Innovex (INVX) Q1 2026 Earnings Call Transcript

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DATE

Tuesday, May 5, 2026, at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Adam Anderson
• Chief Financial Officer — Kendal Reed

TAKEAWAYS

• Revenue -- $239 million, down 13% sequentially from Q4 2025 and down 1% year over year.
• Adjusted EBITDA -- $49 million, yielding a 21% margin; margin improved from 19% in both Q4 2025 and the prior-year period.
• Subsea Business Margins -- EBITDA margin exceeded 20%, "reinforcing our view that our Subsea business can generate margins above 20% when operated with the same disciplined cost focus."
• Capital Expenditures -- $6 million, representing about 2.4% of revenue and down 35% from Q4 2025.
• Free Cash Flow -- $14 million, indicating a 28% conversion rate of adjusted EBITDA despite normal seasonal weakness and temporary working capital build.
• Legal Accrual -- $49 million expense recognized due to a patent infringement jury verdict concerning subsidiary DWS; judgment has not yet been entered.
• Geographic Revenue Mix -- NAM Land revenue essentially flat at $137 million versus $139 million in Q4 2025; international and offshore revenue dropped 24% sequentially to $102 million, reflecting delivery shifts and lower activity.
• Commercial Wins -- Secured two "significant project awards in Asia, each exceeding $20 million," plus contract extension and multiple awards in Saudi Arabia.
• Acquisition -- Acquired Drilling Innovative Solutions (DIS) for $16 million, or approximately 4x trailing 12-month EBITDA.
• Share Repurchase -- Over $14 million in shares repurchased at $24.59 per share during the quarter.
• Balance Sheet -- Ended with $201 million in cash and no bank debt.
• ROCE -- Return on capital employed was 12% for the twelve months ended March 31, 2026; management targets "high teens" long-term ROCE.
• Guidance -- Q2 2026 revenue expected at $235 million-$245 million and adjusted EBITDA between $43 million-$48 million; guidance incorporates less favorable product mix and anticipated higher costs related to Middle East conflict.
• Facility Transition -- Completed exit of Eldridge facility ahead of schedule, accelerating gross margin improvement through manufacturing efficiencies.

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RISKS

• Legal Liability -- CFO Kendal Reed stated, "we recorded a $49 million legal accrual related to patent infringement litigation between Impulse Downhole Tools USA and Innovex's wholly owned subsidiary, DWS, following the previously disclosed jury verdict. No judgment has been entered at this time."
• Middle East Disruption -- CEO Adam Anderson said, "first quarter activity was softer than we had anticipated, driven primarily by project timing and conflict-related disruptions," with additional Q2 cost burden due to "airfreight rates [that] are pretty high right now."
• Sequential Revenue Decline -- Revenue declined 13% sequentially, primarily attributed to lower international and offshore activity and the timing of prior period Subsea deliveries.
• SG&A Increase -- Reported SG&A expenses were "higher sequentially due to several discrete items, including legal, transaction-related and other temporary costs."

SUMMARY

Innovex International (NYSE:INVX) delivered first quarter results above its guidance range in both revenue and adjusted EBITDA, citing favorable product mix and accelerated manufacturing efficiency gains following the early closure of the Eldridge facility. The company completed the acquisition of Drilling Innovative Solutions for $16 million, expanding its portfolio of capital-light, high-margin products with international applications. Commercial execution included two major project wins in Asia, a contract extension in Saudi Arabia, and the first Subsea wellhead order in Southeast Asia under the OneSubsea alliance. Balance sheet strength was maintained with $201 million in cash and no bank debt, while $14 million in share repurchases underlined management’s confidence in long-term value creation. Financial guidance for the next quarter reflects anticipated logistical headwinds and cost pressures related to the Middle East conflict, as well as a less advantageous product mix.

• First quarter capex of $6 million reflected disciplined investment alongside integration of acquired assets.
• Management expects free cash flow conversion to be on or above the high end of the 50%-60% through-cycle range, following the typical Q1 dip.
• Commercial pipeline highlights continued momentum in Subsea, with management stating there is "a growing pipeline of Subsea opportunities."
• The addition of DIS is expected to "strengthen the U.S. offshore market position and create additional opportunities to grow with both existing and new customers," according to management.
• Secondary sale by major shareholder Amberjack enhanced public float and trading liquidity.
• Management maintains a disciplined M&A strategy centered on high-margin, capital-light bolt-ons at reasonable multiples, regardless of market volatility.

