Dril-Quip, Inc. Announces Fourth Quarter and Full Year 2023 Results
- Annual revenue increases double digits year-over-year
- Full year cash provided by operations increases $44.5 million year-over-year
- Company provides fiscal 2024 financial outlook
- Revenue of $126.3 million in Q4 2023 increased 8% sequentially and 31% year-over-year
- Net Bookings of $122.7 million in Q4 2013 increased $76.2 million sequentially
- Net Income of $1.8 million in Q4 2013 increased $8.9 million sequentially
- Adjusted EBITDA of $16.5 million in Q4 2013 increased 34% sequentially
- Gross Margin of 27.4% in Q4 2013 improved 44 basis points sequentially
- Cash Provided by Operations of $26.1 million in Q4 2013 increased $2.9 million sequentially
- Free cash flow of $14.5 million in Q4 2013 increased $37.3 million year-over-year
- Revenue of $424.1 million for full year 2023 increased 17% year-over-year
- Net Bookings of $295.4 million for full year 2023 increased 9% year-over-year
- Signed 11 new master service agreements in 2023
- Net Income of $0.6 million for full year 2023 increased $2.2 million year-over-year
- Adjusted EBITDA of $46.5 million for full year 2023 reflecting 27% incremental margins
- Company provides 2024 financial outlook with revenue growth of 15%-20% and adjusted EBITDA of $65 million to $75 million
- None.
Insights
The reported annual revenue growth of 17% for Dril-Quip, Inc. reflects a robust performance amidst a recovering energy sector. The revenue upswing, primarily driven by the acquisition of Great North and an increase in Subsea Services activity, indicates successful strategic expansion and diversification of the company's service offerings. Gross margin improvement year-over-year suggests effective cost management and productivity initiatives, despite the noted unfavorable product mix and start-up costs. However, a decrease in gross margin in the fourth quarter compared to the previous year warrants attention to the sustainability of margins in the face of dynamic market conditions.
Net income turning positive and a significant year-over-year increase in adjusted EBITDA by 56% demonstrate an enhanced operational efficiency and the company's ability to leverage incremental revenues. The reported capital expenditures align with the company's growth initiatives, although continuous monitoring of these investments against returns is crucial. The company's financial outlook for 2024, projecting a revenue growth of 15%-20% and an adjusted EBITDA of $65 million to $75 million, sets a positive tone for investors, reflecting confidence in the company's strategic direction and market opportunities.
Dril-Quip's strategic maneuvers, including the acquisition of Great North and the signing of 11 new master service agreements, position the company to capitalize on the offshore upcycle. The energy industry, particularly offshore drilling, is cyclical and currently experiencing an uptick, which Dril-Quip is poised to benefit from. The company's focus on securing major contracts, such as the subsea production system in Australia and the multi-well contract in Mexico, suggests an aggressive market penetration strategy. The emphasis on lean operations and quicker delivery times is indicative of a competitive edge in operational efficiency.
The company's financial flexibility and strong balance sheet, as mentioned by the CEO, afford it the capability to pursue both organic and inorganic growth opportunities. This strategic posture may lead to increased market share and sustained growth, potentially impacting the stock positively. However, it is critical to assess how these strategies will withstand industry volatility and pricing pressures in the long term.
Dril-Quip's involvement in various international projects, including the Petrobras Exploratory project and the geothermal project in New Zealand, highlights the company's diversification in energy markets beyond traditional oil and gas. This diversification is a strategic hedge against the volatility of the oil market and positions the company as a versatile player in the energy sector. The company's engagement in carbon storage and geothermal projects also aligns with the global shift towards sustainable energy solutions, which may enhance its reputation and lead to new business opportunities in emerging markets.
The company's commitment to innovation, as evidenced by the deployment of BigBore™ IIe and HorizontalBore™ subsea trees, showcases its investment in technology that can differentiate its offerings and potentially lead to premium pricing. The mention of 'pressure balanced drilling' technology indicates an investment in advanced drilling techniques that can reduce operational risks and costs, a significant factor in the energy sector's capital-intensive environment.
