GlobeNewswire Inc | Nov 2, 2020 07:00AM EST

November 02, 2020

Results In-Line with Updated GuidanceRenewed Contract Operations Contract for Six Years - No Incremental CAPEX RequiredSigned Agreement to Sell U.S. Compression Fabrication Business

HOUSTON, Nov. 02, 2020 (GLOBE NEWSWIRE) -- Exterran Corporation (NYSE: EXTN) (Exterran or the Company) today reported third quarter financial results.

Andrew Way, Exterrans President and Chief Executive Officer commented, The third quarter came in better than we had originally expected as we continue to focus on what we can control and on executing well on our strong backlog. While COVID-19 remains a challenge, we were able to move employees around more efficiently than in the first half of the year, which drove the rebound in aftermarket services segment revenue. Despite the challenges posed by the pandemic, we were able to renew another contract operations contract, for six years, with a total value of around $80 million, and there is no requirement for any incremental CAPEX. This success puts total renewals for Latin America at over $200 million so far this year, with no additional CAPEX needs. Our focus continues to be on securing additional commercial opportunities while simultaneously driving improved cash flow and returns over the long-term.

Net loss from continuing operations was $16.7 million, or $0.51 per share, on revenue of $169.5 million for the third quarter of 2020. This compares to 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 and net loss from continuing operations of $13.0 million, or $0.38 per share, on revenue of $186.0 million for the third quarter of 2019. Net loss was $17.7 million for the third quarter of 2020, as compared to net loss of $31.9 million for the second quarter of 2020 and net loss of $9.8 million for the third quarter of 2019. EBITDA, as adjusted, was $35.8 million for the third quarter of 2020, as compared to $24.9 million for the second quarter of 2020 and $43.8 million for the third quarter of 2019. Loss before taxes was $11.0 million as compared to loss before taxes of $15.4 million for the second quarter of 2020 and loss before taxes of $12.5 million for the third quarter of 2019.

Selling, general and administrative expenses were $30.0 million in the third quarter of 2020, as compared with $31.5 million in the second quarter of 2020 and $32.3 million in the third quarter of 2019.

Contract Operations SegmentContract operations revenue in the third quarter of 2020 was $81.7 million, a 5% increase from second quarter of 2020 revenue of $77.9 million and a 15% decrease from third quarter of 2019 revenue of $96.3 million.

Contract operations gross margin in the third quarter of 2020 was $57.1 million, a 5% increase from the second quarter of 2020 gross margin of $54.2 million and an 8% decrease from the third quarter of 2019 gross margin of $61.9 million. Gross margin percentage in the third quarter of 2020 was 70%, as compared with 70% in the second quarter of 2020 and 64% in the third quarter of 2019.

Revenue increased sequentially given contract adjustments and an increase in activity.

Aftermarket Services SegmentAftermarket services revenue in the third quarter of 2020 was $30.4 million, a 22% increase from second quarter of 2020 revenue of $25.0 million and a 13% decrease from third quarter of 2019 revenue of $34.9 million.

Aftermarket services gross margin in the third quarter of 2020 was $7.3 million, a 22% increase from the second quarter of 2020 gross margin of $6.0 million and a 17% decrease from the third quarter of 2019 gross margin of $8.8 million. Gross margin percentage in the third quarter of 2020 was 24%, as compared with 24% in the second quarter of 2020 and 25% in the third quarter of 2019.

The revenue increase was driven by an increase in activity in Latin America and Asia Pacific.

Product Sales SegmentProduct sales revenue in the third quarter of 2020 was $57.4 million, a 104% increase from second quarter of 2020 revenue of $28.1 million, and a 5% increase from third quarter of 2019 revenue of $54.8 million.

Product sales gross margin in the third quarter of 2020 was $3.1 million, an increase from the second quarter of 2020 gross margin of $(4.3) million and a decrease as compared to the third quarter of 2019 gross margin of $6.6 million. Gross margin percentage in the third quarter of 2020 was 5%, as compared with (15)% in the second quarter of 2020 and 12% in the third quarter of 2019.

Revenue increased sequentially driven by incremental activity in our international locations. Margin increased for the quarter due to improved absorption of fixed costs because of higher plant activity. We have moved our U.S. compression fabrication business into discontinued operations.

Product sales backlog was $496.7 million at September30, 2020, as compared to $547.2 million at June 30, 2020 and $153.2 million at September30, 2019. Product sales bookings for the third quarter of 2020 were $8.7 million, resulting in a book-to-bill ratio of 15%. This compares to negative bookings of $2.9 million for the second quarter of 2020 and bookings of $71.5 million for the third quarter of 2019.

Conference Call InformationThe Company will host a conference call at 10:00 a.m. Central Time on Monday, November2, 2020.The call can be accessed from the Companys website at www.exterran.comor by telephone at 877-524-8416.For those who cannot listen to the live call, a telephonic replay will be available through November 9, 2020 and may be accessed by calling 877-660-6853 and using the pass code 13711895. 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 InformationGross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense). 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 and oil price declines on Exterrans business; Exterrans financial and operational outlook and ability to fulfill that outlook; demand for Exterrans products and services and growth opportunities for those products and services; and statements regarding industry activity levels and infrastructure build-out opportunities.

