Press Release
Dril-Quip, Inc. Announces Fourth Quarter and Full Year 2022 Results
Fourth quarter and full year revenue increase double digits year-over-year
Significant progress made along operational excellence initiatives
Company provides fiscal 2023 financial outlook
Fourth Quarter Highlights
- Revenue of
$96.8 million increased 10% sequentially and 24% year-over-year - Net Bookings of
$93.8 million increased 52% sequentially and 18% year-over-year - Net Loss of
$0.3 million improved$63.2 million year-over-year - Adjusted EBITDA of
$10.4 million improved from$0.6 million one year ago and increased 48% sequentially - Gross Margin of 31% increased 579 basis points sequentially and 979 basis points year-over-year
- Published first corporate sustainability report
Full Year Highlights
- Revenue of
$362.1 increased 12% year-over-year - Net Bookings of
$271.6 million increased 19% year-over-year - Signed
$122.0 million of master service agreements (MSAs) in 2022 - Net Income of
$0.4 million increased$128.4 million year-over-year - Adjusted EBITDA of
$30.0 million increased 97% year-over-year - Gross Margin of 27% increased 160 basis points year-over-year
- Repurchased
$20.8 million of shares during the year at an average price of$23.41 per share - Announced a Collaboration Agreement with Aker Solutions to offer subsea injection systems for carbon capture, utilization, and storage (“CCUS”) projects
- Announced Scope 1 and Scope 2 GHG emissions reduction target of 50% by 2030
- Received upgraded MSCI ESG rating of an “A”
- Closed on the sale of the
Houston forge facility and entered into purchase and sale agreements for Houston’s administrative and aftermarket buildings - Committed investment of
$22 million in wellhead manufacturing equipment that is expected to be delivered in Q4’23
"
“Looking ahead, we expect to continue to capitalize on the constructive offshore drilling market. We are keeping a pulse on customer behaviors and confidence, and we expect order trends and spending to accelerate in 2023. We continue to see increased investment and activity in key markets such as
2023 Financial Outlook
- Revenue growth of 10%
- Bookings year-over-year growth of 10% to 20%
- Adjusted EBITDA incremental margins of 40% to 60%
- Capital Expenditures of
$25 million to$30 million
In conjunction with today’s release, the Company posted a new investor presentation entitled “2023 Investor Presentation” to its website, www.dril-quip.com, on the “Events & Presentations” page under the Investors tab. Investors should note that
Operational and Financial Results
Revenue, Cost of Sales and Gross Operating Margin
Consolidated revenue for the fourth quarter of 2022 was
Cost of sales for the fourth quarter of 2022 was $66.6 million, an increase of $0.9 million sequentially from the third quarter of 2022. Gross operating margin for the fourth quarter of 2022 was 31.2%, up from 25.4% for the third quarter of 2022. Gross margins increased sequentially driven by favorable product line mix from subsea projects, strong downhole tools growth and leverage on higher revenue.
Cost of sales for the full year of 2022 was $265.9 million, an increase of $23.6 million from the full year 2021. Gross operating margin for the full year 2022 was 26.6% compared to a gross operating margin of 25.0% for the full year 2021. The increase in gross operating margin year-over-year can be primarily attributed to favorable product line mix and productivity initiatives, partially offset by some higher materials costs from inflationary pressures.
Selling, General, Administrative, and Engineering Expenses
Selling, general and administrative (“SG&A”) expenses for the fourth quarter of 2022 were $26.9 million, an increase of $4.4 million compared to the third quarter of 2022. SG&A increased sequentially primarily due to bad debt expense incurred during the quarter. SG&A expenses for the full year 2022 were $94.2 million, a decrease of $20.8 million compared to the full year 2021. The year-over-year decrease in SG&A is primarily attributable to lower legal expenses in connection with the FMC lawsuit and decreased administrative costs associated with the importation tax settlement under the Brazilian tax amnesty program. Engineering and product development expenses of
Net Income, Adjusted EBITDA and Free Cash Flow
For the fourth quarter of 2022, the Company reported net loss of
Adjusted EBITDA totaled
Net cash used in operations was
Gain on sale of property, plant and equipment was approximately
Share Repurchases
As of
Conference Call and Webcast
Management will host a conference call and a webcast to discuss the financial results on
To pre-register for the conference call and obtain a dial-in number and passcode, please click on the registration link below.
