OIL STATES INTERNATIONAL, INC. 2026 Q3 Earnings Call

Brian, please go ahead. Good morning, and welcome to Oil States Third Quarter 2026 Earnings Conference Call.

Our call today will be led by our President and CEO, Lloyd Hajdik, and Matt Autenrieth, Oil States Executive Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. No one should assume that these forward-looking statements remain valid later in the quarter or beyond. Any such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our 2025 Form 10-K and Form 10-K/A, along with other recent SEC filings. This call is being webcast and can be accessed through Oil States' website.

A replay of the conference call will be available 2 hours after the completion of this call and will continue to be available for 12 months. I will now turn the call over to Lloyd.

Thanks, Brian, and good morning, everyone. Thank you for joining our conference call today, where we will discuss our third quarter 2026 results and share our thoughts on the market trends, in addition to discussing our company-specific strategy and opportunities ahead as we finish the year. As we approach the end of 2026, our industry continues to be influenced by a combination of strengthening long-term fundamentals and ongoing near-term uncertainties. Crude oil prices remain elevated and volatile, driven largely by supply disruptions and inventory reductions resulting from the ongoing conflicts in the Middle East and Europe. The sustained disruption of access to Middle East exports has emphasized the global need for secure, reliable, and diversified energy supplies, and continues to strengthen the multi-year outlook for offshore and international investments, particularly in Brazil, Guyana, and across the Asia region.

While we remain cautious regarding the timing of a broader recovery in the Middle East, we believe the underlying investment drivers remain firmly intact. These favorable macro fundamentals are demonstrated by our continued backlog bookings momentum, with a year-to-date book-to-bill ratio of 1.2 times in our Offshore Manufactured Products segment. Given the higher commodity price environment, we believe operator spending in the U.S. should strengthen as well in 2027. During the third quarter, we generated revenues of $170 million and adjusted EBITDA of $20 million, up 8% and 6% sequentially, respectively. We are pleased that these results exceeded our guidance, with revenue growth led by our Offshore Manufactured Products and Downhole Technologies segments. We are encouraged by this progress and continue working to improve the profitability of our differentiated products and services.

72% of our consolidated revenues generated in the first nine months of 2026 were driven by offshore and international activity, which is a substantial increase from around 50% in 2023. This strategic shift in business mix has positioned Oil States well for sustained long-term growth. Our Offshore Manufactured Products segment generated sequential revenue growth and higher adjusted segment EBITDA, although project and service mix tempered margins. Production platform, military, and connector products, as well as higher service activity, provided positive uplift in the quarter. Backlog increased to its highest level in almost 12 years, totaling $482 million, supported by bookings of $135 million, which resulted in a quarterly book-to-bill ratio of 1.3 times. Our Completion and Production Services segment maintained a strong margin profile despite a modest sequential decrease in revenue. Changes in customer activity within the U.S. land markets in which we operate impacted quarterly results.

We are responding by closely monitoring costs and pursuing additional opportunities in both international and domestic markets. Third quarter adjusted segment EBITDA margin of 26% reflects the recent high-grading of our service lines that are now more concentrated on our proprietary Extended Reach Tools, Gulf of America service operations, and certain international markets. In our Downhole Technologies segment, revenue continued to improve, supported by stronger completion and perforating product sales. Revenue and adjusted segment EBITDA were both substantially higher than a year ago, reflecting significant progress achieved with our expanded product portfolio and higher U.S. activity levels. These improvements were achieved despite the significant headwinds faced in the current period associated with premium explosive powder availability and increased raw material costs. We believe that our focus on international growth, product design improvements, and inventory procurement plans should provide support for long-term revenue growth and margin expansion.

