Thanks, and good morning, everyone. Welcome to this morning’s fireside chat with Dril-Quip’s management team.

As mentioned, I’m James West from Evercore ISI. I’m joined today with Blake DeBerry, the company’s President and CEO.

And Blake’s soon to be successor Jeff Bird who will take over as President and CEO at the turn of the year. Perhaps before we get started, I’d like to say a few words about Blake and Jeff.

I began covering Dril-Quip in the early 2000s when the company’s three founders shared the titles of Co-Chairman and Co-CEOs and while Larry, Gary and Mike did an excellent job building Dril-Quip into the highly successful company it is today, it was during Blake’s tenure as a CEO when his successful transition from a founder-led start-up to a modernized global leader really unfolded. Blake’s tenure has been impressive.

He was further augmented when Jeff joined the company in 2017. And together, these two gentlemen have further strengthened the company and successfully navigated one of the most challenging periods in the modern oilfield.

So I’m very confident of Blake is leaving the company in good hands with Jeff as its leader. Perhaps, to start off here though, I do want to Blake to say a few words, maybe give a brief recap of the third quarter and some opening comments.

Sure. Thank you, James, and thanks for covering Dril-Quip throughout my tenure, and from the 2000, so 20 years or so have covered.

And I agree with you, I think the company has been in good hand – is going to be in good hands with Jeff, as I depart, and look forward to seeing how the company progresses as we go forward. With respect to the third quarter, the bookings came in at the lower end of our $40 million to $60 million range, which is, it’s still within the range that we expected, but on the lower side, and revenue was pretty much in line, but our EBITDA was impacted by some one-time items and some margin pressure.

On the positive side, our downhole tools group again had a really strong quarter, set another high for that business since its acquisition in 2016. So that’s a positive that business continues to grow and accelerate.

We had another good quarter with respect to free cash flow, which has been a big focus for the management team of Dril-Quip this year. Kind of looking forward, we saw improvement quarter-over-quarter in our aftermarket and our leasing revenues and this is always a good indicator of a pickup in activity impending pickup in activity, as our customers are getting back to work and consuming their inventory.

Additionally, we’ve had good conversations with customers that are trending more positively of activity levels. So we’re seeing that happen.

And just looking at the market, particularly the offshore rig market we’re hearing more and more positive signs about quotation activity for rigs, number of quotes for rigs offshore rigs, as well as the duration of the request for the contract. So those are all positive indicators of an improving market.

So, maybe I’ll turn it over to Jeff for a second here. As I think all of us know with any transition, as soon as you announced that even though Blake may not be still in the room.

Everybody starts hanging out Jeff’s office more than Blake’s office. So you are the man leading the charge here.

Commodity prices have seen a good strength this year such as past several quarters, but all reason they are all not experiencing the same conditions and recovering economically where – what it is already seen or maintain growth activity and particularly when do you think we’ll see growth improvements in the Gulf of Mexico.

Yes. So thanks, James.

Just walking around the world, if we think about Gulf of Mexico, we are starting to see signs of recovery there. Specifically, the independents that are more susceptible or more responsive to higher commodity prices are starting to come back to the market, we’re optimistic about that.

If we go around the rest of the world and just talk subsea Brazil is definitely back. We’ve talked a little bit about the 11 wellhead exploration tender that we received last quarter 26 liner hangers that we received last quarter as well, so that’s definitely coming back.

There is also a tender that’s out there right now on the development wellheads. We expect, we’re optimistic about that.

We expect that to be awarded sometime in the fourth quarter as well. So definitely Brazil is back.

If we look at offshore UK, it’s a return. It’s not at 2019 levels yet, but it’s definitely returned.

Norway is very strong right now a lot of government incentives there. So we’re optimistic about that.

China also on is hot, and we’re looking at a tender either late this year, early next year as well. On the areas that are slower at Malaysia, Indonesia, India, Australia also, and those are mainly COVID-related to be honest, we’ve just seen the activity really curtail there.

And then probably further in the distance we are starting to see some of the large greenfield developments and Africa, starting to have conversations again.

Okay, okay, makes sense. And do you think that your capital discipline working capital management, is going to play a role and kind of how customers think about ordering activity?

