Expro Group Holdings N.V. (XPRO) Q2 2018 Earnings Report, Transcript and Summary

Good morning, and welcome to the Q2 2018 Frank's International N.V. Earnings Conference Call. My name is Michelle, and I will be your operator for today's conference. [Operator Instructions]. Please note that this conference is being recorded. I would now turn the call over to Mr. Blake Holcomb. Sir, you may begin.

Thank you, Michelle. Good morning, everyone, and welcome to the Frank's International conference call to discuss the second quarter 2018 earnings. I'm Blake Holcomb, Director of Investor Relations and Communications. Joining me today on the call are Mike Kearney, Chairman, President and Chief Executive Officer; and Kyle McClure, Senior Vice President and Chief Financial Officer. We also have Steve Russell, President of Tubular Running Services; and Scott McCurdy, President of Blackhawk Specialty Tools to join the Q&A portion of today's call. A presentation has been posted on our website that we'll refer to throughout this call. If you'd like to view this presentation, please go to the Investors section of our website at franksinternational.com. Before we begin commenting on our second quarter 2018 results, there are a few legal items I would like to cover beginning on Slide 2. First, remarks and answers to questions by company representatives on today's call may refer to or contain forward-looking statements. Such remarks or answers are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date, or if different, as of the date specified. The company assumes no responsibility to update any forward-looking statements as of any future date. The company has included in its SEC filings, cautionary language identifying important factors that could cause actual results to materially different from those set forth in any forward-looking statements. A more complete discussion of these risks is included in the company's SEC filings, which may be accessed on the SEC's website or on our website at franksinternational.com. There, you may also access both the second quarter 2018 earnings release and a replay of this call. Frank's International uses its website as a channel for distribution of material company information. Such information is routinely posted and accessible in the Investor Relations section. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in the second quarter 2018 earnings release, which was issued by the company earlier today. I will now turn the call over to Mike for his comments.

