Prompt:
Human: I'm joined here today by Steve Westhoven, our President and CEO; Pat Migliaccio, our Chief Financial Officer; as well as other members of our senior management team.
This could cause results to materially differ from our expectations, as found in slide one.
We will also be referring to certain non-GAAP measures such as net financial earnings or NFE.
We believe that NFE provides a more complete understanding of our financial performance.
However, it is not intended to be a substitute for GAAP.
Our non-GAAP financial measures are discussed more fully in Item seven of our 10-K.
Our agenda for today is found on slide two.
Steve will begin today's call with highlights from the quarter, followed by Pat, who will review our financial results.
New Jersey Resources delivered strong performance in the first quarter.
And on slide three, I'll take you through the highlights.
We reported NFE of $0.46 per share, driven by the performance of our core business, New Jersey Natural Gas.
We are also reaffirming our NFE guidance for fiscal 2021 of $1.55 to $1.65 per share and increasing our fiscal 2022 NFE guidance to $2.20 to $2.30 per share, an increase of $0.15 per share from prior guidance.
At New Jersey Natural Gas, we completed almost 90% of the Southern Reliability Link and expect to place the project into service this year.
We received approval to move forward with our infrastructure Investment Program, a 5-year, $150 million accelerated recovery program that will improve the resiliency and reliability of our natural gas infrastructure.
And we filed for SAVEGREEN 2020, a new energy efficiency program that is designed to help our customers reduce their energy consumption and save money.
At Clean Energy Ventures, we acquired the 2.9 megawatt Mt. Laurel Solar Facility, which is part of our plan to invest $165 million this year.
In our Storage & Transportation business, we've begun to construct -- to convert the Southern portion of Adelphia Gateway to natural gas and expect it to be in service later this calendar year.
And just yesterday, the U.S. Supreme Court granted PennEast petition to hear its appeal.
But despite this positive news, we are still excluding PennEast for our long term projections until there's more clarity on the project.
And at NJR Energy Services we entered into an asset management agreements, which will result in contracted cash proceeds of $501 million over a 10-year period.
I'll take you through the transaction in more detail on the next slide.
Turning to slide four.
Energy Services entered into a series of AMAs with an investment-grade public utility.
These transactions illustrate the value of our portfolio of natural gas storage and transportation contracts that are a testament to the hard work of our talented team.
The transactions assist our counterparty in securing needed supply, while Energy Services monetizes the value of a portion of the assets it controls.
Let me walk you through some of the specifics.
Beginning in November of 2021, which is our fiscal year 2022, NJRES will begin to release portions of our pipeline capacity.
Under the terms of the agreements, NJRES will receive payments of $261 million over the first three years of the AMAs.
After FY 2024, NJRES will receive additional payments of approximately $34 million per year through 2031.
The benefits for NJRES include, extracting value from our assets without the need for weather-related price volatility and reducing operational risks associated with the direct management of these transportation assets.
The result will be more predictable earnings and cash flows and a lower risk Energy Services business.
These transactions also allow us to increase our fiscal 2022 guidance by $0.15 per share, as we'll see on the next slide.
And later in the call, Pat will take you through other financial impacts of these transactions.
Turning to our NFE guidance for fiscal 2022 on slide five, we are increasing our overall guidance to a range of $2.20 to $2.30 per share.
This reflects the impact of the AMAs and the expected cash settlement of our equity forward.
However, our long term annual growth rate of 6% to 10% remains based off our originally communicated guidance of $2.05 to $2.15 per share, which excludes the impact of the AMAs and any other contribution from Energy Services.
As Pat will discuss later, the NFE benefits of AMAs will not be the same every year.
And on slide six, I'll take you through some of the operational highlights.
Looking at the top left, we invested $89 million in New Jersey Natural Gas during the first quarter, with about 1/3 of the capex providing near real-time returns.
Despite the ongoing COVID-19 pandemic, we added over 1,900 new customers, only slightly below the customer additions from the same period a year ago, which was pre-pandemic.
This is due to the favorable growth demographics in our service territories.
Construction on the Southern Reliability Link continues to progress, and we now have almost 90% of the project complete with an in-service date expected this year.
We plan to file our rate case to recover the costs associated with the project in fiscal 2021.
And as I mentioned earlier, we received approval for our IIP program and filed for SAVEGREEN 2020.
On slide seven, I'll take you through the operational highlights of our other core business, Clean Energy Ventures.
We added 2.9 megawatts of capacity this quarter.
And as you can see on the top right, we now have 360 megawatts of installed capacity.
We have a strong project pipeline with about $260 million worth of investments, either under contract or exclusivity that are targeted for commercial operation in fiscal 2021 and 2022.
Total invested capital at CEV this quarter was $23 million with $17 million of commercial projects and $6 million at Sunlight Advantage.
The bottom right shows our expected CEV revenue for fiscal 2021, a significant portion of which is secured through our SREC hedging program.
The sustainability agenda we've outlined for our company focuses on innovation, emissions reductions, energy efficiency and transparency.
But I'm pleased to report NJR has made significant progress.
Last quarter, we announced that NJR achieved our goal of reducing our New Jersey operational emissions by 50% of 2006 levels, well ahead of schedule.
And we set a new higher target of 60% reduction by 2030.
This is a significant accomplishment that reflects the decades of investment in safety and environmental responsibility.
It reflects our strong commitment to sustainability and the hard work of our team.
Our new target ensures our company's goals are aligned with the state's 2050 statutory goals for emissions reduction.
Last month, we issued our 12th Annual Corporate Sustainability Report, which is available on our website.
For the first time, this year's report includes ESG reporting and disclosures established by SASB, which is another step to increase transparency and strengthen our communications with our investors in the financial communities on these issues.
Slide 10 shows the main drivers of our NFE for the first quarter.
As we communicated at our Analyst Day in November, this is the first quarter where we're utilizing the deferral method of accounting for CEV.
And as such, we've recast our financials for the comparable periods.
Reported NFE of $44.7 million or $0.46 per share compared to NFE of $34.9 million or $0.38 per share in the first quarter of fiscal 2020.
New Jersey Natural Gas saw an NFE improvement of $5.6 million due primarily to a full quarter of higher base rates from NJNG's fiscal 2020 rate case settlement as compared to a partial quarter a year ago.
CEV was down $2, primarily due to increased O&M expenses related to project maintenance costs, especially with new projects placed in service, which is partially offset by a decrease in depreciation expense.
Storage & Transportation saw a modest increase during the quarter, mostly related to increased operating income from Leaf River, and was offset by interest expense related to the acquisitions of Leaf River and Adelphia Gateway.
Energy services improved $6.6 million, primarily due to higher financial margin compared to last year, due to increased natural gas pricing spreads.
Home Services and Other saw slightly lower operating revenue and slightly higher interest expense.
As Steve mentioned, we reaffirmed our NFE guidance of $1.55 to $1.65 per share for fiscal 2021.
On slide 11, you can see the segment contributions with our core businesses, NJNG and CEV, accounting for 80% of total NFE.
To help understand the distribution of our net financial earnings by quarter, let me walk you through how we expect NJNG's utility gross margin and CEV's revenues will occur.
For NJNG, we expect to recognize approximately 70% of our utility gross margin in the first half of the year, in line with our historical trends.
At CEV, the majority of our revenue will come in the second half of the year, in particular the fourth quarter, when we expect to recognize the majority of our SREC revenue.
We expect the net financial earnings contributions of our Storage & Transportation business to be fairly consistent throughout the year, because of the fixed price contracts.
On slide 12, we've highlighted the details of our SREC hedging program.
We continue to actively hedge to ensure SREC revenues are largely unaffected by future changes in SREC prices.
Energy year 2023, we increased our hedge level to 75%.
Comparing year 2024, market fundamentals and pricing remained strong with SREC trading at over 85% of SACP.
And we now have 49% of our 2024 volumes hedged.
Turning to slide 13.
I'll explain some of the nuances to achieve the revenue recognition for the AMAs.
Under the terms of the agreements, NJR will initially release the transportation capacity to our counterparty, and later on, will permanently release the contracts to the utility.
