10-QPeriod: Q1 FY2020

SLB LIMITED/NV Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 22, 2020For Securities:SLB

Summary

SLB LIMITED/NV (SLB) reported a significant net loss of $7.376 billion for the first quarter ended March 31, 2020, a stark contrast to the $430 million net income in the prior year period. This loss was primarily driven by a substantial $8.523 billion in impairments and other charges, including significant goodwill and intangible asset write-downs totaling over $6.3 billion, directly attributed to the severe market downturn caused by the COVID-19 pandemic and a collapse in oil prices. Total revenue also saw a decline, falling by 5% year-over-year to $7.455 billion, reflecting reduced customer spending and activity disruptions. Despite the substantial net loss, the company's operational cash flow remained positive at $784 million, though this was lower than the $326 million in the prior year. SLB also took proactive steps to conserve cash, including a significant reduction in its dividend and a decrease in capital expenditures. The company faces considerable uncertainty due to the ongoing pandemic and volatile oil prices, impacting future operational outlook and potential for further charges. Investors should closely monitor management's strategies for navigating this challenging environment and its impact on future earnings and cash flow.

Financial Highlights

47 data points
Beta

Revenue

$7.46B

Net Income

-$7.38B

-98.9% Net Margin

EPS (Diluted)

$-5.32

Total Assets

$48.59B

Cash & Equivalents

$1.38B

Free Cash Flow

$377.00M

Financial Statements
Beta
Revenue$7.46B
R&D Expenses$173.00M
Operating Income$776.00M
Interest Expense$136.00M
Net Income-$7.38B
EPS (Basic)$-5.32
EPS (Diluted)$-5.32
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Significant net loss of $7.376 billion for the quarter, compared to a net income of $430 million in Q1 2019, largely due to $8.523 billion in impairment charges.
  • 2Total revenue decreased 5% year-over-year to $7.455 billion, impacted by the global economic crisis and oil price collapse.
  • 3Goodwill impairment of $3.1 billion and intangible asset impairments of $3.3 billion were recorded due to market conditions.
  • 4North America revenue declined significantly by 17% year-over-year, while international revenue saw a modest 2% increase.
  • 5Cash flow from operating activities was $784 million, a decrease from $326 million in the prior year, reflecting the challenging operating environment.
  • 6The company announced a 75% dividend reduction and reduced capital expenditures by over 30% to conserve cash.
  • 7Management anticipates further severance charges in Q2 2020 and acknowledges the potential for additional restructuring and impairment charges.

Frequently Asked Questions

The primary driver of the substantial net loss of $7.376 billion was $8.523 billion in impairments and other charges. This included a $3.1 billion goodwill impairment, $3.3 billion in intangible asset impairments related to past acquisitions, and $1.3 billion for Asset Performance Solutions projects, all resulting from the severe market downturn triggered by the COVID-19 pandemic and the collapse in oil prices during March 2020.

The company experienced a 5% year-over-year decrease in total revenue to $7.455 billion. This was driven by reduced customer spending, activity disruptions due to COVID-19 lockdowns, and the volatile oil price environment. North America revenue was particularly hard-hit, declining 17% year-over-year, while international revenue showed slight resilience with a 2% increase. The company has implemented cost-saving measures, including salary reductions, headcount cuts, and facility closures, to navigate the challenging conditions.

As of March 31, 2020, SLB had $1.375 billion in cash and $1.969 billion in short-term investments, totaling $3.344 billion in highly liquid assets. The company also has access to committed credit facilities. To conserve cash in response to the economic downturn, SLB has reduced its dividend by 75% and reduced its capital expenditure program by over 30%. Management stated these measures are intended to ensure sufficient liquidity for at least the next 12 months and maintain a strong balance sheet.

The outlook for 2020 remains highly uncertain and challenging. SLB anticipates customer capital spending to decline significantly, particularly in North America. The company expects the second quarter to be extremely disruptive and has planned for various scenarios. Management acknowledges the possibility of further restructuring and impairment charges as market conditions evolve and strategy is adjusted. The duration and scope of the COVID-19 pandemic, along with oil price volatility, are key factors influencing future results.