Press Release
Dril-Quip, Inc. Announces Third Quarter 2021 Results
Key highlights for the third quarter of 2021 included:
- Increased revenue to
$83.0 million on higher aftermarket activity in the Western Hemisphere; - Recorded third quarter net loss of
$11.1 million , or$0.31 per share, an improvement of$7.9 million , or$0.23 per share, from the second quarter of 2021; - Reported adjusted EBITDA of
$4.0 million , or 4.8% of revenue, driven by improved aftermarket and downhole tools activity; - Generated net cash provided by operating activities of
$9.3 million and free cash flow of$7.0 million , or 8.5% of revenue; - Initiated additional stock purchases under the previously Board authorized share repurchase program; and
- Achieved targeted
$10 million in annualized productivity gains ahead of schedule.
“We believe our strategic growth pillars are setting the foundation to outperform the market in a recovery; however, we have not yet seen product orders resume to pre-pandemic levels. As a result, we are experiencing increased pressure on our product revenue and margins impacted by customer and product mix. We believe that this is temporary and are encouraged by the stabilization of oil and gas prices being seen in the market as the global economy continues to recover. These sustained higher prices and energy shortages in parts of the world are examples of the continued need for hydrocarbons in the energy supply mix for years to come. Although we are still uncertain of some customer plans as they formalize budget plans for 2022, we are seeing activity increases in the shorter cycle onshore areas that are most suited to our downhole tools business. Additionally, increased service and leasing revenues in the quarter are a good leading indicator that our customers are getting back to work and consuming their inventory of our products. As we look toward Q4 and the first half of 2022 we are encouraged by indications of increased activity by our independent exploration and production customers that are seeking to take advantage of higher commodity prices. Lastly, we expect that the larger integrated oil companies will begin to look at placing new orders in the back half of 2022 should commodity prices continue to remain at or near current levels. Our view on fourth quarter bookings remains unchanged and expect bookings will be at the high end of our
“Even with these ongoing challenges, we have been able to generate strong free cash flow during the year, including
In conjunction with today’s release, the Company posted a new investor presentation entitled “Third 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 third quarter of 2021 was
Cost of sales for the third quarter of 2021 was
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expense for the third quarter of 2021 was
Net Income, Adjusted EBITDA and Free Cash Flow
For the third quarter of 2021, the Company reported 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
Share Repurchases
For the three-month period ended
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, 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 | $ | 53,622 | $ | 55,860 | $ | 66,451 | |||||
Services | 19,560 | 17,536 | 17,778 | ||||||||
Leasing | 9,815 | 7,401 | 7,066 | ||||||||
Total revenues | 82,997 | 80,797 | 91,295 | ||||||||
Costs and expenses: | |||||||||||
Cost of sales | 62,834 | 61,539 | 67,211 | ||||||||
Selling, general and administrative | 25,265 | 29,593 | 20,843 | ||||||||
Engineering and product development | 3,510 | 3,722 | 3,983 | ||||||||
Restructuring and other charges | - | 1,000 | 602 | ||||||||
(Gain) loss on sale of assets | (13 | ) | 82 | 14 | |||||||
Foreign currency transaction (gains) and losses | (1,663 | ) | (475 | ) | 746 | ||||||
Total costs and expenses | 89,933 | 95,461 | 93,399 | ||||||||
Operating loss | (6,936 | ) | (14,664 | ) | (2,104 | ) | |||||
Interest income | 188 | 63 | 188 | ||||||||
Interest expense | (94 | ) | (59 | ) | (138 | ) | |||||
Income tax provision (benefit) | 4,301 | 4,407 | (16,380 | ) | |||||||
Net income (loss) | $ | (11,143 | ) | $ | (19,067 | ) | $ | 14,326 | |||
Loss per share | |||||||||||
Basic | $ | (0.31 | ) | $ | (0.54 | ) | $ | 0.41 | |||
Diluted | $ | (0.31 | ) | $ | (0.54 | ) | $ | 0.41 | |||
Depreciation and amortization | $ | 7,899 | $ | 7,343 | $ | 7,908 | |||||
Capital expenditures | $ | 2,303 | $ | 3,112 | $ | 1,925 | |||||
Weighted Average Shares Outstanding | |||||||||||
Basic | 35,387 | 35,387 | 35,049 | ||||||||
Diluted | 35,387 | 35,387 | 35,249 |
Comparative Condensed Consolidated Balance Sheets | |||||
(Unaudited) | |||||
(In thousands) | |||||
Assets: | |||||
Cash and cash equivalents | $ | 375,172 | $ | 345,955 | |
Other current assets | 452,099 | 517,238 | |||
PP&E, net | 224,676 | 234,823 | |||
Other assets | 41,790 | 53,156 | |||
Total assets | $ | 1,093,737 | $ | 1,151,172 | |
Liabilities and Equity: | |||||
Current liabilities | $ | 91,826 | $ | 85,512 | |
Deferred Income taxes | 6,194 | 6,779 | |||
Other long-term liabilities | 15,940 | 17,353 | |||
Total liabilities | 113,960 | 109,644 | |||
Total stockholders equity | 979,777 | 1,041,528 | |||
Total liabilities and equity | $ | 1,093,737 | $ | 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 income (loss) | $ | (11,143 | ) | $ | (0.31 | ) | $ | (19,067 | ) | $ | (0.54 | ) | $ | 14,326 | $ | 0.41 | ||||||
Adjustments (after tax): | ||||||||||||||||||||||
Reverse the effect of foreign currency | (1,314 | ) | (0.04 | ) | (375 | ) | (0.01 | ) | 589 | 0.02 | ||||||||||||
Restructuring costs, including severance | - | - | 790 | 0.02 | 476 | 0.01 | ||||||||||||||||
(Gain) loss on sale of assets | (10 | ) | - | 65 | - | 11 | - | |||||||||||||||
Adjusted net income (loss) | $ | (12,467 | ) | $ | (0.35 | ) | $ | (18,587 | ) | $ | (0.53 | ) | $ | 15,402 | $ | 0.44 |
Reconciliation of Net Income (Loss) to Adjusted EBITDA | |||||||||||
Adjusted EBITDA: | Three months ended | ||||||||||
(In thousands) | |||||||||||
Net income (loss) | $ | (11,143 | ) | $ | (19,067 | ) | $ | 14,326 | |||
Add: | |||||||||||
Interest (income) expense, net | (94 | ) | (4 | ) | (50 | ) | |||||
Income tax provision (benefit) | 4,301 | 4,407 | (16,380 | ) | |||||||
Depreciation and amortization expense | 7,899 | 7,343 | 7,908 | ||||||||
Restructuring costs, including severance | 1,400 | 7,250 | 602 | ||||||||
(Gain) loss on sale of assets | (13 | ) | 82 | 14 | |||||||
Foreign currency transaction (gains) and losses | (1,663 | ) | (475 | ) | 746 | ||||||
Stock compensation expense | 3,276 | 3,079 | 3,003 | ||||||||
Adjusted EBITDA | $ | 3,963 | $ | 2,615 | $ | 10,169 | |||||
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | |||||||||||
Free Cash Flow: | Three months ended | ||||||||||
(In thousands) | |||||||||||
Net cash provided (used) by operating activities | $ | 9,323 | $ | 11,343 | $ | 13,889 | |||||
Less: | |||||||||||
Purchase of property, plant and equipment | (2,303 | ) | (3,112 | ) | (1,925 | ) | |||||
Free cash flow | $ | 7,020 | $ | 8,231 | $ | 11,964 |
Source: Dril-Quip, Inc.