CHX - Earnings call 3 2023 | ChampionX Corporation

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Operator

Good morning. Welcome to ChampionX Corporation's Third Quarter 2023 Earnings Conference Call.

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

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

will then open We the call for Q&A.

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

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

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

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

Soma Somasundaram

On with environmental to designed earnings the we everyone. up the our would of accessible corporate free our delivering again and customers, and at geographically from one improving still dedication customers portfolio helped Thank #X, on-site Thanks customers once shareholders. committed some robust Good with monitoring delivered because we morning, and solution We #X, impact. our our in expansion lives joining cross an emitting from third cash our growth systems technology was our generation and monitoring being continuous communities. On call. innovation, our many this savings. which XXXX margin focus appreciative businesses. its and our We emission delivered shareholders, our illustrates third of operating Slide customers to begin system, production the every analysts our that call day to despite in I in which for near-term land and of you, our quarter employees, their profit earnings our to on like in to vision, today. Cantex XP up for resulting we employees be facilities excess example detection quarter as our the us our delivering benefits league employees and Byron. stock all of and U.S. day, demonstrated types our ground wake welcome purpose to we financial effective out. day the in how our and of flow to diversified cycle detect adjusted Slide of EBITDA I at currents advocates value a am of shareholders philosophy [indiscernible] for relentless tireless returned and one real for and avoid case study methane our of one continuous time, emerge capital

emittance Our and our is monitoring meet current even small to needs designed gas methane is or oral a future complement imaging accurately to help documenting natural system and our optical and customers detecting by [indiscernible] leaks. XP

to turning Now quarter third performance.

Technologies PAT In offset lower third drilling our U.S. U.S. XX% declined impacting in and Technologies almost completion growth QX, Technologies completions revenues as sequentially Drilling Production Our X% revenue rigs in over Chemical were sequentially, businesses our and driven by & strong increased and U.S. segment. land, quarter in Production declined sequentially largely Automation lower activity international and X% by activity. activity

productivity benefits technologies including drive customers. our emissions year-over-year. that of revenues remain digital for tangible increased sustainability and digital Our continued XX% highly encouraged our fit-for-purpose by adoption We the strong management solutions, our

continuous more emission than continue emission Today, our XP the recurring installation technology customers revenues. monitoring to along Our technology. with monitoring grow use continuous XX

of basis deliver to XX% EBITDA EBITDA to year-over-year, X expanded performance strong our shown and our business financial EBITDA Slide quarter XXX first you me XXXX. on shortly, adjusted XXXX, compared adjusted highlights, but touch X let the Ken key margin grew the during through continue third of We which first on points results months months details our the will of take are first X #X.

quarter of remain compared for First, expansion points of third to year EBITDA full adjusted adjusted in in of expansion. we losses margin devaluation, adjusted step margin XXXX. quarter, XXXX. through an improvement. Based EBITDA EBITDA ability Despite our sixth of further guidance, foreign on expand related which XX.X% currency midpoint delivered QX EBITDA we our margin EBITDA represents experiencing the of the an our We exchange confident million $X margin our to adjusted basis Argentina we margin consecutive XXX XXXX, will to deliver as sequential

the businesses Second, cash flow of This free of best-in-class capability flow flow cash in XX% cash free which delivered $XXX XX% capital-light and of flow converting between of free conversion cash high having generated of cycle. to flow. portfolio XX% another demonstrates at XXXX adjusted EBITDA. to delivering our strong We free flow to cash cash free through a quarter, the generating XX% represented illustrates further least and EBITDA million, EBITDA free confidence degree in of of

growth coming to margin driven the our continue and cash years, We expect free by EBITDA grow flow in to expansion.

capital returning to shareholders. Third,

in and shareholders. XXXX, return to returned between designed is the And capital on $XXX to our capital allocation our free second period. our of $XX repurchases, of dividends of In of This shareholders. shareholders. we repurchases. value of Since capital to $XX of we free delivered excess cash million disciplined during we million share the commitment shareholders stock to the regular to cash quarter, returned our return XX% third generated framework through quarter third in quarter, the again dividend create cash have program we began and same flow flow represents cash our XX% the our for the Our million once

remain at least as grow grow free cash the years, of this through we to to flow our and year committed free returns and return in flow capital our expect our shareholders the to cash XX% We we cycle. coming

