Innovex International Inc (INVX) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to Dril-Quip Second Quarter 2021 Fireside Chat. (Operator Instructions) I would now like to hand the call over to your speaker today, Mr. Daniel Burke. Please go ahead.

Yes. Good morning. I want to welcome everyone joining our Dril-Quip discussion via the phone or webcast. And I'm happy to introduce Dril-Quip Management CEO, Blake DeBerry; and CFO, Raj Kumar. Welcome, guys, and thanks for the opportunity to host this conversation.

Thanks for having us, Daniel.

Yes, likewise. I want to plunge right in and start with some questions on the second quarter results you guys just released yesterday evening. But before I jump right in, let me hand the floor over to you, Blake and ask you to highlight any key themes you want to make sure we emphasize here before delving into the specifics.

Sure, Daniel. Look, I think the main thing is we've laid out several pillars of strategy that we believe will help the company be successful in the future. And we're getting success on all those strategic initiatives. We've outlined our peer-to-peer strategy, which is really a consolidation by collaboration. And we did, during the quarter, sign our first peer-to-peer agreement or actually our second if you include the Proserv agreement.

Our downhole tool business, which we've been focused on pretty intently to get improvement in that business, is gaining significantly more tractions, and that business is doing very well.

So we're very pleased with that. Thirdly, we spend a lot of time, energy and effort on new products, and we are starting to see now new product adoptions. We've had several of those in the quarter, run a lot of [serial #1s,] which is the most difficult thing to do is get somebody to try it the first time. And that generally lends itself to adoption of that product.

And so we've had success there. And lastly, we identified a $10 million productivity gain for 2021, and we're well on our way to meeting that productivity gain.

So on balance, strategically, the things that we're trying to do, we're having success with in the quarter.

Okay. Appreciate that, Blake. Let me go ahead then and start with a couple of questions, really catalyzed by the Q2 release. Let's start with one that's a bit high level. You included a handful of updates on your 2021 targets, a little bit of an update on year-over-year revenue trend, order outlook and free cash flow target margin. Maybe -- I thought it would be worthwhile if you guys could take a second and highlight those updates.

Sure. On the revenue side, we originally forecast 2021 to be similar to 2020. I think we've guided that down just slightly. So our revenue was down a little bit on the quarter. But that really is just a result of the lower bookings that we had in the back half of 2020, starting to manifest themselves in the top line. That's just really it.

And as our bookings level increase, which we're hopeful for in the back half of the year here, we should see improvement in the revenue and things turning around. On the bookings side, we had a pretty good bookings quarter right down the fairway of our range of $40 million to $60 million.

But if you just compare Q1 to Q2 on base bookings. So in Q1, we booked like $57 million, $58 million, but we had a $20 million booking in there for 2 subsea trees and control systems.

So the net bookings were really kind of the $37 million just broke open baseline bookings in Q1 and in Q2, there was no large onetime. So we booked $50 million in Q2. And so that's a significant improvement quarter-on-quarter in bookings. So pleased about that. And happy to take more questions on bookings and how we see them going forward.

Free cash flow, we had a pretty good free cash flow quarter. We're trending significantly better than expected, and I think we will exceed our target by year-end, for sure, in that area.

Got it. That's a helpful rundown, Blake. So let's stay with, as you mentioned, orders. You mentioned an expectation that the Q4 '21 orders, in particular, will be strong. Can you talk about the visibility you have into what's giving you that conviction? And is there any key timing element to watch out for where we could see a dip in orders in Q3 before a correspondingly strong rebound in Q4?

Yes, sure. So first on the visibility. We have -- some of it's qualitative, some of it's quantitative. I mean some things we can put our hands on heart and say, yes, that's something new in the order book. And then some of it is more qualitative, what you're seeing in the environment.

