Dril-Quip, Inc. Announces Fourth Quarter and Full Year 2021 Results
Dril-Quip reported its Q4 and full-year 2021 results, showing Q4 revenue of $77.9 million and full-year revenue of $322.9 million. The company incurred a net loss of $128.0 million, or $3.62 per share, due to restructuring costs and lower product revenues. Despite a challenging year, Dril-Quip recorded $4.7 million in net cash from operations in Q4 and $38.4 million for the year. New orders totaled $79.8 million in Q4, with an optimistic outlook for a nearly 20% increase in orders for 2022. The company authorized an additional $100 million for share repurchases.
- New orders totaled $79.8 million in Q4 2021, surpassing prior guidance.
- Cash on hand was $355.5 million, providing strong liquidity.
- Authorized an additional $100 million share repurchase program, totaling $118 million available.
- Established a strategic collaboration with Aker Solutions for carbon capture and storage projects.
- Downhole tools revenue grew over 35% from 2020 levels.
- Full-year net loss of $128.0 million, a significant increase from 2020's net loss of $30.8 million.
- Sequential revenue decline in Q4 by $5.1 million compared to Q3 2021.
- Q4 gross operating margin fell to 21.5% from 24.3% in Q3 2021.
- Increased SG&A expenses by $5.4 million in Q4 due to executive separations and higher bad debt reserves.
HOUSTON, Feb. 23, 2022 (GLOBE NEWSWIRE) -- Dril-Quip, Inc. (NYSE: DRQ), (the “Company” or “Dril-Quip”) today reported operational and financial results for the fourth quarter and full year 2021.
Key highlights include:
- Delivered fourth quarter revenue of
$77.9 million and full year 2021 revenue of$322.9 million ; - Recorded a net loss of
$128.0 million , or$3.62 per share, for the full year 2021, driven primarily by restructuring costs of$78.9 related to the exiting certain markets and vendor outsourcing associated write-downs; - Adjusted net loss of
$54.5 million , or$1.54 per share, for the full year 2021 after adjusting for restructuring costs, including severance and other charges; - Reported net cash provided by operating activities of
$4.7 million in the fourth quarter of 2021 and$38.4 million for the full year 2021; - Free cash flow of
$2.6 million , inclusive of$2.1 million of capital expenditures, for the fourth quarter of 2021 and$28.4 million , inclusive of$10.0 million of capital expenditures, for the full year 2021; - Booked
$79.8 million in new orders for the fourth quarter of 2021 and$228.2 million for the full year 2021; - Completed
$24.2 million of share repurchases for the full year 2021, including$23.1 million during the fourth quarter of 2021, and an additional$5.8 million in the first month of 2022 - Board of Directors authorized an additional
$100 million in share repurchases under its share repurchase plan; - In early 2022, entered into strategic collaboration agreement with Aker Solutions for the supply of subsea wellheads and shallow water trees for the growing carbon capture, utilization and storage market; and
- In early 2022, awarded contracts for up to 87 Big Bore IIe wellhead systems for the exploration and development phases of deepwater wells in Brazil through 2025.
Jeff Bird, Dril-Quip’s President and Chief Executive Officer, commented, “As we begin 2022, we are cautiously optimistic we are seeing the first signs of a recovery. Orders finished the year strong above the top end or our Q4 guidance at almost
“First, we continue to build out our peer-to-peer commercial strategy. These actions allow us to partner with market leading companies to jointly serve our customers. This enables us and our partners to take advantage of our respective strengths and be more competitive in our combined offerings. We are pleased with the two collaboration agreements we’ve signed over the last twelve months. We signed a collaboration agreement with OneSubsea in early 2021 to provide both wellheads and liner hangers for projects where we have a more fit-for-purpose offering. This collaboration agreement is giving us significantly more opportunities for our products with customers in underserved markets. While we are already seeing the benefits of this agreement in our downhole tool business, we expect the first subsea wellhead awards will be realized in the coming months.”
“Furthermore, we are pleased to announce our most recent collaboration agreement in the first quarter of 2022 with Aker Solutions. This agreement opens the door for us to participate in a best-in-class carbon capture, utilization and storage offering with our customized injection wellheads and subsea trees. Under this agreement, the parties have agreed to work together to target the Northern Endurance Partnership in the United Kingdom which will be a priority project to develop offshore carbon dioxide storage in the North Sea.”
