GlobeNewswire Inc | Aug 9, 2021 04:05PM EDT

August 09, 2021

Second Quarter Results In-Line with Expectations; Year over Year Adjusted EBITDA Increased over 40%Reiterate Full Year Adjusted EBITDA Guidance of $150-160 millionUpdate on Capital Structure Review

HOUSTON, Aug. 09, 2021 (GLOBE NEWSWIRE) -- Exterran Corporation (NYSE: EXTN) (Exterran or the Company) today reported second quarter financial results.

Andrew Way, Exterrans President and Chief Executive Officer commented:

Our global teams continue to execute well despite continued COVID related challenges, particularly in the Eastern Hemisphere. Commercially our teams are building strong customer relationships and a growing pipeline of opportunities. We are tracking over $3.5 billion in total opportunities between our natural gas and water product lines, and are working diligently to convert at least one more Contract Operations project to an order this year. We continue to expect a 15% compounded annual growth in our adjusted EBITDA over the next two years given this strong pipeline.

With the recent surge in COVID cases related to the Delta variant, we continue to closely monitor the supply chain side of our business, particularly with regard to the movement of both people and equipment, as we ramp up construction of large projects. That said, even with the challenges we faced, we were able to deliver results in-line with expectations and continue to have line of sight to adjusted EBITDA for the full year between $150-160 million.

Lastly, I would like to give you all an update on the proactive strategic capital structure review we commenced after our first quarter earnings conference call, to better position the Company to take full advantage of our commercial pipeline. Management and the Board have made great strides over this time diligently assessing the business, the needs, and the best path or paths forward for the organization. I am sure you all can appreciate the time and effort these undertakings require and this remains the top priority of the Board over the coming quarter.

Net loss from continuing operations was $35.1 million, or $1.06 per share, on revenue of $146.2 million for the second quarter of 2021. This compares to net loss from continuing operations of $29.0 million, or $0.88 per share, on revenue of $136.2 million for the first quarter of 2021 and net loss from continuing operations of $19.3 million, or $0.59 per share, on revenue of $131.1 million for the second quarter of 2020. Net loss was $35.2 million for the second quarter of 2021, as compared to net loss of $29.9 million for the first quarter of 2021 and net loss of $31.9 million for the second quarter of 2020. EBITDA, as adjusted, was $35.1 million for the second quarter of 2021, as compared to $33.1 million for the first quarter of 2021 and $24.9 million for the second quarter of 2020. Loss before taxes was $26.2 million as compared to loss before taxes of $21.5 million for the first quarter of 2021 and loss before taxes of $15.4 million for the second quarter of 2020.

Selling, general and administrative expenses were $33.6 million in the second quarter of 2021, as compared with $32.6 million in the first quarter of 2021 and $31.5 million in the second quarter of 2020.

Contract Operations SegmentContract operations revenue in the second quarter of 2021 was $87.5 million, an 8% increase from the first quarter of 2021 revenue of $81.0 million and a 12% increase from the second quarter of 2020 revenue of $77.9 million.

Contract operations adjusted gross margin in the second quarter of 2021 was $59.7 million, a 4% increase from the first quarter of 2021 adjusted gross margin of $57.7 million and 10% increase from the second quarter of 2020 adjusted gross margin of $54.2 million. Adjusted gross margin percentage in the second quarter of 2021 was 68%, as compared with 71% in the first quarter of 2021 and 70% in the second quarter of 2020.

Revenue increased sequentially primarily due to the acceleration of deferred revenue, increased productivity and better operating efficiencies. Margins declined to more normalized level during the quarter, but also incurred some additional maintenance costs.

Aftermarket Services SegmentAftermarket services revenue in the second quarter of 2021 was $29.4 million, a 17% increase from the first quarter of 2021 revenue of $25.1 million and an 18% increase from the second quarter of 2020 revenue of $25.0 million.

Aftermarket services adjusted gross margin in the second quarter of 2021 was $6.0 million, a 17% increase from the first quarter of 2021 adjusted gross margin of $5.1 million and flat with the second quarter of 2020 adjusted gross margin of $6.0 million. Adjusted gross margin percentage in the second quarter of 2021 was 20%, as compared with 20% in the first quarter of 2021 and 24% in the second quarter of 2020.

Revenue increased sequentially as first quarter seasonality abated, while adjusted margin was flat given consistent mix.