Annual revenue increases double digits year-over-year
Full year cash provided by operations increases
Company provides fiscal 2024 financial outlook
HOUSTON, TX / ACCESSWIRE / February 26, 2024 / Dril-Quip, Inc. (NYSE:DRQ), (the "Company" or "Dril-Quip"), a developer, manufacturer and provider of highly engineered equipment, service, and innovative technologies for use in the energy industry, today reported operational and financial results for the fourth quarter and full year 2023.
Fourth Quarter Highlights
- Revenue of
$126.3 million increased8% sequentially and31% year-over-year - Net Bookings of
$122.7 million increased$76.2 million sequentially and$24.4 million year-over-year - Net Income of
$1.8 million increased$8.9 million sequentially and$2.1 million year-over-year - Adjusted EBITDA of
$16.5 million increased34% sequentially and61% year-over-year - Gross Margin of
27.4% improved 44 basis points sequentially and decreased 381 basis points year-over-year - Cash Provided by Operations of
$26.1 million increased$2.9 million sequentially and$43.7 million year-over-year - Free cash flow of
$14.5 million decreased$3.3 million sequentially and increased$37.3 million year-over-year - Closed on the sale of a third Houston property generating net proceeds of
$9 million - Secured major subsea production system in Australia for approximately
$40 million - Awarded 3-year deepwater subsea wellhead contract by CNOOC
- Won a multi-well, multi-year contract to supply Subsea Wellhead Systems in Mexico
- Awarded Hibernia / Exxon Canada Diverter Systems which provides a special application for pressure balanced drilling
- Deployed equipment for the completion of three Canadian carbon storage appraisal wells
Full Year Highlights
- Revenue of
$424.1 million increased17% year-over-year - Net Bookings of
$295.4 million increased9% year-over-year - Signed 11 new master service agreements (MSAs) in 2023
- Net Income of
$0.6 million increased$2.2 million year-over-year - Adjusted EBITDA of
$46.5 million reflecting27% incremental margins - Closed on the sale of two Houston properties completing the current footprint optimization initiative, resulting in net proceeds of
$23 million in 2023 - Completed the acquisition of Great North which contributed
$35.2 million to 2023 revenue - Installed BigBore™ lle subsea wellhead systems for Petrobras Exploratory project in the Santos Basin
- Successfully installed HorizontalBore™ subsea trees at Woodside Shenzi North
- Awarded tender with Petrobras for 43 subsea wellhead systems supporting their pre-salt well development project
- First delivery of XPak De TM liner hangers for exploration projects in Africa
- Participation in a geothermal project in New Zealand through our connector product line
"Strong performance in the fourth-quarter was great way to close out 2023 for Dril-Quip with double-digit growth in both annual revenue and adjusted EBITDA, showcasing significant progress toward our longer-term financial, operational, and strategic objectives," said Jeff Bird, Dril-Quip's President and Chief Executive Officer. "Bookings in the fourth quarter came in at
"With improved reporting lines, leaner operations, and quicker delivery times for our customers, we are well positioned to capitalize on the ongoing offshore upcycle and drive future margins meaningfully higher. Our strong balance sheet and financial flexibility allow us to continue to evaluate both organic and inorganic growth opportunities with the expectation to capture incremental market share and ultimately drive sustained, profitable growth for our shareholders."
