DRQ Dril-Quip

Blake DeBerry President and Chief Executive Officer
Jeff Bird SVP, Production Operations and Chief Financial Officer
David Anderson Barclays
Sean Meakim JP Morgan
Marc Bianchi Cowen
Ian Macpherson Simmons
George O'Leary Tudor Pickering Holt
Connor Lynagh Morgan Stanley
Vebs Vaishnav Scotiabank
Blake Gendron Wolfe Research
Call transcript
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Ladies and gentlemen, thank you for standing by. Welcome to Dril-Quip’s Conference Call. [Operator Instructions] An updated investor deck was posted under the investors tab on the company’s website yesterday along with the earnings release and will be referenced during today’s call. This conference is being recorded and a replay will be made available on the company’s website following the call.

Before we begin, I would like to remind you that Dril-Quip’s comments may include forward-looking statements and discuss non-GAAP financial measures. forward-looking that to of anticipated differ expectations in noted Dril-Quip’s could results be expressed results actual materially these should a factors variety cause or It statements. from the quarter Please refer we yesterday reconciliations full for financial and operational on statements non-GAAP results released forward-looking XXXX disclosure of to announcement and fourth the measures.

now DeBerry, ahead, Chief and Please go Dril-Quip’s sir. like Executive turn conference the to would President, I over Blake to Officer.

Blake DeBerry

all to of I our Thank welcome the you. to said would received the discuss and call. the community. hosting We conference in do made feedback have and team, once behalf initial that plan investment positive are results sense us strong calls these and hosted per XXXX. to On to you like you Last of management year year that call again this call join pleased from we we year-end had believe for Dril-Quip we most them the along annually our today’s to February, conference with

in the then high with of I Bird, we that XXXX. results XXXX. XXXX over highlight and deliver, begin of to will review Chief transformation questions. our Financial then the will of level accomplishments some I'll able successful call launched Officer highly call a Jeff Senior for Production provide I to comments detailed to general give many financial to President Vice Operations our turn including review open and the guidance and results closing were review late a and

energy uncertain year. an the improving particularly past made still we this over of in proud I'm environment offshore many achievements but

flow operating to transform to products, deliver while Our footprint. we which employees and our cash cost and efficiencies, global permanent our cost drive new our rationalize savings provide to free operationally execute management reduce generate continue and customers, model team

support to our the commitment base. level our customers and our to to provide expanding remained of highest we of and As continue customer service our part transformation, unchanged

focus revenue and revenue led million XXXX a revenue execution QX with revenue $XX growth X% at to XXX in million We to XXXX operational saw XXX or year million. XXXX and throughout Our million. QX XX year over at growth

we well. adjusted revenue to quarterly More growth importantly, as increases EBITDA the translated though,

adjusted XX year-over-year the to ability on Many we financial million Our ambitious by cost our grew $XX.X to achieved our EBITDA million. XXX% operational directly to and or initiatives. sales and attributable of savings transformation are gains deliver

systemic of and our we target of million were of annualized sales total cost The our existing and from million centered solutions in created XXXX, a bookings, and results our company of efforts of a As products the new performance, reduce implementation changes improve we increases forward. client to XX moving delivered performance. We initially to wide cost are We and our made now transformation XXXX business our structured expand full announced, customers we sales these in to to specifically product previously around target DNA new commercial of part efficiencies. savings base. in see to and operating began organization initiatives approach costs announced a teams retool an operating $XX

have R&D, initiatives customers' the we optimizing in chain SG&A, manufacturing, cost our while pleased across leveraging needs. accomplished generated strong The certainly growth of savings footprint infrastructure adjusted we very and in savings the improving and and flexibility supply more engineering and integrated $XX we model, annualized million our to to contributed our addressing EBITDA sustainable create chain, are our able XXXX. a will I'm deliver end high efforts key markets workforce, through in which of that were global of above we the an expectations, supply maintained

saw revenue and $XX As productivity million. focus improvements, adjusted our chain fourth increase further million nearly and to supply procurement on will we continue leveraging quarter beyond, $XXX to to we look EBITDA capability. XXXX and and grow The

In strong XX $XXX EBITDA our quarters product achieved sustainably we non project that growth, million. bookings of we and bookings. grow in able The product the to also were XXXX revenue adjusted above time was addition first to fourth quarter

For we $XXX the product year full or million, by XXXX, saw year year our XX% of bookings increase XXX to over million.

and innovative excellence. growth the a award Our continued R&D remains to winning key commercial and future component

