Innovex International (NYSE:DRQ) Q4 2025 Earnings call February 24, 2026 09:00 AM ET Company ParticipantsAdam Anderson - CEOEric Wells - Chief of StaffJosh Jayne - Managing DirectorKeith Beckmann - Vice President of Equity ResearchKendal Reed - CFOConference Call ParticipantsDerek Podhaizer - Director and Senior Research AnalystDon Crist - Senior Research AnalystEddie Kim - Equity Research AnalystOperatorGood morning, welcome to Innovex's fourth quarter 2025 earnings call. At this time, all participants are ...

Market Overview - The equity market has shown resilience despite recent selling pressure, with the S&P 500 near all-time highs and the equal-weighted S&P up 6-8% year-to-date [3][4] - There is a broad bull market, but certain sectors have been heavily impacted, particularly those exposed to AI disruptions [2][3] Sector Performance - Technology stocks are experiencing mixed sentiments, with some positive outlooks for companies like Palantir and Apple, especially with upcoming product launches [4][5] - Sectors such as oil field services, copper mining, and chemicals are performing well, indicating that not all sectors are equally affected by AI advancements [7] International Markets - Japan's market is performing strongly, with significant interest in Japanese equities due to corporate governance reforms and fiscal policies [14][17] - China continues to export disinflation, with expectations of 2-4% deflation in real estate, which may help keep global inflation in check [12] Cryptocurrency and Commodities - Bitcoin ETFs have seen significant outflows of $5.8 billion, while Abu Dhabi has invested $1 billion, indicating a divergence in market sentiment [19][20] - Gold is viewed as a safe haven amid deflationary pressures, with expectations that it may rise above $5,000 again [21][23] Small Cap Stocks - Small cap stocks are performing well, with the Russell 2000 index showing positive trends despite broader market concerns [26][27] - Wisdom Tree emphasizes the importance of small caps in their investment strategy, highlighting their historical performance and growth [25][27]

Core Insights - Magnolia Oil & Gas Corporation (MGY) reported a fourth-quarter 2025 net profit of 37 cents per share, exceeding the Zacks Consensus Estimate of 36 cents, although it decreased from 49 cents in the same quarter last year [1] - The company's total revenues were $318 million, surpassing the Zacks Consensus Estimate of $312 million, but down 2.7% from $327 million in the previous year due to lower oil and natural gas liquids revenues [2] Revenue Breakdown - Revenues from oil amounted to $215.6 million, a 12.5% decrease from $246.5 million in the year-ago quarter, but slightly above the consensus estimate of $215 million [3] - Natural gas revenues increased significantly to $52.9 million from $28.4 million year-over-year, beating the consensus estimate of $49.6 million [3] - Natural gas liquids revenues were $49.1 million, down from $51.7 million in the previous year, but above the consensus estimate of $47.4 million [3] Cash Flow and Dividends - The company generated $208.4 million in net cash from operating activities and achieved a free cash flow of $74.7 million [4] - Magnolia declared a cash dividend of 16.5 cents per share for Class A Common stock and 15 cents per Class B unit, marking a 10% increase in the quarterly dividend rate, resulting in an annualized dividend of 66 cents per share [4] Share Repurchase and Returns - In the fourth quarter, Magnolia repurchased 2.4 million Class A Common shares for $53.4 million and increased its share repurchase authorization by an additional 10 million shares, totaling 12.9 million shares remaining for repurchase [5] - The company returned 110% of free cash flow to shareholders through dividends and buybacks [5] Production and Prices - Average daily total output was 103,799 barrels of oil equivalent per day (boe/d), an 11.5% increase from 93,096 boe/d in the year-ago quarter, exceeding the Zacks Consensus Estimate of 101,173 boe/d [6] - Oil volumes were 40,730 barrels per day (bpd), up 4.9% from the previous year, surpassing the estimate of 40,262 bpd [6] - Natural gas volumes reached 196,618 thousand cubic feet per day (Mcf/d), a 17.7% increase from the previous year, exceeding the estimate of 192,400 Mcf/d [7] - The average realized crude oil price was $57.54 per barrel, a 16.6% decrease from $69.01 in the year-ago period [7] Price Realizations - The average realized natural gas price was $2.92 per Mcf, significantly up from $1.85 year-over-year, beating the estimate of $2.83 [9] - The average realized natural gas liquids price was $17.63 per barrel, down 17.1% from the previous year, missing the estimate of $18 [9] - The average sales price was $33.26 per boe compared to $38.13 a year ago [9] Financial Position - As of December 31, 2025, Magnolia had cash and cash equivalents of $266.8 million and long-term debt of $393.2 million, resulting in a debt-to-capitalization ratio of 16.8% [10] - The company spent $116.5 million on its capital program in the reported quarter, with operating expenses increasing to $223.5 million from $202.5 million in the previous year [10] Guidance - For Q1 2026, Magnolia expects D&C capital spending to be about $125 million, with total production estimated at roughly 102 Mboe/d [11] - For the full year of 2026, total D&C capital spending is estimated to range between $440 million and $480 million, supporting approximately 5% total production growth [12]