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

Kenneth Fisher

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

X%, and and XXXX. lower X% businesses land and with growth while sequential X% positively. international Our basis, were lower X% third geographic second revenues, of revenue of down declining solid and the up were quarter both XXXX. and declined new revenues North and X% our our growth were automation Drilling is the XXXX X%, quarter North third PAT. of was were production On America of our X%, driven in XX% the international well With In Technologies America Chemical third lower. respectively. down North $XXX rig revenues Drilling quarter, and impacted up revenue rest Meanwhile, world X% with U.S. respectively. the million, were revenues while largest technology sequentially, flat quarter up Year-over-year, down activities, by quarter-over-quarter versus revenue business, shorter-cycle PCT X% quarter overall a XXXX and PBT American U.S. PADT international and revenues up up X% generated second quarter, solid X% slightly revenues versus Technologies completion with in U.S. Production contributing sequentially, count at than X% the

agreement cross anniversary under of date. the As previously of ended merger the sales with communicated, our to sales Ecolab passing the third

As the other. corporate in to Ecolab in segment sales and Technology are such, reported no any and now Chemical Production longer reported

$XX million or was GAAP $XX net company in for in million million quarter $XX versus $X.XX quarter third the and income of quarter second the Third share diluted per XXXX. the

on a X% the XX% Slide XX, was increase seen quarter and consolidated adjusted the EBITDA quarter As year-over-year. third million, ChampionX previous $XXX up versus in

quarter, the sequentially XXXX. third of delivered exposure Third to was points period. of million X impact EBITDA of third and loss of basis foreign quarter margin approximately Argentina the exchange a consolidated adjusted up of included XXX In points in XX.X%. the EBITDA peso the devaluation quarter our over strong This up $X ChampionX adjusted related during

the Production conversion reflected respective flow free million, EBITDA. from of EBITDA third where $XX and X% operations Chemical asset proceeds X% investment quarter million, the Technologies and flow cash strong sequentially $XXX strong generated from lower X% was higher up of than $XXX third net flow working up and from free second XX% operating our internationally, Our XXXX. X% in quarter from $XXX capital year-over-year. X% The adjusted million cash Segment from focus up sequentially. Sales were quarter and revenue adjusted continued Cash $XXX represented capital of of quarter was was and million, third America million revenues activities XX% sales. North on million and management. were $XXX cash of

saw period. volumes impacted by projects price inversely up loss basis segment productivity EBITDA adjusted sequentially The basis strong selling points from up points billion positive margin X% Geographically, a America and XX% was which year-over-year EBITDA up XX XX.X%, sequentially, increased foreign higher impact the some aforementioned the lumpiness third volume international and was drove and revenues, from we exchange increased North segment Technologies projects. X%. productivity during $XXX while noted. improvement. third year's increased revenue Production Automation growth, XXX again Volume revenue Argentina quarter driven period, productivity quarter the of was prior was adjusted Segment the $X exhibit can & X%. Sequentially, increasing selling down X% by were down Digital X% the year-over-year. revenue Year-over-year, million sequentially, revenue quarter-to-quarter prices PAT while sequentially. higher the previously initiatives and

the the certain restructuring last This resulted cost million driven and from improvement land XXX $XX significant segment year-over-year XX.X% $XX and year due quarter quarter up by Reservoir lines segment was margin profile and X% remain down on during million flat segment expected quarter third very up offering. corresponding selling Technologies of the reduce Segment million business. the emissions period. posted in growth sequentially from down exit higher the We and adjusted focus this versus $X year-over-year, X% million, XX.X%, Segment XX% see was for $X product and including segment sequentially sequentially decrease revenue driven adjusted continue prices. the quarter compared was points adjusted activity. EBITDA lower down sequentially. margin exit quarter, increased the quarter, revenue third XX% Technologies third lower excited third to EBITDA rig in $X.X down million to in the of year our and margin PAT the a operational segment quarter discussed, XX.X% basis second basis delivered $XX increased to technologies sequentially, Drilling of versus Year-over-year, adjusted previously product by basis driven third by We digital, EBITDA volumes flat second the $XX but quarter, XXXX. million and up low-margin a the revenue implementing Chemical and improvements. Technologies was basis during while lower margin was revenue quarter, the quarter, a line customer prior count year-over-year. U.S. the EBITDA in up and the revenues, about EBITDA The RPP adjusted emissions Drilling drive points year. the future XX% related and XX million digital in year-over-year.As adjusted decline to margin with actions. decline. flat XXX was point both X% was exit third with of points emission segment EBITDA sequential of XXX declines prior

