Mergers and Acquisitions - The merger between Innovex Downhole Solutions, Inc. and Dril-Quip, Inc. was completed on September 6, 2024, resulting in Legacy Innovex becoming a wholly owned subsidiary of Dril-Quip, with a conversion ratio of 2.0125 shares of Company Common Stock for each share of Legacy Innovex Common Stock [22]. - Innovex acquired 80% of Downhole Well Solutions, LLC for an aggregate purchase price of $75.1 million in cash and 1,918,558 shares of Company Common Stock on November 29, 2024 [23]. - Innovex maintains a disciplined acquisition strategy, viewing acquisitions as a core competency, as evidenced by the merger with Dril-Quip and the acquisition of DWS [32]. Market Overview - The total addressable market (TAM) for Innovex's products in 2023 was estimated at $4.5 billion, which increased to $8.3 billion in 2024 post-merger, with $3.6 billion in NAM and $4.7 billion in International & Offshore markets [25]. - In 2024, approximately 55% of Innovex's revenue came from the NAM market, while 45% was generated from International and Offshore markets [26]. - Pro forma revenue for Innovex in the NAM market in 2024 was approximately $491 million, implying a market share of 13% [41]. - In the International and Offshore markets, Innovex generated approximately $548 million in revenue in 2024, resulting in a market share of approximately 12% [43]. Revenue Sources - Innovex's revenue sources in 2024 included approximately 80% from product sales, 8% from rental tools, and 12% from services [35]. Research and Development - The company has a strong focus on research and development, with an engineering team dedicated to ongoing product enhancements and new technology development [44]. - As of December 31, 2024, Innovex held approximately 829 U.S. and international patents, covering its inventions related to products and technologies [51]. Customer Base - As of December 31, 2024, the company had 1,376 unique active customers, a decrease from 1,485 in 2023, with the top ten accounts contributing 35% of revenue [58]. - The company’s top customers include major national and international oil companies, indicating a strong market position [58]. Operations and Workforce - The company operates manufacturing facilities in multiple locations, including Texas, Scotland, Singapore, Brazil, Canada, Vietnam, and Saudi Arabia, to support global operations [60]. - The company had a total of 2,683 employees as of December 31, 2024, with a strong focus on employee health, safety, and well-being [67]. - The company is focused on innovation and attracting top talent, promoting a culture that supports employee engagement and development [66]. Regulatory Environment - The company is subject to various environmental regulations, which may increase operational costs and affect financial performance [69]. - The company is committed to maintaining compliance with air emissions regulations and holds all necessary permits for operations [73]. - The company anticipates that regulatory measures related to climate change could impact demand and prices for fossil fuels [76]. - The Infrastructure Investment and Jobs Act and the Inflation Reduction Act (IRA) contain billions in incentives for renewable energy and clean technologies, potentially impacting demand for oil and natural gas [77]. - The IRA imposes a methane emissions charge starting at $900 per ton in 2024, increasing to $1,500 per ton by 2026, which could raise customers' operating costs [77]. - The Bureau of Ocean Energy Management estimates that $6.9 billion in new financial assurance will be required from offshore leaseholders under new regulations [85]. - Regulatory changes may lead to increased costs for customers, potentially reducing their demand for products and services [79]. - Increased regulation on hydraulic fracturing could adversely affect demand for the company's products and services [84]. Financial Risks - The company is substantially dependent on the oil and natural gas industry, with exploration and production activities directly affected by oil and gas price trends [64]. - The company is exposed to commodity price risk due to fluctuations in oil and natural gas prices, impacting drilling and completion activity levels [358]. - As of December 31, 2024, the company had variable rate debt of $11.4 million under the Term Loan and $14.0 million under the Revolver, exposing it to interest rate risk [360]. - Environmental activism and divestment initiatives could limit access to capital for companies engaged in fossil fuel extraction [80]. - The company relies on customer indemnifications and third-party insurance as part of its risk mitigation strategy, which may not always be sufficient [89]. - The company does not engage in material hedging transactions, leaving it exposed to market risks inherent in its operations [91].
Innovex International, Inc.(INVX) - 2024 Q4 - Annual Report