The accounting standard requires to allocate revenue to both the initial and permanent release.
With the disproportionate amount of revenue signed to the permanent releases that occur in fiscal years 2024 and 2032.
Subsequently, this allocation will generate a mismatch between revenue and cash proceeds.
Finally, I will note that while the revenue provides some general indication of the NFE, it does not reflect the impact of taxes, demand charges and other items.
Importantly, though, the cash proceeds provides us with additional benefits that I'll detail shortly.
As you can see on slide 14, we now expect our cash flows from operations to grow the CAGR of approximately 25% from fiscal 2020 to 2024 compared to our previous estimate of 20%.
And as you can see from the chart on the right, the strength of our cash flows implies that our dividends are expected to become a smaller percentage, supporting our long term dividend growth rate of 6% to 10%.
Another benefit from the AMAs is the improvement to our credit metrics, which you can see on slide 15.
As we reported at our Analyst Day, our FFO to adjusted debt ratio is rising from fiscal 2022 to 2024.
And when you have the positive impact of the AMAs, our metrics are expected to increase to the high teens in fiscal 2022, and reach about 20% by fiscal 2024.
And because of these strong credit metrics, we will cash settle the equity forward we put in place during our December 2019 equity issuance.
At that time, we issued 5.3 million shares, and we entered into an equity forward to issue an additional 1.2 million shares at a later date, which we no longer need to do.
Also, as we mentioned during our Analyst Day, we have no block equity needs in foreseeable future.
Before I open the call to questions, I'd like to summarize the quarter.
NJR is off to a good start for fiscal 2021 and on track to meet our NFEPS guidance for this fiscal year.
We increased our fiscal 2022 NFEPS guidance by $0.15 per share, and we expect strong cash flow to support our dividend growth.
Our key infrastructure projects, SRL and Adelphia Gateway, continue to make progress, and we expect both to be in service this calendar year.
Our improved credit metrics allow us to cash settle our equity forward.
And as we said in our Investor Day, we have no need for further block equity issuances.
And we've made substantial progress in our commitment to de-risk the Energy Services business by providing more stable fee based revenue.
 Assistant:

Chosen response:
new jersey reaffirms nfe/share outlook of $1.55 to $1.65 for 2021.
reaffirmed nfe per share (nfeps) guidance of $1.55 to $1.65 for fiscal 2021.
increased nfeps guidance for fiscal 2022 by $0.15 to a range of $2.20 to $2.30.
qtrly consolidated net financial earnings of $44.7 million, or $0.46 per share.


Prompt:
Human: We're well positioned to continue enhancing shareholder value as we look ahead to the balance of 2021 and beyond.
In July, we announced a roughly 2% increase in our common stock dividend effective later this month, thus making 2021 our 32nd consecutive year of annual dividend increases.
National Retail Properties is in the select company of only 85 U.S. public companies, including only two other REITs, which have achieved this impressive track record.
Based on our strong performance, we announced today a further increase in our 2021 guidance for core FFO per share to a range of $2.75 to $2.80 per share.
Our long-standing strategy is designed and executed to generate consistent per share growth on a multiyear basis.
And as the disruption caused by the pandemic and related store closures is easing, the value of this long-term approach is reflected in our second guidance increase this year.
Turning to the highlights of National Retail Properties second quarter financial results.
Our portfolio of 3,173 freestanding single-tenant retail properties continue to perform exceedingly well.
Occupancy was consistent with the prior quarter at 98.3%, which remains above our long-term average of 98%.
We also announced collection of 99% of rents due for the second quarter.
Collection of previously deferred rent remained at an equally high percentage and we forgave almost no rent during the quarter.
These impressive collection results compare very favorably to other retail real estate companies including those with a significantly higher percentage of investment-grade tenants.
Moreover, we believe that these results validate our strategy of doing direct sale leaseback transactions with large regional and national operators for well-located real estate parcels at low cost per property and reasonable rents.
And while we're on the topic of large tenants, I'm pleased to report that one of our top tenants, Mister Car Wash, recently completed its initial public offering.
Congratulations to John Lai and the entire management team at this impressive company.
Mister Car Wash was one of our first relationship tenants 15 years ago, and we're very proud of the role that National Retail Properties has played in that company's growth and success.
During the quarter, we invested just under $103 million in 29 new properties at an initial cash cap rate of 6.7% and with an average lease duration of over 17 years.
Almost all of our acquisitions were from relationship tenants with which we do repeat programmatic business.
Year-to-date, we've invested over $208 million in 58 new properties leased to 10 different relationship tenants at an initial cash cap rate of 6.5% and an average lease duration of 17.5 years.
In an environment where cap rates remain near all-time lows, we will continue to be very thoughtful in our underwriting and primarily pursue sale-leaseback transactions with our portfolio of relationship tenants.
Based on our pipeline and conversations with those relationship tenants, we remain comfortable with our ability to meet and hopefully exceed our 2021 acquisition guidance of $400 million to $500 million, primarily via direct sale-leaseback transactions with long duration leases.
During the second quarter, we also sold 15 properties, raising almost $23 million of proceeds to be reinvested in new acquisitions.
And year-to-date, we've now raised over $40 million from the sale of 26 properties, including 15 vacant properties.
Although job one is always to release vacancies and our leasing team does an excellent job of it.
We'll continue to sell nonperforming assets if we don't see a clear path to generating rental income within a reasonable time period.
Our balance sheet remains one of the strongest in our sector.
In June, Kevin led the recast of our unsecured line of credit, increasing the capacity of our facility from $900 million to $1.1 billion.
Although our credit line has been upsized, the balance outstanding remains the same, 0, and we ended the quarter with approximately $250 million of cash on hand.
With no material debt maturities until 2024, we remain well positioned to fund our 2021 acquisition guidance without needing to tap the capital markets.
That's up $0.01 from the preceding first quarter, $0.69 per share, and it's up $0.05 from the prior year's $0.65.
Today, we also reported that AFFO per share was $0.77 per share for the second quarter and that's also up $0.01 from the preceding first quarter $0.76.
We did footnote this amount includes $8.3 million of deferred rent repayments and our accrued rental income adjustment in the second quarter AFFO number.
So without that, we would have produced AFFO of $0.72 per share.
So excluding those deferral repayments, our AFFO dividend payout ratio for the first six months was 72.7%, that's fairly consistent with prior year's levels.
Occupancy, as Jay mentioned, was 98.3% at quarter end.
That's been fairly flat compared to recent quarters.
G-and-A expense was $11.9 million for the second quarter.
The increase for the quarter and the six months was largely driven by incentive compensation.
Rent collections continue to remain strong in the second quarter.
As Jay mentioned, today, we reported rent collections of approximately 99% for the second quarter rent.
Collections from our cash basis tenants, which represent about 7% of our total annual base rent improved to approximately 92% for the second quarter rent, and that's up from 80% previously reported for that cohort in the first quarter of 2021.
As Jay noted, we increased our 2021 core FFO per share guidance from a range of $2.70 to $2.75 per share to a new range of $2.75 to $2.80 per share.
This incorporates the better-than-expected rent collections and the actual results in the first half of 2021.
The driver for the increase in our full year guidance is the assumed higher rent collection rate more in line with our current collection rates.
So while we previously assumed 80% rent collection from the $50 million of cash basis tenant annual base rent, we are now assuming 90% rent collections that incremental 10% amounts to about $5 million on an annual basis.
And for the remainder of our tenants, we continue to assume 1% of potential rent loss.
And again, that's consistent with our prior guidance.
We ended the quarter with $250 million of cash on hand and no amounts outstanding on our newly recast $1.1 billion bank credit facility.
This bank line, as Jay noted, increased from $900 million in size to $1.1 billion.
The interest rate was reduced 10 basis points to LIBOR plus 77 basis points and maturity was extended to June of 2025.
Our liquidity is in excellent shape, our weighted average debt maturity is now 13 years with a 3.7% weighted average fixed interest rate.
Our next debt maturity is $350 million with a 3.9% coupon in mid-2024.
The very good liquidity and leverage position have no real need to raise any additional capital to meet 2021 acquisition guidance, and we're well positioned as we look forward to 2022.
