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DRQ Dril-Quip

Participants
Blake Holcomb Director, IR & Corporate Planning
Blake DeBerry CEO & Director
Raj Kumar CFO & VP
Jeffrey Bird President & COO
Sean Meakim JPMorgan Chase & Co.
James West Evercore ISI
Taylor Zurcher Tudor, Pickering, Holt & Co.
John Anderson Barclays Bank
Connor Lynagh Morgan Stanley
Call transcript
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Operator

Good morning, and welcome to Dril-Quip's Year-End 2020 Conference Call. I'd like to turn the event over to Mr. Blake Holcomb, Director of Investor Relations. Please go ahead.

Blake Holcomb

Welcome to Dril-Quip's Full year 2020 Conference Call. Instructions]. [Operator call. deck yesterday the release along be during investor the tab and posted referenced website company's with today's was updated Investors under on will An the earnings replay This will company's call following call. the recorded, is and website be available on being made the a

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

the call Officer. Chief Kumar, DeBerry Dril-Quip, and we from Financial Officer; Executive today have, Chief Speaking Blake Raj on

remarks. for turn the We portion DeBerry. following also Officer, to now Operating have prepared on would Chief Blake Jeff President Q&A the call and over I like call Bird, the the to

Blake DeBerry

our thoughts the like you. XXXX globally many their were their challenges I to general call and focused and management resilience, comments year. for Dril-Quip's to with give our performing our The closing to employees Raj a the customers, over would thanking of call working their in challenges employees will review all a remotely, deliver begin their our rig These to the the pandemic. presented to immense all to welcome results then and were jobs our then achieved on and on and turn the tremendous begin highlight our for and today's our XXXX brought organization team, I you customers some industry to accomplishments our we call. despite adjusted questions. by will financial family. excellence. dedication provide the global high-level grateful financial for behalf the on to and Thank remaining like review of I with of year-end outlook. I with of the contributions. pandemic jobs I would performed accomplishments conference of that facilities, good the results open On employees their I'll service servicing during am or the Whether customers. to were their lives all manufacturing in able

destruction, and started our were Although XXXX by and it for not in oil we of to the results year significant $XXX with environment. accomplishments a $XX productivity positioned and EBITDA. demand journey revenue and XXXX us million XXXX challenging transformation conclude adjusted pandemic and The Dril-Quip. challenged were associated progress well without of million gas was for able We this

the as environment continued delivering and mitigating a Although the we successfully impact our XXXX our seen customers. from decrease challenging operating responded products our financial services of and by the in pandemic to results, results and to

cease the our first carbon during subsea celebrated our footprint. our benefit accomplishments to presented VXTe for their capital VXTe also drill provides savings operator technology improves by for development in pull estimate the Subsea were and and IRR hanger the wellhead orientation. tubing in the system that Technology drilling Offshore with of VXTe run of operator added to stack ability development rig whereby well eliminates stack research which time by the land normal operations, operations and horizontal products, May, we and is the the completion reducing a as days per and rerun to their completion. cost the our We drilling will on our their of X e-Series This part then will the and System. production save its time. We and traditional system significant award customers, other without drill approximately million well new spool this, well XXXX. operators efforts disruptive tree time to reducing regard with with space. well BOP $X combined The the fifth oil, the in offers tubing to In VXTe to the the Tree The technology BOP Conference spotlight or scenario, many technology the

customers seen response incredibly have to this positive improve their potential We our technology. from about with operations the

maintain of and hard first complete through VXTe the the qualification tree. the R&D tests manufacturing worked schedule teams to and Our all pandemic production

With year. to installing this the final the delivery hopefully, first tree and we assembly, expect in quarter now VXTe first make in the

