TechnipFMC plc (FTI) on Q1 2023 Results - Earnings Call Transcript
Operator: Thank you for holding, and welcome everyone to the TechnipFMC First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. [Operator Instructions]. Thank you. I will now turn the call over to Matt Seinsheimer, Senior Vice President, Investor Relations and Corporate Development. Mr. Seinsheimer, please go ahead. Matt Seinsheimer: Thank you, Jack. Good morning and good afternoon, and welcome to TechnipFMC first quarter 2023 earnings conference call. Our news release and financial statements issued earlier today can be found on our website. I'd like to caution you with respect to any forward looking statements made during this call. Although these forward looking statements are based on our current expectations, beliefs and assumptions regarding future developments and business conditions. They are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. Non-material factors that could cause our actual results to differ from our projected results are described in our most recent 10-K, 10-Q and other periodic filings with the U.S. Securities and Exchange Commission. We wish to caution you not to place undue reliance on any forward looking statements which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward looking statements after the date they are made, whether as a result of new information, future events or otherwise. I will now turn the call over to Doug Pferdehirt, TechnipFMC’s Chair and Chief Executive Officer. Douglas J. Pferdehirt: Thank you, Matt. Good morning and good afternoon. Thank you for participating in our first quarter earnings call. I am pleased with the solid performance in the quarter, as we successfully delivered on the commitments we made in February. Total Company revenue in the period was $1.7 billion. Total Company adjusted EBITDA was $155 million with an adjusted EBITDA margin of 9% when excluding foreign exchange impacts. Total Company inbound orders in the quarter were $2.9 billion driving sequential growth in backlog to $10.6 billion. In Subsea, we had a very strong start to the year with inbound orders of $2.5 billion representing a book to bill of 1.8. This included four announced awards in the period as well as a large iEPCI project that received FID in the first quarter. iEPCI accounted for more than 50% of orders in the period. Importantly, the combination of iEPCI Subsea services and all other direct awards totaled 70% of awards. This is a result of our unique commercial model, iEPCI, our demonstrated technology leadership which includes Subsea 2.0 and our long standing client relationships, which together provide our customers with confidence in the execution capabilities of TechnipFMC. Given the high quality of the work we are pursuing today, and the strength of the broader market, we are confident that Q1 is not the quarterly peak for iEPCI inbound in 2023. We continue to expect iEPCI to post record inbound in 2023. This is enabled by a record level of iFEED activity, which often leads to a direct award for the iEPCI phase of the project. This provides further confidence in our outlook for Subsea orders of more than $8 billion for the full-year. Since the creation of TechnipFMC, we have taken bold steps to fundamentally change the way we operate our business. These include the introduction of our integrated commercial model iEPCI, the development of Subsea 2.0 and the formation of our vessel ecosystem which together enable a differentiated approach to project execution that will allow us to successfully capitalize on this period of significant growth. Our integrated commercial model begins with iFEED. This early client engagement allows for the highest degree of integration, innovation and cost savings. iEPCI then delivers the optimized architecture and solution leading to an acceleration in time to first production. We recently delivered the very first integrated project in Brazil. Our client Karoon Energy has emphasized that the project would not have been economically feasible without our iEPCI execution model. This differentiated outcome underscores our rationale to focus our people and assets on those opportunities which benefit from integration and technology enabling shorter cycle times as well as risk mitigation. We've also reduced complexity and cost with our Subsea 2.0 product portfolio. Delivery schedules for a subsea tree have been shortened more than 50% when utilizing Subsea 2.0 by leveraging our configured to order model. CTO allows us to industrialize our solutions while still addressing the unique requirements of individual projects. This gives us incremental manufacturing capacity without the need for additional capital expenditures. This also eliminates design engineering and redefines our sourcing strategy by utilizing pre-approved suppliers and standard configurations, reducing supply chain risk during the manufacturing process. We have also made strategic decisions in support of our fleet through the creation of our pipelay vessel ecosystem. Here we have extended our capabilities through alliances with Allseas and Saipem providing us the industry's most comprehensive suite of pipelay solutions. This ecosystem expands our iEPCI opportunities, while providing greater capital efficiency through collaboration. iEPCI, Subsea 2.0 and the vessel ecosystem are all transformational elements that have re-shaped our Company. They have fundamentally changed the way we do business, and provide real and sustainable differentiation for TechnipFMC. In closing, we are confident in continued market strength. We are confident in our ability to execute in this period of growth as the simplification and standardization of our integrated products and services reduce project complexity and execution risk. And our improved commercial success is a direct result of our customers' confidence in our ability to successfully deliver their projects. Our journey is not predicated on the market recovery. It reflects the changes we have made to our business that are already providing tangible benefits today through unique market visibility, improved commercial success and enhanced operational insight. And