Yes. So if we think about that obviously in the Lower 48 home rider case.

So we’ve got almost no exposure in the Lower 48. So that’s not really impacting us.

As we have conversations with customers, though we do see a lot of customers really reloading their balance sheet in the fourth quarter and probably the first half of next year where they’re going to take advantage of those higher commodity prices to reload balance sheets before they start ordering again in the back half of the year. So as a result, we believe that the IOCs are more back-end loaded in some of our customers are more back-end loaded next year primarily because of capital discipline and kind of reloading their balance sheets.

Okay. And are you seeing any change in behavior, as we think about kind of energy transition, is there a hesitancy to sanction larger projects at this point?

Yes. I think there is certainly a little bit more caution around the larger projects than there might have been in the past.

So it’s going to be more brownfield tie-back type projects. We are starting to see some of the large greenfield projects that I mentioned.

Right. You mentioned.

But it’s going to be more brownfield tie-back. We’re starting to see, as it relates to energy transition more robust comments in the tenders and more request in the tenders specifically around carbon footprint, specifically around what we can do to help customers reduce their carbon footprint.

In fact, I think we got a tender last quarter that was probably the most robust. As it relates to that, we’ll be curious to see how that factors into the tendering process its not exactly clear right now, other than a very robust list of questions and requests.

Sure, sure. Okay.

Well, I do want to come back to that tender and the carbon. But maybe to touch on at least kind of where we are and as we’re doing today orders seem to be kind of paying out this $40 million to $60 million range.

What do you think you need to see to have orders break outside of that range? And do you think this happens since late Q4 and just 2022?

Yes. So if we think about it, we – we’ve been quoting $40 million to $60 million.

We believe, we’ll be at the high end of that range in Q4, that Q4 range is largely dependent on how the independents come in, and right now, we’ve got a lot of nice projects around those independents coming in and that would dictate whether we’re at the high end of the range or actually even exceed the high-end of that range in the fourth quarter. If we look out to next year, and 2022 right now, it’s early days and we see a lot of our customers in the middle of their planning project right now.

So we met with the customer. I think earlier this week action when we met with that customer earlier this week, they were actually even surprised at the amount of activity within their own company gone around their budgeting process.

So I think those customers are still in a state of flux, but early days right now, we see 2022, up 20% to 25% on 2021 from a booking standpoint. And this year we expect the book a trees next year, we would expect double the number of trees that we’ve booked in this year.

So we’re definitely optimistic about next year. I do think it’s going to be choppy as we come out.

Sure. Okay, okay, makes sense.

And are there any large projects you’re tracking or have an update on?

Yes. There’s really two.

There is there is the Petrobras development tender that we’re talking about.

Right.

Where we believe we’re well-positioned for that, and we’re pretty optimistic about that. We think that will be awarded in the fourth quarter.

And then the other one is actually with CNOOC. And that one is actually a collaboration agreement and that would be our first large collaboration tender and that we expect that either fourth quarter of this year or first quarter next year.

When you say collaboration, what do you?

That’s the one subsea collaboration. So in the case, there we’re actually going in with one subsea.

We provide the wellhead, they provide a lot of the other kit.

Okay, okay, great. Makes sense.

So a lot of your focus, firstly, Jeff, since you got involved in the business you’ve been taking all the cost out and running the operations more efficiently. Are there any actions or are the actions you took last year playing out the way you expected now?

And what scenarios could arise that would cause you to consider further changes to the cost structure.

Yes. So I think everything is playing out, as we expected.

We’ve gotten the cost out of business. We’re actually a little ahead this year and what our productivity projects are.

If you remember back to the transformation, when we positioned that we set at $400 million of revenue, we do $40 million to $50 million of EBITDA. Who knew at the time we thought that would be the here trough revenue.

Obviously, we didn’t expect the pandemic so the trough revenue is a little lower than we thought. So it’s – I think it’s unquestionable right now that we’re holding more cost, than we need to hold in anticipation of a recovery.

Okay.

This spot we don’t want to be in, to be honest is, cut a bunch of costs this quarter and find out next quarter or two quarters from now that a recovery is underway, and we just add a bunch of that costs rack. So we estimate that we’re probably holding $20 million to $30 million of excess cost right now, as a result of where we are right now in the cycle.

