TechnipFMC plc — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The company completed the spin-off of Technip Energies on February 16, 2021; results and balance-sheet comparisons therefore reflect a significant change in the continuing business. Technip Energies’ historical results are presented as discontinued operations.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $1.632 billion | $1.583 billion |
| Gross margin | 11.7% | 11.3% |
| Income (loss) from continuing operations attributable to TechnipFMC | $430.3 million | $(3.235) billion |
| Net income (loss) attributable to TechnipFMC | $368.2 million | $(3.256) billion |
| Diluted EPS, total | $0.81 | $(7.28) |
| Operating cash flow from continuing operations | $181.5 million | $(439.8) million |
| Cash and cash equivalents at quarter-end | $752.8 million | $1.269 billion at Dec. 31, 2020 |
| Total debt | $2.531 billion | $3.460 billion at Dec. 31, 2020 |
| Net debt | $1.778 billion | $2.191 billion at Dec. 31, 2020 |
Reported earnings included $470.1 million of income from the Technip Energies investment, comprising a sale-related purchase-price discount and fair-value revaluation gain. Excluding charges and credits, the company reported an adjusted continuing-operations loss attributable to TechnipFMC of $14.5 million and adjusted diluted EPS of $(0.03). These non-GAAP measures are not substitutes for GAAP results.
Changes and segment results
- Revenue rose 3.1% year over year: Subsea revenue increased 10.6% to $1.387 billion, while Surface Technologies revenue fell 25.5% to $245.5 million, primarily due to lower North American operator activity.
- Subsea and Surface Technologies reported segment operating profits of $37.0 million and $8.2 million, respectively. Both comparisons with Q1 2020 were heavily affected by prior-year impairment charges.
- Q1 2020 included $3.188 billion of impairments, chiefly goodwill; Q1 2021 included $18.8 million of impairment charges, primarily related to operating lease right-of-use assets. SG&A declined 24.4% to $147.6 million, reflecting cost-reduction initiatives.
- Continuing-operations operating cash flow improved by $621.3 million year over year, which management attributed primarily to project milestone and vendor-payment timing. Total cash declined $516.4 million during Q1.
Capital, outlook and risks
- In connection with the spin-off, the company issued $1.0 billion of 6.50% senior notes due 2026 and established a $1.0 billion, three-year secured revolving facility. It repaid maturing synthetic bonds, $500 million of 2022 notes, and commercial paper; $200 million was drawn on the new facility at quarter-end. Facility availability was $800 million, and the company reported compliance with its covenants.
- Q1 inbound orders were $1.722 billion, up from $1.538 billion; backlog was $7.221 billion versus $7.290 billion at year-end. Management expected to recognize approximately 44.7% of backlog during 2021.
- Management expected 2021 Subsea inbound orders to exceed the $4 billion achieved in 2020, with Brazil expected to be the most active region. It anticipated improving FEED activity and a recovery in deepwater awards, while noting project-sanctioning and customer capital-discipline risks. Surface Technologies guidance included expected modest international market growth and approximately 65% of 2021 segment revenue from international markets. Estimated 2021 capital expenditures were approximately $250 million.
- Management described a more constructive oil-market outlook but cautioned that COVID-19, energy-market volatility, customer spending, execution of fixed-price projects, supply-chain dependence, and foreign exchange could affect results. It planned an orderly exit from its Technip Energies investment within a year and intended to use sale proceeds to reduce net leverage. After quarter-end sales, its retained stake was 31%.
- Unresolved French anti-corruption investigation matters relating to historical projects carried a $70 million provision; a settlement could exceed the provision, and criminal proceedings remain possible if no resolution is reached. Maximum potential payments under reported guarantees were $1.245 billion; management did not expect these to cause a material adverse effect. Other legal and tax matters were described as not expected to be material, subject to uncertainty.
Investor verification priorities
- Separate recurring operating performance from the $470.1 million Technip Energies investment gain and from impairment, restructuring and other charges; review the reconciliation of non-GAAP measures.
- Assess continuing-operations cash generation and working-capital timing, alongside the quarter’s cash decline, debt refinancing, interest costs and available revolving-facility capacity.
- Track Subsea order intake, backlog conversion and project awards, and whether Surface Technologies activity recovers as management expects.
- Verify proceeds, remaining ownership and future disposition of Technip Energies shares, including subsequent sales and intended use of proceeds.
- Monitor the French anti-corruption investigation, related provision adequacy, guarantees, and contract execution or liquidated-damages exposure.