Dril-Quip (DRQ) Misses Q2 EPS by 28c, Revenues Beat

Dril-Quip (NYSE: DRQ) reported Q2 EPS of ($0.34), $0.28 worse than the analyst estimate of ($0.06). Revenue for the quarter came in at $90.4 million versus the consensus estimate of $88.35 million.

Key highlights for the second quarter of 2020 included:

• Generated $90.4 million of revenue on lower product volumes and leasing revenues, reflecting the continued impacts of the COVID-19 pandemic on global operations;
• Reported second quarter net loss of $14.1 million, or $0.40 per share, an improvement of $5.6 million, or $0.15 per share, from the first quarter of 2020;
• Recorded adjusted EBITDA of $6.0 million, or 6.7% of revenue;
• Improved sequential net cash provided by operating activities by $24.3 million to $3.0 million increasing cash position to $345.8 million;
• Completed approximately $11.5 million of previously announced annualized cost saving actions, with additional savings expected to be captured in the second half of 2020;
• Selling, general and administrative expense declined $1.3 million in the second quarter compared to the first quarter of 2020;
• Announced strategic collaboration agreement with Proserv for the development and manufacturing of subsea controls

Blake DeBerry, Dril-Quip’s Chief Executive Officer, commented, “Dril-Quip continues to persevere through this difficult and uncertain market environment brought about by the COVID-19 pandemic and the associated disruptions it has caused the global economy. Although these issues remain a headwind to near-term growth, actions we are currently executing will position us to better weather this storm and maintain focus on ensuring the safety of our employees and suppliers while meeting our customer’s needs.”

“Our operations experienced further negative effects from the ongoing pandemic in the second quarter as we were forced to make modifications that reduced our global production output. Adapting to regulatory restrictions, implementing necessary precautions and conforming to guidelines from health administrators led to lower production output and higher costs. We also saw historically low commodity prices and corresponding customer capital spending reductions that resulted in the delay or deferment of customer product delivery and booking decisions. These delays and deferments led to recorded bookings of $40.5 million during the second quarter. However, even with the sequential decline in bookings, we expect our bookings will be approximately $200 million for the full year 2020.”

“Despite these circumstances, we continue to improve our manufacturing production output and remediate supply chain interruptions, including the reinstatement of overtime at the majority of our manufacturing facilities towards the end of the quarter. We made significant progress on our cost cutting initiatives which we began executing in the second quarter, achieving $11.5 million in annualized cost savings, and we are on track to deliver a further $9.0 million annualized savings in the second half of 2020. Our top priority is to continue to meet these challenges and improve operational and financial results in the second half of 2020.”

“Additionally, we announced an agreement with Proserv to manufacture and supply Dril-Quip with subsea controls systems. This allows us to offer our customers a broader range of cutting-edge technology control systems along with our innovative subsea tree systems and wellheads. The transition of our controls business will be seamless for our existing customers as they will continue to receive the same level of service and support from Proserv going forward. Collaborating with Proserv on controls not only benefits our customers but allows us to avoid an estimated $8 million to $10 million per year of research and development and other associated expense over the next three years in order to offer our customers market leading controls.”

“As we look ahead to the second half of 2020, Dril-Quip is well positioned with a strong balance sheet, backlog of customer projects and an action plan to proactively address the current environment. We expect these factors along with the efforts of our dedicated employees will lead to improved financial performance with an emphasis on cash flow generation.”

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

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