Oceaneering (OII) Q1 2026 Earnings Transcript

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Date

Thursday, April 23, 2026 at 11 a.m. ET

Call participants

• Chief Executive Officer — Roderick A. Larson
• Senior Vice President and Chief Financial Officer — Michael L. Sumruld

Takeaways

• Revenue -- $692 million, up 3%, with year-over-year gains in Subsea Robotics (SSR), Manufactured Products, and Aerospace and Defense Technologies (AdTech).
• Operating income -- $57.8 million, down 21%, primarily due to comparison against a record Offshore Projects Group (OPG) result in the prior year.
• Net income -- $36 million, or $0.36 per share, representing a 28% decline.
• Adjusted EBITDA -- $83.7 million, down 13%, reflecting lower OPG contribution and impacts across several segments.
• Order intake -- Approximately $1 billion, one of the highest quarterly intakes since 2020, resulting in a constructive book-to-bill ratio.
• SSR awards -- Approximately $300 million booked, including contracts with terms extending up to five years, increasing long-term revenue visibility.
• Ocean Intervention II utilization -- Secured multiple survey contracts to keep the vessel highly utilized for the next three quarters, demonstrating adoption of simultaneous operations capabilities.
• AdTech contract wins -- Added about $175 million in new awards and contract increases, with increased volumes in both Oceaneering Technologies (OTEC) and Marine Services Division (MSD).
• Negative free cash flow -- $(76.5) million, marking a $30 million improvement due to better working capital and lower organic capital expenditures ($17.4 million spent, 54% for growth, 46% for maintenance).
• Liquidity -- $607 million cash plus $215 million undrawn revolver, totaling $822 million at quarter-end.
• No share repurchases -- No activity this quarter, attributed to heightened market volatility tied to the Middle East conflict and share price swings.
• SSR operating income -- $55.5 million, down 7%, despite higher revenue; EBITDA margin at 32%, with ROV utilization falling to 61% and revenue per ROV day utilized increasing from $10,788 to $12,401 due to improved pricing and one-time items.
• ROV fleet -- 250 systems in service, with a 58% market share on contracted floating rigs (83 of 143 rigs as of March 31, 2026).
• Manufactured Products backlog -- $492 million, down $51 million, with a book-to-bill ratio of 0.91, and management citing healthy pipeline and anticipated backlog rebuild.
• Manufactured Products operating income -- $26.1 million, or 18% of revenue, up 37% excluding a one-time $10.4 million charge in 2025, supported by rotator valves and higher-margin backlog execution.
• OPG performance -- Revenue at $135 million and operating income at $18 million (14% margin), impacted by seasonally lower activity versus the prior year's exceptional quarter.
• IMDS results -- Decreased revenue and margins, with stable Middle East results after an initial benefit from new contracts, but subsequent activity decline due to regional conflict.
• AdTech operating income and margin -- Both declined due to a net $5.5 million accrual for a contract dispute, but underlying revenue rose on higher OTEC and MSD volumes.
• Guidance -- Q2 revenue expected to increase sequentially, with EBITDA forecast at $100 million to $110 million, and full-year EBITDA range reaffirmed at $390 million to $440 million; full-year organic revenue growth in the low- to mid-single-digit percentage range.

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Risks

• AdTech recognized a net $5.5 million accrual for a contract dispute, with management stating it impacts operating income and margin for the segment.
• IMDS activity levels in the Middle East remain uncertain due to "conflict and associated activity decline," with management noting future activity may be contingent on evolving geopolitical conditions.
• Free cash flow remained negative at $(76.5) million, despite quarter-over-quarter improvement, highlighting ongoing near-term cash outflows tied to incentive compensation and elevated receivables.
• No share repurchases were made due to market volatility from the Middle East conflict, with management stating a need to remain "cautious about when we choose to do so and find those opportunistic moments."

Summary

Oceaneering International (NYSE:OII) delivered consolidated results aligned with prior guidance, supported by record-level order intake and strong contributions from SSR and AdTech segments. The company emphasized a shift toward longer-tenor SSR contracts extending through 2031, suggesting increased visibility into multi-year utilization rates. Management stated that new survey contracts and technology advancements, especially around the Ocean Intervention II and Momentum ROV platform, are driving customer adoption of simultaneous and autonomous operations. Full-year guidance was reaffirmed, with anticipated revenue and EBITDA growth dependent on seasonal factors, energy market recovery in the second half, and evolving conditions in the Middle East.

