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Deep Down (DPDW)

Participants
Charles Njuguna President, Chief Executive Officer, Chief Financial Officer, Director
Trevor Ashurst Vice President of Finance
Walter Schenker MAZ Partners
Charles Hale Polar Capital
Chris Doucet Doucet Capital
Call transcript
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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Deep Down's third quarter 2020 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 XX, Tuesday, reminder, XXXX. a is today, being November As related forward-looking filed Deep in detailed to A disclaimer Down's release Monday SEC. the issued statements afternoon 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 the 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 the 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 like time, this the At Charles would call CEO, over to turn Njuguna. to

You may begin.

Charles Njuguna

to thank effects and oil felt industry. you Good pandemic across oil Coronavirus gas Thank joining continued us the you of morning be the today. The and the and Sonia. crash for price

the hover remaining of the many expectation our customers price With with to evaluating continuing close of this future. of oil the $XX barrel, projects for their foreseeable are prices per around to level

third across Our campaigns with international the our the offshore lower execute seeing revenues during to currently ability to begin to pass quarter reflect restrictions expect after continuing travel year. increased current wild. hamper We environment the travel market the of the

here signs activity of we Mexico. However, seeing are U. in in our S. increasing backyard the of Gulf

the since before We are completed of number us of the quarter which to will middle of a be end short in the of the the of awarded cycle projects, year. where several and end third

increased maintenance-related work our of are they While in projections end be there the do the that to need service from year lend scope early for of the year. credence an the towards smaller, these projects will

damaged on year's professionals repair work our during hurricane have to season. customers their also engaged service this Our record-breaking perform offshore

our without to customers and much same these across This area response size, industry. as our particular, factors be our of same are depth and and can the longer compromising able our and We, knowledge In customers of quality they the because seeing that is value are pursue several quick lead opportunity times experience. are all safety. times competitors more consolidation including bureaucratic. to bigger grow our flexibility, however, in seeing Another our the with we service, larger us of for opportunities speed extensive attributed

Our is losing nimble. the to to competitive we continue goal provided grow the being business advantage by without

industry. traditional products our beyond services, the been has on recently focus Looking the an there and energy transition increased across

operations making to of their Our reorganize to largest new their their intentions plans include to customers have to portfolios have and their diversify meet goals. announced started forms energy

announcements We service have from companies. also seen similar offshore the largest

and are oil we As opportunities towards apply and evaluate developments, non these our to gas capabilities applications. expertise increasing we seeing various

critical of most free few color is Trevor which more is flow the in types our discussions of to to discussions efforts enhance the our relationships challenging into for new that in, cash environment continue shareholders, about well testament still leveraging on We as team. primary and business these business our segments. a which collective are these are customers some we the existing as promising provide generate encouraged by we this focus ourselves will undoubtedly questioning to we already order the Despite a been serve by managing appropriately as we our and future remains able our moments. to plan cash. adequately value part current have of assets, of a transition In our customers the of find in

Finance, to lender any Business me Trevor for we also call Trevor? confirmation Ashurst, forgiveness over turn for loan the now let received our the Program cash, applied of our from Small that for decision. briefly the to but overview, Paycheck a we financials. quick on Vice our With yet we President of Protection of earlier Administration's review year receive Speaking this

Trevor Ashurst

last of for the were million year million, of XXXX $X.X the Revenues for million note quarter Charles. revenues This having to the the charge the projects year X% company's restrictions compared of the pandemic. that last process to represents But as in expenses volume for gross for and our margin revenues disruptions the founder. XXXX the in resulting compared to included a quarter the year. margin quarter revenue expiration same year you SG&A of the in a resignation mainly the third of impact decreased third same as million service $X.X second expenses for administrative were quarter as year expenses lower decline lower compared third of quarter rent Shortfall received this of $X.X $X.X in combination during to in last margin $XXX,XXX gross this third Gross and third a period of Thank travel was XXXX. prices third oil of in quarter. to quarter compared please XXXX. the well well drop resulting as in of the quarter related XX% decline from delays mix which and COVID-XX SG&A COVID-XX Selling from was driven abatements to by general

$X.X Excluding million. moves approximately down charge, this to million one approximately time SG&A from $X.X

the on compared a for year quarter exemplifies as to remove cost expense a translates normalized the basis. to decline in continued decrease same This a expenses basis, the excess on third efforts SG&A in to quarter prior. in the So go-forward SG&A this company's XX% this

pursue to profitability while measures business. continue will improve We supporting to operations and cost containment growth the our opportunistic of

share year XXXX. of quarter per a net compared net a This to We income. per reported share. $X.X of loss or or of $XXX,XXX loss for of of $XXX,XXX $X.X Looking loss a at third third quarter this loss net the a

