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Frank’s International N.V. Announces Second Quarter 2019 Results

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Strong Fundamentals Drive Solid Top and Bottom Line Improvement

HOUSTON, Aug. 06, 2019 (GLOBE NEWSWIRE) -- Frank’s International N.V. (FI) (the “Company” or “Frank’s”) today reported financial and operational results for the three and six months ended June 30, 2019.

Second Quarter 2019 Financial Highlights

  • Revenue for the quarter totaled $155.7 million, an improvement from the prior quarter of 8% and from the prior year quarter of 18%.

  • Net loss of $15.2 million for the quarter, which reflected an improvement of nearly 50% from the first quarter.

  • Adjusted EBITDA for the quarter was $17.2 million, up 78% in comparison to the first quarter of 2019 results of $9.7 million, and up 57% compared to $11.0 million for the second quarter of 2018.

  • Incremental margins year-to-date are 34% in comparison to the first half of 2018.

  • Tubular Running Services demonstrated strong revenue growth of 9% sequentially and 16% over the prior year. Strong fall through resulted in a sequential 6% adjusted EBITDA margin gain, yielding a 24% margin for the quarter.

  • Tubulars segment sequential revenue growth of 20%.

“Our second quarter results exceeded expectations as we capitalized on increasing activity in the offshore markets, particularly in the U.S. Gulf of Mexico and West Africa. The relentless focus of our team on best serving the needs of our customers through industry leading technological differentiation has allowed us to gain market share and take advantage of increasing market activity, which is driving the improving financial results,” said Michael Kearney, the Company’s Chairman, President and Chief Executive Officer.

“This spring, Frank’s was presented the 2019 Hart’s E&P Meritorious Engineering award in recognition of our patented Collar Load Support System for Stands. This is yet another example of our commitment to provide technology solutions that increase well construction efficiency and improve well integrity for our customers. Most importantly, the Collar Load Support System removes both our employees as well as those of our customers from the red zone on the rig floor, reinforcing our paramount emphasis on safety. I want to congratulate all our employees involved in making this product a success.”

“We continue to maintain our full year 2019 view of significant revenue growth and increased margins across all of our business segments. Our international operations will drive much of the improvement coupled with activity increases in the North America offshore market. Frank’s remains well positioned to continue to show improving results in the recovering offshore market, with innovative and unique product and service offerings which focus on solving our customers’ complex drilling and completion challenges,” concluded Mr. Kearney.

Financial measures not presented in accordance with U.S. generally accepted accounting principles (“GAAP”) are defined and reconciled to their most directly comparable GAAP measures below. Please see “Use of Non-GAAP Financial Measures” and the reconciliations to the nearest comparable GAAP measures.

Segment Results

Tubular Running Services

Tubular Running Services revenue was $106.6 million for the second quarter of 2019, compared to $98.1 million in the first quarter of 2019, and $91.5 million for the second quarter of 2018. The increase in sequential revenue was primarily driven by increased customer activity in West Africa, the U.S. Gulf of Mexico, the Caribbean and Asia Pacific. In addition, the U.S. onshore TRS business continued its upward revenue trend for the twelfth consecutive quarter despite declining rig counts.

Segment adjusted EBITDA for the second quarter of 2019 was $25.4 million, or 23.8% of revenue, compared to $17.7 million, or 18.1% of revenue, for the first quarter of 2019 and $18.9 million, or 20.6% of revenue, for the second quarter of 2018. The sequential increase in margin growth was primarily a result of regional mix in the offshore markets and lower manufacturing costs.

Tubulars

Tubulars revenue for the second quarter of 2019 was $22.3 million, compared to $18.7 million for the first quarter of 2019, and $17.0 million for the second quarter of 2018. Improvements from the first quarter of 2019 were generally attributable to increased demand for Tubular products in the U.S. Gulf of Mexico as well as a large customer order in Mexico. Drilling tools revenue also continued to experience growth through further customer adoption of the Company’s VERSAFLO™ technology which provides differentiated casing and drill pipe flowback and circulation control compared to other products in the market.

Segment adjusted EBITDA for the second quarter of 2019 was $3.9 million, or 17.6% of revenue, compared to $4.1 million, or 22.0% of revenue, for the first quarter of 2019 and $3.3 million, or 19.5% of revenue for the second quarter of 2018.