INDUSTRY GLOSSARY

• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted to exclude certain non-recurring items and to reflect operating performance.
• Subsea: Refers to products and solutions deployed on the seafloor or underwater within offshore oil and gas production systems.
• NAM Land: North America Land; company shorthand for the United States and Canadian onshore oilfield services market.
• DUC: Drilled but uncompleted well; a well that has been drilled to total depth but not yet hydraulically fractured or brought online.
• ROCE: Return on capital employed; a profitability ratio measuring the efficiency and profitability of a company’s capital investments.
• SG&A: Selling, general, and administrative expenses; overhead costs associated with running the business, excluding production expenses.
• OneSubsea alliance: Collaborative partnership involving Innovex and other industry players to provide integrated offshore solutions for subsea oil and gas development.

Full Conference Call Transcript

Adam Anderson: Good morning, and thank you for joining us today. I want to start by thanking our teams across the organization for another quarter of strong execution. We continue to operate in a dynamic environment where our people have remained focused on serving customers, leveraging our unique platform and growing our business through relentless innovation and a commitment to delighting our customers. That commitment is reflected in our first quarter performance. Since the merger with Dril-Quip, we've stayed disciplined in how we run the company, improving the cost structure, expanding the technology portfolio and focusing on cash flow and returns.

Core to our success is our No Barriers culture, which means we tear down barriers between ourselves, our teams and our customers. We operate as one team across regions and product lines, not as a collection of separate businesses. That remains a real source of competitive advantage for us. On today's call, I'll walk through our first quarter performance, highlight several important commercial and operational developments from the quarter and then turn the call over to Kendal for a more detailed review of our financial results, capital allocation priorities and outlook for the second quarter. Starting with performance. We delivered a strong start to 2026.

First quarter revenue totaled $239 million, which exceeded the high end of our guidance range, and adjusted EBITDA totaled $49 million, with an adjusted EBITDA margin of 21%, well above the high end of our guidance range. These results reflect continued strong operational execution, organic growth from new product introductions, and cross-selling across our global platform. We benefited from a favorable mix in the quarter, and we also saw earlier-than-expected benefits from the exit of the legacy Eldridge facility. More broadly, the quarter reinforces our view that our Subsea business can generate margins above 20% when operated with the same disciplined cost focus and a commercial approach that we apply across the rest of Innovex.

Our No Barriers culture has unlocked the potential of our combined team. I've been particularly impressed by the contributions from our colleagues who've joined Innovex as a part of the Dril-Quip merger. They bought into the culture and are unlocking the embedded value and technology in the Subsea portfolio. Commercial performance remained healthy across our core markets. In U.S. Land, we continue to outperform underlying activity levels. Organic growth was driven by cross-selling as well as new product introductions. As a reminder, we have curated a portfolio of big impact, small ticket products and services. In aggregate, our offering represents just 2% to 3% of total well cost.

Despite representing a small proportion of the cost of a well, our technologies are critical to well performance. Therefore, the purchase decision is driven primarily by performance, not price. Offshore and internationally, we continue to build momentum in Subsea. During the quarter, we secured 2 significant project awards in Asia, each exceeding $20 million in value, reflecting the strength of our specialized technology portfolio and our ability to win complex high-specification work. These awards span multiple parts of the well system, reinforcing the breadth of our Subsea technology portfolio. We also delivered the first Subsea wellhead order in Southeast Asia under the OneSubsea alliance, representing an important milestone in expanding our presence in integrated offshore projects.

Beyond Asia, we continue to make encouraging commercial progress across key offshore basins where we see attractive long-term opportunities for our portfolio. More broadly, we are seeing a growing pipeline of Subsea opportunities, which supports our confidence in the trajectory of the business. In the Middle East, first quarter activity was softer than we had anticipated, driven primarily by project timing and conflict-related disruptions. We remain encouraged by our recent commercial progress, including multiple offshore awards in the Kingdom of Saudi Arabia as well as a contract extension for our off-bottom liner systems and lower completion technologies. We continue to view the Middle East as an important long-term growth market.

We recently completed the acquisition of Drilling Innovative Solutions for $16 million or approximately 4 times trailing 12-month EBITDA. This is exactly the type of transaction that we believe drives value, one that is priced reasonably and offers substantial opportunity for organic growth by leveraging our platform. DIS brings differentiated production technologies that complement our existing completions offering, strengthening our U.S. offshore market position and create additional opportunities to grow with both existing and new customers. We believe the DIS portfolio has applicability across global deepwater markets as well as select onshore markets. DIS fits squarely with our model of curating a portfolio of big impact, small ticket products with strong margins, low capital intensity and meaningful room for growth.