Thank you, Blake, and good morning to everyone in the Americas, good afternoon to those in Europe and Africa and good evening to the call participants in the Middle East and Asia Pacific. Beginning on Slide 4, I will go over some of the key drivers of our second quarter results. Frank's revenue and adjusted EBITDA in the second quarter was the highest we've seen since the first quarter of 2016. It's been a challenging two years, but I'm very proud of our employees for resilient and have remained dedicated to serving our customers during this period. In the second quarter, the International Services business saw strong improvement, with revenue up 22% sequentially as some new contracts commenced operations, projects were extended longer than expected and we saw an increase in the use of our technology that help drive margins. U.S. Services revenue grew during the quarter as we picked up additional share offshore in the Gulf of Mexico as well as in the U.S. onshore market. The onshore market also saw increased rig activity and pricing during the quarter, helping drive a sequential increase in revenue and margins. We're seeing the early signs of some longer-term contract extensions and some new contracts in the Gulf of Mexico, making us more optimistic that our largest offshore market is positioned to see further improvement. The Blackhawk segment revenue was up sequentially in the U.S. offshore and onshore markets as well as internationally in the majority of products and service lines. In fact, the International sales in Q2 were the highest for this segment since Blackhawk became part of the Frank's family. The positive results this quarter help support our view that the bottom is behind us and that the recovery is beginning to take hold, particularly internationally. However, the recovery is not uniform in its trajectory and difficult to forecast on a quarterly basis. We'll provide a bit more on that later. In Q2, we saw projects extending longer than expected as well as some short-term call-out work. This can lead to some quarter - quarterly variability, but generally the momentum is upward. We now believe that unanticipated customer changes and work scope will generally be more positive than negative. While the overall market is beginning to do its parts to help elevate the company's results, we are diligently working to cultivate a mindset, which will drive improved operational and financial performance. On Page 5, you can see our three near-term strategic priorities. First, we will continue down the path of optimizing our tubular running services business. As the market continues its recovery, we must be well prepared to serve our customers and improve our profitability. In the second quarter, we completed the deep dive evaluation of our geographic footprint. During this process, we categorized our location configurations into three categories. First, we have core countries, which we define as a permanent location with a legal entity and operational base and full-time personnel. Second, we have flex countries because they afford us the optionality to row in and row out or sail in and sail out as the case might be. These locations will have a legal entity; however, no permanent base or permanent local personnel. This structure gives us the opportunity to pursue discrete pieces of business without a significant investment. All remaining locations are classified as inactive, meaning there is no base or personnel, and we see no near-term prospects that meet our business objectives. Obviously, we will adjust the categories of certain locations over time as the industry develops new prospects in place. We're also prioritizing what we refer to as our highest value opportunities. Our business intelligence team is now segregating the opportunities that make the most sense for us to pursue based on the number of services or sale items we can provide as well as the volume or time on the rig across all of Frank's segments. Our goal is to identify these opportunities as early as possible from an operator decision standpoint, then engage with the customer or prospect to make sure they are aware of the value added Frank's can provide. In the best of circumstances, we seek to have our proprietary technologies specced into a tender. If that's not possible, we certainly expect to be early to the game and maximize our odds of winning the business. With an emphasis on being agile, we construct internal teams to work every project to maximize our chances of success. Conversely, we will not pursue opportunities, which have more limited value or are in regions with the higher risk profile. These high-value opportunities will bring to bear all of our overarching strategic teams of people, technology, portfolio and profitability. The result of our TRS optimization initiative will ensure we are laser focused on the right opportunities and the right countries. Our second near-term priority is the continued expansion of Blackhawk in the high-value international markets. We're gaining traction by educating our customers on the benefits of technologies that improve their well-construction operations, solve their well-intervention challenges and increase the overall safety of their operations. The growth of this business goes hand-in-hand with improving our commercial and go-to-market optimization work done by the high-value opportunity teams. Delivering the full spectrum of Frank's services and products to new and existing customers is essential and this represents the next step forward for our future growth. In the coming quarters, we expect to see our international sales from the Blackhawk segment increase further as certifications are finalized and more tools are manufactured to meet demand. We have dedicated resources, specifically, targeting the completion of these certifications and has made great progress. We are currently rolling out newly certified tools and expect to have tools that are certified to the most stringent customer and market requirements worldwide in the fourth quarter of this year. Our final near-term priority is to complete the necessary actions to meet our cost reduction and profitability goals. As we discussed on our Q1 call, we're targeting a 10% reduction in G&A and a 300 basis point 2018 exit rate improvement in gross margin. The combination of accomplishing these two goals should result in around $30 million of operating margin improvement on a run-rate basis as we exit this year. Through the first half of 2018, we have made good progress on our profitability improvement goals and project the remaining progress will be completed over the back half of the year. With that, I'll now turn the call over to Kyle to provide additional details on the financial and operational results during the quarter. Kyle?

