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Deep Down (DPDW)

Participants
Charles Njuguna President, Chief Executive Officer, Chief Financial Officer and Director
Trevor Ashurst Vice President-Finance
Walter Schenker MAZ Partners
Call transcript
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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Deep Down’s Second 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 August 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 CEO, would call your over to turn Njuguna. Charles to

You may ahead. go

Charles Njuguna

will the Good at today. and capitalize longer continuing been the above these with for to prices price able a that industry in Thank quarter. you for the for second This adapted has industry, barrel, increased catalyst hold point hold morning, to levels managing has With activity you, within this cautious increased revenues largely projects on oil positive joining we’re us sentiment optimism to in Justin. per price the thank resulting which $XX term.

pass price by increases by prices. While this progress which hampered of some these the we higher mentioned lower as And increased call, impacted projects, fixed cannot margins on last revenues, we’re was were we labor costs on material this level by encouraged and customers. the on to

successfully Talking such projects, complete. to now manage the operations adjusting situations do carousel forward. are We situation, our announced project our envision of better being not and continuously norm, going previously is currently this

no to the to injuries customers’ the are environment. We’re products especially that there personnel, no glad damage to impact and no

our performance team, of on and not the company the with safety success In within project. the without possible and level would addition close companies other worked by collaboration high we our overall have been such to

field, several from in and an sale modify equipment need were a order they when of we dollars project the for expertise By schedule, while save potentially are in to on expedited to put days creativity, eliminating our customer the team’s able our to in of accommodate Our was costs. hundreds able thousands vessel full display date.

day anywhere are $XXX,XXX a like to we perspective, depressed $XXX,XXX from levels. those vessel vessel at other not And range today’s equipment counting price rental could a using for rates, day, prices For labor costs. are and additional

boom time, the higher. prices During those even were

immediate about well also many discussions So, project every day the of future benefit customers on are This new saved this farther provides as rental the other spawned opportunities, carousel a road. as down customer, this has customer. them project though, magnitude to with of

of of discussions in offshore engaged by level gas projects management also slated having are would them in is discussions customers’ be future engaged or applicable advanced cable are are and These drilling about designs non-oil for as we as we point with future for XXXX, field out regarding prospects, as industry. the to the late that and carousel for are our discussions XXXX. fairly that depth I We even like would for XXXX exhibited far interest designs.

provide actual on yet detailed very U.S. sanctioned in projects discussions, but the say at details presently to involved to We are not sufficed liberty discussions of within we’re these

a international our will expertise to incumbent acknowledge we fruitful. have that the efforts hope supplier-base our While been show we are these U.S.-based, able leverage they be of to providers of and services, presence

effort efforts, of our is gas own our dovetailed equipment. operations, further the our oil Our of endeavors which sustainability of efforts to with to internal One expand further electrification detail to example future plan we beyond increase in have periods. and well this

challenging environmentally come reduce with environmental up improvements very is impact. our fleet equipment current to our engineering further to our friendly, While we’re team

that has offer, technology as looking core two as our actively base oil avenues competencies would company we opportunities, outside who at are are on could down for complimentary to energy evaluate we what sight we storage these intently caution that do of of our subsea road. Beyond of window an losing rig developed hydrogen engaged leverage just opportunity pursuing company, as be without the different we business. examples to are with a a well farther many want the the earlier, materialize I These also opportunities is discussions, to in touched of that We opportunities sector.

a eye our are we continuing key and a flows. keep cost focus, on to While remains close growth cash structure our

by forgiveness our position received of XXXX. recently first cash in our the for back loans, As was two PPP we April the shortly, Trevor received will enhanced detail which

their On our cash flows the from us with own flip led income some cash a larger resolve which of negatively operational struggle in to to customers flows, impacted for turn and which our provide quarter. receivables, continue our side, the for some operations

see prudence to call While wait the a of of review make overview, to this for receivables Vice as briefing to me these our we the make customers With our resolve to turn of quick these will President Ashurst to now entail. the Trevor over continue payment future financials. what without Trevor? that pledge let Finance,

Trevor Ashurst

Thank you, Charles.