• The company cited customer inquiries for increased OpEx-oriented vessel work, and noted that deferred Middle East IMDS activity could create a "bow wave" of demand if geopolitical conditions stabilize.
• Management indicated the SSR revenue per day utilized will decline from the first quarter's level as non-recurring items normalize, but average rates are expected to remain above 2025 levels.
• The AdTech segment's multiyear U.S. Navy submarine rescue system delivery reflects complex program execution and supports ongoing growth in high-value government contracts.
• Rotator valves within Manufactured Products secured the largest-ever contract in that product line, reinforcing management's confidence in backlog recovery and segment performance for the year.

Industry glossary

• ROV (Remotely Operated Vehicle): Underwater robot controlled from the surface and used for subsea inspection, construction, and intervention activities in offshore energy operations.
• Book-to-bill ratio: A metric comparing new customer orders to revenue recognized in the same period, used to assess demand and backlog pipeline strength.
• IMR (Inspection, Maintenance, and Repair): Offshore services focused on the ongoing assessment and servicing of subsea infrastructure and equipment.
• SSR (Subsea Robotics): Segment specializing in deepwater robotics solutions, including ROVs and associated tools for energy and industrial clients.
• AdTech (Aerospace and Defense Technologies): Business unit that provides engineering, manufacturing, and technical services to defense and aerospace customers.
• OTEC (Oceaneering Technologies): Subdivision within AdTech responsible for specialized engineering and technology contracts, particularly for government clients.
• MSD (Marine Services Division): Subdivision within AdTech delivering submarine maintenance, naval repair, and related marine services.

Full Conference Call Transcript

Roderick A. Larson: Good morning, and thanks for joining the call today. I am pleased with our first quarter results, which reinforce our confidence in the year ahead. We generated consolidated revenue and adjusted EBITDA consistent with our guidance, and drove strong commercial momentum, capturing new awards and extensions across the portfolio. At the segment level, Aerospace and Defense Technologies, or AdTech, posted significant year-over-year revenue growth as expected, indicating steady demand across our defense portfolio. Despite softer energy sector activity, Subsea Robotics, or SSR, and Manufactured Products both delivered year-over-year increases in revenue, demonstrating the resilience of our portfolio. Overall, this positions us well to deliver on our full-year guidance.

Importantly, we further solidified our outlook with a strong first quarter order intake of approximately $1 billion, one of the healthiest intakes since 2020, which resulted in a constructive first quarter book-to-bill ratio. SSR awards totaled approximately $300 million, including projects extending to 2031, which improves our visibility into utilization levels across the next several years. In addition, we secured multiple survey contracts for the Ocean Intervention II that will keep the vessel highly utilized for the next three quarters and showcase its range of capabilities, including simultaneous operations. AdTech added approximately $175 million in new contract awards, exercised options, and increases to existing contract values. We also progressed on the technology front.

As we shared on our last earnings call, we formally introduced Momentum, our next-generation electric work-class ROV, which delivers improvements in supervised autonomy, endurance, and reliability. We expect to mobilize it on one of our U.S. Gulf vessels during the second quarter. We continue to develop our autonomous systems portfolio, including our Freedom platform. One commercial unit is currently operating in West Africa, and we are moving towards testing and customer demonstration of a specialized Freedom vehicle for the Defense Innovation Unit, or DIU, which reinforces our position as a provider of dual-use technology in the energy and growing defense markets. In AdTech, we delivered the U.S.

Navy's Submarine Rescue Diving and Recompression System following a multiyear complex rebuild and recertification of this globally deployable mission-critical capability. Beyond our subsea markets, I am very proud of the support we provided to NASA's Artemis program and the safety of its astronauts, applying decades of deep-sea harsh environment experience to the unique demands of space. The successful launch and return of Artemis II showcased this work, incorporating our advanced products and technologies. We value NASA's trust in us. Alongside these milestones, we are always navigating an evolving geopolitical environment. Let me address the impact of the Middle East conflict on Oceaneering International, Inc. before Michael gets into our detailed financial results.