Product Sales SegmentProduct sales revenue in the second quarter of 2021 was $29.3 million, a 2% decrease from the first quarter of 2021 revenue of $30.0 million, and a 4% increase from the second quarter of 2020 revenue of $28.1 million.

Product sales adjusted gross margin in the second quarter of 2021 was $2.2 million, a decrease from the first quarter of 2021 adjusted gross margin of $4.5 million and an increase as compared to the second quarter of 2020 adjusted gross margin of $(4.3) million. Adjusted gross margin percentage in the second quarter of 2021 was 7%, as compared with 15% in the first quarter of 2021 and (15)% in the second quarter of 2020.

Revenue was relatively flat sequentially as COVID related project delays continued in the Eastern Hemisphere. Adjusted gross margin percent decreased for the quarter due to higher under absorption.

Product sales backlog was $410.8 million at June30, 2021, as compared to $445.1 million at March31, 2021 and $547.2 million at June30, 2020.

Conference Call InformationThe Company will host a conference call at 10:00 a.m. Central Time on Tuesday, August 10, 2021.The call can be accessed from the Companys website at www.exterran.com or by telephone at 877-524-8416.For those who cannot listen to the live call, a telephonic replay will be available through May 11, 2021 and may be accessed by calling 877-660-6853 and using the pass code 13721466. A presentation will also be posted on the Companys website prior to the conference call.

About Exterran CorporationExterran Corporation(NYSE: EXTN) is a global systems and process company offering solutions in the oil, gas, water and power markets. We are a leader in natural gas processing and treatment and compression products and services, providing critical midstream infrastructure solutions to customers throughout the world.Exterran Corporationis headquartered inHouston, Texasand operates in approximately 25 countries.

For more information, contact:Blake Hancock, Vice President of Investor Relations, at 281-854-3043Or visit www.exterran.com

Non-GAAP and Other Financial InformationAdjusted gross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense). Adjusted gross margin percentage is defined as gross margin divided by revenue. The Company evaluates the performance of its segments based on gross margin for each segment.

EBITDA, as adjusted, a non-GAAP measure, is defined as net income (loss) excluding income (loss) from discontinued operations (net of tax), cumulative effect of accounting changes (net of tax), income taxes, interest expense (including debt extinguishment costs), depreciation and amortization expense, impairment charges, restructuring and other charges, non-cash gains or losses from foreign currency exchange rate changes recorded on intercompany obligations, expensed acquisition costs, gain on extinguishment of debt and other items.

Adjusted net income (loss) from continuing operations and diluted adjusted net income (loss) from continuing operations per common share, non-GAAP measures, are defined as net income (loss) and earnings per share, excluding the impact of income (loss) from discontinued operations (net of tax), cumulative effect of accounting changes (net of tax), impairment charges (net of tax), restructuring and other charges (net of tax), gain on extinguishment of debt, the effect of income tax adjustments that are outside of the Companys anticipated effective tax rates and other items.

See tables below for additional information concerning non-GAAP financial information, including a reconciliation of the non-GAAP financial information presented in this press release to the most directly comparable financial information presented in accordance with GAAP. Non-GAAP financial information supplements should be read together with, and are not an alternative or substitute for, the Companys financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies non-GAAP financial measures having the same or similar names.

Forward-Looking StatementsAll statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements may include words such as guidance, anticipate, estimate, expect, forecast, project, plan, intend, believe, confident, may, should, can have, likely, future and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking information in this release include, but are not limited to: Exterrans financial and operational strategies and ability to successfully effect those strategies; Exterrans expectations regarding future economic and market conditions; the expected impact of COVID-19 on Exterrans business; and Exterrans financial and operational outlook and guidance, and ability to fulfill that outlook and guidance;

