Oil States (OIS) Q4 2025 Earnings Call Transcript

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DATE

Friday, February 20, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Cynthia B. Taylor
• Executive Vice President, Chief Financial Officer, and Treasurer — Lloyd A. Hajdik

TAKEAWAYS

• Consolidated Revenues -- $178 million, up 8% sequentially and year over year, reflecting increased offshore and international business mix.
• Adjusted Consolidated EBITDA -- $23 million, representing a 9% sequential increase, at the top of management’s prior guidance range.
• Net Loss -- $117 million, or $2.04 per share, primarily from $112 million in noncash impairments and restructuring charges in the Downhole Technologies segment.
• Adjusted Net Income -- $8 million, or $0.13 per share, excluding the impact of noncash impairments and restructuring.
• Cash Flow From Operations -- $50 million for the quarter, up 63% sequentially, enabling retirement of $50 million of outstanding convertible senior notes.
• Year-End Net Cash Position -- Cash on hand exceeded total debt by $15 million at year-end following debt repayments.
• Segment Revenue Mix -- Offshore and international markets comprised 77% of revenues, up from 72% in the prior-year period, after exiting underperforming U.S. land-based operations.
• Offshore Manufactured Products (OMP) Segment -- $123 million in revenues and $25 million in adjusted segment EBITDA with a 20% margin; backlog reached $435 million, the highest since March 2015, and a quarterly book-to-bill of 1.3 times.
• Completion and Production Services (CPS) Segment -- $23 million in revenues and $7 million in adjusted segment EBITDA, with margins expanded to 32% from 29% sequentially, aided by restructuring.
• Downhole Technologies Segment -- $32 million in revenues, up 11% sequentially, and adjusted segment EBITDA of $1.3 million; $112 million in noncash impairment charges due to writing down older product technologies and acquired intangibles.
• Free Cash Flow (Full Year) -- $94 million, up 92% year over year, exceeding full-year guidance.
• Shares Repurchased -- $17 million in common stock repurchased during the year, equating to approximately 5% of shares outstanding at the start of the year.
• Credit Facilities -- New four-year credit agreement signed after year-end, providing up to $75 million revolver and $50 million multi-draw term loan, replacing previous asset-based arrangement.
• 2026 Guidance -- Full-year revenues expected between $680 million and $700 million and EBITDA in the $90 million to $95 million range.
• First Quarter 2026 Guidance -- Revenues to range $150 million to $155 million, EBITDA expected at $18 million to $19 million.
• 2026 Cash Flow from Operations -- $60 million to $65 million expected, lower than 2025 due to anticipated working capital build.
• 2026 CapEx Plans -- $20 million to $25 million targeted for capital expenditures.

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RISKS

• Downhole Technologies segment recorded $112 million in noncash long-lived asset and inventory impairment charges, reflecting abandonment of older product technology and acquisition-date intangibles.
• Completion and Production Services segment incurred $5 million in restructuring charges during the quarter, with ongoing costs until facilities and equipment are fully exited and monetized.
• Management acknowledged, "Cash flows from operations are expected to remain strong in 2026, in a range of $60 million to $65 million, down from 2025 due to expected working capital build."
• Tariff costs on perforating products materially increased mid-2025, with management stating, "We got hit pretty hard in our cost of goods sold because of orders in place that—when the tariff rate went from 25% to 98% about midyear."

SUMMARY

Oil States International (NYSE:OIS) reported significant sequential and year-over-year revenue growth in the quarter, driven by offshore and international operations following the strategic exit of underperforming U.S. land-based businesses. Quarterly cash flows from operations reached a historical high and were used to retire convertible senior notes, resulting in year-end cash exceeding debt by $15 million. The Offshore Manufactured Products segment achieved its highest backlog since March 2015 at $435 million, supported by a 1.3 times book-to-bill ratio and increased military product awards. The company provided full-year 2026 revenue and EBITDA guidance above prior-year levels, outlined first-quarter expectations reflecting normal seasonality, and highlighted a strategic focus on capital allocation and further shareholder returns as facility exits and restructuring charges decrease.