A couple of numbers.
Net debt to gross book assets was 35%.
At quarter end, net debt to EBITDA was 5.0 times at June 30.
Interest coverage, 4.7 times and fixed charge coverage 4.2 times for the second quarter.
Only five of our 3,000-plus properties are encumbered by mortgages.
So 2021 is shaping up to be a very solid year for us as the economy and retailers capture the government stimulus, which feels like it will have some tailwinds in 2022.
Our focus remains over the long term as we continue to endeavor to give NNN the best opportunity to succeed in the coming years and, importantly, growing per share results.
And with that, Tom, we will open it up to any questions.
 Assistant:

Chosen response:
second quarter 2021 operating results and increased 2021 guidance announced by national retail properties inc.
qtrly affo per common share $0.77.
core ffo guidance for 2021 was increased from a range of $2.70 to $2.75 to a range of $2.75 to $2.80 per share.


Prompt:
Human: They involve risks and uncertainty, and actual results may differ materially.
Our comments also include non-GAAP measures.
On a U.S. GAAP basis for the first quarter of 2021, NOV reported revenues of $1.25 billion and a net loss of $115 million.
Later in the call, we will host a question-and-answer session.
2020 is 1-2 punch of an oil supply price war, followed closely by an oil demand crushing global pandemic led to a sharp decline in demand for oilfield equipment and consumables through the year.
NOV's results for its first quarter of 2021 reflect the full impact of the shock wave emanating from the combination of these events that led to this historically painful downturn in an industry noted for painful downturns.
As we reported in our operational update on March 16, the quarter was further impacted by other factors: severe winter weather and power outages in Texas and Oklahoma led to 63 NOV facilities being shuttered for a week or more.
Additionally, new pandemic control measures flared up overseas, which shut down another couple of large plants and disrupted our supply chains for certain raw materials, notably fiberglass and resin.
And as if that weren't enough, the quarter also ended up being impacted by higher costs on two projects related to poor execution on our part.
In one case, a new pipe design has proven more expensive to manufacture than expected.
And another, an offshore platform component was delayed because our engineering took longer than expected.
Both have been corrected.
Despite these, the final quarterly results, slightly exceeded our March forecast due to better progress on cost reductions overall as well as, and this is important, more and more green shoots emerging in the oil field, particularly in Wellbore Technologies and particularly in North America.
Although we would still face headwinds in many markets, our confidence continues to mount that the worst is behind us.
North American oilfield activity continued its recovery during the quarter, with March revenues up sharply from January for certain of our earlier cycle domestic businesses, while international results began to point to early signs of a recovery as well.
Nevertheless, the first quarter sequential decline in capital equipment revenues reflect the pummeling our backlog took in 2020, which led to consolidated revenue declines of 6%.
EBITDA fell to breakeven, which is unacceptable and is prompting further cost reductions.
As a provider of capital equipment and spares to the oilfield, our results lag those of our customers, generally speaking.
The first quarter of 2021 reflects the preceding nine months of crashing oil demand and a virtual cessation of capital spending, offset by substantial downsizing and cost reductions.
We believe this down cycle is the worst our industry has ever seen.
Oil prices went negative in April.
In August, the U.S. rig count hit its lowest level since records began in World War II.
North American frac fleet utilization hit single digits.
By year-end, more than 100 North American oil and gas companies had filed for Chapter 11 bankruptcy protection with a combined debt of over $100 billion.
Were not for a couple of large projects that were awarded before the lockdown, FIDs for offshore projects in 2020 would have marked the lowest since 1960.
Although the recovery has begun taking hold in many markets, average first quarter rig counts were down 46% for North America land, 36% for international land and down 31% for offshore year-over-year.
When I say that it has been a historically bad downturn, what I mean is that it has been a measurably provably historically bad downturn.
In this environment, our oilfield service customers are sticking to the tried and true survivor playbook of cannibalizing equipment, spares and consumables, deferring maintenance, reducing spending to bear substance levels and hoarding precious cash.
NOV's largest competitor in this environment is idled equipment.
By fall, every stacked rig had become an incremental source of drill pipe, shaker screens, handling tools, etc at same dynamic applies across all categories of oilfield equipment when utilization collapses and service companies fight to keep the lights on.
A year ago, day rates began racing to find bottom at daily cash costs, which were insufficient to cover long-term maintenance cash costs, much less the capital consumption costs represented by depreciation.
For many sectors, year-end 2020 day rates reflected desperation.
Companies discounting to keep some assets and crews working and spending cash only as a last resort.
Consequently, NOV's oilfield backlogs fell throughout the year and first quarter annualized revenue run rate is down 45% from just five quarters ago.
Here's the good news.
160 years of oilfield history demonstrates that this dynamic is always temporary.
The amount of idled equipment available to be parted out falls as activity resumes and dwindling spares and consumables must be restocked as utilization improves.
We're beginning to see the early signs of this in certain areas as rigs and frac fleets go back to work.
Idled stripped drilling rigs must have cannibalized pumps and handling tools replaced to go back into service.
And this rebuilding, restocking and reactivation phenomenon occurs at a time when service company desperation is evaporating and optimism is growing with rising oilfield activity.
We know this because NOV has lived it through recovery cycles like this in the past.
As the oilfield goes back to work, customers will soon start to worry about nontrivial cash investment required to reactivate rigs and equipment.
Think about the courage required to put your precious cash into the business that almost killed you last year.
That's what these customers face when it comes to reactivations.
We believe our customers will require higher pricing on their incremental assets going back to work in order to mitigate risk by achieving quicker paybacks on their reactivation investments.
Plus they'll need to cover rising wage pressures and other inflationary forces and more on that in just a moment.
And if oil prices remain constructive, pricing momentum will lift margins and return significantly, such is the nature of the cyclical business we serve.
NOV will be a key recipient of this unit reactivation investment.
As various basins and categories of equipment pass through the inflection to emerge into higher day rate regimes, their orders for capital equipment will accelerate.
This is the sweet spot of our business model.
The historical oilfield events of 2020 have led predictably to an enormous disassembly of well construction capability by the oilfield services industry, the tried and true playbook I referred to earlier.
Every surviving oilfield service company on the planet has made it this far by downsizing extraordinarily well.
Collectively, our surviving customers are the dream team of cost-cutters.
And they have been hard at it for several years before, tripling their cost-cutting ferocity in 2020.
It stands to reason that the aggregate capacity to construct wells has been materially diminished in our view.
If the global economies continue to recover out of COVID and demand more oil, the oilfield services industry will be tested to get back to normalized levels of wellbore construction sufficient to meet rising oil demand.
We think that's more likely than not.
First, governments around the world responded to the economic turmoil of the pandemic with unprecedented stimulus packages.
For instance, the G10 plus China passed more than $20 trillion of stimulus in the aggregate.
This has led to stunning money supply growth.
The U.S. M2 is up 27% year-over-year, as an example.
Generally, money supply growth and low interest rates inflate asset prices, including commodity prices like oil.
Next, drug companies invented a vaccine, several, actually.
While there are fits and starts, global vaccination efforts are progressing, positioning the world to emerge from the pandemic lockdown.
Huge economic stimulus and a powerful catalyst, vaccines, to more or less simultaneously open economies, coupled with sharply improved household balance sheets and a widespread desire to get our lives back to normal, well, I cannot conceptualize a more compelling recipe for a synchronized global economic recovery of a size that we have not seen since the 1950s post-war boom.
We believe this synchronized recovery will lead to rising oil consumption.
In fact, leading demand indicators for crude oil, gasoline and distillate already point to a stronger recovery than many economists expected, and global inventory levels appear to be normalizing ahead of schedule.
On the whole, this is a highly constructive backdrop for oil prices for the next few years in our view.
Key risk to this thesis include excess Saudi and OPEC capacity, which is scheduled to trickle in over the next several months, and the possibility of the return of Iranian crude production.
However, record levels of crude inventories achieved through the first half of 2020 have, to the extent we have visibility into them, largely dissipated.
That only happens because withdrawals have exceeded additions.
So supply, held artificially low by OPEC, has been less than demand, held artificially low by the pandemic lockdown.