These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Exterrans control, which could cause actual results to differ materially from such statements. As a result, any such forward-looking statements are not guarantees of future performance or results. While Exterran believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: conditions in the oil and natural gas industry, including a sustained imbalance in the level of supply or demand for oil or natural gas or a sustained low price of oil or natural gas, which could depress or reduce the demand or pricing for Exterrans natural gas compression and oil and natural gas production and processing equipment and services; reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies; economic or political conditions in the countries in which Exterran does business, including civil developments such as uprisings, riots, terrorism, kidnappings, violence associated with drug cartels, legislative changes and the expropriation, confiscation or nationalization of property without fair compensation; risks associated with natural disasters, pandemics and other public health crisis, and other catastrophic events outside of Exterrans control, including the impact of, and the response to, the ongoing COVID-19 pandemic; changes in currency exchange rates, including the risk of currency devaluations by foreign governments, and restrictions on currency repatriation; risks associated with cyber-based attacks or network security breaches; changes in international trade relationships, including the imposition of trade restrictions or tariffs relating to any materials or products (such as aluminum and steel) used in the operation of Exterrans business; risks associated with Exterrans operations, such as equipment defects and equipment malfunctions, environmental discharges; the risk that counterparties will not perform their obligations under their contracts with Exterran or other changes that could impact Exterrans ability to recover its fixed asset investment; the financial condition of Exterrans customers; Exterrans ability to timely and cost-effectively obtain components necessary to conduct its business; employment and workforce factors, including Exterrans ability to hire, train and retain key employees; Exterrans ability to implement its business and financial objectives, including: (i) winning profitable new business, (ii) timely and cost-effective execution of projects, (iii) enhancing or maintaining Exterrans asset utilization, particularly with respect to its fleet of compressors and other assets, (iv) integrating acquired businesses, (v) generating sufficient cash to satisfy Exterrans operating needs, existing capital commitments and other contractual cash obligations, including Exterrans debt obligations, and (vi) accessing the financial markets at an acceptable cost; Exterrans ability to accurately estimate its costs and time required under its fixed price contracts; liability related to the use of Exterrans products, solutions and services; changes in governmental safety, health, environmental or other regulations, which could require Exterran to make significant expenditures; and risks associated with Exterrans level of indebtedness and ability to fund its business.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Exterrans Annual Report on Form 10-K for the year ended December 31, 2020, and other filings with the Securities and Exchange Commission available on the Securities and Exchange Commissions website www.sec.gov. A discussion of these risks is expressly incorporated by reference into this release. Except as required by law, Exterran expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.



EXTERRAN CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) Three Months Ended June30, 2021 March 31, June 30, 2020 2021Revenues: Contract operations $ 87,498 $ 81,014 $ 77,945 Aftermarket services 29,401 25,120 24,993 Product sales 29,300 30,030 28,119 146,199 136,164 131,057 Costs and expenses: Cost of sales (excludingdepreciation and amortization expense):Contract operations 27,764 23,344 23,746 Aftermarket services 23,422 20,012 19,020 Product sales 27,109 25,573 32,387 Selling, general and 33,630 32,631 31,530 administrativeDepreciation and amortization 45,709 42,499 32,306 Impairment 7,959 ? ? Restructuring and other charges (370 ) 624 3,105 Interest expense 10,357 9,964 9,638 Gain on extinguishment of debt ? ? (2,644 ) Other (income) expense, net (3,159 ) 3,061 (2,641 ) 172,421 157,708 146,447 Loss before income taxes (26,222 ) (21,544 ) (15,390 ) Provision for income taxes 8,836 7,456 3,895 Loss from continuing operations (35,058 ) (29,000 ) (19,285 ) Loss from discontinued (156 ) (873 ) (12,604 ) operations, net of taxNet loss $ (35,214 ) $ (29,873 ) $ (31,889 ) Basic and diluted net loss per common share:Loss from continuing operations $ (1.06 ) $ (0.88 ) $ (0.59 ) per common shareLoss from discontinued (0.01 ) (0.03 ) (0.38 ) operations per common shareNet loss per common share $ (1.07 ) $ (0.91 ) $ (0.97 ) Weighted average common sharesoutstanding used in net loss per common share:Basic and diluted 33,056 32,950 32,803

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During the fourth quarter of 2020, we completed the sale of our U.S. compression fabrication business and it is now reflected as discontinued operations in our financial statements for all periods presented.

