Press Release
Dril-Quip, Inc. Announces Second Quarter 2021 Results
Key highlights for the second quarter of 2021 included:
- Generated revenue of
$80.8 million for the second quarter of 2021; - Reported second quarter net loss of
$19.1 million , or$0.54 per share, an improvement of$15.3 million , or$0.43 per share, from the first quarter of 2021; - Recorded adjusted EBITDA of
$2.6 million , or 3.2% of revenue, including a one-time$2.3 million negative impact related to termination of the forge facility lease; - Second quarter net cash provided by operating activities of
$11.3 million and free cash flow of$8.2 million , or 10.2% of revenue; - Booked
$50.4 million of new product orders during the second quarter of 2021; and - Executed strategic collaboration agreement with a major oilfield service peer for the supply of subsea wellheads, tubular goods, liner hangers and related tools and services.
“The second quarter also marked significant progress toward our strategic growth pillars. First, we entered into a collaboration and supply agreement with an integrated industry peer to serve as a supplier of subsea wellheads, tubular goods, liner hangers and related tools and services. This agreement increases market access for
“Finally, we built on previous success in the expansion of our ‘e-Series’ technologies product suite with installations of our DXe™ wellhead connector in the
“In addition to these strategic wins, we also experienced some challenges during the quarter that impacted our financial results. In connection with the lessee’s termination of our forge facility lease at the end of April, we had a negative impact on our revenue and gross margins during the second quarter. The monthly cost of maintaining the forge is negligible and we are exploring potential future arrangements. The second quarter also saw the global market for raw materials and freight prices increase. We have yet to experience a significant impact to our margins due to these increases and we continue to closely monitor the changes in our materials and logistics costs. Accordingly, we have notified our customers that a surcharge will be added to new orders to ensure that cost increases in longer lead time items will not negatively impact margins.”
“There are still concerns about the pace of global economic growth, and the corresponding recovery of oil and gas demand, resulting from ongoing challenges related to the COVID-19 pandemic, we are optimistic about the second half of 2021 leading into 2022. We are seeing encouraging signs from our customers as many begin to formulate their 2022 capital budgets in the third quarter and expect additional resources to be allocated toward increased offshore activity. These are positive indications for an increase in orders. We also anticipate that our wellhead supply collaboration could begin to yield benefits in late 2021 going into 2022 which would further enhance our product orders and backlog. As we look toward improvements in the macro environment,
In conjunction with today’s release, the Company posted a new investor presentation entitled “Second Quarter 2021 Supplemental Earnings Information” 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 second quarter of 2021 was
Cost of sales for the second quarter of 2021 was
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the second quarter of 2021 were
Net Loss, Adjusted EBITDA and Free Cash Flow
For the second quarter of 2021, the Company reported a net loss of
Adjusted EBITDA totaled
Net cash provided by operations was
Productivity Improvements and Liquidity
In the first quarter of 2021, the Company announced its plans to target productivity gains of approximately
Dril-Quip’s cash and cash equivalents as of
About
Forward-Looking Statements
Statements contained herein relating to future operations and financial results that are forward-looking statements, including those related to the effects of COVID-19 pandemic, market conditions, anticipated project bookings, expected timing of completing the 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 ongoing 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 net 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, 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
(713) 351-4098
Blake_Holcomb@dril-quip.com