And the key question is, what will the picture look like as artificial constraints on both ease.
Another risk is the productivity of U.S. shales which achieved extraordinary levels of growth off and on throughout the past decade.
Simul fracs and other advancements point to the relentless march of the domestic E&P industry toward greater efficiencies.
But to be fair, the domestic E&P industry was helped in the prior era by, one, gobs of cheap capital that fuel drilling programs seeking production growth; and two, duress in oilfield services that held pricing below that required to replace, let alone earn a return on the capital consumed in the construction of these wellbores.
Capital, when they can get it, is far, far more expensive now.
And it feels like it is becoming even more so as ESG factors play a more prominent role in investment decisions.
And the incremental investments that will be required to restore oilfield service well construction capabilities will also demand higher returns.
Layer in on top of that, the consolidation among domestic E&P operators, the higher cost of attracting labor back to the oilfield while a major economic expansion is under way, giving workers a lot of other high-paying options, and well, you get the picture; a return to material production growth from U.S. shales will be more challenging this time around from where we sit.
Behind the artificial production constraints imposed by OPEC, Russia and Saudi Arabia, the artificial consumption restraints imposed by COVID economic lockdowns lies impressive depletion math.
All oil wells decline.
To what level has the aggregate natural decline of oil well has been obscured by these artificial constraints.
We can debate about what the true supply demand picture looks like, but one thing we can all agree on is that both are far more opaque in 2021 than any prior year.
After all, we've never had an economic shutdown like this before.
My point is this, when the industry materially cuts its expiration, its development, it's steady construction of the platforms, projects and wells that produce the oil that our global economy relies on, and further, eviscerates the tools of the oilfield services industry that actually do the work, there will be a day of reckoning.
Throughout this historic period, NOV has been steadfast in: one, reducing our costs, which are down $12.6 billion since 2014, including approximately $2 billion in annual fixed cost reductions; two, improving our cash flow, which has delevered our balance sheet; and three, investing in the next-generation of technologies, both for the oilfield as well as emerging renewables opportunities.
Whether it's the next-generation of rig floor technology, like our robotic pipe handling system controlled in our NOVOS digital environment; our ideal e-frac fleet, outfitted with our QuickLatch system and FlexConnect frac host system to remove both emissions and manpower from the completion process; or NOV Max, our digital platform that brings out -- brings all the disparate data sources together for the operator to utilize as he or she sees fit.
NOV remains at the forefront of the next-generation of oilfield technology.
Our push into supporting the energy transition focuses on areas where we believe we can carve out significant competitive advantages while delivering superior economic returns for our customers in wind, solar, geothermal and other emerging energy sources.
seven out of eight Wellbore Technologies business units posted sequential growth in the first quarter, reflecting surging demand for certain products.
Consequently, we began to add shifts to manufacturing, and we achieved the highest level of absorption we've seen since the first quarter of 2020.
NOV witnessed share gains for our ReedHycalog bits in West Texas and Saudi Arabia, despite increasing prices due to strong performance and rising activity.
Drilling motor demand is also increasing and downhole friction reduction tools are completely sold out in certain North American markets as revenues were up more than 30% sequentially.
We pushed drilling motor pricing up double digits in some areas.
North American rig instrumentation and solids control services pricing is up double digits on new work back to pre-COVID levels and poised to rise further.
In our international markets, we expect our wired drill pipe jobs to increase over 25% in the second quarter.
As operators become increasingly convinced of the value of real time, high bandwidth data from the bottom of their drill strings, something that's only available through our proprietary IntelliServ Wired Drill Pipe technology.
Global OCTG demand appears to be picking up, which led to double-digit sequential growth in NOV Tuboscope's pipe inspection services worldwide.
And despite continuing day rate pressure on drilling contractors, Grant Prideco posted a book-to-bill greater than 100% as operators are requiring larger 5.5-inch drill pipe to accommodate better hydraulic performance, leading drilling contractors to purchase this pipe with our proprietary Delta premium connections.
On the whole, higher oil prices and higher rig counts, particularly in North America, placed Wellbore Technologies at the forefront of the oilfield recovery.
On the other hand, Completion & Production Solutions and Rig Technology segments continue to battle through low capital equipment backlogs and stingy customer spending.
However, the CAPS segment saw its book-to-bill for new capital equipment orders above 100% for the first time since the fourth quarter of 2019, an indication of better results to come.
The group's North American quick turn businesses began to see improvement.
North American production chokes backlog popped 30% and our reciprocating pump backlog grew 69% sequentially.
We won another Tier four dual fuel fleet upgrade for a domestic pressure pumping service provider and demand for coiled tubing strings tripled from its low point in the second quarter of last year.
While we lost a large project in Alaska, we did win another large project for Brazil, and both projects are evidence that perhaps operators are moving forward with some decisions after protracted COVID-related malaise.
Rig technology sees challenging conditions for rig capex in the near term, but it did see double-digit growth in spare parts orders, followed by two record low spare parts order quarters in a row.
It is also seeing rising inquiries for rig engineering around offshore drilling rig reactivations.
So while our first quarter results were terrible, I'm growing increasingly confident that results will improve significantly as the year progresses.
Our spare parts, consumables and services businesses tied to activity are seeing it already, and our sales force is wasting no time repairing pricing to acceptable levels.
And healing for our capital equipment businesses always begins with rising orders, which we started to see in many businesses for the first time in 1.5 years.
You skillfully position the company to support our customers and to capitalize on opportunities to serve them better.
Most importantly, through a year that has thrown a lot at our team, you've taken care of each other.
I'm incredibly proud to serve with you and appreciate all that you do.
Jose, Blake and I look forward to better days with you as things improve through 2021.
NOV's consolidated revenue fell $78 million or 6% sequentially to $1.25 billion during the first quarter of 2021.
The sequential decline was the result of ongoing austerity from our customer base, operational disruptions from severe weather and COVID-19 challenges, which continue to play global supply chains.
A simple way to summarize the quarter is that January was extremely slow, February was a frozen disaster and in March, orders began to pour in, and we made up a lot of lost ground, giving us confidence that our results will improve through the rest of the year.
Ongoing cost-out initiatives, a higher-margin revenue mix and better pricing, limited sequential decremental margins to 22%.
However, we take no comfort in this performance, given that we are breakeven EBITDA, which is unacceptable in any market environment.
We continue to challenge our organization to look for new ways to drive incremental efficiencies.
During Q1, we realized $52 million in annualized cost savings and identified an additional $31 million in opportunities, bringing the total we expect to achieve in 2021 to $106 million.
During the first quarter, our operations used $27 million in cash and capital expenditures totaled $49 million.
It's typical for the organization to consume cash in the first quarter, and we expect to be free cash flow positive for the year.
We ended the first quarter with $1.61 billion in cash and $1.85 billion in gross debt or net debt of $244 million.
Following the end of the quarter, we fully redeemed the remaining $183 million of our senior notes due in December 2022 with cash on hand.
As a result, our next bond maturity does not occur until December 2029, and interest expense should decline roughly $1 million per quarter.
Moving on to our segment results.
Our Wellbore Technologies segment generated $413 million in revenue during the first quarter, an increase of $40 million or 11% sequentially.
Cost cutting, improved absorption in our manufacturing plants, a more favorable sales mix and better pricing drove 55% incremental margins and a $22 million increase in EBITDA to $34 million or 8.2% of sales.
Our ReedHycalog drill bit business achieved 20% revenue growth with strong improvements across the Western Hemisphere.
ReedHycalog's technology leadership is driving market share gains in most markets, and the gains helped drive modest revenue growth in the Eastern Hemisphere during a quarter in which we typically see a seasonal slowdown.
Share gains, improved absorption, better pricing and cost-cutting drove incremental margins of almost 50%.
We expect our ReedHycalog business to post another solid sequential improvement in Q2, led by growing activity in the Middle East and Asia Pacific markets.
Our Downhole Tool business realized a 13% sequential improvement in revenue, led by sales growth that meaningfully outpaced the increase in drilling activity in the Western Hemisphere, partially offset by seasonal declines in the Eastern Hemisphere.
