Press Release
Dril-Quip, Inc. Announces Third Quarter 2022 Results
Results for the third quarter of 2022 included:
- Revenue of
$88.1 million for the third quarter of 2022, a decrease of$5.8 million from the second quarter of 2022 driven by unfavorable foreign exchange rate impacts, supply chain delays in downhole tools and reduced leasing revenues in subsea service; - Net income of
$15.2 million , or$0.45 earnings per share, an increase of$20.8 million , or$0.61 per share compared to the second quarter of 2022, due to the gain on sale of theHouston forge facility, lower income taxes, and lower restructuring costs in the period; - Generated adjusted EBITDA of
$7.0 million , or 8.0% of revenue, a decrease of$2.3 million from the second quarter of 2022; - Cash and short-term investments ended the third quarter at
$315.6 million . Third quarter net cash provided by operating activities of$1.0 million and free cash flow of negative$9.2 million , inclusive of$10.3 million of capital expenditures; - Closed on the sale of the
Houston forge facility during the third quarter of 2022 driving a net gain on sale of$17.3 million ; - Booked
$75.0 million of gross new orders during the third quarter of 2022. Net of$13.3 million of cancellations and adjustments, bookings were$61.7 million ; - Repurchased
$11.1 million of shares at an average price of$24.35 during the third quarter of 2022. Year-to-date repurchases through the third quarter of 2022 total approximately$21 million ; and - Received upgraded MSCI ESG rating of an “A” in the quarter.
“The benefits of our new product-line focused teams continue to emerge as we are evaluating our 2023 strategies and key priorities. Our product line leadership is focused on our customer and supplier partnerships, eliminating excess costs, and improving operational efficiency and profitability. We also continue to progress on our footprint rationalization plan, with the sale of the
“Additionally, I am proud to announce that
“As we look to the conclusion of this year, we now expect our full year bookings to grow 15% to 20% compared to 2021, due to the two customer project cancellations in the second and third quarters. Incremental adjusted EBITDA margins are expected to be in the 30% - 40% range for the full year 2022. We are also revising our free cash flow margin target to be break-even for the full year 2022, due to increased working capital investment in stocking programs to secure forging supplies.
“As we look forward to 2023, leading indicators such as tender volume and average quote value have recovered to pre-pandemic levels. We are well positioned to capitalize on what is clearly a constructive offshore market and believe the order trends will continue to accelerate into next year. This will be led by activity growth in markets such as
In conjunction with today’s release, the Company posted a new investor presentation entitled “Third 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
Operational and Financial Results
Revenue, Cost of Sales and Gross Operating Margin
Consolidated revenue for the third quarter of 2022 was
Cost of sales for the third quarter of 2022 was
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the third quarter of 2022 were
Net Income, Adjusted EBITDA and Free Cash Flow
For the third quarter of 2022, the Company reported net income of
Net cash provided by operations was
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 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
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
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) 939-7711
Erin_Fazio@dril-quip.com
Comparative Condensed Consolidated Income Statement | ||||||||||||
(Unaudited) | ||||||||||||
Three months ended | ||||||||||||
(In thousands, except per share data) | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 58,508 | $ | 61,979 | $ | 53,622 | ||||||
Services | 20,443 | 19,596 | 19,560 | |||||||||