I am confident these changes will continue to drive improved results for our Company. I will now turn the call over to Alf, to discuss our financial results. Alf Melin: Thanks Doug. Total Company inbound orders were $2.9 billion in the quarter, with Subsea inbound of $2.5 billion and Surface Technologies of $322 million. Total Company backlog increased 13% sequentially to $10.6 billion. Revenue in the quarter was $1.7 billion. Adjusted EBITDA was $155 million excluding a foreign exchange gain of $2 million. When excluding the impact of charges and credits, our adjusted income from continuing operations was $1 million. Now turning to our sequential results. In Subsea, operating results were similar to the fourth quarter, as we suggested back in February. Revenue of $1.4 billion increased 3% with higher project activity in Brazil and the Gulf of Mexico, partially offset by lower activity in Asia Pacific. Our services activity continued to be impacted by seasonal factors. Adjusted EBITDA increased modestly to $142 million with a margin of 10.2%. In Surface Technologies, revenue was $330 million down 6% from the fourth quarter. Revenue decreased primarily due to lower international activity, which was impacted by the timing of backlog conversion. Adjusted EBITDA was $40 million a 9% decrease primarily due to the lower international activity, partially offset by cost savings. Adjusted EBITDA margin was 12.2% approximately 150 basis points ahead of our expectations. Turning to corporate and other items in the period, corporate expense was $27 million. Net interest expense was $19 million and is currently trending to the low end of our full year guide of $100 million to $110 million. I expect the remaining interest expense to be fairly evenly distributed over the rest of the year. And lastly, tax expense in the quarter was $37 million. Cash required by operating activities was $386 million. Capital expenditures were $57 million. This resulted in free cash flow consumption of $444 million in the quarter. The outflow follows a typical seasonal pattern of our business, driven by working capital consumption of $485 million related to the timing of project milestones and the payment of annual incentives. We ended the period with cash and cash equivalents of $522 million. Net debt was $868 million. In the quarter, we also repurchased 3.4 million shares amounting to $50 million. Lastly, let me provide some thoughts on the second quarter. For Subsea, we expect to benefit from the typical seasonal uplift as well as improved margins in backlog with sequential revenue growth of approximately 15% driving margin expansion of approximately 400 basis points. For Surface Technologies, we expect similar revenue to the first quarter with a sequential improvement in EBITDA margin of approximately 50 basis points, which will largely be driven by our international business. I would now like to make a few additional comments with respect to our confidence in 2023 guidance, cash conversion and shareholder distributions. Let me first speak to guidance. In the quarter, our segments delivered on our financial objectives, with adjusted EBITDA of $155 million when excluding foreign exchange. And as indicated by our second quarter and full year outlook, we expect to capitalize on our momentum. In Subsea, our full year outlook is supported by $3.3 billion of backlog scheduled for execution in 2023. When combined with our anticipated Subsea Services inbound for the remainder of the year, we have more than 90% coverage of our full year revenue at the midpoint of guidance. In Surface Technologies, we started the year modestly above plan and we continue to anticipate all of our growth in the year to come from international markets, much of which currently sits in backlog today. Our confidence in this outlook serves as support for my second takeaway which is the confidence we have in our cash conversion. In the first quarter, we saw the typical seasonal outflow in working capital. Again, the following historical patterns, we should see a material improvement in Q2 before we move into a much stronger second half. We remain committed to our free cash flow guidance for the full year, which at the midpoint is $300 million. And this leads to my final takeaway, which is our commitment to shareholder distributions. I want to highlight that even with the anticipated cash outflow experienced in the first quarter, we continue to execute on our share repurchase program. We have now bought back $150 million of our $400 million repurchase authorization representing nearly 40% of the total. We continue to believe that our stock is one of the most attractive investments we can make today. We expect that the structural changes we have made to our business will drive sustainable improvements in our profitability, providing further support to continued buyback activity and future dividend distributions. Operator, you may now open the line for questions. Operator: Certainly. [Operator Instructions]. Arun Jayaram with J.P. Morgan. Your line is open. Arun, your line is open. Marc Bianchi with TD Cowen. Your line is open. Operator: Chase Mulvehill with Bank of America. Your line is open. Operator: Scott Gruber with Citigroup. Your line is open. Operator: Arun Jayaram with J.P. Morgan. Your line is open. Operator: Guillaume Delaby with Societe Generale. Your line is open. Operator: David Anderson with Barclays. Your line is open. Operator: Our final question will come from the line of Kurt Hallead with Benchmark. Your line is open. Operator: We have one final question from Bertrand Hodee with Kepler Cheuvreux. Your line is open. Operator: I will now turn the call back over to Matt Seinsheimer for closing remarks. Matt Seinsheimer: Thank you, Jack. This concludes our first quarter conference call. A replay of the call will be available on our website beginning at approximately 8 PM British summertime today. If you have any further questions, please feel free to reach out to any of the members of the Investor Relations team. Thanks for joining us. Jack you can end the call. Operator: This concludes today's call. We thank you for your participation. You may now disconnect.