Operators working to reduce trips, maximize hydraulic flow and reduce friction are driving improved demand for our SelectShift drilling motor, fluid hammer, impulse axial pulse technology and agitator tools.
A more favorable sales mix, higher volumes, improved operational efficiencies and better pricing allowed the business to deliver 50% incremental margins during the quarter.
Our WellSite Services business realized a 16% sequential increase in revenue, primarily from improving results in its solid control operations.
The business unit has steadily recaptured market share in North America from desperate competitors that have fallen out of the market over the last several quarters and is now starting to claw back pricing.
Our M/D Totco business realized low single-digit revenue growth in the first quarter.
Revenue from surface sensor and data acquisition offerings in the Western Hemisphere improved in line with drilling activity but was partially offset by the seasonal falloff in capital equipment sales to the Eastern Hemisphere.
The business unit's eVolve wire drill pipe optimization services achieved record rental service revenue, and as Clay mentioned, picked up additional jobs for Q2.
Our track record of improving drilling efficiencies for operators is driving an increasing rate of adoption.
However, the relatively high cost of wire drill pipe in a capital-constrained market has mostly restricted the service offering to operators that have complex wells with tight drilling parameters.
We believe our new low-cost, next-generation wire drill pipe technology could significantly expand the market and accelerate the adoption of our wired drill pipe enabled services.
Our Tuboscope pipe coating and inspection business posted a 10% sequential increase in revenue.
Demand for inspection services improved globally and was particularly strong in the U.S., where piece counts from steel mills and outside processors improved 43%.
Revenue from coating operations fell due to seasonal declines in the Eastern Hemisphere, which more than offset improving demand in North America.
Our Grant Prideco drill pipe business achieved a high single-digit sequential increase in revenue.
A higher proportion of large-diameter premium pipe in our sales mix drove outsized incremental margins despite meaningful costs associated with the winter storm, which included facility repairs, overtime pay and scrapping costs from power outages that occurred during sensitive heat-treating operations.
The business unit achieved a 104% book-to-bill, which should allow for another sequential improvement in Q2.
31% of our orders came from North America, the highest percentage in quite a while.
As Clay mentioned, we saw strong demand for 5.5-inch pipe driven by operators seeking greater hydraulic efficiencies consistent with the driver we're seeing for our high flow rate drilling tools at a time when there continues to be ample supplies of 4.5- and 5-inch customer-owned drill pipe in the U.S. For our Wellbore Technologies segment, we expect activity gains in the U.S. and Latin America to moderate and activity in the Eastern Hemisphere to recover, resulting in sequential revenue growth of 8% to 10% during the second quarter.
We also expect continued improvement in the segment's cost structure and better pricing, which should allow incremental EBITDA margins near 50%.
Our Completion & Production Solutions segment generated $439 million in revenue during the first quarter, a decrease of $107 million or 20% sequentially.
The sharp decline was primarily due to depleted backlogs, severe weather-related disruptions and supply chain challenges.
Efforts to reduce costs and improve operational efficiencies limited decremental margins to 30% and EBITDA declined $32 million to a loss of $4 million.
Orders for the segment improved $57 million sequentially to $338 million, resulting in a book-to-bill of 127%; the segment's first book-to-bill greater than 100% since the fourth quarter of 2019.
During the quarter, we began to include orders for subsurface fiberglass fuel storage tanks in our capital equipment backlog.
Excluding this addition, our book-to-bill would have been 115%.
Our Fiber Glass Systems business realized a 25% sequential decline in revenue.
Difficulties faced by the unit were emblematic of what we saw in most of our capital equipment businesses during the first quarter.
We anticipated absorption challenges resulting from five straight quarters with a book-to-bill below 1, but severe COVID-19 and weather-related disruptions also impacted operations.
COVID outbreak shut down our two large manufacturing facilities in Malaysia for three weeks, and the pandemic's impact on global supply chains resulted in shortages of epoxy resin and glass fiber, which limited manufacturing output at our facilities.
Severe winter weather further hampered operations and caused customers to defer deliveries due to transportation constraints and difficulties installing large subsurface storage tanks and frozen soil.
Despite demonstrating the near-perfect case study for Murphy's law, our team did everything within reason to protect the bottom line and was able to maintain positive EBITDA margins.
While ongoing supply challenges may not be fully resolved until August, the outlook for this business seems to be improving with each passing day.
A significant pickup in orders in March for our fuel handling products allowed the unit to post a book-to-bill north of 100%.
We're also seeing demand return from marine scrubbers in Asia and fiberglass pipe in the Middle East, providing us with confidence that the business should realize steady improvement in its results throughout the remainder of 2021.
Our Intervention & Stimulation Equipment business realized a mid-single-digit sequential decline in the first quarter, its fifth straight quarter of declining revenue.
Despite continued weakness in the North American market, the segment achieved its second straight quarter with a book-to-bill greater than 1.
Demand for wireline equipment, particularly in the Middle East, Europe and Africa, has been a bright spot.
And while our global coiled tubing business experienced a sharp falloff in Q1, quoting activity from international markets remains healthy and improving completions activity in the U.S. is driving greater demand for consumables.
In the pressure pumping space, activity levels have increased significantly, but pricing for our customer services remain well below pre-COVID levels, forcing cannibalization and low-cost purchases of distressed equipment to sustain operations.
Opportunities to cannibalize are limited.
And while equipment auctions continue, the quality of iron on the auction block is quickly deteriorating.
As a result, we're seeing a significant increase in quotes, albeit off extremely low levels for new equipment.
Our Q1 cementing equipment orders were double the amount we received the entire second half of 2020.
And we're also seeing increasing demand for stimulation equipment with enhanced capabilities and reduced emissions.
During Q1, we booked an order to convert 16 Tier two frac pumps to new Tier four DGB dual fuel units that can run on a combination of diesel fuel and natural gas, lowering operating costs and emissions.
Additionally, we're seeing growing interest in our ideal e-frac stimulation equipment, which recently finished its first field trial where our pump completed more than 200 stages at rates up to 22 barrels per minute, nearly 3 times that of a traditional 2,500 horsepower unit.
With improved bookings and growing demand for aftermarket services, we expect our Intervention & Stimulation Equipment business will realize a meaningful pickup in revenue during the second quarter.
Our XL Systems conductor pipe business experienced a sharp sequential decline in revenue during the quarter, resulting from a backlog that was depleted after eight straight quarters with a book-to-bill of less than 1.
Our team limited decremental margins to only 17%, and we achieved a 143% book-to-bill indicative of improving market conditions.
Interestingly, we've seen certain customers award work then delay deliveries, while other customers are scrambling hard with urgent orders for newly established near-term spud dates.
So sentiment remains mixed, if not a little unusual, but we take the current dynamics as a net positive.
Meanwhile, competition remains fierce with desperate competitors offering pricing and payment terms that we will not match.
Fortunately, our technological and quality differentiation allows us to win a sufficient number of projects that are not entirely driven by pricing, such as the award we received associated with the industry's first 20,000-psi well development project.
Our Subsea flexible pipe business realized a low double-digit sequential revenue decline with outsized decremental margins resulting from lower volumes, a less favorable product mix and the manufacturing challenges associated with the new pipe design that Clay mentioned.
While bookings remained light, customer dialogue and order outlook has improved, particularly in Brazil, where we expect large projects to advance later this year.
However, exact timing remains somewhat uncertain as extreme COVID-19-related challenges in the country make it difficult to coordinate efforts and complete essential engineering work required to advance projects.
We believe the offshore production-oriented components of our CAPS segment are at or near bottom.
On our last several calls, we've mentioned how we've been pursuing a large number of offshore production-related projects that continue to push out quarter after quarter.
We finally started to see some of these projects shake loose and remain hopeful that stronger oil prices could support more FIDs through the year.
For the second quarter of 2021, we anticipate revenue from our Completion & Production Solutions segment will improve between 15% to 25% sequentially, with incremental margins in the mid-20% range.
Our Rig Technologies segment generated revenues of $431 million in the first quarter, a decrease of $6 million or 1% sequentially.
A small increase in capital equipment sales related to offshore wind was more than offset by the seasonal falloff in aftermarket services.
