HMH Holding, Inc. Q2 FY2026 earnings call

• Overall Quarterly Performance
  • Q2 revenue saw choppiness in product orders and repair intake, but underlying business fundamentals remain strong
  • The company delivered year-over-year expansion in adjusted EBITDA margins, maintained disciplined cost control, and generated healthy commercial activity across all markets
• Demand and Product Trends
  • Order momentum for digital technology upgrades remained robust during the quarter, supporting future revenue growth
  • Offshore drilling market conditions are evolving favorably: contracting activity is improving, customers are securing longer-duration awards, and most rigs winning new contracts are equipped with HMH technologies
  • Oil and gas operators are increasingly focused on upgrading equipment, adopting automation, digital solutions, and next-generation technologies, which are core value-added areas for HMH
• Strategic Positioning
  • HMH's strong customer relationships and differentiated technology/service offerings underpin its market position
  • Management confirmed 2027 contracted rig years visibility has improved to 80%, up from 65% year-over-year, and contracted rig years for the first seven months of 2026 are 50% higher than the same period in 2025

No detailed financial performance data for individual product segments, including absolute revenue values and revenue contribution percentages, was disclosed in this earning call transcript. Only general high-level performance trends are referenced.

• Full-year 2026 adjusted EBITDA guidance is maintained at $157 million to $177 million, with expected performance improvement in the second half of 2026
• Capital expenditures (excluding development costs) are expected to equal 2% of 2026 revenue
• Management expects market acceleration to continue through the second half of 2026 and into 2027, and expects HMH to capture emerging market opportunities

• Ongoing geopolitical instability in the Middle East has caused discrete installation, commissioning, and order delays, creating a $10 million revenue headwind in Q2
• Some customer upgrade and reactivation spending has been delayed as operators wait for geopolitical uncertainty to resolve
• The remaining 20% gap in 2027 contracted rig years visibility carries both upside and downside risk, though downside risk has narrowed as new contracts are secured

Q: With 2027 contracted rig year visibility improved to 80% from 65% a year ago, what is the outlook for closing the remaining 20% gap, and what are the upside and downside risks for hitting 2027 rig year estimates? / A: The overall 2027 rig year forecast remains unchanged from six months ago, but there is now greater certainty around the forecast. Both upside and downside risk remain, though downside risk has narrowed following recent contract wins, and the company is ahead of where it would be at this point in past cycle recoveries. Contracted rig years for the first seven months of 2026 are 50% higher than the same period in 2025, supporting expectations for 2027 growth.

Q: Given the expected order inflection in the second half and Q2 revenue miss, are delays tied to Middle East geopolitics, and what clearing event should we watch for the inflection? / A: Persistent geopolitical tension in the Middle East caused $10 million in discrete Q2 revenue headwind from installation and order delays, which lasted longer than management expected. Digital orders have accelerated even amid this uncertainty, but many short-cycle reactivation and upgrade projects are delayed as operators wait for geopolitical conditions to stabilize before moving forward with spending.

Q: Will the $10 million in delayed Q2 revenue from the Middle East be recovered in future periods, and when can we expect these delayed activities to resume? / A: All of the delayed revenue is expected to be fully recoverable and will shift to later periods. Installation and commissioning activities will resume once the geopolitical situation resolves, as some required equipment is currently stuck in transit. Some new order delays may extend beyond 2026 as customers work through disrupted plans and rebuild infrastructure.