Earnings call transcript Q1 2023

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Operator

Good morning. Welcome to ChampionX Corporation's First Quarter 2023 Results.

Your host for this morning's call is Byron Pope. I will now turn the call over to Mr. Pope, you may begin.

Byron Pope

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

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

We open call the will for then Q&A.

to During today’s on our posted call, we the will website. slides be referring

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

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

which found website. can on first quarter details financial GAAP Additional measures release, available to comparable reconciliations in our directly most is on be the press our

I will call Soma. to over now turn the

Soma Somasundaram

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

value dedication performance Let our free and key that saying start delivered the our that daily to our margin to ChampionX return delivering our customers. of capital me quarter remarkable first employees cash appreciative on metrics, strong the EBITDA by adjusted generation including in expansion, flow I'm in shareholders. demonstrate

wake day employees, and number on we call our and of communities. with our I lives because operating purpose touch first earnings our up our our customers, focused Before always corporate begin on every our shareholders the performance we X, on improving our quarter vision, slide philosophy

glimpse our we of communities and seriously X, of number purpose just our take and ways within areas in improving On we few live a the in lives which functional businesses which around slide world teammates our the a share work. the countless into in

performance. quarter to turning first Now,

revenues quarter XX% first Our grew year-over-year.

During normal strength international was sequential we which experienced by revenues. decline our the quarter, American of sequentially. This revenues, seasonal offset X% the first North in partially grew

our of in All segments four sequential American North revenues. growth posted

grew revenues year-over-year. digital X% and Our sequentially XX%

continued seeing our adoption and drive their fit-for-purpose for sustainability that management productivity tangible help including digital emissions customers technologies solutions, our them are We our strong achieve of goals.

continuing which are financial X. take quarter result area. in to through details three invest me on are We of let slide on first this but you shown number first business Ken highlights, touch shortly, key the our will

in management. EBITDA typically see meaningful experiencing margin continued EBITDA international our was delivering cost a First, results. approximately sustainable sequentially improvements, margin XX margin in XXX pricing basis productivity first the improved is our realization, by basis sequential Despite operations, and expansion, revenue primarily points expansion and decline QX which year-over-year focus on seasonality driven adjusted points continued on we by and quarter,

This of adjusted marked the EBITDA sequential improvements in our fourth consecutive quarter margin.

progressively the We than through to of exit fourth expect expect margin now greater year, quarter this we and adjusted of rate EBITDA our an XX% the to deliver year. in improve

delivered we flow another and the of quarter the flow tends conversion especially our that cash quarter, strong given be we that cash quarter free flow, free free to pleased lowest year. differentiated Second, are cash first

capital cash illustrates of XX% cash XX% of cash businesses least our XXXX cash converting of at EBITDA. again flow first light million high between flow XX% confidence through EBITDA continue cycle. best-in-class free to EBITDA Our quarter of of XX% flow conversion and degree to the free to $XX in once deliver to in capability of and demonstrates portfolio generating free represented the This our our adjusted of flow

value first allocation the you to excess on We at month, regular XX% our to to for to cash of our free share detail flow Investor And In our return Day disciplined our commitment shareholders. flow shareholders. this free We to returning capital create shareholders. Third, the shareholders. at our cash delivered of shared return our cycle. through how XX% of remain again first most quarter, quarter once we last cash we the is in and capital between to and of repurchases, our dividend with returned previously shareholders $XX $XX million recently year in and committed designed to million least framework cash

first our our me call second to outlook. Let to the now and quarter Ken turn over quarter discuss results