A less favorable revenue mix and weather-related disruptions resulted in a $6 million decline in EBITDA to $13 million or 3% of sales.
Orders for the segment declined $78 million sequentially to $112 million, yielding a book-to-bill of 59%; the segment's sixth quarter out of the last seven with a book-to-bill of less than 1.
Orders for rig capital equipment remained weak as drilling contractors continued to cannibalize idle equipment and minimize spend.
Despite improving activity and dialogue, there remains a distinct lack of urgency from our customers.
Quotation levels increased 25% sequentially, and the conversion of quotes to orders also improved, however, only quotes for small orders converted to bookings.
We aren't losing larger orders to competitors and customers are not canceling projects.
There's simply just a lack of urgency and potential orders keep sliding to the right.
Ongoing waves of COVID-19 outbreaks in international markets do not inspire confidence and neither does uncertainty around the timing of when several of our offshore drilling contractor customers will exit bankruptcy.
While customers in the Middle East and Asia continue to express the need for newbuild rigs and offshore customers require meaningful upgrades for reactivations, we expect the lack of urgency will keep the book-to-bill for our traditional rig equipment business below 1 times.
However, we are optimistic that a few additional quarters of stability in commodity prices and improving activity levels will do quite a bit to move projects forward.
On a more positive note, we began manufacturing the first two rigs from our new manufacturing plant in Saudi Arabia.
Near-term revenue from these projects will help offset the expected weakness in our rig equipment order book.
As a reminder, the plant has a commitment for 50 drilling rigs over the next 10 years and accounted for $1.8 billion in backlog.
We expect to deliver the first rig at the end of this year, a rig in each quarter during 2022 and five rigs per year beginning in 2023.
In our Aftermarket business, spare part bookings increased 22%, led by demand from the Middle East and U.S. land markets as the ability to cannibalize stacked rigs has nearly run its course.
As previously mentioned, several of our larger offshore customers are in the late stages of restructuring processes, and we currently have a large amount of their equipment sitting in the -- in our shops.
We're optimistic that once capital structures are reset and more FIDs advance, we will realize a meaningful pickup in service repair and recertification-related work.
Our renewables business has a completely different field than our traditional rig business.
During the quarter, we booked an order for the design, jacking systems and crane for a European wind turbine installation vessel.
Our Q1 offshore wind order intake was modest relative to the opportunities we are pursuing, which include over $400 million in potential projects that could be awarded before the end of the year.
Looking ahead to Q2, we expect growth in our renewables business, improving aftermarket activity and progress on the rigs in Saudi Arabia to offset the impact of weak orders from our rig capital equipment business, which should lead to results for our Rig Technology segment that are in line with the first quarter.
With that, we'll now open the call up to questions.
 Assistant:

Chosen response:
national oilwell varco q1 2021 revenues of $1.25 billion, a decrease of six percent compared to q4 of 2020.
q1 2021 revenues of $1.25 billion, a decrease of six percent compared to q4 of 2020.
completion & production solutions generated revenues of $439 million in q1, decrease of 20% from q4 of 2020.
completion & production solutions new orders booked during quarter totaled $338 million.
new orders booked in rig technologies during the quarter totaled $112 million.
as of march 31, 2021, company had total debt of $1.85 billion.


Prompt:
Human: Joining me are Bill McDermott, our president and chief executive officer; and Gina Mastantuono, our chief financial officer.
During today's call, we will review our third-quarter 2021 financial results and discuss our financial guidance for the fourth quarter of 2021 and full-year 2021.
We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP.
A replay of today's call will also be posted on our website.
While a beat-and-raise headline from ServiceNow is familiar, it is no less extraordinary.
Our team delivered another outstanding quarter, yet again significantly exceeding the high end of our guidance across all metrics.
Subscription revenues were up 31% organically.
This is unprecedented in our industry.
CRPO was up 32%, subscription billings were up 28%, operating margin was 26%.
We again have raised our guidance for the full year, strengthening our clear path to $15 billion-plus in revenue by 2026.
I was introduced as ServiceNow's CEO more than two years ago.
We've all seen a lot since then.
What we've never seen is such consistent innovation and execution at global scale.
And we're only getting started.
Before Gina gives you a complete report, let's talk about this dramatic structural incline at ServiceNow.
The pace of digital investment is accelerating.
IDC has consistently sized this opportunity at $7.8 trillion over a four-year period.
With this massive addressable market, ServiceNow is at the intersection of two generational opportunities: First, the need for a new technology foundation is supercharging our close partnership with CIOs.
A recent Wall Street Journal report highlighted the role of CIOs as the architects of digital business.
Ongoing advances in public cloud and machine learning are forging a new era of software innovation.
Technology teams want a fully integrated software cycle: planning, development, deployment, operations and service.
ServiceNow is leading this 20th to 21st century migration for our customers.
The Now Platform, with its immense versatility and scalability, has become the control tower for digital transformation.
The second dimension fueling ServiceNow is the reordering of the enterprise application platforms for hyperautomation.
Leaders today recognize their technology architecture is their business architecture.
Over several decades, enterprise has invested trillions into on-premise and first-generation SaaS applications.
These applications satisfy the business process needs of the 20th century.
Today, new business models require a fully connected value chain.
Legacy environments are not adaptive enough to enable this change.
As the pioneer of modern digital workflows, ServiceNow is leading the renaissance.
The Now Platform connects different applications and data sources to create intuitive mobile experiences, all at a consumer grade.
We don't ask businesses to bet everything on a single system or collaboration tool.
We give choice, which not only unlocks value from our platform but from other platform investments as well.
ServiceNow also empowers anyone to build applications on our platform.
In its low-code development technologies report, Gartner estimates that 70% of new applications developed by 2025 will use low-code or no-code technologies.
Gartner also named ServiceNow as a leader in its Magic Quadrant.
These tailwinds are driving fast organic growth across our entire solutions portfolio.
The number of deals greater than $1 million was 63, up 50% year over year, signaling substantial adoption of our platform strategy.
In Q3, IT workflows remained very strong.
ITSM was in 18 of our top 20 deals while IT Operations Management had 10 deals over $1 million.
Internal Revenue Service is in a multiyear digital transformation effort.
In Q3, they chose ServiceNow to consolidate 12 complex systems into a single platform to support the agency's mission-critical operations.
Demand for our entire IT portfolio is strong.
And with the launch of Lightstep Incident Response in Q3, we are unlocking a new wave of product-led growth in application monitoring and observability.
Employee Workflows also had a fantastic quarter with HR in 13 of our top 20 deals.
In Q3, NTT Data will leverage the Now Platform to create an employee experience portal, enhancing productivity for hybrid work and managing vaccine administration for its entire workforce.
Momentum continues for Customer Workflows with CSM in 12 of our top 20 deals and eight deals over $1 million.
Industry vertical solutions are leading the way with major brands.
Verizon is adopting our telco solution, American Century, our financial services solution, and Sunbelt Health, our healthcare solution.
Creator Workflows, which helps businesses build their own applications, was exceptional in Q3 in 18 of our top 20 deals.
We're partnering with Stanley Black & Decker to bring ServiceNow's new manufacturing vertical solution with App Engine to change how they serve their customers.
Together, we're maximizing facility uptime and delivering great experiences for distributors, dealers and end consumers.
Fujitsu will also expand its use of the Now Platform to drive its own digital transformation.
We couldn't be prouder that Uber, Honeywell, Telia and many others all chose ServiceNow in Q3.
This is a complete performance for the company, strong growth across the Americas, EMEA, and Asia Pacific/Japan.
As we look to a strong finish in 2021 and beyond, here are a few of the many factors giving us great confidence in this business.
First, while lots of talent is raging out there, we're highly encouraged by the colleagues choosing ServiceNow in record numbers.
Our new joiners, together with our amazing global workforce, are building a uniquely inclusive, driven, and happy culture.
We're also seeing major developments in our partner ecosystem.
Just three weeks ago, we announced a new partnership with Celonis.
Celonis will deliver process mining insights, ServiceNow will build better workflows, our customers will gain from the integrated approach.
We also deepened our long-standing partnership with Microsoft.
