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Deep Down (DPDW)

Participants
Charles Njuguna President, Chief Executive Officer and Chief Financial Officer
Trevor Ashurst Vice President of Finance
Walter Schenker MAZ Capital Advisors
Chris Doucet Doucet Asset Management LLC
Call transcript
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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Deep Down's First Quarter 2021 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 May 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 the 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 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 like time, this the At Charles would call CEO, over to turn Njuguna. to Please go ahead.

Charles Njuguna

for thank oil oil the modest gas you, Good above recovery industry. barrel, steady and Thank joining increasing us per you prices morning a holding today. With and of $XX Rein. is for optimism

the many macro-events were However, Despite to net XXXX. a projections months, for consecutive year we quarter XX during positive call quarter industry possibly positive profitability able of stronger in recovery that for a still first of generate of second past this the the income do positive we've of team's note since time resources. limited able efforts revenues the better that to higher. like quarters so I evidence time first second at the first to XX% were utilize our our trend of XXXX. is been This and would to our

restrictions cautiously jurisdictions, be first travel our during optimistic As are quarter. international a us are enabled prevalence teams service will of ago, work lifted. able continue successfully investor during now scopes we vaccines, travel perform weeks With of the our most which mentioned few different to that to to to call we increasing offshore

for increase activity, and work. rest are beyond, the seeing especially a of in marked scopes we Looking of XXXX bidding smaller towards

our As we an life assets. of work is their there need work as increased previously extend maintenance to customers the for discussed,

interest carousels rental in also and equipments. We our increased other have seen

to on still larger customers the However, many of new in off given the industry, holding our committing are prevailing uncertainties projects.

are materials. Another the increases of we is facing significant in prices raw challenge

in For example, of of we not are steel certain seeing XXXX, increase just our able July we to to more components a unfortunately are which the price XX% pass on customers. than since

is this delay prices normalize is our full than industry recovery later. will could rather sooner our us, this that isolated hope Otherwise, While the project increased due to not further of costs. to

As continuing to opportunities around we industry, higher are transition of look the to the broader at energy nontraditional we energy proportion sources. a evaluate

future, these of timing of uncertain. While sources for the to of be lots promise some provide appear the flows continues to cash

application response Administration we the cash, of as all a to received better the known which time, loan, expect Business not, of continue get still on we Small most, for this from initial if await to of April forgiven. Protection XXXX. PPP, At in Speaking our for it Paycheck back forgiveness Program

will the yet the in But not process as application expect to discuss for the we buffer, loans our which period Trevor the forgiveness soon prolonged their moment. have second our March. satisfied. to terms so financial further our of is payment We covered position for loan, especially have a customers much-needed as as provided begun we loan received do in These have us us. some

financial consistent facilities step profitability stewardship. bank of of being one to quarters consecutive us our of secure bank, evidence closer our see to to moves needed able Our also the credit as our improved

Finally, are we in-house the backlog we we working projects often of that publish in through. periods recognize past

we remainder set expectations proportion have work chance the of based this on for foresee any to year, a currently have this number. of service and Given heavy we the

to the this these next could is most some be books, are to easily currently of committed While projects million we currently for which slated that also have of close we pushed on $XX year, aware year. of work

personnel extremely being case nimble oil On continues the of point faced that in flip emergencies. bear to determined past come X company the need are when By customer with and morning. track of our developed a built customers efforts And with had would and customers to the had A they work our would issue, on of morning. our for our on in Sunday coming afternoon, need yesterday PM were our responsive we side, solution. solution. Sunday and offshore XX Early plan an and had late that proposed fruit developed our record that at a Mexico recommended Saturday in offshore some our night, testing Gulf we had hand, ready an facility our offshore option waiting action, of into by resolve started to field customer's materials not to final on of situation and to we we their unit early our Saturday some on then pursue the We Saturday evaluate team morning, morning. this before their personnel a shop

the backlog, perceive a our happen frequently of to dock are Such unit them. the the closely since be we're key included speak, But and the trend will we by to results. team part cannot of services further projects along year. continue followed this financial of the to the not we to expect rest Coast, in headed customer. As they providing members is who And for our our able Gulf be

managing of With now quick the on strategically as our which business. briefly President Ashurst Finance, that are remain levers pursue to Trevor? and structure financials. review further grow our therefore Trevor relentlessly to the within call me for will opportunities let our our cash flows our cost over control, Vice we turn focus overview, Our of our