XXXX. as to badger New than technology million, product well tripling bookings wellhead bookings or the XX% IIe achieved product we $XX strength connectors. $XX orders of for high Big we Bore for received as system, more fatigue the high our DXe grew in approximately profile in In XXXX XXXX, million new total specifying

subsea and with towards relation systems for and and clarification project FED agreements Phase we the agreement Islands. received on post conclude X a the also the wells liner OTC another system Premier suited system, Premier well and strings sanction with located continued industry's first has on project to DE In in used termed diameter Lion particularly drilling contract frame Xpak is move contract expansion project production Limited. October, to the Sea into fracking, Oil continue for spotlight double large is forward from We new when Production to project entered for and FED award In development for or development Falkland Exploration execution. offshore and casing to fully XXXX, technology design the we This work deepwater. which engineering

We move project are this to forward. continues that encouraged

for we repurchase our that the repurchase common we program. the share As we total in current in million last announced to million in of additional was Board February completed under addition authorized over program. $XXX XXXX XXXX. This program XXX,XXX $XXX share year shares million $XX.X a XXXX, In an purchased of

strategic XX pursuing and acquisitions. XXXX, as possible have sheet buyback more balance over for to cash With see, powder an key debt a you at free As of opportunistically projects investing shares. we $XXX in funding million we needed as available supporting dry still million future significant well can and repurchases in have for remaining year-end upturn

and sales can operating As flow cash on downturn. on free while XXXX goals, and see, remain in generating strategic executing achieving our hard worked you efficiently business this we focused our through transformations and

review Jeff financials more initiatives. the to I on over that, provide call cost-cutting the With our will to and turn details

Jeff Bird

Thank you, morning, everyone. good Blake and

results for at fourth Revenue high-end $XXX and million quarter primarily by increased the showed was of quarter quarter and driven financial for service million. from activity. This to the continued our to leasing guidance the $XXX Our of prior the million fourth improvement. $XXX range was increased

increases XXXX of revenues of For aftermarket for revenue in our $XXX $X Western to XXXX, X%, as Gulf the our full quarter continued X%. fourth XXXX, entries as in of a the prior revenue from or million, of about segment million America. increase well wellheads of quarter increase by subsea and On an year the versus parts driven Hemisphere basis, Mexico primarily by were the Latin

Our sales. timing $X due Eastern or by of the in XX% to approximately revenue decreased to million fourth product quarter, Hemisphere prior quarter, the compared

was revenue flat sequentially. Asia-Pacific

our to stronger continue overall cost margins. translated see initiatives that operating We to

the gross from For operating realized up the which we XXXX. year full XXXX XX%, XX% margin in was was

As revenue, second increased yet This is sales costs over million, joint $XX impact in half increased negative seen higher revenue a of fabricated the of despite from mix mostly XXXX. reminder, only a $X.X million.

expenses. SG&A to Moving

primarily of reduction third fourth year adjustment the onetime million, stop quarter, due end compensation quarter XXXX, million, to a of For to to compared a $X.X $XX was SG&A the expense.

captured in brought decreased inflation in normalized partially XXXX. cycle. to with expenses year $XX For These salary needs. savings the gains $XXX by a were anticipated organization million our meaningful million to offset merit we from return We XXXX full SG&A in and future line as more XXXX,

decreased to of SG&A revenues headwinds, percentage XXXX. as for XX% from XX% a expenses these Despite down XXXX, for

to average As we move expenses into approximately SG&A expect quarter. $XX XXXX, a million we would

As full of to Blake seen savings adjusted impact us of we many delivered savings these we will our EBITDA expand be the cost generate XXXX XXXX. discussed, in that expect and have in transformational helps ability

set you'll If to to you capability. we we goal transformation presentation savings, exceed to look at our capture optimizing that break on able by that able operating million and XX, million XX annualized Slide while out the $XX we will savings million website delivered goal at be were savings. to in see the those ambitiously where our by $XX we area and executing that We we methodically our posted initiative,

the ensuring operating customer transform leveraging to way do we towards with while view continuing meet expectations. exceed a are and costs, we We business

journey. Early touched pace this to has the events our word embrace in XX our XXXX, and XXXX location our our to tools within we major in across real is quickly most transformation business. teams will function are cross Probably every our this facilities, every This reviewing of journey important day. our intentional. participated understand each This in and locations, was at This and in floor manufacturing every manufacturing on daily XXXX in walks began XXX to employees learned from double day element react lean amount four prior and of XXXX. the [indiscernible] I performance year beyond. shop past time. that in Earlier benefits use the reap walk continue employees problems one allows to us the and The we journey, functional

million and gains in million they tools clear, of XXXX see in to $XX learned to in expect apply expect our in we all across continue $XX approximately realized XXXX. savings additional to productivity We balance the of as aspects of realized the business be XXXX. the be To

