Innovex International, Inc. Q2 FY2026 earnings call

Core Quarterly Performance

• Delivered total revenue and adjusted EBITDA at the high end of management's prior guidance ranges, with 20% adjusted EBITDA margin and $30 million in free cash flow, representing 63% conversion of adjusted EBITDA to free cash flow. Capital expenditures totaled $7 million (2.7% of revenue), in line with the company's 2-3% of revenue target. Ended the quarter with $222 million in cash and no outstanding bank debt. Return on capital employed (ROCE) for the 12 months ended June 30 2026 was 12%, with a long-term target of high-teens ROCE.

Acquisition Strategy and Recent Deal

• Completed the $95 million acquisition of TCO Group on July 1 2026, paid via $65 million cash and $30 million InnoVEX common stock. TCO owns differentiated consumable laminated glass plug technology for downhole well barriers that can be opened without intervention, reducing customer cost, time and risk, and requires minimal sustaining capital.
• TCO strengthens InnoVEX's position in Norway and the UAE, two high-potential long-term markets, and fits the company's 'big impact, small ticket' acquisition framework. The M&A pipeline remains robust, with a mix of smaller bolt-on opportunities and larger strategic transactions, and management will maintain discipline to only pursue deals that meet strict return criteria.

Commercial and Operational Milestones

• Subsea Segment: Secured a $20 million subsea tension riser package for a Malaysian operator (with expected follow-on wellhead orders), completed the first successful multi-year qualified XPAC expandable liner hanger trial with a major Asia Pacific operator, and completed the first combined installation of the new Argo Latch subsea release plug and XPAC system in Brazil, demonstrating the value of post-merger integration capabilities.
• International Markets: Q2 2026 completion activity in Mexico already exceeded full-year 2025 total activity; the Canadian wellhead team completed its first surface wellhead delivery to Mexico, marking a key milestone for the company's regional wellhead strategy. In Saudi Arabia, InnoVEX gained market share in expandable liner hanger technology, grew its presence in unconventional applications, and secured its first direct contract via the local InnoVEX Saudi entity. Increased customer engagement and quotation activity is seen in Venezuela, with no meaningful revenue recognized to date.

In the second quarter of 2026, InnoVEX reported total revenue of $245 million, up 2% sequentially and 9% year-over-year. Adjusted EBITDA was $48 million, with a 20% adjusted EBITDA margin.

1. NAM Land: Revenue was $131 million, which accounts for 53.5% of total Q2 2026 revenue, representing a 4% sequential decrease. The sequential decline was attributed to seasonally lower activity in Canada.
2. International and Offshore: Revenue was $113 million, which accounts for 46.1% of total Q2 2026 revenue, representing an 11% sequential increase driven by broad strength across international markets, partially offset by normal project timing variability in the offshore segment. Newly acquired TCO Group, which closed on July 1 2026, is expected to contribute $15 million in revenue and $3 million in adjusted EBITDA to Q3 2026 results.

• For the third quarter of 2026, management set revenue guidance of $260 million to $270 million and adjusted EBITDA guidance of $51 million to $57 million. This guidance includes a conservative projection of $15 million in TCO revenue and $3 million in TCO adjusted EBITDA.
• Management expects sequential growth in Q3 2026 for both U.S. land (driven by rising rig counts) and Canadian onshore activity, after the seasonal Q2 2026 decline.
• The company maintains a long-term target of reaching high-teens return on capital employed (ROCE) via margin expansion, high-return M&A, and shareholder return programs.
• Factors that could push results to the high end of the Q3 2026 guidance range include earlier-than-expected delivery of TCO projects and a resolution to the Middle East conflict that reduces elevated logistics costs.

• Quarter-to-quarter revenue variability in the international and offshore segment caused by uneven project timing, which impacts near-term results visibility.
• Elevated logistics and freight costs tied to the ongoing Middle East conflict, which added $1.5 million in incremental costs in Q2 2026 and is expected to continue pressuring margins in Q3 2026.
• Geographic market entry requires regulatory and technical qualification timelines that delay revenue generation, particularly in underpenetrated markets like Norway.
• U.S. land onshore market activity remains dependent on customer rig count trends that are difficult to predict beyond the near term.

Q: What is InnoVEX's strategy for growing its Canadian wellhead business, including international expansion and potential U.S. entry? / A: InnoVEX already holds a leading market share position in Canada, with consistent growing share in the thermal well segment. Near-term priority is growing international opportunities, starting with Mexico, where the company has existing customer relationships and a strong technical fit. A large scale push into the U.S. land market is not planned in the near term, though the company will slowly evaluate opportunities over the next several years leveraging its existing distribution network.

Q: How has customer behavior changed in the offshore space, and what is the outlook for conversion of the current pipeline through 2026 and 2027? / A: Management reports a robust offshore pipeline, with $60-80 million in awarded Asian projects that will begin generating meaningful revenue in 2027. A strong pipeline of additional awards, in the U.S. Gulf of Mexico and other international markets, is expected to convert over the next six months. The combination of DrillQuip inherited technology, more aggressive commercial strategy, and improving market momentum is expected to drive market share gains in the segment.

Q: How is InnoVEX's organic base business growing relative to overall end market trends, after multiple acquisitions? / A: On a pro forma basis that combines all completed acquisitions, InnoVEX's underlying base business is up slightly year-over-year even while broader global activity has declined over the past two years. This consistent outperformance confirms the company is gaining market share, not just growing via acquisitions. InnoVEX's customer-centric 'No Barriers' culture, which focuses on solving customer technical and commercial problems, has driven consistent market share growth for a decade, and the company aims to become a top-ranked player in all its product lines across international markets.

Q: What cross-selling opportunities exist for the newly acquired TCO Group across InnoVEX's existing platform? / A: A key immediate opportunity is entering the Brazil market, where TCO's technology has a strong product fit but the firm had no meaningful historical presence. InnoVEX is already the leading provider of subsea wellheads in Brazil to the same customer base, allowing for immediate synergistic go-to-market collaboration. TCO also strengthens InnoVEX's positions in Norway (a currently underpenetrated market for InnoVEX) and the UAE, while InnoVEX will help expand TCO into the Saudi Arabian market.