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 continued spread and impact of, and the response to, the 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, equipment malfunctions, environmental discharges and natural disasters; 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 and services; changes in governmental safety, health, environmental or other regulations, which could require Exterran to make significant expenditures; and 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, 2019, 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 September30, June 30, September 2020 2020 30, 2019Revenues: Contract operations $ 81,679 $ 77,945 $ 96,261 Aftermarket services 30,435 24,993 34,893 Product sales 57,397 28,119 54,796 169,511 131,057 185,950 Costs and expenses: Cost of sales (excluding depreciation and amortization expense):Contract operations 24,548 23,746 34,356 Aftermarket services 23,135 19,020 26,079 Product sales 54,263 32,387 48,187 Selling, general and administrative 29,959 31,530 32,308 Depreciation and amortization 36,630 32,306 41,106 Impairments 1,695 ? 2,970 Restructuring and other charges 238 3,105 1,257 Interest expense 9,623 9,638 10,103 Gain on extinguishment of debt (780 ) (2,644 ) ? Other (income) expense, net 1,178 (2,641 ) 2,101 180,489 146,447 198,467 Loss before income taxes (10,978 ) (15,390 ) (12,517 )Provision for income taxes 5,745 3,895 477 Loss from continuing operations (16,723 ) (19,285 ) (12,994 )Income (loss) from discontinued (998 ) (12,604 ) 3,153 operations, net of taxNet loss $ (17,721 ) $ (31,889 ) $ (9,841 ) Basic and diluted net loss per common share:Loss from continuing operations per $ (0.51 ) $ (0.59 ) $ (0.38 )common shareIncome (loss) from discontinued (0.03 ) (0.38 ) 0.09 operations per common shareNet loss per common share $ (0.54 ) $ (0.97 ) $ (0.29 ) Weighted average common sharesoutstanding used in net loss per common share:Basic and diluted 32,806 31,889 33,783

__________________________During the third quarter of 2020, the U.S. compression business met the held for sale criteria and is also now reflected as discontinued operations in our financial statements for all periods presented.

EXTERRAN CORPORATIONUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands) September30, December 31, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 28,159 $ 16,683Restricted cash 1,670 19Accounts receivable, net 183,620 179,158Inventory 114,520 119,358Contract assets 49,092 36,997Other current assets 19,333 22,003Current assets associated with discontinued 28,491 61,705operationsTotal current assets 424,885 435,923Property, plant and equipment, net 770,421 824,194Operating lease right of use assets 26,204 26,227Deferred income taxes 12,331 13,994Intangible and other assets, net 75,775 93,924Long-term assets associated with discontinued 20,877 23,742operationsTotal assets $ 1,330,493 $ 1,418,004 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable, trade $ 59,230 $ 82,864Accrued liabilities 99,976 92,641Contract liabilities 105,736 66,695Current operating lease liabilities 6,051 5,819Current liabilities associated with 37,355 78,626discontinued operationsTotal current liabilities 308,348 326,645Long-term debt 516,584 443,587Deferred income taxes 1,483 993Long-term contract liabilities 93,643 156,262Long-term operating lease liabilities 30,646 30,189Other long-term liabilities 51,514 48,749Long-term liabilities associated with 2,299 2,041discontinued operationsTotal liabilities 1,004,517 1,008,466Total stockholders? equity 325,976 409,538Total liabilities and stockholders? equity $ 1,330,493 $ 1,418,004

__________________________During the third quarter of 2020, the U.S. compression business met the held for sale criteria and is also now reflected as discontinued operations in our financial statements for all periods presented.

EXTERRAN CORPORATIONUNAUDITED SUPPLEMENTAL INFORMATION(In thousands, except percentages) Three Months Ended September30, June 30, 2020 September 30, 2020 2019Revenues: Contract operations $ 81,679 $ 77,945 $ 96,261 Aftermarket services 30,435 24,993 34,893 Product sales 57,397 28,119 54,796 $ 169,511 $ 131,057 $ 185,950 Gross margin: Contract operations $ 57,131 $ 54,199 $ 61,905 Aftermarket services 7,300 5,973 8,814 Product sales 3,134 (4,268 ) 6,609 Total $ 67,565 $ 55,904 $ 77,328 Gross margin percentage: Contract operations 70 % 70 % 64 %Aftermarket services 24 % 24 % 25 %Product sales 5 % (15 ) % 12 %Total 40 % 43 % 42 % Selling, general and $ 29,959 $ 31,530 $ 32,308 administrative% of revenue 18 % 24 % 17 % EBITDA, as adjusted $ 35,804 $ 24,938 $ 43,803 % of revenue 21 % 19 % 24 % Capital expenditures $ 25,457 $ 23,589 $ 44,605 Revenue by Geographical Regions:North America $ 13,364 $ 9,354 $ 22,007 Latin America 60,302 58,352 85,928 Middle East and Africa 69,682 52,373 66,601 Asia Pacific 26,163 10,978 11,414 Total revenues $ 169,511 $ 131,057 $ 185,950 As of September30, June 30, 2020 September 30, 2020 2019Contract Operations Backlog:Contract operations $ 1,208,139 $ 1,253,962 $ 1,210,187 services Product Sales Backlog: Compression equipment $ 18,165 $ 58,451 $ 40,899 Processing and treating 447,109 453,729 50,176 equipmentOther product sales 31,380 35,031 62,174 Total product sales $ 496,654 $ 547,211 $ 153,249 backlog