XX% benefit we that productivity In to targeting addition, improvement will gross eight are XXXX.

demand weakening commodity virus corona and oil causing prices, XXXX gas. for supply Looking for outbreak ahead and in the uncertainty recent global to resulted disruptions, has

We disruption urgent This on to to employees more and focus minimize in supply Make. chain our shift our model are mitigate and proactively to to Aberdeen, allows steps Singapore supply needs. organization operating disruptions. The any our facilities allow facility, us out but built taking to more personal help importantly, newly our will Houston, production

income the diluted at million XXXX, reported diluted income or or $X.XX quarter share. net fourth share. quarter million fourth of we for per Adjusted $X.X net of for the net per $X.XX was income Looking X.X

We million fourth per slide XXXX our was XX, totaled million. estimate and year year. CapEx to the on between million million shown for maintenance As full CapEx normal and $XX in run $XX $X quarter annual the $XX our of

will tools of as million our result million XXXX. XXXX. in or year acceptance guidance This full new products, our invest $XX However, would CapEx to new in rapid a $X running $XX the $XX in bring million million of to we

the demand $X year million. monitor was capital will accordingly. our and to full Despite Subsea Tree fourth XXXX XXXX and the $X of downhole quarter for in was tools and strategically million cash adjust We flow continue inventory. expenditures global investing Free

cash of generating focused targeting This our reductions a operating ours on of lean of in and key model Blake positive cash XXXX. Through priority seventh consecutive is and year mid free we flow. and remain flow new overall flow. As are of between now efforts our working we focused positive cash our free noted, free tools, a combination is capital

will you our across a that presentation, If the XX cash day cash we to are to see working reduction targeting capital. you of slide elements in look at XX in XX cycle all

XXXX, we liquidity. resulting million to compensation million ABL remain key include a million as of we At and in turns cash investing pursuing cash and in available on facility, our working for hand $XXX the For had to have to shareholders metrics objective. $XX of capital long-term, year-end, strategic $XXX our approximately redesigned committed available We returning acquisitions.

opportunities capitalize the We capital optimize focused on operating allocate on efficiently. and in are our remain to continuing model well-positioned and future to

I turn will over back to that said, the Blake. With call

Blake DeBerry

Jeff. Thanks,

coronavirus. and energy downward the the in the As about offshore pressure decline we beyond, optimistic on we to and due cautiously recent XXXX look global pricing despite to demand oil recovery, remain

our vision has made markets. Our proactive to stronger long-term in up a flexibility of with company Dril-Quip viability strategic the a approach changing on focus adapt the us to plan XXXX towards to bottoms with

up $XXX million. outside delays revenue this, first coronavirus, our XXXX to near-term some While the Pacific the to demands. favorable This the to us supply we more Asia providing has production meet facilities $XXX region to of due ramp are to million were we $XXX and and range forecasting customer's to we of experienced disruption expecting the $XX for between of be guidance Prior in able million quarter our million.

between company remains that, million. re-evaluating Despite entire I estimate believe our XX am months and million efficiently $XX that, realigned and we've the fourth for business uncertainties, operate product encouraged our macro $XXX bookings these lines environment. We and past in spent product more to the quarter any and our overall reorganized

products, our instead, find customers leverage manufacture chain capability we location, the cost-effective We quality returns solutions and while every the company. but the everything supply ensure that longer will no manufacturing will newly maximizing created our get in for

ensure will in capture term chain our to We make continue fine strides tuning supply sustainable that to we improvements. long

XXX million a and driven balance class with sheet service We on cash have an in experienced delivering results strong first organization, nearly clean hand.

majors and products we We pipeline. product to impressive Most grow getting independents focus and bookings. our and from our innovative revenue continue leverage both on interest are recently, will R&D product technologically to new regarding

$X and million a As we product and we incremental $X accelerate an development estimate future million. expect around to development quarter now $XX revenue XXXX to products. result, in expense Therefore, in new engineering to growth million spend to on for research average these

flow free should add we our Finally, will long which meaningfully our history and on cash growth profitable value of build shareholders. generating delivering to

I With turn to to line will up the that, call questions. the open the for over operator


Thank you.

our and now Barclays. David will first question answer And We question will from begin ahead. Anderson [Operator come the of Please session. Instructions] go

David Anderson

actually to XXXX is to presentation Brazil. you be Brazil on seems few growth markets starting the the is highlighted your question In of right of move areas. So, one now. one The main offshore

One, kind was there. us wellheads I your think over carry for big a can remind contracts these with cycle. questions contracts of from two stand guess I of you you from some there now last where customers, So,

inventory of there the contracts kind left on give a can on I'm you curious, those your Make. status grab in us or is any secondarily, they And to renewed. So, be then need do

ground a of on never already to it, of refresh it, installed. about for something think where stand Make was I think said but you the supply just I taking there's on some we recall, wells memory but here of those is kind maybe I But Can of it? it inventory and as other missed parts. I our lot on from you kind paid