First and foremost, the safety of Oceaneers is our top priority, and all in the region are accounted for and safe. We have enacted established protocols, are in frequent contact with our teams in the region, and are taking necessary precautions to safeguard our people and property. Operationally, we have experienced intermittent disruption during this period, though the consolidated financial impact has thus far been modest. Integrity Management and Digital Solutions, or IMDS, has the greatest exposure in the region and has therefore been the most affected. We are coordinating closely with our customers and partners to manage these impacts and are monitoring conditions closely.

With that context, I will turn the call over to Michael to summarize our first quarter results, and then I will be back to provide our outlook for the second quarter and full year of 2026. Michael?

Michael Sumruld: Thanks, Roderick, and good morning. Let me share our first quarter 2026 consolidated financial results. Overall, results were in line with the guidance we provided last quarter. As expected, we saw lower activity in our energy portfolio and significant improvement for AdTech. Compared to 2025, revenue was $692 million, representing a 3% improvement, with year-over-year revenue increases in SSR, Manufactured Products, and AdTech. Operating income was $57.8 million, down 21%. Net income was $36 million, or $0.36 per share, down 28%, and adjusted EBITDA was $83.7 million, down 13%. The consolidated year-over-year comparisons are materially impacted by the record first quarter that our Offshore Projects Group, or OPG, delivered last year. Turning to our cash flow and liquidity.

We utilized $59.1 million of cash for operating activities, largely for payment of performance-based incentive compensation and increased customer receivables. We invested $17.4 million in organic capital expenditures, with approximately 54% allocated to growth and 46% allocated to maintenance. This resulted in negative free cash flow of $76.5 million, an improvement of $30 million compared to 2025. We ended the quarter with a cash balance of $607 million and $215 million available under our secured revolving credit facility, resulting in total liquidity of $822 million. Since we are discussing liquidity, let me address our share repurchase activity. We remain committed to an opportunistic and disciplined approach.

Given the heightened market volatility tied to the Middle East conflict and the resulting swings in our share price, we chose not to repurchase shares in the first quarter. We will evaluate share repurchases as the year progresses, as returning capital to our shareholders continues to be an important component of our capital deployment strategy. Now let us look at our business operations by segment for 2026 as compared to 2025. SSR operating income of $55.5 million was down 7% on higher revenue. Average ROV revenue per day utilized increased from $10,788 to $12,401, driven by improved pricing and discrete first quarter items that boosted ROV revenue and are not expected to repeat.

Specifically, we mobilized ROV systems for upcoming projects, which contributed revenue without associated ROV days utilized. We also completed a discrete cost-reimbursement scope of work that contributed revenue with minimal margin. Looking ahead, we expect full-year 2026 average ROV revenue per day utilized to exceed $20.25, but we do not expect to maintain the first quarter rate. SSR EBITDA margin declined to 32%, driven primarily by lower ROV utilization, which decreased to 61% as activity softened in both drill support and vessel services. We also saw our geographic mix shift somewhat to lower profitability regions as expected.

We incurred costs to prepare the Ocean Intervention II for operations and continue to invest in the Freedom vehicle ahead of upcoming defense customer trials. We expect SSR margins to rebound in the second quarter as utilization increases in ROV and survey. For the quarter, revenue split between the ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was unchanged from 2025 at 79% and 21%, respectively. ROV days utilized in favor of drill support was 67%, while vessel-based services were 33%, compared to 62% and 38%, respectively, in 2025. As of 03/31/2026, we had ROV contracts on 83 of the 143 floating rigs under contract, or 58% market share.

We maintained our fleet count of 250 ROV systems. Turning to Manufactured Products. Revenue increased 6%. Operating income was $26.1 million, or 18% of revenue, which is up 37% excluding the $10.4 million theme park ride reserve taken in 2025. Revenue results benefited from the receipt of steel tubes but at no margin, while operating income improved on continued execution of higher-margin backlog and strong performance from our rotator valves business. Our backlog was $492 million on March 31, 2026, down $51 million from 2025. Our book-to-bill ratio of 0.91 was similar to the same period last year. We have seen backlog decline over the past two quarters largely due to the timing of awards.

