Dril-Quip(US:DRQ)2021-10-27 16:00Financial Performance - Total revenue for the three months ended September 30, 2021, was $82.997 million, an increase from $80.797 million for the previous quarter [123]. - Total revenues decreased by $8.3 million, or approximately 9.1%, to $83.0 million for the three months ended September 30, 2021, compared to $91.3 million for the same period in 2020 [140]. - For the nine months ended September 30, 2021, revenues decreased by $32.7 million, or approximately 11.8%, to $245.0 million from $277.7 million for the same period in 2020 [147]. - The company recorded a net loss of approximately $64.6 million for the nine months ended September 30, 2021, compared to a net loss of $19.5 million for the same period in 2020 [154]. - Net loss was approximately $11.1 million for the three months ended September 30, 2021, compared to a net income of $14.3 million for the same period in 2020 [146]. - Adjusted EBITDA for the nine months ended September 30, 2021 was $14.6 million, down from $22.7 million for the same period in 2020, reflecting a decrease of approximately 35.7% [156]. Revenue Breakdown - For the nine months ended September 30, 2021, the company derived 67.4% of its revenues from product sales, 22.3% from services, and 10.3% from leasing [126]. - Approximately 64.5% of the company's revenues for the nine months ended September 30, 2021, were derived from foreign sales [126]. - The company accounted for 29 projects using over-time accounting for the three months ended September 30, 2021, representing approximately 24.9% of total revenues [129]. Operational Challenges - The ongoing COVID-19 pandemic has significantly reduced global economic activity and demand for oil and gas, impacting the Company's operations and supply chain [96]. - The Company expects the constraints imposed by the pandemic to slow research and development activities and qualification efforts with customers [102]. - The Company continues to face risks and uncertainties that could materially affect its operational and financial performance, including potential contract terminations and market volatility [97]. - The Company has taken steps to implement safety measures and retain employees during the pandemic, including on-site vaccination administration [98]. - The company adjusted its workforce in response to ongoing market conditions related to the COVID-19 pandemic [161]. Tax and Financial Management - The Company deferred approximately $2.9 million in FICA cash tax payments to 2021 and 2022 due to the Payroll Tax Deferral provided by the CARES Act [99]. - The effective income tax rate fluctuates based on changes in pretax income in jurisdictions with varying statutory tax rates [136]. Cost Management - Cost of sales decreased by $4.4 million, or approximately 6.5%, to $62.8 million for the three months ended September 30, 2021 [140]. - Selling, general and administrative expenses increased by $4.4 million, or 21.2%, to $25.3 million for the three months ended September 30, 2021 [141]. - Selling, general and administrative expenses increased by $15.6 million, or approximately 22.6%, to $84.4 million for the nine months ended September 30, 2021 [147]. - Engineering and product development expenses decreased by approximately $3.6 million, or 24.3%, to $11.3 million for the nine months ended September 30, 2021 [149]. Cash Flow and Liquidity - Cash flows from operating activities for the nine months ended September 30, 2021 were $33.7 million, a significant improvement compared to cash used in operating activities of $4.3 million for the same period in 2020 [165]. - The company had approximately $375.2 million in cash and cash equivalents as of September 30, 2021, with an additional availability of $31.1 million under the ABL Credit Facility [160]. Market Conditions and Future Outlook - The average Brent Crude oil price is projected to be approximately $71 per barrel in 2021 and $72 per barrel in 2022, compared to an average of $41.69 per barrel in 2020 [104]. - The Company anticipates that the uncertainty in the sustainability of current oil prices will continue to negatively impact oil and gas activities [102]. - The Company continues to explore potential acquisitions and joint ventures, although the timing and success of such efforts remain unpredictable [172]. Foreign Exchange Risks - The Company does not engage in any material hedging transactions, forward contracts, or currency trading to mitigate foreign exchange risks [175]. - The Company’s foreign subsidiaries may have monetary assets and liabilities not denominated in their functional currency, exposing them to currency exchange rate fluctuations [176]. - There is no assurance that the Company will be able to protect itself against future currency fluctuations [176]. - The Company has operations in various countries and conducts business in multiple currencies, increasing exposure to foreign exchange rate risk [176]. - There have been no material changes in market risks for the Company since December 31, 2020 [175].