Comparative Condensed Consolidated Income Statement | |||||||||||
(Unaudited) | |||||||||||
Three months ended | |||||||||||
(In thousands, except per share data) | |||||||||||
Revenues: | |||||||||||
Products | $ | 55,860 | $ | 55,583 | $ | 63,133 | |||||
Services | 17,536 | 17,667 | 20,750 | ||||||||
Leasing | 7,401 | 7,989 | 6,563 | ||||||||
Total revenues | 80,797 | 81,239 | 90,446 | ||||||||
Costs and expenses: | |||||||||||
Cost of sales | 61,539 | 56,787 | 66,937 | ||||||||
Selling, general and administrative | 29,593 | 29,558 | 23,331 | ||||||||
Engineering and product development | 3,722 | 4,037 | 5,364 | ||||||||
Restructuring and other charges | 1,000 | 25,020 | 1,587 | ||||||||
(Gain) loss on sale of assets | 82 | (3,955 | ) | (85 | ) | ||||||
Foreign currency transaction (gains) and losses | (475 | ) | 1,374 | 817 | |||||||
Total costs and expenses | 95,461 | 112,821 | 97,951 | ||||||||
Operating loss | (14,664 | ) | (31,582 | ) | (7,505 | ) | |||||
Interest income | 63 | 49 | 653 | ||||||||
Interest expense | (59 | ) | (439 | ) | (209 | ) | |||||
Income tax provision | 4,407 | 2,386 | 7,081 | ||||||||
Net loss | $ | (19,067 | ) | $ | (34,358 | ) | $ | (14,142 | ) | ||
Loss per share | |||||||||||
Basic | $ | (0.54 | ) | $ | (0.97 | ) | $ | (0.40 | ) | ||
Diluted | $ | (0.54 | ) | $ | (0.97 | ) | $ | (0.40 | ) | ||
Depreciation and amortization | $ | 7,343 | $ | 7,416 | $ | 7,940 | |||||
Capital expenditures | $ | 3,524 | $ | 2,513 | $ | 4,131 | |||||
Weighted Average Shares Outstanding | |||||||||||
Basic | 35,387 | 35,385 | 35,023 | ||||||||
Diluted | 35,387 | 35,385 | 35,023 |
Comparative Condensed Consolidated Balance Sheets | ||||||
(Unaudited) | ||||||
(In thousands) | ||||||
Assets: | ||||||
Cash and cash equivalents | $ | 370,481 | $ | 345,955 | ||
Other current assets | 478,805 | 517,238 | ||||
PP&E, net | 229,247 | 234,823 | ||||
Other assets | 46,176 | 53,156 | ||||
Total assets | $ | 1,124,709 | $ | 1,151,172 | ||
Liabilities and Equity: | ||||||
Current liabilities | $ | 106,535 | $ | 85,512 | ||
Deferred Income taxes | 6,694 | 6,779 | ||||
Other long-term liabilities | 16,156 | 17,353 | ||||
Total liabilities | 129,385 | 109,644 | ||||
Total stockholders equity | 995,324 | 1,041,528 | ||||
Total liabilities and equity | $ | 1,124,709 | $ | 1,151,172 |
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 | ||||||||||||||||||||||
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 | $ | (19,067 | ) | $ | (0.54 | ) | $ | (34,358 | ) | $ | (0.97 | ) | $ | (14,142 | ) | $ | (0.40 | ) | |||||
Adjustments (after tax): | |||||||||||||||||||||||
Reverse the effect of foreign currency | (375 | ) | (0.01 | ) | 1,085 | 0.03 | 646 | 0.02 | |||||||||||||||
Restructuring costs, including severance | 790 | 0.02 | 19,766 | 0.56 | 1,254 | 0.04 | |||||||||||||||||
(Gain) loss on sale of assets | 65 | - | (3,124 | ) | (0.09 | ) | (67 | ) | - | ||||||||||||||
Adjusted net loss | $ | (18,587 | ) | $ | (0.53 | ) | $ | (16,631 | ) | $ | (0.47 | ) | $ | (12,309 | ) | $ | (0.34 | ) |
Reconciliation of Net Income (Loss) to Adjusted EBITDA | |||||||||||
Adjusted EBITDA: | Three months ended | ||||||||||
(In thousands) | |||||||||||
Net loss | $ | (19,067 | ) | $ | (34,358 | ) | $ | (14,142 | ) | ||
Add: | |||||||||||
Interest (income) expense, net | (4 | ) | 390 | (444 | ) | ||||||
Income tax provision | 4,407 | 2,386 | 7,081 | ||||||||
Depreciation and amortization expense | 7,343 | 7,416 | 7,940 | ||||||||
Restructuring costs, including severance | 7,250 | 29,820 | 1,587 | ||||||||
(Gain) loss on sale of assets | 82 | (3,955 | ) | (85 | ) | ||||||
Foreign currency transaction (gains) and losses | (475 | ) | 1,374 | 817 | |||||||
Stock compensation expense | 3,079 | 3,186 | 3,282 | ||||||||
Brazilian amnesty settlement | - | 1,787 | - | ||||||||
Adjusted EBITDA | $ | 2,615 | $ | 8,046 | $ | 6,036 |
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | |||||||||||
Free Cash Flow: | Three months ended | ||||||||||
(In thousands) | |||||||||||
Net cash provided by operating activities | $ | 11,343 | $ | 13,072 | $ | 3,046 | |||||
Less: | |||||||||||
Purchase of property, plant and equipment | (3,112 | ) | (2,513 | ) | (4,131 | ) | |||||
Free cash flow | $ | 8,231 | $ | 10,559 | $ | (1,085 | ) |
Source: Dril-Quip, Inc.