balance our sheet. to Moving

was ended including As trailing with $XXX shown our debt net $XXX capacity. our cash allocation our a XX, quarter the net to to our ratio hand framework, X.Xx we on of strong alignment again very XX-month adjusted and of At XX, liquidity In third the capital to September return we revolver on million million, of with EBITDA. remain capital Slide surplus committed shareholders. leverage position available in

and cash have the quarter, shareholders, to free repurchases. of flow returned returned of shareholders. cash we XX% approximately flow million Year-to-date, XX% in including free regular quarterly third quarterly we $XX million $XX to During dividends share of

on focus in expect working us capital disciplined free continued our improvement process forward, capital continue and Moving of with allocation cash operating delivery management. flow along our to and

at also least level and are on robust financial flow of We a position shareholders. maintaining and free strong focused cash able continue returning our XX% to liquidity to

you productivity, As to on can our improve allocation continue and drive improvement or continuous capital see invested in capital ROIC. we on XX, return as to we continue Slide disciplined

We toward are making progress ROIC. good XX%-plus targeted our

to improved has full rate. points ROIC XX-month basis trailing the Our XXX up XXXX actual approximately year XX%, over

Now XX for turning to our outlook Slide fourth on forward quarter.

positive sequential year-end We in million expected revenue businesses by in quarter range holiday. as expect momentum offset The primarily by move seasonal million. they continued North revenue American driven fourth the into our $XXX the our slowdown in projected change businesses to of is $XXX international

business to of that of and act our sequential expect manage decline flow quarter XXXX revenue capital the of drilling as some working a the We to technology similar experience their in free customers cash fourth to our year-end.

Argentine For the midpoint million this year-over-year the points adjusted note adjusted $XXX range margin fourth significant EBITDA in of $XXX fourth the represents company's increase basis the over an EBITDA a the which to during XXX approximate Please clarity, X% midpoint, a guidance of we any peso period. devaluation rate. does expect adjusted this EBITDA, at anticipate At million, improvement XXXX. quarter in the not quarter for represents further

flow the cash cycle, full to ratio now free you. at XXXX. XX% we back Thank cash forward, adjusted quarter remain and least conversion a through for ratio XX% EBITDA of expect to nd Soma. flow in Moving free guidance fourth and to of the year confident XX% we our

Soma Somasundaram

Ken. you, Thank

to let we open with me share few Before the call questions, thoughts a you.

U.S. are We the global and cost-effective U.S. of in leading the positioned operating our early in land the our customers and to tailwinds a start the of in softness help beyond. particularly sustainable XXXX customer reset. short-term maximize their midstream value upstream production and As favorable remain demand in and ways.Despite are optimization producing to cycle we budget industry, confident experiencing provider a we in well short our XXXX we assets solutions growing energy for businesses, for as activity businesses expect

our With delivering would and on capital their that, our which open adjusted generation, employees purpose for strong priorities committed our call our like disciplined growth, the tireless shareholders our high-return to fully our customers, thank I ChampionX the capital to lead framework improving of X,XXX and With cash commitment humbled inspiring we for around and questions. of includes employees, our investments creating with to team. through all our margin line solid cash value laser-focused of EBITDA the to would and to community. shareholders. remain bottom honored and are I'm that, lives expansion for to for deployment, crystal returning I focus allocation We clear excess world and like the even shareholders our

Operator

[Operator first Your line Gengaro question of from Instructions] comes the Stephen from Stifel.