• Management noted continued growth in differentiated offshore technologies, including first-time deployments of advanced pressure drilling and deep sea mineral riser systems at record water depths.
• Share repurchases and the new credit facility enhance financial flexibility after significant deleveraging in 2025.
• Military products contributed roughly 10% of OMP segment revenues, with growth potential in U.S. Navy and Australian defense applications.
• Geographic expansion is centered on Brazil, Guyana, Southeast Asia (including new manufacturing capacity in Batam, Indonesia), recovering markets in West Africa, and increased targeting of Middle Eastern and international perforating equipment sales.
• Productivity gains from operational restructuring and technology mix shifts are expected to generate higher margins and cash flow despite projected year-over-year reductions in U.S. land activity and modest near-term headwinds from residual restructuring charges.

INDUSTRY GLOSSARY

• Book-to-Bill Ratio: The ratio of orders received (bookings) to revenues billed during a specific period, used as a forward indicator of demand and backlog growth.
• Managed Pressure Drilling (MPD): An advanced drilling technique enabling precise control of wellbore pressure, improving safety and efficiency in challenging offshore environments.
• Perforating: The process of creating holes in well casing or liners to connect a wellbore with the reservoir, enabling oil or gas flow.
• Riser System: A conduit system connecting subsea equipment to surface facilities, critical for oil, gas, and mineral extraction from deepwater locations.
• Convertible Senior Notes: Debt instruments that can be converted by holders into equity and have seniority in capital structure, commonly used for corporate financing and refinancing.
• Extended Reach Technology: Equipment and tools designed to access reservoirs at greater distances from the wellbore or surface location, often used for complex offshore or remote onshore drilling projects.
• Impairment Charge: A noncash expense recognized when carrying value of an asset exceeds its recoverable amount, reflecting a reduction in estimated future cash flows or market value for the asset.

Full Conference Call Transcript

Cynthia B. Taylor: Thank you, Ellen. Good morning, and thank you for joining our conference call today where we will discuss our fourth quarter 2025 results and provide our thoughts on market trends in addition to discussing our company-specific strategy and outlook for 2026. We are pleased to report strong fourth quarter results with adjusted EBITDA exceeding our guidance and quarterly cash flows from operations at historically high levels. We generated $50 million of cash flows from operations, which was used to retire an equivalent amount of our outstanding convertible senior notes. Following the repayment, our cash on hand exceeded outstanding debt by $15 million at year-end.

We continue to progress our multiyear strategy to optimize Oil States International, Inc.’s business mix in favor of operations focused in the offshore and international markets. Our consolidated fourth quarter results were driven by backlog conversion, disciplined execution, and improved margins in our Completion and Production Services and Downhole Technologies segment as both segments are showing positive trends following restructuring. Fourth quarter consolidated revenues increased 8% both sequentially and year-over-year with revenue growth tempered by our strategic decisions to exit certain underperforming U.S. land-based operations. These actions have resulted in a shift in our business mix with 77% of our revenues generated from offshore and markets in the current quarter compared to 72% in the prior-year period.

Going forward, our sharpened focus on more differentiated product and service lines should provide sustained incremental margins and cash flows to support returns to our stockholders. Our Offshore Manufactured Products segment delivered another standout quarter with revenues and adjusted segment EBITDA increasing 1,312% sequentially. Backlog continued to increase, totaling $435 million, the highest level since March 2015, supported by bookings of $160 million, yielding a quarterly book-to-bill ratio of 1.3 times. Importantly, in our Completion and Production Services segment, our recent focus on high-grading technologies and service lines has translated into improved adjusted EBITDA margins and cash flow.

In our Downhole Technologies segment, we are focused on market introductions of our revamped technology domestically along with international expansion of our full product suite. Despite it being early days into these strategies, we realized improved contributions from our perforating and completion products during the quarter. During 2025, Oil States International, Inc. secured multiple new contracts and successfully deployed advanced offshore technologies that reinforce our leadership in high-specification offshore and international markets. Continued adoption of our managed pressure drilling system and the first successful deployment of our low-impact workover package demonstrated meaningful operational improvements for our customers including reduced nonproductive time, enhanced safety, and improved project efficiency.