“Second, we were successful in growing our downhole tools product line revenue more than
“Finally, we saw continued recognition, adoption and expansion of our ‘e-Series’ technology offering. Perhaps our biggest success for this suite of products was the Big Bore IIe wellhead. In addition to multiple installations and the adoption by several key customers as their new standard, we were awarded contracts in Brazil to provide up to 87 of these wellheads for the exploration and development stages of projects expect to be completed over the next several years. Additionally, we were again awarded a Spotlight on New Technology Award by the 2021 Offshore Technology Conference for our BADGeR specialty casing connector marking our fifth ‘e-Series’ product to win this award over the past five years.”
“I’m excited about the future of Dril-Quip as I enter the CEO role. We have three key focus areas in 2022. First, we will be streamlining our leadership, and subsequently our operations, around more focused and integrated business units: Subsea Products, Subsea Services and Downhole Tools. These businesses and product lines each have unique strategies, as well as operating models. This will move Dril-Quip from the functionally run organization we are today to an organization with no functional barriers. Eliminating these barriers will enhance our customer focus on delivering best-in-class products and services. It will also allow us to expand operating margins as we eliminate the waste that can often happen in functionally structured organizations. Further, it will provide the transparency within our businesses to allow us to make more thoughtful investment decisions that offer the highest return on capital employed. We would expect our Energy Transition business to grow into a fourth business in the coming years.”
“Second, we simply find ourselves with more footprint than required even when we look out to a full market recovery. A good example of this is our 218-acre campus in Houston. We are in the early stages of an evaluation, but believe that once rationalized and leaned out around our new business model, we will be able to sell approximately 120 acres of that campus over the next few years. We would estimate the sale of the excess property to yield
“Third, we will be setting up a more disciplined and focused capital allocation strategy. This strategy will assist us in thoughtfully deploying excess cash we have on the balance sheet today towards internal projects, targeted acquisitions in both the energy and energy adjacent markets and continued opportunistic stock buybacks.”
“I believe we are well-positioned commercially in our core markets for the years ahead. Our revamped organization and streamlined footprint we are putting in place will serve to make us both operationally and financially stronger. We are uniquely positioned with a strong cash position that gives us flexibility to consider strategic alternatives many in our industry cannot. I look forward to further communicating our progress on our plans in the quarters ahead as we diligently execute our strategy to the benefit of our stakeholders.”
In conjunction with today’s release, the Company posted a new investor presentation entitled “Fourth Quarter and Full Year 2021 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 fourth quarter of 2021 was
Cost of sales for the fourth quarter of 2021 was
Cost of sales for the full year of 2021 was
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the fourth quarter of 2021 were
Net Loss, Adjusted EBITDA and Free Cash Flow
For the fourth quarter of 2021, the Company reported a net loss of
Adjusted EBITDA totaled
Net cash provided by operating activities was
Aker Solutions Collaboration Agreement
On February 21, 2022, the Company announced an agreement with Aker Solutions, a global provider of integrated solutions, products and services to the energy industry, to supply subsea trees and wellheads for application in carbon capture, utilization and storage (“CCUS”) projects. Under the agreement, Dril-Quip will provide subsea trees and wellheads purposely designed for carbon dioxide injection that will be integrated into Aker’s CCUS subsea injection system, creating a best-in-class technology solution for customers. The companies will also jointly market this combined CCUS offering that leverages Aker’s position as an integrated supplier of CCUS systems, control systems and electrification components with Dril-Quip’s technology-leading subsea trees and wellheads.
Balance Sheet and Liquidity
Dril-Quip’s cash on hand as of December 31, 2021 was
The Company’s ABL credit facility dated February 22, 2018 and with a maturity date of February 23, 2023, was terminated effective February 22, 2022. The Company’s strong liquidity position, combined with a debt-free balance sheet, provides for significant financial and operational flexibility without that ABL credit facility.