Cementing Equipment

Cementing Equipment revenue was $26.7 million in the second quarter of 2019, compared to $27.7 million in the first quarter of 2019 and $23.5 million for the second quarter of 2018. The sequential decline was in line with expectations due to the timing of certain completions work and some international project delays. This was partially offset by increased demand and margin improvement in the U.S. Gulf of Mexico. The U.S. onshore market also maintained activity levels sequentially, despite declining rig counts. The Company continues to expect further international expansion in this segment during the second half of the year.

Segment adjusted EBITDA for the second quarter of 2019 was $3.0 million, or 11.3% of revenue, compared to $3.8 million, or 13.7% of revenue, for the first quarter of 2019 and $4.2 million, or 17.6% of revenue, for the second quarter of 2018. The decline was due to the aforementioned lower international revenue in addition to certain targeted investment in personnel and facilities preparing for future international expansion.

Capital Expenditures, Liquidity and Cash Flow

Cash expenditures related to property, plant and equipment and intangibles were $9.1 million for the second quarter of 2019. The Company expects total capital expenditures of approximately $40 million for 2019, with the majority of spending related to new technologically advanced tools and equipment to meet customer demand.

As of June 30, 2019, the Company’s consolidated cash, cash equivalents and short-term investments was $172.1 million compared to $172.0 million as of the prior quarter end. Total debt outstanding was $2.1 million as of June 30, 2019 compared to $3.9 million as of the prior quarter. Liquidity at June 30, 2019 was $237.3 million, including cash, cash equivalents and short-term investments, as well as $65.2 million available under the Company’s Credit Facility. For the first time since the third quarter of 2017, the Company returned to a positive Free Cash Flow position amounting to $3.3 million due to improved operational results and working capital management.

Conference Call

The Company will host a conference call to discuss second quarter 2019 results on Tuesday, August 6, 2019 at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). Participants may join the conference call by dialing (888) 771-4371 or (847) 585-4405. The conference access code is 48818535. To listen via live webcast, please visit the Investor Relations section of the Company's website, www.franksinternational.com. A presentation will also be posted on the Company’s website prior to the conference call.

An audio replay of the conference call will be available approximately two hours after the conclusion of the call and will remain available for seven days. It can be accessed by dialing (888) 843-7419 or (630) 652-3042. The conference call replay access code is 48818535#. The replay will also be available in the Investor Relations section of the Company’s website approximately two hours after the conclusion of the call and remain available for a period of approximately 90 days.

About Frank’s International

Frank’s International N.V. is a global oil services company that provides a broad and comprehensive range of highly engineered tubular running services, tubular fabrication, and specialty well construction and well intervention solutions with a focus on complex and technically demanding wells. Founded in 1938, Frank’s has approximately 3,100 employees and provides services to leading exploration and production companies in both onshore and offshore environments in approximately 50 countries on six continents. The Company’s common stock is traded on the NYSE under the symbol “FI.” Additional information is available on the Company’s website, www.franksinternational.com.

Contact:

Erin Fazio – Investor Relations
Erin.Fazio@franksintl.com
713-231-2515

FRANK’S INTERNATIONAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2019

2019

2018

2019

2018

Revenue:

Services

$

127,091

$

115,406

$

105,746

$

242,497

$

197,094

Products

28,563

29,002

26,339

57,565

50,560

Total revenue

155,654

144,408

132,085

300,062

247,654

Operating expenses:

Cost of revenue, exclusive of depreciation and amortization

Services (1)

85,785

83,239

74,088

169,024

145,050

Products (1)

23,475

20,128

18,798

43,603

36,427

General and administrative expenses (1)

34,026

35,411

32,787

69,437

64,883

Depreciation and amortization

23,913

25,242

28,862

49,155

57,162

Severance and other charges, net

815

455

1,115

1,270

2,369

Loss on disposal of assets

154

227

217

381

452

Operating loss

(12,514

)

(20,294

)

(23,782

)

(32,808

)

(58,689

)

Other income (expense):

Tax receivable agreement (“TRA”) related adjustments

220

(1,171

)

220

(4,112

)