But specifically, when we look in our CRM, we see more opportunities coming up, particularly Q4 into 2022. And we're starting to see some, what I call, availability plays with some of our independent customers that "Hey, I'm going to go drill a well. Do you have something in inventory that we could take now?" So those opportunities are starting to appear. And to be quite candid, if I look at our markets just on a segmented regional basis, there's more areas where there's upside and increased activity than there are down or neutral. And that's different than what we've seen in the past.

Looking forward, speaking about bookings in Q3, I think we're going to see Q3 similar to Q2, kind of in the mid of that $40 million to $60 million range. And then Q4 is where we hope to see some momentum in our bookings and then that continue on into 2022.

Okay. Helpful. And then again, just to lean on 2022 for a moment, any reason -- I mean, or do you think you'll crack out of that $40 million to $60 million per quarter type of range you've been at really since the onset of kind of the COVID times?

Yes. So we expect Q4 to kind of end at the -- right now, we're just saying we think we're going to be at the top end of that $40 million to $60 million range on bookings on a quarter.

Right now, 2021 is looking optimistic. I'm not ready to call a number, but I think our Q4 number would be a consistent start-off, jump-off point. We're just seeing a lot of improvement in the market. I think you're seeing some -- even the rig contractors making commentary that they're getting more activity on leasing the rigs. And I think Transocean recently came out and said that all the rigs in the Gulf are going to be mostly subscribed and under contract by the end of the year. So that bodes well for us.

Got it. Also I wanted to talk about margins. Q2 products margins did dip about -- its like about 400 basis points sequentially. You mentioned mix as a reason. But harkening back to last quarter, you had mentioned margins in the back half of the year likely to firm up on improving mix and your cost-out programs. And I guess I wanted to affirm that that's still the case and you expect to claw back some ground on the margin line.

Yes. Mark -- Raj, you want to want to talk to...

Yes. I'll (inaudible). So Daniel, margins in Q2, we talked about the AFGlobal impact to margins. So about 1.5 years ago, we leased our forge operations to AFGlobal. And as part of that, we accounted for leasing revenue that we had to accrue for. Some of this leasing revenue was forward in nature that we accrued for. And that impact had -- the fact that they terminated the lease had an impact on our margins because it impacted our cost of goods sold. I'd consider that to be around 300 basis points of impact in Q2.

We also had some mix issues in Q2. But when I say mix issues, actually, it's a good story here. We saw pipe and connector mix go up. And that's always a leading indicator for us. What it means is our customers are going back to work. They're getting the pipe and the connectors ordered. They're going to run down the wellhead inventory. And soon, they are going to see those wellhead inventories have to be replenished, and that's going to help us with our mix going forward. So if you think about that and if I were to look out second half of this year, I should see mix start to improve in Q3 and firm up in Q4.

There is -- we've had some very good results with our downhole tools outsourcing. We've seen very positive results there. I expect that to continue. I expect project -- there may be some headwinds with our project mix in terms of -- we're doing a lot of controls work with Proserv. And evidently, we have a margin sharing situation there that could be a headwind to our mix. But overall, as I look into Q3 and Q4, I see stabilization in Q3, firming up in Q4. And if I were to guide you in terms of EBITDA, I would say that on a normalized basis, our EBITDA should be in the high teens going forward.

Okay. That's helpful. So a recurring theme this earnings season has been input cost pressures and how well companies can manage them. And one of the more interesting elements of your release was the disclosure that you'll impose a 10% surcharge on orders in essentially an effort to be proactive here with the potential for rising costs.

Can you just talk about how that has been received by customers? And how easy you think that's going to be to implement?

Yes. So Daniel, I think our customers are understanding of this cost increase. We're not pushing it because it's demand based. They're seeing the same cost pressures themselves. While nobody likes a price increase, it's just the reality that transportation and materials are going up, and that's putting pressure on our margin cost base.

I just -- I recall back in 2003 and '04 and again in -- I think it's 2006 and '07, we saw the same kind of price increase on raw materials, and our customers, while may not like it, they accept that, that's the reality of what's going on in the market. So I don't expect too much pushback in that regard.