Thanks, Mike. Let's go ahead and jump into the segment results on Slide 6. Starting first with our International Services segment, which was the primary driver of growth in the quarter. International Services revenue in the second quarter was up around $11 million or 22% sequentially to almost $60 million. The increase can be attributed to double-digit growth in Latin America, Europe, Canada and Asia, as services on additional rates picked up during the quarter. All international markets experienced robust growth with the exception of Africa, which continues to be facing near-term challenges. Adjusted EBITDA for International Services in the second quarter was $13.5 million, up $11 million from the first quarter. The increase was driven by the improved work mix from offshore call-out work and share gains. During the quarter, Frank's active average offshore rig count increased 14 rigs. You can see the real earnings power of the international and offshore business with the significant margin leverage we experienced during the quarter. Turning to U.S. Services on Slide 7. Second quarter revenue increased 8% to just over $35 million. Second quarter U.S. offshore revenue exceeded our expectations, up roughly 4% sequentially. The growth was due to instances where we were called out by a customer to displace a competitor on several rigs in the Gulf. The U.S. onshore business also grew revenue during the quarter, rising 12% compared to an overall market rig increase of 8%. The higher revenues were attributed to improved market share and more rigs working in the market. Adjusted EBITDA for U.S. Services in the second quarter was a loss of $6 million, an improvement of nearly $3 million sequentially. The improvement quarter-over-quarter is attributed to improved pricing, offshore call-out work and improved efficiency and onshore operations. As a reminder, this segment contains our domestic G&A, which includes all support functions for Gulf of Mexico and U.S. onshore business and in many cases, supports global activity as well as our corporate overhead. The total for all of these was around $20 million for the quarter burdening adjusted EBITDA of which approximately $8 million is related to corporate cost. Turning to Slide 8, we'll take a look at our Blackhawk segment results. Total revenue from Blackhawk was more than $23 million, up 24% from the first quarter of 2018 and up 30% year-over-year. International revenue saw the most significant improvement during the quarter as services were deployed in seven different countries and four geographic regions during the quarter. By the fourth quarter of 2018, we're expecting to have around 25% of total Blackhawk revenues coming from outside of the U.S. market. Land product sales in the U.S. market were up 15% sequentially, setting a record for the second consecutive quarter. Adjusted EBITDA dollars were higher from the first quarter due to increases in higher-margin offshore international and U.S. work as well as the increase in U.S. onshore product sales, although you will see adjusted EBITDA margins have moved down since Q4 of last year. There are two reasons driving this. First, more mix of the revenue is moving away from rentals and moving to more product sales, which has lower margin profile. Second, Blackhawk is making significant investments in people and certifications this year as well as picking up a portion of centralized corporate programs. This is being done to position them for future growth in international markets. Wrapping up the segment with Tubular Sales on Slide 9. Revenue in the second quarter was $14 million, down 8% sequentially. Adjusted EBITDA for Tubular Sales in the second quarter was $200,000, down from $2 million in the first quarter. Revenues were lower sequentially due to changes in customer drilling schedules. The decrease in adjusted EBITDA was driven by lower volumes and higher TRS manufacturing costs, which reside in the segment. We do expect that delayed orders due to customer well-campaigning changes will be delivered later in 2018. However, this revenue was not likely to be recognized until Q4. For the full year, we would expect this segment's revenue to be up around 10% from full year 2017 levels. Turning to Slide 10, we summarized the quarterly financial results. On a company-wide basis, revenues were up 14% sequentially. Global TRS was up 16% as the combination of expected contract starting up and some unexpected call-out work for revenues higher, particularly in the international segment. Adjusted EBITDA exceeded our expectations as we experienced the combination of new projects starting, certain projects being extended and better-than-expected call-out work and better-than-forecasted Blackhawk international sales. Second quarter cash flow from operations was negative $17 million, but a $4 million improvement sequentially. As you would expect, we are seeing working capital needs increase as the business growth picks up speed. CapEx for the quarter was approximately $5 million. Some CapEx is expected in the first half of 2018 has been delayed in the second half of 2018. So we would expect to see this increase in the second half of this year. Full year CapEx is likely to be in the $40 million range as we build out rental fleet for drilling tools and Blackhawk for further international expansion. We remain well capitalized at $245 million in cash and short-term investments on the balance sheet, essentially no debt and expect to finalize a new credit facility in the coming months. The facility is expected to give us access to roughly $75 million of additional liquidity. To close out on my comments, I'll provide some color on what we expect to see in the third quarter and the remainder of the year. Looking at Q3, we expect to see total company revenues decline 3% to 5%. The international segment is expected to be lower at some projects and the level of call-out works in Q2 is likely to decline and difficult to forecast. I will describe the international market as fluid as operators and their schedules are becoming more challenging to forecast, albeit we see an overall better international and offshore market going forward, but it will not be linear. The tubular segment revenue will also be lower based on revised customer drilling campaigns. The U.S. Services business should continue to see growth, onshore and offshore, while Blackhawk is forecasting some Gulf of Mexico rigs to be more completion focused, which will likely drive revenue slightly down in the quarter. Looking at adjusted EBITDA for Q3, just as we saw higher incremental margins in Q2, we expect to see similarly high decremental margins as we experienced a less favorable work mix due to the decline in international revenues in the quarter. For the full year 2018, we estimate that revenues will be somewhere between $500 million and $510 million and adjusted EBITDA will be in the $15 million to $25 million range. The fundamentals of the market are improving. We are seeing increased offshore rig count and tendering activity, particularly in the international markets, and customers are becoming more receptive to technology upsell than the previous 18 months. As offshore rig rates continue to end shop, Frank's will benefit as the value proposition become even stronger. This trend, combined with controlling our costs and a growing international presence for our Blackhawk business, gives us optimism that the stage is being set for even more profitable 2019. With that, we will open the call to Q&A.

[Operator Instructions]. The first question in the queue, sir, comes from Kurt Hallead with RBC.

Sounds like game plan is moving along in a right direction. It's always great to see. Appreciate the guide points here as well, looks pretty favorable relative to where the street is at least for the year. So, Mike, maybe start off a question for you, as you kind of getting into the program and cost reduction dynamics and you continue to emphasize being able to achieve this $30 million run rate by year-end. As you go through the process, what do you think the opportunity is to see greater cost reductions than what might be on the table right now?

