Oil States International, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Geopolitical instability, lower crude oil prices, and fluctuating U.S. trade policies presented challenges, but offshore and international markets showed resilience.
• The company achieved the midpoint of its guided EBITDA range for Q2 2025 due to its product and service mix.
• 72% of consolidated revenues came from offshore and international projects, a significant shift from prior periods.
• The Offshore/Manufactured Products segment delivered strong performance with 15% sequential revenue growth and 18% adjusted segment EBITDA growth, and backlog reached $363 million.
• Completion and Production Services and Downhole Technologies segments saw sequential revenue declines primarily due to reduced U.S. land-based activity.
• Cash flow from operations grew 61% sequentially, and $8 million of free cash flow was generated, used for stock repurchases and note retirements.
• Capital expenditures were elevated due to construction of a new manufacturing facility in Batam, Indonesia, and low-impact workover equipment production.
• The company received a 2025 Meritorious Engineering Award for its low-impact workover package.

Segment Performance

• Offshore/Manufactured Products: Generated revenues of $107 million and adjusted segment EBITDA of $21 million in the second quarter, contributing approximately 64.85% of the company's $165 million consolidated revenue.
• Completion and Production Services: Recorded revenues of $29 million and adjusted segment EBITDA of $8 million, accounting for about 17.58% of consolidated revenue.
• Downhole Technologies: Generated revenues of $29 million and $1 million of adjusted segment EBITDA, making up approximately 17.58% of consolidated revenue.

Guidance

• Maintained full-year EBITDA guidance in the range of $88 million to $93 million.
• Updated revenue guidance to $685 million to $700 million due to streamlining U.S. land operations.
• Third-quarter guidance: revenues between $165 million and $170 million, EBITDA between $21 million and $23 million.
• Full-year cash flow from operations expected to be between $65 million and $75 million.
• CapEx guided to approximately $30 million, driven by the Batam facility completion and specific equipment production for customer contracts.

Risks

• Geopolitical Instability: Unstable geopolitical conditions can impact business operations.
• Lower Crude Oil Prices: Affects U.S. land-based drilling and completion activity.
• Fluctuating U.S. Trade Policies: Tariffs, particularly on the perforating side of the Downhole Technologies segment, may have modest cost implications.
• Sustained U.S. Land Activity Decline: Continued reduction in U.S. land-based drilling and completion activity impacts certain segments.

Question and Answer

• Q: Jim Rollyson asks about offshore project track and tariff impacts A: Cindy Taylor notes offshore projects are multiyear and not derailed by short-term macroeconomic issues; Lloyd Hajdik mentions minimal tariff impact on most operations but minor on the Downhole Technologies perforating side.
• Q: Pat Quellette inquires about revenue mix normalization A: Cindy Taylor explains the breakdown of the 28% land base mix, with half from Downhole Technologies and a smaller portion from U.S. land-driven service activity.
• Q: John Daniel asks about U.S. land business breakdown and competitor dynamics A: Cindy Taylor discusses exiting commoditized product lines and market consolidation in the U.S. land-based market.
• Q: Chuck Minervino asks about Q4 revenue step-up and Completion and Production segment decline A: Cindy Taylor attributes Q4 revenue step-up to the Offshore/Manufactured Products segment's backlog build; explains Completion and Production segment decline due to exiting marginal commoditized operations.
• Q: Stephen Gengaro asks about offshore order flow and margin outlook A: Cindy Taylor and Lloyd Hajdik discuss strong year-to-date order flow and margin expectations in the Offshore/Manufactured Products segment, expecting margins to accrete to 21%-22% over time.