EXTERRAN CORPORATIONUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands) June30, 2021 December 31, 2020ASSETS Current assets: Cash and cash equivalents $ 45,493 $ 40,318 Restricted cash 978 3,410 Accounts receivable, net 202,899 198,028 Inventory 107,788 109,837 Contract assets 32,528 32,642 Other current assets 20,329 19,810 Current assets associated with discontinued 21,795 25,325 operationsTotal current assets 431,810 429,370 Property, plant and equipment, net 663,137 733,222 Long-term contract assets 17,537 33,563 Operating lease right of use assets 23,012 25,428 Deferred income taxes 6,079 8,866 Intangible and other assets, net 74,893 71,436 Long-term assets associated with discontinued 1,687 1,606 operationsTotal assets $ 1,218,155 $ 1,303,491 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable, trade $ 46,375 $ 60,078 Accrued liabilities 116,693 94,404 Contract liabilities 94,669 100,123 Current operating lease liabilities 5,781 6,340 Current liabilities associated with discontinued 4,169 13,707 operationsTotal current liabilities 267,687 274,652 Long-term debt 573,307 562,325 Deferred income taxes 1,465 1,014 Long-term contract liabilities 69,804 80,499 Long-term operating lease liabilities 27,945 29,868 Other long-term liabilities 43,539 57,159 Long-term liabilities associated with 1,267 2,142 discontinued operationsTotal liabilities 985,014 1,007,659 Total stockholders? equity 233,141 295,832 Total liabilities and stockholders? equity $ 1,218,155 $ 1,303,491

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During the fourth quarter of 2020, we completed the sale of our U.S. compression fabrication business and it is now reflected as discontinued operations in our financial statements for all periods presented.

EXTERRAN CORPORATIONUNAUDITED SUPPLEMENTAL INFORMATION(In thousands, except percentages) Three Months Ended June30, 2021 March 31, 2021 June 30, 2020Revenues: Contract operations $ 87,498 $ 81,014 $ 77,945 Aftermarket services 29,401 25,120 24,993 Product sales 29,300 30,030 28,119 $ 146,199 $ 136,164 $ 131,057 Segment Adjusted Gross margin:Contract operations $ 59,734 $ 57,670 $ 54,199 Aftermarket services 5,979 5,108 5,973 Product sales 2,191 4,457 (4,268 ) Total Adjusted Gross $ 67,904 $ 67,235 $ 55,904 margin Segment Adjusted Gross margin percentage:Contract operations 68 % 71 % 70 %Aftermarket services 20 % 20 % 24 %Product sales 7 % 15 % (15 ) % Selling, general and $ 33,630 $ 32,631 $ 31,530 administrative% of revenue 23 % 24 % 24 % EBITDA, as adjusted $ 35,112 $ 33,054 $ 24,938 % of revenue 24 % 24 % 19 % Capital expenditures $ 5,284 $ 7,199 $ 23,589 Revenue by Geographical Regions:North America $ 3,100 $ 6,325 $ 9,354 Latin America 68,592 60,618 58,352 Middle East and Africa 61,979 57,179 52,373 Asia Pacific 12,528 12,042 10,978 Total revenues $ 146,199 $ 136,164 $ 131,057 As of June30, 2021 March 31, 2021 June 30, 2020Contract Operations Backlog:Contract operations $ 1,186,943 $ 1,227,654 $ 1,253,962 services Product Sales Backlog: Compression equipment $ 5,800 $ 12,562 $ 58,451 Processing and 374,173 403,718 453,729 treating equipmentOther product sales 30,817 28,781 35,031 Total product sales $ 410,790 $ 445,061 $ 547,211 backlog

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Compression Equipment backlog includes sales to international customers. During the fourth quarter of 2020, we completed the sale of our U.S. compression fabrication business and it is now reflected as discontinued operations in our financial statements for all periods presented.