2024 Financial Outlook
- Revenue growth of
15% -20% - Adjusted EBITDA of
$65 million to$75 million - Subsea Product Bookings of
$200 million to$225 million - Capital Expenditures 3
-5% of revenue
In conjunction with today's release, the Company posted a new investor presentation entitled "2024 Investor Presentation" 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 2023 was
For the full year 2023, revenue was
Cost of sales for the fourth quarter of 2023 was
Cost of sales for the full year of 2023 was
Selling, General, Administrative, and Engineering Expenses
Selling, general and administrative ("SG&A") expenses for the fourth quarter of 2023 were
Engineering and product development expenses were
Net Income, Adjusted EBITDA and Free Cash Flow
For the fourth quarter of 2023, the Company reported net income of
Adjusted EBITDA totaled
Cash provided by operations was
Cash provided by operations was
Net proceeds from sale of property, plant and equipment was
Share Repurchases
During 2023, the Company did not make any share repurchases. The Company has approximately
Conference Call and Webcast
Management will host a conference call and a webcast to discuss the financial results on February 27, 2024, at 10:00 a.m. Eastern Daylight Time / 9:00 a.m. Central Daylight Time. The presentation is open to all interested parties and may include forward-looking information.
To access the call, please dial in approximately ten minutes before the start of the call.
Conference Call and Webcast Details
Date / Time: | Tuesday, February 27, 2024 at 10:00 a.m. EDT / 9:00 a.m. CDT |
Webcast: | https://www.webcaster4.com/Webcast/Page/2968/49907 |
U.S. Toll-Free Dial-In: | 877-545-0523 |
International Dial-In: | 973-528-0016 |
Participant Access Code: | 699212 |
For those unable to participate in the live call, an audio replay will be available following the call through midnight Tuesday, March 12, 2024. To access the replay, please call 877-481-4010 or 919-882-2331 (International) and enter replay passcode 49907. A replay of the webcast will also be archived shortly after the call and can be accessed on the Company's website.
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, benefits of the recently completed acquisition of Great North, 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 actions taken by the Organization of Petroleum Exporting Countries and the expanded alliance (OPEC+) with respect to their production levels and the effects thereof, risks related to the recently completed acquisition, including the risk that the benefits of the acquisition may not be fully realized or may take longer to realize than expected, that we will fail to successfully integrate the properties and assets into our business and that management attention will be diverted to integration-related issues, the impact of general economic conditions, including inflationary pressures and interest rates, a general economic slowdown or recession or instability in financial institutions, on economic activity and on our operations, 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 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 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.
Dril-Quip, Inc.
Comparative Condensed Consolidated Income Statement
(Unaudited)
| Three months ended | Twelve months ended | |||||||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2023 | December 31, 2022 | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 78,344 | $ | 77,603 | $ | 271,021 | $ | 240,762 | ||||||||
Services | 33,452 | 27,214 | 105,680 | 79,129 | ||||||||||||
Leasing | 14,548 | 12,427 | 47,359 | 42,033 | ||||||||||||
Total revenues | 126,344 | 117,244 | 424,060 | 361,924 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 91,687 | 85,603 | 308,503 | 265,935 | ||||||||||||
Selling, general and administrative | 29,825 | 26,993 | 101,517 | 94,206 | ||||||||||||
Engineering and product development | 2,987 | 3,061 | 12,649 | 11,740 | ||||||||||||
Restructuring and other charges | (130 | ) | 2,267 | 3,245 | 13,364 | |||||||||||
Gain on sale of property, plant and equipment | (342 | ) | (1,027 | ) | (8,754 | ) | (20,019 | ) | ||||||||
Acquisition costs | (41 | ) | 5,358 | 6,451 | - | |||||||||||
Change in fair value of earn-out liability | (2,282 | ) | - | (2,282 | ) | - | ||||||||||
Foreign currency transaction loss (gain) | 83 | 1,060 | (2,549 | ) | (3,756 | ) | ||||||||||
Total costs and expenses | 121,787 | 123,315 | 418,780 | 361,470 | ||||||||||||
Operating income (loss) | 4,557 | (6,071 | ) | 5,280 | 454 | |||||||||||
Interest income, net | (1,150 | ) | (2,312 | ) | (8,188 | ) | (4,249 | ) | ||||||||
Income tax provision (benefit) | 3,863 | 3,275 | 12,864 | 6,327 | ||||||||||||
Net income (loss) | $ | 1,844 | $ | (7,034 | ) | $ | 604 | $ | (1,624 | ) | ||||||
Net income (loss) per share | ||||||||||||||||
Basic | $ | 0.05 | $ | (0.21 | ) | $ | 0.02 | $ | (0.05 | ) | ||||||
Diluted | $ | 0.05 | $ | (0.21 | ) | $ | 0.02 | $ | (0.05 | ) | ||||||
Depreciation and amortization | $ | 8,487 | $ | 7,899 | $ | 30,324 | $ | 29,421 | ||||||||
Capital expenditures | $ | 11,585 | $ | 5,430 | $ | 32,626 | $ | 18,866 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
Basic | 34,306 | 34,132 | 34,174 | 34,237 | ||||||||||||
Diluted | 34,539 | 34,132 | 34,473 | 34,237 | ||||||||||||
Dril-Quip, Inc.