Okay. And then maybe a more basic element of the question. And what are you seeing in terms of steel pricing, raw material pricing, freight? What exposure, if any, do you have now against your existing backlog?

Yes. So right now, as we look at our backlog and then the transportation and the material elements in there, there's really about a blended 10% increase, and that's really kind of where we're -- why we're pushing that number out there.

The fortunate thing for us is that our business is longer cycle in nature. So we have the ability to plan ahead. Our supply chain organization that we stood up in 2019 has done a really great job of securing long-term contracts.

So right now, even though transportation rates, container freight rates are up as high as $9,000, $10,000 a container, we still have contracts where we're paying $3,000 to $4,000 a container coming to or from Asia, for example. But those contracts have an end. And so that's why we're pushing the surcharge through because we have to cover those additional expenses as they come through.

Got it. Okay. And then, Raj, you mentioned earlier the impact of the cancellation of the forge lease with AFGlobal on the Q2 results. But thinking about that strategically, now that they've canceled the lease, what are your options and -- for sourcing? And what are your plans for the forge itself?

So right now, the immediate step is to warm stack the forge, right? We -- Blake talked about our supply chain organization, and they have been very successful in ensuring that we have forge supplies -- the ability to get forge supply from multiple suppliers. So we've kind of mitigated that risk completely.

AFGlobal was, prior to this, they were supporting us from a domestic -- only from a domestic perspective. And we were very quickly been able to pivot and get other sources of forge supply. So we're not too concerned about that.

From a warm stacking perspective, the cost of doing that is negligible. It's not going to be anywhere close to the $11 million to $13 million we saw when we were operating the forge back in the day. This will be maybe $100,000 a month.

We're actually having conversations with a number of forge operators right now. Some are looking to lease. Some are looking to buy. And those conversations are proceeding. And I'm confident that we should get to some closure on this issue with the forge by the end of the year.

Okay. That's helpful. And Raj, just to stay with you for one moment, I wanted to revisit a comment you made just a few moments ago when we were talking about margins. You talked about normalized high teens EBITDA margins going forward. And I just wanted to get a little incremental clarity there. Are you talking about adjusted company-wide EBITDA margins in the high teens once things normalize, which can mean to kind of get out of the G&A burden you've had related to litigation and, again, some of the AFGlobal stuff?

Yes. So yes, that's absolutely right, Daniel. When I'm talking about normalized, I mean, once we get back to steady state, and we're nowhere near steady state right now. And to Blake's earlier comments, the lower order clip rate is coming to roofs right now. For us, when we start talking normalized, it's when we're back to activity levels that we saw maybe 3 or 4 years ago.

Once we get to that level, I should expect us to be in the mid-teens -- sorry, mid to high teens. And on the litigation side, yes, that's been a headwind this year for us, but we're putting that behind us. We could have some additional costs, but nowhere near what we've experienced over the past year, right?

So in that sort of -- with that sort of perspective, I would expect, very easily, once we get to normalized, we should be trending up to the mid going up to the high teens in terms of EBITDA.

Okay. That's helpful context. And so to be clear, it's kind of cleaning up some of the specials as well as getting back up to maybe a more robust top run and you're experience in this year. Okay.

Let's see. And again, an element to that margin progression is also the cost savings that you guys have implemented, includes $10 million this year. I mean, frankly, looking at the Q2 update, you're well on your way to that $10 million.

Are there any scenarios you could envision that would result in further changes to the cost structure for the company?

So Daniel, it's in our DNA to constantly evaluate our cost structure. The past 3 years, I think you've seen what you're calling structural costs, what we call transformational costs. We call it transformational because what we're looking to do is leverage every dollar of cost that we have, right, being more efficient in the way we look at a dollar spent.