In addition, following quarter-end, Oil States International, Inc.’s Merlin deep sea mineral riser system achieved a record deployment in water depth of over 18,000 feet, or three and a half miles below the surface of the water, underscoring our differentiated engineering capabilities and strong positioning in emerging ultradeepwater and offshore resource applications. With our extensive portfolio of differentiated technologies, expanding margins, and strong cash generation, we believe we are well positioned to support disciplined capital allocation and to continue returning capital to stockholders. These attributes taken together reflect a company that is more focused, more resilient, and better positioned to generate sustainable returns across industry cycles.

Lloyd will now review our operating results along with our financial position in more detail.

Lloyd A. Hajdik: Thanks, Cindy, and good morning, everyone. During the fourth quarter, we generated revenues of $178 million, up 8% sequentially from the third quarter, and adjusted consolidated EBITDA of $23 million, representing a 9% sequential increase and at the top of the guided consolidated EBITDA range that we provided on our third quarter 2025 earnings call. We reported a net loss of $117 million, or $2.04 per share, which included long-lived asset impairments, restructuring charges, and valuation allowances established on U.S. deferred tax assets. Noncash impairments of our long-lived assets and inventory were recorded in our Downhole Technologies segment, principally related to intangible assets recorded at the date of acquisition in 2018.

Our adjusted net income totaled $8 million, or $0.13 per share, after excluding these charges. For the full year, we generated adjusted consolidated EBITDA of $83 million, adjusted net income of $22 million, and adjusted EPS of $0.37 per share. Cash flow performance was a clear highlight during the fourth quarter and the full year, reflecting solid underlying operational performance of the company. During the quarter, we generated $50 million of cash flow from operations, up 63% sequentially. Investments in CapEx totaled $3 million in the fourth quarter, offset by $6 million in proceeds from asset sales.

For the full year, cash flow from operations totaled $105 million and free cash flow totaled $94 million, representing increases of 129% and 92%, respectively, year-over-year and exceeding the full-year cash flow guidance we provided last quarter. We ended 2025 with cash on hand exceeding our total debt by $15 million. Turning to segment performance. Our Offshore Manufactured Products segment generated revenues of $123 million and adjusted segment EBITDA of $25 million in the fourth quarter, resulting in an adjusted segment EBITDA margin of 20%. Our backlog totaled $435 million as of December 31. We achieved a 1.3 times book-to-bill ratio in the fourth quarter and for the full year.

Our backlog continues to reflect a diversified mix of offshore energy, international, and military programs. Backlog strength and execution continue to support earnings visibility into 2026 and beyond, with a significant portion of our backlog expected to convert to revenues within the year. Our Completion and Production Services segment delivered $23 million in revenues, and adjusted segment EBITDA of $7 million in the fourth quarter, with adjusted segment EBITDA margins expanding to 32% from 29% in the third quarter, reflecting benefits of the restructuring actions taken in 2025. During the quarter, the segment recorded facility exit and other restructuring charges totaling $5 million. These quarterly charges will reduce in 2026 once the underlying equipment and facilities are sold.

In our Downhole Technologies segment, we generated revenues of $32 million, up 11% sequentially, and grew adjusted segment EBITDA to $1.3 million. During the fourth quarter, the Downhole Technologies segment recorded noncash long-lived asset and inventory impairment charges totaling $112 million. Older product technology is being abandoned in favor of our revamped products. Intangible assets established at the acquisition date in 2018 have been written down to reflect current estimates of fair market values. In January, we entered into a four-year cash flow-based credit agreement which provides for borrowings of up to $75 million under a revolving credit facility and $50 million available under a multidraw term loan facility, which replaced our asset-based lending credit agreement.

We had $53 million in principal amount of our convertible senior notes outstanding at December 31, and cash on hand of $70 million. We intend to use U.S. cash on hand and borrowings under our new credit agreement to retire these notes on or before their maturity on 04/01/2026. In addition to purchasing $71 million in principal amount of our convertible senior notes in 2025, we also repurchased a total of $17 million of our common stock, representing about 5% of shares outstanding as of 01/01/2025. We will remain opportunistic with additional purchases of our common stock as we continue to prioritize returns to shareholders. Now Cindy will offer some market outlook and concluding comments.

