Dril-Quip (DRQ) Misses Q1 EPS

Dril-Quip (NYSE: DRQ) reported Q1 EPS of ($0.55), which may not compare to the analyst estimate of $0.02. Revenue for the quarter came in at $96 million versus the consensus estimate of $98.99 million.

Blake DeBerry, Dril-Quip’s President and Chief Executive Officer, commented, “I want to thank all Dril-Quip employees for their determination and resilience in responding to the hardships brought about by the COVID-19 pandemic as well as the significant downturn in the energy industry. I appreciate their dedication to perform their jobs safely and uphold our commitment to the customer to deliver first-class products and services that assist them in accomplishing their operational objectives.”

“Our first quarter results reflect the initial impacts of the extraordinary challenges facing our industry today. In response to the sharp decline in oil and gas prices late in the first quarter, we saw operators act swiftly and decisively in making deep cuts to capital spending plans and operating budgets. These actions led to delays in customer decisions to order equipment for scheduled and upcoming projects, resulting in product bookings of $57.9 million. In addition to the shift in customer behavior and capital investment priorities, we experienced disruptions to our manufacturing productivity and global supply chain as a result of the necessary actions taken in response to the COVID-19 pandemic. These actions reduced our manufacturing capacity as we implemented staggered shifts, social distancing, quarantine of service personnel and, where possible, remote work arrangements. The overall effect of this was reduced productivity in the delivery of our products and services. All these factors contributed to our lower than expected revenue, adjusted EBITDA margin and free cash flow for the quarter.”

“While our first quarter results were not what we had anticipated at the outset of 2020, they reflect the reality of the uncertain and volatile environment facing our industry in the coming quarters. The industry is experiencing extreme demand destruction from the global economic shut down due to the COVID-19 pandemic on one side and a supply glut from oil and gas producing nations seeking to solidify share in the global market on the other side. While we have not experienced any significant order cancellations to date, we are seeing customers delay delivery requirements in our existing backlog. We will continue to execute on our backlog, but given the uncertain environment, we remain cautious on providing guidance for the year.”

“Despite these circumstances, we are confident in our plan going forward to preserve the Company’s financial strength without limiting our ability to meet customer expectations during these extraordinary times. In response to these market conditions, we are announcing today our intention to further streamline our business operations. These actions are expected to result in $20 million in cost savings on an annualized basis and include changes to our organizational structure, manufacturing footprint and research and development programs, including a strategic repositioning of certain product lines. These savings will be in addition to the realized savings from our previously implemented 2019 transformation efforts.”

“Even with a less clear outlook for 2020, we expect to generate positive free cash flow from operations and overall cash neutrality for the full year 2020. Preserving our balance sheet strength and the associated financial optionality it brings, position Dril-Quip to successfully navigate this current downturn and emerge from it a leaner, more agile and operationally efficient organization.”

For earnings history and earnings-related data on Dril-Quip (DRQ) click here.

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