While this segment is a lumpy, project-based business where backlog can change meaningfully from quarter to quarter, we have not seen a change in underlying demand. Our sales pipeline is healthy with a robust level of tendering activity and substantial opportunity value, and we expect to rebuild backlog in the coming quarters as projects move to award. OPG's results decreased as activity returned to more typical seasonal levels compared to a record first quarter last year, which included higher vessel utilization and a better service mix in the U.S. Gulf and international locations. Revenue was $135 million and operating income was $18 million, resulting in a 14% margin.

Favorable project mix partially offset the lower activity, supported by installation work and continued execution on an international intervention project. IMDS revenue, operating income, and margin decreased due to lower activity in West Africa and Australia, the latter of which was the result of our decision to exit a low-margin contract. We entered 2026 expecting growth in the Middle East based on several recent contract awards and initially realized some of these benefits as the year started. However, the Middle East conflict and associated activity decline led to regional results that were essentially flat compared to the first quarter last year.

AdTech revenue increased to $131 million, reflecting higher volumes in our Oceaneering Technologies, or OTEC, and Marine Services Division, or MSD, business lines. In OTEC, growth was primarily tied to the large contract awarded in 2025, which is progressing on schedule. MSD results improved due to increased volume in submarine maintenance and repair work, and an increase in dry deck shelter overhauls. Operating income and margin decreased primarily due to a net $5.5 million accrual related to the expected resolution of a previously disclosed contract dispute. While the agreement remains subject to final approval, we expect that it will resolve the matter, reduce uncertainty, and enable the team to focus on program execution and continued customer support.

We anticipate settling our obligation over the life of the associated multiyear contract. Our unallocated expenses of $49.3 million were consistent with our expectations for the quarter and increased year over year due to a combination of wage inflation, foreign exchange impacts, and increased IT costs. I will turn the call back to Roderick to discuss our outlook for 2026.

Roderick A. Larson: Thanks, Michael. We expect to build on our first quarter results with sequential improvement. The quarter is shaping up as planned to support our guidance, even though we expect our consolidated results to be down year over year. On a consolidated basis, we expect our revenue to increase and EBITDA to be in the range of $100 million to $110 million. Comparing our second quarter 2026 to 2025 by segment, for SSR, we expect increased revenue and flat operating income due to changes in geographic mix and increased survey activity. As previously communicated, we anticipate an improving geographic mix and higher utilization in 2026. For Manufactured Products, we expect revenue and operating income to both increase by a mid-single-digit percentage.

For OPG, we expect flat revenue and decreased operating income with modestly lower vessel utilization in the U.S. and West Africa and a project mix shift to lower-margin inspection, maintenance, and repair, or IMR, work. For IMDS, we expect revenue and operating income to decrease due to lower activity in West Africa and Australia. Middle East activity remains uncertain and will depend on how regional conditions evolve. For AdTech, we expect significantly higher revenue and higher operating income. We project unallocated expenses to be approximately $50 million as wage inflation, foreign exchange impact, and increased IT costs are expected to persist. Returning to our 2026 outlook, our full-year plan is progressing as expected despite the uncertainty in the Middle East.

We anticipate an acceleration in energy market activity in the second half of the year, with the potential to add incremental work in our OpEx-oriented workstreams earlier. Against that backdrop, we are reaffirming our consolidated guidance ranges of low- to mid-single-digit revenue growth and EBITDA of $390 million to $440 million. Comparing our full year 2026 to 2025 by operating segment, for SSR, we continue to forecast low- to mid-single-digit percentage revenue growth. Average ROV revenue per day utilized is expected to increase slightly compared to our 2025 average.

We anticipate that our ROV fleet utilization will be in the mid-60% range with higher activity levels during the second and third quarters, and that we will maintain our drill support market share in the 55% to 60% range. Tooling and survey results are expected to increase with improved utilization of the Ocean Intervention II based on recent contract wins. For the year, SSR EBITDA margins are forecasted to be in the mid-30% range. For Manufactured Products, we expect higher operating income on slightly lower revenue, with operating income margins to range in the mid-teens. We expect high absorption in our umbilicals plants and a strong year from rotator products, which recently won its largest-ever contract.