Okay.

We’ll continue to monitor that by the way into your specific question on what triggers. We’re looking at a $40 million to $60 million range.

I think if we start to see orders at the low end of that range or even the mid-end of that – mid-part of that range, we’ll have to react accordingly from a cost standpoint. We know what the triggers are we need to pull.

We’re just trying to be thoughtful about it.

Right. Okay, okay.

And there’s been a lot of conversation in the media certainly, and amongst investors about rising materials and rising the freight prices. What are you seeing on that side in terms of impacts to your business?

And how are you trying to mitigate some of those impacts?

So let me divide the business between downhole tools, and subsea. On the downhole tools side, and that is a short cycle business, right.

So those are 12-week lead times. So in those cases, we see the impact much quicker.

And we have to pass on the price much quicker around that. So we’ve immediately gone out with price increases around the downhole tool business, and we’ve been largely successful around that.

On the subsea side, because those lead times can be anywhere from 26 to 52 to 18 months. We’ve got a lot longer runway around that.

So largely what we see there is, we will see the increases we are passing along a 10% price increase on the subsea side. And largely, we believe we’ll be successful on that subsea side as well.

So we don’t really see that inflation impact that you’d expect to see short – in a short time horizon. Freight is a little different story.

And freights an odd story in that we’re seeing two problems with freight. One is obviously, just the escalation in freight prices alone, but it’s also availability of routes and modes, if you will.

So we find ourselves in some situations where we might normally go oceans somewhere. We can get the ocean, and we end up airfreighting something out because we can’t.

Our customer needs it, the ocean modes not available and we end up airfreighting. And so we do have inflation, as it relates to freight, and in some cases that inflation is just a result of having use a more expensive mode than we might normally use as well.

Right. Okay, okay.

I want to go back to the collaboration part that you mentioned that the project with one subsea as you’re working on with CNOOC. Historically, I’d say probably before your arrival, Jeff, the collaboration was a big part of Dril-Quip’s business.

I still remember spending time with Gary and Larry and those guys and they always figure they can just do it better. And then they did to their credit.

But you’ve putting some collaboration efforts. What’s the impact have that’s had on the business thus far?

And what’s your future expectations?

Yes. So we’ve really got two major collaboration agreements that we have announced one is Proserv and that’s where Proserv is providing the controls for us.

And we did that largely because candidly were holding excess cost and found ourselves in a position where we’re going to have to invest a considerable amount of money to get our controls up to the right level. The benefit there really if you look back at the BHP Norskan award, that happened earlier in the year, that was a direct result of that Proserv collaboration agreement.

And if you look out over the next 18 months, we know there’s going to be at least a few more trees that will come out of that BHP award and that’s going to be a direct result of the Proserv collaboration. So we believe that’s working and that’s just one example of how that’s working.

The downside of that is that, there is some pass through impact of that obviously, so those controls pass-through at a lower margin than you might normally expect. Just have to keep that in mind, and it depends largely by the way on how the customer wants to contract.

BHP is a good example where they said we will one contract, one butt to kick so to speak, so we end up passing through BHP. Other customers don’t care and will contract separately and that will make the margin lose a little bit better, but understand that.

One subsea collaboration we signed recently as well that’s around wellheads and essentially we sit down every month and go through what are the joint opportunities out there, and we bid jointly with one subsea in many cases. So the CNOOC is a good example we’ve bid with them.

There are opportunities where we bid with them and bid separately, as well and that’s part of the collaboration. It’s taken a little while to take off just because of the bid cycle 26 to 52-week lead times on wellheads.

It doesn’t happen immediately, so this one and fourth quarter will likely be the first opportunity that we could see a win.

Okay.

Fourth quarter of this year, first quarter next year.

And are you guys thinking about imagining, exploring other product line and collaboration partners?

Yes. So I think there is really two or three other opportunities there.

One is on the downhole tool side, specifically around liner hangers. Liner hangers is part of that one subsea collaboration agreement.