Share Repurchases
For the three-month period ended December 31, 2021, the Company purchased 1,063,962 shares under its share repurchase plan authorized by the Board of Directors in February of 2019. For the full year ended December 31, 2021, the Company purchased 1,109,187 shares under the share repurchase plan at an average price of
On February 22, 2022, the Board of Directors authorized an additional
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 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 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 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 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) 939-7711
Blake_Holcomb@dril-quip.com
Dril-Quip, Inc. | ||||||||||||||||
Comparative Condensed Consolidated Income Statement | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||
December 31, 2021 | September 30, 2021 | December 31, 2021 | December 31, 2020 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 48,694 | $ | 53,622 | $ | 213,760 | $ | 258,834 | ||||||||
Services | 19,380 | 19,560 | 74,143 | 75,577 | ||||||||||||
Leasing | 9,838 | 9,815 | 35,042 | 30,562 | ||||||||||||
Total revenues | 77,912 | 82,997 | 322,945 | 364,973 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 61,197 | 62,834 | 242,356 | 269,698 | ||||||||||||
Selling, general and administrative | 30,620 | 25,265 | 115,036 | 95,057 | ||||||||||||
Engineering and product development | 3,834 | 3,510 | 15,104 | 18,920 | ||||||||||||
Impairment | - | - | - | 7,719 | ||||||||||||
Restructuring and other charges | 52,913 | - | 78,933 | 35,380 | ||||||||||||
(Gain) on sale of assets | (596 | ) | (13 | ) | (4,482 | ) | (587 | ) | ||||||||
Foreign currency transaction (gains) and losses | 1,600 | (1,663 | ) | 836 | 2,345 | |||||||||||
Total costs and expenses | 149,568 | 89,933 | 447,783 | 428,532 | ||||||||||||
Operating loss | (71,656 | ) | (6,936 | ) | (124,838 | ) | (63,559 | ) | ||||||||
Interest income | 274 | 188 | 575 | 2,131 | ||||||||||||
Interest expense | (195 | ) | (94 | ) | (787 | ) | (621 | ) | ||||||||
Income tax provision (benefit) | (8,148 | ) | 4,301 | 2,946 | (31,281 | ) | ||||||||||
Net loss | $ | (63,429 | ) | $ | (11,143 | ) | $ | (127,996 | ) | $ | (30,768 | ) | ||||
Loss per share: | ||||||||||||||||
Basic | $ | (1.81 | ) | $ | (0.31 | ) | $ | (3.62 | ) | $ | (0.87 | ) | ||||
Diluted | $ | (1.81 | ) | $ | (0.31 | ) | $ | (3.62 | ) | $ | (0.87 | ) | ||||
Depreciation and amortization | $ | 7,723 | $ | 7,899 | $ | 30,381 | $ | 32,389 | ||||||||
Capital expenditures | $ | 2,062 | $ | 2,303 | $ | 9,990 | $ | 11,943 | ||||||||
Weighted Average Shares Outstanding: | ||||||||||||||||
Basic | 35,167 | 35,387 | 35,331 | 35,260 | ||||||||||||
Diluted | 35,167 | 35,387 | 35,331 | 35,260 |
Dril-Quip, Inc. | |||||||||
Comparative Condensed Consolidated Balance Sheets | |||||||||
(Unaudited) | |||||||||
December 31, 2021 | September 30, 2021 | December 31, 2020 | |||||||
(In thousands) | |||||||||
Assets: | |||||||||
Cash and cash equivalents | $ | 355,451 | $ | 375,172 | $ | 345,955 | |||
Other current assets | 390,098 | 452,099 | 517,238 | ||||||
PP&E, net | 216,200 | 224,676 | 234,823 | ||||||
Other assets | 48,677 | 41,790 | 53,156 | ||||||
Total assets | $ | 1,010,426 | $ | 1,093,737 | $ | 1,151,172 | |||
Liabilities and Equity: | |||||||||
Current liabilities | $ | 93,663 | $ | 91,826 | $ | 85,512 | |||
Deferred Income taxes | 3,925 | 6,194 | 6,779 | ||||||
Other long-term liabilities | 15,730 | 15,940 | 17,353 | ||||||
Total liabilities | 113,318 | 113,960 | 109,644 | ||||||
Total stockholders equity | 897,108 | 979,777 | 1,041,528 | ||||||
Total liabilities and equity | $ | 1,010,426 | $ | 1,093,737 | $ | 1,151,172 | |||
Adjusted Net Loss and EPS: | Three months ended | ||||||||||||||||||||||
December 31, 2021 | September 30, 2021 | December 31, 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 loss | $ | (63,429 | ) | $ | (1.80 | ) | $ | (11,143 | ) | $ | (0.31 | ) | $ | (11,254 | ) | $ | (0.33 | ) | |||||