Ken Fisher

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

Automation first levels. this Geographically, $XXX Technologies exhibiting Technologies quarter Production up X% international grew and revenues XXXX fourth Technologies was revenue up revenue million, year-over-year was and was year-over-year was businesses. below XX%. sequentially, Drilling our and quarter seasonality, both Our Production some America Chemical growth offset and X% in down expected by North XX% partially

than quarter sales $XX revenues of first to cross period. our and lower fourth in Ecolab, from supply year prior were were sequentially XX% the declined XX% which Included quarter million the

margin As the financial revenue and in previously allocated associated these we we communicated, is have to statements. corporate other our do on not recognize and sales

the business. million, XXXX. in per quarter $XX in Russian million GAAP versus or quarter quarter we net for our million $XX of exit charge recorded $XX company First quarter, diluted income $X.XX the the fourth of for and the a first million $XX In the was share

we recognize revenue in Moving Russia. not forward, will

In prior adjusted first ChampionX slide X% of the quarter, points XX up year over was This sequentially up and margin first of on EBITDA quarter X, the and quarter for versus $XXX seen adjusted XX.X%. was period. delivered versus up previous the quarter points basis down XXX million, consolidated EBITDA the As consolidated basis first ChampionX XXXX. XX% the

cash quarter million activities proceeds cash net capital operations flow Cash strong and management. focus first laser from million from capital asset investment $XX were continued on was Our a free from of reflected of and million $XX flow working operating $XX sales.

million, XX% drove higher Volume first improvement. $XXX we a period, prices projects of the than quarter adjusted generated seasonality of saw mix. volumes down productivity points Production price adjusted down year's the up from initiatives. fourth selling selling the and our XXX XXX Turning sequentially margin first from productivity EBITDA million, Chemical down Segment some year-over-year. Sequentially, in XX%, $XXX points was our higher of to growth, and quarter and XXXX. and was EBITDA XX% XX% the X% Segment lesser segments. quarter basis increased on the impact and prior revenue up year-over-year driven by basis Technologies sequentially

revenue higher revenues selling increased volume first up . and quarter X% were sequentially by and prices. both quarter million in driven increased Production segment X% up revenue was fourth Digital Automation of $XXX Technologies’ year-over-year sequentially, XX%, the XX% year-over-year

on Technologies to focus cost operational and implementing improvements. We continue see to and reduce drive increasing Digital emissions customer

We expect to to from future revenues continue trend. industry benefit this

sequentially the prior the PAT a million $XX $XX . adjusted million the quarter, above prior million, up sequential period EBITDA $XX margin delivered $X first adjusted XX% was period. first from million points higher fourth year XXXX. up Segment XXX volumes in $X million and sequentially the costs. XX% basis quarter higher XX%, due EBITDA was year-over-year adjusted tooling to EBITDA basis Technologies segment by revenue Segment quarter, and increase X% points flat prices. XXX up first Drilling was year and selling Drilling Technologies was volumes basis sequentially XX% during quarter, down quarter driven and compared of in the point up the versus the margin segment quarter XXX and to first and lower of segment

XX% Our year-over-year Chemical and decrease $XX revenue in Technologies . was sequentially revenue the for a first segment, quarter million flat

As but in the RCT The lines margin a to certain in up significant improvement quarter, EBITDA revenue discussed, $X the exit during posted profile year-over-year last prior the of revenues was driven $X This product of segment decline million segment. year. previously lower corresponding resulted by and the low of the million year the this period. versus compared fourth up million $X adjusted first quarter margin

sequential a resulting line in by Segment the the basis exit the actions. and prior quarter, points year favorable product X,XXX XXX the XX% restructuring basis driven and point improvement was period margin versus

Moving revolver cash million on of $XX of position very we the to in quarter. as and sheet liquidity was versus strong on our shown hand. increase This available $XXX million record XX, first slide quarter prior an ended including capacity the balance with

