Filing identity and reporting period
The supplied filing is Dril-Quip, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2022—not an Innovex International, Inc. filing as specified in the request metadata. Financial information below is therefore for Dril-Quip. The company designs, manufactures, sells, and services drilling and production equipment, primarily for offshore and other demanding oil and gas applications.
Financial results and position
Unless otherwise noted, amounts are in U.S. dollars; financial statement amounts are in millions.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $94.0 | $80.8 | $177.1 | $162.0 |
| Operating loss | $(3.9) | $(14.7) | $(9.5) | $(46.2) |
| Net loss | $(5.6) | $(19.1) | $(14.5) | $(53.4) |
| Diluted loss per share | $(0.16) | $(0.54) | $(0.42) | $(1.51) |
| Adjusted EBITDA (non-GAAP) | $9.3 | $2.6 | $12.5 | $4.4 |
Q2 gross margin was approximately 25.9%, versus 23.8% a year earlier; six-month gross margin was approximately 24.6%, versus 27.0%. For the quarter, product revenue was $62.0 million, services $19.6 million, and leasing $12.4 million. The company reported a $2.2 million Q2 income tax provision despite a pretax loss, citing geographic earnings mix, valuation allowances, and other tax factors.
At June 30, 2022, cash and cash equivalents were $320.8 million, total assets $973.6 million, total liabilities $104.9 million, and stockholders’ equity $868.7 million. Current assets were $747.9 million and current liabilities $84.9 million. The filing reports no outstanding borrowings; the ABL credit facility was terminated in February 2022. Cash includes collateral restricted to support letters of credit.
For the first half, operating cash flow was $(20.2) million, investing cash flow $(2.8) million, and financing cash flow $(9.7) million, including $9.7 million of share repurchases. Cash declined by $34.7 million from year-end 2021. Capital expenditures were $3.4 million.
Changes versus comparable periods
- Q2 revenue increased 16.3% year over year, with growth in products, services, and leasing. Higher offshore activity and customer drilling schedules contributed; Asia-Pacific product and service revenue were weaker.
- Q2 net loss narrowed to $5.6 million from $19.1 million. Lower SG&A—mainly reduced legal expense related to the FMC litigation—and improved revenue and cost-of-sales ratio contributed.
- First-half revenue rose 9.3%, but cost of sales grew faster, driven in part by product mix and raw-material inflation. The first-half operating cash flow reversed from $24.4 million provided in 2021 to $20.2 million used in 2022, reflecting working-capital movements, including unbilled receivables, vendor advances, and accrued expense payments.
- First-half 2021 results included $26.0 million of restructuring and other charges, including inventory write-downs; first-half 2022 charges were $5.8 million, principally long-lived asset write-downs and related costs.
- Product backlog was $208.6 million at June 30, down from $220.9 million at March 31, 2022. Remaining performance obligations under over-time product contracts were $65.2 million, with approximately 98.5% expected to be recognized within 12 months.
Outlook, commentary, risks, and unusual items
- Management provided no specific earnings or revenue guidance. It stated that cash reserves and anticipated operating cash flows should meet ordinary-course cash needs for the next 12 months.
- Management cited rising oil prices and increased offshore drilling activity, while cautioning that subsea demand typically responds to oil-price recovery with a lag and that the sustainability of oil prices remains uncertain.
- Dril-Quip entered a collaboration with Aker Solutions to offer subsea injection systems for carbon capture, utilization, and storage projects.
- The company is marketing Houston administrative, forge, and aftermarket facilities for sale as part of a footprint consolidation. Assets held for sale totaled $20.6 million; Q2 included approximately $5.1 million of long-lived asset write-downs and $0.7 million of other restructuring costs.
- Risk factors include dependence on oil and gas capital spending, commodity-price volatility, customer contract changes or cancellations, inflation and supply-chain exposure, foreign exchange movements, international operations, sanctions and geopolitical uncertainty related to Russia’s invasion of Ukraine, COVID-19 developments, and industry regulation. The company reported no material change in risk factors from its earlier disclosures.
- FMC Technologies appealed a jury verdict in Dril-Quip’s favor in a trade-secret case; Dril-Quip said it would continue to defend the matter. Management did not expect ordinary-course legal matters to have a material adverse effect, but outcomes are uncertain.
Important facts for investors to verify
- Confirm the intended issuer: this source is Dril-Quip, Inc., not Innovex International, Inc.
- Review whether working-capital cash use, particularly unbilled receivables and vendor advances, is temporary and how it affects future operating cash flow.
- Assess backlog conversion, cancellations or revisions, and the distinction between reported backlog and the $65.2 million of remaining performance obligations.
- Track product margins and raw-material cost inflation, as first-half cost of sales increased faster than revenue.
- Verify the timing and proceeds of the planned facility sales, and evaluate further restructuring or impairment charges.
- Consider the appeal in the FMC litigation, tax uncertainties, and the amount of cash unavailable due to letter-of-credit collateral.