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Deep Down (DPDW)

Participants
Ronald Smith Chief Executive Officer
Charles Njuguna Chief Financial Officer
Tate Sullivan Sidoti & Company
Walter Schenker MAZ Partners
Call transcript
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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Deep Down's Second Quarter 2018, Conference Call.

During the presentation, all participants will be in a listen only mode. After the speakers remarks you will be invited to participate in a question-and-answer session.

call recorded this X, Thursday, reminder, XXXX. a is today, being August As related forward-looking filed Deep in detail to A disclaimer Down's release last SEC. the published statements night the and with press included is is request. available or the website Company's It deepdowninc.com also upon on non-GAAP our used in of website. on release the press our measures included is call in financial release reconciliation press and A today's and on to statements, the cautioned not place which date only are on forward-looking undue Listeners these of speak as made. reliance no revise after any undertakes forward-looking obligation to reflect circumstances its also or statements the Down Deep to of events made. date I'd to time, this call At Smith. like over Ron to CEO, the turn

Ronald Smith

upward off projects. prices an a have independents long higher wide to independents projects oil spend at several oil existing companies last services progress additional Thank our you, Demand opportunities new driven Down. to I'll open quarter to are reasonable industry will a starting industry of stages the and call second and Ashley. to Njuguna by Oil pace then Down majors that CFO and on call relied then Charles share pass deep our for maintenance have specialized on quarter water years. Deep in far challenging after few the on demand welcome sees our our financials call. shore and some We I'll trend then for services in for management review flavor firmed morning major and as for Good is believe first range for insight Deep months. over and the questions. and the early on the for where continues equipment

availability and overdue such of result certain forecasting. budgeting efforts are financial as a However, many constraints less long capital

of faster. Basin Another positive some the logistical into companies production oil can hurdles the are many Down production production are Permian onshore turning attention resources for that their to get by affecting hampered with these offshore bottlenecks Deep

about at development in optimistic America projects very and different of Latin We are Africa. stages

in in you from may back As new two recall million in America. April, announced customers the subsea orders X we South

of pipeline we has expected pace should second the the our quarterly on projects Though that international revenue pace capabilities. political view largely Despite work slow are the involved Down's room growth provide for However, as over predict hard majority annual in unique slower of years. complexity this the some few and international encouraged and to Despite diversification from been continue or with Down substantial regulatory experience due their a quarter came offering Deep with during international next Deep growth opportunities the opportunities than engagement of to international financial our issues. growing ample even our basis, and we to added region performance improved for markets.

installation over and procurement, like AKA Down is Deep key have the While in cutting valuable expertise, and been the and spanning positioned the our EPIC capabilities, in increase driven and an expertise, unique contract in explanation solving cost there been streamlining oil and in by in Down during and summary engineering companies major focus by production the bid of efficient on only will and prices, offers believe ours. confident a strategy well large shift we are provider to increasing special support areas super industry problem activity on development situations. engineering, are deep water all few contracting of sizes. a contractors, the services one of of also commissioning of seeing portions side, we subcontract the shore service customer looking And equipment are expand companies a Deep demand majors contractor downturn, given deepwater operational has we higher next innovation regularly we opportunities consolidation our to project requirements years. very customized lead production. that Based contracts now on more a In are solve our then they requirements business EPIC where a expectation off invited planning to toward to such EPIC

I'll completing For of XXXX, to half remainder very over for high confidence the this to beyond. XXXX opportunities we have grow Charles. the now year, and also that for scheduled the of few call first with continuing pipeline were key assignments And our in of a originally that turn while

Charles Njuguna

Thank interest Thank You, Deep Ron. for you your morning. Good in Down.