ServiceNow's Employee Center can now be directly embedded in Microsoft Teams, reaching 250 million monthly users.
Together with our expanding partner community, we will reduce complexity to make work better for people.
Finally, innovation without disruption is a hallmark of our best-in-class engineering tradition.
When we say without disruption, we mean invisible, a seamless upgrade experience for our customers.
In our Now Platform Rome release, we delivered countless new features to customers, including Mobile App Builder, an Automation Discovery tool, Employee Journey Management and new Customer Service Playbooks.
Every business leader in the world is looking at the future of work.
These new features give the Now Platform even more capability to build that hybrid future.
I'll defer to a comment made by industry analyst Josh Bersin, who said on our Rome Platform release, "This company seems to be able to build and deploy enterprise software faster than almost any I've ever seen, and that's why they're a juggernaut".
Josh, naturally, I agree.
In closing, the company is firing on all cylinders.
The quarter speaks for itself.
We beat again, we raised again.
The secular tailwinds are at our back.
Our customer base is expanding just as our customer NPS is increasing.
Our partner ecosystem is fired up.
We accelerated our timeline to be net zero.
We help businesses drive their own ESG initiatives on our platform with a major release.
The list goes on and on.
Overall, our message to the market couldn't be any clearer.
Whatever systems, challenges or opportunities you have, however fast you need to move, you have a trusted innovator in ServiceNow.
We want to make the world work better for everyone, and we'll never lose our focus on the privilege that comes with saying, the world works with ServiceNow.
Gina, over to you.
Q3 was another fantastic quarter with continued outperformance across all of our growth and profitability guidance metrics.
Demand was strong globally across all three of our geos.
The consistency of our results quarter after quarter exemplifies the strength of our product portfolio and the team's focus on building deep customer relationships.
Q3 subscription revenues were $1.43 billion, $22 million above the high end of our guidance range and growing 31% year over year, inclusive of 100 basis points tailwind from FX.
RPO ended the quarter at approximately $9.7 billion, representing 34% year-over-year growth.
Current RPO was approximately $5 billion, representing 32% year-over-year growth and a 2-point beat versus our guidance.
Currency did not have an impact on year-over-year growth.
Q3 subscription billings were $1.38 billion, representing 28% year-over-year growth and a $55 million beat versus the high end of our guidance.
FX and duration were 150 basis points tailwind year over year.
We saw broad-based strength across the industries we serve, with transportation and logistics and business services seeing particularly robust net new ACV growth.
Our renewal rate was a healthy 98% in Q3, a testament to the value ServiceNow delivers to our customers.
We view our relationships with customers as long-term partnerships, and we continually innovate to provide new solutions to address their evolving business needs.
That land-and-expand motion has manifested into a base of 1,266 customers paying us over $1 million in ACV, up 25% year over year.
As the breadth of our portfolio and the addressable opportunities have expanded, so too have our deal sizes.
We closed 63 deals greater than $1 million net new ACV in the quarter, up over 50% year over year.
And in Q3, all of our top 20 deals included four or more products.
Operating margin was 26%, 3 points above our guidance, primarily driven by the strong revenue beat.
We also saw savings from the delay in return to work and lower travel.
Our free cash flow margin was 15%.
Together, these results show the power of our business model and our ability to drive a balance of growth and profitability.
We're delivering great experiences that drive powerful employee engagement, fierce customer loyalty, and significant productivity gains.
By delivering more intelligent automation that provides even better experiences, we are well-positioned as the workflow standard on our journey to becoming a $15 billion-plus revenue company.
We're raising our guidance for the full year.
We're raising our subscription revenue outlook by $32 million at the midpoint to a range of $5.565 billion to $5.57 billion, representing 30% year-over-year growth, including 200 basis points of FX tailwinds.
We are raising our subscription billings outlook by $61 million at the midpoint to a range of $6.379 billion to $6.384 billion, representing 28% year-over-year growth.
Excluding the early customer payments in 2020, our normalized subscription billings growth outlook would be 32% year over year at the midpoint.
Growth includes a net tailwind from FX and duration of 200 basis points.
We continue to expect 2021 subscription gross margin of 85%, and we're raising our full-year 2021 operating margin from 24.5% to 25%.
This reflects the increase in our top-line growth and savings from the delay in return to work and lower travel.
We're also raising our full-year 2021 free cash flow margin by 50 basis points from 31% to 31.5%.
And we expect diluted weighted average outstanding shares of 202 million.
For Q4, we expect subscription revenues between $1.515 billion and $1.52 billion, representing 28% year-over-year growth, including a negligible impact from FX.
We expect CRPO growth of 27% year over year.
This includes a 150-basis-point FX headwind due to sharp movements recently in the euro and pound.
On a constant currency basis, we expect CRPO growth to be 28.5%.
We expect subscription billings between $2.305 billion and $2.31 billion, representing 26% year-over-year growth.
Excluding the early customer payments in Q4 of 2020, our normalized subscription billings growth outlook would be 32% year over year at the midpoint.
Growth includes a net headwind from FX and duration of 50 basis points.
We expect an operating margin of 22%, which includes accelerated demand generation spend in the quarter to set us up for a strong start in 2022, and we expect 203 million diluted weighted outstanding shares for the quarter.
In summary, the pace of digital investment is accelerating, and ServiceNow is rising up to seize the opportunities before us.
The team has never been more engaged and focused on serving the enormous needs of our customers.
And as ServiceNow becomes the defining enterprise software company of the 21st century, we are also remaining steadfast in our goal to create positive impact in the world.
I'm happy to announce that in September, we committed to reaching our net-zero emissions goal by 2030, two decades earlier than our previous goal.
We've never been prouder of our employees and their continued focus on serving our customers, partners, and communities as we make not only work, work better but the world work better, too.
Our hungry and humble culture is stronger than ever.
And with that, I'll open it up for Q&A.
 Assistant:

Chosen response:
subscription revenues of $1,427 million in q3 2021, representing 31% year-over-year growth.
qtrly total revenues$1,512 million, up 31%.


Prompt:
Human: These statements involve a number of risks and uncertainties, including impacts from the pandemic and related governmental responses and their impact on the general economy, as well as other risks and uncertainties that are described in our filings with the SEC, including our most recent Form 10-K and Form 10-Q.
Also during the call, we will reference a number of non-GAAP financial measures.
The impact of foreign exchange rate changes subsequent to the end of the fourth quarter, interest rate increases differing from assumptions outlined in guidance, impact from the further spread of COVID-19 or other variants, and environmental and litigation charges.
It was a successful year across EnPro as we continue to rise to the occasion to meet the challenges and opportunities that have arisen over the past 12 months.
To begin, I will provide financial and strategic highlights for the full year, and then Milt will share details on our fourth quarter results.
2021 represented another transformational year at EnPro.
We continue to successfully reshape our portfolio and shift toward our growth markets with products and services that command higher margins and cash flow returns.
With the acquisition of NxEdge and the divestiture of CPI in December, as well as the divestiture of the polymer components business in the third quarter, we achieved meaningful strides in our portfolio reshaping strategy, which is positioning our company for a very promising future.
As volumes recovered from the 2020 pandemic lows, we saw positive momentum across the organization.
For the year, sales grew 6.3% to $1.14 billion.
Organic sales grew 14.4%.
We saw strong demand in most markets, including general industrial, semiconductor, heavy-duty truck, petrochemical, food and pharma, and aerospace.
Adjusted EBITDA of $208.4 million, increased by 23.8% compared to 2020.
Adjusted EBITDA margin of 18.3%, increased 260 basis points, driven primarily by organic sales increases.
Select product, select price actions, and the net benefit of strategic portfolio reshaping completed in both 2020 and 2021, partially offset by raw material inflation, as well as supply chain labor and logistics constraints.
As we said last quarter, we still expect raw material inflation and supply chain challenges to continue.
And we will see uncertainty and volatility in the macro environment as we enter 2022.
Our commercial and supply chain teams continue to evaluate all opportunities to mitigate these current circumstances, while meeting the needs of our customers in the Strong demand environment.