EXTERRAN CORPORATIONUNAUDITED NON-GAAP FINANCIAL MEASURES(In thousands, except per share amounts) Three Months Ended June30, 2021 March 31, June 30, 2020 2021Non-GAAP FinancialInformation?Reconciliation of total gross margin to Totaladjusted gross margin:Revenues $ 146,199 $ 136,164 $ 131,057 Cost of sales (excludingdepreciation and amortization 78,295 68,929 75,153 expense)Depreciation and amortization^ 44,017 40,835 30,861 (1)Total gross margin 23,887 26,400 25,043 Depreciation and amortization^ 44,017 40,835 30,861 (1)Total adjusted gross margin ^ $ 67,904 $ 67,235 $ 55,904 (2) Non-GAAP FinancialInformation?Reconciliation of Net loss to EBITDA, asadjusted:Net loss $ (35,214 ) $ (29,873 ) $ (31,889 ) Loss from discontinued 156 873 12,604 operations, netoftaxDepreciation and amortization 45,709 42,499 32,306 Impairment 7,959 ? ? Restructuring and other charges (370 ) 624 3,105 Interest expense 10,357 9,964 9,638 Gain on extinguishment of debt ? ? (2,644 ) (Gain) loss on currencyexchange rate remeasurement of (2,321 ) 1,511 (2,077 ) intercompany balancesProvision for income taxes 8,836 7,456 3,895 EBITDA, as adjusted^ (3) $ 35,112 $ 33,054 $ 24,938 Non-GAAP FinancialInformation?Reconciliation of Net loss to Adjusted net lossfrom continuing operations:Net loss $ (35,214 ) $ (29,873 ) $ (31,889 ) Loss from discontinued 156 873 12,604 operations, net of taxLoss from continuing operations (35,058 ) (29,000 ) (19,285 ) Adjustment for items: Impairment 7,959 ? ? Restructuring and other charges (370 ) 624 3,105 Gain on extinguishment of debt ? ? (2,644 ) Tax impact of adjustments ^(4) 105 ? ? Adjusted net loss from $ (27,364 ) $ (28,376 ) $ (18,824 ) continuing operations ^(5) Diluted loss from continuing $ (1.06 ) $ (0.88 ) $ (0.59 ) operations per common shareAdjustment for items,after-tax, per diluted common 0.23 0.02 0.02 shareDiluted adjusted net loss fromcontinuing operations per $ (0.83 ) $ (0.86 ) $ (0.57 ) common share ^(5) (6)

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During the fourth quarter of 2020, we completed the sale of our U.S. compression fabrication business and it is now reflected as discontinued operations in our financial statements for all periods presented.

^(1) Represents the portion only attributable to cost of sales. ^(2) Management evaluates the performance of each of the Company?s segmentsbased on adjusted gross margin. Total adjusted gross margin, a non-GAAPmeasure, is included as a supplemental disclosure because it is a primarymeasure used by our management to evaluate the results of revenue and costof sales (excluding depreciation and amortization expense), which are keycomponents of our operations. Management believes total adjusted grossmargin is important supplemental information for investors because itfocuses on the current performance of our operations and excludes the impactof the prior historical costs of the assets acquired or constructed that areutilized in those operations, the indirect costs associated with our SG&Aactivities, the impact of our financing methods, restructuring and othercharges, gain on extinguishment of debt and income taxes. In addition, theinclusion of depreciation and amortization expense may not accuratelyreflect the costs required to maintain and replenish the operational usageof our assets and therefore may not portray the costs from current operatingactivity.

^(3) Management believes EBITDA, as adjusted, is an important measure ofoperating performance because it allows management, investors and others toevaluate and compare our core operating results from period to period byremoving the impact of our capital structure (interest expense fromoutstanding debt), asset base (depreciation and amortization), oursubsidiaries? capital structure (non-cash gains or losses from foreigncurrency exchange rate changes on intercompany obligations), taxconsequences, impairment charges, restructuring and other charges, expensedacquisition costs, gain on extinguishment of debt and other items.Management uses EBITDA, as adjusted, as supplemental measures to reviewcurrent period operating performance, comparability measures and performancemeasures for period to period comparisons. In addition, the Company'scompensation committee has used EBITDA, as adjusted, in evaluating theperformance of the Company and management and in evaluating certaincomponents of executive compensation, including performance-based annualincentive programs. ^(4) The tax impacts of adjustments were based on the Company?s statutorytax rates applicable to each item in the appropriate taxing jurisdictions.Using statutory tax rates for presentation of the non-GAAP measures allows aconsistent basis for investors to understand financial performance of theCompany across historical periods. The overall effective tax rate onadjustments was impacted by the inability to recognize tax benefits fromcharges in jurisdictions that are in cumulative-loss positions. ^(5) Management believes adjusted net income (loss) from continuingoperations and diluted adjusted net income (loss) from continuing operationsper common share provides useful information to investors because it allowsmanagement, investors and others to evaluate and compare our core operatingresults from period to period by removing the impact of impairment charges,restructuring and other charges, expensed acquisition costs, gain onextinguishment of debt and other items not appropriately reflective of ourcore business. ^(6) Diluted adjusted net income (loss) from continuing operations percommon share, was computed using the two-class method to determine the netincome (loss) per share for each class of common stock and participatingsecurity (certain of our restricted stock and restricted stock units)according to participation rights in undistributed earnings.