Comparative Condensed Consolidated Balance Sheets
(Unaudited)
| December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | ||||||||||||
Assets: | ||||||||||||
Cash, cash equivalents, and restricted cash | $ | 191,400 | $ | 181,072 | $ | 264,804 | ||||||
Short-term investments | 25,908 | 8,911 | 32,232 | |||||||||
Other current assets | 502,409 | 519,057 | 452,988 | |||||||||
PP&E, net | 217,631 | 211,806 | 181,270 | |||||||||
Other assets | 90,833 | 86,722 | 38,657 | |||||||||
Total assets | $ | 1,028,181 | $ | 1,007,568 | $ | 969,951 | ||||||
Liabilities and Equity: | ||||||||||||
Current liabilities | $ | 117,703 | $ | 106,735 | $ | 87,555 | ||||||
Deferred income taxes | 10,564 | 12,114 | 3,756 | |||||||||
Other long-term liabilities | 18,654 | 18,257 | 6,288 | |||||||||
Total liabilities | 146,921 | 137,106 | 97,599 | |||||||||
Total stockholders equity | 881,260 | 870,462 | 872,352 | |||||||||
Total liabilities and equity | $ | 1,028,181 | $ | 1,007,568 | $ | 969,951 | ||||||
Dril-Quip, Inc.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Free Cash Flow: | Three months ended | |||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | ||||||||||||
Net cash provided by (used in) operating activities | $ | 26,131 | $ | 23,234 | $ | (17,604 | ) | |||||
Less: | ||||||||||||
Purchase of property, plant and equipment | (11,585 | ) | (5,430 | ) | (5,154 | ) | ||||||
Free cash flow | $ | 14,546 | $ | 17,804 | $ | (22,758 | ) | |||||
Free Cash Flow: | Twelve months ended December 31, | |||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| (In thousands) | ||||||||||||
Net cash provided by (used in) operating activities | $ | 7,727 | $ | (36,771 | ) | $ | 38,428 | |||||
Less: | ||||||||||||
Purchase of property, plant and equipment | (32,626 | ) | (18,866 | ) | (9,990 | ) | ||||||
Free cash flow | $ | (24,899 | ) | $ | (55,637 | ) | $ | 28,438 | ||||
Dril-Quip, Inc.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Adjusted EBITDA: | Three months ended | |||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | ||||||||||||
Net income (loss) | $ | 1,844 | $ | (7,034 | ) | (405 | ) | |||||
Add: | ||||||||||||
Interest income, net | (1,150 | ) | (2,312 | ) | (3,378 | ) | ||||||
Income tax provision (benefit) | 3,863 | 3,275 | 1,266 | |||||||||
Depreciation and amortization expense | 8,487 | 7,899 | 7,069 | |||||||||
Restructuring and other charges | (130 | ) | 2,267 | 3,466 | ||||||||
Acquisition costs | (41 | ) | 5,358 | - | ||||||||
Change in fair value of earn-out liability | (2,282 | ) | - | - | ||||||||
Gain on sale of property, plant and equipment | (342 | ) | (1,027 | ) | (2,249 | ) | ||||||
Foreign currency transaction loss | 83 | 1,060 | 1,818 | |||||||||
Stock compensation expense | 3,173 | 2,576 | 2,694 | |||||||||
Other | 3,041 | 309 | - | |||||||||