Other income, net

669

529

2,033

1,198

1,593

Interest income, net

426

768

609

1,194

1,553

Mergers and acquisition expense

(58

)

Foreign currency gain (loss)

(661

)

483

(4,267

)

(178

)

(2,563

)

Total other income (expense)

654

1,780

(2,796

)

2,434

(3,587

)

Loss before income taxes

(11,860

)

(18,514

)

(26,578

)

(30,374

)

(62,276

)

Income tax expense (benefit)

3,300

9,773

(815

)

13,073

5,560

Net loss

$

(15,160

)

$

(28,287

)

$

(25,763

)

$

(43,447

)

$

(67,836

)

Loss per common share:

Basic and diluted

$

(0.07

)

$

(0.13

)

$

(0.12

)

$

(0.19

)

$

(0.30

)

Weighted average common shares outstanding:

Basic and diluted

225,052

224,653

223,981

224,854

223,775

__________________________
(1)
For the three months ended June 30, 2018, $7,565 and $1,508 have been reclassified from general and administrative expenses and cost of revenue, products, respectively, to cost of revenue, services. For the six months ended June 30, 2018, $14,199 and $2,626 have been reclassified from general and administrative expenses and cost of revenue, products, respectively, to cost of revenue, services. The reclassifications reflect a change in presentation of the information used by the Company’s chief operating decision maker.

FRANK’S INTERNATIONAL N.V.

SELECTED OPERATING SEGMENT DATA

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2019

2019

2018

2019

2018

Revenue

Tubular Running Services

$

106,615

$

98,079

$

91,518

$

204,694

$

170,392

Tubulars

22,334

18,657

17,040

40,991

34,726

Cementing Equipment

26,705

27,672

23,527

54,377

42,536

Total

$

155,654

$

144,408

$

132,085

$

300,062

$

247,654

Segment Adjusted EBITDA:

Tubular Running Services

$

25,400

$

17,735

$

18,860

$

43,135

$

23,806

Tubulars

3,934

4,112

3,327

8,046

6,920

Cementing Equipment

3,029

3,794

4,151

6,823

5,102

Corporate

(15,200

)

(15,983

)

(15,385

)

(31,183

)

(27,034

)

Total

$

17,163

$

9,658

$

10,953

$

26,821

$

8,794


FRANKS INTERNATIONAL N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

June 30,

December 31,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

157,204

$

186,212

Restricted cash

1,251

Short-term investments

14,921

26,603

Accounts receivables, net

204,647

189,414

Inventories, net

75,151

69,382

Assets held for sale

8,700

7,828

Other current assets

9,099

12,651

Total current assets

470,973

492,090

Property, plant and equipment, net

385,637

416,490

Goodwill

211,040

211,040

Intangible assets, net

25,354

31,069

Deferred tax assets, net

14,085

14,621

Operating lease right-of-use assets

34,428

Other assets

31,187

28,619

Total assets

$

1,172,704

$

1,193,929

Liabilities and Equity

Current liabilities:

Short-term debt

$

2,135

$

5,627

Accounts payable and accrued liabilities

107,532

123,981

Current portion of operating lease liabilities

8,012

Deferred revenue

138

116

Total current liabilities

117,817

129,724

Deferred tax liabilities

3,390

221

Non-current operating lease liabilities

26,490

Other non-current liabilities

28,931

29,212

Total liabilities

176,628

159,157

Stockholders’ equity:

Common stock

2,841

2,829

Additional paid-in capital

1,069,065

1,062,794

Retained earnings (deficit)

(28,923

)

16,860

Accumulated other comprehensive loss

(29,994

)

(32,338

)

Treasury stock

(16,913

)

(15,373

)

Total stockholders’ equity

996,076

1,034,772

Total liabilities and equity

$

1,172,704

$

1,193,929


FRANK’S INTERNATIONAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

June 30,

2019

2018

Cash flows from operating activities

Net loss

$

(43,447

)

$

(67,836

)

Adjustments to reconcile net loss to cash from operating activities

Depreciation and amortization

49,155

57,162

Equity-based compensation expense

5,591

5,168

Amortization of deferred financing costs

177

Deferred tax provision

3,702

Provision for bad debts

85

41

Loss on disposal of assets

381

452

Changes in fair value of investments

(1,879

)