Cynthia B. Taylor: Thank you, Lloyd. Before looking ahead, I want to briefly reflect on what we delivered in 2025. Over the year, we executed according to our strategic priorities by expanding our offshore and international exposure, growing backlog to a decade-high level, strengthening margins, and generating substantial free cash flow while deleveraging the balance sheet. Our results and accomplishments reflect disciplined execution across the organization with meaningful progress in repositioning Oil States International, Inc. for more durable performance across industry cycles. As we look ahead into 2026, we believe we are well positioned to build on that progress.

Our Offshore Manufactured Products segment backlog continues to grow, and our business mix is increasingly weighted towards offshore and international markets, with longer-cycle visibility, stronger margins, and more favorable cash flow characteristics. Our balance sheet strength provides additional flexibility, allowing for prudent capital allocation. While U.S. land activity is expected to remain relatively subdued, we believe the actions we have taken over the last couple of years, including high-grading our portfolio, sharpening our technology focus, and maintaining disciplined execution, have provided a more resilient operating model. Now let us discuss guidance for the full year 2026 and the first quarter individually.

We expect 2026 full-year revenues to range between $680 million and $700 million and full-year EBITDA to range between $90 million and $95 million, both metrics up meaningfully year-over-year. As a reminder, our first quarter is historically our weakest quarter in terms of revenue, EBITDA, and cash flows due to the timing of order releases, material deliveries, and working capital uses. Our first quarter guidance calls for revenues in a range of $150 million to $155 million and EBITDA of $18 million to $19 million. Cash flows from operations are expected to remain strong in 2026, in a range of $60 million to $65 million, down from 2025 due to expected working capital build.

Investments in CapEx of $20 million to $25 million are planned for 2026. Across the business, our priorities remain consistent: advancing differentiated technologies and services aligned with customer needs, driving margin durability, generating free cash flow, and delivering long-term stockholder value creation. We entered 2026 as a more focused, financially flexible, and cash-generating company, which is being recognized by investors leading to stock price appreciation, as the market has begun to understand and embrace our strategic initiatives. With a strong balance sheet, expanded margins, and a growing offshore and international footprint, we are confident in our ability to continue the momentum achieved in 2025. That concludes our prepared remarks. Colby, please open the call up for questions.

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, you can press 1 again. We will pause just for a moment to compile the roster. Your first question comes from Stephen David Gengaro with Stifel. Your line is open.

Stephen David Gengaro: Thanks, and good morning, everybody.

Operator: Good morning. Stay safe.

Stephen David Gengaro: So two for me. One, I think, is probably pretty straightforward. On the Completion and Production side, has the restructuring, or at least that is the wrong word, but the exiting of underperforming businesses—Is that completely reflected in the 4Q revenue run-rate levels?

Cynthia B. Taylor: I think the answer to that is yes. I am going to let Lloyd do a little back-of-the-envelope for me as we talk about that. I will just make a comment. We have reported, and you have seen, fairly significant EBITDA add-backs throughout the year on a quarterly basis. Think of that as runoff of operations, closing up facilities, severance costs, etc., as you exit facilities. One of the key things I am focused on is mitigating that and reducing that as we go forward. Those adjustments will continue probably through the first half, but be much lower than what you have seen. Two comments there: you will see probably an increase overall in assets held for sale.

That is clear messaging that those facilities have now been exited. The workforce, the machinery, the equipment, the inventory has been relocated, and those are being prepped for sale and disposition. But as you know, there are going to be ongoing property tax, insurance, utilities until we monetize those. On the balance sheet, I think it separates assets held for sale, which approximate $17 million. And then there are still a handful of operating facilities yet to be fully exited. Just know there is a lot of inventory and equipment yet to be monetized, but we are in process. Again, that will be much less significant than what we have seen in the past.

Importantly, Stephen, if you look at our year-over-year EBITDA margins, you should notice material improvement as we have progressed. You have to look at adjusted EBITDA, obviously, because we have had the drag of exiting these. But I believe, Lloyd, what were our EBITDA margins in Q4? 32%. Thirty-two percent. Again, much more indicative of the go-forward level of activity that we have. I will also point out generally what we have left is our extended reach technology, which is very differentiated in the market, and that is largely, of course, a land-based operation, not only in the United States, but also in Canada supporting operations there.