Blake DeBerry

orders to with any with did that remember question you we contracts Petrobras, contract renegotiated Petrobras first had acquire primarily place Petrobras a minimum the respect existing purchase if your I contract for for Brazil, to on a in So, obligation expire. an may or minimum it extended we amount fulfilled under orders still period expect don't will they don't some requirement items under supply the I contract specifically. products that new get that that although and of contract so

pretty is expect inventory we your Secondly, recollection good.

they us. I ago, think It's try and years commented preferred actually quite We've burning been down that make point were that XXX been that systems provider two wellhead at positive had time. there. in have Petrobras to worked Make it and we was about for through Dril-Quip inventory that us the at in in They inventory. to hard

wellhead. have Petrobras I wells drills five think currently out uses six a Dril-Quip of every that

out and indications So, systems pace is they're at consuming going our XX Petrobras for the tender wellheads good for news faster is hearing a we sometime come a about that to are wellhead in XXXX.

to So, operation. a and more them we're looking resuming forward normal purchase consumption

David Anderson

actually on was That question, next to any good. so if That's hear. horizon my the tenders great that's

are guys play. Second orders not us here, to XXXX. any just of you side, kind typically guys for of Is out of bit a from Trees, the game the picture material would three again much think a Subsea a there bigger big can for probably of Tree you say, is little On flat like altogether. it market different came tell aggressive just but pretty kind guys orders of unlikely? subject how I Subsea was to you is Tree kind kind XXXX fair

a So, is probably orders of is on it these the fair that 'XX Tree better side? for timeframe to say probably some

Blake DeBerry

Actually, no.

So, had pretty a booked year. Trees XXXX Subsea we successful XXXX. in nine We

we're pleased expecting better with expecting XXXX, Should were hold, than the bit bit internally bookings macro-environment for little better we're we actually that bookings. a and So, little result, nine. a

get sold VXTE. that. one. one trying that, product. I the up a going to, we've those. about That's believe space on We lot R&D. We've we positive Subsea spent of have pretty Tree our We're we're we've one guided called first the differentiated time So, of the reasons a of to

watch and deliver that quarter major can of to can and the in quarter this unveil money more significant to that installation. installed XXXX. differentiation first We're product save hopefully independents, sold that And expect in OTC but third that you those and a at does they the some products a because that product have get space at the it has them OTC. the from gotten year fourth from we both during going lot of this interest we So, operators provide importantly of

David Anderson

Blake. asked guys this time and calls. XX been I've covering of for years great, a ever your you That's I've first on question now, the one is

a asking third I'm question. So,

Blake DeBerry


David Anderson

waited I've think I long enough.

supply on curious just the So, chain.

You us of, guess I times. what's about you where talked kind give complete? of just an Is couple Can Kind operations? that now? and a run thoughts on your gone? by forging How's update AF now it transition being stand right Global. we your It's that

Blake DeBerry

Sure. positive. very it's Actually

supply operational AF a So, the them. is that from facility. forge We complete. in have contract is fully transition do Global

people chain demand. up us. supply They're interact with daily for stocking forward almost setting program probably at a Our Global looking AF

of AF we and do our is quite leaders to well Global sure to a arrangement believe, to So, that is regular AF And to things Global forge at I the companies. is just because lease this Jeff health companies. arrangement are beneficial view a going make both both honestly, with meet the check facility beneficial on basis,

David Anderson

you Great. Thank very much.


Our Meakim go Please Sean ahead. next will question of from Morgan. JP come

Sean Meakim

from the just So year? start Could just is right off. is opportunity away the the in of expectations rest the us there let get shift other in just there a pushed or you for flow the does words, into terms cadence? margin catch think me revenue the Singapore XQ up to from help rest near-term? about And the impact In of the a lower

Blake DeBerry

that? want you to Jeff, take

Jeff Bird


of essentially ramp we from go of lost that and China is just Lunar for as New Singapore, of that's came three a back temporary and in, of workers So, a there. our about and they And disruption extended candidly what Year number in kind slow we QX result in worth weeks then back an to production, experienced Year. candidly, a just a New

and be beginning fully I Houston in up now risks and really we an QX, right the less in standpoint, be to second temporary setting again. will of be margin and first QX the impact than quarter, we're from in that it'll view now by would of that setting up immaterial any this up mitigate running dollars imagine are operations We operational there. in Singapore quarter, future primarily a we're million very Houston There'll as end the as a

