Oil States International(OIS) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Reported revenues for Q2 2023 were $184 million, adjusted consolidated EBITDA was $19 million, and net income was $1 million or $0.01 per share, marking the fourth consecutive quarter of positive net income [5][3] - Revenues and adjusted EBITDA increased year-over-year but declined sequentially by 6% and 11% respectively due to timing of activities in U.S. shale basins and delays in project conversions [3][11] - Backlog totaled $338 million at June 30, an increase of 40% from June 30, 2022, representing the highest backlog level since Q4 2015 [6][8] Business Line Data and Key Metrics Changes - Offshore/Manufactured Products segment generated revenues of $94 million with an EBITDA margin of 17%, a slight increase from 16.2% in Q1 [14] - Well Site Services segment reported revenues of $65 million and an EBITDA margin of 18%, down from 20% in Q1, primarily due to project delays [15] - Downhole Technologies segment had revenues of $25 million, an operating loss of $3 million, and an EBITDA of $2 million, affected by reduced customer demand [16] Market Data and Key Metrics Changes - Activity in the Gulf of Mexico was impacted by third-party intervention vessels being temporarily out of service, but international operations showed improvement due to higher customer activity [7][11] - The U.S. land activities have softened, but there are indications of a potential bottoming out in the market [28][39] Company Strategy and Development Direction - The company remains focused on optimizing operations and pursuing profitable activities in both U.S. and international markets, with an emphasis on technology leadership and value-added services [29][33] - The investment cycle is expected to extend beyond the next couple of years, supported by backlog growth and new product introductions [12][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing recovery in offshore and international drilling, despite challenges in U.S. shale basins [3][11] - The company anticipates continued growth in the Offshore/Manufactured Products segment in the second half of 2023, driven by strong order flow and backlog [40][41] Other Important Information - The company generated strong cash flow from operations of $45 million in Q2 and repaid all amounts outstanding under its revolving credit facility, maintaining a strong financial position with cash on hand of $42 million [12][8] - Capital expenditures for 2023 are expected to be approximately $28 million, depending on market conditions [8] Q&A Session All Questions and Answers Question: What is the outlook for margin progression in the Offshore/Manufactured Products business? - Management indicated that margins are expected to improve in the second half of the year, supported by backlog development and a favorable mix of projects [34] Question: Are there any signs of a bottoming out in the market? - Management noted that while there has been a softening in U.S. land activities, customer conversations suggest that there is not a further decline expected from current levels [37] Question: How will the company address the challenges faced in the second quarter? - Management acknowledged that the challenges were largely timing-related and expressed confidence in recovering margins as operations normalize and backlog is converted into revenue [38]