Newpark Resources(US:NR)2020-02-07 19:28Financial Data and Key Metrics Changes - The fourth quarter 2019 revenues totaled $189 million, representing a 7% decline from the prior quarter and a 23% decline year-over-year [39] - The net loss for the fourth quarter was $0.19 per share, compared to a net loss of $0.02 in the third quarter and net income of $0.11 per diluted share in the fourth quarter of the previous year [41] - Free cash flow for the fourth quarter totaled $17 million, bringing the full-year 2019 free cash flow to $41 million [22][42] Business Line Data and Key Metrics Changes - The Fluids Systems segment generated total revenues of $135 million for the fourth quarter, reflecting a 12% sequential decrease and a 24% year-over-year decrease [25] - The Mats business saw total segment revenues improve to $55 million in the fourth quarter, representing a 9% sequential improvement driven by a $13 million increase in product sales [34] - The operating margin for the Mats segment improved sequentially to 27% for the fourth quarter, compared to 20% in the third quarter [37] Market Data and Key Metrics Changes - North American revenues declined 22% sequentially, reflecting the impact of the declining rig count and budget exhaustion by several customers [18] - International revenues improved by 12% sequentially, with the EMEA region contributing 36% of the fourth quarter fluids revenues [30] - Canadian revenues declined by 33% to $5 million, driven by budget exhaustion with several key customers [29] Company Strategy and Development Direction - The company is focused on diversifying its product offering, customer base, and geographic scope to mitigate risks associated with North American market volatility [60] - Investments are being made to expand geographical and commercial footprint, particularly in the energy infrastructure market [64] - The company aims to leverage its growing IOC and NOC customer relationships to provide greater stability and stronger financial returns [67] Management's Comments on Operating Environment and Future Outlook - Management noted that the North American land environment remains challenging, but they have demonstrated the ability to adjust course and deliver consistent free cash flow [59] - The expectation is for U.S. revenues to remain relatively consistent with fourth quarter levels, with a modest improvement in deepwater activities [47] - The company anticipates total Q1 revenues to pull back to roughly the $40 million level, with near-term margins likely pulling back into the mid-to-high teens [52][53] Other Important Information - The company has taken actions to rightsize its operational footprint and drive a more variable cost structure in response to market conditions [32] - The fourth quarter provision for income taxes was $2.6 million, despite reporting a pre-tax loss of $14 million [40] - The company plans to utilize its free cash flow generation in 2020 primarily to reduce its bank facility balance [46] Q&A Session Summary Question: On the Fluids side, have we aligned the cost structure to today's activity level enough? - Management indicated that it will take a few quarters for the cost structure adjustments to fully reflect the activity levels, with steady month-over-month cost improvements expected [80][86] Question: Can you talk about the breadth of your non-E&P Mats customer base? - Management reported an increase in the number of customers purchasing Mats, with over two dozen customers in Q4, indicating growing product awareness and adoption [87] Question: What are you hearing from your customers about the 2020 activity plans? - Management noted that customers are focused on capital discipline and free cash flow, with cautious optimism for a ramp-up in activity in the second and third quarters [108]