Sean Meakim

being just table. back then, self you last help our a of heavy lifting about And on discussions, thinking, year the in recent on M&A lot talked

stock additional that fourth bought You in quarter. the

Your seen in the as stock's thoughts a you there changed CapEx latest in And evolving, interest M&A market. long share of we've with the your and uses sellers your environment lot that's are expecting out beyond what stock versus how what's happening new on the term cheaper, organic business can your maybe cash space? considering

Blake DeBerry


off, focused lot spend quite on on honestly, of have. we mean not XXXX first I we cost We the anything did through that shows results target. end the energies and in program. were we on of than intently that out cost let's our a other So, execute out exceeded the the top

we're this I integrated we going our are changes team basically strategic the back our review and market just doing bottoms help on and that we capabilities what based program, have a in again, what's forward. new developed doing, roll as and lot view Jeff into so skills we more XXXX, before, we're acquisitions stepping doing how As quite a within up honestly, said through self and ourselves management

our as pause button forward. call. and broader But, is in more strategic here our to cyclical strategic do that shareholders we market that and the at method business. Share to mix repurchase takes the to a probably hit review we that the first to So, to what cash look where want the do will preferred always that return review we're us be go offering we the before make is the nature of due and going see have


Marc next with question go Cowen. ahead. Our Bianchi will come Please from

Marc Bianchi

wanted ask on I to outlook. the order

had concern outlook look didn't outlook You on kind reasons. the this I'm order of concern guys, for curious, the if the kind revenue thinking you operational would know and and and virus the customer you tempered here I days talk about do obvious virus. customers what Can impact any have early oil your price, from different we be to the to of of might it's any Blake, how here? conversations with you've

Jeff Bird

quarter. still the and we is. execution longer prepared forecast lifting dividends XXXX period. views having time XXX call, It's the believe said optimistic very conversations the business, you our Most development wait-and-see kind and change and We're are to to We Look, transitory. our plan revenue the sales to as were particularly range. first of a and QX heavy term paying are oil, just we in customers transformation to cycle entering bookings in We we've of our still did unlike know, it's going a customer. the is the come Most XXX not the this space were with mode. forecast done customers' go, much and offshore is broader our in and our shorter for

think, the I our So, as that you profile we don't really know, bookings I'm in change any year see hoping progresses.

Marc Bianchi

encouraging. That's Okay.

to this On the dollars the first related margin million you quarter, throughput. Jeff, of side repositioning mentioned for

Just other that's there's factors. I or going on factor couple a maybe think the

You of mix the second had 'XX. in the fab higher joint half

a rolls also it extent here quarter sounds of tailwind progresses could can and maybe the to a products going So, new quantify margins you talk But to that about if tailwind. kind be I'm into are beyond also wondering Could first help? to 'XX. maybe and can, the into as that you much that that share how lower a like how

Jeff Bird


will probably would it as only first fab of the below see we from level in quarter, that we'll continue XXXX, million fab dollars of end full the exact that half And we dollars start back now, standpoint, you in you comment that in high mentioned but to quantify to first on happen quarter the see the that first the there. an normalized get to probably mentioned near the first year. will So joints, not giving the guidance in into a go a right then really be year, the back level, And year but on then joints the not of given more of that probably quarter. will the going the spot margin, million transitory quarter, number other we're and on

Marc Bianchi


Blake DeBerry

say actually would customers more happening to that's product view encouraging in mix to say joints, Blake the inventory, with in as would is products is there, consuming This jumping fab because our are wellheads that. that I dynamic go that Marc. they tubular I that, here. the we the have buying

And the in so, that drawing likely means wellhead indicating for improve is inventory and demand down which that will products a increase the mix.

Marc Bianchi

Right, right.

Okay guys. it Thanks for turn that. I'll back.


will our ahead. next go And Macpherson with question come Please from Simmons. Ian

Ian Macpherson

to, year, Thanks. you've will of morning decremental Jeff. there horse and Jeff, from expenditures got decline you a with Good well. G&A want I'm some this to engineering then on to given be revenue bridge as struggling QX XX I to moving. and benefits your QX, a still and Blake, the but development product million higher just And There here capture have also sorry margins. that's to flog annualized lot plus is

eye decrement mind's million QX or seeing X QX. million too not? Is my EBITDA in to So, XX from of extreme I'm to that