Stepping back, our priorities remain unchanged, gaining share, expanding our technology portfolio, driving innovation, improving efficiency, and disciplined capital allocation. We believe the combination of innovation, execution and capital discipline continues to differentiate Innovex, and we see a strong pipeline of opportunities across both organic initiatives and inorganic opportunities. As we move through 2026, we remain confident in the trajectory of the business and our ability to create durable value for shareholders over time. I will now turn the call over to Kendal to walk through our financial results and outlook in more detail.

Kendal Reed: Thanks, Adam, and good morning, everyone. I'd now like to review our first quarter 2026 financial results. For the first quarter 2026, revenue totaled $239 million, down 13% sequentially from the fourth quarter of 2025 and down 1% year-over-year versus Q1 2025. Adjusted EBITDA totaled $49 million, resulting in an adjusted EBITDA margin of 21% compared to 19% in Q4 2025 as well as Q1 2025. We were pleased to exceed the high end of our guidance range on both revenue and adjusted EBITDA despite a dynamic operating environment during the quarter. Profitability in the quarter benefited from favorable product mix and improved manufacturing efficiency associated with the transition out of the Eldridge facility.

As we consolidated our footprint and improved throughput, we saw better absorption and stronger operating leverage within the Subsea business. Reported SG&A was higher sequentially due to several discrete items, including legal, transaction-related and other temporary costs. Excluding these items, underlying SG&A remains well controlled, reflecting our continued focus on cost discipline. During the quarter, we recorded a $49 million legal accrual related to patent infringement litigation between Impulse Downhole Tools USA and Innovex's wholly owned subsidiary, DWS, following the previously disclosed jury verdict. No judgment has been entered at this time. We strongly disagree with the jury verdict and intend to pursue post-trial motions and, if necessary, appeal any resulting judgment to the U.S.

Court of Appeals for the Federal Circuit. From a geographic standpoint, NAM Land remained a source of strength with revenue holding essentially flat at $137 million compared to $139 million in the fourth quarter despite weather-related disruption during the quarter. International and offshore revenue declined 24% sequentially to $102 million from $135 million in Q4. As we discussed previously, the fourth quarter benefited from an unusually high level of Subsea deliveries, including approximately $15 million of shipments that we had originally expected to occur in the first quarter, creating a tough year-over-year comparison. Lower Subsea delivery volumes, softer activity in certain international markets, and modest disruptions related to the ongoing conflict in the Middle East contributed to the sequential decline.

A meaningful increase in activity in Mexico partially offset this softness. We view quarterly volatility as timing related and consistent with the normal variability that can occur in offshore and project-oriented markets. Importantly, underlying commercial momentum remains solid, and we remain constructive on the long-term outlook, expecting significant Subsea momentum in the back half of 2026. Capital expenditures in the first quarter 2026 totaled $6 million, down 35% sequentially, representing approximately 2.4% of revenue. CapEx remained in line with Innovex's historical range of 2% to 3% of revenue despite ongoing facility integration efforts associated with the exit of the legacy Eldridge facility. Free cash flow was $14 million in the quarter, representing approximately 28% conversion of adjusted EBITDA.

As a reminder, the first quarter is typically our weakest free cash flow quarter due to the timing of certain annualized cash payments. We also saw a temporary working capital build in the quarter, primarily related to the timing of collections and normal inventory movements, which we expect to moderate as the year progresses. Our capital-light model continues to support strong through-cycle free cash flow generation. We ended the quarter with approximately $201 million of cash and cash equivalents and no bank debt, providing significant financial flexibility. Our balance sheet strength supports a disciplined capital allocation framework centered on balancing organic investment with selective high-return M&A opportunities and opportunistic share repurchases.

Our M&A pipeline remains robust, including a mix of smaller bolt-on opportunities like DIS as well as larger opportunities. That said, we will only execute where opportunities align with our big impact, small ticket strategy, can generate high gross margins with low capital expenditures, and can be acquired at reasonable multiples. This disciplined approach remains central to how we intend to create long-term shareholder value. Consistent with that discipline, we also repurchased over $14 million of our shares at a price of $24.59 per share, underscoring our confidence in the intrinsic value of Innovex and our commitment to thoughtful capital allocation. We were also pleased to see Amberjack complete a secondary sale of shares during the quarter.