(417

)

Unrealized (gain) loss on derivative instruments

204

(765

)

Other

(373

)

Changes in operating assets and liabilities

Accounts receivable

(14,334

)

(21,712

)

Inventories

(2,323

)

(1,461

)

Other current assets

2,063

2,042

Other assets

111

324

Accounts payable and accrued liabilities

(17,118

)

(10,192

)

Deferred revenue

22

(424

)

Other non-current liabilities

594

(244

)

Net cash used in operating activities

(17,389

)

(37,862

)

Cash flows from investing activities

Purchases of property, plant and equipment and intangibles

(17,240

)

(11,265

)

Proceeds from sale of assets

260

1,755

Proceeds from sale of investments

31,739

56,946

Purchase of investments

(20,185

)

(42,279

)

Net cash (used in) provided by investing activities

(5,426

)

5,157

Cash flows from financing activities

Repayments of borrowings

(3,492

)

(2,921

)

Treasury shares withheld for taxes

(1,542

)

(1,217

)

Proceeds from the issuance of ESPP shares

692

562

Deferred financing costs

(184

)

(48

)

Net cash used in financing activities

(4,526

)

(3,624

)

Effect of exchange rate changes on cash

(416

)

2,078

Net decrease in cash, cash equivalents and restricted cash

(27,757

)

(34,251

)

Cash, cash equivalents and restricted cash at beginning of period

186,212

213,015

Cash, cash equivalents and restricted cash at end of period

$

158,455

$

178,764

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future business strategy and prospects for growth, cash flows and liquidity, financial strategy, budget, projections and operating results, the amount, nature and timing of capital expenditures, the availability and terms of capital, the level of activity in the oil and gas industry, volatility of oil and gas prices, unique risks associated with offshore operations, political, economic and regulatory uncertainties in international operations, the ability to develop new technologies and products, the ability to protect intellectual property rights, the ability to employ and retain skilled and qualified workers, the level of competition in the Company’s industry and other guidance. These statements are based on certain assumptions made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance.

Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the factors discussed or referenced in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 that has been filed with the SEC and in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 that will be filed with the SEC. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law, and we caution you not to rely on them unduly.

Use of Non-GAAP Financial Measures

This press release and the accompanying schedules include the non-GAAP financial measures of free cash flow, adjusted EBITDA and adjusted EBITDA margin, which may be used periodically by management when discussing the Company’s financial results with investors and analysts. The accompanying schedules of this press release provide a reconciliation of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with GAAP. Free cash flow, adjusted EBITDA and adjusted EBITDA margin are presented because management believes these metrics provide additional information relative to the performance of the Company’s business. These metrics are commonly employed by financial analysts and investors to evaluate the operating and financial performance of the Company from period to period and to compare it with the performance of other publicly traded companies within the industry. You should not consider free cash flow, adjusted EBITDA and adjusted EBITDA margin in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Because free cash flow, adjusted EBITDA and adjusted EBITDA margin may be defined differently by other companies in the Company’s industry, the Company’s presentation of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The Company defines free cash flow as net cash (used in) provided by operating activities less purchases of property, plant and equipment and intangibles. The Company defines adjusted EBITDA as net income (loss) before interest income, net, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on disposal of assets, foreign currency gain or loss, equity-based compensation, the effects of the tax receivable agreement, unrealized and realized gains or losses and other non-cash adjustments and other charges or credits. The Company uses adjusted EBITDA to assess its financial performance because it allows the Company to compare its operating performance on a consistent basis across periods by removing the effects of its capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), income tax, foreign currency exchange rates and other charges and credits. The Company defines adjusted EBITDA margin as adjusted EBITDA divided by total revenue.

Please see the accompanying financial tables for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures.