While know This consolidation quickly collaboration. executing nonexclusive we we in through strategy achieved priorities. and control embarked consolidation In of strategic XXXX, that collaboration Accordingly, strategy. of in main into subsea is entered with we for a needed aware our also sector, a systems. we agreement are Proserv collaboration manufacture supply the that the difficulties X on

technology allowed customers well make the development $X research over investment and line. to operating without eliminated it next having to as our the per associated to the years, of million $XX costs product controls X million First, that as us significant latest subsea of year offer the maintaining

helps with with scenario us return Allowing resources from subsea a larger bundle engineering continue capital. This us us consolidate our solutions offer Proserv the location we on XXX reduced to on led continue in subsea and therefore, includes little XXX was tree and approximately maintaining down is Aberdeen costs our project a executed the decline to highest path to to million as and presence to win-win our management, subsea in and allows difficult there. market to still the us systems fabrication, a transformation close strategy peers This market transition trees to sales, balance trees serving manufacturing tree the a manufacturing assembly our us towards our we over that Aberdeen customers set saw sheet. business on our to value. and to by and tree award-winning a for refocus our subsea operations to XXXX invested and from final offer control operations, significant Houston our decision profitability and apart state-of-the-art activity. XXXX. The $XX total, from productivity strategy basis part our annualized awards align significant strong this have with Second, critical Proserv's our collaboration aftermarket In of initiatives customers. an

more levels. contrast, today, subsidies development, to we a support or parts like and years regulatory will the sources. and we often seems longer, in believe toward regulators by As probable of both a emphasis take are future remain move to the underway, out national Furthermore, most an be likely. gradual transition, while is in the The factors, the play fuels Gulf accomplish. The typically OPEC, to oil levels be nations activity favor vary Low-cost projects expected play energy provide Sea, is and government this customer regulatory fossil including view guided and and of same demand North of poverty, should see believe increased by recovery developed domestic account lift approached take Caribbean, affordable, into that is energy on XXXX is supply U.S. We consistency. the Dril-Quip transition to geography alternative the that control transition process can a resources recovery role market outlook we could consumption environment it the in areas The forces less This profile. also developments uncertainty continuing to it of consumption. but of U.S. nations and from to post-pandemic recognize energy executive to likely in our In offshore several means in time by energy sources. companies steady. the transitioning of for hydrocarbons recent recovery, on to return around activity of toward with will rationally more from solution. order has Mexico. through help created continue role transition said the drill the to with important takes market energy Overall, has parts for reliable cleaner market developing multiple alternative

with innovative of are equipment reliability, must workovers. be and part efficiently our prioritized commitment the Dril-Quip's our Dril-Quip's line been associated hydrocarbons design, better reductions reducing days. of well continues have helping green These manufacturing our in our Many methodology, of products of companies. customers always customers these suite significant part as we transition, e-Series have products to leads legacy. that equipment DNA, to the improve and this of neutral always supply or thoroughly or as by made are will which produce commitments, As design come has offering fewer installed. XX% in as carbon integrity well from who high tested to cases, to emissions, carbon that carbon in vendors the part in reduce as A reduction of years. some coming these emissions products offshore large which material latest the pledges eliminated This become installation

to that our combination help objectives. of the and from We is can example, products required. achieve the no tons in approximately needed For steel process the to steel to e-Series forward alone tons emissions XX XX The operational longer reduces component produce of traditional lead elimination the as carbon this look customers operations. continuing of reduce technologies by roughly their help technologies our

great reliable, not role we the we transition affordable currently pride plays do the make important energy of the industry as sight and providing very in we However, take together, lose today will I the the of outlook. our in over initiatives solution review turn XXXX to and and to well. that, cost-cutting call more With financials being that provide Raj details on part as energy,

Raj Kumar

full the XXXX. and lower given the through market. from to U.S. of We Blake, cases, going quarter. EBITDA $X we also saw the for our from I'm performance through challenges The you, fourth prior mainly hours was in and to the QX executed everyone. million, decrease manufacturing bottom same good for slightly to overall fourth revenue Adjusted a of of line. the related million the from fell levels prior in review due Thank quarter year to seen well, the million. increasing rising provide decline was $XX fell impacting quarter $X to quarter quarantines mainly Revenue a the factors morning, This production the COVID-XX for walk