Trevor Ashurst

Charles. Thank you,

margin pandemic. of of a project XX, X% ended million a their increase percentage million, in result March backlog working remain of revenues opportunistic increase XXXX, compared projects to cost Gross and due increase the consistent higher implemented year. a were supporting first $X.X of initiatives compared growth while work quarter the service when which year. general improve administrative to the $X.X the year, this QX of being generated margin ending in to primarily quarter the containment customers approximately increased This months gross a delayed in previously primarily level which to Deep XXXX. to through to mindful the X XXXX is gross This margin as X activity of the revenues expenses million XXXX $X.X $X.X XX% revenues represents first for throughout last by million generated quarter compared XXXX. motivated the equipment driven in QX rental cost in and to due proportion mainly Down first decreased XXXX, profitability, was we our pursue approximately is due months XX% quarter. in of Selling, profit of for increase measures our by having to more business. to larger reduction company represents of XX, this XX% expenses a last a having X% versus in We which was in that of SG&A of This the For operations decrease March of the to XXXX and

compared $X.XX net to the diluted year. or net is improved net of to of period this XXXX. of loss of $XXX,XXX, a driven first gross this $XXX,XXX quarter per in year of income, the for mainly loss share last first was income Turning the to QX in The revenue the This or margin by reported of year. share improvement for same quarter $X.XX compared per net and income higher company

our second received million Our capital the as In workforce XX, March includes million March, allowed $X.X we working strengthen capital $X.X structure early and fund working loan, in has PPP capital. in $X.X XXXX. cash which of to we as us million

As PPP the balance loan. continue to on Charles our mentioned first guidance before, regarding from decision the we its forgiveness the of await of entire SBA

to SBA the during this decision point expect of this We receive quarter second year. some at

has We covered been loan apply of forgiveness also the expect to our once second PPP satisfied. for period

continued positive fourth in translated increased market this we of carry recovery So increased quarter fourth of the prices that to began commodity of we in of throughout will see the levels. XXXX. this quarter gradually on year, healthier to activity in And This encourage the of And to the last first orders recovered the year. quarter as trend year. in summary, signs rest

trajectory sheet to us your to Looking our thank strategic measured you appropriate forward, I investments to make back that when positioned And Charles. our for on growth, over of us turn increase now allows well and call this capitalize time. to said, capital balance will efficiency. With the

Charles Njuguna

Thank you, today. Trevor. remarks That concludes our prepared

call the I'll to back questions. So turn Rein? the take investor operator to

Operator

Your Instructions] question Walter from [Operator first Schenker Thank MAZ from comes you. Partners.

line open. is Your

Walter Schenker

Actually, there'll questions. X be

current mix revenues, and cost that point, at a least business. to related, increases little significant more as service at portion materials, a substantial given I'm of are is, really the First, how trying color on your your get on of this

Charles Njuguna

good for morning, the the thanks for question, Thanks sorry. Walter, call.

of or which building service includes have install, work, amount service we use for equipment, do we service. While then work the a then which fair we us

in was materials we need be $X the their that so, installation. project offshore which to they worth, in certain units our units right. seeing customer, are the that already projects close across project, project, $XXX,XXX committed. we build And with probably about case we a use to for our company going have $XXX,XXX you're The oil to point, certain themselves increase overall the cost in but And will to And talk are on of million. we it and had

variation order. no is a So there opportunity for

high that proportion that are company. service we we So more of a work is a right hit service still But work, significant fortunate to the now. have