release get second to press so As published we session. quarter the last our have of keep overview in I remarks financials Q&A a night, our brief my can provided good we

over We with plan are pleased containment quarters. have few the cost made we our last the progress

are While seen those completes, benefits we first beginning be largely the some incremental expect benefits in now balance the of XXXX. year measures to of seen the over to additional be quarter and

collection However, for second additional we this anticipated quarter. have and so improved are in in lookout quarter the the trend far Cash in we always as operational efficiencies. continued third the

cost respectively XX% current and absorb new and key a overhead to We Deep while from retained our in and actions as cost ability identified reductions, compared our second in the of margin down quarters Our having that million cash work quarter, ensuring and took to metrics higher XXXX gross second we to million quarter realized of in second XX% sized over to short-term business areas Deep quarter. sequentially investments We as despite have in to benefited still of XX% some few did activity. and the to make first Down from personnel our level achieve of improvements a XX% percentage custom of SG&A right that the coming action X.X from to quarter service margin Down are today payables able the approximately and quarter sequential the the $X were in in weeks. large revenue, of up to first operating our grown and as the key years. in anticipated capabilities, opportunities last could close of support XXXX. in

service We cost will continue. opportunities any work will are to continue margin and towards the pursue reduction recent that optimistic higher other trend

as XX. done Importantly, Deep that our concludes $X.X to addition book very is customers financial that some of in belt important tangible today. sound We of working a and in while believe have I financial of want an investors. remarks strength for June a XX.X tightening And capital million reiterate good attribute prospective Down value current million position remains our prepared our with you including

So we to questions. investor now take call the will any open

Ashley?

Operator

Thank line Sullivan & Company. with you. the Tate Sidoti the question from comes [Operator of Instructions] And first

now is line Your open.

Tate Sullivan

Hi, thank you.

assets more quarter sell and sold you those still operating asset what give sales sale you you as Ron, to as can and details the on I think you have an had do view well. you of in do inventories kinds

Ronald Smith

I'm question on let answer we to Charles stuffs sell. that Charles. going Go the ahead,

Charles Njuguna

Thanks, Tate. How are you doing?

Tate Sullivan

good Hi morning.

Charles Njuguna

of and We ROV tooling assets. our ROV assets sold some

call not quarter believe in the renting about that, actively. for where them and last out assets recall talked may I looking You sales before opportunistic areas we we're in

opportunities So saw we that some in area. that that was

also of long have clients couple term. former than opted on a rather We other to rent rental that purchase the assets

- and we're presents not go as that So do itself sell area actively, ahead view where and renting we'll that if opportunity something the it. an

Ronald Smith

to on sure don't we're it is What to not we're Let the selling give less for what that making so revenue some of we anything other actually feel and me not them, words, selling on us areas. opportunity in future our we're buying offer touch a we're books be gear solutions like that In anyone other that we're is after that potential. this than a we'll that there's that will other good too. and some having more what client work our they're to of of introduces sort able new

Tate Sullivan

orders million backlog your from noted XX-Q XX think your to and a previously that's give you was or related announced any it number million. I detail $XX Can Okay, that in saw of also last the order? I on you of had committed up incremental

Charles Njuguna

so Yes, we'll knew on scopes that perfect relate discussion have we that incremental segue It's of a does some were relate the work is question perform. on It to to - have. we additional that you good going actually work. is to

the One of than slates to close wanting rather where but now unfortunately X.X, up going actually first wanted X.X end at some they of revenues to our next to million, now it be it's one the the the right want September, of was of that equipment at it about year, quarter further will right. shift the the project is end that going to to the of so

Tate Sullivan

about review or your strategic your to mean is have I talk Okay, a review, I prepared imagine you it missed I but is remarks, open timeline the may ended? finish can't there it but in

Charles Njuguna

commit we a is can three time that. we because in forever. if months, we'll the may call update we'll have do about of we At better By call there finite any things the have All about it we end timeline. position time a by can get point we not be the provided to this go bit financials, the and a year in imagine where see wouldn't We the little I multiple stand. is definitely on have it about that questions talk this

the and to looking best full a they're the companies We've equity XXX the have on As genuine and XXX and approached in is multiple to or Depending of spent evolves was the a a interest then on to, especially deployed. and where are lot you discussion private billion by so sideline consolidation they to be interest who talk that's a going where shareholders Ron on estimates be felt billion, see billion billion process, in the available with on company there. sitting M&A from vary go that it the first run touched partnering remarks of B and about into to now it been been industry. in his of that from on company there's funds consolidation a speak that's

that you can calls kind position. random not the money that few getting, led we've a imagine So but had with them credible really to this that of of are credible many us you're