We believe the transaction broadened our public float and enhanced trading liquidity. Amberjack remains a valued long-term shareholder and partner. Return on capital employed for the 12 months ended March 31, 2026, was 12%. ROCE is impacted by our net cash balance sheet. We remain focused on achieving a long-term target of high teens ROCE via margin expansion, high-return M&A, and shareholder returns. Looking ahead to the second quarter of 2026, we expect revenue in the range of $235 million to $245 million and adjusted EBITDA of $43 million to $48 million.

Our guidance reflects a less favorable product mix in the second quarter as well as the potential for sales disruptions and higher costs associated with the ongoing conflict in the Middle East. Even with those near-term pressures, we remain confident in our margin improvement trajectory as 2026 progresses, supported by continued share gains in U.S. Land, improving international activity, and the growing Subsea opportunity set that Adam discussed earlier. I'll now turn the call back to Adam.

Adam Anderson: Thanks, Kendal. We are pleased with our start to 2026. We exceeded the high end of our guidance range, continued to improve margins, generated positive free cash flow, and strengthened our portfolio through the DIS acquisition. Just as importantly, we continue to build momentum commercially, particularly in Subsea, where recent wins reinforce the progress we are making with customers around the world. While near-term market conditions may create some quarterly variability, our priorities remain unchanged. We will continue to focus on gaining share, expanding our technology offering through innovation, improving operational efficiency, and deploying capital in a disciplined manner. We believe our integrated platform, strong balance sheet, and No Barriers culture, positions Innovex well to create durable long-term value.

Thank you again to our employees, customers, and shareholders for your continued trust and support. Operator, we can now open the line for questions.

Operator: [Operator Instructions] Our first question comes from the line of Derek Podhaizer from Piper Sandler.

Derek Podhaizer: Maybe first start on U.S. Land growth from here. Obviously, a great quarter. What are you seeing when you look out in the second quarter, maybe the back half of the year? One of the biggest E&Ps in the Permian just gave the industry the green light to add rigs and activity and completion. So maybe just help us understand your exposure into that, which specific product lines you are seeing gain the most traction or have the most potential to grow here and really take advantage of the E&Ps restarting a bit of work?

Adam Anderson: Yes. Derek, thanks for the question. So I think up until now, the tone we have largely heard from our customers is, say, on the margin they are going to do a little bit of extra work, really around like workovers, maybe a couple of incremental DUCs that they were going to frac, which would -- all that would largely benefit our fishing tool and production accessory business. It does feel like in the last couple of weeks, there's been acceptance that maybe the price signals a little bit stronger for longer than people were expecting a couple of weeks ago.

So I would expect that the rig count ticks up a little bit in North America Land the rest of the year. That particular customer, Diamondback, is an important partner of ours. We'd expect to benefit on all of our technologies leveraged to the drilling of new well count. So hard to tell from here. I don't think it's going to be a big, big ramp-up, but I think we do see a little bit of incremental addition to rig count between now and the end of the year. The other thing the benefit of our business model is we do not have to be great at predicting forward activity.

We just have to be highly responsive to that activity as it ticks up or down. So it feels good right now, but we all know that, that can change a little bit in the near term.

Derek Podhaizer: Yes. That is for sure. Maybe on your latest acquisition, Drilling Innovation (sic) [ Innovative ] Solutions, interesting here. Maybe just help us understand exactly what they do, maybe describe to us their product line, their service? Really curious around the commercial rationale with the platform that you created at Innovex driving those revenue synergies, putting it on the global platform, similar to what you have been able to really successfully accomplish with DWS and Citadel? So maybe just some help understand this a little bit better on what you plan to do with DIS here?

Adam Anderson: Yes, so really excited about the DIS deal. Like you said, it's very similar to the Citadel and DWS acquisitions, really great products that fit nicely with our strategy of big impact, small ticket, capital-light products and an area where they can help us and we can help them. And what I mean by that is, in this case, a really strong team and products that our customers really are asking our salespeople about have been doing for a while. So it really helps. We think their team and kind of the halo effect of their products will help us on the margins, pull through more downhole tools in their core market, which today is largely the U.S. offshore.

And then similarly, there's a home for their products in some of the international offshore markets as well as potentially on U.S. Land that was probably going to be hard for DIS to realize in the short term on a stand-alone basis. So we can help them there. With respect to their product, they really have 2 big products, one being the Gatekeeper product, which is a valve running the shoe track of liners in the U.S. offshore. That fits great with our float equipment business. We're running other products at that shoe track as well as our liner hanger business. So this is just an integrated part of that portfolio.