And if you look at where we are right now and the outlook that we have in terms of bookings, I think we're in a good -- very strong position, a very good position to get a lot of operating leverage in this recovery. We always had the view that when the recovery comes back that we need to be ready to do it and be able to flex our manufacturing, and we are in that position right now.

Obviously, we'll have to pull on overtime to get the first 20% to 30% of output. And once we get some stability in terms of activity levels, we'll probably have to look at adding some variable costs to maintain the level of activity that we're anticipating going into next year.

But for now, where we sit, it's -- we are focused on the productivity improvements. Blake talked about the fact that we're well underway as we had a $10 million target out there. We have exceeded the run rate. We are close to $8 million right now in terms of our productivity savings. And any additional structural changes or transformational changes will have to be evaluated against the market context.

But as of now, what we are seeing is I think we are poised and well positioned to take advantage of the recovery.

Got it. Let me pivot then and just ask a couple of questions on the -- really the commercial side of the business. Let me start with something you mentioned previously, Blake, in your opening comments. Your consolidation via collaboration strategy, you mentioned the agreement you signed with an integrated oil services peer for wellheads and related equipment. And that sounds like it could be significant. Is there any way you can kind of frame up or provide some incremental color on the size of the opportunity and maybe timeline the first sales under the agreement?

Certainly, yes. Of course, I'm really pleased with our team and reaching an agreement. The agreement we signed is with OneSubsea, and it is for the provision of wellheads and liner hangers and tubular goods, so pipe and connectors. And so it's pretty significant. The teams are just now starting to work together and comparing opportunities.

And I guess the way to frame it, Daniel, is to the extent that OneSubsea is successful, then Dril-Quip is going to be successful. They're going to give us access to markets that we previously didn't play in, particularly the integrated developments. And I think we're likely to have some success by the end of this year or early next year.

I mean, I think there's one opportunity that comes up end of this year, and then there are several out in the future. But I think it's going to be meaningful to our wellhead business, that's for sure.

Okay. That's helpful. And then on the e-Series technologies, you've had some booking success with VXTe, BigBore IIe and I think you mentioned the DXe Connector in the press release yesterday afternoon. Just generally, highlight some of the successes you've seen initially.

And maybe highlight as well, more specifically to the VXTe, your thinking on timeline there for -- it was mentioned in the press release sort of first project or product deployment and opportunities beyond that point.

Sure. Look, it's been a good quarter for new products. This is one of the things I'm extremely pleased about. So XPak DE, our liner hanger, we just signed a multiyear contract with a major Brazilian NOC. I think that's pretty clear what that is. And this is -- it's for the XPak DE liner hanger system. So this is an arrangement even turnkey suppliers like Schlumberger and Halliburton will be coming to us to get the XPak DE for use by this operator. So that's a big, big win on the XPak DE.

BigBore IIe, I think we announced last quarter, we ran our first BigBore IIe. We ran a second one this quarter. But we are now seeing that, that same NOC in Brazil is looking very closely at BigBore IIe in the current tender that's out and we're optimistic, but we don't have a contract yet. But they're starting to realize the time savings has real value and it's meaningful to their cost structure. And same thing with BigBore IIe, we've got 2 IOCs that are looking to standardize on it. And we're consolidating our wellheads from 15 different SKUs to 4 and BigBore IIe is a part of -- a big part of that. And so I think that's a great start. And then another one, the DXe Wellhead Connector. Now this one's a little more subtle to understand. But the top of the wellhead has a profile on there.

That's traditional de facto standard profile has been an H4 profile for over 20 years, longer than that, probably. And the DXe Connector is a different profile on the wellhead and it has very high fatigue resistance. And when you have large rigs in shallow water like they have in Norway, the length of time that the rig can stay on the well was very, very short because of the fatigue and the DXe Connector, including the profile on the wellhead is extended by an order of magnitude the amount of time they stay on the well.