On We quarter. capital flows. our also net debt- the with of continued reduce shareholders, our ratio we to our least to XX% X.X was of in March outstanding cash surplus debt first XX, $XX capital framework, million the representing remain with In return EBITDA. repaid alignment free committed to at allocation leverage to-adjusted

delivery allocation, and million laser flow, operating repurchases. $XX strong we the free During shareholders, effective million maintaining focused regular flow including cash our of and capital share in XX% $XX management, to remain first free and position. We financial disciplined quarterly liquidity working dividends on capital and quarter, of cash returned of

which our to RCT EBITDA million cross cross Ecolab in Specific represents quarter a sales. midpoint of XX be to Please expanding revenue the growth outlook, lines revenue another higher revenues, including and of sales exited to solid quarter, expect Russia adjusted revenues slide significantly $XXX revenue and range of to forward billion, product on to the continue at growth. year-over-year recall Turning margins. second expect the we we $X year Ecolab second X% included XXXX XXXX the level

our in primarily seasonal and is international revenue up positive a continued in in change North American sequential businesses. quarter Second driven by momentum activity step

adjusted company's points At second XXX $XXX this For basis the EBITDA quarter EBITDA, XX% expect in represents range adjusted represents increase of margin at midpoint a million to the the midpoint, rate. over which million a we year-over-year $XXX improvement a XXXX.

than EBITDA we We adjusted confidence throughout XX%. margin greater have expect at we of year, exit that rate a EBITDA improve adjusted our company will XXXX increasing and margin the to

we remain range capital in XXXX. of spending the annual to X% In terms revenues of X.X% investment, to to of continue during expect

EBITDA XX% periods XX% capital see growth need remain flow cash the adjusted in in the through free guidance some for revenue we confident cycle. will our investment, we conversion While ratio to to of working

cash expect For continue flow flow this adjusted free a cash EBITDA at to to with conversion least of XX. free year, we strong ratio

cash the weighted reminder, Thank year. half you. to delivery is of flow Soma. a As towards second And the back our now free

Soma Somasundaram

you, Ken. Thank

free open the achieve us call capabilities we ChampionX margin like and leading flow Before important would industry deliver conversion. couple operating I helps of to within that highlight sustainable to expansion cash questions, a

driving on touch like First, improvements. to productivity I would

part Given is our productivity improvements industrial driving of our DNA. heritage,

using long We our by improves and of and margins solvers eliminating to in of rooted culture our improving improvement methodologies all are period constantly in principles, continuous on productivity from contribute productivity a over our dollars to our vary improvement contribute through be daily this improvements can as collaborative projects the the waste large These deliver organization up that problem efforts of an continuous that of enable customer efficiency, that a culture earnings. time by training our value advantage. that We important lean in add millions is projects system. in everyone list and view to working business we employees restructuring competitive

process flow in Second, it heart visibility, of this through robotic to industry The with profile the been ChampionX capital differentiated working and a metrics through on business real working merger, investing system model mapping, enable capabilities bottlenecks. we daily since have management, our capital driving free eliminating capital enhance combined management working waste cycle. process in our cash by We the building result At capabilities light management. strong time the our it, capital involves analytics, digitization velocity through data automation. having and

you multiyear and constructive let support We levels, demand tailwinds adjusted portfolio the of outlook our focused energy that uniquely remind producing in in to Despite of provider declines operators global value American we potential their their to objective EBITDA me oriented that cost our concerns solid sustainable cash line optimization meet term is production see near portfolio. leading North for highly generation. bottom market assets and and activity we continue maximizing strong positioned remain for help ChampionX well of laser businesses expansion solutions effective our natural the industry, ways. directed about favorable to gas growth, the oil delivering As are on a in margin

committed to disciplined shareholders priorities a fully are capital framework capital, our allocation for high return clear creating investment shareholders. for returning through including and We cash value our with to

all of our customers, and the of thank employees ChampionX me shareholders, world the our their lives purpose employees, let X,XXX tireless dedication our that, around our for to our communities. improving With our of

daily. You I open all would for to like that, inspire With me the questions.