Our Gulf of Mexico operations is wireline and production services support activity, and then our international equipment as well, largely dedicated to the Middle East. We do have residual operations in the Bakken area that is a bit less competitive, I will call it. That is our focus going forward. Again, revenues will be down, but you have already seen that margins go up, indicating the very marginal nature that we were getting from both previously in 2023, 2024 flowback operations and some of our frac and isolation assets that we felt compelled to exit.

The good thing is you are not only reducing some of the low margin or no margin activity, you are going to mitigate CapEx, achieve higher margins, and free cash flow in the process. I will let Lloyd add anything to that.

Lloyd A. Hajdik: Yeah. Thanks, Cindy. So, Stephen, your question. In the fourth quarter, there is about $1 million of revenues from the exited operations. Just as a frame of reference, for the full year 2025, the $669 million of consolidated revenue includes about $21 million derived from those exited operations.

Stephen David Gengaro: Great. That helps. Thank you. And then you created more questions in my mind, Cindy, but I will ask one and get back in line. When we think about the backlog levels in the Offshore Manufactured Products business, obviously, you had great order flow. Overhead absorption should clearly help. Is the embedded margin profile materially better right now than it was exiting the year 8–12 months ago?

Cynthia B. Taylor: I just looked at—we have had, if you look to our decades of history in that business, consistent overall margin improvement. But as you know, there are a lot of things that go into that. One is the mix that you have across your global operations. Again, we are not a single product focused competitive landscape company. Some enjoy higher margins than others depending upon the proprietary nature of the equipment. The second one, of course, is absorption and utilization of our various facilities around the world. That being said, we are targeting fairly consistent margins on a blended basis for 2026, but on strong revenues at the end of the day.

Mix could alter that to the benefit, as an example. Absorption could create some upside there as well. We had taken initiatives for the long term to improve our overall margin performance, particularly with the new facility that we now have up and running in Batam, Indonesia, that got kicked off last year but certainly is not yet at the revenue run rate that we think it is capable of. In addition to that, we are evaluating bringing in a broader range of products being manufactured out of that facility.

Again, it is hard to say that next quarter is going to be up and to the right, but these are all embedded strategies that over the course of time will elevate that overall. I think most importantly, as you point out, it is a backlog-driven business, and despite growing revenues, we had a book-to-bill in 2025 of 1.3 times that we are very proud of. Our indications and our outlook are that we will exceed a one-time book-to-bill again in 2026. I think the trends are there, but this business is not the cyclical up and down that you see in North American-based businesses.

If you look at our performance over a continuum of five to ten years, you are going to say it has been rather impressive.

Lloyd A. Hajdik: Yeah. We have had a book-to-bill in excess of one for the past five years on a year-by-year basis.

Stephen David Gengaro: Okay. Great. Thanks. Just one quick one, and I will get back to it. The CPS margins in the quarter—was there anything unusual in that 32% that we should be thinking about? I know you have seasonality in the first quarter, but that is a fairly healthy number and a fairly good number to base forward assumptions off of.

Cynthia B. Taylor: I think it is in reality. Now we may have had a one-off facility or equipment sale gain. Honestly, I do not remember in that level of detail quarter by quarter. There have been some facility sale gains of some consequence every quarter as we have exited all of this. But we are comfortable with EBITDA margins for that business in the 30% to, I do not know, 33%, 34% range.

Stephen David Gengaro: Great. Thanks, and congrats on all the progress.

Cynthia B. Taylor: Thank you. Thanks, Stephen.

Operator: Your next question comes from the line of James Michael Rollyson with Raymond James. Your line is open.

James Michael Rollyson: Hey, good morning, Cindy, Lloyd, everybody. Great job on the way you finished out the year for sure. Curious just to circle back to your answer on Steve’s question. He was talking about backlog margins and, obviously, in part of that answer, you talked about book-to-bill being north of 1x five years in a row. It is interesting because offshore spend took a little bit of a dip as we went through the last 18 months or so, and yet you have continued to crank out well above one-times type of order flow.