So it's a significant adoption because it's not just somebody bought a product, but they decided to change a de facto standard of the interface of the wellheads to the BOP stack. So that's a big deal. Specifically to VXTe, we do have another opportunity to run the VXTe with Walter Oil and Gas. They are spudding the wells on April 1. Walter buys these trees and put them in inventory, and when they drill a prospect, if it is suitable for subsea development or requires a tree, then they just go right ahead and run the completion and run the tree. So every time they drill a well, we got an opportunity to run the VXTe.So I'm hopeful that they are successful on this well, and we'll get that tree run just at the end of this year, early next year and have that [serial #1] behind us.

That said, we had a lot of pressure during the lawsuit. We had several major step backs for VXTe till the lawsuit was resolved. We are reengaging with many of them. Total has come back. They're fully onboard. And so I think we're getting back on track with our VXTe marketing strategy. So it is a meaningful product from a time cost and carbon footprint standpoint.

Got it. Well, again, staying on still the commercial side, Blake, let me pivot over to downhole tools. Obviously, the business had a really strong Q1. And it had a pretty good Q2 as well. So your comp in revenue, up about 30% year-over-year, year-to-date. And you've touched on these before, but help me better understand the drivers. Is any portion of this catch-up related to a disrupted 2020? What portion is structural?

I know you made some changes to the business. But help me understand that. Help me understand as well, whether you can kind of sustain this higher revenue run rate looking into the second half of the year.

Yes. So there's a little bit of catch up from 2020, but that's a very small part of it. It's really more about the changes we've made to the operating model of this business. We did bring in new leadership for the downhole tools group. But not only that, over his time with Dril-Quip, we've also changed the leadership in several regions where we operate. We have an increase in our geographic focus and we also have some new technology.

The other thing we did is we looked at what are the areas where we're underperforming. And we closed some businesses and left some areas because it was a distraction, and we said we're going to focus on these key areas, which is really Middle East, Latin America and our offshore business, and that we've done.

We've improved our supply chain with better stocking programs and quite honestly, lower costs, so improved margins there. So we're much more competitive now. And downhole tools, specifically liner hangers, it's a business that you sell from inventory. If you don't have the inventory, you don't get the business. And so we've built that inventory up, and we're being much more competitive in it.

And we are -- we are maniacally focused right now on our service quality. We've got initiatives in place to improve our service quality. And so that's helped grow that business. And we're also seeing more peer-to-peer activity. We've always provided liner hangers to peers, but that seems to be increasing over the course of the year. And those things are just structural, right? And those things will just continue on.

Got it. And then also, again, on sort of the commercial front, you guys have fielded a number of energy transition questions over the last few calls, but it does remain a germane main topic. So let me add one. And more of the straightforward one, right?

When you look at your green-by-design campaign and the message you tried to convey to customers, what's the reception been like there?

Yes. So green-by-design is a campaign we put together that really ties together our R&D focus for all the new products we developed. So I think I've talked about this before. I challenged our engineers with the concept of I want you to develop equipment that structurally changes how our customers drill wells to provide them permanent cost savings. And so the way you can do that is I can eliminate things that I have to install. I can reduce the time, so I reduce steel and I reduced time. And as the focus shifted more to carbon footprint environment, what we realized was saving time in an offshore spread has a significant impact on carbon footprint.

And so that really kind of changed the way we think about R&D. The time is really important because it's important both from an IRR perspective and return on the investment, but also from a carbon perspective because the number of vessels working offshore is significant. So it really just represents a significant change in how we think about designing and R&D products.

And just to kind of put a finer point on it, we started doing what's the carbon footprint savings of installing a VXTe tree. And these are preliminary numbers because we haven't added everything in. So I'm going to give you a number here that's probably conservative to the low side. But VXTe is about 1,000 metric tons of carbon saved per well. And that's in addition to the 5 days and $5 million of cost. So it's pretty meaningful for our customers.

Got it. All right. So -- and then you've also mentioned, Blake, that Dril-Quip has some ability to kind of step out into the marketplace around carbon capture and geothermal, and you've described some of those opportunities or adjacencies. But any actual commercial opportunities emerge that are on the horizon?