Well, I think, it's going to be tough to - first of all, I think we'll achieve our goals. But with the growing business and looking to investment towards next year and more business next year, obviously, it creates a little bit of headwind in terms of - you're trying to cut cost in the phase of an increasing business. So you are optimistic we can get to what we laid out, but in terms of something dramatically beyond that, I've got kind of a wait-and-see attitude on that one. I'd love to exceed the targets, but I don't want to set out false hope.

Okay. That's fair enough. Maybe as a follow-up question. I know in the past you guys were looking to improve the performance on the U.S. Land TRS business. Looks like there had been some progress made during the course of the quarter. Just wondering if you give some update on strategically where the U.S. Land TRS business fits in longer term? And if does fit in longer term, what are some of the key performance metrics you might put in place?

I'll start with that and then hand it over to Steve. The U.S. Land business, as everyone knows, is over the course of the cycle, has less margin than the deepwater offshore. But nevertheless, it's a good business, it's a solid business. And operational folks have done a great job of continuing to increase that business. So we're very happy with it. It's never going to have margins exceeding a deep offshore well, but it still doesn't mean that it's not a great business that we like. So in terms of kind of what we're seeing in the next quarter or two, I'll let Steve pick up on that one.

Yes. Thanks, Mike. So cut in U.S. Land here during Q2, we managed to get some leverage around pricing with several of our larger clients in U.S. Land, which helps the margin somewhat. And we've also gained some market share in there, which is what's been driving the performance. Obviously, as we look forward in the midterm, that's the world publicized question of where the Permian is going and what's going? So we're keeping our eye on that, but generally the focus around U.S. Land in the midterm here is execution and continuing to push pricing where we can.

The next question in the queue comes from Byron Pope with Tudor, Pickering, Holt.

I just wanted to probe a little bit on the Gulf of Mexico commentary. It seems as though that market has historically been a call-out market, but I think I've heard although to some potential long-term contracts or opportunities. So just some clarification there, just given how well you guys are positioned in the deepwater Gulf?

Yes. So, Steve Russell here. I'll speak from a TRS perspective. So we had some gains during Q2 where we replaced a competitor to service issues for a large operator in the Gulf. So we've seen some market share gains. Traditionally, that market is via quite long-term contracts. So we've actually got most of the - what we have at the moment is on contracts for several years looking out, half to is pretty solid looking for Gulf of Mexico. Obviously, as we look out there further into 2019, the clients are still out there looking at their budget for 2019 and that will drive very much where our activity looks.

And then just a second question on the Latin America region. If I recall correctly, it seems as though you guys are particularly well levered to some of the activity occurring offshore Guyana. So is it fair to think that, that contributed to Q2 and as we continue to see incremental well construction activity, they are reasonable to think that you guys are well positioned there on the TRS side?

Yes, you are absolutely correct there. A lot of Q2 was driven by Guyana, specifically, correct.

The next question comes from Sean Meakim with JPMorgan.

So maybe if you could just characterize a little more granularity of that call-out work, some of the project cadence you highlighted, some that are wrapping up and then the other timing of those that are starting to pick up, Guyana being an important one. And just thinking about kind of a cross geography customer-type project mix. Could we get a little bit more granularity there as you pointed out there's going to be some variability, but maybe it'll be helpful for us to better understand the puts and takes how that's informing kind of your base case for the second half of '18?

Yes. Okay. So a lot of the call-out work in TRS during Q2 was in Asia Pacific and also the Middle East, which was hammering projects that tend to be sort of quite short-term with not too much visibility. We - on a more wider scale internationally, we've got a handful of rigs just dropping off contract, which is why you saw some of the Q3 guidance going down. But I think as we look forward into Q4 and beyond, we've got some visibility of increased activity. We pick up a contract for a large operator in Norway, which will kick in Q4 and be fairly robust.

Well, this is Kyle. What I'm going to say, Sean, is that on the way down, I don't think we're really good at projecting how bad things were coming down, and I think as things kind of come out of there, it's difficult for us to forecast this business as it's coming online how it's the velocity of the comeback, if you will. You see at this quarter, as we of kind of guide you guys down in for Q2 as something pars out where we landed. So some of this is call out, but some of this is just work we have won that is now we're starting to see some pricing uplift and it's starting to fall through the online.