We of also government pandemic being the saw result the as regional a implemented during subsidies quarter. reduced

a Adjusted For versus EBITDA the This by reduce full our and optimize impacts was gas was We XXXX. decrease were million to were decrease $XXX oil of XXXX, overall swiftly previous demand. full addressing on by costs successful driven a footprint. $XX this of market year. pandemic taking for from the million in $XX revenues the of global million, XXXX $XX the year year million, the steps our and decline

always this difficult the cost necessary these of are reduction the million actions. profile of We as XXXX environment. a benefit As our our margin realize cost decisions, saw improve half execution, in result met second significantly $XX were in of this but XXXX. we target in we These

to these sustainable expect forward. cost We be reductions going

of saw saw most While previous tools increase service an leasing regions the revenues an year, our years, due booked primarily year-over-year. our product business. in was and increase revenue during to headwinds in growth with installations This orders from downhole coupled in our the to

business outpace move tools of was share service the under the were by by key held Latin result X%. Middle a in Gross pressure. environment, But downhole I'll to now only East margins. as it Our falling quality given able up in markets market on the to America margins gaining and execution. and

mix XXXX margins take actions X% half to early progressed. half first We from after the EBITDA to normalizing the support as helped to disruptions improve the the year to saw COVID-XX. margins for decision impact of second related year Our and the in

to expenses. SG&A Moving

fourth due XXXX, mainly was $X of $XX million increase to third short-term to million, an SG&A This quarter. of legal was quarter the For expenses. increase the compared

of currently expenses into half legal first the April. continue with trial to We for in these XXXX, the connection expect mostly scheduled

SG&A XXXX, For These the excluding $XX initiatives. expenses. year cost from these after by out decreased million in our short-term $X XXXX stem SG&A full million legal to expenses improvements

engineering the R&D as the a side, we increase VXTe On to market. million modest XXXX work we in saw bring to $XX to

bookings predictable holding a million orders orders in uncertainty bookings negatively on impacted for conditions the book million its timing. commodity see less off X between led difficult XXXX, or impact with or or looking year. X surrounding for a customers delaying smaller were decisions the the After upcoming market We bookings approximately difference XXXX. $XXX projects. at their being We in $XX bookings now during by and million the to to pandemic the $XX Product prices Now quarter. saw orders

stability We in upside things is economic the to year the expect cautiously increased the of some see half recover the recent returns XXXX, vaccines. but are global pandemic COVID-XX there believe first prices effects rollout of operators if of will optimistic progresses. the We in into persist as gradually and that the confidence with recovery

expect to more gradual. be the road recovery We to

outsourcing related are on philosophy and from basis. driven initiatives to savings taking our a million management primarily and $XX LEAN these cost expected of of our functions, improvement come for of actions are in tools We productivity is the million realized by over productivity take chain to benefit our place our actions The will downhole manufacturing will roughly $X increase changes XXXX. annualized in in an including and timing targeting year deliver business. the These an course supply

over fourth minimum year, X capital CapEx expenditure million. around it we past was level maintenance totaled the quarter represents $X to million. on And our the of just Moving CapEx of have XXXX, years. CapEx. seen full or In This that the a $XX for under

increase to growth an range XXXX. partly related increase tools downhole our in in in to The million however, anticipating $XX We $XX CapEx in to business. million between is are,

We equipment manufacturing are safety our information infrastructure. investing and in also and technology

We CapEx if but and will adjust will support improve conditions to profitability. monitor necessary, long-term we these efficiency our our growth and believe investments

me let turn sheet. the Now balance to

$XXX and liquidity. balance facility. availability protecting $XXX maintain strong in of At of debt. results position on our had $XX to further million million cash We cash on sheet year-end, we remain no approximately This available with a ABL our a and in million of continue focused hand

flexibility. execute liquidity commitments balance gives financial position confidence our for Our ability our in our critical sheet customers and provides It us. are and to on

flow cash Moving on million. Free a flow. fourth the was quarter cash $XX for negative free to

the year, cash pandemic. which of flow the $XX the full and headwinds, full several related quarter was it For Both was year million. negative free to by slowed many were

customers number were a January. large payments due saw whole year-end that in we Firstly, until at of early

are amount experience. disturb our sheet customers, our management normal this accustomed While beyond to balance our by was we

customers driven we delays upcoming saw Secondly, materials by and shipments in our procure XXXX, for requesting to projects. to inventory need build in continue

to inventory. our for tools business inventory subsea to We and in have factors expand added strategically working increases these trees capital a the we and offset These programs. refund. led and tax for federal strong believe collection vendors. also a We worked improve billing stocking for expanding terms partially in by turnaround payment foundation increase downhole executed improving laid Both We our were recovery. an with efforts

for flow a XXXX. of more as a these management is clearly team. expect will we benefits We see efforts in Free cash focus primary us

incentives We our for have all annual leadership entire cash to team free tied flow.