Jeff Bird

too extreme. That's

adjusted to when, $X So it on we elements we the I spoke EBITDA from side, me bit it an look at different talk margin basis, that's the as Houston, just a just of about there. million let we're we Singapore the about. about headwind the, and If so little on manufacturing reposition talking

that SG&A million with makes SG&A XX and think if the line in of that you fourth we on but charge a the year exactly really because that's in side, com number the artificially nature about low we the look did On guided quarter, onetime the in that of full what our XXXX. stock

a get to And there returning to you there. be that's we're quarter the or that, R&D you're So, of spite that's XX a million when right cycle. some normal in more say merit fact to then and engineering, headwinds will

number engineering a million ramp to on we we're the the up year, ramping then $XX to low million R&D throughout said probably and starting On to up incremental by this year, the quarter. the invest in in going QX full side projects $X fourth side, that'll

run if call that in as probably So, at side it'll $X.X and million wouldn't to you about that, a million it $X.X the quarter. until on think fourth full be start quarter low the QX rate

Ian Macpherson

super helpful, That's thanks. Perfect.

working couple levels. inventory On from of past over the capital your returns guess, and coming lot made down years you've side, the I internationally a improvement already high

on from So, you normal more about now, what then away there. easier the talk capital within are receivables you some objectives after? work that's think your you're for levels been and to closer you year recently. moving Can to just business harder still that going ways go But but the this

Jeff Bird

the a product, inventory I Yes, we in the improve to look opportunity candidly inventory cash probably invest of much look ourselves walk we If and are over that things, be but in half. little to been not at the we're going which bottom from, inventory at close more easy XX, those up did not as the might on things, two, is in actual it the there though easy a posted We little reduction, you and is burn XXXX Slide vendor buying a more. payments. and we There's cash year through some of set bit the presentation to in lot excess invest and kind speculatively so model if time. the through have we buying a bit that to next improvement we we XXXX, where production we'll get cells move a expect

benefit the actually and terms, what XX side we chain see as there. So, that The did you that's vendor on in a XXXX. reduction there of we're XX to supply work that that's payment of days working

also time, at were lot So a around to good We're the there, we same vendor drive did costs drive down down. we of doing work more costs aggressive that to in but XXXX terms. work being

see expand over XXXX months. next from improvement an we we can believe in XX that further So, you XXXX even DPO, to to XX the did

terms vendor not payments because of price a as part milestone pushed candidly, downturn candidly, also to were What customers. a lot downturn, and our price as tougher our it's the and was control within the payment The terms payment is get payments around we relates get it questions during we of our lot well. questions just as during as don't around pushed the

at the So, step this think one looking more what terms. starting gain we're of environment, first about first a if reasonable pricing back step the to back, year gaining is price you is really in

our be So, our Blake customers just trees. there's on more around a actually billing tools, a on type of ourselves. working our year, customers projects. that joint those lot this with And also from with between cycle we've milestone errors had we're being of the to a an couple with, with and customers a number payments nine of the hand some that our number around those and mentioned, Kaizens hand payment. going them milestone for But of of aggressive customers see work trees reducing actually then on is in opportunity to lean with working we really that

So, hopefully, that's helpful.


from question O'Leary and come Tudor Pickering ahead. Holt go And next will Company. from Please George our

George O'Leary

on R&D side wonder focused a me if The to problems kind always you could directed spend year-over-year of is types of makes R&D equation. technology where bit I what innovators solve. very lot the of share increased looking guys about, always spend R&D of and to spend sense the that been are have customers a on for your you little that and incremental as you

Just any are that incremental super interesting. color would R&D where incremental focused guys deploying you be on spend

Blake DeBerry


that the R&D benefits the balance our one and of them downturn savings off, going flow, cost provide sheet that first has the that's having forward. way change the products developing to just throughout free we of invested we've our and drill on to customers really been focus cash structurally wells have and say, permanent in the So

back You're And talking right? both reducing incredibly helps a which giving is them really them. footprint. smaller is honestly, meaningful the you're days IRR to less giving ESG, it helps you're If It time installation on time, time, carbon their what spend got them I off-shore, there So, about quite space. right.

Subsea a that talked got have looking and as the a We we we and of one products control So, business general. been at controls which we that, much in VXTE we of controls. funding as new includes We've in looked space Tree product evaluated really lot in Subsea package that hardware our at space, is, SPS the the I Trees, XXXX, the that is as things about products. and traction and have Subsea whole of haven't do R&D

update product to right. And more controls our help us and the and an Selling really bulk also controls on integrated make trees of SPS and so, space, going And is business it, product controls, it in going entire the a much focused that package. subsea this to modernize believe line R&D flexible that's in we forward.

