Dril-Quip, Inc. (NYSE: DRQ), (the “Company” or “Dril-Quip”) today
reported operational and financial results for the first quarter of
2022.
Results for the first quarter of 2022
included:
- Revenue of $83.1 million for the first quarter of 2022, an
increase of $5.2 million from the fourth quarter of 2021 on higher
subsea products revenue;
- Booked $66.5 million of new orders during the first quarter of
2022, including approximately $17 million in product and service
orders for projects in Brazil;
- Reported a net loss of $8.9 million, or a $0.26 loss per share,
an improvement of $54.5 million, or $1.55 per share compared to the
fourth quarter of 2021, due to increased revenue and lower
restructuring and other charges
- Generated adjusted EBITDA of $3.2 million, or 3.8% of revenue;
an increase of $2.6 million from the fourth quarter of 2021;
- First quarter net cash used by operating activities of $10.9
million and free cash flow of negative $13.0 million, inclusive of
$2.1 million of capital expenditures
- Repurchased $5.8 million of shares at an average price of
$21.20 during the first quarter of 2022.
Jeff Bird, Dril-Quip’s President and Chief
Executive Officer, commented, “We continue to see a strengthening
market that is supportive of customer activity and an increasing
demand for our products and services. Orders this quarter represent
the second straight quarter of strengthening bookings we saw off
the pandemic lows of 2020 and most of 2021. This, along with our
continued focus on our strategic growth pillars of peer-to-peer
collaboration, downhole tools expansion and e-Series technology
position us well for our expected 20% year-over-year growth in
orders. The customer response from our Aker Solutions collaboration
agreement has been strong, and we are beginning to align and
dedicate resources to this effort that we expect will be an
emerging revenue stream for us in the coming years. These strong
order trends started to translate into revenue in the first quarter
as revenue was up by approximately 7% sequentially. We would expect
this trend to continue and ultimately drive revenues up 10% for the
full year 2022 compared to 2021.”
“As discussed in our annual earnings call, we
also continue to make progress in the strategy of creating product
line teams that are organized and focused on end-to-end customer
and financial execution of their respective product line and a
smaller, leaner, more sustainable footprint. We expect this new
model to create a more customer-focused organization that drives
both operational and financial excellence. We are already beginning
to realize the benefits of this more transparent organizational
structure in several areas including manufacturing, supply chain,
and sales. I look forward to discussing the timing and size of
these benefits in the coming quarters.”
“As we look forward in 2022, we remain confident
in our ability to achieve the goals we set forth during our annual
earnings call. Bookings, revenue and adjusted EBITDA will be the
primary focus of our team. We believe our strategic path and
internal continuous improvement mindset coupled with our strong
balance sheet will lead to a stronger Dril-Quip in the coming
quarters and years for the benefit of our shareholders and
stakeholders.”
In conjunction with today’s release, the Company
posted a new investor presentation entitled “First Quarter 2022
Supplemental Earnings Information” to its website,
www.dril-quip.com, on the “Events & Presentations” page under
the Investors tab. Investors should note that Dril-Quip announces
material financial information in Securities and Exchange
Commission (“SEC”) filings, press releases and public conference
calls. Dril-Quip may use the Investors section of its website
(www.dril-quip.com) to communicate with investors. It is possible
that the financial and other information posted there could be
deemed to be material information. Information on Dril-Quip’s
website is not part of this release.
Operational and Financial
Results
Revenue, Cost of Sales and Gross Operating
Margin
Consolidated revenue for the first quarter of
2022 was $83.1 million, up $5.2 million from the fourth quarter of
2021 and up $1.9 million compared to the first quarter of 2021. The
sequential increase was primarily a result of higher subsea product
volumes, primarily fabricated joints, partially offset by a
decrease in downhole tools product and service revenues. The
increase in revenue year-over-year was driven by higher leasing
revenues across most regions related to improved subsea rental tool
utilization due to increased customer activity.
Cost of sales for the first quarter of 2022 was
$64.0 million, an increase of $2.8 million from the fourth quarter
of 2021 and an increase of $7.2 million compared to the prior year.
Gross operating margin for the first quarter of 2022 was 23.0%, an
increase from 21.5% in the fourth quarter of 2021 and a decrease
from 30.1% in the first quarter of 2021. The increase in gross
margins compared to Q4 2021 was mostly attributed to increased
absorption of fixed overhead from higher product revenues,
partially offset by a decrease in service revenues and unfavorable
product mix.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”)
expenses for the first quarter of 2022 were $22.4 million, a
decrease of $8.2 million compared to the fourth quarter of 2021 and
a decrease of $7.2 million compared to the first quarter of 2021.