Got it, that was very helpful detail. So somewhere related, I guess, we've talked quite a bit in previous calls around some kind of larger multi-rig tenders that were out there and certainly when times were tough, there was a pretty significant fight for market share. Could you maybe give us a sense of what you see out there in terms of the larger tendering opportunities over the next several quarters, maybe where you could see opportunity for picking up share versus where you think you may have to be defending share? Could you give us a sense of where that piece fits into the mix?

Yes. I still think a lot of the tenders that we're seeing come across the table at the moment is for fairly moderate scopes of work, 1 or 2 rigs for the handful of wells. I would say, there's opportunity in the longer term down in Brazil for us where we have a fairly moderate market share position and have some potential to gain. And generally, as Africa starts picking up, which we expect to see some activity pick up here at the end of '19 and going into 2020, that becomes an opportunity for us.

Yes, and as Mike was talking about in his prepared commentary, this high-value opportunity team is really important as we think about the commercial focus of winning. There is about 20 - 10 to 20 each year to come down the pipe that you have to be part of and you need to get and use the baseball part on the on-base percentage. You need to be a little bit higher. You need to be more sort of [indiscernible] not so much [indiscernible], so we've got to get on base more often and I think the team here is really focused on doing that. Definitely, we've got a good process going forward.

The next question comes from Jim Wicklund from Crédit Suisse.

Good job. Nice surprise. We love those. In previous calls, we've talked about Frank's transition to doing more jack-up work. You note the Middle East was a little bit better. It was shorter cycle work, which makes me think jack-ups. Can you talk about how your penetration is into the jack-up market has gone and what today is the best market we've clearly seen a pickup in high-end jack-ups splashed us frankly over the past couple of quarters? Can you talk about that part of your business?

Yes. I would say, we've had some improvement in the Middle East in terms of getting on work, specifically, in Saudi Arabia or in Abu Dhabi. The contracts over there are typically issued to a number of vendors and then distributed - individual rigs are distributed across that vendor network. So we've had some success in getting some additional offshore rigs, jack-ups. I'd also say, we're starting to see some improvement in the U.K. sector of the North Sea. We've done fairly well on the jack-ups.

Yes, so let me just say from a market share standpoint, Jim, we have taken our global market share from 10% up to 18% here in the last 12 months on the global jack-up market.

That's successful effort by anybody's metric. Okay, that's helpful. And what's interesting to us is you notice - you note the contract in Norway in Q4 and a pickup in West Africa, which was one of the slow points in the quarter in later '19 and '20. That's typically more visibility than we typically see in a lot of oil field cases. Can you talk about everybody expects the deepwater market to a bottom, but the trajectory is slow on the uptake? Is it late '19, 2020 that you guys see deepwater starting to really improve? Or from that it makes me think that most of the rest of '18 and '19 is probably going to be minor? But '19, '20 to '21 starts to sound more interesting. Do you all see that way?

Yes. I think that's safe to say, but of course, Jim, I'd be retired at the ranch if I could predict rig counts with a great certainty. You'd be at your ranch too. So it's hard to predict a couple of years out, but I think the overall tone - of course, it's - I can't claim to be a macroeconomist, but I think as operators start to become more convinced that the commodity prices are going to be more or less in the range they are in and they gets to be more of a confidence level, then we can feel more confident going a little further out. And we're seeing that, I think, on all fronts that the market is stabilized. And of course, it all drives off of a - first of all, the commodity price and then the - they are kind of the profitability level for the offshore operators. You've - we've all heard the speeches by the big offshore operators that they've managed to reduce their breakeven prices dramatically based on standardization offshore. This isn't new news. But if we think we're in a $70, $75 sustained commodity price and the operators have driven their profit targets, where they can make good money from $80 a barrel to $45 or $50 a barrel, they get convinced that they've got a nice spread. That's going to be healthy for everyone. So I think that's kind of the scenario we're buying into and that'll bode well for our business over the next 2 to 3 years. Of course, we could all be wrong, but it look - the signals all look pretty good that we're going to be back in a more sustained stable environment.

The next question in the queue comes from Ian MacPherson with Simmons.