Conference Call and Webcast Details
| Date / Time: | |
| Dial-in Registration | https://register.vevent.com/register/BId225fc2493c24803a6596c6eba9e08da |
| Webcast: | https://edge.media-server.com/mmc/p/mmhy2ipd |
About
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 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
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 (loss) 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
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
Erin_Fazio@dril-quip.com
| Comparative Condensed Consolidated Income Statement | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Revenues: | ||||||||||||||||
| Products | $ | 64,713 | $ | 58,508 | $ | 240,842 | $ | 213,760 | ||||||||
| Services | 21,657 | 20,443 | 79,195 | 74,143 | ||||||||||||
| Leasing | 10,444 | 9,190 | 42,033 | 35,042 | ||||||||||||
| Total revenues | 96,814 | 88,141 | 362,070 | 322,945 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of sales | 66,567 | 65,710 | 265,935 | 242,356 | ||||||||||||
| Selling, general and administrative | 26,877 | 22,431 | 94,206 | 115,036 | ||||||||||||
| Engineering and product development | 2,699 | 2,645 | 11,740 | 15,104 | ||||||||||||
| Restructuring and other charges | 3,466 | 2,180 | 11,443 | 78,933 | ||||||||||||
| Gain on sale of property, plant and equipment | (2,249 | ) | (17,276 | ) | (20,019 | ) | (4,482 | ) | ||||||||
| Foreign currency transaction (gain) loss | 1,818 | (1,901 | ) | (3,756 | ) | 836 | ||||||||||
| Total costs and expenses | 99,178 | 73,789 | 359,549 | 447,783 | ||||||||||||
| Operating income (loss) | (2,364 | ) | 14,352 | 2,521 | (124,838 | ) | ||||||||||
| Interest income | 3,310 | 379 | 4,465 | 575 | ||||||||||||
| Interest expense | 68 | (131 | ) | (216 | ) | (787 | ) | |||||||||
| Income tax provision (benefit) | 1,266 | (610 | ) | 6,327 | 2,946 | |||||||||||
| Net income (loss) | $ | (252 | ) | $ | 15,210 | $ | 443 | $ | (127,996 | ) | ||||||
| Income (Loss) per share | ||||||||||||||||
| Basic | $ | (0.01 | ) | $ | 0.45 | $ | 0.01 | $ | (3.62 | ) | ||||||
| Diluted | $ | (0.01 | ) | $ | 0.44 | $ | 0.01 | $ | (3.62 | ) | ||||||
| Depreciation and amortization | $ | 7,069 | $ | 7,123 | $ | 29,421 | $ | 30,381 | ||||||||
| Capital expenditures | $ | 5,154 | $ | 10,283 | $ | 18,866 | $ | 9,990 | ||||||||
| Weighted Average Shares Outstanding | ||||||||||||||||
| Basic | 34,038 | 33,948 | 34,237 | 35,331 | ||||||||||||
| Diluted | 34,038 | 34,232 | 34,467 | 35,331 | ||||||||||||
| Comparative Condensed Consolidated Balance Sheets | ||||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
| Assets: | ||||||||||
| Cash and cash equivalents | $ | 264,804 | $ | 290,279 | $ | 355,451 | ||||
| Short-term investments | 32,232 | 25,287 | - | |||||||
| Other current assets | 455,552 | 430,192 | 390,098 | |||||||
| PP&E, net | 181,270 | 181,359 | 216,200 | |||||||
| Other assets | 38,657 | 43,407 | 48,677 | |||||||
| Total assets | $ | 972,515 | $ | 970,524 | $ | 1,010,426 | ||||
| Liabilities and Equity: | ||||||||||
| Current liabilities | $ | 87,555 | $ | 89,287 | $ | 93,663 | ||||
| Deferred Income taxes | 3,756 | 3,918 | 3,925 | |||||||
| Other long-term liabilities | 6,288 | 12,482 | 15,730 | |||||||
| Total liabilities | 97,599 | 105,687 | 113,318 | |||||||
| Total stockholders equity | 874,916 | 864,837 | 897,108 | |||||||
| Total liabilities and equity | $ | 972,515 | $ | 970,524 | $ | 1,010,426 | ||||
| Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) and Diluted Earnings (Loss) per Share | ||||||||||||||||||||||||
| to Adjusted Diluted Earnings (Loss) per Share | ||||||||||||||||||||||||
| Adjusted Net Income (Loss) and Diluted EPS: | Three months ended | |||||||||||||||||||||||
| 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 income (loss) | $ | (252 | ) | $ | (0.01 | ) | $ | 15,210 | $ | 0.44 | $ | (63,429 | ) | $ | (1.80 | ) | ||||||||
| Adjustments (after tax): | ||||||||||||||||||||||||
| Foreign currency transaction (gain) loss | 1,436 | 0.04 | (1,502 | ) | (0.04 | ) | 1,264 | 0.04 | ||||||||||||||||
