Dril-Quip, Inc.

Good day, thank you for standing by, and welcome to the DrillQuip Q3 2021 Fireside Chat Conference Call. I would now like to hand the conference over to your speaker today, Mr. James West with Evercore ISI. The floor is yours.

Thanks, and good morning, everyone. Welcome to this morning's Fireside Chat with Drillquip's management team. As mentioned, I'm James West from Evercore ISI. I'm joined today with Blake DeBerry, the company's president and CEO, and Blake's soon-to-be successor, Jeff Byrd, who will take over as president and CEO at the turn of the year. Perhaps before we get started, I'd like to say a few words about Blake and Jeff. I began covering Drillquip in the early 2000s when the company's three founders, shared the titles of co-chairmen and co-CEOs. And while Larry, Gary, and Mike did an excellent job building Droko up into the highly successful company it is today, it was during Blake's tenure as CEO when a successful transition from a founder-led startup to a modernized global leader really unfolded. Blake's tenure has been impressive. It was further augmented when Jeff joined the company in 2017. And together, these two gentlemen have further strengthened the company and successfully navigated one of the most challenging periods in the modern oil field. So I'm very confident Blake is leaving the company in good hands with Jeff as its leader. Perhaps to start off here, though, I do want Blake to say a few words, maybe give a brief recap of the third quarter and some opening comments.

Sure. Thank you, James, and thanks for covering real quick throughout my tenure and from the 2000s, so 20 years or so of coverage. And I agree with you. I think the company is going to be in good hands with Jeff as I depart and look forward to seeing how the company progresses as we go forward. With respect to the third quarter, the bookings came in at the lower end of our 40 to 60 range, which is still within the range that we expected, but on the lower side. Revenue was pretty much in line, but our EBITDA was impacted by some one-time items and and some margin pressure. On the positive side, our Downhold Tools Group, again, had a really strong quarter, set another high for that business since its acquisition in 2016, so that's a positive. That business continues to grow and accelerate. We had another good quarter with respect to free cash flow, which has been a big focus for the management team of DrillQuick this year. Kind of looking forward, we saw improvement quarter over quarter in our aftermarket and our leasing revenues, and this is always a good indicator of a pickup in activity, impending pickup in activity as our customers are getting back to work and consuming their inventory. Additionally, we've had good conversations with customers that are trending more positively about activity levels, so we're seeing that happen. And just looking at the market, particularly the offshore rig market, we're hearing more and more positive signs about quotation activity for rigs, number of quotes for rigs, offshore rigs, as well as the duration of the request for the contract. So those are all positive indicators of an improving market.