The sequential decrease in SG&A was due to a reduction in
expense related to the executive separation agreement, lower
incentive compensation accrual and a decrease in reserve for bad
debt. The year-over-year decrease in SG&A is primarily
attributable to lower legal expenses in connection with the FMC
Technologies, Inc. lawsuit, a decrease in professional fees and the
non-recurrence of expense associated with the importation tax
settlement under the Brazilian tax amnesty program. Engineering and
product development expenses were down $0.2 million sequentially
and $0.4 million lower than the first quarter of 2021 due to lower
research and development expenses as a result of the completion of
investments in certain strategic projects.
Net Loss, Adjusted EBITDA and Free Cash Flow
For the first quarter of 2022, the Company
reported a net loss of $8.9 million, or a $0.26 loss per share.
Adjusted EBITDA totaled $3.2 million for the first quarter of 2022
compared to $0.6 million for the fourth quarter of 2021,
representing incremental margins of 48.9% quarter over quarter.
Adjusted EBITDA for the first quarter of 2022 was down $4.9 million
compared to the first quarter of 2021. The improvement in adjusted
EBITDA sequentially can be attributed to increased revenues from
subsea products. The decrease in adjusted EBITDA year-over-year can
be mostly attributed to lower gross margins from unfavorable
revenue mix, primarily lower margin subsea products contribution
and a decrease in downhole tools product and service revenue.
Net cash used by operations was $10.9 million
and free cash flow was a negative $13.0 million for the first
quarter of 2022. This decrease from the previous quarter was
primarily driven by seasonal cash tax payments and short-term
incentive compensation, partially offset by a decrease in working
capital. Capital expenditures in the first quarter of 2022 were
approximately $2.1 million, flat compared to the fourth quarter of
2021. The Company expects that capital expenditures will increase
throughout the remainder of 2022 for rentals tools to support
upcoming projects in Latin America and investments in information
technology.
Share Repurchases
For the three-month period ended March 31, 2022,
the Company purchased 273,629 shares under its share repurchase
plan at an average price of $21.20 per share, totaling $5.8 million
and retired such shares. The Company has purchased approximately
$82 million of the $200 million currently authorized by the Board
of Directors. The Company continues to evaluate the amount and
timing of its share repurchases as part of the Company’s overall
capital allocation strategy.
About Dril-Quip
Dril-Quip is a developer, manufacturer and
provider of highly engineered equipment, service and innovative
technologies for use in the energy industry.
Forward-Looking Statements
Statements contained herein relating to future
operations and financial results that are forward-looking
statements, including those related to market conditions,
anticipated project bookings, expected timing of completing
strategic restructuring, anticipated timing of delivery of new
orders, anticipated revenues, costs, cost synergies and savings,
possible acquisitions, new product offerings and related revenues,
share repurchases and expectations regarding operating results, are
based upon certain assumptions and analyses made by the management
of the Company in light of its experience and perception of
historical trends, current conditions, expected future developments
and other factors. These statements are subject to risks beyond the
Company’s control, including, but not limited to, the impact of the
ongoing COVID-19 pandemic, the effects of actions taken by third
parties, including, but not limited to, governmental authorities,
customers, contractors and suppliers, in response to the COVID-19
pandemic, the impact of actions taken by the Organization of
Petroleum Exporting Countries (OPEC) and non-OPEC nations to adjust
their production levels, the general volatility of oil and natural
gas prices and cyclicality of the oil and gas industry, declines in
investor and lender sentiment with respect to, and new capital
investments in, the oil and gas industry, project terminations,
suspensions or scope adjustments to contracts, uncertainties
regarding the effects of new governmental regulations, the
Company’s international operations, operating risks, the impact of
our customers and the global energy sector shifting some of their
asset allocation from fossil-fuel production to renewable energy
resources, and other factors detailed in the Company’s public
filings with the SEC. Investors are cautioned that any such
statements are not guarantees of future performance and actual
outcomes may vary materially from those indicated.
Non-GAAP Financial
Information
Adjusted Net Income (Loss), Adjusted Diluted
EPS, Free Cash Flow and Adjusted EBITDA are non-GAAP measures.
Adjusted Net Income (Loss) and Adjusted Diluted
EPS are defined as net income (loss) and earnings per share,
respectively, excluding the impact of foreign currency gains or
losses as well as other significant non-cash items and certain
charges and credits.
Free Cash Flow is defined as net cash provided
by operating activities less cash used in the purchase of property,
plant and equipment.
Adjusted EBITDA is defined as net income
excluding income taxes, interest income and expense, depreciation
and amortization expense, stock-based compensation, non-cash gains
or losses from foreign currency exchange rate changes as well as
other significant non-cash items and other adjustments for certain
charges and credits.