As we maybe pulse back up in offshore, at least that is the expectation as we go into late 2026, 2027, 2028, I am curious—you go back, look at historical levels, you are at ten-year highs, but you have been higher. I am curious if the revamp of spend offshore over the next couple of years continues to drive well north of 1x backlog to where, two, three years out, you are back to the old highs from several years ago. I am curious how things are shaping up with the macros trending, the spend levels trending, your product line trending. Are we just going to keep going up and to the right for the next couple of years?

Cynthia B. Taylor: Well, all I can say is I certainly hope so. I want to drill down and give you a little more color on that answer. I would say, first of all, it seems like our—I cannot even remember the last peak backlog. It is probably 2014 at the peak market time frame, so well over a decade ago. $600 million. I would go on to say, number one, we have the same global footprint that we had then. Two, we actually have added two very new enhanced facilities, one being in our U.K. operations near Edinburgh, and two, our new Batam facility.

One could say that from a facility and manufacturing footprint perspective, we are actually more capable than we were a decade ago. Limitations could be some amount of labor, but typically we have been able to flex over time. It all depends on timing and magnitude of the ramp that we are hypothetically talking about. I want to point out, 2025—it is easy to say, well, how did you do the 1.3 book-to-bill in what was not a heroic spending environment? I think that is your question. I have to remind everybody, we have brought new products to market, in particular our MPD assets. That did not exist a decade ago.

We are continually trying to enhance the offering we provide to our customers globally. That being one, and I point on that to the MPD; I could also point to our mineral riser system. This is a completely new operation that did not exist ten years ago, dedicated to trying to find these rare earth metals and minerals to support electrification. Those things are additive and they both could absolutely grow as we progress into the next five to ten years. We have invested in things that have no revenue yet, or not substantial revenue, including our offshore wind platform.

We are doing a lot of bidding and quoting, and we do not have any anticipation in our 2026 results that we would have revenue at this point in time. It creates some long-term upside potential for the business. I might—oh, and Lloyd reminded me—we, with increased defense spending, as you know, Jim, have oftentimes had a military revenue stream. It has generally been in the range of 10% of the segment, OMP segment, revenues, and we got a healthy amount of military awards this year, particularly late in the year. That was non-oil and gas spending related. I have spoken to the broad base of the product line and the exposures that we have.

I think our facilities are in good place. Importantly, we just recently were seeing some larger bid opportunities come in that in the past you might say, what is the CapEx required? What is the working capital investment that you have to make? Having the strength of our balance sheet as we move into the next decade is also going to prove beneficial to us.

James Michael Rollyson: Appreciate all that color, and that actually brings up my follow-up question, which is on the balance sheet and cash flow. You are in a position now where you have more cash than you have debt, with that coming due April 1. You will be basically close to debt free. You are certainly net debt free here soon. If I did my math right, you are kind of zeroing in around $40 million of free cash flow, and I presume that is before asset sales, because, Cindy, you talked about the assets held for sale growing to $17 million. You could very well be, on the timing of that, somewhere in the $50-plus million free cash flow range.

I am curious, as you just get past the debt repayment on the convert, do you deploy the majority of your free cash flow back to shareholders in share repurchases? Or do you go on offense at all, now that you are in much better shape than you were two or three years ago, Just curious kind of how you think about the balance sheet and the ability to use that.

Lloyd A. Hajdik: Yes. Thanks, Jim. Your math is correct. That $40 million is free cash flow excluding potential proceeds from asset sales, which could boost that. In terms of deploying the free cash flow, share repurchases—we were very public at $17 million last year. After we pay the debt off, we should be opportunistic in buying back more shares and obviously have more optionality to look at M&A as a result.

Cynthia B. Taylor: I will tag into Lloyd’s comment. As we get more globally diversified, we are going to look—comparable companies would be on our target list more so than anything that is land-based U.S. because that is the pivot we have made. We have made some very good small tuck-ins there, but they are few and far between. I think in the near term you are going to see us focused on shareholder returns via share repurchases, but you know us. We are continually looking for good tuck-ins across the globe that fit our product suite and our capabilities. That will not stop, obviously. But it is nice to have a currency that is not a deterrent to getting things done.