We aspects are focused capital. working on all of

more We have dedicated recovery a cross-functional team working on inventory environment. reduction in gradual a

I the the cash line to just a Our continuing time In auditor more inventory cash a turning gaining on reducing I the we current moving by teams yield. given able are be expect to our to environment vendor-managed free bill. and cash metric leverage initiatives And to generate base X% the mentioned, bottom The to we free flow traction are is that program. flow to is view to supply call in team. for Prior levels bookings key year. management be XXXX. product our we the growth what some around expect expect conversations downhole back these to we slightly in in to and tools on to see At customers, XXXX. $XXX with million business, revenue and Blake will we to current from the down with the flat come expect for booking on anticipated Based XXXX over for color see closing to give the comments,

any we We hold critical XX% given decremental address a decline recovery. as are to costs for forecasting margins in revenue

a in As are XXXX. cash I around we mentioned flow yield free earlier, forecasting X%

we and a from see while of sight. to target. positioned headwinds near-term towards achieve this recovery aligned the we incentives and hangover have see well objectives the gradual in sum To goal are management We pandemic, up, meeting this

a record proven of on for we and near-term executing our these focus head challenges and have recovery on as meet track We prepare the initiatives. strategic

Blake. strong financial team management I With a over turn in market a back the have We to environment. to this call strong and that, position will execute

Blake DeBerry

Thanks, Raj.

there recovery, are believe XXXX, one, take more a gradual to that to enter optimistic form. we beginning be As we is even signs a

which have will to strategic in We established years several the initiatives, thrive ahead. Dril-Quip position

remains lend that via a both to a provider, opportunity consolidation continuing to with technology. strategy technology the delivery to monetization integrated With and midterm pull to qualification and peer-to-peer collaboration customers to our peers through we from VXTe We multiple our are market our progress through help lenses. believe access collaborations With through IP VXTe, providing believe Dril-Quip and superior peers we expand end kit partnering collaborations peers wellhead First, for customers. see that respect for themselves significant conversations via market as these best-in-class the to our offerings. in several both in we wellheads,

with Finally, of to share out better capacity. the delivery chains partner reducing to theme we world to with The our believe to customers. is real opportunity common exists pipe expand around strategies overall our providers these that connectors, to supply build improve while industry

downhole not here in a have for similar the we we've market franchises share believe growth over we years expect business to that laid last Second, a a few most with fulfilled We our potential. frankly, significant foundation has have business would to business. XXXX. its in the tool Quite that has that struggled XXXX in we've But markets. wellhead

on shuttered We've resources development leader. Further, we stock new in added key outlined technology. underperforming beginning via a our with and have DE regions. smart our We only are business XPak technology bets to bases. capitalize as place We

demands followed, in well good and span times. as the an us while way productivity initiatives times difficult serve us and Finally, market scale up LEAN to returns. and we've moved organization are annual nimble and that do the we now Productivity organization us to when productivity allowing will sure in business bad of These real transformation you from I'm our organization improvements. an make will

transition, lower delivering on transition. their footprint customers design, in to drive to our customers, we the for the be continuing customers by carbon As and our we green carbon that continuing to market increasingly are look options for energy reduces R&D focused following our

in we assured we have these efforts of market differentiator. and share to While bring us are innovation that the that to technology culmination decades. our the of transition to execution to level of the all by the R&D, same leads using early rest a our customers several In conclusion, you as can stages expect over last energy increasing

attract on free be will yield to generation keenly and investment our competitive benefit cash focused We cash in ultimately flow shareholders. free flow a

As are key commitments making I XXXX. over reduction have providing seriously our these across line goals. of further towards the capital success Raj shareholders. to take meeting call indicated, all I working benefits to performance and these are customers operator tied on the open initiatives we in quarters We several coming to sharing with in up questions. the continuing annual for areas look now compensation updates the progress we our employees, turn the our strategic the and and will forward