Core Insights - Helmerich & Payne, Inc. (HP) reported a first-quarter fiscal 2026 adjusted net loss of 15 cents per share, significantly missing the Zacks Consensus Estimate of adjusted net income of 12 cents, and a sharp decline from the previous year's profit of 71 cents due to weakness in the North America Solutions segment and a non-cash impairment charge of $103 million [1][9] Financial Performance - Operating revenues reached $1 billion, surpassing the Zacks Consensus Estimate of $986 million, with Drilling Services sales increasing by 50.2% year-over-year [2][9] - The company distributed approximately $25 million to shareholders as part of its ongoing dividend program [2] Segment Performance - **North America Solutions**: Operating revenues were $563.9 million, down 5.7% year-over-year, with an operating profit of $36.2 million, significantly lower than the prior year's $152.2 million due to a one-time impairment of $98 million [4] - **International Solutions**: Operating revenues surged 393.4% to $234.3 million, but the operating loss widened to $55.3 million compared to a loss of $14.5 million in the prior year [5] - **Offshore Solutions**: Revenues increased 554.6% to $188.3 million, with an operating profit of $16.4 million, although it missed the estimate of $20.3 million [6] Debt and Financial Position - As of the end of January, HP repaid $260 million of its existing $400 million term loan, expecting to repay the entire loan by the end of the third quarter of fiscal 2026 [3] - The company had $247.2 million in cash and cash equivalents, with long-term debt totaling $2 billion and a debt-to-capitalization ratio of 42.8% [7] Guidance - For the second quarter of fiscal 2026, North America Solutions is projected to deliver direct margins between $205 million and $230 million, while International Solutions is expected to generate direct margins of $12 million to $22 million [8][10]

1Q'2026 Results February 4, 2026 Forward-Looking Statements This presentation includes "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this presentation, including, without limitation outlook for fiscal 2026, the Company's business strategy, future financia ...

Financial Data and Key Metrics Changes - Fourth quarter 2025 revenue was $138.3 million, up 3% compared to Q3 2025 and up 7% year-over-year [13] - Full year 2025 revenue was $526.5 million, slightly up year-over-year, driven by growth in service revenue [13] - Operating margins in reservoir description for Q4 2025 were 14%, expanding sequentially by 60 basis points [8] - Net income ex items for Q4 was $9.7 million, down 5% sequentially and down 7% year-over-year [24] - Earnings per diluted share ex items for Q4 was $0.21, compared to $0.22 in the prior quarter [24] Business Line Data and Key Metrics Changes - Reservoir description revenue for Q4 was $92.3 million, up over 5% compared to Q3 [41] - Production enhancement revenue for Q4 was $46 million, up over 8% year-over-year [45] - Operating income for reservoir description was $12.7 million, yielding operating margins of 14% [41] - Operating income for production enhancement was $3 million, yielding operating margins of 7%, down from 11% in Q3 [46] Market Data and Key Metrics Changes - Strong international demand for proprietary technologies helped offset a seasonally soft US land market [6] - Demand for laboratory services tied to crude oil was negatively impacted by geopolitical conflicts and sanctions [8] - U.S. land completion activity is expected to decline in the first half of 2026 compared to the same period in 2025 [32] Company Strategy and Development Direction - Core Laboratories continues to execute its strategic plan focused on technology investments to solve client problems and capitalize on opportunities [6] - The company aims to maximize free cash flow, return on invested capital, and return excess free cash to shareholders [11] - Core Lab plans to introduce new product and service offerings in key geographic markets while maintaining a strong balance sheet [10] Management's Comments on Operating Environment and Future Outlook - Management maintains a constructive multiyear outlook despite near-term economic headwinds and commodity price volatility [36] - The IEA forecasts global crude oil demand growth of approximately 900,000-1.4 million barrels per day in 2026 [30] - Geopolitical conflicts and evolving trade dynamics continue to create uncertainty in demand for Core Lab's products and services [32] Other Important Information - The company returned free cash to shareholders through dividends and share repurchases, repurchasing over 363,000 shares in Q4 [9] - Core Lab's operational leverage allows for revenue and profitability growth with minimal capital requirements [28] - The company expects capital expenditures in 2026 to be in the range of $15 million-$18 million, primarily targeted at growth opportunities [28] Q&A Session Summary Question: Comments on Venezuela's market potential - Management noted a long history in Venezuela and the potential to monetize legacy data if operators return [56] Question: Update on Middle East operations - Management confirmed expanded lab capabilities in Saudi Arabia and ongoing engagement with Aramco [59] Question: Future cash flow and debt management - Management indicated a mix of using free cash flow for share buybacks and debt reduction, with a focus on maintaining a comfortable leverage ratio [62]