Based on our current sales funnel, which indicates that backlog will build in the second and third quarters, we forecast the book-to-bill ratio will be in the range of 0.9 to 1.0 for the full year. For OPG, we expect lower revenue and significantly lower operating income, with margins to range in the mid-teens. This reflects our forecast for lower-margin IMR work in the U.S. Gulf and lower activity in West Africa, which we expect will be partially offset by ongoing intervention work in the Caspian and an upcoming installation project in North Africa. For IMDS, despite the recent drop in Middle East activity, we continue to forecast revenue growth supported by demand for our digital and engineering services.

Operating income is still expected to increase, but by less than we previously anticipated, with margins in the mid-single-digit range. For AdTech, operating income is expected to increase on significantly higher revenue, with margins in the low teens. Demand for our OTEC and MSD services should increase, and recent government actions have provided funding consistency across our larger programs, giving us increased confidence in our outlook for 2026 and beyond. In summary, while conditions remain fluid, our outlook for the second quarter and full year of 2026 is unchanged.

We are confident in our ability to deliver, supported by our first quarter order intake and our sales funnel for the rest of the year, the visibility provided by our consolidated backlog, the breadth of the geographies and end markets we serve, the flexibility provided by our healthy balance sheet, and the commitment of Oceaneers worldwide. We appreciate everyone's continued interest in Oceaneering International, Inc., and we will now be happy to take your questions.

Operator: We will now open the call for questions. Please press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Your first question comes from Eddie Kim with Barclays. Your line is open.

Eddie Kim: Hi. Good morning. The SSR awards of $300 million you booked in the quarter was a big number. Just curious how much of it was secured before or after the Iran conflict. And just broadly, as the Iran conflict and the resulting increase in oil prices we have seen, has that increased customer inbounds for more ROVs and even other parts of your business?

Roderick A. Larson: I would characterize it this way, Eddie. I think you would be hard pressed to try to see an inflection point or anything in the orders. Everything was kind of underway anyway, so not a big thing. I will call out this, though. One of the things that is interesting about the orders is when you think about whether this is a near-term or a long-term effect on oil prices, we had an increase in longer-term contracts. We averaged above one year for the contracts that were awarded, and we had some out to five years. I think the longer term says that there is more than just a blip going on here.

Eddie Kim: Got it. And sticking on SSR, your ROVs full-year utilization, you maintained that in the mid-60% range, even though first quarter was a little bit low at 61%. Obviously, you expect utilization to increase the remainder of the year. What gives you that confidence? Is it just more offshore rigs going to work in the back part of the year, or something else?

Roderick A. Larson: Yes, and definitely the back half helps, but also the biggest part is the seasonality. We do get busier on vessels, especially in the second and third quarters. So we have that going on, plus some of these contracts that I just talked about will pick up in the fourth quarter. We will have some mobilizations in there as well.

Eddie Kim: And if I could just squeeze one more in. The AdTech contract dispute impact in the first quarter seems like, on EBITDA, maybe it was a couple million dollars. And then how much would you say is the Iran war impact? Is that another couple million? And is that going to linger into second quarter, which I assume is embedded in your second quarter guide? Just curious on both sides.

Roderick A. Larson: Eddie, I do not think Iran affected the results on that. What I would say is I think it did help us clear up funding. We mentioned that the funding came through and people made sure that the programs continue. It was more about just making sure the funding was in place than it was about any activity directly related to Iran.

Michael Sumruld: And the overall impact on our EBITDA was a net $5.5 million, just when you are building out your model.

Eddie Kim: Got it. Understood. Great. Thanks for all that color. I will turn it back.

Operator: Your next question comes from Keith Beckmann with Pickering Energy Partners. Your line is open.

Keith Beckmann: Good morning. I wanted to dig into the ROV pricing discussion a little bit more. Obviously, it was up in 1Q pretty significantly. You talked about some items that may not be repeatable. Is the 4Q 2025 exit rate on revenue kind of the right way to think about things going forward, given some of the earlier impacts that you mentioned? Or anything on pricing on that front?

Roderick A. Larson: I think revenue per day, yes, it is a good starting point. We are still expecting to average higher year over year. As we said, there were some one-offs that topped up revenue but did not have much of an effect on EBITDA. Some of those things fall back, and then we go back to a more normal continuous improvement of the day rate.

Keith Beckmann: Thanks. And then the second question is around the lower profitability depending on working in certain regions. Can you outline maybe higher profitability versus lower profitability regions a little bit?