Tate Sullivan

line, back Okay, thank for thank you the I'll And you. jump that. in

Operator

comes Walter your from the And with Partners. next line you. of Schenker Thank question MAZ

open. now is line Your

Walter Schenker

you at it's first, equipment business, Actually two property XX Depreciation much. XX% of in too or an the is term, depreciated. but it's enough, questions, plant, million, three and not about net sometimes sometimes have it's accounting looking

what would XX the look base asset in As should you of got another property look plan the have how looking replacement equipment twenty viable you've your the million versus million, equipment of your X at at million cost and basis? construction I plus net in progress, at you

Ronald Smith

I'm Charles; It's I'll you jump not answer to going need I this. if to. let in

Charles Njuguna

Walter, he to lecture his I do that. sophomore on teaching yes a if know

and in cost right equipment and we number that plant low to term is some pumps when actually is a that about The equipments. cases on higher thing property, the rental our own So build in is one labor it assets, of zero for, depreciation assets like talk on our and our an the also we with which shore cost we have touch or that like accounting you're value self-build is replacement in or lot on what materials. operational view especially much basis off of than kind that books we

So the books for. a than we able higher I be say don't may lot have now. like what give a right specific in number not we it's to to it

Walter Schenker

or you to for the and turn Okay, the big to actually I to going rest years whoever we know - on going like what going that's to they're make hand carousels buy we them me something continue resting. issue if have money the asking they to next are call have don't into we on - two don't on to a have into money. are can want three the sit about actually but them, They're we books it, without can't might turn them business, are other that to actually a

Ronald Smith

talk to is about reason let The wanted you first talk I this. I Charles

Alabama some X. this is in we've time, penny, at right. they a different here carousels But sell value around on two, are of being $XX these through this because - blue this looking these, gone opportunities the one for okay, project shy price, million on long one X.X, or two market down usually - I'd these are the of great carousels dismissed just or we So falls value the Mobil, or not to and we're is X.X win when and so say not in that. it's I've have down been market books got right shy the just

send we bit little large one So couple to we to one one have and that's good just mobilization as that's one down now and Mobil, the and we right one run - opportunities for to this ready a and or I to go here two it have in wanted carousels serious Alabama Malaysia. the say of with every one softer people it's price T&M as of pretty Mobil, here I months shape a and have for all opportunity for as

of that and good so So put about if can I'm to feeling these carousels But some really money in be we're the we to of good able sell I'm now. bank that just - going but two what and feeling here. those like out knowing really of one said, there's number the the walk you that - carousels then ten is around much out just so there's more PP Charles as and

good for or year this chance think carousel I Walter next the yeah, year. So

Walter Schenker

the say years just three we've me Let lecture. Ron that heard for

million a create - carousels a X.X is really price find it the me. at or The You wanted going know X or house for street to I'd combined XX we're necessary across They million; not started roughly; million bring get to they to cost else, value. X.X so hopefully down. Pemex is that sold they're the if be it going million someplace

know think view can hopefully for of on I don't that one one the you someone of stand your for. we where least at really price, it we first sold prices these buy can and get

price company's stock buy can $X the the stock, half your of you fair of we at argue buck for amount a the the and of may like under Just value moment dollar. a whatever a a

we of like as it gross can overhead done for and lease the two Is discuss that can forward with think term using you've the margins. very numbers at maintain that's cutting everyone would see I going ramp of price the the last get to more like and and So realize the make type off had of way sold And Charles i.e. you've enhancing I'd a of company those it comfortable see books. we number model benefit good revenues a business it the far, downturn realistic job feel a them to new all someone to so sold, is that revenues? question would the everyone and is looking in when you norm whether higher else's a

Ronald Smith

like that to have in answer processes. are that people and worked the behind Charles increasing hard really revenue and we going the I'd to to we not because strategy more when Actually starts us add

reduce super can't we're safety we really audited tightened or by or our the constantly of quality up because engineering an have We and get control being and process work. these majors have to

the that we've done So still the and do cost cutting, can with we streamlining increased so less. the more processes

question be your hard really start to yes, when is this down we back come that answer revenue and not to going steadily increasing increase but the the what is the going to as that add have to So SG&A trend, is the achieve, to are we work we so revenue. we

Walter Schenker

question. And I'm sorry last really my

the is the an just stock, there, board the legally that you've process see can out been blocks to started, put You the may given are XX,XXX Would question sure that a out didn't buy back was stock stock you under precluded from fact you've I'm of asked have buying or you the the process any the there considering example that since - be precluded you now has at go half, in going distorts stock be hopefully the you've in you you've asked allowed in you've market process at moment buying - obviously or the to announced you the you're appears if - dollar. shares having the as now first continued on?