Lloyd A. Hajdik: Correct. Yep.

James Michael Rollyson: Absolutely. And then just one last thing for a little color. We do not often talk about military products because that is not your core focus, but it has clearly been a beneficiary to your bookings and even your free cash flow, thanks to timely government payments. With an administration that is seemingly willing to spend more money on the defense side, maybe just a reminder of what you provide there and how you think about the outlook given the strong back ’25 as we go into ’26 and ’27?

Cynthia B. Taylor: These are legacy products that we supplied to the military for as long as I have been here, quite frankly. It is an adaptation of some of our flex joint technology that is used in sound and vibration dampening applications on submarines. So it is exposed to the Navy, obviously. I am always asking how do I grow this base even more? The Navy has been very good about doing R&D and engaging with us on R&D on different technologies. We do hope to work together to expand that product offering. The main thing is this is a legacy product we have had for many years.

There are ebbs and flows depending upon defense spending and the investments made by the U.S. government. We also have some small orders that we are beginning to get from the Australian defense sector. Hopefully, there are ways to grow that even further. It is a good base of business for us. Working for the government requires very high standards. I think that is a testament to the strength of our quality processes and our manufacturing overall.

James Michael Rollyson: Great. Appreciate all the color, guys. Thanks again.

Cynthia B. Taylor: Thank you. Thanks, Jim.

Operator: Your next question comes from the line of Joshua James with Daniel Energy Partners. Your line is open.

Joshua James: Good morning. Thanks for taking my questions. First one, Cindy, maybe you could walk through the offshore world geographically—where you see the most opportunities and how you are positioning yourself for continued growth given that backdrop, and maybe even highlighting some of the facilities that you have mentioned and how increasing utilization there could ultimately play into you growing your market share moving forward? That is my first question.

Cynthia B. Taylor: The great thing is we do have a global base of operations. The first thing I will say—it will not shock you—is that Brazil has been and will continue to be a very strong base, and Petrobras is the larger deepwater player and investor in the world right now. We have a great base there, good strong leadership in-country, and we have been there for over twenty years. It is not a new market entrance that experiences the vagaries of working. I feel very good about that. We are really trying to expand all of our capabilities and bring all of our total company products and services into that market.

It will not shock you that Guyana is another strong base of operations when I look to the south. Southeast Asia has been a legacy foothold for us for decades, from Singapore and now more manufacturing in Batam, Indonesia. You also pick up Australia with that kind of presence. Emerging activity—probably recovering activity—beginning in West Africa. I am trying to think of any real basin that is not showing more activity. I would say most of our Middle East activity right now is on land, really not offshore. Anything else I have missed there?

Lloyd A. Hajdik: Actually, for Southeast Asia, for more of the product side. Yeah.

Cynthia B. Taylor: Southeast Asia—again, that is not just OMP. We are trying to do the best that we can in the Middle East, as an example, to introduce our frac equipment into the market, our through-tubing into the market, and perforating across the world. There has been a dual strategy on recovering the perforating market. One is an improved product offering that we can offer to the domestic market, and I will check the box. It has been hard to get into the market given the weakness we have seen on land U.S. over the last two years. But the technology is there. Thankfully, we are positioned well going forward. International expansion has been the second tier of that.

I would say right now the various target markets internationally—but the lead for our perforating equipment is going to be Middle East and likely both Brazil and Southeast Asia. That will evolve over a few years. It will not happen immediately. We are optimistic to show improvement there in that perforating business as well. Think of us as doing the best that we can to expand the full breadth of our product and service offering on a global basis through the installed base that we have in the market.

Joshua James: That is helpful. As my follow-up, I want to follow up on one of the questions about the 2015 backlog. Maybe offer your thoughts on where you believe we stand in the offshore cycle for your business, because we have had some white space over the last couple of years. Do you think where you sit today is more a reflection of the lull of activity in the last 18 to 24 months and some catch-up there? Or do you believe we are in the early stages of a five-, seven-, ten-year offshore cycle just with where capital is moving?

I also see—and you mentioned it in one of the answers—when you have riser systems, MPD, military, that all was not in your backlog back then. It seems like you have a lot of room to grow and run in that business from where we were previously.