Adjustments (after tax): | |||||||||||||||||||||||
Reverse the effect of foreign currency | 1,264 | 0.04 | (1,314 | ) | (0.04 | ) | 3,179 | 0.09 | |||||||||||||||
Restructuring costs, including severance | 45,962 | 1.31 | - | - | 4,407 | 0.12 | |||||||||||||||||
Gain on sale of assets | (471 | ) | (0.01 | ) | (10 | ) | - | (39 | ) | - | |||||||||||||
Adjusted net loss | $ | (16,674 | ) | $ | (0.46 | ) | $ | (12,467 | ) | $ | (0.35 | ) | $ | (3,707 | ) | $ | (0.12 | ) | |||||
Adjusted Net Income (Loss) and EPS: | Twelve months ended December 31, | ||||||||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||||||||
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) | $ | (127,996 | ) | (3.62 | ) | $ | (30,768 | ) | $ | (0.87 | ) | $ | 1,720 | $ | 0.05 | ||||||||
Adjustments (after tax): | |||||||||||||||||||||||
Reverse the effect of foreign currency | 660 | 0.02 | 1,853 | 0.05 | (1,287 | ) | (0.04 | ) | |||||||||||||||
Add back impairment | - | - | 6,098 | 0.17 | - | - | |||||||||||||||||
Restructuring costs, including severance | 76,354 | 2.16 | 31,979 | 0.91 | 3,473 | 0.10 | |||||||||||||||||
Gain on sale of assets | (3,541 | ) | (0.10 | ) | (464 | ) | (0.01 | ) | (1,194 | ) | (0.03 | ) | |||||||||||
Adjusted net income (loss) | $ | (54,523 | ) | $ | (1.54 | ) | $ | 8,698 | $ | 0.25 | $ | 2,712 | $ | 0.08 | |||||||||
Adjusted EBITDA: | Three months ended | ||||||||||
December 31, 2021 | September 30, 2021 | December 31, 2020 | |||||||||
(In thousands) | |||||||||||
Net loss | $ | (63,428 | ) | $ | (11,143 | ) | $ | (11,254 | ) | ||
Add: | |||||||||||
Interest (income) expense, net | (80 | ) | (94 | ) | (1 | ) | |||||
Income tax expense (benefit) | (8,148 | ) | 4,301 | (373 | ) | ||||||
Depreciation and amortization expense | 7,723 | 7,899 | 7,668 | ||||||||
Restructuring costs, including severance | 58,180 | 1,400 | 5,578 | ||||||||
(Gain) loss on sale of assets | (596 | ) | (13 | ) | (49 | ) | |||||
Foreign currency transaction (gains) losses | 1,600 | (1,663 | ) | 4,024 | |||||||
Stock compensation expense | 5,354 | 3,276 | 3,453 | ||||||||
Adjusted EBITDA | $ | 605 | $ | 3,963 | $ | 9,046 | |||||
Adjusted EBITDA: | Year ended | ||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||
(In thousands) | |||||||||||
Net income (loss) | $ | (127,996 | ) | $ | (30,768 | ) | $ | 1,720 | |||
Add: | |||||||||||
Interest (income) expense, net | 212 | (1,510 | ) | (7,626 | ) | ||||||
Income tax expense (benefit) | 2,946 | (31,281 | ) | 8,709 | |||||||
Depreciation and amortization expense | 30,381 | 32,389 | 34,020 | ||||||||
Impairment | - | 7,719 | 4,396 | ||||||||
Restructuring costs, including severance | 96,650 | 40,480 | - | ||||||||
(Gain) loss on sale of assets | (4,482 | ) | (587 | ) | (1,511 | ) | |||||
Foreign currency transaction (gains) losses | 836 | 2,345 | (1,630 | ) | |||||||
Stock compensation expense | 14,895 | 12,914 | 15,721 | ||||||||
Brazilian amnesty settlement | 1,787 | - | - | ||||||||
Adjusted EBITDA | $ | 15,229 | $ | 31,701 | $ | 53,799 | |||||
Free Cash Flow: | Three months ended | ||||||||||
December 31, 2021 | September 30, 2021 | December 31, 2020 | |||||||||
(In thousands) | |||||||||||
Net cash provided (used) by operating activities | $ | 4,689 | $ | 9,323 | $ | (16,786 | ) | ||||
Less: | |||||||||||
Purchase of property, plant and equipment | (2,062 | ) | (2,303 | ) | (1,700 | ) | |||||
Free cash flow | $ | 2,627 | $ | 7,020 | $ | (18,486 | ) | ||||
Free Cash Flow: | Year ended December 31, | ||||||||||
2021 | 2020 | 2019 | |||||||||
(In thousands) | |||||||||||
Net cash provided (used) by operating activities | $ | 38,428 | $ | (21,088 | ) | $ | 14,678 | ||||
Less: | |||||||||||
Purchase of property, plant and equipment | (9,990 | ) | (11,943 | ) | (11,501 | ) | |||||
Free cash flow | $ | 28,438 | $ | (33,031 | ) | $ | 3,177 | ||||
FAQ
What were Dril-Quip's Q4 revenue results for 2021?
How much was Dril-Quip's net loss for the full year 2021?
What is the total amount authorized for Dril-Quip's share repurchase program?
What was Dril-Quip's cash position at the end of 2021?