10-QPeriod: Q1 FY2019

TechnipFMC plc Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 9, 2019For Securities:FTI

Summary

TechnipFMC plc (FTI) reported a decrease in total revenue for the first quarter of 2019 to $2.91 billion, down from $3.13 billion in the prior year period, primarily due to declining project activity across its segments. Net income attributable to TechnipFMC plc also saw a significant drop to $20.9 million ($0.05 per diluted share) compared to $95.1 million ($0.20 per diluted share) in Q1 2018. This decline was impacted by lower revenue, reduced gross profit margins, and increased merger transaction and integration costs. Despite the revenue decline, the company demonstrated a positive operating cash flow of $121.4 million for the quarter, a substantial improvement from a negative $201.6 million in Q1 2018, driven by better management of working capital, particularly a decrease in trade receivables. The company's order backlog remained robust at $17.8 billion, providing visibility into future revenue streams. Management highlighted improvements in project economics and continued engagement with customers, particularly in the Subsea and Onshore/Offshore segments, though the Surface Technologies segment experienced near-term volatility in North America.

Financial Highlights

53 data points
Beta

Revenue

$2.91B

Net Income

$20.90M

0.7% Net Margin

EPS (Diluted)

$0.05

Total Assets

$25.63B

Cash & Equivalents

$4.97B

Free Cash Flow

-$56.80M

Financial Statements
Beta
Revenue$2.91B
R&D Expenses$39.90M
SG&A Expenses$297.80M
Operating Expenses$2.78B
Operating Income$216.10M
Net Income$20.90M
EPS (Basic)$0.05
EPS (Diluted)$0.05
Shares Outstanding (Basic)450.10M
Shares Outstanding (Diluted)453.30M

Key Highlights

  • 1Total revenue decreased by 6.8% to $2.91 billion in Q1 2019 compared to $3.13 billion in Q1 2018.
  • 2Net income attributable to TechnipFMC plc decreased significantly to $20.9 million ($0.05 per diluted share) from $95.1 million ($0.20 per diluted share) in the prior year period.
  • 3The company reported positive operating cash flow of $121.4 million, a substantial improvement from -$201.6 million in Q1 2018.
  • 4Gross profit margin declined to 17.2% from 19.2% year-over-year, attributed to a more competitive backlog and mix of projects.
  • 5Order backlog remained strong at $17.8 billion as of March 31, 2019, providing a solid foundation for future revenue.
  • 6The Surface Technologies segment experienced near-term volatility in North America due to reduced operator spending and pricing pressure.
  • 7The company incurred $12.1 million in merger transaction and integration costs in Q1 2019.

Frequently Asked Questions

The primary driver for the decrease in revenue was declining project activity across the company's segments. Specifically, the Onshore/Offshore segment saw a significant drop as major projects, notably Yamal LNG, progressed towards completion. Subsea revenue was relatively flat, while Surface Technologies saw growth from international markets offset by declines in North America.

TechnipFMC showed a significant improvement in its cash flow from operations, generating $121.4 million in Q1 2019 compared to using $201.6 million in Q1 2018. This turnaround was primarily driven by better management of working capital, particularly a reduction in trade receivables and improvements in contract liabilities.

The outlook varies by segment. Subsea is showing an improving industry outlook with increased client engagement and project tendering. Onshore/Offshore sees potential in natural gas monetization projects, particularly LNG, with an improved market outlook. However, Surface Technologies is experiencing near-term volatility in North America due to reduced operator spending, though international markets show resilience.

The company is cooperating with investigations by the U.S. Department of Justice (DOJ) and other authorities regarding potential violations of the U.S. Foreign Corrupt Practices Act (FCPA) related to projects in Brazil, Ghana, and Equatorial Guinea. A provision of $280.0 million was recorded in late 2018 for a probable settlement, though the final settlement amount could exceed this provision. Additionally, a shareholder class action lawsuit remains pending, though most claims have been dismissed.