The Company believes that these non-GAAP
measures enable it to evaluate and compare more effectively the
results of our operations period over period and identify operating
trends by removing the effect of its capital structure from its
operating structure. In addition, the Company believes that these
measures are supplemental measurement tools used by analysts and
investors to help evaluate overall operating performance, ability
to pursue and service possible debt opportunities and make future
capital expenditures. Adjusted Net Income (Loss), Adjusted EBITDA
and Free Cash Flow do not represent funds available for our
discretionary use and are not intended to represent or to be used
as a substitute for net income or net cash provided by operating
activities, as measured under U.S. generally accepted accounting
principles (“GAAP”).
See “Unaudited Non-GAAP Financial Measures”
below for additional information concerning non-GAAP financial
information, including a reconciliation of the non-GAAP financial
information presented in this press release to the most directly
comparable financial information presented in accordance with GAAP.
Non-GAAP financial information supplements and should be read
together with, and is not an alternative or substitute for, the
Company’s financial results reported in accordance with GAAP.
Because non-GAAP financial information is not standardized, it may
not be possible to compare these financial measures with other
companies’ non-GAAP financial measures.
Investor Relations Contact
Blake Holcomb, Director of Investor Relations and Corporate
Planning(713) 939-7711Blake_Holcomb@dril-quip.com
|
|
|
|
|
|
|
|
|
|
|
|
Dril-Quip,
Inc. |
Comparative
Condensed Consolidated Income Statement |
(Unaudited) |
|
|
|
|
|
|
|
Three months ended |
|
March 31, 2022 |
|
December 31, 2021 |
|
March 31, 2021 |
|
(In
thousands, except per share data) |
Revenues: |
|
|
|
|
|
Products |
$ |
55,642 |
|
|
$ |
48,694 |
|
|
$ |
55,583 |
|
Services |
|
17,499 |
|
|
|
19,380 |
|
|
|
17,667 |
|
Leasing |
|
9,996 |
|
|
|
9,838 |
|
|
|
7,989 |
|
Total revenues |
|
83,137 |
|
|
|
77,912 |
|
|
|
81,239 |
|
Costs and
expenses: |
|
|
|
|
|
Cost of sales |
|
63,995 |
|
|
|
61,197 |
|
|
|
56,787 |
|
Selling, general and administrative |
|
22,393 |
|
|
|
30,620 |
|
|
|
29,558 |
|
Engineering and product development |
|
3,676 |
|
|
|
3,834 |
|
|
|
4,037 |
|
Restructuring and other charges |
|
32 |
|
|
|
52,913 |
|
|
|
25,020 |
|
Gain on sale of property, plant and equipment |
|
(114 |
) |
|
|
(596 |
) |
|
|
(3,955 |
) |
Foreign currency transaction (gains) and losses |
|
(1,254 |
) |
|
|
1,600 |
|
|
|
1,374 |
|
Total costs and expenses |
|
88,728 |
|
|
|
149,568 |
|
|
|
112,821 |
|
Operating
loss |
|
(5,591 |
) |
|
|
(71,656 |
) |
|
|
(31,582 |
) |
Interest
income |
|
203 |
|
|
|
274 |
|
|
|
49 |
|
Interest
expense |
|
(54 |
) |
|
|
(195 |
) |
|
|
(439 |
) |
Income tax
provision (benefit) |
|
3,496 |
|
|
|
(8,148 |
) |
|
|
2,386 |
|
Net
loss |
$ |
(8,938 |
) |
|
$ |
(63,429 |
) |
|
$ |
(34,358 |
) |
Loss per
share |
|
|
|
|
|
Basic |
$ |
(0.26 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.97 |
) |
Diluted |
$ |
(0.26 |
) |
|
$ |
(1.81 |
) |
|
$ |
(0.97 |
) |
Depreciation
and amortization |
$ |
7,559 |
|
|
$ |
7,723 |
|
|
$ |
7,416 |
|
Capital
expenditures |
$ |
2,066 |
|
|
$ |
2,062 |
|
|
$ |
2,513 |
|
Weighted
Average Shares Outstanding |
|
|
|
|
|
Basic |
|
34,494 |
|
|
|
35,167 |
|
|
|
35,385 |
|
Diluted |
|
34,494 |
|
|
|
35,167 |
|
|
|
35,385 |
|
|
|
|
|
Dril-Quip,
Inc. |
Comparative
Condensed Consolidated Balance Sheets |
(Unaudited) |
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
