Oil States International(US:OIS)2023-10-27 19:09Part I Financial Statements For the nine months ended September 30, 2023, Oil States International reported a net income of $6.9 million, a significant turnaround from a net loss of $12.4 million in the same period of 2022, driven by a 7% increase in revenues to $574.0 million, with total assets of $1.05 billion and strong operating cash flow of $52.4 million | Financial Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $574,017 | $535,272 | | Operating Income (Loss) | $15,334 | $(368) | | Net Income (Loss) | $6,928 | $(12,425) | | Diluted EPS | $0.11 | $(0.20) | | Balance Sheet Item | As of Sep 30, 2023 (in thousands) | As of Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $52,904 | $42,018 | | Total Assets | $1,048,020 | $1,064,392 | | Total Liabilities | $349,656 | $374,834 | | Total Stockholders' Equity | $698,364 | $689,558 | | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $52,377 | $18,993 | | Net Cash used in Investing Activities | $(19,116) | $(19,345) | | Net Cash used in Financing Activities | $(22,705) | $(17,896) | Management's Discussion and Analysis (MD&A) Management attributes the improved financial performance in 2023 to increased customer capital investments and internal cost controls, with the Offshore/Manufactured Products segment benefiting from growth in international offshore projects and a strong liquidity position maintained with $52.9 million in cash and $84.5 million available under its ABL facility Business Overview and Outlook The company's business is cyclical and dependent on oil and gas industry activity, with the Offshore/Manufactured Products segment's backlog growing to $348 million, while U.S. land-based segments are affected by a lower U.S. rig count - The Offshore/Manufactured Products segment backlog increased to $348 million as of September 30, 2023, up from $308 million at the end of 2022 and $258 million a year prior91 - Bookings for the Offshore/Manufactured Products segment were strong, with a book-to-bill ratio of 1.2x for both Q3 2023 and year-to-date91 - The average U.S. rig count declined to 649 in Q3 2023 from 761 in Q3 2022, impacting demand for completion-related products and services95 Results of Operations In Q3 2023, consolidated revenues rose 3% year-over-year to $194.3 million, while net income nearly doubled to $4.2 million, with the Offshore/Manufactured Products segment driving growth and offsetting declines in Downhole Technologies | Metric (Q3 2023 vs Q3 2022) | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $194,289 | $189,394 | +3% | | Operating Income | $6,190 | $5,058 | +22% | | Net Income | $4,212 | $2,143 | +96% | | Metric (9M 2023 vs 9M 2022) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $574,017 | $535,272 | +7% | | Operating Income (Loss) | $15,334 | $(368) | N/A | | Net Income (Loss) | $6,928 | $(12,425) | N/A | - Q3 2023 results included $1.6 million in facility consolidation charges, while Q3 2022 results included a $6.1 million gain from a litigation settlement106 Segment Operating Results For Q3 2023, the Offshore/Manufactured Products segment's revenue grew 16% YoY to $111.0 million, with operating income increasing to $17.8 million, while Downhole Technologies' revenue fell 29% to $23.4 million, resulting in an operating loss of $4.1 million - Offshore/Manufactured Products: Q3 revenue increased 16% YoY to $111.0 million, driven by backlog conversion and higher service sales, with operating income growing to $17.8 million despite a $1.6 million consolidation charge120121 - Well Site Services: Q3 revenue decreased 1% YoY to $59.9 million, but operating income improved from $2.4 million to $3.3 million due to a favorable service mix123124 - Downhole Technologies: Q3 revenue declined 29% YoY to $23.4 million due to lower U.S. customer activity, leading to an operating loss of $4.1 million compared to a $0.3 million loss in Q3 2022125126 Liquidity and Capital Resources The company's liquidity remains strong, with cash increasing to $52.9 million at quarter-end, year-to-date operating cash flow of $52.4 million, and no borrowings under the ABL facility, which had $84.5 million of availability - Cash and cash equivalents increased to $52.9 million as of September 30, 2023, from $42.0 million at December 31, 2022160 - In February 2023, the company repaid the outstanding $17.3 million principal of its 1.50% convertible senior notes due 2023169 - As of September 30, 2023, the company had $84.5 million available to be drawn under its ABL Facility and was in compliance with all debt covenants46166 - A new $25.0 million stock repurchase program was authorized in February 2023, with $3.0 million used for repurchases during the first nine months of the year163 Quantitative and Qualitative Disclosures About Market Risk The company's main market risks are interest rate fluctuations on its ABL facility and foreign currency exchange rate volatility, with no outstanding floating-rate borrowings and an accumulated other comprehensive loss of $77.3 million from international operations - The primary market risks are exposure to changes in interest rates and foreign currency exchange rates175 - Interest rate risk is tied to the ABL Facility, which had no floating-rate obligations outstanding as of September 30, 2023176 - Foreign currency exchange rate risk from international operations resulted in an accumulated other comprehensive loss of $77.3 million as of September 30, 2023178 Controls and Procedures Based on management's evaluation, the company's disclosure controls and procedures were deemed effective as of September 30, 2023, despite internal control modifications due to an ERP system migration in the Downhole Technologies segment - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023179 - Internal controls were modified for an ERP system migration in the Downhole Technologies segment, which was not considered a material change180 Part II Risk Factors The company updated its risk factors to include a new material risk related to adverse developments in the financial services industry, highlighting potential impacts from events like bank failures or market liquidity problems on its access to funds, financing, and customer/supplier stability - A new risk factor was added concerning adverse developments in the financial services industry, such as liquidity issues or bank failures185 - Potential impacts include delayed access to deposits, inability to secure credit, and breach of contractual obligations188 Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2023, the company did not repurchase any equity securities, with approximately $22.0 million remaining available under the $25.0 million share repurchase program authorized in February 2023 - No shares were repurchased during the three-month period ended September 30, 2023189 - As of September 30, 2023, $22.0 million remained available for share repurchases under the current authorization which extends through February 2025190189