Adjusted EBITDA | $ | 16,546 | $ | 12,371 | $ | 10,281 | ||||||
Adjusted EBITDA: | Year ended | |||||||||||
| December 31, 2023 | December 31, 2022 | December 31, 2021 | ||||||||||
| (In thousands) | ||||||||||||
Net income (loss) | $ | 604 | $ | (1,624 | ) | $ | (128,493 | ) | ||||
Add: | ||||||||||||
Interest expense (income), net | (8,188 | ) | (4,249 | ) | 212 | |||||||
Income tax provision | 12,864 | 6,327 | 2,946 | |||||||||
Depreciation and amortization expense | 30,324 | 29,421 | 30,381 | |||||||||
Restructuring and other charges | 3,245 | 13,364 | 96,650 | |||||||||
Acquisition costs | 6,451 | - | - | |||||||||
Change in fair value of earn-out liability | (2,282 | ) | - | - | ||||||||
Gain on sale of property, plant and equipment | (8,754 | ) | (20,019 | ) | (4,482 | ) | ||||||
Foreign currency transaction loss (gain) | (2,549 | ) | (3,756 | ) | 836 | |||||||
Stock compensation expense | 10,892 | 10,363 | 14,895 | |||||||||
Other | 3,935 | - | 1,787 | |||||||||
Adjusted EBITDA | $ | 46,542 | $ | 29,827 | $ | 14,732 | ||||||
Dril-Quip, Inc.
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 | |||||||||||||||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| 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) | $ | 1,844 | $ | 0.05 | $ | (7,034 | ) | $ | (0.21 | ) | $ | (405 | ) | $ | (0.01 | ) | ||||||||
Adjustments (after tax): | ||||||||||||||||||||||||
Foreign currency transaction loss | 66 | - | 837 | 0.02 | 1,436 | 0.04 | ||||||||||||||||||
Restructuring and other charges | (103 | ) | - | 1,791 | 0.05 | 2,738 | 0.08 | |||||||||||||||||
Gain on sale of property, plant and equipment | (270 | ) | (0.01 | ) | (811 | ) | (0.02 | ) | (1,777 | ) | (0.05 | ) | ||||||||||||
Adjusted net income (loss) | $ | 1,537 | $ | 0.04 | $ | (5,217 | ) | $ | (0.16 | ) | $ | 1,993 | $ | 0.06 | ||||||||||
Adjusted Net Income (Loss) and Diluted EPS: | Twelve months ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||
| 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) | $ | 604 | $ | 0.02 | $ | (1,624 | ) | $ | (0.05 | ) | $ | (128,493 | ) | $ | (3.63 | ) | ||||||||
Adjustments (after tax): | ||||||||||||||||||||||||
Foreign currency transaction loss (gain) | (2,014 | ) | (0.06 | ) | (2,967 | ) | (0.09 | ) | 660 | 0.02 | ||||||||||||||
Restructuring and other charges | 2,564 | 0.07 | 10,558 | 0.31 | 76,354 | 2.16 | ||||||||||||||||||
Gain on sale of property, plant and equipment | (6,916 | ) | (0.20 | ) | (15,815 | ) | (0.46 | ) | (3,541 | ) | (0.10 | ) | ||||||||||||
Adjusted net loss | $ | (5,762 | ) | $ | (0.17 | ) | $ | (9,849 | ) | $ | (0.29 | ) | $ | (55,020 | ) | $ | (1.55 | ) | ||||||
Investor Relations Contact
Erin Fazio, Director of Corporate Finance
Erin_Fazio@dril-quip.com
SOURCE: Dril-Quip, Inc.
View the original press release on accesswire.com
FAQ
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