Core Insights - Companies like Halliburton and SLB have become lean and efficient due to years of discipline [1] Group 1 - Halliburton has implemented strategies that enhance operational efficiency [1] - SLB has also focused on streamlining processes to improve profitability [1] - The trend towards efficiency in these companies reflects broader industry practices [1]

Market Overview - Asian shares have mostly advanced, influenced by Wall Street's performance following US President Trump's decision to retract tariffs on eight European countries regarding Greenland [1][4] - The S&P 500 and Dow Jones Industrial Average futures showed minimal changes, indicating a stable market outlook [1] Regional Performance - Tokyo's Nikkei 225 increased by 1.7% to 53,688.89, driven by technology stocks, with SoftBank Group rising 11.6% and Disco Corp. soaring 17.1% [2] - South Korea's Kospi closed 0.9% higher at 4,952.44, marking a significant milestone by crossing the 5,000 mark for the first time [2] - Technology stocks in South Korea saw gains, with SK Hynix up 2% and Samsung Electronics up 1.9% [3] - The S&P/ASX 200 in Australia gained nearly 0.8% to 8,848.70, while Taiwan's Taiex rose 1.6% and India's Sensex added 0.2% [3] US Market Reaction - US markets experienced their largest losses since October due to Trump's initial tariff threats, which raised concerns about US-European relations [4] - Following Trump's reversal on the Greenland issue, the S&P 500, Dow Jones Industrial Average, and Nasdaq composite all rose by 1.2% [6] Company-Specific Developments - Halliburton's stock jumped 4.1% after reporting stronger-than-expected quarterly profits [7] - United Airlines shares rose 2.2% following better-than-expected quarterly results, while Netflix fell 2.2% despite reporting stronger profits due to concerns over subscriber growth [7] Commodity and Currency Movements - The price of gold fell 0.2% to $4,828.70 per ounce, reflecting reduced investor anxiety [8] - US Treasury yields eased, with the 10-year Treasury yield dropping to 4.25% from 4.30% [8] - The US dollar strengthened against the Japanese yen, rising to 158.75 from 158.27, while the euro increased to $1.1692 from $1.1687 [9]

Market Overview - The U.S. stock market rebounded after President Trump announced a potential deal regarding Greenland and the cancellation of threatened tariffs on several European countries [1][2] - The S&P 500 increased by 1.2%, recovering over half of its previous day's 2.1% drop, while the Dow Jones Industrial Average rose by 588 points (1.2%) and the Nasdaq composite also climbed by 1.2% [2][8] Treasury and Currency Movements - Treasury yields eased, indicating reduced investor concerns, with the 10-year Treasury yield dropping to 4.25% from 4.30% [3][9] - The U.S. dollar regained some value against other currencies after a decline the previous day [3] Company Performance - Halliburton's stock rose by 4.1% following a stronger-than-expected quarterly profit [6] - United Airlines shares increased by 2.2% after reporting better-than-expected profits and indicating strong revenue momentum into 2026 [6] - Netflix's stock fell by 2.2% despite reporting a stronger profit than anticipated, as investors were concerned about slowing subscriber growth and a lower profit forecast [7] - Kraft Heinz shares dropped by 5.7% after Berkshire Hathaway indicated it might sell its stake in the company [7][8] Market Sentiment and Historical Context - Trump's acknowledgment of the stock market's previous decline due to his Greenland ambitions suggests a pattern where his threats lead to market volatility, followed by a recovery through subsequent deals [4][5] - The "TACO" acronym reflects the market's expectation that Trump may backtrack on aggressive financial threats if they provoke strong market reactions [5]

Market Reaction - The stock market rebounded significantly after President Trump's announcement regarding a potential deal about Greenland and the decision not to impose tariffs on several European countries, with the Dow Jones Industrial Average rising 1.2% (nearly 600 points) to 49,072, the S&P 500 gaining 1.1%, and the Nasdaq advancing over 250 points (1.2%) [1][2][10] Company Performance - Halliburton's stock increased by 2.9% following a stronger-than-expected profit report for the latest quarter [8] - United Airlines saw a 2.7% rise in its stock price after reporting better-than-expected profits for the end of 2025, with CEO Scott Kirby indicating strong revenue momentum continuing into 2026 [8] - Conversely, Netflix's stock dropped by 2.9% despite reporting a stronger profit than anticipated, as investors were concerned about slowing subscriber growth and a lower-than-expected profit forecast for the current quarter [9] - Kraft Heinz's stock fell by 6.3% after Berkshire Hathaway indicated it might sell its 325 million shares in the company [11]