TechnipFMC plc (NYSE:FTI) - A Leader in the Energy Sector
- TechnipFMC's ROIC of 17.77% significantly outperforms its WACC of 8.83%, indicating strong value creation for shareholders.
- Oceaneering International and other competitors show positive returns over their cost of capital, but not as robust as TechnipFMC's performance.
- Dril-Quip and Core Laboratories struggle with ROIC to WACC ratios below 1, highlighting challenges in covering their cost of capital.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, providing services and technologies to the oil and gas industry. The company specializes in subsea, onshore, offshore, and surface projects. TechnipFMC's main competitors include Oceaneering International, NOV Inc., Flowserve Corporation, Dril-Quip, and Core Laboratories, all of which operate in similar sectors, offering various oilfield services and equipment.
TechnipFMC's Return on Invested Capital (ROIC) is 17.77%, significantly higher than its Weighted Average Cost of Capital (WACC) of 8.83%. This results in a ROIC to WACC ratio of 2.01, indicating that the company is generating returns well above its cost of capital. This is a strong indicator of the company's ability to create value for its shareholders.
In comparison, Oceaneering International has a ROIC of 12.58% and a WACC of 10.42%, resulting in a ROIC to WACC ratio of 1.21. While this shows positive returns over its cost of capital, it is not as robust as TechnipFMC's performance. NOV Inc. and Flowserve Corporation have ROIC to WACC ratios close to 1, suggesting they are only marginally covering their cost of capital.
Dril-Quip and Core Laboratories face challenges, with ROIC to WACC ratios below 1. Dril-Quip's negative ROIC of -0.42% against a WACC of 7.20% results in a ratio of -0.06, indicating it is not covering its cost of capital. Core Laboratories also struggles with a ROIC to WACC ratio of 0.63, as its ROIC of 7.15% falls short of its WACC of 11.35%.
TechnipFMC's superior ROIC to WACC ratio highlights its efficiency in generating returns compared to its peers. This positions the company as a potentially attractive investment, assuming other factors such as market conditions and company-specific risks are favorable.
TechnipFMC plc (NYSE:FTI) - A Leader in the Energy Sector
- TechnipFMC's ROIC of 17.77% significantly outperforms its WACC of 8.83%, indicating strong value creation for shareholders.
- Oceaneering International and other competitors show positive returns over their cost of capital, but not as robust as TechnipFMC's performance.
- Dril-Quip and Core Laboratories struggle with ROIC to WACC ratios below 1, highlighting challenges in covering their cost of capital.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, providing services and technologies to the oil and gas industry. The company specializes in subsea, onshore, offshore, and surface projects. TechnipFMC's main competitors include Oceaneering International, NOV Inc., Flowserve Corporation, Dril-Quip, and Core Laboratories, all of which operate in similar sectors, offering various oilfield services and equipment.
TechnipFMC's Return on Invested Capital (ROIC) is 17.77%, significantly higher than its Weighted Average Cost of Capital (WACC) of 8.83%. This results in a ROIC to WACC ratio of 2.01, indicating that the company is generating returns well above its cost of capital. This is a strong indicator of the company's ability to create value for its shareholders.
In comparison, Oceaneering International has a ROIC of 12.58% and a WACC of 10.42%, resulting in a ROIC to WACC ratio of 1.21. While this shows positive returns over its cost of capital, it is not as robust as TechnipFMC's performance. NOV Inc. and Flowserve Corporation have ROIC to WACC ratios close to 1, suggesting they are only marginally covering their cost of capital.
Dril-Quip and Core Laboratories face challenges, with ROIC to WACC ratios below 1. Dril-Quip's negative ROIC of -0.42% against a WACC of 7.20% results in a ratio of -0.06, indicating it is not covering its cost of capital. Core Laboratories also struggles with a ROIC to WACC ratio of 0.63, as its ROIC of 7.15% falls short of its WACC of 11.35%.