Stephen Gengaro

improvement maybe in sort of fourth about some a other I us us quarter expectations understand North bit. a softness Can in and maybe a at? a the what's you your basis, segment of help you're normally looking understand understand thinking can I'm the areas. the margin margin little you production chemicals, on help bit American But kind of progression

Soma Somasundaram

at business QX given and to you in improvement perform resilience PCT we in we QX expect well margins PCT to PCT, PCT, QX QX. international look seasonal margin of the When expect compared the to in the progression,

important or Stephen, be about strong the an also time similar You I Argentina you will in performance performance should see slightly talk it devaluation. see -- think, a better And QX. had in this should even QX, to

about to PAT do to at it QX the exited technologies, Because we PAT, ask that as be us. When and margin you U.S. comes we saw, And September. finish for I when Ken in my sequentially to land. comments, that. drilling look talk expect As business the I'll we softer impacted

U.S. the when pronounced could we weakness entered the we how exited So September, land see in September, in getting September. in we more and QX activity

also do slowdown the It we fully will QX, we September. starting so PAT. We saw the some happen expect into in in of present. And be to already as that seasonal the that signs mix go is normal

the more completion is primarily As ESP side. side is know, you driven by -- the completion

to be a the PAT it margin in side. So higher tends

conversations bigger somewhat this the -- QX, see I some hardware in see when we think slowdown then to to going DT PAT the with so so QX, impact a mix the to going are received drilling management. DT, So in very to those for it's our the that push that to purchases calls where to clear year.So have digital to very similar working at already be will we which are that, of of very look the particularly customers conversations and deliveries customers already are And focused margin of because last a out are very QX means starting on with technologies types conversation and PAT, similar get along will QX happening. that down. we is you capital is be impact, to type happened And

to XX%. it business If last similar you we much our that's So to XX%, technologies as imagine why year, can is down be drilling expect it impacted. sequentially could as be

to expect that Drilling know, so business be you as business the decrements higher, down. should you Technologies So

I Now capital and towards lot having of type would be customers to see managing Stephen, said this a of this, slowdown issues. seasonal very say we QX all temporary working

still at If strong. are businesses the you of the look quality very

see year-over-year have exit improvement. strong And We still deliver still strong margin generation. you will cash

returns. strong You'll capital see still

So which see then we the U.S. out land see the these quarter we playing are quarter. as third experiencing, towards we fourth which it of the end in now weaknesses, and started temporary

So to enter U.S. growth positive expect we we as reset, we and the another well it we XXXX expect into land as XXXX, as early of globally. are will in be budget year confident --

that, with because devaluation talk since do QX Ken it's impacted Argentina I margin. our to about want So

So Ken?

Kenneth Fisher

business PCT business the in Argentina historically Stephen, Yes. done has profitably.

issue been to regularly. supplier, the -- of many able dollar that million been to that are It's repatriate U.S. have we that. We current as of out And had so issue But Argentina about monies then. the primarily in at to when we've functional really dollar, impact. rate we we're there. we've sales U.S. accounting that indexed product invoice, I wanted questions a invoice some clear be the historically, roughly revenue essentially was devaluation have the around there. contracts that annual $XXX about a not We to the a we

year government of so and a we've to to repatriate. our ability had been and the that's late series then And delayed this an it never make practice but before, changes regulation issue year, and last repayments seen us to delayed through both

exposure had the we that peso the rate we right exchange balance the so loss changed they the And hit up noted. with were that election, in built and with a country we the then after

trying to in as the as we've through minimize possible. working meantime, balance much that mitigate that So been to

to dollars. customers some fact, We negotiating have business, the and country and little U.S. of entailed start we're in then a us have to agreed outside in pay

down over next quarters. the to of we'll work exposure that here So couple continue

As about exposure. of this week, it's million $XX a

we So devaluation, should we're another minimize it. an but there significant hard be would working have issue, to

Soma Somasundaram

I swap, And blue-chip you have think, major to Stephen, this some as which of a approached know, companies results in a do the write-down.