Operator

Instructions] [Operator

Stephen Gengaro from Your first comes question Stifel. from

Stephen Gengaro

a the Thanks. on on now you mind Good material talk solid what raw when little but which that how side pricing guess impact we with I bit if starting the be you're stabilized about if PCT everybody. can quarter, think that should some margins. we of, about morning, has you in the thinking margin also about was don't performance, trends, seeing clearly cost and and

Soma Somasundaram

Good morning, Yes. Steve.

the stabilized. favorability. So, some definitely costs mentioned on saw have incremental we we input PCT QX, side, the And in as

saw we that So QX. continue into

going we the input forward, stable. costs feel remain So going to are

our of sure pricing been aspect realization combination of continued the and know, making important as those and other we so that of margin PCT as is The through work pricing expansion amount productivity pricing you in very improvements. active the significant we have as well realization the

So we go the through in continued PCT year feel about we our very margin as good this business. expansion

Stephen Gengaro

that on side, that the And where just stands Great, up, an you. and traction an developments on thank update you methane monitoring on any as us unrelated and follow front? can give or

Soma Somasundaram

Steve. question, great Yes,

who XX% and encouraging is we stream that Today adopted running we a technologies. our revenue recurring of revenues. from the derive rate have customers And recurring If revenue in what's business business the XX XXXX, today you look XX% of over also that grew in really about stream have is we business. at at

continuous business in XX%- in the be it's lot at we So see monitoring year continuing confidence particularly we quarter us are with are growth seen business another the what monitoring adoption have greater year or a another first expecting we our we'll, than and be in XX% of where to even going and that. this least will to is giving methane

Operator

from comes Citigroup. question Gruber Your next from Scott

Scott Gruber

Yes, good morning.

seen cut, indication by chemical their in whether sales First around the the Are you impacted on after any Middle East. on production to have what guys announcement production impact that OPEC decision? here any in of East got the questions We the will cut you bunch a chemical that question be in guys be Middle region. seeing sales

Soma Somasundaram

Scott. Yes, question, great

really interesting production what and cuts near this production production back we don’t several cuts your And specific cuts, that impact over to impact temporary again of or the PCT chemical revenues whenever in that on seeing we gone trends. are what's question OPEC seem seeing is not on our have years, announced our type revenue technologies. of to have are impact any revenues. production We our see specifically, we now any at the answer looked has And term

prolonged XXXX. time when as during So saw significant the during time the in significant is revenues we cuts cut cutbacks we PCT Outside impact with is of don't only and the temporary there a production the now pandemic have that that, seem impact the or production not of on quarter second such any to PCT and frame ’XX-’XX either. on seeing revenue the our are

Scott Gruber

up, international sell to up the sold there that good then have slid then And making bids others US revenue onshore a hear. we rig the bit, and Drilling count follow we rising bids inserts but internationally. a on to That's a was get rig Technologies will and guys do count you know your

curious for the bids cutter even domestic are rest your sales the out go how though year abroad. of see the those playing sometimes you So business. But just

of US given some weaker rig cross and Just rising activity. between international potential kind count currents

Soma Somasundaram

recount. as the rightly to Scott, Yes pointed tend you track we out, global

down, One flat revenue America and even the terms drive recount current there about So going to it being close be our now, but as saw recount things in that international forward first though to X% North drilling feel sequentially grew close we X%, some in you down should continuing our was of - to technologies X.X% the we in continue sequentially is recount business. the to improvement quarter, technologies. to in And good recount in cross about could raise. while drilling two the sequentially worldwide

second And aspect the that. from adoption. benefit technology the is we'll So

a technologies some adoption within QX introduced and our innovative customers seeing we really we in So those are broad of technologies.

the In of best has customers even he extent of seen advances the fact, out recent in pointed one to years. technology is some

growth drive in really continued business. feel we the So technologies our adoption sequential of should the also forward going good cutters our drilling technology

So sequentially about these should year. technologies very continue factors good through improve feel the our business drilling we combination the of to two

