Market Overview

Apergy Reports Second Quarter 2019 Results

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  • Revenue of $306 million in Q2-19, up 1% sequentially
  • Net income of $24 million and adjusted net income of $27 million in Q2-19
  • Diluted EPS of $0.31 and adjusted diluted EPS of $0.35 in Q2-19
  • Adjusted EBITDA of $75 million in Q2-19, up 3% sequentially with adjusted EBITDA margins improving 40 basis points
  • Repaid $25 million of term loan debt in Q2-19, bringing total repaid to $95 million since May 2018

THE WOODLANDS, Texas, July 24, 2019 (GLOBE NEWSWIRE) -- Apergy Corporation ("Apergy") (NYSE:APY) today reported net income of $23.8 million in the second quarter of 2019, compared to net income of $22.2 million in the second quarter of 2018. Adjusted net income was $26.8 million in the second quarter of 2019, compared to adjusted net income of $29.4 million in the second quarter of 2018. Results from the second quarter of 2018 do not include all of the expenses that would have been incurred had Apergy been a stand-alone public company during the period, including interest expense and additional corporate costs.

Diluted earnings per share was $0.31 in the second quarter of 2019. Adjusted diluted earnings per share, excluding restructuring and spin-off activities, was $0.35 in the second quarter of 2019.

Revenue was $306.1 million in the second quarter of 2019, an increase of $0.2 million compared to $305.9 million in the second quarter of 2018, and an increase of $4.4 million, or 1%, compared to $301.7 million in the first quarter of 2019.

Adjusted EBITDA was $74.6 million in the second quarter of 2019, a decrease of $2.0 million, or 3%, compared to $76.5 million in the second quarter of 2018, and an increase of $2.1 million, or 3%, compared to $72.5 million in the first quarter of 2019. Adjusted EBITDA margin was 24.4% in the second quarter of 2019. Compared to the second quarter of 2018, the second quarter of 2019 includes an additional $2.1 million of corporate costs associated with Apergy becoming a stand-alone public company.   

Cash from operating activities was $39.4 million in the second quarter of 2019, compared to $51.1 million in the second quarter of 2018, and $19.9 million in the first quarter of 2019. In the second quarter of 2019, Apergy paid an additional $12.3 million in cash interest expense compared to the second quarter of 2018.  The free cash flow conversion ratio was 35% in the second quarter of 2019, compared to 46% in the second quarter of 2018, and 14% in the first quarter of 2019. In the second quarter of 2019, Apergy used available cash to repay $25 million of term loan debt. Since the completion of the spin-off on May 9, 2018, Apergy has repaid $95 million of term loan debt.

    Three Months Ended     Variance
(dollars in thousands, except per share amounts)   Jun. 30,
2019
    Mar. 31,
2019
    Jun. 30,
2018
  Sequential   Year-
over-
year
Revenue $ 306,054     $ 301,691     $ 305,850     1%   0%
                         
Net income attributable to Apergy $ 23,779     $ 22,287     $ 22,154 *   7%   7%
Diluted earnings per share attributable to Apergy $ 0.31     $ 0.29     $ 0.28 *   7%   11%
                         
Adjusted net income attributable to Apergy $ 26,800     $ 24,896     $ 29,363 *   8%   (9)%
Adjusted diluted earnings per share attributable to Apergy $ 0.35     $ 0.32     $ 0.38 *   9%   (8)%
                         
Adjusted EBITDA $ 74,553     $ 72,458     $ 76,510     3%   (3)%
Adjusted EBITDA margin   24.4%       24.0%       25.0%     40 bps   (60) bps
                         
Net cash provided by operating activities $ 39,391     $ 19,910     $ 51,148   $ 19,481 $ (11,757)
Capital expenditures $ 12,970     $ 9,718     $ 16,087   $ 3,252 $ (3,117)
                         
*Results from the three months ended June 30, 2018 do not include all of the expenses that would have been incurred had Apergy been a stand-alone pubic company during the period. 

"We continued our strong execution in the second quarter against a volatile commodity market," said Sivasankaran "Soma" Somasundaram, President and Chief Executive Officer. "We delivered sequential growth in revenue and adjusted EBITDA, which was driven by growth in our artificial lift and digital products, partially offset by the expected seasonal decline in Drilling Technologies. Our continued focus on productivity and cost discipline resulted in 40 basis points of sequential adjusted EBITDA margin improvement.

"Sequentially, Production & Automation Technologies second quarter revenue increased 5%, and Drilling Technologies revenue decreased 9%. The sequential decline in Drilling Technologies was due to the seasonally lower Canadian rig count and a decline in U.S. drilling activity through the second quarter.

"During the second quarter we generated healthy free cash flow of $26 million. Consistent with our capital allocation priorities we repaid $25 million of term loan debt in the second quarter of 2019. Our focus on cash flow generation and disciplined capital management has enabled us to repay $95 million of debt since our spin-off.

"As we look into the second half, we expect our customers to exercise capital discipline and focus on free cash flow generation. While North American market activity is expected to be slightly down in the third quarter, we expect modest sequential revenue growth for Apergy, driven by our growth initiatives in artificial lift and digital products. We expect a slight sequential revenue decline in our Drilling Technologies segment due to lower drilling activity in North America. With respect to free cash flow, we generated 23% more free cash flow in first half of 2019 compared to the same time period in 2018. We expect this momentum to continue and result in a full year 2019 free cash flow conversion ratio of 40% to 45%. At Apergy, we continue to remain focused on the factors under our control and delivering solid performance relative to the market."

  Three Months Ended   Variance  
(dollars in thousands)   Jun. 30,
2019
    Mar. 31,
2019
    Jun. 30,
2018
  Sequential   Year-
over-
year
 
Production & Automation Technologies                          
  Revenue $ 235,703     $ 224,156     $ 240,608     5%   (2)%  
  Operating profit $ 20,919     $ 16,163     $ 23,225     29%   (10)%  
  Operating profit margin   8.9%       7.2%       9.7%     170 bps   (80) bps  
  Adjusted segment EBITDA $ 51,743     $ 46,098     $ 54,198     12%   (5)%  
  Adjusted segment EBITDA margin   22.0%       20.6%       22.5%     140 bps   (50) bps  
                           
Drilling Technologies                          
  Revenue $ 70,351     $ 77,535     $ 65,242     (9)%   8%  
  Operating profit $ 24,251     $ 26,806     $ 21,340     (10)%   14%  
  Operating profit margin   34.5%       34.6%       32.7%     (10) bps   180 bps  
  Adjusted segment EBITDA $ 26,577     $ 29,315     $ 24,135
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