That’s a little bit behind where the wellheads are right now, but we’re starting to gain traction that we already sell through Schlumberger, but we’re starting to gain more traction there as well. If you think about it in terms of the VXTe which is another opportunity, we would expect to work with other tree manufacturers to provide VXTe through those other tree manufacturers.

And then the last opportunity is really around energy transition. And we’ve got a nice offering on shallow water trees and in many cases there is a lot of large – much larger enterprises going after large carbon capture, and storage projects that don’t have good shallow water tree.

So we’re in conversations with those partners as well. So those are the next two opportunities probably VXTe and something around CCUS specifically shallow water trees.

Okay. That’s great.

Great to hear. I did speak to the drill on rent, so your downhole tool business recently another record quarter in the third quarter.

So what do you – what’s happening? And what’s driving these improvements in the business?

How are you making progress to drive growth in key markets? And what are the longer-term goals and targets this business could do?

Yes. So we brought Steven in the last 18 months, 24 months and we brought him in candidly.

He looked at where we were playing everywhere in the world around downhole tools. And there is a couple of reasons that we just decided we can’t compete in those regions.

We’ll never make money in those regions. We exited those on the regions or end specifically around Middle East, specifically around Latin America, specifically around deepwater.

We’re very focused on those we’ve brought new general managers in, in each of those regions. And then in addition to that, we’ve put stocking programs in place in each of those regions.

So we’ve got specific SKUs that we’ve got in those regions that allows us to respond quickly to our customers. We’ve made some inventories – inventory investments I think around $6 million in inventory investment this year, but it’s going to allow us to be up 30% year-on-year.

In revenue on downhole tools, we expect to be up another 30% again next year, year-on-year in downhole tools, and we would see ourselves getting to a $100 million to $120 million in downhole tools, not 2022 necessarily, but think about that as 2023 target and beyond, right. I mean I think that $100 million with insight just in the geographies we’re in just of the SKUs we’ve got.

I think that next piece after that is going to take getting into some different geographies and thinking about some different SKUs.

Okay, okay. Makes a lot of sense.

Maybe let’s talk a little bit the e-Series family of technologies, because they are beginning to see some success in bookings and installations. And can you maybe talk about which products we’re seeing success?

And also maybe an update to on the VXTe post-trial verdict and how the conversation has changed?

Let’s – I’ll start with more and on BigBore IIe. And on BigBore IIe, which is our wellhead we’ve seen wild success in that, to be honest.

In fact, we would expect by the end of next year for 60% to 70% of all the incoming orders that we’re getting to be BigBore IIe. So there has been wide acceptance of that product.

That’s great for a number of reasons, obviously, technology is great, but when you get that many of your wellheads going through one product, it just makes inventory easier, it makes manufacturing easier as well. On the DXC connector, we’ve seen two, three installs in Norway, and we’re starting to gain pretty good acceptance in that Norway market around the DXC connector.

And then on XPak, we’ve done two installs on XPak in deepwater and we’re starting to see traction on that as well. So if you think about a BigBore IIe is way ahead, but following that is probably DXe and XPak.

If you think about the VXTe, VXTe, we would expect that we hope to have an install, fourth quarter of this year maybe first quarter of next year. It’s largely dependent on the well that’s being drilled right now.

I think we’ve talked about already that it’s Walter Oil and Gas that would do that. And it largely depends on how that well looks.

If that works out well, then candidly, I think we’ll see that move forward very quickly. We’re already in conversations with large IOCs and other customers around VXTe, but as you can appreciate, in our industry there is a lot of, I want to be the first to be second.

And so I think everyone’s anxiously looking at that install for the opportunity. So if you think about how we triangulate that it’s really get the install in the fourth quarter.

We’ve got to pull from the large IOCs and major customers, and then we’re working with one subsea they’ve looked at it from a technology standpoint, so it’s really the trifecta of those three things happening that would prove success in the VXTe.

Okay. Okay, makes sense.

Now, how do you think about the R&D spend in your business going forward. Since you’ve launched the e-Series products, what type of projects are kind of next in the queue that you guys are working on?

So one of the things that I’m working on you joked a little about being in seat.

Right.

But as a new person in seat, really, it’s really looking between now, and our February earnings call. And what I’d hope is, that I have February earnings call.

