Dril-Quip(US:DRQ)2024-02-26 16:00Revenue and Sales Performance - In 2023, the company generated revenues of 63.9% from product sales, 24.9% from services, and 11.2% from leasing, compared to 66.5%, 21.9%, and 11.6% in 2022 respectively[220]. - Approximately 74.9% of the company's revenues in 2023 were derived from foreign sales, up from 66.2% in 2022[220]. - Revenues increased by $62.2 million, or approximately 17.2%, to $424.1 million in 2023 from $361.9 million in 2022[234]. - Total revenues for 2023 reached $424.06 million, a 17.1% increase from $361.92 million in 2022[316]. - Total bookings for 2023 were $445.975 million, an increase from $392.816 million in 2022[264]. - The company's product backlog increased to approximately $262.8 million at December 31, 2023, representing a 9.1% increase from $240.9 million at the end of 2022[262]. - The company expects to fill approximately 70% to 80% of the December 31, 2023 product backlog by December 31, 2024[265]. Acquisition and Investment - The company acquired Great North Wellhead for a cash purchase price of approximately $79.8 million, with potential earnout payments of up to $22.8 million based on revenue growth targets[205]. - The Company completed the acquisition of Great North for total consideration of $87.7 million on July 31, 2023, with $14.7 million of acquired intangible assets related to customer relationships[310]. - The acquisition contributed revenues of USD 35.2 million and earnings of USD 2.7 million from August 1, 2023, to December 31, 2023[372]. - The preliminary purchase price allocation identified net identifiable assets acquired at USD 70.9 million and goodwill of USD 16.8 million[375]. - The fair value of the contingent consideration for Great North could range from zero to CAD 30 million, approximately USD 22.8 million, based on future revenues for FY 2024 and 2025[374]. Financial Performance - Net income was approximately $0.6 million in 2023, compared to a net loss of $1.6 million in 2022[245]. - Adjusted EBITDA for 2023 was $46.5 million, compared to $29.8 million in 2022, reflecting improved operational performance[249]. - Operating income for 2023 was $5.28 million, a significant improvement from $454,000 in 2022[316]. - The company reported a gross profit margin of 27.3% in 2023, up from 26.5% in 2022, indicating improved operational efficiency[316]. - The company reported a total comprehensive loss of $931,000 in 2023, compared to a loss of $13.65 million in 2022, indicating reduced losses[320]. - The company’s comprehensive loss for the year ended December 31, 2023, was $135.367 million[332]. Costs and Expenses - Cost of sales increased by $42.6 million, or 16.0%, to $308.5 million in 2023, with cost of sales as a percentage of revenue decreasing to 72.7% from 73.5% in 2022[236]. - Selling, general and administrative expenses rose by approximately $7.3 million, or 7.8%, to $101.5 million in 2023, largely due to the addition of Great North SG&A expenses[237]. - The company incurred acquisition costs related to Great North were approximately $6.5 million in 2023[242]. - The company reported stock-based compensation expenses of $14.895 million for the year ended December 31, 2023[332]. - The company incurred $3.2 million in restructuring and other charges, primarily due to office moves, site cleanup, severance, consulting, and legal fees[394]. Assets and Liabilities - Total assets increased to $1.03 billion in 2023, up from $970 million in 2022, driven by growth in trade receivables and inventories[323]. - The company’s total liabilities increased to $146.92 million in 2023 from $97.60 million in 2022, primarily due to higher accounts payable[323]. - The Company’s consolidated inventory balance was $194.6 million as of December 31, 2023, reduced by a reserve for slow moving, excess, and obsolete inventory of $66.2 million[307]. - Inventory reserves for slow-moving, excess, and obsolete inventories were $66.2 million as of December 31, 2023, down from $75.9 million in 2022[348]. Market Conditions and Risks - The company continues to monitor inflationary pressures and geopolitical conflicts, which may impact financial position and results of operations[211]. - The company has minimal operational exposure in Russia and does not intend to commit further capital towards projects in the region due to ongoing geopolitical tensions[210]. - The company expects continued pressure on crude oil and natural gas prices, which may affect drilling and production activities in the future[212]. - A sensitivity analysis indicated that a 10% adverse movement in foreign currency exchange rates could result in a decrease in revenues of approximately $20.9 million and a decrease in net income of approximately $1.0 million for 2023[285]. Operational Insights - The average contracted offshore rig count increased by 7.1% from 519 rigs in 2022 to 556 rigs in 2023, with 146 floating rigs and 410 jack-up rigs[219]. - The company accounted for 75 projects using the over time method in 2023, representing approximately 25.5% of total revenues, down from 34.7% in 2022[223]. - The Company recognizes leasing revenues from the rental of running tools on a day rate basis over lease terms generally between one to three months[280]. - Rework and reconditioning service revenues are recorded using the over time method, with payments received after services are performed, typically billed monthly[279]. Strategic Initiatives - The company entered into a collaboration agreement with Aker Solutions to provide subsea injection systems for carbon capture projects, enhancing its technological capabilities[208]. - The company reorganized its structure into three reportable business segments: Subsea Products, Subsea Services, and Well Construction, reflecting a strategic alignment with its business strategy[335].