Cynthia B. Taylor: I think to be in this business, you have to believe in the macro—i.e., the long-term demand for crude oil and natural gas—which I do. I always have. The U.S. land can flex quicker up and down. The reduced activity you have seen today is simply because crude prices have dipped close to or below $60 a barrel. That has put a dampening effect on international and deepwater activity too. I think that is where the “white space” has come in. The different recognition is that we are clearly underinvesting for the long term if you believe in the ultimate demand for crude oil. I think that is recognized.

The second thing I will tell you, there is a long lead time when you talk about particularly deepwater and international activity that I think there is a recognition we have to get going. It is public to follow the offshore rig companies. You see white space on the drilling cycle. You take that as an indicator of weaker activity. We are beginning to see those white space gaps be filled in, and so rig equipment will tend to lead the recovery, and that can be riser systems, MPD systems for us—the things that we offer—as well as the upgrade and service cycle around that equipment. It all feeds deepwater infrastructure which is kind of bread and butter for us.

That plays into our more proprietary products. It is a long-winded way of answering a question that I believe we have underinvested. We are going to have to commit capital. Then you are going to argue where does it come from. The last twenty years, most of the increased production has come from U.S. shale efficiency. There is the perception that incremental growth is waning. Therefore, you have to look at other basins around the world to provide the supplies. I think that plays into our manufacturing capabilities and the equipment that we offer over the long term.

Joshua James: Thanks. I will squeeze one more in, if I may, because the news is out this morning. It sounds as though the Supreme Court struck down Trump’s sweeping tariffs, and so there could be an impact reversing the tariffs coming in 2026 or 2027. Could you remind us what your impact was? That will be my final question. Thank you.

Cynthia B. Taylor: I would say that so much of what we do in the Offshore Manufactured Products segment is for international locations that we benefit from temporary import bonds. I will say it is incredibly difficult to claim those. Generally, OMP has not suffered too much in the way of tariffs. The one that hit us front and center, particularly midyear 2025, was on perforating because we and everybody else sourced gun steel out of China. We do bring it in the U.S. The value add from the machining and finishing is done here in the U.S.

It is much more difficult to identify whether those guns are going domestically or internationally, and how much of that gun body would be subject to tariffs. We got hit pretty hard in our cost of goods sold because of orders in place that—when the tariff rate went from 25% to 98% about midyear. Part of our improvement in our perforating operation was delayed because of tariffs. I will call it welcome news that the go-forward might be a more predictable cost structure. With a weaker market in the U.S. and a lot of competition that came into the market, it was very hard to pass those costs on to our customers.

More stability in our supply chain and lower tariff costs would be favorable, but it would really be reflected predominantly in our perforating side of our business.

Joshua James: Thanks for taking my questions. I will turn it back.

Operator: Thanks, Josh. Your next question comes from the line of Stephen David Gengaro with Stifel. Your line is open.

Stephen David Gengaro: Thanks, and thanks for taking the follow-up. I know this came up a little bit earlier, Cindy. When we think about potential additions to your portfolio, is there any geographic region we should be thinking about? Would it be offshore international, or would you do something on U.S. land that made sense? I am not sure about calling any product lines, but how should we think about it?

Cynthia B. Taylor: What we are looking for is differentiated technology and differentiated opportunities, whether that is an organic investment or through M&A. You and I have been doing this a long time. It is hard for me to think of things that are truly differentiated on land that cannot be replicated in short order. It has always been a challenge for us because we do all the diligence, all the upfront R&D work, patent the technology, and then it is amazing how quickly companies come in. Then you are asking, do I sue them? It is going to cost me probably $5 to $10 million to do so. It is a tough business to have long-standing differentiated technology.

I am not saying no, but I am saying we would be very selective.

Stephen David Gengaro: Great. Thanks for the color. Thanks, Stephen.

Operator: With no further questions in queue, I would like to turn the conference back over to Cynthia B. Taylor for closing remarks.

Cynthia B. Taylor: Thank you all for your time today and for the thoughtful questions. We remain focused on executing our strategy, strengthening our portfolio, and maintaining discipline around future capital allocations. We look forward to catching up with all of you as the year progresses.

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

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