Walter Schenker

price I you going very important, or there an use to forward competitive that materials of of environment, a some revenues ability time sort And when trend and at forward? going contract for given is are a realize protection it's it

Charles Njuguna

about discussions We having internally are that.

pricing was things we a then projects, had One we opening because of things up was are nice some But storm, was committed that it and as where last perfect - are the the executing. year.

it's so, harder. been And

in are As to wording we the an extent. us to future, we putting in towards contracts look protect our

where in active. in not an for who are the However, we people participate smaller their keeping bigger to of customers are environment projects so sake doing willing aren't

pressure So there's some as price well.

line protect can ourselves. we are yes, are everything But, balancing. fine do a it's to we So we looking to

Walter Schenker

second of question, the those correct is, And in first Is the minimal the quarters. will lease, mostly be carousel, semantics next a in whatever were right quarter the that on the couple revenues the statement? rental and

Charles Njuguna

Yes. Yes.

Walter Schenker

But this will year. that completed be

Charles Njuguna

within revenues third biggest of - will second there we Yes, be in there significant biggest is the But the some quarter. well. quarter the as expect currently proportion the -

Walter Schenker

be margin business And we've off are it relating expenses that, there good while written the to should carousels. given

Charles Njuguna

Yes, sir.

Walter Schenker

done ha-ha? you carousel have what And get employed, the to other

Charles Njuguna

going We actually do some any I'm quite but bit not - interestingly, points. we again make to call promises. to a actually of give But at a you hope have I interest,

Walter Schenker

Remember, I'm getting - I'm getting older, Charles.

Charles Njuguna

time Walter. long live, to a got You've

Walter Schenker

on second the it's very I - - at would from has does some you we cash immediately but understand just cash. building a cash got point surely much really board sense PPP the to run realized been returning are But I not lastly, do life loan. really any it any that we just you carousel, thought do feel you the how sense happen been of And have But difficult. need some if business? have be and I came

Charles Njuguna

the [finds One it] [ph] your that. been point, I to the is in of want push touched to on XX. payments, towards haven't So at cash do of are And, first customers their question, forgiven need too our customers the obviously seeing much. fund this we out to therefore, we we some also so so comments answer heavily any thing to, are prolong of part to net we it that think, begin us we pushing bigger our them, really

table. But As do a commitments yes, a board. to, on with we'll timing that that we're or if to discussion would as the sell any it have any buyback carousel, when on be be definitely the able make ready not time far the that. we on would as of But I'm

Walter Schenker

Okay. Thanks a lot, Charles.

Charles Njuguna

Thank you, Walter.

Operator

question comes from from Capital. Doucet next Doucet Your Chris Instructions] [Operator

is open. line Your

Chris Doucet

Hey, Chris Charles. It's Doucet.

Charles Njuguna

How Chris. are you Hey, doing?

Chris Doucet

Congratulations on your progress.

little of how But that So previous your was to And I the a does only questions actually backlog? a had. asked had the backlog question backlogs? percentage How your that compare wanted I given COVID? the can is backlog. historical caller execute you touch I just bit, big on to of What couple

Charles Njuguna

is we thanks Hey, $XX touched on do like heavily the if the question. everything If customers that for determining Chris, now on Yeah, we to when right depend was backlog can it. earlier million. close our -

decisions to entail For which jurisdictions customers have that. instance, would as move Again, into open that some million we also international next have own around year. do easily could up travel, their $X.X make this

on optimistic we that factors like of all to we're So to of able we're today. definite earlier, it. a commit we'll said timeline able not it to execute constant, be But being on all as

Chris Doucet

Thanks. luck Okay. All Good right. the quarter. with

Charles Njuguna

Chris. you, Thank

Operator

[Operator this Instructions] continue. you may There's question time, at no further

Charles Njuguna

We I our our to Deep And thanks you call interest speaking on you, and joined the appreciate progress Down you of calls. with earnings who next Thank and forward today. of your all support to look Rein. about

conclude let's all. today's So you call. Thank

Operator

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

disconnect. may now You