Leasing | 9,190 | 12,403 | 9,815 | |||||||||
Total revenues | 88,141 | 93,978 | 82,997 | |||||||||
Costs and expenses: | ||||||||||||
Cost of sales | 65,710 | 69,663 | 62,834 | |||||||||
Selling, general and administrative | 22,431 | 22,498 | 25,265 | |||||||||
Engineering and product development | 2,645 | 2,720 | 3,510 | |||||||||
Restructuring and other charges | 2,180 | 5,765 | - | |||||||||
Gain on sale of property, plant and equipment | (17,276 | ) | (380 | ) | (13 | ) | ||||||
Foreign currency transaction gains | (1,901 | ) | (2,419 | ) | (1,663 | ) | ||||||
Total costs and expenses | 73,789 | 97,847 | 89,933 | |||||||||
Operating income (loss) | 14,352 | (3,869 | ) | (6,936 | ) | |||||||
Interest income | 379 | 573 | 188 | |||||||||
Interest expense | (131 | ) | (99 | ) | (94 | ) | ||||||
Income tax provision (benefit) | (610 | ) | 2,175 | 4,301 | ||||||||
Net income (loss) | $ | 15,210 | $ | (5,570 | ) | $ | (11,143 | ) | ||||
Income (Loss) per share | ||||||||||||
Basic | $ | 0.45 | $ | (0.16 | ) | $ | (0.31 | ) | ||||
Diluted | $ | 0.44 | $ | (0.16 | ) | $ | (0.31 | ) | ||||
Depreciation and amortization | $ | 7,123 | $ | 7,670 | $ | 7,899 | ||||||
Capital expenditures | $ | 10,283 | $ | 1,363 | $ | 2,303 | ||||||
Weighted Average Shares Outstanding | ||||||||||||
Basic | 33,948 | 34,476 | 35,387 | |||||||||
Diluted | 34,232 | 34,476 | 35,387 | |||||||||
Comparative Condensed Consolidated Balance Sheets | ||||||
(Unaudited) | ||||||
(In thousands) | ||||||
Assets: | ||||||
Cash and cash equivalents | $ | 290,279 | $ | 355,451 | ||
Short-term investments | 25,287 | - | ||||
Other current assets | 430,192 | 390,098 | ||||
PP&E, net | 181,359 | 216,200 | ||||
Other assets | 43,407 | 48,677 | ||||
Total assets | $ | 970,524 | $ | 1,010,426 | ||
Liabilities and Equity: | ||||||
Current liabilities | $ | 89,287 | $ | 93,663 | ||
Deferred Income taxes | 3,918 | 3,925 | ||||
Other long-term liabilities | 12,482 | 15,730 | ||||
Total liabilities | 105,687 | 113,318 | ||||
Total stockholders equity | 864,837 | 897,108 | ||||
Total liabilities and equity | $ | 970,524 | $ | 1,010,426 | ||
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) | $ | 15,210 | $ | 0.44 | $ | (5,570 | ) | $ | (0.16 | ) | $ | (11,143 | ) | $ | (0.31 | ) | |||||||
Adjustments (after tax): | |||||||||||||||||||||||
Reverse the effect of foreign currency transaction gains | (1,502 | ) | (0.04 | ) | (1,911 | ) | (0.06 | ) | (1,314 | ) | (0.04 | ) | |||||||||||
Restructuring and other costs, including severance | 1,722 | 0.05 | 4,554 | 0.13 | - | - | |||||||||||||||||
Gain on sale of property, plant and equipment | (13,648 | ) | (0.40 | ) | (300 | ) | (0.01 | ) | (10 | ) | - | ||||||||||||
Adjusted net income (loss) | $ | 1,782 | $ | 0.05 | $ | (3,227 | ) | $ | (0.10 | ) | $ | (12,467 | ) | $ | (0.35 | ) | |||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA | ||||||||||||
Adjusted EBITDA: | Three months ended | |||||||||||
(In thousands) | ||||||||||||
Net income (loss) | $ | 15,210 | $ | (5,570 | ) | $ | (11,143 | ) | ||||
Add: | ||||||||||||
Interest (income) expense, net | (248 | ) | (474 | ) | (94 | ) | ||||||
Income tax provision (benefit) | (610 | ) | 2,175 | 4,301 | ||||||||
Depreciation and amortization expense | 7,123 | 7,670 | 7,899 | |||||||||
Restructuring and other costs, including severance | 2,180 | 5,765 | 1,400 | |||||||||
Gain on sale of property, plant and equipment | (17,276 | ) | (380 | ) | (13 | ) | ||||||
Foreign currency transaction gains | (1,901 | ) | (2,419 | ) | (1,663 | ) | ||||||
Stock compensation expense | 2,569 | 2,573 | 3,276 | |||||||||
Adjusted EBITDA | $ | 7,047 | $ | 9,340 | $ | 3,963 | ||||||
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 | $ | 1,042 | $ | (9,281 | ) | $ | 9,323 | |||||
Less: | ||||||||||||
Purchase of property, plant and equipment | (10,283 | ) | (1,363 | ) | (2,303 | ) | ||||||
Free cash flow | $ | (9,241 | ) | $ | (10,644 | ) | $ | 7,020 | ||||
Source: Dril-Quip, Inc.