Operator

Instructions]. [Operator

question Meakim First with comes Sean JPMorgan. from

Sean Meakim

I'm that put lot really annual chat information. A you great starting to enjoy guys together. these of

range So at where I product what to possibility beyond garner potential the what seem got to noted, for guide maybe million to there's is midpoint can focuses it's terms for you offset the short it. Dril-Quip, business. optimism, the the thanks overall term, better it's think more also the orders, of then go? the in bar effect for partnerships I market the growth or awards similar million $XX peer you've one than and -- to but room faster to with key think quarter really levels. relative in offshore $XX the To the XXXX, in bit investors, a the But then where in as the there's only innovations trough for setting off the offers. of more And in how you've spending doing start macro, a And not implies about specifically thinking been 'XX, of per new

what this look the potential from on we're So -- now, are think could year kind maybe what we as base if flow some 'XX what financials? could anything, a What have from initiatives do the would a back you medium-term outcomes be about little of like block offered you. nice and just deviate more help to range? building to looks conversation us that are of case through actually towards that the the And it into if these

Blake DeBerry

to of So, let biggest Jeff which doing he's peer-to-peer because think lot work the pass Sean, on me stuff, here. a focus is that I the probably

Jeffrey Bird

Yes.

about million to few $XX $XX a So talk that range. there. We comments million

those ramping the half If of of back There are that you year, to the right some getting let If me in keep up out the closer standpoint of quarter-to-quarter look range, at we play. first and it's going be the the think are They from items right to like large a month-to-month, separate now probably $XX peer-to-peer pushed things about tenders, out. a of tender year. number in that now. million half

to back we're optimistic the likely year. the land we're to going that are in of they're half optimistic the but So land year, those in

to be the the million low side relationships beginning, the peer-to-peer, on we think on $XX Now or as million -- But to expect $XX above lot those we've a talked something If that high at about it working earlier, there's to at think move lot not I a today. number about $XX range. already we're should million take million end. below doesn't of side the to you a that $XX

here year those splash in You around now, from year. see But that first what think if likely you're increased big I as peer-to-peer a the bookings sitting won't relationships. is of you'd see result probably half the of a a

in an really there's half those think a bookings, talked areas. meaningful we a conversations quarter to probably of wellhead probably end other as this candidly the or opportunity and of and peer-to-peer, selling us are of than like We've year for early the of see to opportunity the other our touching year. customers in number us a an tree this If that. that our on lot in wellhead probably just the more next areas instead our wellhead wellheads X conversations advanced So of X this together. great providers year, way provide And to really any the to maybe often we're the we that those, with show conversations. start to And an fourth having and work them. will buy last wellhead about the up about more And to is think tree the customer, about

end competitive a they've So to offering the more customer. got

a -- connector stages up deal about side the side, talked VXTe really and customer earlier out but thoughtful bit to connector we're be the how to be a customers. some that some in we world little about little a On and better on probably And pipe as any the a that's with our well. side, that can interest there's there providers done monetization we manufacturers furthest end of a we've a needs tree pair them. of there, side but both is with probably that's of great provide believe, a work and there, the tree more provider opportunities around on technology number supply There's chain to then

Sean Meakim

think I the really frames the Yes, well. great. That's and medium-term that short-term

progression. on maybe then So margin

for gross potential of it's progression outcomes and different the we you range expecting there, So down would based year, focus decrementals, to orders how we a out what you're recovery. flat for on revenue think, think noted margins Can sense et XX% mix, maybe about helpful. gross talk just That throughput, the on makes for just cetera, levers, margins, I holding be about this shook how you're and the in whether 'XX.

Raj Kumar

about about XX% talked I is If I decrementals. talking the XXXX, margins. Yes, Sean, look to into gross profitability relation this in Raj.

of We are Jeff we're bit into going a to. 'XX. holding cost terms And similar in from anticipation a has the 'XX recovery seeing alluded mix, of very of that in mix

of that The going actions there's we're are that through. cost through there. to to last going going year cost flow say full the did this major shift be flow we wouldn't cognizant I are So into year. actions any thing to annualized year The is

going there. I our we've to that's year. that's us help this We're productivity and focus, LEAN this to help going focus. mean, be So a always this had focus, shifting also

upside $XX of at into of there, million million are XXXX. We which $X looking hit would

