 HOUSTON, July 30, 2020 GLOBE NEWSWIRE -- Dril-Quip, Inc. NYSE: DRQ, the Company or Dril-Quip today reported operational and financial results for the second quarter of 2020. Key highlights for the second quarter of 2020 included: Generated 90.4 million of revenue on lower product volumes and leasing revenues, reflecting the continued impacts of the COVID-19 pandemic on global operations; Reported second quarter net loss of 14.1 million, or 0.40 per share, an improvement of 5.6 million, or 0.15 per share, from the first quarter of 2020; Recorded adjusted EBITDA of 6.0 million, or 6.7 of revenue; Improved sequential net cash provided by operating activities by 24.3 million to 3.0 million increasing cash position to 345.8 million; Completed approximately 11.5 million of previously announced annualized cost saving actions, with additional savings expected to be captured in the second half of 2020; Selling, general and administrative expense declined 1.3 million in the second quarter compared to the first quarter of 2020; Announced strategic collaboration agreement with Proserv for the development and manufacturing of subsea controlsBlake DeBerry, Dril-Quips Chief Executive Officer, commented, Dril-Quip continues to persevere through this difficult and uncertain market environment brought about by the COVID-19 pandemic and the associated disruptions it has caused the global economy. Although these issues remain a headwind to near-term growth, actions we are currently executing will position us to better weather this storm and maintain focus on ensuring the safety of our employees and suppliers while meeting our customers needs.Our operations experienced further negative effects from the ongoing pandemic in the second quarter as we were forced to make modifications that reduced our global production output. Adapting to regulatory restrictions, implementing necessary precautions and conforming to guidelines from health administrators led to lower production output and higher costs. We also saw historically low commodity prices and corresponding customer capital spending reductions that resulted in the delay or deferment of customer product delivery and booking decisions. These delays and deferments led to recorded bookings of 40.5 million during the second quarter. However, even with the sequential decline in bookings, we expect our bookings will be approximately 200 million for the full year 2020.Despite these circumstances, we continue to improve our manufacturing production output and remediate supply chain interruptions, including the reinstatement of overtime at the majority of our manufacturing facilities towards the end of the quarter. We made significant progress on our cost cutting initiatives which we began executing in the second quarter, achieving 11.5 million in annualized cost savings, and we are on track to deliver a further 9.0 million annualized savings in the second half of 2020. Our top priority is to continue to meet these challenges and improve operational and financial results in the second half of 2020.Additionally, we announced an agreement with Proserv to manufacture and supply Dril-Quip with subsea controls systems. This allows us to offer our customers a broader range of cutting-edge technology control systems along with our innovative subsea tree systems and wellheads. The transition of our controls business will be seamless for our existing customers as they will continue to receive the same level of service and support from Proserv going forward. Collaborating with Proserv on controls not only benefits our customers but allows us to avoid an estimated 8 million to 10 million per year of research and development and other associated expense over the next three years in order to offer our customers market leading controls.As we look ahead to the second half of 2020, Dril-Quip is well positioned with a strong balance sheet, backlog of customer projects and an action plan to proactively address the current environment. We expect these factors along with the efforts of our dedicated employees will lead to improved financial performance with an emphasis on cash flow generation.In conjunction with todays release, the Company posted a new investor presentation entitled Second Quarter 2020 Supplemental Earnings Information to its website, on the Events Presentations page under the Investors tab. Investors should note that Dril-Quip announces material financial information in Securities and Exchange Commission SEC filings, press releases and public conference calls. Dril-Quip may use the Investors section of its website to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. Information on Dril-Quips website is not part of this release.Operational and Financial ResultsRevenue, Cost of Sales and Gross Operating MarginConsolidated revenue for the second quarter of 2020 was 90.4 million, down 5.6 million from the first quarter of 2020 and 13.4 million lower compared to the second quarter of 2019. The decrease in revenue sequentially and year-over-year was driven by negative impacts to production output, delays in rentals related to product installations, customer requests to extend deliveries and supply chain disruptions, all of which were attributed to the COVID-19 pandemic and the associated impacts on the global oil and gas markets.Cost of sales for the second quarter of 2020 was 66.9 million, a decrease of 4.5 million sequentially and a decrease of 6.9 million compared to the prior year. Gross operating margin for the second quarter of 2020 was 26.0, an increase from 25.6 in the first quarter of 2020 and a decrease from 28.8 in the second quarter of 2019. The improvement in gross margin sequentially was driven primarily by improved product mix in the Eastern Hemisphere and higher downhole tool products and services revenue in Mexico. The decline in gross margin year-over-year was primarily related to lower production output globally due to increased days off of work and local or Company precautionary workplace restrictions, lower product sales and other increased costs associated with COVID-19 impacts. These factors were partially offset by savings from the 2019 transformation initiative and from leasing our forge facility to AFGlobal Corporation during the fourth quarter of 2019.Selling, General and Administrative ExpensesSelling, general and administrative SGA expenses for the second quarter of 2020 were 23.3 million, a decrease of 1.3 million compared to the first quarter of 2020. The sequential decline in SGA was primarily due to lower corporate overhead from cost saving actions completed in the second quarter, partially offset by higher information technology expenses related to establishing remote workstations for employees as a result of COVID-19 of approximately 0.9 million. SGA remained relatively unchanged year-over-year compared to the 23.1 million for the second quarter of 2019.Net Loss, Adjusted EBITDA and Free Cash FlowFor the second quarter of 2020, the Company reported a net loss of 14.1 million, or 0.40 per share, compared to a net loss of 19.7 million, or 0.55 per share, for the first quarter of 2020 and net income of 1.7 million, or 0.05 per diluted share, for the second quarter of 2019. The sequential decrease in net loss was a result of improved mix of product revenue and lower restructuring and other charges, partially offset by foreign currency exchange losses of 0.8 million compared to a foreign currency exchange gains of 3.2 million in the first quarter of 2020 and the previously noted increase in information technology expenses. The decline in net income year-over-year was driven by decreased product revenues and gross margins caused by decreased production output as a result of COVID-19 related market condition declines, increase in income tax provision and an increase in foreign currency exchange losses.Adjusted EBITDA totaled 6.0 million for the second quarter of 2020 compared to 6.5 million for the first quarter of 2020 and 13.4 million for the second quarter of 2019. The sequential decrease in adjusted EBITDA is attributed to revenue declines in product deliveries and leasing revenues caused by operational and logistical challenges caused by the global COVID-19 pandemic, partially offset by an improved mix toward higher margin products and increased service revenues in the Western Hemisphere. The decrease in adjusted EBITDA year-over-year was due to fall through from a decline in product and leasing revenues as a result of market declines and higher SGA costs, primarily from pandemic related information technology spend.Net cash provided by operations was 3.0 million and free cash flow was approximately negative 1.1 million for the second quarter of 2020. The improvement in net cash provided by operations of 24.3 million compared to the first quarter of 2020 was primarily driven by improved collections of receivables and successful negotiation of extended supplier payment terms, partially offset by increases in stocking program inventory in anticipation of product sales growth in the Eastern Hemisphere and timing of deliveries due to logistical impacts caused by the global pandemic. Capital expenditures in the second quarter of 2020 were approximately 4.1 million, the majority of which was related to rental tools for our downhole tools business as well as machinery and equipment related to consolidating our Aberdeen manufacturing operations into Houston. 