Yes. So our plan is to be an active player in the energy transition. And carbon capture and geothermal are certainly things that are adjacent to what we already do. We have bid a couple of carbon capture projects. We have not been successful. We got a big one coming up next year that we're really focused on. Every time you bid these things, you understand more what the requirements are, and I think we're going to be successful here.

We're spending a little bit of R&D money to do some development work that fine-tunes our tree systems to meet the requirements of carbon capture. But this is an area where we're going to become more strategic, whereas the past was just kind of ad hoc opportunities, this is an area where we now focus on and our sales guys really go out and look for people, for customers that are planning these geothermal or CCUS projects.

Okay. And I wanted to pivot back to sort of free cash margin targets. And Raj, you might have given me a bit of a hint with your comment on normalized EBITDA margins for the company being mid-high teens, an ambition we won't see this year, but a relevant sort of data point.

So -- but building from that, could you share some thoughts on where free cash flow margin could be or could trend over the intermediate term?

Absolutely. So Daniel, we guided at the beginning of the year, we said that we would expect our free cash flow margin to be 5%. And when I use the word free cash flow margin, I'm using the margin on revenue, just to be clear on that.

If you look at how we've been with the progress we've made year-to-date, we will exceed that target in 2021. In fact, I'm confident that we'll get very close to double of that target, so close to 10% by 2021 -- by the end of 2021. And my only caution is as we approach next year and the back half of this year going into next year, we're starting to see orders come in, the markets starting to recover, backlogs starting to build. I expect that we could see some headwinds. And these to me are good headwinds to working capital, right?

But I expect this to be transitionary, maybe a slight dip next year, and then we should get back to that 10% yield very, very quickly. If you go back to my comment on the EBITDA, it's very -- you can very quickly see you have a CapEx impact, you've got some cash taxes in there, and you very, very easily land at that 10-plus yield on a normalized basis.

Got it. And Raj, you're referring to some of the elements of working capital influencing free cash. And so maybe the follow-up there. It looks like you guys have made good progress this year on the AR side and the AP side, but inventory level still seems a bit elevated. What do you do? And is there the ability to see improvement there in the face of -- or in the face of anticipating a rising order trend?

Yes. So that's a good point, Daniel. Let me talk about working capital, right? So on the AR side -- first, let me talk about the progress we've made on the AR and the AP side. On the AR side, a lot of process improvements initially rolled out domestically in the U.S. And then we went into the regions and did a lot of process improvements in terms of invoicing turnaround, collections efforts, coordination with the customer, meeting payment terms, et cetera. And that's coming to bear fruit for us.

I mean, this is something we worked on last year, and we're seeing the results of that come into play now. On the AP side, we've done a lot with our supply chain group that we recently stood up. We've done a lot of vendor management, et cetera, in terms of payment terms, and that's helped us. Deeper relationships with fewer vendors is going to allow us to have better terms basically.

Now shifting to inventory. Yes, it is a problem. We've highlighted it. We're maniacally focused on it. We've done a lot of substitution efforts this year. We've looked at consignment with some of our vendors to help us on the inventory side.

But these are all -- you can only do so much, right? At the end of the day, we need the booking to come in. The bookings need to come in for us to turn the inventory. So if I look out second half going into next year as bookings start to improve, we should start turning inventory at a faster clip rate. And that too is going to help us in terms of adding to the working capital wind down.

Okay. Got it. And then that kind of leads us as well to another popular question on the balance sheet with Dril-Quip and a little bit of a recurring question here.

But you're up to $370 million in cash after a couple of quarters of free cash flow. What are the latest thoughts on capital allocation? And are -- or M&A opportunities, are they receding or do they grow as your marketplace transitions to a recovery scenario?