Looking ahead, we remain enthusiastic about prospects for our differentiated technologies, including our managed pressure drilling system. The booking of another MPD rental project during the quarter further reflects our continued momentum in customer adoption. We also see future subsea intervention opportunities that will support long-term growth with solutions that leverage our proven riser, connector, and pressure control capabilities for well maintenance, workover, and decommissioning applications. Further, deep sea mineral gathering system opportunities also continue to progress. With our strong backlog and extensive portfolio of differentiated technologies, Oil States is well-positioned to support our customers' evolving requirements. We will continue to invest selectively in technologies that improve performance, efficiency, and the reliability in increasingly complex operating environments. Matt will now review our operating results along with our financial position in more detail.

Thank you, Lloyd, and good morning, everyone. During the third quarter, as Lloyd mentioned, we generated revenues of $170 million and adjusted EBITDA of $20 million, representing sequential increases of 8% and 6% respectively. We reported net income of $3 million, or $0.05 per share, which included executive transition, facility exit, and other charges. Excluding these charges, our adjusted net income totaled $8 million, or $0.15 per share. Turning to segment performance. Our Offshore Manufactured Products segment generated revenues of $104 million and adjusted segment EBITDA of $19 million in the third quarter, resulting in an adjusted segment EBITDA margin of 18%. The modest decrease in margin sequentially was driven by a third quarter shift in revenue mix toward lower margin product and service offerings. We achieved a 1.3 times book-to-bill ratio in the quarter and 1.2 times year-to-date.

Our backlog totaled $482 million as of September 30th, an increase of 7% sequentially and 21% from a year ago. This is our highest reported level of backlog in almost 12 years. Our growing backlog continues to reflect a diversified mix of offshore and international energy projects, as well as military programs. Our Completion and Production Services segment generated $23 million in revenues and adjusted segment EBITDA of $6 million in the third quarter, resulting in an adjusted segment EBITDA margin of 26%. Revenue and adjusted segment EBITDA declined 5% and 7% sequentially due to changes in customer activity within our U.S. land-based operations. We continue to focus on growing our higher margin core service lines, both domestically and abroad. In our Downhole Technologies segment, we generated revenues of $42 million and adjusted segment EBITDA of $4 million.

Third quarter revenues increased 6% sequentially, with growth across all major product categories. As further evidence of sales momentum within the segment, revenues reached the highest level since the first quarter of 2023. The sequential adjusted segment EBITDA comparison was impacted by a non-recurring tariff refund benefit recognized in the prior quarter and a shift in sales mix. Input costs for our shaped charges remained elevated, particularly the cost of tungsten, explosive powders, and copper. During the first nine months of 2026, we invested $38 million in inventory purchases necessary to support the execution of our growing backlog, as well as strategic longer-term inventory purchases to support increasing demand for our downhole consumable product lines. We invested $10 million in capital expenditures year-to-date to support our growth and generated proceeds of $13 million from asset sales.

Our remaining $14 million in assets held for sale will continue to be monetized, with timing subject to market conditions and transaction completion. Across the first three quarters of the year, we put a new cash flow-based credit facility in place, retired the balance of our outstanding convertible senior notes, and maintained a net cash position. Our strong balance sheet and ample liquidity continued to provide us with the flexibility to make accretive investments while returning capital to our stockholders. During the first nine months of 2026, we purchased $9 million of our common stock. With the expiration of our prior share repurchase authorization on October 24th, our board of directors approved a new $50 million two-year share repurchase authorization yesterday that runs through October of 2028. Now, Lloyd will offer some market outlook and concluding comments.

Thanks, Matt. As we look ahead, we are encouraged by this quarter's progress, growing our backlog and continuing positive customer engagement while exceeding our market guidance. Our priorities include growing our order book, converting existing backlog into profitable revenue through reliable delivery, and efficiently executing across our core businesses. The broader energy backdrop continues to support our strategic vision. We believe offshore and international markets offer an attractive multi-year opportunity, even as activity varies across regions. Our strategy remains clear: strengthen the core, scale differentiated customer-backed growth platforms, and pursue selective acquisitions that fill technology gaps, while also returning cash to stockholders through opportunistic share repurchases. Cash conversion, returns on invested capital, and balance sheet flexibility govern each of these priorities.