We’re coming out specifically talking about our R&D allocation. We’ll continue to spend money on innovation, we’ll continue to spend money on R&D, we’re keenly focused right now on energy transition.

We believe we’ve got a real opportunity in carbon capture, we believe we’ve got a real opportunity in geothermal. It’s not that we won’t continue to invest in our normal core products, but those are two growth areas that we think are real opportunities.

And we’d like to talk about R&D in that February meeting as what percentage of our R&D are we spending on energy transition specifically around those two.

Perfect. That leads to my next question, because obviously alternative resources are a big topic today.

Top 26 is starting next week. How are you approaching our house Dril-Quip as a firm approaching energy transition?

And how was the Green by Design campaign been resonating with customers? And what are the key benefits and advantages that your technology – that do you have in your technology comparing to them?

Yes, I’ll start with Green by Design, that’s been very well received by our customers. And in fact, it plays nicely into the tender that I mentioned earlier, where we’re specifically – we’ve got specific targets around where carbon footprint reduction is, and we’ve talked a great deal about that in that e-Series of products, so that resonates very well with our customers.

And just about across the board to be honest, NOCs, IOCs and even some of the larger independents are very interested in that. We did spend the summer really going through every opportunity from an energy transition standpoint.

So we went through each of the major verticals, if you will around the energy transition. What we really landed on is the no regret that’s for us.

Mark carbon capture and geothermal. It’s not to say that we won’t pay attention to anything else.

It’s just to say those are kind of the no regrets easy bets where we think we can gain traction in the short term. We are – we did hire someone end at lead energy transition that person works directly for me.

We continue to look at every other vertical and energy transition. And interestingly, where we are finding some opportunities.

There is a lot of I’d characterize them is early phase companies that don’t have manufacturing capability.

Right.

And so the inbound calls we often get are those type of companies that say, hey, I’ve got this opportunity. I’m about to win a tender.

I have no idea. I’m going to scale this up and manufacturer.

And so we are literally meeting. We’ve got our VP of Manufacturing, and our engineers and our ops people meeting with the companies like that where they’re just looking for a partner.

And we’re not looking to be a contract manufacturer for those companies. We’re really looking to get a stake in the company when that happens.

So if we’re going to invest our time and energy and resources in setting up manufacturing for those companies what we look to do is get a small piece of that company. And if it’s successful that’s great for us.

We’ll leverage our manufacturing capability here. If it’s not successful, it’s a very low bet, very, very low no risk bet, if you will.

So that’s really how we’re thinking about energy transition right now.

Okay, okay, that makes sense. So, perhaps, maybe turning to some of the balance sheet items for a couple of minutes here.

Forge’s balance sheet it’s always been that way substantial cash, no debt, yet, we’re going into an upturn. Is there opportunity for cash at this point that you could potentially return to shareholders or M&A?

Is there other opportunity for cash? How are you thinking about capital allocation over the next several quarters?

Yes, I mean look, not unlike our R&D strategy, capital allocation strategy is the same where we’re working on that over the next few months. We estimate – without any debt, we estimate we need $100 million to $150 million of cash to maintain the business, and even in an upturn.

So that leaves the fair amount of excess cash. You saw we did some stock buyback.

A little bit in the third quarter and more in the fourth quarter as well. We’ll always be thoughtful around how we’re thinking about that buyback.

We’ll always be looking at opportunities there. But if I go out beyond that, we want to be more thoughtful around M&A and where our opportunities might be there.

I think it’s unquestionable that in the industry we’re in right now, we need some level of consolidation. It’s not a secret that at the size and revenue we’re at today.

It’s a scale issue for us right now. And we’re not alone in that.

We could both name six, seven, eight, our companies that are in that same spot. So we’re constantly looking at those opportunities.

And to be honest in early days, one of the early things I’m doing is meeting with the CEOs of all these other OFS companies, just to get a gauge for their view of the industry and where things are right now, and where there might be thoughtful partnerships. And those might not always be M&A, that might be a collaboration agreement as an example.