You've done a lot with internal levers and market share. And the Gulf of Mexico to me has been the one surprisingly late recovery actor. Would you think that, that changes as we look out the next year? We've seen so much improvement in the North Sea and, obviously, exploration success in other deepwater basins like Guyana has created special situations. But the flatness of the Gulf of Mexico has been a bit surprising given where we are with commodities. Are your customers talking more constructively about getting back to work in the Gulf next year or do you think that's still a wait-and-see market?

I'll turn over to Steve. I mean, I'm not hearing any major euphoria in terms of the Gulf of Mexico. You read bits and pieces about operators that have new funds or extending place. So I see some mild optimism, but I don't see any leap forward and upward rapidly. Steve, what are you hearing or seeing?

Yes. I think, it's a wait and see for 2019. I think in the short term, we've got a fairly solid outlook for the second half of '18 and the clients have to go through their budget cycles for '19 before we can really comment further on that.

Got it. And then my other question, I was just curious if I could ask you about your outlook for free cash generation. It's been working capital appears a bit of a drag here in the first half. And wonder if there is a target in place for free cash flow based on your updated guidance, otherwise, for the second half.

I think, we've had some pretty good working capital outages in Q1 and Q2. We'll catch up likely in the back half of the year as we get into quarter-end in Q4 in those areas. But I think from a fundamental standpoint, you've got a business that just did obviously $11 million in adjusted EBITDA, so that will get more profitable to begin with from a CapEx standpoint. In the near term, we're probably going to add a $40 million figure. It will be in that range for the year, but I think from a free cash flow in the back half of the year standpoint, we're probably looking at a negative $10 million free cash flow from this point on based upon our internal projections. We've got a 90-day DSO. So as we grow in a given quarter, almost all of that cash is getting kicked to next quarter as well. So I think we sit here today with $245 million of cash and short-term investments. I think, will be down slightly from here to the end of the year. And then as we look at '19 and see what the profitability looks like as well as the growth rates, we'll assess it again, but I think first half of the year is probably a little bit overdone in the working capital side, and we'll catch up on some of that in the back half.

Next question in the queue comes from Joe Gibney with Capital One.

Just a question on Blackhawk. You referenced sort of a target of getting 25% international mix by the end of the year. Just curious where it stands now kind of year it is, sort of a 10% international mix and kind of where are we kind of exiting 2Q? And then you talked about seven different countries in terms of, sort of, incremental growth. Was there one in particular Norway has certainly been a target in getting some of your tools certified and deployed? Just trying to understand some of the big inflection there internationally and Blackhawk. I know it has been target, but definitely a step higher.

Scott, if you're on the phone, you can chime in.

Yes. I think it's going to be very broad. To answer one of your questions, we have seen a ramp up over the course of the year. The first half average is about 10%, but in the second quarter, that was more like 20%, and we do see that ramping up over the rest of the year. Right now, Kyle mentioned we had 7 - we're active in seven countries in the second quarter. We think over the back half of the year, we already have visibility of work and ordered work in about 13 different countries and its much major markets, Latin America, Europe, Asia, Middle East, Caribbean. And so it's going to be pretty broadly spread out, which is good as we're getting our name out and getting our customers exposed to our tools outside of the U.S.

Okay. Helpful. And then just a follow-up for Kyle. Just to clarify on your 3Q sequential guide. Kyle to commentary on international Blackhawk in tubular. I wasn't sure what the intimation was on what you're seeing for the U.S. for the third quarter, if you could clarify? I don't need any comment, I just want to clarify.

I think the commentary there would be, we likely see that segments up slightly. I think we'll see continued growth as Steve talked about U.S. Land. We see some price increase that will come through on the onshore side of the house and Gulf of Mexico as we see right now will be slightly up in the quarter as well. So I'd tell you, continued growth in that overall segment, obviously, the Q-to-Q has been the international space and how that shakes out. We were, I think, presently surprised as it relates to Q2 and more cautiously optimistic as it relates to Q3 and heading forward.

The next question in the queue comes from Mike Urban with Seaport Global.

So regarding the restructuring and review of the business that you've been undertaking. Last quarter, you said you had line of sight on about 80% of your target on the $30 million improvement. Presumably having completed the review that you've done internally, I'm assuming that's essentially 100% complete and now that you presumably have completed that, is there - have you identified kind of incremental opportunities there? Or is that - if you just kind of confirm what you were thinking initially?