So annualized on guide. million an a is $XX good

the call the I talked about of on I are lapsing We some about talked seeing the script, early the headwinds. on subsidies. in -- government

that's is we us headwind terms for some reinstated to of That's in -- be in to environment. going a the mentioned to variable this And have, compensation. a cash we're So critical But free headwind for $X that that initiative of the $X in tied million around so going headwind that that's estimation, million see. also in this to us. environment, I because for us flow some we margins. have

So takes going margins are the and those as I forward. look puts at

Operator

comes James of ISI. The West next call Evercore from

James West

that are cash it on free you Raj, tied flow. question management And guys to understanding on focused and it. is compensation

missing? within of So working we faster move target capital -- one a that to area inventories not than for we the expect? something converting longer it's you. there's would some definitely the are Is unable cycle because are is Why of there you're perhaps equipment? Or this what --

Raj Kumar

on for we had vendor on we thanks stuff with where shipment bit year, had et working inventory the on aspect receive the the was capital. James, the a and to a So deal right? cetera. delays, as as side, both So unique side of well then question customer the we interruptions, early year to Last had the

the So there were -- side. headwinds some against what inventory on

in Now I down are environment in to around place, it, slightly see inventory manage we've terms information that revenue. 'XX granted we given want we've put very I different 'XX, with flat put to shift of of you're to terms to to and in able going in tools the being better a together think and that what technology,

on liquidation. can it's quite of confidently should terms decrease So say more a of see a gradual year-over-year But inventory recovery, a that's I that in inventory headwind levels. and we total

anywhere maybe to up expect $XX reduction. $XX stretch, should a million of from inventory million, You with

James West

Okay.

think Great question me, hear. then, a maybe Blake. And Okay. to from I for

assume Within two, any especially, any is -- already, or or of the case? whether one, guess, but taken you, now. from they I that they as customer inventory that wellheads I people you from taken back the could would on to this -- kind because people right it's understand And I the of base that -- had lead when they gradual as maybe their back a be but a need type some recovery, own market they of restock bit more kind inventories? bump to a of to work get to perhaps little will get destocked

Blake DeBerry

Yes, observation, James. that's a good

time anticipation in back. a they the their down much in burned of where pretty have pretty high customers And level our this period. through don't frame We 'XX that inventory our unlike cut had that cycle. customers So activity had in 'XX,

with wells the we where believe activity it's -- is take currently, so drilled and much many inventory before the is will commence. that down, then their burned And cycle reorder to going inventory level, not

think activity I So picks see bookings to the pretty quickly. once you're respond going level up,

Operator

from and Zurcher, Tudor, Pickering question Holt. Next Taylor

Taylor Zurcher

question energy first is within at Clearly, one the least comments portfolio. kind you is avenue of on The change, the the e-Series product that have on effectuate made to of transition. you of your products some existing

geothermal. in presentation opportunities mentioned also and the you're around exploring some and carbon You storage capture

curious to sort to into weight that your existing And markets? market. wait be technology apply so would of existing kind kind set the Are and some could of skill the on those we of of that know I'm things Or inorganic kind about suite of growth thinking opportunities more those or how of market you section into?

Jeffrey Bird

Yes.

of as So target. have come their couple we customers are this believe, there, And out, back of the all our carbon those targets, done to a rightly, We've vendors. of reduction most on things is going Jeff. point you of a

our there footprint. reduce the carbon we're So standpoint help doing their customers green-by-design to from right things

could we'll a about almost side, the we that's amount capture follow good capture. an X, think, as immediately bear think candidly, carbon bring have that's the If there's of specifically, our area renewable now, you overlap on And that last carbon right products we front. around fair X, and to XX the years longer-term where really over customers. think done you a job, We've I then R&D on where,

now, capture I an be well. then in So think recently an the directly working longer-term the R&D area M&A. specific now reduction, intellectual me. of inorganic we're look side we have To carbon to a more we've from as We to at standpoint that's out right wouldn't carved looking than horsepower carbon at it do that start bring we as both afraid renewable think To well. internally organic But to standpoint. and actually for that end, group bear around

Taylor Zurcher

touched cost initiatives. with on extra get Okay. Great. the forward. And you'll follow-up, profile of the LEAN margin you sort some And out my moving