And then they've got a valve called the Sentinel valve, which is a drill pipe valve used in underbalanced drilling applications, used a lot again in U.S. offshore. There's a variant for the U.S. market that they are just starting to roll out, that again fits really nicely with the legacy Innovex and our drilling enhancement business that we got through the DWS business. So yes, this is, I think, a great deal both for DIS as well as Innovex. So we are really excited about it.

Operator: Your next question comes from the line of Don Crist from Johnson Rice.

Donald Crist: I wanted to ask about the Middle East. Obviously, there's a lot of talk about it. It doesn't feel like there's that many impacts in the first quarter. Can you just kind of explain whether or not you were running through inventory in the first quarter and that could have a bigger impact in the second quarter? Or just any comments around the Middle East given that the conflict continues to rage on?

Adam Anderson: So. Yes, so we did have some impact in Q1, expect to have some impact in Q2 as well from the conflict. For us, the biggest area is some of the offshore markets, particularly in Saudi, has been impacted the most. Most of the land activity is still going, perhaps at a slightly lower pace than it was before. So we saw some impact. It's a little hard to quantify precisely. Certainly, our thoughts and prayers are with everybody in the region, and are pulling for a pretty quick resolution to the conflict for everybody's best interest.

I think going forward, the other impact we're going to see in Q2 that we didn't have as much of in Q1 is just the logistical cost. To your point, we were pulling down -- we were serving our ongoing operations with inventory in the region to withstand a little bit of disruption in the supply chain. Q2, we have to airfreight some things in that we previously would have sea freighted in. And those -- as you can imagine, those airfreight rates are pretty high right now. So we will see a little bit of incremental cost burden tied to that as well as some other kind of onetime expenses. All that is baked into our Q2 guidance.

Donald Crist: Okay. But going forward, it shouldn't be that big of an impact. Obviously, there will be some impact, but you are getting things into the region.

Adam Anderson: Yes, for now, that's correct. So kind of what's baked into our forecast is that we are able to continue to get products and equipment in region, everyone is kept safe over there, and that activity levels are kind of what we see today is what we see for the rest of the quarter and that there's no meaningful change one way or the other in the region.

Donald Crist: Okay. And just turning over to the optimization of the businesses and the manufacturing around the world. Obviously, we saw some good margins in the first quarter. Your goal is to come up a couple of more percentage points as we move through the year. But are there any milestones that we're really looking for? Is it Singapore ramping up? Or is it Vietnam ramping up or something like that, that's going to drive a lot of it? Or is Eldridge enough for it to see a boost as we kind of move through the rest of the year?

Kendal Reed: Yes, so I think what we are really pleased with in the first quarter was how much progress we have made on that. What we had kind of told everyone previously is we're looking to be out of Eldridge by the middle of this year, which is still the target, but we were able to make a lot more progress on the manufacturing efficiency side in Q1 than even we had hoped. It has been a core initiative internally and kind of testament to all the good work that our team has been doing.

So if you look at the gross margin improvement from Q4 to Q1, rough numbers, about half of that's going to be driven by product mix and about half of that's driven by improved manufacturing efficiency. So that was a big driver for the Q1 margin performance. Now, like we have always said, that's not going to be a smooth linear thing. We will make the final push here in Q2 to fully exit that Eldridge facility. We'll incur some moving costs to do that. So not to say it's going to continue to tick up at the same pace.

But I think we've seen a big improvement on our manufacturing cost structure that we're really excited about through the rest of the year. But like you said, the big domino that has to fall is to fully exit Eldridge, get all that demand flowing through the other plants, and really realize the full benefits of that absorption. So I think that's what we are really focused on here in Q2 so that back half of the year, we're kind of in that consistently north of 20% EBITDA margin range like we talked about.

Donald Crist: Okay. And if I could sneak in one more. Obviously, a good couple of orders in Asia. But just more broadly, can you talk about the offshore? Is energy security becoming more top of mind and you're seeing more operators accelerate plans or get more aggressive on plans going forward? Just kind of any comments around that?

Adam Anderson: I think there is some talk of that. As you know, that is a really long-cycle business in the offshore market. So I -- We're not forecasting a really robust recovery in offshore right now as a direct result of the geopolitical situation we have seen over the last couple of months. We still feel like it probably does tick up a little bit here later this year into next year, but there has not been a massive response that we have seen from the customers yet.