Roderick A. Larson: Sure. What we have referenced before in the fourth quarter call and here is the geographic mix for SSR. Typically, what we see—although not bad, and we have seen improvement over the last year—the margins in the North Sea and Brazil tend to trail the Gulf of Mexico and West Africa. We see that mix shift towards those lower-margin locations in the first part of this year. I think we are seeing that come to fruition, but based on line of sight, we think that shift is going to move back towards the Gulf of Mexico as we move into the latter part of the year. The second thing to watch is the mix of work.

The IMR work tends to be less differentiated, which means it is not as high margin as, say, the well remediation, light well intervention, or construction work. As we get more of that work, we start to see the margins go up. We could potentially see more of that intervention work with everything going on.

Keith Beckmann: Appreciate it. If I could slide one more in. You brought up no share repurchase activity this quarter. Is there a chance that there could be a change in how you are thinking about deploying capital, given maybe energy security risks create opportunities that could be there, maybe not in the immediate term? Thoughts on capital deployment—if CapEx and returns there could be a better way to utilize capital?

Roderick A. Larson: You are thinking about it the right way. We have always said organic growth, potential inorganic growth that we think is really good, and then return to shareholders. As those things become more attractive, one of the things I would tell you is, as we do this work with AdTech and we are prime on projects now, we are starting to see people that we work with who look really good as potentially being part of Oceaneering International, Inc. The more work we do, the more we see those opportunities. If we have an opportunity to deploy capital that way, we would definitely redirect.

Michael Sumruld: And I think it is fair to say that we feel like we have the capital necessary to return some to shareholders. We just need to be cautious about when we choose to do so and find those opportunistic moments. It was just such a challenge in the first quarter, with the stock swinging too much either direction in our opinion.

Keith Beckmann: Awesome. I really appreciate you taking my questions, and I will turn it back.

Operator: Your next question comes from Josh Jain with Daniel Energy Partners. Your line is open.

Josh Jain: Morning. Thanks for taking my questions. First question for me: it sounds like you are anticipating some incremental spending on OpEx items later in 2026 and into 2027. Maybe just some incremental color would be great, and perhaps weave in some of the sense of urgency from customers given what has happened over the last eight weeks.

Roderick A. Larson: It is two different stories. First, we talked a little bit earlier about the increased oil price. That puts more money in customers' pockets and also improves the economics on well intervention, workovers, and well remediation. We have already seen customers start to ask about vessel availability during the season—second and third quarters. Some of that could come in quickly; we could pull some of that into the second quarter, but it could definitely fall into this year. The other side is, if we see some resolution of the conflict in the Middle East, all those facilities that are close to the action are going to have to be looked at before they start up.

We think there could actually be a bow wave coming on Middle East IMDS activity, which would have us scrambling to put resources there to check things out so they can start up the plants and refineries. Those are the two fronts we are watching carefully. And on the latter, the couple of contracts that we won earlier this year and at the end of last year that started up before the activity declined due to what happened bode well for us moving into the latter part of this year if that additional activity shows up. It was a great time for us to improve our footprint there.

Josh Jain: Understood. Thanks. And then my second one: you mentioned the Ocean Intervention II. From the commentary, it sounds like the opportunities are accelerating for simultaneous operations. Could you talk a bit more about the scope of work and how eager your customers are to book an asset like this today versus where you were maybe six to nine months ago?

Roderick A. Larson: Absolutely. For us, the exciting part is it has given us a chance to flex a little on the autonomous and remote operations side. When we talk about simultaneous operations, we are talking about operating the ASV—the autonomous surface vessel that we bought—that we are doing surveys with, along with doing the towed sonars and other things off the Ocean Intervention II and other systems we deploy from the vessel. It is the ability to almost do the work of two boats at once, using lower-cost, more efficient technology, and customers are really getting excited about it. Especially when we go into remote areas where there are not as many assets available, that tends to be pretty exciting.

We did some trial work here in the Gulf, and we hope to get outside the Gulf and do some work as well.

Operator: This concludes the question and answer session. I will turn the call to Roderick A. Larson for closing remarks.

Roderick A. Larson: Since there are no more questions, I will wrap up by thanking everybody for joining the call. This concludes our first quarter 2026 conference call. Have a great day.

Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.

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