__________________________Compression Equipment backlog includes sales to International customers. During the third quarter of 2020, the U.S. compression business met the held for sale criteria and is also 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 September30, June 30, September 2020 2020 30, 2019Non-GAAP FinancialInformation?Reconciliation of Loss before income taxes to Total grossmargin:Loss before income taxes $ (10,978 ) $ (15,390 ) $ (12,517 )Selling, general and administrative 29,959 31,530 32,308 Depreciation and amortization 36,630 32,306 41,106 Impairments 1,695 ? 2,970 Restructuring and other charges 238 3,105 1,257 Interest expense 9,623 9,638 10,103 Gain on extinguishment of debt (780 ) (2,644 ) ? Other (income) expense, net 1,178 (2,641 ) 2,101 Total gross margin ^(1) $ 67,565 $ 55,904 $ 77,328 Non-GAAP FinancialInformation?Reconciliation of Net loss to EBITDA, as adjusted:Net loss $ (17,721 ) $ (31,889 ) $ (9,841 )(Income) loss from discontinued 998 12,604 (3,153 )operations, netoftaxDepreciation and amortization 36,630 32,306 41,106 Impairments 1,695 ? 2,970 Restructuring and other charges 238 3,105 1,257 Interest expense 9,623 9,638 10,103 Gain on extinguishment of debt (780 ) (2,644 ) ? (Gain) loss on currency exchange rateremeasurement of intercompany (624 ) (2,077 ) 884 balancesProvision for income taxes 5,745 3,895 477 EBITDA, as adjusted^ (2) $ 35,804 $ 24,938 $ 43,803 Non-GAAP FinancialInformation?Reconciliation of Net loss to Adjusted net loss fromcontinuing operations:Net loss $ (17,721 ) $ (31,889 ) $ (9,841 )(Income) loss from discontinued 998 12,604 (3,153 )operations, net of taxLoss from continuing operations (16,723 ) (19,285 ) (12,994 )Adjustment for items: Impairments 1,695 ? 2,970 Restructuring and other charges 238 3,105 1,257 Gain on extinguishment of debt (780 ) (2,644 ) ? Tax impact of adjustments ^(3) (24 ) ? (3 )Adjusted net loss from continuing $ (15,594 ) $ (18,824 ) $ (8,770 )operations ^(4) Diluted loss from continuing $ (0.51 ) $ (0.59 ) $ (0.38 )operations per common shareAdjustment for items, after-tax, per 0.03 0.02 0.12 diluted common shareDiluted adjusted net loss fromcontinuing operations per common $ (0.48 ) $ (0.57 ) $ (0.26 )share ^(4) (5)

__________________________During the third quarter of 2020, the U.S. compression business met the held for sale criteria and is also now reflected as discontinued operations in our financial statements for all periods presented.

^(1) Management evaluates the performance of each of the Company?s segmentsbased on gross margin. Total gross margin, a non-GAAP measure, is includedas a supplemental disclosure because it is a primary measure used by ourmanagement to evaluate the results of revenue and cost of sales (excludingdepreciation and amortization expense), which are key components of ouroperations. Management believes total gross margin is important supplementalinformation for investors because it focuses on the current performance ofour operations and excludes the impact of the prior historical costs of theassets acquired or constructed that are utilized in those operations, theindirect costs associated with our SG&A activities, the impact of ourfinancing methods, restatement related charges (recoveries), restructuringand other charges, gain on extinguishment of debt and income taxes. Inaddition, the inclusion of depreciation and amortization expense may notaccurately reflect the costs required to maintain and replenish theoperational usage of our assets and therefore may not portray the costs fromcurrent operating activity.

^(2) 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, restatement related charges (recoveries),restructuring and other charges, expensed acquisition costs, gain onextinguishment of debt and other items. Management uses EBITDA, as adjusted,as supplemental measures to review current period operating performance,comparability measures and performance measures for period to periodcomparisons. In addition, the Company's compensation committee has usedEBITDA, as adjusted, in evaluating the performance of the Company andmanagement and in evaluating certain components of executive compensation,including performance-based annual incentive programs. ^(3) 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. ^(4) 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, restatement related charges (recoveries),expensed acquisition costs, gain on extinguishment of debt and other itemsnot appropriately reflective of our core business. ^(5) 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.