On takes headwind. the bit government flip a other the are on of rolling how COVID having a than of are lessening margins that. still first today. headwind impacts some off over that you the would COVID subsidies hopefully Maybe the it talk negative the of But color year? some be will you there any just helpful. Can about of side, meaningful be half the longer impacts these that impact a then And negative see

Raj Kumar

Yes.

the by So, this here, Raj is way. Taylor,

last at cetera. This COVID. had all issues in to year, look and from I had we we due think was manufacturing, you a the et delays headwind If about terms million $XX the of all

expect would the as get sort Going year, expect Taylor. confident the I that year the that not half progresses, year. is I out, as I'm line progresses the the vaccinations into as going of of half would headwind year first back evidently, sort year, as this for as trend of that, to of abate, that rolled the and

Operator

question from Lynagh, Next Stanley. Morgan Connor comes

Connor Lynagh

Yes.

pieces, expecting? ultimately, something XXXX. this trying rate. lines. think of help And along you you're is how out about about you think with in you And frame Do you James I if think if Just think business? of mid-single-digit longer if how these Do can wondering time, is you to we're moving your should we basically, around I'm think driving margin, could of was cash is understand as where is I'm the wondering this us just could better? But asking big can look us flows out do free you sort just through cash sketch much release thinking exit But worse? can I capital we you cash for for working thoughts that. what sort do

Raj Kumar

Raj. Connor, this is Yes.

free right, So flow, talking about capital. the major cash working looking facets of at

doing on accounts side, was terms their of year. sheet last at quarter the customers our side, receivable the the DSO end balance of in window a quarter On the and dressing horrendous managing

improve. We we're that efforts. our expect situation just up that It's stepping collections to

are going do to receivable to convert more happen play going expect getting customers quarter. they're to and they gymnastics cash. tune are our understanding accounts that those in every how We I that with

control. we've to in. do I about So are XX going we that kind what this doing, going should I'm whatever DSO we to of say We're can expect improve year factored that that with days year-over-year.

the place the On looking we all there. million that actions talked put already million given -- side, about at a inventory, inventory I I $XX around to in to mentioned release I'm James, of $XX

going on be going side, There's as you're material the On but be around inventory the XX We're around it's days. as some seeing running side. opportunity, not the still AR it's to and DPO what that periphery. probably the to

cash opportunity real a last was from pandemic sales. estate have, year also to delayed We due from that the position,

So our expect this sales real $X cash million $X should we position. that come year help to estate in million do in of to

all in yield expect a these, right, would on So say XXXX. I on of with achievable I revenue, X% revenue that is

I that at if potentially a on long-cycle meet that number. a understand looking business. longer-term are to was or basis, fact, exceed we And In say we QX, you've could I'd got

when projects have build right, we project to a to that the X% some our to nature. a be say a on reasonable And X% And is would component there the revenue business. because is there cycle, recovery, look of inventory, when going yield We expectation. over I to is a

Connor Lynagh

it. helpful lot there. of There a Got was context

level, a you've I balance. mean, got higher a cash I at just it. appreciate substantial guess very So

has You've some past you return the in be of admittedly, of about investment do think somewhat of any positive capital? that capital. this going M&A. But at about the cash how free thoughts that I if talked of working balance? just priorities, the the of think that's cash sort been You'll year, What's But what's because public quite the valuations on great. sectors that we but are other look markets, be context high in would economy, around

Raj Kumar

Yes.

a be than I the what some we think going is going market evidently. 'XX. talked recovery. into powder to over cautiously optimistic about remain seeing keeping for But 'XX, We dry right buoyant now, So a we're bit more

look put things have side, million probably we We to technology to at matter cash using map, aside related. look the cash the will transformational upside. $XXX transaction help million We R&D us on can that M&A. to do $XXX So at there maybe on in done. terms that don't a that getting But be R&D, see our for road we or of accelerate debt

stick I On equity currency now. best side, -- for we the transformational think always to the is us our right will

Operator

Instructions]. [Operator

Next Anderson of question Barclays. is from Dave

John Anderson

be wondering the work prior But you've still Brazil. kind Brazil of of contract. of to -- I offshore grow wasn't of talk status about I country to a in A not you few kind Petrobras that was maybe This question you one tender. I'm equipment the an many about markets to for a most, believe Does presence on about a still strong new down if in have of there. year. years. sure might all had heard pretty is talk this fulfilled terms the you just lot just move okay in through? what inventory of all through.