Yes. This is Kyle. We've got a couple of different initiatives going on and one of that Mike mentioned was that of the footprint review. Over time, we've grown into too many countries around the world and the team sort of did a deep dive, obviously, Mike's prepared commentary kind of what's core or what's ride in, ride out, and we've got a number of countries that are after that still need to be shut down just from a legal entity and branch registration, statutory books of keep. There's no real activity going on. No real people in there anymore. So you've got that initiative going on, which is going to capture something. You've got the high-value opportunity team, which we talked about, which is from winning the work we want to win, which is a piece of that. So not all this on the cost side either. So we've got pricing we need to capture in certain markets as well. On the G&A side, I think we've got that what I call largely identified, not totally execute at this point in time. And I think we've still got some more work to do on that front.

Okay, got you. If you had to quantify in terms of how much you've realized to date relative to the $30 million exit target, where would you say you are?

In gross margins, obviously, in the quarter, we're kind of up to a target for the year at 34-plus percent. So that doesn't mean we're done. I just mean, some of the execution items here has - at least getting some traction in the business itself, which is better from an overall growth standpoint. I'd say on the G&A front, we're probably 1/3 or half way through at this point in time. We still have some additional items we need to work through on that front. But we've gone through sort of detail reviews, sort of piece by piece, department by department internally and I'd tell you 1/2 to 1/3 done on G&A and I tell you that on the gross margin improvement that we're about half way through - 3/4 way through based upon the internal reviews we've done. So in terms of what's been executed at this point in time, I tell you I'm probably more in the 25% range.

[Operator Instructions]. And the next question in the queue comes from Sasha Sanwal from UBS.

Just on offshore TRS, we're starting to see slight pickup in deepwater rig activation. And we know that picking is once you have your equipment on the rig, the key driver of offshore TRS. So for reactivated rig, kind of talk about how involved E&P and IOC customers are? We're doing the contract versus the offshore driller and thus having your equipment on the rig when it was working last, how much of the advantage is that?

Yes. So we were seeing an increase in tendering activity stretching out into - for operations stretching into '19 and 2020. The very, very large majority of that tendering activity comes from traditionally in peak clients. We've not seen at the moment drilling contractors are subcontracting TRS in that market. It's important to win the work and be on the rig. From there, you can execute various technology sell-outs to improve margins and pricing. Some stickiness to our equipment on a particular rig meaning if we were on that rig previously, we would have structured to support our equipment. But essentially, there's also the ability to change our competitors as rigs pick up and drop.

Okay, great. It's very helpful. And just follow-up to Sean's question on market share. When are your major competitors are undergoing a transformation? And so, I guess, at a high level, can you comment in any changes you've seen in recent bidding activity, whether it's on pricing or bundling? Maybe just give us your current thoughts on competitive landscape and if there are any changes there?

Yes. Well, of course, we can't predict what the competitors do. When we go into a tender situation, we evaluate first of all, if it's an existing customer. If so, how profitable is that business and where do we need to take that the pricing. Hopefully, it's generally up, but it could be flat to slightly down depending on circumstances. So we - all I can say is we hope that all competitors are financially disciplined and seek to get a fair return on the business that they quote. So all I can say is, we hope for rational competitors and we'll get our fair share of the business. I don't know, Steve, if you have any further thoughts on that?

Yes. I think, generally, we've seen an inflection point on pricing in the offshore market, but still very much in local market. It's driven by competitive forces and desires for market shares in local and regional markets at the moment.

We have no further questions at this time. So I will turn the call over to Mike Kearney for final remarks.

Thanks, everyone, for your questions. We're pleased with the Q2 results. However, we do expect a slight decline in revenue and EBITDA in Q3 as we mentioned based on our customer's drilling schedules primarily. Q4 should see a bit more of a pickup in revenues from Q3 to [indiscernible] into a full year range of $500 million to $510 million in revenue and the $15 million to $25 million in adjusted EBITDA. We know there is still a need to improve our financial performance and operational efficiency to emerge as a better company following the downturn. Recent trends in the market have reinforced our optimism that we're on the way back to sustain growth and profitability with a broader product offering, a more optimized global footprint and our strong balance sheet. Thank you for your time and interest in Frank's International.

Thank you, ladies and gentlemen. This concludes today's teleconference. Thank you for participating. You may now disconnect.