Kenneth Fisher

that's peers Maybe point. are of the a group good the in services. Yes. providing A lot primarily

So historically, able were repatriate. less to they

And from they accessed adjusted normal of so even losses. We parallel called market swap balances. blue-chip bigger losses big their excluded and And part they EBITDA. a as today FX treat They those EBITDA. built took the

and but took and year So at of But significant substantial get each late on some exclude losses this you peers some we swaps because some balances. blue-chip early the last it, small more gains up period. build they the write-downs pretty even don't year

adverse we're I are So to very appreciated, product government recently have been normally, a the able and because repatriate actions say. I'd guess, provider, not we

give hopefully, that some helps So color.

Stephen Gengaro

number after margin one about account PC, the fourth slightly that that being to follow-up is up maybe performance the in XQ, me. million, cleaner Just when is i.e., for taking into a quick key flat -- sequential $X I the quarter? the And in think

Soma Somasundaram

be PCT to it under So closer does another devaluation. margin contemplate QX the XX%. I not that the should And scenario, think in

Operator

Bianchi of is TD next line Cowen. the from Your question Marc from

Marc Bianchi

you're of because third right? or sort worth this that leverage of that the PCT one in I in operating isn't because in XX% if Are to you're wanted margins situation million other not out there maybe another reading hit on currents absence cross just seems pointing quarter. there to going have recapturing the it Argentina the in here $X quarter, the fourth business really ask like I'm some any are

Soma Somasundaram

the No, businesses. mix I mean, there's significant. always I that don't happens think within anything issues there's some

other than is mix. to major of There the So -- normal Marc, issues. there's any due would say, I outside variations of that, nothing other -- no

Marc Bianchi

you mentioned insight And And in XXXX? there's us but entering then, typical have had I an Soma, any off. the PCT seasonality you typically, you occurs for particular some know XXXX, early Can falling walk first just sort with expectation if quarter that through about progression? of growth in the

Soma Somasundaram

color in always Marc, worked see that we great QX and PCT around how the Yes, some because business. we to seasonality in this observation past, QX have our historically provided has

or look a pure QX revenues at a So over business years, PCT have average about That if X an X%. you mean the last at X on QX seasonality. is the to declined

much it's And some worse. quarters,

Some quarters, how on is. depending QX it's better

And in QX like have QX then which QXs type a be typically, will our a some Drilling rebound. be tend to DT to do historically, sharper look rebound QX And in rebound said, expect Technologies, when business. good you to it's Technologies our be Drilling the we X%. shown we and the it in there in are decline expect but And expecting, seasonally revenue, again, years, when So to of the do QX a could at Technologies be rebound, QX we QX Drilling I will PCT historically is driven. we business

because as QX the QX of reset early to business expect budgets PAT to well be in part QX. better sequentially the We typically

will place exit normally, than when But businesses, PAT in the entered see what getting much little the we budget with stronger it will QX January. run will in as start QX. we rate February, So the slow into a quarter a in we starts

So expect to be we'll QX seasonally QX. summary, PCT in down to

be but the are there. in may and QX, to But PAT year, to quarter what run this confident to lower QX, the from to of up, are be improve of look there QX to XXXX -- to tend QX to will QX QX as like. as rest QX we you at that's expect issues, be of QX look be to up we the And year in DT predict we we these expect to we we know, to as QX XXXX, sequentially quarter QX. we'll Marc, and sometimes QX, growth then type early seeing the QX QX growth, QX And look see We like too and into that QX. tends

Operator

comes of David question next Barclays. Your line Anderson from from the

John Anderson

I few PCT. of side have a North America questions the on

contracted rig year. through But at this U.S. I the numbers, So at increased, XX% if look periods actually onshore July. EIA count least production the have

Now lower bit rig revenue Is was thought Am a to falling. of a I But -- was it you missing really said PCT the relationship. terms due longer slide? count term there much here? a little it driver there. I I'm something production longer of in the was cycle of that relationship that surprised

Soma Somasundaram

which in we the slide think by slide the I segment, U.S. had non-U.S. a deck, versus showed sequential

So where grew actually real we the if U.S. at with X%, the land. in sequentially PAT the business and look that, DT PCT in had issues you

So relationship this goes our to of show and business. the long-term PCT resilience the

X% So to QX. business QX grew PCT U.S.

