Executive Summary

Q1 2024 revenue was $110.3M, down 12.7% sequentially vs Q4 2023 but up 21.4% year-over-year; gross margin rose to 28.9% (+147 bps q/q, +99 bps y/y), while adjusted EBITDA was $10.2M (down q/q, up y/y) .
GAAP net loss was $20.0M (−$0.58 diluted EPS), driven largely by $19.0M of merger-related expenses tied to the pending Innovex combination; cash used in operations was $4.1M and free cash flow was −$8.9M .
The company suspended guidance updates due to the Innovex merger and did not host an earnings call for Q1 2024, limiting near-term visibility; prior 2024 outlook from Q4 materials included revenue growth of 15–20% and adjusted EBITDA of $65–75M (press release) / $70–80M (investor presentation) .
Operational highlights: Great North contributed $25.1M revenue; Subsea Product bookings disclosure tightened to “Net Subsea Product Bookings” ($41.1M), reflecting evolving procurement, with sequential revenue decline driven by lower Subsea Products connector/surface equipment sales and a delayed Subsea Service project in Europe .

What Went Well and What Went Wrong

What Went Well

Gross margin expanded to 28.9% (+147 bps q/q; +99 bps y/y) on favorable product mix in Subsea Products and Well Construction .
Great North contributed $25.1M in Q1 revenue, supporting y/y top-line growth and segment breadth .
Strategic and product milestones: first Great North wellheads delivered internationally (North Africa) and first SS-15 RLDe Rigid Lockdown Subsea Wellhead installation in Australia; ESG rating maintained at “A” (MSCI) .

Quote (Q4 2023 context highlighting momentum): “Strong performance in the fourth-quarter was great way to close out 2023... double-digit growth in both annual revenue and adjusted EBITDA” — Jeff Bird, CEO .

What Went Wrong

Sequential revenue fell 12.7% q/q to $110.3M, primarily due to lower Subsea Product connector/surface equipment sales and a delayed Subsea Service project in Europe .
GAAP net loss of $20.0M, with $19.0M merger-related expenses recognized in the quarter; adjusted EBITDA decreased $6.4M sequentially to $10.2M .
Cash used in operations (−$4.1M) and FCF (−$8.9M) reversed Q4’s positive cash generation, reflecting working capital dynamics and capex cadence .

Financial Results

Consolidated Performance vs Prior Periods and YoY

Metric	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Revenue ($USD Millions)	$90.9	$117.2	$126.3	$110.3
Gross Margin (%)	27.9%	27.0%	27.4%	28.9%
Diluted EPS ($)	$0.07	($0.21)	$0.05	($0.58)
Adjusted EBITDA ($USD Millions)	$8.8	$12.4	$16.5	$10.2
Cash from Operations ($USD Millions)	($52.9)	$26.8	$26.1	($4.1)
Free Cash Flow ($USD Millions)	($58.3)	$21.4	$14.5	($8.9)
Capex ($USD Millions)	$5.4	$5.4	$11.6	$4.8

Revenue Mix

Revenue Component ($USD Millions)	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Products	$59.2	$77.6	$78.3	$64.6
Services	$21.3	$27.2	$33.5	$30.2
Leasing	$10.3	$12.4	$14.5	$15.5
Total	$90.9	$117.2	$126.3	$110.3

Bookings and Disclosures

KPI	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Net Bookings / Net Subsea Product Bookings ($USD Millions)	n/a	$46.5	$122.7	$41.1 (Subsea Product)

Notes: Beginning Q1 2024, DRQ reports Subsea Product bookings only and adds regular disclosures on MSAs to reflect evolving customer procurement strategies .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth (%)	FY 2024	15%–20% (Q4 press release)	Guidance suspended due to Innovex merger	Suspended
Adjusted EBITDA ($USD Millions)	FY 2024	$65–$75 (Q4 press release) / $70–$80 (Investor presentation)	Guidance suspended due to Innovex merger	Suspended
Subsea Product Bookings ($USD Millions)	FY 2024	$200–$225 (Q4 materials)	Guidance suspended due to Innovex merger	Suspended
Free Cash Flow	FY 2024	Positive (Investor presentation)	Guidance suspended due to Innovex merger	Suspended
Capex (% of Revenue)	FY 2024	3–5% (Q4 press release)	Guidance suspended due to Innovex merger	Suspended

