10-QPeriod: Q3 FY2018

TechnipFMC plc Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 6, 2018For Securities:FTI

Summary

TechnipFMC plc (FTI) reported a decrease in total revenue for the third quarter of 2018 to $3,143.8 million, down 24.1% from $4,140.9 million in the prior year quarter. This decline was primarily attributed to reduced project activity in the Subsea segment, particularly in Africa, Asia Pacific, and Europe, and a decrease in Onshore/Offshore projects like Yamal LNG. Despite the revenue dip, the company saw an improvement in gross profit margin to 18.6% from 16.2% year-over-year, driven by strong project execution and a lower operating cost structure. Net income attributable to TechnipFMC plc increased to $136.9 million ($0.30 per diluted share) from $121.0 million ($0.26 per diluted share) in the third quarter of 2017. This improvement, despite lower revenues, was supported by reduced selling, general, and administrative expenses and a significant decrease in impairment, restructuring, and other expenses. The company also noted strong inbound orders across all segments, particularly in Subsea and Onshore/Offshore, contributing to a substantial increase in the total order backlog to $15,178.0 million. However, the company's disclosure controls and procedures were deemed not effective due to previously identified material weaknesses in internal control over financial reporting, though remediation efforts are ongoing.

Financial Highlights

51 data points
Beta

Revenue

$3.14B

Net Income

$136.90M

4.4% Net Margin

EPS (Diluted)

$0.30

Total Assets

$26.66B

Cash & Equivalents

$5.55B

Free Cash Flow

$20.10M

Financial Statements
Beta
Revenue$3.14B
R&D Expenses$38.60M
SG&A Expenses$250.60M
Operating Expenses$2.86B
Operating Income$375.00M
Net Income$136.90M
EPS (Basic)$0.30
EPS (Diluted)$0.30
Shares Outstanding (Basic)454.50M
Shares Outstanding (Diluted)459.00M

Key Highlights

  • 1Total revenue decreased by 24.1% to $3,143.8 million in Q3 2018 compared to $4,140.9 million in Q3 2017, mainly due to lower project activity in Subsea and Onshore/Offshore segments.
  • 2Net income attributable to TechnipFMC plc increased by 13.1% to $136.9 million ($0.30 per diluted share) in Q3 2018, up from $121.0 million ($0.26 per diluted share) in Q3 2017.
  • 3Gross profit as a percentage of sales improved to 18.6% in Q3 2018 from 16.2% in Q3 2017, reflecting better project execution and a lower cost structure.
  • 4Selling, general, and administrative expenses decreased by 11.9% year-over-year, driven by cost reduction initiatives and lower headcount.
  • 5Impairment, restructuring, and other expenses decreased significantly by 83.7% to $9.7 million in Q3 2018 from $59.4 million in Q3 2017.
  • 6Total inbound orders increased by 47.4% to $3,647.2 million in Q3 2018 compared to $2,461.9 million in Q3 2017.
  • 7Order backlog at September 30, 2018, stood at $15,178.0 million, up from $12,982.8 million at December 31, 2017, indicating a stronger future revenue pipeline.

Frequently Asked Questions

The primary reason for the decrease in revenue for the third quarter of 2018 was the decline in project activity across key segments. Specifically, the Subsea segment saw reduced activity in Africa, Asia Pacific, and Europe as projects neared completion, and the Onshore/Offshore segment experienced a decrease due to the progression of major projects like Yamal LNG.

TechnipFMC improved its net income due to several factors. The gross profit margin increased to 18.6% from 16.2% due to strong project execution and cost efficiencies. Additionally, the company successfully reduced selling, general, and administrative expenses and significantly lowered impairment, restructuring, and other expenses. These combined efforts offset the impact of lower revenues.

The substantial increase in inbound orders, up 47.4% to $3,647.2 million in Q3 2018, and the growth in order backlog to $15,178.0 million from $12,982.8 million at the end of 2017, indicate a strengthening demand for the company's services and products. This suggests a positive outlook for future revenue and operational activity across its segments.

Yes, the company disclosed that its disclosure controls and procedures were not effective due to previously identified material weaknesses in internal control over financial reporting. These relate to calculations of temporary gains/losses on natural hedges, period-end financial reporting processes, and certain IT systems. However, the company stated that it is dedicating significant resources to remediate these weaknesses.