FRANK’S INTERNATIONAL N.V.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION

(In thousands)

(Unaudited)

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2019

2019

2018

2019

2018

Revenue

$

155,654

$

144,408

$

132,085

$

300,062

$

247,654

Net loss

$

(15,160

)

$

(28,287

)

$

(25,763

)

$

(43,447

)

$

(67,836

)

Interest income, net

(426

)

(768

)

(609

)

(1,194

)

(1,553

)

Depreciation and amortization

23,913

25,242

28,862

49,155

57,162

Income tax expense (benefit)

3,300

9,773

(815

)

13,073

5,560

Loss on disposal of assets

154

227

217

381

452

Foreign currency (gain) loss

661

(483

)

4,267

178

2,563

TRA related adjustments

(220

)

1,171

(220

)

4,112

Charges and credits (1)

4,941

3,954

3,623

8,895

8,334

Adjusted EBITDA

$

17,163

$

9,658

$

10,953

$

26,821

$

8,794

Adjusted EBITDA margin

11.0

%

6.7

%

8.3

%

8.9

%

3.6

%

___________________________
(1)
Comprised of Equity-based compensation expense (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $3,017, $2,574 and $2,888, respectively, and for the six months ended June 30, 2019 and 2018: $5,591 and $5,168, respectively), Mergers and acquisition expense (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: none, none and none, respectively, and for the six months ended June 30, 2019 and 2018: none and $58, respectively), Severance and other charges, net (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $815, $455 and $1,115, respectively, and for the six months ended June 30, 2019 and 2018: $1,270 and $2,369, respectively), Unrealized and realized gains (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $383, $308 and $1,561, respectively, and for the six months ended June 30, 2019 and 2018: $691 and $1,161, respectively) and Investigation-related matters (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $1,492, $1,233 and $1,181, respectively, and for the six months ended June 30, 2019 and 2018: $2,725 and $1,900, respectively).

FRANK’S INTERNATIONAL N.V.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION

(In thousands)

(Unaudited)

SEGMENT ADJUSTED EBITDA RECONCILIATION

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2019

2019

2018

2019

2018

Segment Adjusted EBITDA:

Tubular Running Services

$

25,400

$

17,735

$

18,860

$

43,135

$

23,806

Tubulars

3,934

4,112

3,327

8,046

6,920

Cementing Equipment

3,029

3,794

4,151

6,823

5,102

Corporate

(15,200

)

(15,983

)

(15,385

)

(31,183

)

(27,034

)

17,163

9,658

10,953

26,821

8,794

Interest income, net

426

768

609

1,194

1,553

Depreciation and amortization

(23,913

)

(25,242

)

(28,862

)

(49,155

)

(57,162

)

Income tax (expense) benefit

(3,300

)

(9,773

)

815

(13,073

)

(5,560

)

Loss on disposal of assets

(154

)

(227

)

(217

)

(381

)

(452

)

Foreign currency gain (loss)

(661

)

483

(4,267

)

(178

)

(2,563

)

TRA related adjustments

220

(1,171

)

220

(4,112

)

Charges and credits (1)

(4,941

)

(3,954

)

(3,623

)

(8,895

)

(8,334

)

Net loss

$

(15,160

)

$

(28,287

)

$

(25,763

)

$

(43,447

)

$

(67,836

)

___________________________
(1)
Comprised of Equity-based compensation expense (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $3,017, $2,574 and $2,888, respectively, and for the six months ended June 30, 2019 and 2018: $5,591 and $5,168, respectively), Mergers and acquisition expense (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: none, none and none, respectively, and for the six months ended June 30, 2019 and 2018: none and $58, respectively), Severance and other charges, net (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $815, $455 and $1,115, respectively, and for the six months ended June 30, 2019 and 2018: $1,270 and $2,369, respectively), Unrealized and realized gains (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $383, $308 and $1,561, respectively, and for the six months ended June 30, 2019 and 2018: $691 and $1,161, respectively) and Investigation-related matters (for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018: $1,492, $1,233 and $1,181, respectively, and for the six months ended June 30, 2019 and 2018: $2,725 and $1,900, respectively).

FRANK’S INTERNATIONAL N.V.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION

(In thousands)

(Unaudited)

FREE CASH FLOW RECONCILIATION

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2019

2019

2018

2019

2018

Net cash (used in) provided by operating activities

$

12,381

$

(29,770

)

$

(16,953

)

$

(17,389

)

$

(37,862

)

Less: purchases of property, plant and equipment and intangibles

9,095

8,145

4,942

17,240

11,265

Free cash flow

$

3,286

$

(37,915

)

$

(21,895

)

$

(34,629

)

$

(49,127

)