TechnipFMC's superior ROIC to WACC ratio highlights its efficiency in generating returns compared to its peers. This positions the company as a potentially attractive investment, assuming other factors such as market conditions and company-specific risks are favorable.
TechnipFMC plc (NYSE:FTI) - A Comparative Analysis of Capital Efficiency in the Energy Sector
- TechnipFMC's ROIC of 13.07% is higher than most of its peers, indicating relative efficiency in using capital to generate profits.
- The company's ROIC to WACC ratio of 0.91 suggests it is not generating returns above its cost of capital, highlighting an area for improvement.
- NOV Inc. has the highest ROIC to WACC ratio among the peers, although it does not exceed its WACC, showcasing the competitive challenges within the energy sector.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, providing services and technologies to the oil and gas industry. The company specializes in subsea, onshore, offshore, and surface projects. TechnipFMC competes with companies like Oceaneering International, NOV Inc., Flowserve Corporation, Dril-Quip, and Core Laboratories, all of which operate in similar sectors, offering various services and products to the energy industry.
TechnipFMC's Return on Invested Capital (ROIC) is 13.07%, while its Weighted Average Cost of Capital (WACC) is 14.31%. This results in a ROIC to WACC ratio of 0.91, indicating that the company is not currently generating returns that exceed its cost of capital. This suggests that TechnipFMC is not as efficient in using its capital to generate profits as it could be.
In comparison, Oceaneering International has a ROIC of 9.66% and a WACC of 12.54%, resulting in a ROIC to WACC ratio of 0.77. This shows that Oceaneering is less efficient than TechnipFMC in generating returns relative to its cost of capital. Similarly, Flowserve Corporation and Core Laboratories have ROIC to WACC ratios of 0.81 and 0.61, respectively, indicating they are also less efficient than TechnipFMC.
NOV Inc. stands out among the peers with a ROIC to WACC ratio of 0.89, the highest among the group. Although NOV's ROIC of 8.41% does not exceed its WACC of 9.46%, it is still the most efficient in generating returns relative to its cost of capital. Dril-Quip, on the other hand, has a negative ROIC of -0.42% and a WACC of 7.20%, resulting in a ROIC to WACC ratio of -0.06, indicating significant inefficiency.
Overall, while TechnipFMC is relatively efficient compared to its peers, it still faces challenges in generating returns above its cost of capital. This analysis highlights the importance of improving capital efficiency to enhance profitability and competitiveness in the energy sector.
TechnipFMC plc (NYSE:FTI) - A Comparative Analysis of Capital Efficiency in the Energy Sector
- TechnipFMC's ROIC of 13.07% is higher than most of its peers, indicating relative efficiency in using capital to generate profits.
- The company's ROIC to WACC ratio of 0.91 suggests it is not generating returns above its cost of capital, highlighting an area for improvement.
- NOV Inc. has the highest ROIC to WACC ratio among the peers, although it does not exceed its WACC, showcasing the competitive challenges within the energy sector.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, providing services and technologies to the oil and gas industry. The company specializes in subsea, onshore, offshore, and surface projects. TechnipFMC competes with companies like Oceaneering International, NOV Inc., Flowserve Corporation, Dril-Quip, and Core Laboratories, all of which operate in similar sectors, offering various services and products to the energy industry.
TechnipFMC's Return on Invested Capital (ROIC) is 13.07%, while its Weighted Average Cost of Capital (WACC) is 14.31%. This results in a ROIC to WACC ratio of 0.91, indicating that the company is not currently generating returns that exceed its cost of capital. This suggests that TechnipFMC is not as efficient in using its capital to generate profits as it could be.
In comparison, Oceaneering International has a ROIC of 9.66% and a WACC of 12.54%, resulting in a ROIC to WACC ratio of 0.77. This shows that Oceaneering is less efficient than TechnipFMC in generating returns relative to its cost of capital. Similarly, Flowserve Corporation and Core Laboratories have ROIC to WACC ratios of 0.81 and 0.61, respectively, indicating they are also less efficient than TechnipFMC.
NOV Inc. stands out among the peers with a ROIC to WACC ratio of 0.89, the highest among the group. Although NOV's ROIC of 8.41% does not exceed its WACC of 9.46%, it is still the most efficient in generating returns relative to its cost of capital. Dril-Quip, on the other hand, has a negative ROIC of -0.42% and a WACC of 7.20%, resulting in a ROIC to WACC ratio of -0.06, indicating significant inefficiency.
Overall, while TechnipFMC is relatively efficient compared to its peers, it still faces challenges in generating returns above its cost of capital. This analysis highlights the importance of improving capital efficiency to enhance profitability and competitiveness in the energy sector.
