharges that of of volume? around much guess, pricing line first year kind these outlook, sticky into of seeing you some the question top how friction kind if raw really

Soma Somasundaram

Yes.

will say, would of like we probably of of our contributing. well we both go as one. be versus to going of pricing the And more very would as -- And your quarter, not I we'll say the provide would say than pricing just growth the The pricing we split a not first price, that to And to XX% both the realization first longer, what if there how I you, and on. increases, different on volume types But hold businesses say growth talked business. pricing revenue be on of can quarters on time traction growth. say, X%, growth how to in that materials I contract prices as the we that. we we pricing, So, tell gains able sequential volume where Clearly, for had coming that contacted in to for in the should given pricing volume just as Chase, would both to the that expect the delay I And through would I of raw sticky revenue pricing year, question are I customers. down, realization much are raw volume number are contracts But we to growth the contribute saw able would also about, as as XX% the that also was you follow-up whether are two, growth well, of number up-cycle to on. -- contributing. are us goes versus still typically, this these specific the contracted, a the start of get hang that like us our and with have pricing

Chase Mulvehill

you unrelated could lift the penetration post the really obviously, mean, perfect. I us here, on international the on Okay, update some side. follow-up lift merger, you The international wanted better strategy? to get

And of benchmark so that just know of lift, recent about in willing the our data can had don't any you've recently? on we for kind to seeing the I out you points growth kind lift be if overall you'd what we're international. international So, what success against have there market got it share for

Soma Somasundaram

Yes.

year, So, of you last kind recall may communicated. the we

are a with right, we plan the synergy So, delivered on recall, may accelerate wins and revenue of respect And year, and international. million this aspects, to $XX we that. new doing $X So seeing is basis good to year, to due itself, we was synergies, we side the you of are of million our update out right? synergy of yearly how on signs last synergies which to really expect that revenue

outside in America say, sequentially about business the our say, Now North us, me internationally, the XX%. with Technologies, international Production respect would grew I of for Automation growth let quarter to in & first

our it's it's is business America -- remind of I mean, the again, is a the business is -- XX% split PAT, North So, and little a that over the XX% remaining international. to in of

first faster. the So, grew international in quarter,

Chase Mulvehill

Yes.

turn makes over. will Soma. back it Okay, Thanks, sense. I that really

Soma Somasundaram

you. thank Yes,

Operator

this at time. questions further no have we And

Soma Somasundaram

everyone, thank So, for the today. joining you call

and where are as excited the our flow dividend we we on shareholder are free a we execute are on return surplus pricing special based position consideration line momentum, be with on very margin the be return top cash our focused repurchase ChampionX and well. delivering as through as to stock that dividends to at to of continue well we cash able or realization, We expansion, about well either announced programmatic to as in as accelerating

thank for you excited So, And in quarter. forward we about the joining, again you and to of are and to -- ChampionX. for look you next thank talking the future we

Operator

today's for participating. Thank and concludes you Thank conference. this you. gentlemen, Ladies

Speakers, by disconnect. your for You may now debrief. stand

ChampionX (CHX) 27 Apr 222022 Q1 Earnings call transcript