John Anderson

[indiscernible]. up held that there So

the side is ESPs. the relationship PAT completions the there the with it's and So

Okay. That makes sense.

a in longer-term growth for of of if PCT, U.S. not to mode. lot a We're next we kind of So see about several think going sort drivers the is production over manufacturing whole years. NAM onshore

in should story about this of growth time? should them there an here? from intensity PCT think of underlying over for how about drivers Is increasing production business in relative we think the to kind kind So chemicals here? How we

Soma Somasundaram

things. growth is to is And the in that's intensity. the continues Mexico it's business PCT, think of continued U.S. right. grow of exactly Gulf in the X combination definitely the our a you well. then And look in second I One if aspect growth as even at

as the was and important Mexico part at our offshore of If QX globally, grew markets sequentially we you growth QX, look an offshore to that Gulf of in XX% well.

go to expect the continue of intensity as Gulf as XXXX, improvements the as So we well. well into as we growth Mexico

John Anderson

and production should just a U.S. So to to -- about of Chevron. hypothetically just onshore, production your even you're this obviously I -- grow on to how sort higher onshore E&P then a onshore? around potentially let's continue very and know multi opportunity more in you about flat, Is sticking curious consolidation we a over guess time? is But does with see? And trend that PCT And is that theme more offshore the you basically talk to second for means still Exxon U.S. create expecting Is Can And say then that frankly, what flat with big is onshore? how I'm business U.S. market fragmented? share business? that. chemicals

Soma Somasundaram

at with consolidation, when the we the the you you relationships, the for look think we supplier this saw positive I as award. with of you year so know, And have won aspect us Exxon, is stronger IOCs.

IOCs, consolidation. and is relationship gain the consolidation and our So maintain help driven as our by presence us the long-term positions this our with to continue should IOCs in

savings make Now to way we relationship obviously, our areas, along think and is to we but for support global way customers really net the in a given long-term for -- and efficiencies be consolidate, as will thing it we have see will these will positive do given watching we sure, they the E&Ps I also the for our the us. feel, be look

John Anderson

market going in increasing X here be intensity chemical any sorry, from are So onshore any drivers inherent on to the and of other -- increasing revenue production growth. share of kind U.S. growth, aside NAM main top

Operator

the of Your next Gruber line question comes Citigroup. from Scott from

Scott Gruber

it Soma, mentioned But you heard is stagnate weakness. in look correctly, think does I if Can EBITDA North XQ, I given like this in going expansion margin here margin 'XX. to American later your year getting is you a you think that drivers back you of level do think walk realistic next major continued XX% you do to And for expansion? through Do the margin goal? some better? you

Soma Somasundaram

then a is last years, we there have to consistently And performances clearly, look X a for Yes. our X at softer quarter-to-quarter and margin given see a typically efforts from tends of every pick Scott, expanded year. QX margin to you expansion Items will how there. in if calendarization QX, to the QX you bit bit we'll margins of drop, our quarter. be up a a

as a when little at our midpoint the points, XXXX, we and so at will look expand guidance, we look when XXXX. over to into right? at a by XXXX full that. we you of -- things. of driven year will expansion margins we be Number So XXXX, growth you will for versus couple that positive in XXXX, a continued see basis do So XXX close expect of And go one,

So help. that incremental will

efforts digital is businesses, emissions our business continued i.e., our our growth and productivity second business. higher-margin in The and continued

think will do of the we in mix growth help. our businesses that the So also

to do your margin So expect expansion in question, answer XXXX. we continued

Scott Gruber

take in XX%. about hit here And post we It business that XXs, to XQ. thinking XX%? XX%. used XX% to business But get can high looking to just something to closer the normal? should specifically to? than new that the term, expecting be And closer at was a better drilling, I margins Or going back that medium is it's realize Where

Soma Somasundaram

Scott, a question. it's great Yes,

I in a drilling period around volume of that think driving growth efficiencies continued the challenges structural a the that is time. are there element is business over

Can in would depend So the get what is at will definitely no very to it But business. business margin a say XX% in to as business is mind. question is I our It QX, definitely There's to going volume. XX% stage. I hit margin take mentioned. it's a business much closer on a a XX% this

Operator

Bank from the from of his comes Pant Your next And Saurabh has line disconnected. line just question got America. of

next question the from Moving to over Modak Goldman Atidrip from Sachs.