Operator

comes from question Bianchi from Cowen. next TD Marc Your

Marc Bianchi

ask wanted curious probably X% of rates you more you some quarter. beyond for growth know specific I first about And could growth want you. but shapes don't a to by how sort consistent quarter those just revenue do is like implied guidance. So into how see you it figures, the Maybe at Thank to around get rate second I'm maybe in second color progressing expect an level? that looks the is acceleration here the at you year point this I Hi. stay later or up. provide some it

Soma Somasundaram

sure, Mark. Yes,

think I first midpoint, in in rate the Ken quarter his end our prepared of like about the is at mentioned But sequentially Russia. we exited think I X%. growth remarks, the

that So But revenues will is exiting and the for what down all lines to into us margin play sales lower are that is not then the we forward the here really lower breakeven cross that going important repeat continued these Ecolab also product step product revenues all Russian of some RCT thing which the to then will in are is equation. lines. margin type and

So the growth is growth, revenue of including elements. sequential while all those X% revenue

digit confident Now growth laid organic out Investor which Day. going high about are during forward, the the very we we single

cash have stepping more and the expect year growth digit are do be we our all of some confident, restructuring as we work product exited to we single high done the revenue EBITDA of the our But margin generation solid and lines. margin our we of So and expansion because this on even up have lower well. and continued growth margin

Marc, the quarters of here. greater the this our should expect as will the the And confidence us single That's work to sequentially, XX% be what growth for EBITDA growth you improve digit so But than to rates still expect our growth stronger rate to achieving time. and we us, gives in high achieve through year. significant we we exit even rate

Marc Bianchi

a higher back Okay, a not great have you which of to the the answered half margin above And response XX.X%. leverage. need above would It question, bit my assuming mostly and to XX% second that that that XX%. get in was is margins appear sort incremental to I'm to related that

it's restructuring that to to expect is would you bit than a by cost sort pick needs of to seem that it of price up. I'm more sounds going more develop. would You're beat what hearing And but kind that, the like margin leverage improvement it than any it

Soma Somasundaram

Yes, combination that the year. things. do volume the would then And contribute say all productivity continue second step Because, right. Marc, expect thing steps through I work up is it's is done to well. as we we continue to two to you have a sequentially, of our our One know, up, volume will as the

as volume restructuring it's well all definitely So done. the and as we work, have the productivity

Operator

question next from comes Bank Pant America. Your of from Saurabh

Saurabh Pant

Hi, Soma. Hi, morning. Ken. Good Hi.

that's So be you one confirm does that want how quick Soma, should one And think on which technology? perspective, I think Marc's single do top just that Which just that hitting between then clarify, line correct, does I number. drilling should lift think worse just a up high number that. said top a we than and XXXX to question better number? in chemicals line digit assuming and than to I different and you about the businesses you follow from percentage think

Soma Somasundaram

areas, to foremost, expect the RCT, we our all business, say, because all and of except XXXX, Saurabh, restructuring year-over-year which and done, I except we that corporate. first have is of two in the grow Yes, would

year, Ecolab additional to of under will you get the middle reporting cross would to by the line. we from on sales the sales in our know, end June, But there to time you reported segments. the of as be As corporate any Ecolab stop this by know,

So the framework. that's

our PCT. lead we framework, that business given PAT to of our growth, followed the So kind expect by

single and our you technologies both of to than then PAT, and business at by business. those So little should drilling expect level that, followed the high type be performing with more digit

So that's about how I Saurabh. would think it,

Saurabh Pant

do and quick we talking you as double guidance. just what right. And then PCT cost just business right. what follow happen double digit, to that you last high Soma. There's digit , growth think about a just it were of well, volume. growing understand. hitting about perfect. probably were not up, know possibility, revenues digit we dynamic was of I'm in just a be think I It And lot was PCT flow know in just can single I a number, pricing talking that a XXXX. kind needs not to through of trying revenue that I quarter versus to realized for I kind right. so Okay, But