So first, the way we look at cash and the way we run our business is very, very return on invested capital focus. It's very ROIC-focused. I think you can see that. The examples I can show, I can talk about are, one, the forge, right? We -- it was basically a capital allocation discussion where you think about the forge, us leasing it to AFGlobal. I understand there's been a termination, but we're looking to now find a pathway that's going to help us in terms of from a ROIC perspective.

Another example I can talk to is like the controls fees, collaborating with Proserv. These are areas where it leverages our ROIC and increases our leverage on the business. So coming to your question on the M&A opportunities, there are M&A opportunities, no doubt about it. There are consolidation opportunities. The problem we're still having is the bid outspread continues to be wide.

We also find some of the targets balance sheets to be constrained, making a deal not possible for us. We've always said that we're not going to do a deal just for the sake of doing a deal, it's got to make sense for us. It's got to make sense for us strategically, operationally and financially. And right now, I think I expect that over the course of the year, sentiments may change and people may get a bit more reasonable in terms of what valuations should be. And we continue to monitor what's going on in the marketplace.

One aspect that we've sort of shifted our focus to is we started to look at energy transition opportunities, looking at areas where we can leapfrog our participation in this area, especially as it relates to carbon capture and geothermal because we see ourselves very well positioned with our product suite to target that market and be very successful in that area.

Okay. Got it. And then maybe as close to a final question, come back up to a high level. The challenges for you and peers are that the end markets are growing, or poised for growth. But peak industry activity levels are far way off, maybe unlikely to recur. You've done a lot to take costs out of Dril-Quip. Could you sum up maybe for me, Blake, the initiatives that are most important to you guys as you look at ways to grow top line? And admittedly, we've touched on a number of these throughout the course of the conversation, but I think it'd be helpful to kind of -- to go back through and recite them.

Certainly. First off, let's set the stage. I think our expectation is that our customers are going to be a little more conservative with large orders. We're not going to see the -- I recall back to the $680 million booking from Petrobras, right, which was right before a downturn, which they ultimately didn't follow through on, I just don't think those are going to happen anymore. I think it's going to be a much more call-off type environment, where you have a contract and we're going to order 10 or 11 wellheads, and we're going to call them off over this time period. And so the market has changed a bit.

But we believe and I believe that our strategic growth pillars are going to help us outpace that market. The peer-to-peer gives us access to market and opportunities that previously we just couldn't win and we just didn't have access to. And to put a little bit of finer point on that, with the little bit of work we've done so far, it almost doubles our at-bats if you want to use a basic terminology of opportunities, right?

And so our downhole tools business is on track to get back towards its previous peak levels. When we acquired TIW in 2017, their peak revenue was about $140 million, and we could at least see a path to grow that business where it's heading up in that way over the next few years. All the new products that we've worked on are starting to get installed and adopted. We're getting a lot more traction. And the more that we run, the more activity we get from different customers wanting to take advantage of the savings as well as the carbon footprint reduction.

And we've got the company positioned now where we can (inaudible) on the backlog, and we've got a track record of keeping our costs low. So I think we're going to see our margin profile improve. And you put all that together, we're probably one of the few people that can say, "Hey, the market can remain flat, but we're going to gain share through all of these peers and the top line is going to grow."

Got it. Look, I think that was a good summation, Blake. And that does conclude my questions. Again, I think that was a good finishing off point, but Blake, were there any last messages or thoughts you'd like to share?

I'd just say that we're really optimistic about 2020, probably how we were optimist in '19 going into '20, but I think the pandemic is -- I think there's going to be some bumps in the road coming back. I think on balance, things are returning back to normal. And I think that's going to be good for our business. We've got everything lined up to be very successful going forward. And I'm encouraged what 2022 has to bring for Dril-Quip, its employees and its shareholders.

That's great. Thank you, Blake. Thank you, Raj. I think that will conclude our discussion then. And I hope everybody does have a nice weekend.

Thank you, Daniel.

Thank you, Daniel.

And this concludes today's conference call. Thank you for participating. You may now disconnect.