from due apart the debt, reporting working focused Our PPP in on $XX.X $X.X capital net cash includes loss that million We this as $X XX. capital structure remain quarter September long a million was primarily lower sustaining loan to no disciplined revenue. million and and term of

the timing SBA. We for our earlier, application expenditures in of were on balance application This is no flow and in oil global during with commodity regarding capital it our or remaining efforts collection ultimate just efforts pandemic we demand critical have was limiting of our to pressure on forgiveness persistent compared of As flow cash not submitted from negative prices. cost entire the guidance PPP of by Charles the the $X.X continues well the for quarter received In our our of however we is disrupt loan having free outcome quarter. due our to during lender have generate in quarter, third free $XX,XXX to This COVID-XX that items. free cash $XXX,XXX to on part able by to the cash primarily million summary, containment surprise the improvement certain touched as in apply as XXXX. flow

these cash our Our preservation will times to economic a these the by near must remain term also approach allow put in disruption it growth mitigate events. goal will when time be of business caused to focused only through but not it in on endure of invest right. the This position to to is uncertain the the more macroeconomic laser us advantageous

said, we oil in possible. will your the much with quality recover continues now with as to products pace, over the as back unmatched you So will gradual the time. customers a thank for all capital the our turn demand efficiency to That highest while I and devote as services, for providing meantime, to Charles. our efforts call operating at

Charles Njuguna

Trevor. That's our today. you concludes remarks Thank prepared

now will operator I to to back So questions. turn call the the take investor

Sonia?

Operator

[Operator Instructions].

comes Schenker MAZ Partners. of question from Walter first Our

Your line now open. is

Walter Schenker

see. will we question, only the Maybe

have in looking question, at we should at level point what unless you The get first structure better? you quarter, your this your to remain and that things SG&A paired expect materially to with are going comfortable largely in it at it and this expense roughly forward

Charles Njuguna

may things we slightly. point, Hello thought expected back levels start at the Walter. did to this it are past. certain where do We remain this But we this in roughly not the have opening envision up, we we areas Yes, level. at going to at are point, increase as

Walter Schenker

Okay.

know relationship in C, some number Those out who Secondly, had been, the had think a else? strong projects big to if years, I have a Shell postponed, B, theory completed, back has somebody with of A, I given largely company there.

Charles Njuguna

were others on on themselves Obviously, are are on involved we everything going ones we that obvious they much are which evaluations through for certain in going about. now. of can't watch Some there are that we to there, There which, the some reasons based them. right out internal talk

have they pared some so And the aspirations. down of

we down So scale about which I thing worked on was Appomattox public talk couple was following we version we had development. very put a out going a releases there other but about. projects have And they efficiency to about. they which talked called a publicly about be project a scaled They were press find. was also which similar on Vito able have we based release large knowledge to one on are well a of that press are project the been down put that's development which can some And out which of

talked be a strategies like relationship will Shell, what with rethinking continue strong do we companies to oil them. maintain about, So other as going their forward.

work So we them. to continue will with

Walter Schenker

to, there general million? Just not it's travel some any up that aggregate likely question, million as hundreds is dollars, time, will you repair to if what's may you of the millions Okay. once thousands a maintenance the that? or as understand of full type believe of out me be some opens is there $X of that you for give sort in a $XX you sense which travel, dollars, sense sitting I freedom of fully, to have, Can it us work to get backlog

Charles Njuguna

Yes.

number have of again have now, right of very a we million think I on in-house $X shy dependent worth is factors. about timing in-house the we which of know just work we

million We more a have probably which of out there's imminent work anytime. again lot there are million moving worth pop up around. of $X other but that or that's could And is things $X

sense we of business advance. in a not good On the service often have very will especially, side

$XX,XXX Sometimes notice. we or just into call that have order will turns get it a purchase need a and short a

on continuous a that's basis. So

Walter Schenker

we always still talking question still to talking more lastly, people. we And ask, are won't even are people, Okay. to are usual which I we optimistic,

Charles Njuguna

Yes.

We say But that are so didn't yes, that we we call. one just the are. and on that are we I of use yes. we would get the record can

Walter Schenker

Okay.

whatever is could will what Lord But sitting them. can name or like we go out reason his things was. Potter, not there need that there are named, who that to there still Voldemort to believe be he So who Harry

Charles Njuguna

Yes, sir.

Walter Schenker

we and we is, Okay. I are good wait. financial condition. guess in solid news The sit

Charles Njuguna

said. And to are. Trevor continue we that maintain Yes, as discipline, our to goal is

Walter Schenker

Stay you. Thank everybody. safe Okay.