Operator: Your next question comes from the line of Keith Beckmann from Pickering Energy Partners.

Keith Beckmann: I was wondering, we talked a little bit about the Middle East and kind of the 1Q, 2Q impacts. I was wondering maybe, kind of following a little bit on Don's question, what are the additional potential work scopes you guys think you may see following the conflict if activity really starts to ramp? Is there any sort of products or anything in particular you think could be helpful to maybe a recovery in the Middle East whenever we get to that point potentially?

Adam Anderson: Yes. So in the Middle East, most of our -- as it is true across the world, most of our business is tied to the number of new wells drilled and the complexity of those wells. One thing we do a lot of in the Middle East and Saudi Arabia in particular is we do a lot of workover work where they're taking existing wells and modifying them, drilling longer laterals, and we sell a lot of equipment and solutions into that application. So if that were to ramp up meaningfully on the back end of that, that's probably where we would see the biggest near-term tick up.

As we talked about regularly, we have a nice fishing business, a nice artificial lift accessory business, if we do -- is a nice chunk of our business in the Middle East, although smaller. I think those things would also see a nice boost if there's really a lot of workover work, fishing activity, things like this to get existing wells back on production.

Keith Beckmann: Awesome. That's really helpful. And then on my second question, I just wanted to ask around free cash flow conversion, how you guys are thinking about that now. Obviously, we're in a little bit of a different world. How should we be thinking about maybe working capital through the balance of the year? Is there potentially a little bit of a delay on customer payments early on that could potentially reversed into the back half of the year? Just any thoughts on free cash flow?

Kendal Reed: Yes, thanks, Keith. It's a good question. So like we talked about on the Q4 call, Q1 is always seasonally our lowest free cash flow quarter. We have a number of annualized cash payments that hit in the first quarter. So not unexpected that cash was down. But as you pointed out, we did see a healthy working capital build in the quarter as well. Some of that's driven just by timing of customer payments that, yes, we would naturally expect to even out and be a nice tailwind to cash over the next few quarters. And then we did have some inventory build as well, hopefully gearing up for some increased customer activity.

So those 2 things I would expect to normalize. And as we talked about, we're not going to specifically guide free cash flow. But given the kind of market dynamic we're in, we would expect to be kind of on or above the high end of that 50% to 60% through-cycle conversion that we talked about. So Q1, I expect to kind of be the low point for 2026 free cash flow.

Operator: Your next question comes from the line of Blake McLean from Daniel Energy Partners.

Blake McLean: A lot of good stuff on here. I was hoping maybe we could just go back to the M&A stuff real quick. You guys have talked a lot about your pipeline and the potential deals, both small and large, that are in the marketplace. I was just hoping if you maybe talk a little bit about how a choppy macro environment kind of impacts what that pipeline looks like, your ability to move deals forward? Is there anything that changes in a market that feels a little more uncertain?

Kendal Reed: No, it's a really good question. I mean, I guess I would say a couple of things about that. One is that when we are looking at acquisitions, we tend to underwrite deals over the long-term, right? So one, kind of building in a lot of room for error on the valuation side. We try and be pretty disciplined on valuation. And given the dynamic we've been in where there are just a lot more potential sellers and potential buyers, I think we've been able to benefit from that over the last several years.

And then as Adam mentioned, we don't have to be that great in our business at predicting the future, what activity is going to do over the next couple of quarters. We're very responsive to that. And the types of businesses we look to acquire are generally more in line with that approach, right? These big impact, small ticket products, very little CapEx. So we can kind of benefit and create value through the ups and downs of the cycle. So I wouldn't say that changes our thinking too much other than, yes, it's going to have some impact on how you think about valuation and bid-ask spreads.

And then, yes, the other thing I would say is just generally the private markets where we're mostly looking at acquisitions, react to news a lot slower than the public markets, which tend to be very forward-looking. A lot of times when we're looking at M&A deals, it's much more of a conversation about current run rate or trailing 12-month results, that type of thing. So it takes time for these things to get incorporated. So it doesn't have quite the same volatility in terms of valuation expectations.

Operator: There are no further questions. I'd like to hand back for closing comments.

Adam Anderson: Thanks, this is Adam again. Thanks, everyone, for taking the time today. Thanks for the questions. And really, another great quarter, really exceeded our expectations. And I just have to say thank you to our employees, our customers for all of the good work. I think this is really an exciting time, and we are thrilled with how things are progressing and look forward to the next couple of quarters rolling out. So I appreciate everyone joining us.

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

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