But what we look to do in February is be more clear about articulating our capital allocation strategy. One piece is exactly how much we need in a recovery, but how much are we going to think about energy transition where I talked about these collaboration opportunities where we might invest small amounts from an energy transition standpoint.

But then also being very clear and intentional about what an M&A strategy is going to look like. And probably a little more aggressive around that as well.

Okay. Okay.

Good to hear. And then you guys a lot of targets for this year.

Purely cash flow working capital improvements and free cash flow choose between the higher than the 5%, the revenue target. Do you expect that to continue here?

And the working capital trends have been moving in a positive direction as well. So maybe can you talk about those?

Yes. So yes, we are trending higher.

I mean we’ll trend closer to a 10% number is sort of a 5% number this year. This is really been a year.

We’ve seen a lot of great improvement in accounts receivable specifically getting past dues down specifically shrinking our time to invoice and things like that. That’s got legs through the fourth quarter, it gets tougher to continue to do that, especially as we head into a recovery next year.

The days of getting huge progress payments and things like that on large projects are not back yet. Question whether they ever get back there, but they certainly won’t be back there in the beginning.

We did see a nice reduction inventory this quarter. And we’re starting to, and I’ve commented several times around inventory and that that’s just a much tougher lift.

You’ve got to get the incoming orders, and literally we have a team of three to five people that’s sit in a room and every time an order comes in they scour to see how can we use existing material on those incoming orders. It’s starting to get traction.

We believe that will continue in the fourth quarter. We believe that will continue into next year.

So, next year, we’ll see AR start to level off from an opportunity standpoint. In fact if things start rebounding we might even see AR growth.

And we would hope that inventory would continue to be an opportunity for us next year. We’re probably tapped out on accounts payable.

I think we’ve got a nice DPO number right now that we’d be challenging to expand beyond really where we are right now. It will – but cash flow will continue to be a focus next year.

But if we start to see multiple quarters of orders $100 million, you can expect we’re going to have a little bit of a burn on working capital is very low they are.

Okay. That makes perfect sense on an upturn.

How do you expect CapEx to trend? Either your current run rate looks like it’s below that $15 million to $17 million expectation.

Do you think that moves up or you think we’re in a good range? How are you thinking about that?

Yes, it will probably – we will probably come in below that $15 million to $17 million, although, that’s kind of a normal. I think we’ve typically characterize that as kind of our sustaining CapEx, if you will, that was around that much.

We are looking at investments that we might need to make over the next 12, 18, 24 months to make sure that our manufacturing footprints position correctly, but we don’t see anything right now that’s material. But we’d probably talk about that more in February, if we have anything there.

Sure. And then inventories.

You mentioned good inventory order this last third quarter. Are there is still more improvements around there?

And how do you think about inventory, as a competitive advantage as well? Because it’s going to be some guys that are going to be caught off guard when this recovery happens and they I don’t have inventory.

Yes. So I’ll talk about in two-fronts.

One, is we do think there is opportunity, but I talked about the incoming orders, so it can be choppy over the next six quarters or so. Where there’ll be quarters like this quarter we got the 10 out there is going to be quarters where we don’t get anything, really, just because the right orders didn’t come in, in the right timing.

It’s interesting around the competitive advantage. I talked about downhole tools, and the investment we made there.

We now have in each of those key regions specific inventory targets, specific amount that we’ve invested in each of those. So we’ve pushed that out we’re starting to see the revenue increase.

I think the next opportunity right now is starting to improve the turns on the inventory that’s been put out there. So right now, we’re sitting in a 1.5 or 2 turn on that downhole tool inventory I’d like to get that to a 4-turn.

But I’m not going to do it at the expense of revenue right now. So I’m willing to go a little slower on that.

Just to get that 30% revenue increase. If I think about it from a subsea standpoint, we’ve gone from 15 wellheads to 4 wellheads and we talk about BigBore IIe being 60% to 70% of our orders by the end of next year.

We’re really focused on how do we stock from those four wellheads that are left.

Right. Okay.

And what we’re telling customers when we talk to big and small is, if you order one of these four you’re going to get it faster. Your lead time is going to be better, you’re going to get it faster.

You can order something it’s not of those four, it’s going to take longer. It’s going to be more expensive.