Charles Njuguna

same. will do We you and do the

Operator

Capital. Polar like for Njuguna a any I Charles over [Operator closing no at to from And to Actually, Charles Hale turn question showing the of do would now time. questions further remarks. I have Instructions]. this call back we am

Your open. now line is

Charles Hale

regarding us Yes. I question what can incorporated sheet? What I Is don't into is on balance about other just one million? you have which tell balance the $X.X it the sit assets sheet. non-current

Trevor Ashurst

lease Yes. assets. That our basically is primarily operating

So than lease sheet. And and our assets. some property long accounting to asset us have according leases, equipment significant the and the include on a balance on term recent of portion the liability an both as value pronouncements would other the be to operating required plant assets, other the our

Charles Hale

Thank Right. you.

Operator

comes Thank And question next Doucet from Chris Capital. you. Doucet from our

line open. is Your now

Chris Doucet

Hi Capital. Charles. Trevor. Doucet Doucet is This from Chris Hi

couple a quick Just questions.

First progress least Mexico? much Could is much of backlog? And more of travel how bit flow. be pieces And outside at a in of of the going cash Mexico? of obviously and Mexico to of are it I is go Gulf the Gulf on you outside quarter your restrictions. maintaining positive through How know the congratulations in without challenged all, Gulf the the that detail little in being of

Charles Njuguna

hear of about quickly Probably can Mexico, Gulf for would going Good Yes, to better thanks XX% it Chris. of sense me a is XX% and pull calling so that just backlog, let have so is tied of you Hi just about to the be up, from the I in. say, to I it. international.

to our And so is ability dependent on heavily travel. peace international that

Chris Doucet

Is restrictions. you piece, and with transact Okay. do correct? the Mexico can not business are subject to Gulf and that of travel But actually

Charles Njuguna

yes. the For part, most

building them seeing are folks clarify, are being offshore. go can And before in quarantine some We also and that while be customers manage to they that's cash progress down flows. cases their But now that applied to, just also we it some will slow own to Gulf. it also hey, wanting to ultimately ties tries equipments subject restrictions the in for to are that us saying, our

Chris Doucet

a of don't Okay. little you next bit know actually the My oil I at, and said that Can elaborate various market. question opportunities gas that? but sectors what were you is and you you more in getting non seeing are on

Charles Njuguna

Yes.

example we discussions. I give heavily a in that involved So of will an project were

there space around push There the fuel in are a big in some or have very on a finding We had deep solar. offshore cell end some offshore to kind came to us is through some we framework a hydrogen wind need use conditions to of they not recently they and to thought deep involved subsea space. assets But lot discussion discussions subsea were very and around And where energy a piece in hydrogen application. be seems the what installed the conditions just basic about up are. talking or what engineering we of wave for they office

ocean has knowledge on team floor a lot of the our So environment.

very early being want are engaged. those I clarify, do lot are of a we so discussions of these stage. to And the are kind

at are discussing But it's for entities every there number time in right. companies of government seems and got each the region that some cable to these are of we extension Northwest instance, that's For products Pacific involved that installation an in. be a the and week subsea frame,

are moving, it about something the aspirations it this type governments in move Shell, to with So we could the But few late is and when announcements is way be last be of that rate At are seems they weeks made may all Total, have going, states, want their academia. that industry direction next dealing they it they work year. the major forward. going in the XXXX BP, to that

see where And so industry will goes. we the

to positioning be ourselves happens. be ready when So of part composition the and to transition just that are we

Chris Doucet

the have question out program the you buying currently of still And step if last Is you your are stock? queue. in and Okay. in I stock market? back will buyback stepped Or And place? guys back

Charles Njuguna

We new exhausted this we At not programs. started it. point, any have

So we to do. something are it's that planning not

absolutely Walter touching event that. that earlier sell was able on of we the to, would the review in any assets are able However, and are to we large we

Chris Doucet

off in something Okay. call I you kind that discussions those that put word you mean it that obviously ongoing? has C are was through? in because with foreign Are of and conference mentioned progress making the still somewhere a was last Or fallen the offshore country. it

Charles Njuguna

very They hesitant ongoing. but are a different Actually that am say, one. to ongoing. are I they just

are again. We seem But they get hot go cold to to. really trying they and then

a it's bit of coaster. a So roller

Chris Doucet

of step rest luck you. will I the right. in queue. Thank All Okay. Good the back with the quarter.

Charles Njuguna

Thanks Chris.

Operator

this [Operator back any am time. to no showing further like remarks. to And the I questions would I at Instructions]. turn further now over call for Charles Njuguna

Charles Njuguna

Thank who you Sonia. to of you today. And thanks joined our call all

Before would we our take moment call. to in a go, of the heroes I all recognize like to

in of Happy you call, our on service. progress So next to the And your to Deep to we We your about tomorrow. marines to a support any for we speaking and And Happy veterans call. with everyone Down do the are finally, your on we the appreciate like look forward Birthday. and you appreciate interest earnings on call, Marine would wish the call, Day all who the Veterans XXXth

call. And Thank so today's that you. concludes

Operator

and call. participating. Ladies conference Thank this concludes today's you for gentlemen,

now may disconnect. You