| Restructuring and other costs, including severance | 2,738 | 0.08 | 1,722 | 0.05 | 45,962 | 1.31 | ||||||||||||||||||
| Gain on sale of property, plant and equipment | (1,777 | ) | (0.05 | ) | (13,648 | ) | (0.40 | ) | (471 | ) | (0.01 | ) | ||||||||||||
| Adjusted net income (loss) | $ | 2,145 | $ | 0.06 | $ | 1,782 | $ | 0.05 | $ | (16,674 | ) | $ | (0.46 | ) | ||||||||||
| Adjusted Net Income (Loss) and Diluted EPS: | Twelve months ended |
|||||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||||||
| 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 income (loss) | $ | 443 | $ | 0.01 | $ | (127,996 | ) | $ | (3.62 | ) | $ | (30,768 | ) | $ | (0.87 | ) | ||||||||
| Adjustments (after tax): | ||||||||||||||||||||||||
| Foreign currency transaction (gain) loss | (2,967 | ) | (0.09 | ) | 660 | 0.02 | 1,853 | 0.05 | ||||||||||||||||
| Impairments | - | - | - | - | 6,098 | 0.17 | ||||||||||||||||||
| Restructuring and other costs, including severance | 9,040 | 0.26 | 76,354 | 2.16 | 31,979 | 0.91 | ||||||||||||||||||
| Gain on sale of property, plant and equipment | (15,815 | ) | (0.46 | ) | (3,541 | ) | (0.10 | ) | (464 | ) | (0.01 | ) | ||||||||||||
| Adjusted net income (loss) | $ | (9,299 | ) | $ | (0.28 | ) | $ | (54,523 | ) | $ | (1.54 | ) | $ | 8,698 | $ | 0.25 | ||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA | ||||||||||||
| Adjusted EBITDA: | Three months ended | |||||||||||
| (In thousands) | ||||||||||||
| Net income (loss) | $ | (252 | ) | $ | 15,210 | $ | (63,428 | ) | ||||
| Add: | ||||||||||||
| Interest (income) expense, net | (3,378 | ) | (248 | ) | (80 | ) | ||||||
| Income tax provision (benefit) | 1,266 | (610 | ) | (8,148 | ) | |||||||
| Depreciation and amortization expense | 7,069 | 7,123 | 7,723 | |||||||||
| Restructuring and other costs, including severance | 3,466 | 2,180 | 58,180 | |||||||||
| Gain on sale of property, plant and equipment | (2,249 | ) | (17,276 | ) | (596 | ) | ||||||
| Foreign currency transaction (gain) loss | 1,818 | (1,901 | ) | 1,600 | ||||||||
| Stock compensation expense | 2,694 | 2,569 | 5,354 | |||||||||
| Adjusted EBITDA | $ | 10,434 | $ | 7,047 | $ | 605 | ||||||
| Adjusted EBITDA: | Year ended | |||||||||||
| Year ended |
||||||||||||
| (In thousands) | ||||||||||||
| Net income (loss) | $ | 443 | $ | (127,996 | ) | $ | (30,768 | ) | ||||
| Add: | ||||||||||||
| Interest (income) expense, net | (4,249 | ) | 212 | (1,510 | ) | |||||||
| Income tax provision (benefit) | 6,327 | 2,946 | (31,281 | ) | ||||||||
| Depreciation and amortization expense | 29,421 | 30,381 | 32,389 | |||||||||
| Impairments | - | - | 7,719 | |||||||||
| Restructuring and other costs, including severance | 11,443 | 96,650 | 40,480 | |||||||||
| Gain on sale of property, plant and equipment | (20,019 | ) | (4,482 | ) | (587 | ) | ||||||
| Foreign currency transaction gain (loss) | (3,756 | ) | 836 | 2,345 | ||||||||
| Stock compensation expense | 10,363 | 14,895 | 12,914 | |||||||||
| Brazilian amnesty settlement | - | 1,787 | - | |||||||||
| Adjusted EBITDA | $ | 29,973 | $ | 15,229 | $ | 31,701 | ||||||
| Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||||||||||
| Free Cash Flow: | Three months ended | |||||||||||
| (In thousands) | ||||||||||||
| Net cash provided by (used in) operating activities | $ | (17,604 | ) | $ | 1,042 | $ | 4,689 | |||||
| Less: | ||||||||||||
| Purchase of property, plant and equipment | (5,154 | ) | (10,283 | ) | (2,062 | ) | ||||||
| Free cash flow | $ | (22,758 | ) | $ | (9,241 | ) | $ | 2,627 | ||||
| Free Cash Flow: | Twelve months ended |
|||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| (In thousands) | ||||||||||||
| Net cash provided by (used in) operating activities | $ | (36,771 | ) | $ | 38,428 | $ | (21,088 | ) | ||||
| Less: | ||||||||||||
| Purchase of property, plant and equipment | (18,866 | ) | (9,990 | ) | (11,943 | ) | ||||||
| Free cash flow | $ | (55,637 | ) | $ | 28,438 | $ | (33,031 | ) | ||||
Source: Dril-Quip, Inc.