Soma Somasundaram

think the of at Yes, continued I the think last we inflation. year, , mean I pricing year, of I is expecting inflation any happened think what big if I right. stepping you not the don't look one up inflation. and this We're contributors expect for

the the single a pricing, which growth lot is by digit So improvement in carry as as driven volume high well through. got we

Now can further that. even what improve

we For always working as know, share market obviously, on gain are us, you opportunities.

better. And happen we we if be comes that successful more. obviously, also you also where the even shared So production as needle can I in of that aspect can of source can move with that, other from more is the the before, think have are

higher drive, than price as environment drive more increase tend spending. we that. oil have And their high offshore production even also can if is to of then that then there can more So during customers growth the prices expected, from oil mentioned,

to confident some on be very going the single depend feel factors. It's these we can So better? high it all But about of digit growth.

Operator

[Operator Instructions]

question next comes Your Goldman Sachs. Modak from from Atidrip

Atidrip Modak

Hi, good morning.

and XQs? you can it achievable cash XX% that new subsequent Just normal? discipline for XQ this comment like sounds should and be better and capital given a flow full about should year maybe for Is this strong. for the think forward easily we that how the that maybe Soma, drove operating going XQ the free year talk conversion was working about

Soma Somasundaram

do how eliminate know, training continuous solve is starts significant waste is And on the we which improvement improvement. culture, to and the to way rigor you problems. what understand Yes, And drive this our of we and as focused as operating fundamental waste how I look, that basic culture people mentioned, operating for the rooted our And how Ati, to are to us, and core productivity it we to continuous generally very elements with the system identify our business. waste. training really see our the people to a with helping is we then to see in them on

So like constantly important or within know So losing. winning system, making knows each is to talk investments to we all we on the of needs really metrics other everybody view always our strive company to cadence at also in finds that ratio one are enabled corrective to about winning around for employees that one automation, problems. our easier problem top then problem everybody our or we a of finders whether focus we which really, that Right? solvers and imagine in Because operating least frequently, of the make things be who or every sure And aspect to losing on to technology, have solve daily visibility one we because actions. is our we is operating want then is digitization. really problem if our culture enabling because is it's

sustainability to well continuously continuous and important our And and cash So competitive is sustainable generation. us margin system provides for we that's that as about and is why, as why that's a improvement this invest because which operating point this is in this advantage. capability a what your drive

up. our first management are working capability capital in quarter, noticed you Now, really our improvements showing

that But our flow consistency improves generation. It the compared years consistency of backup be still the So cash of generation somewhat cash we to in the weighted. will business. have previous improved

forward, advance this capability. should continue to Ati, you us think we'll expect I that going So from and

Atidrip Modak

across Great, the than thank softening in that more of and segments. gas prices if And kind in the oil exposure do leverage but you to maybe see slowdown what half of second impact then any your so on to from you the activity the prices maybe have you. year you US mentioned prices gas touch

Soma Somasundaram

Yes.

become So before, the gas I is of as business our be with count to right. growing count adoption I international the exposure related able to we But should the be to think count, rig we that drilling have grow technologies continuing mentioned driven. some the impact offset year. and rig new strong, through products we drilling to tend technology feel and rig our Because

where XX% related where you we less about wells have will of than see those area is comes in lift activity. our other gas type be of dewatering revenues will and exposure about gas of This artificial from The gas our operations. like

So see you some that. will of

the that's of So it. extent

We in type just production activities. and and that's our gas wells more driven but by exposure gas have some than completion midstream gas type any transmission I of production. mean drilling

Operator

no at questions this are There further time.

You may proceed.

Soma Somasundaram

quarter interest earnings look everyone, for today. continued and thank our We ChampionX Well, you, talking Thank you. your appreciate call next joining in call. our we forward to to in you

Operator

And for today. for that this your conference We gentlemen, thank and please participating. call ask you disconnect you concludes Ladies lines. your

ChampionX (CHX) 25 Apr 232023 Q1 Earnings call transcript