past. little talked about that the a had you of bit some in think I

maybe an Brazil, just So please. update on

Blake DeBerry

Yes. Certainly.

for And during XXXX. for logical doing were correct. the figured the When systems had amount that XXXX announced tenders in And numbers, the their XX in those ran is So we multiple bid. fact, out we total that, come they rate. substantial wellhead of they first kind math got would your of Petrobras in works time would be memory a run we that inventory. of a Petrobras had was

The All work to cards. of is there, just the slid still out still right. but the has it are bids that on

at 'XX. that active, present, tenders but to about happen we up, on haven't early we're with in we -- do coming So there nothing but expect is discussions them in

John Anderson

down way now. back there? assuming with if you're huge do challenges there you to but that? up of are bring And through, talking meet wellheads, down not it's just where you assuming that your scaled that's XX, thinking that? are mean like I number about I'm I terms does that mean how to come facility a at Macaé in

Jeffrey Bird

We to we And Yes. Brazil. in still facility This some. Jeff. candidly, it did scale down is say have you're the right

and again to it pretty However, able had we scale we're recent have activity there, quickly. up some back

able So up that we'll we're that to received, again. that be confident is It problem. back order and scale if be shouldn't when a

of there We an work aftermarket from have standpoint. a amount operation significant

John Anderson

Of side. in We saw tree who a I about totally That's One don't that that's question, other knows where today. on talked had so different to course. these partnerships about new going. you wellhead the talk Petrobras, question. manufacturers have with the CEO Jeff,

about, hand-in-hand. always do thought they kind certainly of Something I've go

tree You're manufacturers. talking about with pursuing some those

a also have are course, -- tree of You, manufacturer.

build to tried for many market You've that years. out

there this your with major Of one is doesn't create know conflicts of also we there out manufacturer. course, So some competitors tree that that? a

little can bit partnership agreement, a on expand you maybe So please? just that

Jeffrey Bird

Yes.

manufacturers. is But there into spot. spot, So a about smaller will, the way larger, if think we the are really, IOCs the our from positioned standpoint, you than of sweet and it sweet NOCs, other of we're independents, bit from wellhead tree get standpoint. challenged a more is better a this, lot When candidly, tree larger tree a the you some probably our a we're from little standpoint the

our while and but sense So think where us for peer-to-peer of to sweet that to spot, Imagine necessarily providing VXTe right? really, with not talking VXTe kind we're that's think wellhead to those technology. you go we other it's about market. them about perhaps independently, the hand-in-hand, customers And makes providers where the it, if supplying partner it and go also the us providers, those wellhead tree tree

bit might As a going tree we are got that bit both opportunities those a some providers, large. I because think little the edges, of be little but at VXTe not is to conflict. really the that through said earlier, we've don't longer technical work to will but take there's conflict There hurdles with

John Anderson

the a out that's -- bidding then how in And say partnership, a when Okay. Does partnership that projects you in you're in terms kind that? technologies partnership them? a a little taking of much mean of just of today. up that terms together does the integrating Just mean of together? bit more maybe terms time Sorry, call marrying on I'm so of on kind and

Jeffrey Bird

no worries. Yes,

that our and we their about on list we'd price with provider wellhead with would very the into pricing on tree that them negotiate a to side. -- lead our a think technology, wellhead just they be it I times simply see think would probably integrate as able tree that provide side, you'd likely

tree, tree providing you really by will, about them integrated. also providing it's side, VXTe, the VXTe us the would, little a would the -- bit on kit, and kit wellhead. way, the underneath IP On which if more the Think the include the

Operator

This our session. concludes question-and-answer

closing remarks. Now to over conference back Blake for DeBerry Mr. the like turn I'd to

Blake DeBerry

your questions just thank call and want I off, appreciate the and attending first this for Well, morning, input. everyone to the

we than positioned to close more Just and with strategy much that forward. the you of quarter the pretty we're start at updating I company on were as to our our chats. that each the environment going with optimistic we 'XX well we for And we've pandemic, we we fireside into look believe forward are the progress close And like in. of our come the going

take until So care. then,

Operator

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

disconnect. You now may