10-QPeriod: Q3 FY2020

TechnipFMC plc Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 2, 2020For Securities:FTI

Summary

TechnipFMC plc reported relatively flat total revenue of $3,335.7 million for the third quarter of 2020, mirroring the prior year's performance. However, the company experienced a net loss attributable to TechnipFMC plc of $3.9 million, a significant improvement from the $119.1 million loss in the same quarter last year. This improvement was largely driven by a substantial reduction in "Impairment, restructuring and other expenses," which decreased by 34.4% to $92.0 million, and a significant increase in "Other income (expense), net" due to favorable foreign exchange movements. For the nine-month period, revenue saw a slight decrease of 0.6% to $9,624.5 million. The net loss attributable to TechnipFMC plc widened to $3,248.3 million from $1.2 million in the prior year period. This was primarily due to a massive increase in "Impairment, restructuring and other expenses" to $3,440.7 million, largely driven by significant goodwill impairments totaling $3,083.4 million recognized in the Subsea and Surface Technologies segments. Despite these challenges, the company has maintained a strong order backlog of $19,646.1 million, indicating future revenue potential, and has taken proactive steps to preserve liquidity through cost reductions and dividend adjustments.

Financial Highlights

52 data points
Beta

Revenue

$1.73B

Net Income

-$3.90M

-0.2% Net Margin

EPS (Diluted)

$-0.01

Total Assets

$18.91B

Cash & Equivalents

$4.24B

Free Cash Flow

$104.40M

Financial Statements
Beta
Revenue$1.73B
R&D Expenses$20.80M
SG&A Expenses$181.80M
Operating Expenses$1.77B
Operating Income$13.30M
Interest Expense$30.80M
Net Income-$3.90M
EPS (Basic)$-0.01
EPS (Diluted)$-0.01
Shares Outstanding (Basic)449.40M
Shares Outstanding (Diluted)449.40M

Key Highlights

  • 1Total revenue for Q3 2020 was $3,335.7 million, flat year-over-year, while the nine-month revenue was $9,624.5 million, a slight decrease of 0.6% from the prior year.
  • 2The company reported a net loss attributable to TechnipFMC plc of $3.9 million for Q3 2020, an improvement from a $119.1 million loss in Q3 2019. For the nine-month period, the net loss widened to $3,248.3 million from $1.2 million in the prior year.
  • 3Significant impairment charges, primarily goodwill impairments, of $3,083.4 million were recorded in the nine-month period, contributing to the increased net loss.
  • 4Operating profit in the Subsea segment improved to $20.3 million in Q3 2020 from a loss of $79.6 million in Q3 2019, driven by higher project activity and cost reduction initiatives.
  • 5Technip Energies revenue grew slightly by 0.7% in Q3 2020, but operating profit decreased significantly by 54.5% due to a reduced contribution from major projects and lower margin realization.
  • 6Surface Technologies revenue declined by 43.1% in Q3 2020, primarily due to reduced operator activity in North America, resulting in an operating loss of $7.0 million compared to a profit of $6.1 million in the prior year.
  • 7The company's order backlog stood at $19,646.1 million as of September 30, 2020, providing a solid base for future revenue, although down from $24,251.1 million at the end of 2019.

Frequently Asked Questions

The primary driver of the substantial net loss of $3,248.3 million for the nine months ended September 30, 2020, was a significant increase in "Impairment, restructuring and other expenses" to $3,440.7 million. This included goodwill impairments of $3,083.4 million in the Subsea and Surface Technologies segments, stemming from the economic impact of the COVID-19 pandemic and commodity price declines.

COVID-19 has had a material impact, leading to supply chain disruptions, productivity declines, logistics constraints, and incremental direct costs for safety measures. While the company has worked to mitigate these effects, they contributed to operational challenges, particularly impacting revenue and gross profit in Q3 and the nine-month period, especially in the Surface Technologies segment. The company also incurred significant COVID-19 related expenses as part of its restructuring and other charges.

The outlook is mixed. Subsea revenue increased in Q3 due to higher project activity, and the company sees long-term potential in deepwater developments and transition fuels. Technip Energies is affected by long project cycles and has been resilient, with strong fundamentals in natural gas and LNG, although market dynamics have shifted. Surface Technologies faces headwinds from reduced North American operator activity but shows resilience in international markets, particularly the Middle East and Asia Pacific.

TechnipFMC is focused on cash and liquidity preservation. They have reduced capital expenditures, implemented cost reduction initiatives targeting over $350 million in annualized savings, lowered executive salaries and director retainers, and reduced the annual dividend. The company has significant unused capacity under its revolving credit facility and expects to meet funding requirements through operational cash flow and existing credit facilities.