George O'Leary

you a at upon making two or them was once savings I time how only certain into kind don't making appreciate one your at at and were it examples facilities of be guys. Because and Very moving of And interesting. a then some guys could make you're on provide you mentioned that manufacturing that you'll Blake. thought I that everything, color, to looking interesting where call, the model you wondered and some translates products cost you facility footprint comment. I now just everywhere. if for that an you

Blake DeBerry

to hand to going Jeff. I'm that Sure. on

Jeff Bird

at facilities, look we've we up of as really if centers set excellence. it So, our

XXXX, every specific complicated, you for different back over efficient machines if a to their rearrange more products. the them to you for shop back most products made bit way step facility and region in made little a virtually different inefficient, not So, going able that's went that products and for

and products 'XX machines. are these of and for started excellence of large center rearranged looking center really rearrange, obviously, a at the we we excellence wellheads in candidly So, Houston

Houston, wellheads producing to just machines the make simpler. that together So were much closer in

the half we so the and inventory beginning beginning forklifts and can end all wellhead a would've opportunity now it that pre Houston rearrangement, example there. things our a two facility a you there, this feet is and it's travels imagine literally miles happen end, and and and matter of So, often traveled the that in give expeditors

in connectors, the as So, up connectors more our future manufacture those that's cells some and all cells continuing subsea those we those in and well. expect and then savings Aberdeen. in manufacture And Singapore running now trees we're we'll optimize are from we to Houston, our our largely and

up because capital we investment and of quite middle and is cell be had this make year. that should running running by Now to there not yet, the up some that

other up efficient the running right in is but running. that So, there'll and benefit because benefit less regions obviously are comes running. be see we up post some are Aberdeen on should helping of COE than They'll knock they benefit those when be now produce and trees as will that that them

helpful. that's hopefully So,


Connor And will from come our question next Stanley. go ahead. Lynagh of Please Morgan

Connor Lynagh

incremental you're just investing I revenue I things was your the would wondering the the incremental if way investment? you could of from look what some growing engineering return think that we like of to mean, or you're a could any about think how on market addressable on expand more what and expense? little

Blake DeBerry


portion to So, if a X.X additional per to subsea the you to tree. tree, controls about million be add $X is that take is of going million going

Right. price. So, the that's

So, control having trees. to million of million going sales you're as side. SPS basically million a It's your price X.X additive per in to the to grow the add you a $X the business, tree

Jeff Bird

gain the And world you effect And other the on out we then is at fees and as there's other to awarded think at year a the tree built that I have controls drive have that's that in opportunity you share you for as the well. as fact XXXX, really look and I think, the us trees a every well. plus there class XXX you essentially nine look controls an trees knock booked market within

in the the industry drive share So, a win that's also you every really tree, as time the get opportunity as more well. sell market to a. but

Connor Lynagh

you have innovation we're how share up? market Okay, mean, sense. much a of if in etc do would level to you drive to guys that for I relatively expect that market argument, for sake market any growth flat that bring the higher makes just relative targets

Blake DeBerry

market different our in subsea now, other we relatively just the and that sub we there's runway share needs. products X% didn't low varieties breadth lot and right the tree the fulfill of couldn't there customer we've So, of so trees all is our a is challenge the had that

XX%, thing trees XXX XXX so to the moving some that up that's of to local to market us of the was XX% XX% is first more still We're now of we've market, and expanded on. of available areas content. available challenging us are our always There's our getting market. available bid we what XX%, them So, because had a year, the that we maybe

believe have some that design operators our areas reviewing Right major But, now with one. make new a the our we first as won't VXTE we four participate differentiated products, there's we product definitely So we in. we have customers. our we, that's to attractive

bid, Dril-Quip something quickly us giving of opportunity can systems we accepted, that's the really that it in they four said, elusive, present it I we but been been a at had and in good them to an get that the production independents, subsea moment. right. haven't qualify interested getting operator that past, So, like interested the We've has major with got

Connor Lynagh

helpful. That's it. Got

one Just to here the market just in wellheads broader more on sneak more and side of a things.

guys about go little that. restocking. I is to there uncertainty think out on years, the of sort or that's appreciate and a talked you past catch more price there's bit you couple of quarter up a played the say been point within the at have for of a a effect this oil I a Would

Blake DeBerry

Yeah. mean. I

Let's the oil set price aside.

bit little has inventory every different a position. think customer I

them and We're that independents. they've is dormant have think winding, to had. consuming up even picking reorder and years winding four the the for in these getting feedback back time that inventory down. are it's from it are of or three been Hey, are most people I arena, offshore

forward portion And to normal a order more in we're more cycle. so, consumption is our the back going of view

Connor Lynagh

Alright. Thanks much. very


And of Please ahead. from Vaishnav the question come our Scotiabank. go next Vebs will

Vebs Vaishnav


any typically not same about year. bookings product in you this you of So, should that in Brazil XX get wellhead the that up tender why about coming Brazil hold XX% any product reason spoke