Ati Modak

expectations guidance, there Argentina delta expectations that sounds It's the more on? wondering XQ Can the margins, other if like maybe and the were especially any revenue in technologies, for see you exist. really doesn't and activity that things versus forward? around drilling factors those can destocking drove And it you were mention exposure provide there going color any other any how you do but I'm

Soma Somasundaram

Yes.

would of disappointed about right? all, with top again, to say expectation technologies. in at particularly And we is to it, I is If our of land PAT, -- to is line, shortfall you that are the the and our to right? U.S. PAT our and $XX related in half and with own drilling guidance midpoint this respect million our shortfall first So look

X this in comment devaluation then things. to $XX One million driven So delay primarily in roughly shortfall $XX million country that. Drilling another where combination in I'll a this a Mexico. as land, had remaining million, and PAT ask a $XX by Argentina, expectation and million, to as $XX is certifications Ken And well is $XX U.S. million is of in we related is on -- compared shortfall -- to is The Technologies. that in is shortfall remaining that import in a the all issue. a is of Again,

So Argentina to million the another $XX $XX and together Mexico shortfall. contributed million, about

So where U.S. Mexico. primary expectation. and there shorter had land, are we X Argentina areas

Kenneth Fisher

a Department then being sectors. treated have guys a imports started us lot helpful a heard little to were or stop weren't import of that was flow about certificates commerce better of the million And slow U.S. the actually and course during saw that And actually was the quarter. and We -- what the it that Argentina, only been recently. drove they've revenue similarly the that giving with Commerce down that of we experienced In the engaged and try get $X of we lot government across to ones that. those bit and certificates,

Ati Modak

out? Just a for Argentina a is a to follow-up, spread in there way higher as there the what Is gauge us it exposure. evenly is exposure segment is

Soma Somasundaram

all Largely PAT There's It's PCT. PCT. there. lot of exposure a not

Ati Modak

you of have XX% target here And is Are projects over Is that ongoing. the color the other lot from there you other question that you main can just growth bunch time, beyond? provide, kind about a productivity driver? think mentioned drivers that in of expansion. a I -- and some leverage operating flow margin wondering I'm hitting and you if EBITDA growth any as free cash had is of there

Soma Somasundaram

Yes.

for us of is think to cash I generate think intact. And is flow of us think flow the conversion the XX% to you that as target say. what a see That's and combination continues conversion. to And incremental I I very that XX% will revenue XX% mentioned, productivity free is, capital-light would growth. XX% I a for much cash continue to business free business we'll and be our XX% I

Operator

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

Saurabh Pant

should has, you a how of international I'm level revenue in how XXXX year perspective? cross-currency would leading-edge see North and said, But do about basis. North XXXX XXXX? well, we for think basically, on from on a a behaving expectation about and should America activity has that. versus top expand you some full How right? be be Because on growth a can think So basis, whole then like for we as doing I should offshore thinking maybe think America improving you setting XXXX line

Soma Somasundaram

by start me let growth internationally both as in So positive saying in we expect as do a North America XXXX. well

QX now slowdown. in have the what Now the terms given a seasonal slowdown seen slowdown of QX and we

QX, U.S. in think a we from for what particularly had has of the assumed. kind land, bit, base I right, lowered

will as we -- get as think next into will like sequentially you go and North QX the year, and QX will in better QX see see progressively better be we it QX revenue said, QX. So to QX, into you America, go to we I then into

me, North but a for of America. to QX growth I again, is do early too expect right it's -- now, year So positive in next predict

Nothing customer are not to So it's North to be in right XXXX temporary year is conversations a situation going -- seeing what is respect. our in America. growth now in us be we that that telling a is going