TechnipFMC plc (NYSE:FTI) - A Growth Opportunity in the Energy Sector
- FTI's recent performance shows a 5.26% gain over the past month, despite a short-term dip, indicating potential for investor entry.
- The company's Piotroski Score of 8 underscores its strong financial health and operational efficiency, making it an attractive investment.
- With an analyst target price of $34.50, FTI presents a significant growth opportunity, suggesting a substantial upside from its current levels.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, specializing in subsea, onshore, offshore, and surface projects. The company provides a range of services and technologies to the oil and gas industry, making it a key player in the energy market. Competitors include Schlumberger, Halliburton, and Baker Hughes, which also operate in the oilfield services industry.
FTI has recently gained approximately 5.26% over the past month, despite a 4.03% dip in the last 10 days. This fluctuation presents a potential entry point for investors. The stock's growth potential is estimated at 14.96%, indicating significant room for appreciation. This makes FTI an attractive option for growth-oriented investors looking to capitalize on its upward trajectory.
The company's Piotroski Score of 8 highlights its strong financial health and operational efficiency. The Piotroski Score is a tool used to evaluate a company's financial strength, with a score of 8 suggesting robust fundamentals. This high score indicates that FTI is well-managed and financially sound, enhancing its appeal to investors.
Analysts have set a target price of $34.50 for FTI, suggesting substantial upside from its current trading levels. This target reflects confidence in the company's ability to achieve its growth objectives and deliver value to shareholders. Investors should consider this target when evaluating the potential returns on their investment in FTI.
TechnipFMC plc (NYSE:FTI) - A Growth Opportunity in the Energy Sector
- FTI's recent performance shows a 5.26% gain over the past month, despite a short-term dip, indicating potential for investor entry.
- The company's Piotroski Score of 8 underscores its strong financial health and operational efficiency, making it an attractive investment.
- With an analyst target price of $34.50, FTI presents a significant growth opportunity, suggesting a substantial upside from its current levels.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, specializing in subsea, onshore, offshore, and surface projects. The company provides a range of services and technologies to the oil and gas industry, making it a key player in the energy market. Competitors include Schlumberger, Halliburton, and Baker Hughes, which also operate in the oilfield services industry.
FTI has recently gained approximately 5.26% over the past month, despite a 4.03% dip in the last 10 days. This fluctuation presents a potential entry point for investors. The stock's growth potential is estimated at 14.96%, indicating significant room for appreciation. This makes FTI an attractive option for growth-oriented investors looking to capitalize on its upward trajectory.
The company's Piotroski Score of 8 highlights its strong financial health and operational efficiency. The Piotroski Score is a tool used to evaluate a company's financial strength, with a score of 8 suggesting robust fundamentals. This high score indicates that FTI is well-managed and financially sound, enhancing its appeal to investors.
Analysts have set a target price of $34.50 for FTI, suggesting substantial upside from its current trading levels. This target reflects confidence in the company's ability to achieve its growth objectives and deliver value to shareholders. Investors should consider this target when evaluating the potential returns on their investment in FTI.
TechnipFMC plc (NYSE:FTI) - A Promising Investment in the Energy Sector
- TechnipFMC plc (NYSE:FTI) has shown a promising performance with a monthly gain of 5.29%, indicating strong market momentum.
- The stock has a significant growth potential with an estimated increase of 10.66%, suggesting further appreciation and a substantial return opportunity with a target price of $33.80.
- FTI's financial health is robust, highlighted by a Piotroski Score of 8, reflecting strong fundamentals and making it a reliable investment choice.
TechnipFMC plc (NYSE:FTI) is a global leader in the energy sector, specializing in subsea, onshore, offshore, and surface projects. The company provides a range of services and technologies to the oil and gas industry, making it a key player in the energy market. Competitors include Schlumberger, Halliburton, and Baker Hughes, which also operate in similar segments.
FTI has shown a promising performance recently, with a monthly gain of 5.29%. This upward trend indicates strong momentum in the market. Despite a minor decline of 0.31% in the last 10 days, this dip could be a strategic entry point for investors, as it may represent a local minimum.
The stock's growth potential is significant, with an estimated increase of 10.66%. This suggests that FTI is likely to appreciate further, making it an attractive option for investors. The target price of $33.80 highlights the potential upside from its current levels, offering a substantial return opportunity.
FTI's financial health is robust, as evidenced by its Piotroski Score of 8. This score reflects the company's strong fundamentals, including profitability, leverage, liquidity, and operating efficiency. A high Piotroski Score is often an indicator of a company's solid financial position, making FTI a reliable investment choice.