which projects, by decrease XX% last further prices. and of of compared costs gross we a were XX% XXXX. the three the when material gross XX, in compared a generated quarter ended labor percentage $X.X impacted ending year, of as to three which revenues of profit price revenues XX, XX% second Down which margin QX Gross for was lower margin generated months by increased represents June million driven the XXXX, this revenues a June in declining XX% the For of Deep fixed was the to year, million, months in represents $X.X increase margin,

aforementioned administrative for there is of to $XXX,XXX elimination last reserve rent accounts we that charges position. QX also where abatements of receivable. company’s of $XXX,XXX $X to on $X.X a this than This charges a the million these X% SG&A QX for decreased Charles their were or the excluded were $X.X be QX in XXXX, for receivable accounts year the was And reserve the million that received compared the incurred doubtful doubtful XX% would last the million year second included lower respective this year. periods, of to severance Additionally, compared touched second $X.X QX quarter SG&A last million expenses this year the of for includes during and received If quarter XXXX. Selling, COO general not in of to SG&A quarter second to $XXX,XXX related be year. for year during of earlier.

we capital million includes of net improvement million this the our net net per the recording million $X.XX loss the mainly as or of income, compared the to due net second full April million the XXXX. $X.X of charge impairment XX. reported year of per certain of the and second a in And is recorded obtained $XXX,XXX a loan long-lived net loss in a $X.X year, primarily of the for cost recording a PPP to loss June for sheet, by $X.X capital share the driven working quarter forgiveness income was of XXXX. to magnitude cash structure structure disciplined balance company in assets. in to to related or $X.X the quarter of last Turning Shifting quarter income maintaining share diluted for and second The $X.XX

workforce have application loan entire last continued our team to level. highly full mentioned, the review. In has This received half loan we We perform just will and of early received PPP us the professionals allowed company obtained And forgiveness to witnessed continue in as throughout we first the a year. rest year. increased working this activity of fund the reminder balance have project participate this just for the – allowed the previously currently is PPP SBAs in the at year. pending the strengthen this throughout is our as our skilled We of has March PPP year, the summary, dedicated of the of trend second submitted to of second encourage which forgiveness $X.X As of pending highest capital. we million we recently a loan, full recently we

and our appropriate Our balance to us for this said, you thank measured strategic capitalize position us investments sheet increase That growth allows of efficiency. trajectory make time. when to capital your well on to

the over Now, Charles. back turn to call I’ll

Charles Njuguna

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

So the turn I’ll to take back call questions. investor to the operator

Justin?

Operator

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

now line Your is open.

Walter Schenker

Hi Charles, hopefully everyone’s healthy down there.

Charles Njuguna

morning, the family. Good Hope same Everyone’s healthy Thanks. for Walter. your here. and you

Walter Schenker

the point. Family significant were doing project with good. couple well the Can to was announced which June – how quarter? questions, completed. of carousel, today the the in revenues was you at this that you A Well, revenues

Charles Njuguna

the for for half within range In quarter, overall we of did it – $X.X past probably million with when we past our June quarter. $X so of less within to million the than the project this project, it the about was provided

it So was…

Walter Schenker

Okay.

Charles Njuguna

projects So that to that. we had contributed other a lot of

So XX%. it was about probably

Walter Schenker

Okay.

So show quarter. most of up it in the will September

Charles Njuguna

A a significant Yes. within the the well. did bit quarter amount have well. little And we quarter as first September as in

Walter Schenker

Okay.

Charles Njuguna

Yes.

Walter Schenker

price the a contract had you that fixed was with. not That problem

Charles Njuguna

No.

work, had had to old quarter which some lower were show for well. in relationship which an to third some price as to on we and rekindle So service we some win, were will taken fixed projects win strategic up – which margin we able the reasons,

big get in material prices took with the late us. foot and projects customer those then then on a And door so prices material company. oil our went And probably we this on year to last just a south

Walter Schenker

that is $X.X history client as I’m you for some the the big back work to the because done. distress in money, the receivable, because client not And to was of million financial is lot but paying has issues boy just Okay. us, company, the a regard just companies, thinking of or the to for not of of issues.