Ronald Smith

answer we on steps three processes can one the sell the with We stock. step yes. is, here, can going in there's So is

process - second The

Walter Schenker

Buyback actually.

Ronald Smith

say. to what That's wanted I

can't we buyback. Sorry,

on banks. working with is the credit, Charles line this of okay Secondly

we're So cash line is that look bank operating balance. the line, our Matthew's is morning the is a this single Treasury on every so as something in without of so and third key I at cash credit report,

and is line credit increasing of X start hoping carousel that the So buying back. little and a to going are some stock get stock teeter still to could have they're as based it's we again, the X not thought our it less we soon got tottering, over going - stock things We've because we cash to million. are balance good yet than don't that are all was of increases get - balance the some as before on we're price really the the and sells that on, back

either on going the it's sales. value So we're be cash to of based the doing or increasing one or what

whole bunch stock the So carousel, back. sell a that's buy really goal, of the

Walter Schenker

Okay, thank you

Ronald Smith

Walter always talking care. it's good buddy. I you to Take

Operator

Thank next investor. line you. the [Operator your from Riley And of private Gene question comes [ph], Instructions]

open. now is line Your

Unidentified Analyst

question uncompleted Could they a to to again so on on you. dropped what date of Last completed the you they've right those and quarter, quarter. both I bounced up asked this and explain back billings your that earnings quarter last significantly about Thank now estimated contracts contracts, accounts me means?

Charles Njuguna

those A the basis. and for question. we of that Thanks fixed projects books completion about that contracts Gene. to just mix, have the revenue are mix contracting the that subject shift be Hi, on the accounts on more of more to with lot proceeds the a recognition do AFCC gotten is in percentage price the to we've the

we when really And type change. to this when projects those time fixed from accounts is accounts and so when material move price shift

we have our vice to - accounts we a T&M of fixed high contracts so are So versa. those and when contracts higher and when price relative proportion

Unidentified Analyst

shift of what again, contract just back me? one last the that dramatic is the two then type the and in to So quarters other from telling you're

Charles Njuguna

today XXX T&M for especially after continuous show the for in a on in and for financials. we we on on on that that quarters, is show part $X but third be on of account is basis accounted that under a –when the be the if get our which sheets that on being announced not way - would do get would susceptible we lot and that second the would of up typically, But not got liabilities contract, offshore we balance. a we them fixed contract a up would so million accounts price order just - we the show would service so sake, commitments, for basis, not to a and contract would those argument's big Yes, may happens what the a purchase projects those balance that therefore

to say not thought I So go sorry. - ahead,

Unidentified Analyst

business I to that's in any does is this So Okay, XX backlog is backlog contract yeah, backlog? - that business that signed your to say last way like say million, receiving, correct? million is be that just relate like to is it of your as sort so some but of the still XX that in that going backlog, in it's moved expected on was you was you the opposed now now a to your was from quarter, actually one like

Charles Njuguna

on work because committed what have hate contract predict to I change to future was happen for would the that I have yes the heart. shifts it What on a that future a just a actually. because so basis yet will of partially - drop There a to some have simply or where answer cases because we yes. may say some much is, the backlog contract in is so a use hesitance in to it not a if that we a about part as couple is you - cut that may the as chance of the we give instances just be predictor answer clear at and a not would but of no be, of short a But that backlog, what that's of are is of use do answer to signed, a

Unidentified Analyst

Okay, thank you.

Operator

time. Ron any CEO I'm not the further questions I back would Smith closing remarks. over call this for you. now Thank any turn And at like to showing to

Ronald Smith

[indiscernible]. of with Thank our this joined to you, Ashley call all concludes and our thanks that you today's, who and

Operator

participating This conference. and today's you. today's you thank Gentleman Ladies in program. for does Thank conclude

wonderful Everyone day. You may a have disconnect.