And we almost exclusively see every customer saying how do I get myself in one of those four wellheads. Because all of our customers candidly are looking to push the inventory hold back.

And the supply chain, as much as they can. This just helps them be more competitive to be honest.

So that’s just one example of what we’re doing from a stocking program. On a monthly basis we have what we call sales inventory operation planning, and we decide where we might just strategically stock in other places.

So we might do that with a tree block, we might do that with connector or something like that, but downhole tools is a very intentional area that we’re going to keep doing wellheads is a very intentional area that we’ll keep doing.

Okay. Okay.

How should we think about the fourth quarter in terms of revenue and margins? And then, maybe think a little further out.

What do you think more normalized margin profile would potentially look like?

Yes. So if we think about fourth quarter it’s going to look very much like the third quarter to be honest.

In fact be plus or minus a little bit, but let’s be honest, when you get down into the revenue numbers that we’re at a $1 million change, it looks like a big number, but it’s not really that bigger number, in the grand scheme of things, so fourth quarter look much like the third quarter. And we become more dependent on orders now, as we get deeper into 2022.

So right now, we’re really experience in those low or trends that we saw in 2020 in the middle of the pandemic. We’re starting to experience that, and that’s starting to flow through in our revenue and EBITDA.

If I think about next year, and what that revenue trend looks like I talk about orders being up 20%, 25% year-on-year. That likely won’t manifest in revenue until the back half of next year or early 2023, to be honest.

I mean we do get some incoming orders that we immediately get percentage of completion. But largely that will start to manifest back half of next year and 2023.

So from a revenue uptick.

Okay. And then margins, normalized margins?

Yes. Normalized margins.

I think, we expect to get back into the low-20s. If you’re talking product margins.

Right. Okay, it makes sense.

Blake, this is your last fireside chat, last call with Dril-Quip. Parting thoughts.

I do have another follow-up question to that.

Okay.

Parting thoughts for shareholders and investors fans, employees, directors.

Yes. So it’s – so like I’ve said before this is me 40 years in the oilfield services, 33 of those which is Dril-Quip in the last 10 as a CEO.

It’s been an incredible ride. We were talking earlier today.

As I start to cleanup my office and the mementos and things that I’ve saved to have more to do with the people that I’ve worked with. And so I certainly appreciate working with all the employees and shareholders, and our Board and our customers has been, it’s been an incredible ride living all over the world and travel all over the world.

I pulled out my stack of passports, and say oh my god I’ve been on every continent of the Antarctica, so and I’m really optimistic about the future. I mean that’s one of the reasons I feel comfortable stepping right now.

I feel comfortable with Jeff, taking this on board and we got a good team here, and I believe Dril-Quip is positioned to actually outgrow the market.

Good.

I’m optimistic of the go forward.

But we’re optimistic, as well. So, maybe to finish off our chat today, Blake.

I didn’t have the good fortune of meeting your wife recently and then, so I know she is namely CEO of her business. But I’m not sure you got the same job description.

So what are your plans for the future?

Yes. So my wife and I have built a vineyard in a winery in Central Texas.

We live – she lives out there, and it’s been operational for a little over six years now and she runs that, that’s for business to run. So when I was talking about stepping down I had to negotiate a position at the winery.

She is a tough negotiator. And she’s told me several times I don’t think you’re going to like your new boss very much.

But she did finally agreed to let me retain the title of CEO and I was pretty excited about that. And then, she said, so let me define for your job duties that means that you are responsible for cleaning electrical and other.

So…

Other sounds scary.

The other parts pretty scary, particularly when I just has to do with something in the bathroom. But, yes, just looking forward to spend a little more time together.

And today I’m going up to watch my grandkids play soccer for the first time. So just yes have more family life and make wine.

That’s a good plan, Blake. So, Blake you had a great run at Dril-Quip great run as CEO.

Congratulations to you on stewarding the company, as well as you have. Jeff, best of luck as we move forward here, because it’s you and me now and Blake is going to say as well.

So we’ll give it a go.

I look forward to it.

Absolutely. Well, thanks everybody for listening in today, and I think with that we’ll go ahead and end the call.

Alright. Thank you, James.

Thank you James.

Thanks, guys.