Charles Njuguna

– two there the compared involved this from The is And the is to let pay. our from a supplier involved project. client the and customers client me choosing first other companies who project, this. to part clarify, just The of other we’re bigger in client this actually talking and smaller are in to so – picking client,

$XXX,XXX. and a other a customer. big one and are pay. NOV them shy And Baker just companies. was is international of is The just One Hughes they’re who who They of is asked client and to and $XXX,XXX another choosing $XXX,XXX the picking about

Walter Schenker

– additional work sorry. have I’m you And

You on or work have project additional not? that

Charles Njuguna

not will executing – we on paid. We that do get have work additional is we of until be that project that scope

Walter Schenker

are you hopefully And critical mildly have at you for to project do. least

Charles Njuguna

and in day do and need we do if leak. work, Its – do us to they until to this here absolutely they paid, not need a going because the it, to – claim I they commitments. have they but firm we get still But they’ll I’m start probably start, age, make it,

Walter Schenker

to a recover insignificant eventually not maybe is possibility there receivable. an probability, could this as So you

that like gone. Something bankrupt and and they’re in when they’re

Charles Njuguna

us. pay to intend fully they them, to talking From Yes.

prolonged days you this XX the to days, still I’ve our But receivable to been pledging as given get it’s period, a However, talking long they’re largely that make to beyond are auditors, at XXX prudents payments. and resolve point, outstanding.

Walter Schenker

multiple a oil at we what a area, guess you it’s item. a cash outside to And both term just the area. nearest always right best in the charge you the while the non-cash – a it review the was traditional charge in and and opportunities because quarter mentioned maybe the for opportunities, hopefully, possibly not the in look Okay. the it increment, significant thing, money is, spent the term least at so energy and that’s have that opportunities ago the area whatever a gas that have carousels, as related We you

Charles Njuguna

The wind. – offshore energy energies In side. wind wind

Walter Schenker

in that happens, next it it’s happens months of were understand come if sort or I that insufficient is expect this the knows, it negotiations future. fruition, the to year. And you if would this six to never something We’ll your

Charles Njuguna

October. As date the is contract award of now, plant in

Walter Schenker

Okay.

Charles Njuguna

Start at some XX, into activities again, possibly Time this But next on things so year. changed year, Central X:XX much. but August that’s

Walter Schenker

pretty strong a does When area.

ahead. How run. just ships? they used cables table have carousel historically? I Have or mean, So laid out go a also did need large split they power they they may, as well, not they

Charles Njuguna

Yes.

discussions been energy is of grow to can all our been There incumbents previous they’re kind of of there’s The projects have fairly in work. the a projects offshore have your perform the European-based say, a these push lack U.S. U.S., U.S. woods neck in suppliers. wind supplier suppliers, within let’s now. right the only especially, this base. one wind So new in – there and about And who are winds,

take be been believe And convincing a can full the we’ve suppliers. notion. prove U.S. other also but do And trying fairly that of hard that work we people decent by performed we working same, would so them think to to that the we’ve we done job credit

Walter Schenker

really nothing there’s gas, and oil at areas hard other the on And Okay. moment.

Charles Njuguna

There are other opportunities.

manufacture a are always time. tied umbilicals, take these of to However, the which long

current year the there in year be for umbilicals for opportunities next after. are are that projects but production, And would some those so or

come So time fruition. they a take long to

Walter Schenker

I’ve so are about, balance Okay. are something should But receivables there charges committee, us. hopefully, the And and on an and receivables how if be it. remaining money behind audit because of where been the from a question, receivable you standpoint it’s to good you these unfair have was sort – worry left should sheet confident on done

You or you have have say you to done otherwise would it.

Charles Njuguna

Exactly.

are actually we’re collected fairly July confident, in collection. quite well We July, million in think over bit who $X a I

a So our in level high have fairly balance receivables confidence we sheet. the of on

Walter Schenker

pretty a service, quarter. the third rest then it quarter lastly, just the the Okay. given carousel And unusual, the right, or be of and should absent good on contract

Charles Njuguna

the the in quarter. promises, you’ve yes, we by have Yes. encouraged make but careful so seen to to far are I traction not be the

Walter Schenker

healthy, Charles. you. Stay Thank Okay.

Charles Njuguna

sir. you, Thank

too. You

Operator

Thank now showing am no Charles closing further the would turn back like I over remarks. for Instructions] [Operator to And to call questions. I you.

Charles Njuguna

of you, Down. our speaking And today. of and Thank interest Justin. all appreciate in We the support to And in Deep call. about your forward next call our thanks progress we you once do who look you with earnings again, joined to

so you. And let’s today’s conclude call. Thank

Operator

you. Thank today’s for Thank participating. call. concludes you This

now You disconnect. may