TechnipFMC plc — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. TechnipFMC provides subsea and surface technologies, products, systems, and services for the energy industry. Results are unaudited and should be read with the company’s 2022 Form 10-K.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $1.717 billion | $1.556 billion |
| Gross profit margin | 12.9% | 11.9% |
| Income (loss) before tax | $45.2 million | $(5.8) million |
| Net income (loss) attributable to TechnipFMC | $0.4 million | $(61.7) million |
| Diluted EPS | $0.00 | $(0.13) |
| Cash used in operating activities | $386.2 million | $329.4 million |
- Revenue increased 10.4%, reflecting higher project activity in Subsea and increased activity in North America and the Middle East in Surface Technologies. Product revenue rose to $795.1 million from $614.1 million; service revenue declined to $868.1 million from $896.7 million.
- Subsea revenue was $1.388 billion, up 7.6%; segment operating profit increased to $66.8 million from $54.0 million, with margin rising to 4.8% from 4.2%.
- Surface Technologies revenue was $329.8 million, up 23.7%; segment operating profit rose to $22.4 million from $3.7 million, with margin increasing to 6.8% from 1.4%.
- Cash and cash equivalents were $522.3 million at March 31, down from $1.057 billion at year-end 2022. Total debt was $1.391 billion; debt less cash was $868.4 million, compared with $309.5 million at year-end.
- Current assets were $5.102 billion and current liabilities $4.258 billion. The company reported $954.6 million available under its revolving credit facility at quarter-end.
- Operating cash use increased by $56.8 million year over year, mainly due to project-milestone timing, inventory vendor payments, and derivative fluctuations. Capital expenditures were $57.3 million versus $27.3 million.
Orders, outlook, and management commentary
- Q1 inbound orders totaled $2.859 billion, including $2.537 billion for Subsea. Total order backlog reached $10.607 billion, up from $9.353 billion at December 31, 2022; the filing expects to recognize approximately 36.3% during 2023.
- Management expects 2023 Subsea inbound orders to exceed $8 billion and Subsea Services revenue to reach $1.3 billion. It anticipates direct awards, iEPCI, and Subsea Services to make up more than 70% of 2023 Subsea inbound orders.
- Estimated 2023 capital expenditures are approximately $250 million, excluding contingent spending associated with contract awards. Management says liquidity is sufficient for business needs and expects to generate free cash flow through the business cycle; Q1 cash flow was nevertheless materially negative.
- Management describes energy demand and offshore investment prospects as constructive, citing energy security, project economics, and expected activity in international markets. It also highlights energy-transition work in greenhouse gas removal, floating offshore renewables, and hydrogen.
- On April 24, 2023, after quarter-end, the company amended its revolving credit facility, increasing commitments to $1.25 billion and extending its term to five years. It also entered a $500 million five-year performance letter-of-credit facility, with potential increases subject to conditions.
Risks, contingencies, and unusual items
- The Q1 effective tax rate was 82.7%; management attributes year-over-year tax-rate changes primarily to the geographic mix of profits. The filing notes that the rate can fluctuate substantially.
- The French PNF investigation into historical projects in Equatorial Guinea and Ghana remains unresolved. The company maintains a $70 million provision; a settlement could exceed that amount. The PNF is also reviewing historical Angola projects, and the outcome and any potential penalty are uncertain. U.S. and Brazilian enforcement obligations have been completed.
- The company’s share of guarantees for joint-venture vessel debt was $428 million. Consolidated subsidiary financial and performance guarantees had maximum potential undiscounted payments of $1.680 billion; management does not expect these instruments or known contingencies to materially adversely affect results or financial position.
- Other cited risks include oil and gas demand and price volatility, fixed-price contract execution and cost overruns, backlog delivery, suppliers and subcontractors, geopolitical and regulatory disruption, cyber risk, currency movements, and indebtedness. Management reported no material change to previously disclosed risk factors.
- Q1 included $50 million of share repurchases. The prior-year comparison included a $28.5 million loss on the Technip Energies investment and $19.4 million of discontinued-operations loss; neither item recurred in Q1 2023.
Important facts for investors to verify
- Whether Subsea order conversion, backlog execution, and project margins support the stated 2023 order and services outlook.
- Whether operating cash flow improves as project milestones, receivables, contract assets, and inventory convert to cash.
- Progress toward the approximately $250 million capital-expenditure estimate and the company’s leverage and liquidity targets.
- Developments in the PNF investigation, including whether any resolution exceeds the $70 million provision or involves additional sanctions.
- Utilization and terms of the expanded revolving credit and performance letter-of-credit facilities, and any resulting effect on liquidity or debt.