We are realizing the substantial benefits of our portfolio reshaping actions, which have enabled us to capture incremental margin expansion in 2021 while keeping a close eye on cost and further simplifying our already agile organization.
Our strong order trends continued during the fourth quarter and we are beginning 2022 with solid demand.
In particular, we continue to see broad-based strength across our businesses and are encouraged by what we are hearing from our customers, particularly in semiconductor, heavy-duty truck, aerospace, nuclear, and food and pharma markets.
As we look forward, we continue to invest both organically and inorganically in our Advanced Surface Technologies and Sealing Technologies segments, while driving cost and return improvements in the Engineered Materials segment.
We will build upon this core industrial technology foundation, now in place, maintaining our focus on margins and cash flow returns.
Further, we expect to maintain our strong recurring revenue streams with aftermarket revenue across our businesses approaching 50% of total company revenue.
Finally, we remain focused on driving long-term shareholder returns through a disciplined approach to capital allocation supported by our steady cash flows and also through our commitment to sustainability and diversity.
2022 marks our 20th year as an independent public company.
As I enter my first year as EnPro CEO, I marvel at how far we have come and could not be more excited for what the future will hold for all of our stakeholders.
I will now hand the call over to Milt for a deeper dive into our financial results for the fourth quarter.
We had another solid quarter despite the well-publicized headwinds we and many others faced.
As reported, sales of $280.8 million in the fourth quarter, increased 1.7% year over year.
We saw strong demand in the semiconductor, heavy-duty truck, aerospace, general industrial, and food and pharma markets, as well as contributions from the acquisitions of Alluxa and NxEdge, which were largely offset by the reduction in sales due to divestitures and weakness in the automotive market.
Organic sales for the fourth quarter increased 10.4% compared to the fourth quarter of 2020.
Adjusted EBITDA of $47.7 million, decreased 0.8% compared to the prior-year period.
Adjusted EBITDA was impacted by inflationary pressures affecting raw materials, freight and labor costs, and higher SG&A, more than offsetting pricing initiatives and the benefit of the reshaping actions completed in 2020 and 2021.
Corporate expenses of $26.9 million in the fourth quarter of 2021 were up from $10.6 million a year prior, driven primarily by acquisition-related expenses associated with the NxEdge transaction, as well as increased incentive compensation expenses, driven mainly by our fourth quarter share price performance.
Adjusted diluted earnings per share of $1.23 was essentially flat compared to the prior-year period.
Such amortization -- amortization of acquisition-related intangible assets in the fourth quarter was $12.7 million, compared to $10.9 million in the prior-year period, reflecting the additions of Alluxa and NxEdge.
Now, let's move to a discussion of segment performance for the fourth quarter of last year.
Due to the impact of divestitures, Sealing Technology sales of $143.9 million, decreased 7% versus the prior year.
Excluding the impact of divested businesses and foreign exchange translation, sales increased 12% versus the prior-year period, driven primarily by strong demand in heavy-duty truck, aerospace, nuclear, and food and pharma markets.
Also due to businesses divested in 2020 and 2021, adjusted segment EBITDA decreased 12.3% versus the prior-year period.
Excluding the impact of divestitures and foreign exchange translation, adjusted segment EBITDA increased 3% compared to the prior-year period.
Results in the quarter were also impacted by inflationary pressures affecting raw materials, labor and freight costs with such pressures concentrated in our trucking business.
These costs were offset by pricing initiatives and leverage on the organic volume increase in the segment.
Turning now to Advanced Surface Technologies.
Fourth quarter sales of $69.1 million, increased 38.5% versus the prior-year period, driven by strong demand in the semiconductor market and the acquisitions of Alluxa and NxEdge.
Excluding the impact of acquisitions and foreign exchange translation, sales increased 16.6% versus the prior-year period.
For the fourth quarter, adjusted segment EBITDA increased 35.7% versus the prior-year period, driven by the acquisitions and strong organic sales growth.
Excluding the impact of the acquisitions and foreign exchange translation, adjusted segment EBITDA increased 10.4% compared to the prior-year period.
The growth in EBITDA while strong was partially impacted by timing delays and the launch of advanced node chips.
Moving forward, our qualification and production work with semiconductor customers gives us confidence in the organic growth and profitability profile for our semi business, both in the coming year and over the long term.
In Engineered Materials, sales decreased 7.3% versus the prior-year period, driven by the divestitures of the GGB bushing block and CPI businesses.
For the quarter, sales to the automotive market were weak due to chip shortages affecting auto production, particularly in comparison to a strong auto market in the fourth quarter of 2020 that continued in the first half of 2021.
Excluding the impact of divestitures and foreign exchange translation, sales were flat.
Fourth quarter adjusted segment EBITDA decreased 21.9% versus the prior-year period, driven by raw material inflation and supply chain headwinds, as well as the decline in automotive production in Europe and the United States.
Excluding the impact of divestitures and foreign exchange translation, adjusted segment EBITDA decreased by a comparable amount around 20.2% compared to the prior-year period.
Turning to the balance sheet and cash flow.
We ended the fourth quarter with cash of $338.1 million, $310 million of which is located outside the United States.
We have initiated efforts to repatriate portions of this cash for use in debt reduction, where it makes sense to do so from a tax efficiency perspective.
At December 31, we had $213.6 million available for borrowing under our revolving credit facility.
Free cash flow in 2021 was $123.2 million, up from $39.3 million in the prior year, driven by higher operating profits and lower cash taxes resulting from a tax refund associated with a federal income tax audit resolution, partially offset by working capital investments supporting stronger demand.
During the fourth quarter, we paid a $0.27 per share quarterly dividend.
For the year, dividend payments totaled $22.4 million.
Our board of directors voted to increase our quarterly dividend to $0.28 per share effective with the March payment representing our 7th consecutive annual increase in our quarterly dividend since we began paying dividends in 2015.
Moving now to 2022 guidance.
Taking into consideration all the factors that we know at this time, we expect low double-digit revenue growth over reported 2021 sales of $1.14 billion and we expect adjusted EBITDA to be in the range of $263 million to $275 million, implying adjusted EBITDA margins north of 20%.
Further, we expect adjusted diluted earnings per share from continuing operations to be in the range of $6.70 to $7.25 using a normalized 27% tax rate, reduced from 30% last year.
The reduction in our normalized tax rate assumption for 2022 results from the portfolio actions completed late in 2021 which tilt our portfolio to a higher portion of earnings in the United States.
Our guidance assumes depreciation and amortization expense, excluding amortization of acquisition-related intangible assets of $37 million to $39 million and net interest expense of $30 million to $33 million.
Our net interest expense estimate factors in 425-basis-point increases in our variable borrowing rate as 2022 progresses.
Underlying demand and order trends remain strong as we enter 2022, even as inflationary raw material cost, the impact of the omicron variant on labor availability, and supply chain and logistics constraints that put early year pressure on growth and margins.
We will be implementing additional pricing actions across the company as the year progresses in response to inflationary headwinds.
Finally, I want to note that we continue to monitor the current COVID situation and will remain attentive to the safety and well-being of our colleagues, who have demonstrated great resilience in the face of the very challenging conditions over the past two years.
EnPro had a remarkable year.
I am proud of our team and our many accomplishments as we perceive and doing what we said we would do, execute on our multi-year strategy to transform EnPro into a leading industrial technology company, leaning into our best businesses, while investing in markets with faster growth, higher margins, and higher cash flow returns.
Our 2022 guidance implies adjusted EBITDA margins around 21%, up from the 14% in 2019 when we first began our portfolio reshaping strategy.
All the while remaining steadfast in our dual purpose of delivering outstanding financial results and enabling and supporting development of our colleagues and the communities in which we operate.
Our journey is just beginning.
We appreciate your interest in our company.
Now I'll open the line to questions.
 Assistant:

Chosen response:
compname reports q4 adjusted earnings per share of $1.23.
q4 adjusted earnings per share $1.23.
q4 sales rose 1.7 percent to $280.8 million.
introducing guidance for 2022: revenue growth in low double-digit range.
sees 2022 adjusted ebitda of $263 million to $275 million.
sees 2022 adjusted diluted earnings per share from continuing operations of $6.70 to $7.25.