Blake DeBerry

So, Brazil is interesting. They're changing their model a bit.

quantity, shorter tender base. to shorter going more they're And cycle, broader but so, a

the of waning think, is Vebs. So, I the think I past model

I use process, bid lot very, good. they're so will with with done competitive is because think, I additional work a even driven We've to that them to that more to is I their our and new changed of many and that's made say it's own technical existing Petrobras qualification, We've per-well some it their a relationship inventory, allow IOCs partnering or done changed allowed some on though lot of wellheads it's they've their model. them think very a basis. bidding our specifications. to a of what's consume them products,

a the going about not yeah we're open tender but, arrangement necessarily they've optimistic past. So, in split be to as the tender process, an there's done

Vebs Vaishnav

it. Got


you about seen have increased talk that. or the product shifted bookings, has mix way We Can one other? the

Blake DeBerry

backlog. our within mean You

Vebs Vaishnav

backlog? Within new orders and Yes.

Blake DeBerry


roll the going higher on we as little into we're So, mix. bit earlier, shift booking in percentage to which Jeff XXXX, subsea wellheads, to confidence gives that have more us we XXXX as normal a seen spoke the

Vebs Vaishnav

maybe Jeff. for And it. Got question

is two? cost guys this maybe to about a about thinking talking gap correctly, bridge to and between $XXX had. I'm despite million XX the $XX million XX if Can million R&D. million the SG&A me So, you $X off of million savings you're that higher That help

Jeff Bird

manufacturing those late were of in chain of engineering million lines those just million SG&A XX flat SG&A happened early and year The early all engineering. R&D. cost majority actually SG&A XX SG&A versus supply 'XX, and not and 'XX. But up wins is year, So the vast There million Vebs. to R&D really and more on XX the lines, million very XXX on side that is savings the some comes the that the comes the on across

So, have the full in year would booked been 'XX. late savings from those

that had year savings You full there.

not 'XX. 'XX chain going going manufacturing in incremental that . You're from much not SG&A to that be a and to and incremental to see savings, come million needs supply savings R&D of remaining out XX Most to is

Vebs Vaishnav

But in in quarter saw some half virus. should had would And is yes of due maybe first the 'XX we to margins margins the that implication where shift get corona be, headwinds to of because second beyond better? the back that the or

Jeff Bird

year. of on of see bit those profile improve headwinds there to the back will But lower the and that through $XX backend as pressure and candidly, just as year mean, well. well back the margins a you then that start off, of of to Yes, back obviously volume half should I little is because the million see on a the you that of the as think bit margins you puts go margins to a with roll the I through little be look

bit margin QX. little probably and we'll headwind of up ramping a So, through in start QX, with


Wolfe please ahead. We Research, come will have that go more Blake of Gendron question time for and one from

Blake Gendron

side, of there you're control R&D to trying comments the out the you've or little just light in of tuck I'm on year, just to be R&D what is potentially maybe mentioned given your going organically, wanting make set if could as something if You larger, to can in opportunity SPS SPS? a it go the this M&A just cash, and for here, the a marketable understand use bit your done is offering larger at you just typically for little budget more wondering smaller deals. bit go

Jeff Bird

the Yes, so thanks for question.

way roadmap that clear the does it a include at So, we that we very look SPS is controls. have

right right along. there awards We that price the faster and It's are you've perfect to value, and done inorganic the to can organically. right the price R&D OTC would we've and we in the over get to it's two organically the and always But going last side. we're three years the candidly that got have evaluating we've sit easier and come the to seen not success right if we for value same not and expect demonstrated opportunity spotlight on or with develop wait that control to be if versus and the around it's the

a M&A We're bottoms bit as you what projects largely a will and come that size we've XX at. I expect allocation months another talks that the strategic other what behind now. capital piece look little doing Blake that us about And transformation around talk got of If up mentioned of is plan. larger more out we fully earlier, acquisitions, strategy kind later

Blake Gendron

totally Got you, fair. that's

larger This keep to any deals framework it it the or kind like preclude you doesn't as stands So, that's same. small? of would all currently

Blake DeBerry

preclude it larger No, does not deals.

now think are we as the it to what's the on going and industry I our as right at table in relates cycle look think we where everything's on acquisitions. I

Blake Gendron

Totally fair. squeezing out here. turn it for back. Thanks I'll


any now for to to over the turn conference closing like would DeBerry Blake remarks. I

Blake DeBerry

to sales for We on Just I of catching organization, up our proud the forward look performance, the cost to as efforts the attending forward our progresses. our you exceeding for extremely look call. a and here. year out closing, organization am Thanks XXXX in with bookings we incredible


has Thank attending today's now conference you for presentation. concluded. The

may You now disconnect.