Financial Data and Key Metrics Changes - Third quarter revenue was $152 million, an increase of 9% year-over-year and 17% sequentially, primarily driven by the merger with Dril-Quip [31] - Adjusted EBITDA for Q3 2024 was $27.4 million, a decrease of $2.1 million sequentially and $5.8 million year-over-year [36] - Free cash flow for Q3 2024 was $20.1 million, a sequential decrease of $0.8 million and down $6.4 million compared to Q3 2023 [37] - Return on capital employed (ROCE) for the 12 months ended September 30, 2024, was 9%, lower than historical performance due to increased capital employed from the merger [39] Business Line Data and Key Metrics Changes - North America (NAM) revenue increased by approximately 13% sequentially despite a 3% decline in the US land rig count [32] - International and offshore revenue grew 4% sequentially, with a significant decline of 26% in the legacy Innovex business following a strong Q2 2024 [33] - The merger with Dril-Quip is expected to strengthen the international and offshore position, with pro forma international offshore revenue representing approximately 51% of total revenue in Q3 [33] Market Data and Key Metrics Changes - The company has seen growth in market share in the US land cementing tool market from 5% in 2018 to 30% today [12] - In Saudi Arabia, the company has qualified over 30 products and generated approximately $60 million in revenue over the last 12 months [12] Company Strategy and Development Direction - The company aims to create a unique energy platform focused on well-centric products and technologies, emphasizing a capital-light business model [7][9] - The strategy includes leveraging a No Barriers culture to drive innovation and organic growth, minimizing bureaucracy to enhance customer responsiveness [10] - The company is focused on disciplined acquisitions that fit its Small Ticket, Big Impact value proposition, targeting high returns on invested capital [14][15] Management's Comments on Operating Environment and Future Outlook - Management expects some slowdown in NAM revenue during Q4 but remains optimistic about the overall position in the market [32] - The company anticipates achieving $15 million in annualized cost synergies from the merger, with further improvements expected in margins over the next year [36][40] - Management views the current environment as favorable for accretive acquisitions, with a robust pipeline of opportunities [42] Other Important Information - The company recorded a bargain purchase gain of approximately $93 million during Q3 due to the merger [30] - The accounting policies have been conformed, including a shift from percentage of completion to point in time revenue recognition for subsea wellhead products [28] Q&A Session Summary Question: Optimal capital structure for the business - Management emphasized the importance of maintaining a conservative balance sheet to protect the business and take advantage of acquisition opportunities during down cycles [48] Question: Impact of accounting changes on international and offshore product revenue - Approximately $60 million of revenue was reversed due to the purchase price accounting exercise, impacting Q3 results [51] Question: M&A opportunity set and seller expectations - Management noted a robust pipeline of acquisition opportunities, indicating a buyer's market for strong companies with good fits [53] Question: Interaction between Wellhead and Downhole business - Both legacy businesses sell to the same customers, creating natural cross-sale opportunities [55] Question: Outlook for NAM and offshore markets - Management expects NAM to be flat to down, while offshore markets may see mid-single-digit growth [60] Question: Offshore white space concerns and impact on business - Management has not seen significant pressure from offshore white space concerns and remains optimistic about market opportunities [64] Question: Pro forma EBITDA for the year - Pro forma revenue for the year is expected to be around $950 million, with Q4 guidance reflecting strong execution from legacy Innovex [66]
Innovex International, Inc.(INVX) - 2024 Q3 - Earnings Call Transcript