Discrepancy note: Q4 2023 press release cited adjusted EBITDA of $65–$75M for FY24, while the investor presentation indicated $70–$80M; no updated reconciliation provided before Q1 guidance suspension .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023)	Previous Mentions (Q4 2023)	Current Period (Q1 2024)	Trend
Offshore upcycle demand	“Early innings of a multi-year offshore upcycle” despite rig market capacity constraints delaying bookings/service deliveries	Continued constructive offshore outlook; Australia subsea system (~$40M), CNOOC deepwater wellhead contract; multiple MSAs signed	Ongoing; product mix favored gross margin expansion	Positive but uneven quarterly cadence
Rig availability constraints	Delays pushed activity into spring 2024; pressured Subsea Service revenue and profitability	Less emphasized; bookings rebounded strongly in Q4	Europe Subsea Service project delayed; sequential revenue decline	Persistent scheduling headwinds
Great North integration	Acquisition closed; contributed $15.5M in Q3; drove Well Construction growth	Contributed $19.7M in Q4; broader integration progress	Contributed $25.1M in Q1; first international wellhead delivery	Expanding contribution
Bookings reporting methodology	n/a	Announced shift to Subsea Product bookings and enhanced MSA disclosures starting Q1 2024	Reported Net Subsea Product Bookings ($41.1M)	Disclosure refined
ESG and innovation	Active ESG program; technology emphasis	Maintained “A” MSCI rating; continued innovation	Maintained “A” MSCI rating	Stable positive messaging
M&A / strategic combination	n/a	n/a	Announced strategic combination with Innovex; incurring $19.0M transaction-related expense; suspended guidance/call	Major strategic pivot

Management Commentary

“Strong performance in the fourth-quarter was great way to close out 2023 for Dril-Quip with double-digit growth in both annual revenue and adjusted EBITDA…” — Jeff Bird, President & CEO (Q4 2023) .
“With improved reporting lines, leaner operations, and quicker delivery times… well positioned to capitalize on the ongoing offshore upcycle and drive future margins meaningfully higher.” — Jeff Bird (Q4 2023) .
“Capacity constraints in the offshore rig market are introducing headwinds… customers have delayed product orders and service deliveries due to rig availability…” (Q3 2023) .
Q1 2024: Company highlighted product and geographic milestones (North Africa, Australia) and maintained MSCI ESG “A”; emphasized Innovex merger, suspended guidance, and did not host a conference call .

Q&A Highlights

The company did not host a Q1 2024 earnings call due to the pending Innovex merger; therefore, no Q&A was available for this period .
Prior quarter calls were announced (Q4/Q3), but transcripts were not reviewed here; key themes inferred from press releases and investor materials include offshore upcycle momentum, rig availability constraints, and Great North integration .

Financial Results Detail and KPIs

Operating Detail	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Cost of Sales ($USD Millions)	$65.5	$85.6	$91.7	$78.4
SG&A ($USD Millions)	$22.6	$27.0	$29.8	$30.0
Engineering & Product Development ($USD Millions)	$3.4	$3.1	$3.0	$3.7
Acquisition/Merger Costs ($USD Millions)	—	$5.4	($0.04)	$19.0
FX Transaction Gain/Loss ($USD Millions)	$1.1 loss	$1.1 loss	$0.08 loss	$1.9 gain
Depreciation & Amortization ($USD Millions)	$6.9	$7.9	$8.5	$8.4
Cash, Cash Equivalents & Restricted Cash ($USD Millions)	—	$181.1 (Sep 30, 2023)	$191.4	$202.3

Estimates Context

Consensus estimates via S&P Global were unavailable for DRQ Q1 2024 due to missing Capital IQ mapping; as a result, comparisons to Wall Street consensus for revenue/EPS/EBITDA cannot be provided at this time. Values retrieved from S&P Global were unavailable due to mapping constraints.

Key Takeaways for Investors

Mix-driven margin resilience: Despite a sequential revenue decline, gross margin expanded to 28.9% on favorable mix; watch for Subsea Products deliveries and Well Construction cadence to sustain margins .
Merger overhang near term: $19.0M merger expense and suspended guidance/call create near-term uncertainty, but the Innovex combination is a potential strategic catalyst for scale and diversification .
Great North momentum: Contribution grew to $25.1M in Q1 with first international deliveries; integration appears to be driving segment breadth and geographic reach .
Bookings normalization: Q1 Net Subsea Product Bookings at $41.1M following a strong Q4 bookings print; expect volatility tied to rig schedules and customer procurement timing .
Cash flow swing: From Q4 positive FCF to Q1 negative FCF; monitor working capital and capex pacing as management targets positive free cash flow over FY 2024 (pre-guidance suspension) .
Narrative that moves the stock: Progress on merger timeline, clarity on combined entity guidance, and visibility into subsea project deliveries/rig availability are likely the key catalysts. Near-term, reduced disclosures and no call may weigh on sentiment; medium term, integration synergy and offshore cycle exposure underpin the thesis .

DRIL-QUIP INC (DRQ)·Q1 2024 Earnings Summary