Saurabh Pant

of ESP also just a That's on little one the about the that I'm element tell lag recover we issues, thinking, D&C Because production, think would because how of there's How follow-up then year-end is the side slowdown, stuff. are obviously of should things reason there I'm the that especially asking. PAT side if about of a a But just completion all on activity, in right, and versus lower seasonality? activity effect lag, XXXX. effect is how budget an there's And on of us just quickly bit things seasonal important things. thinking element, lag quick you it that obviously lower

Soma Somasundaram

-- the one we lag that. ESP, logically, think have X-month which be pin Number get harder down slowdown. and ESPs X business see primary I of it's things. effect couple to lag the of and lag, the by lag, a times there because is X-month well a and same effect, And it tends we But to have X-month run whether that tends how should much lag, right? completion is, nowadays. tried into Customers as we little this intellectually Xx definitely a doing is a to times, multiple we the you is impacted know, correlating tried

very it's not to it's of X:X. kind sometimes, So -- hard

how but there we quarter see always ESP you a installed because been effect really how it's effect QX starting exactly we bit just and to lag the So to saw that it's September, the do a predict. agree we was in that hard clearly quarter quantify got into and our how is harder rate quantify could works. with we But the we QX And entered I in as exited lower. lag

Saurabh Pant

I to Soma, that secondary extent. about so talked know torch the the obviously it past installations some in offsets you've

Operator

the from comes question Capital next from Doug Your One. Becker of line

Doug Becker

you. Thank

an Artificial of top dip growth with survey, even pointed but some continue been company PAT. The talked the have little So area as in than thought strength. to factoring have the received U.S. given and slower would I Lift mark bit in a PAT and lift the Kimberlite has others that activity

share risk get place your wanted any thoughts So I landscape if to really taking and competitive market shifts there's there? just with the on

Soma Somasundaram

Yes.

major kind at if lift. ESP think in standpoint, is look artificial the So the I market lift, you rod you -- forms competitive lift which if think at of and look X I differentiated landscape the of a from in

our is strong behind there, feel slowdown So any and the of we we remains ESP see. at the look market position activity competitive when you the landscape, type I driver major think

and to lot forth. it when particularly you when and go to and players lift, especially a shops in the comes lower there's components on broad in repair rod end of so of so lift, Now it,

way pressures terms we the of value is a lift will rod on sometimes see. lift, we fringes, in of you provide. see you broad type in So focus will in the some issues pricing and But the

look I of market don't per we growth. wouldn't loss when lot of in I in So are see have that as driven. the -- our se. biggest any an the call the some data, There share And type activity today for U.S. largely I in driver the own It's at But a fringes. slowdown

we position Lyft have forms across know, have you leading categories, we share Lyft pretty all Doug, good in of a the of share As we the lift share if some position. at are in good market look you position. market positions, really But all

largely I think year are that the growth the which issue. activity is say I an So we issue, second experiencing half in would

Doug Becker

One last one.

high Analyst wondering year if to the maybe of and at but single or less digits, high Just likely. from nuance CAGR Day, is end, curious still change this if you about revenue or there's been any the shaded 'XX at talked X.X% the time, maybe plenty

Soma Somasundaram

And you of restructuring, such in some as did terminating better. well as or cross-sales guidance, all normalize for as normalize elements somewhere of if the in we if the various product XXXX. Doug, XXXX, at you our look the for line of as midpoint -- the our the exit, Russia X% part X% we exit slightly the that. CT at of it's

level of we you when we we right, are the right? activity we starting than obviously, half look if when the with second our high it year makes So single-digit at we expecting harder, this anticipated. it So gave weakness that, weren't expected, CAGR, than because lower what

it it makes that, started makes the on it we harder. but acknowledge first harder I that will But given up giving that with not year. the as it X% So we fourth are

Operator

There call further no at the to questions are time. over back I'd like Mr. this now to turn

any closing for Soma remarks.

Soma Somasundaram

for call. thanks, quarter's today's call, day. Well, we to everyone, you in and to joining next look forward and great our talking have you, a Thank earnings

Operator

lovely Thank concludes that you please for you your Ladies and you, sir. We ask for a Have disconnect participating your day. this today. gentlemen, lines. call conference thank and

ChampionX (CHX) 25 Oct 232023 Q3 Earnings call transcript