|
(In
thousands) |
Assets: |
|
|
|
Cash and cash equivalents |
$ |
338,008 |
|
$ |
355,451 |
Other current assets |
|
379,368 |
|
|
390,098 |
PP&E, net |
|
212,944 |
|
|
216,200 |
Other assets |
|
47,790 |
|
|
48,677 |
Total
assets |
$ |
978,110 |
|
$ |
1,010,426 |
Liabilities and Equity: |
|
|
|
Current liabilities |
$ |
70,321 |
|
$ |
93,663 |
Deferred Income taxes |
|
4,335 |
|
|
3,925 |
Other long-term liabilities |
|
15,679 |
|
|
15,730 |
Total
liabilities |
|
90,335 |
|
|
113,318 |
Total
stockholders equity |
|
887,775 |
|
|
897,108 |
Total
liabilities and equity |
$ |
978,110 |
|
$ |
1,010,426 |
|
|
|
|
Dril-Quip,
Inc. |
Reconciliation of Net Income (Loss) to Adjusted Net Income
(Loss) and Adjusted Diluted Earnings (Loss) per Share and
Adjusted Diluted Earnings (Loss) per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income (Loss) and EPS: |
Three months
ended |
|
March 31, 2022 |
|
December 31, 2021 |
|
March 31, 2021 |
|
Effect on net income (loss) (after-tax) |
|
Impact on diluted earnings (loss) per share |
|
Effect on net income (loss) (after-tax) |
|
Impact on diluted earnings (loss) per share |
|
Effect on net income (loss) (after-tax) |
|
Impact on diluted earnings (loss) per share |
|
(In
thousands, except per share amounts) |
Net loss |
$ |
(8,938 |
) |
|
$ |
(0.26 |
) |
|
$ |
(63,429 |
) |
|
$ |
(1.80 |
) |
|
$ |
(34,358 |
) |
|
$ |
(0.97 |
) |
Adjustments
(after tax): |
|
|
|
|
|
|
|
|
|
|
|
Reverse the effect of foreign currency transaction (gains) and
losses |
|
(991 |
) |
|
|
(0.03 |
) |
|
|
1,264 |
|
|
|
0.04 |
|
|
|
1,085 |
|
|
|
0.03 |
|
Restructuring and other costs, including severance |
|
25 |
|
|
|
- |
|
|
|
45,962 |
|
|
|
1.31 |
|
|
|
19,766 |
|
|
|
0.56 |
|
Gain on sale of property, plant and equipment |
|
(90 |
) |
|
|
- |
|
|
|
(471 |
) |
|
|
(0.01 |
) |
|
|
(3,124 |
) |
|
|
(0.09 |
) |
Adjusted net
loss |
$ |
(9,994 |
) |
|
$ |
(0.29 |
) |
|
$ |
(16,674 |
) |
|
$ |
(0.46 |
) |
|
$ |
(16,631 |
) |
|
$ |
(0.47 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Dril-Quip,
Inc. |
Reconciliation of Net Income (Loss) to Adjusted
EBITDA |
|
|
|
|
|
|
Adjusted EBITDA: |
Three months ended |
|
March 31, 2022 |
|
December 31, 2021 |
|
March 31, 2021 |
|
(In
thousands) |
Net loss |
$ |
(8,938 |
) |
|
$ |
(63,428 |
) |
|
$ |
(34,358 |
) |
Add: |
|
|
|
|
|
Interest (income) expense, net |
|
(149 |
) |
|
|
(80 |
) |
|
|
390 |
|
Income tax provision (benefit) |
|
3,496 |
|
|
|
(8,148 |
) |
|
|
2,386 |
|
Depreciation and amortization expense |
|
7,559 |
|
|
|
7,723 |
|
|
|
7,416 |
|
Restructuring and other costs, including severance |
|
32 |
|
|
|
58,180 |
|
|
|
29,820 |
|
Gain on sale of property, plant and equipment |
|
(114 |
) |
|
|
(596 |
) |
|
|
(3,955 |
) |
Foreign currency transaction (gains) and losses |
|
(1,254 |
) |
|
|
1,600 |
|
|
|
1,374 |
|
Stock compensation expense |
|
2,527 |
|
|
|
5,354 |
|
|
|
3,186 |
|
Brazilian amnesty settlement |
|
- |
|
|
|
- |
|
|
|
1,787 |
|
Adjusted
EBITDA |
$ |
3,159 |
|
|
$ |
605 |
|
|
$ |
8,046 |
|
|
|
|
|
|
|
Dril-Quip,
Inc. |
Reconciliation of Net Cash Provided by Operating Activities
to Free Cash Flow |
|
|
|
|
|
|
Free
Cash Flow: |
Three months ended |
|
March 31, 2022 |
|
December 31, 2021 |
|
March 31, 2021 |
|
(In
thousands) |
Net cash provided (used) by operating activities |
$ |
(10,928 |
) |
|
$ |
4,689 |
|
|
$ |
13,072 |
|
Less: |
|
|
|
|
|
Purchase of property, plant and equipment |
|
(2,066 |
) |
|
|
(2,062 |
) |
|
|
(2,513 |
) |
Free cash
flow |
$ |
(12,994 |
) |
|
$ |
2,627 |
|
|
$ |
10,559 |
|
|
|
|
|
|
|
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