Oil States International, Inc. (NYSE:OIS) Q4 2024 Earnings Call Transcript

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Overview

The earnings call reveals mixed signals: positive EPS growth and share repurchases are offset by flat market conditions and operational challenges. The Q&A section highlights comfort with debt levels and potential revenue growth, but also reveals management's unclear response to margin-related queries. The strategic plan includes promising partnerships and technology introductions but faces regulatory and market risks. Given these factors, the stock price is likely to remain stable, leading to a neutral sentiment.

Key Financial Performance

EPS $0.09, up from $0.06 year-over-year due to improved operational efficiency and strategic focus on profitable segments.

Revenues $165 million, with a year-over-year increase attributed to strong demand in offshore and international markets.

Adjusted EBITDA $19 million, reflecting a year-over-year increase driven by growth in offshore manufactured products.

Cash Flows from Operations $18 million, with a year-over-year increase supported by improved operational performance.

CapEx $14 million, with a portion customer-funded, reflecting ongoing investments in growth.

Share Repurchases $9 million, indicating a commitment to returning cash to shareholders.

Offshore Manufactured Product Revenues $107 million, up 5% sequentially, driven by increased activity in international markets.

Completion and Production Services Revenues $30 million, down 5% sequentially due to a declining frac spread count.

Downhole Technology Revenues $27 million, breakeven adjusted EBITDA, reflecting challenges in the segment.

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Operating Highlights

Managed Pressure Drilling Systems: Successfully marketed with key customer approval to operate in South America.

Conductor Connector Products: Positive market momentum observed.

Flex Joint Deepwater Riser Connector Product: Flagship product showing strong market acceptance.

Open Architecture Perforating Systems: New technology introductions expected to support market share gains.

International Revenue Growth: International and offshore revenues grew to 72% of consolidated revenues.

Latin America Contracts: Recent awards in Latin America and Eastern Hemisphere scheduled to commence in 2025.

Offshore and International Projects: Strong long-term prospects expected to drive capital investments.

Sale of Idled Facility: Completed sale netting cash proceeds of $24.8 million, resulting in a pre-tax gain of $15.3 million.

Cash Flows from Operations: Generated $18 million in cash flows from operations during the quarter.

CapEx Investment: Invested $14 million in CapEx, with a portion customer-funded.

Streamlining Operations: Exited underperforming locations and business lines in the US.

Focus on Business Mix Optimization: Continued focus on optimizing business mix during the fourth quarter.

Capital Allocation Priorities: Committed to investing in organic growth opportunities and funding R&D.

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Risk or Challenges

US Land-Driven Operations: The company faced headwinds in US domestic land-based operations due to a declining frac spread count, which was attributed to typical fourth quarter seasonality.

Regulatory Environment: While profitability is expected to improve within completion and production services and downhole technology segments, this is contingent on a more energy-friendly regulatory environment.

Supply Chain Challenges: The company experienced operational challenges due to adverse weather events in the Gulf of America during the second half of 2024, which impacted completion and production work.

Market Conditions: Domestic market conditions and activity levels are expected to remain relatively flat throughout 2025, which may limit growth opportunities.

Restructuring Charges: The company incurred $3.1 million in restructuring charges related to US land-based operations and facility closures, indicating ongoing operational adjustments.

International Market Risks: While there are strong long-term prospects for oil and gas, the company must navigate competitive pressures and potential economic factors in international markets.

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Guidance & Outlook

International and Offshore Revenue Growth: International and offshore revenues grew to 72% of consolidated revenues, with a 6% sequential increase in revenue and bookings.

Streamlining Operations: Strategically streamlined US operations by exiting underperforming locations and business lines, including the sale of an idled facility for $24.8 million.

Investment in Technology: Continued focus on advanced technologies and organic growth opportunities to enhance profitability.

Market Opportunities: Positive market momentum in offshore and international projects, particularly in Latin America, the US, Asia, and Africa.

2025 Revenue Guidance: Expected full-year revenues to range between $700 million and $735 million.

2025 EBITDA Guidance: Expected full-year EBITDA to range between $88 million and $93 million.

Q1 2025 Revenue Guidance: Expected revenues in Q1 2025 to range from $160 million to $170 million.

Q1 2025 EBITDA Guidance: Expected EBITDA for Q1 2025 to range from $17.5 million to $18.5 million.

2025 Cash Flow Guidance: Expected cash flows from operations to range between $65 million and $75 million.

2025 CapEx Guidance: Planned CapEx of approximately $25 million for 2025.

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Shareholder Return Plan

Share Repurchase: During the quarter, we repurchased $9 million of our common stock. We expect to generate strong free cash flow in 2025, allowing for further shareholder returns.

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Key Q&A

Q:What do you are you focused on buybacks over debt reduction at this point?

A:We feel very comfortable with our debt levels. We executed in Q4 with share repurchases. We had roughly $60 million of net debt at the end of the year, and we were roughly net debt $45 million in January. We’re really not concerned with the level of debt that we have at this point. It is prudent to focus on shareholder returns.

Q:Can you give us a sense or remind us sort of the revenue opportunity you have on the FPSO side?

A:There’s revenue growth in our offshore manufactured products business, grounded on existing backlog indicating growth in certain regions. Our bidding and quoting activity particularly in North America gives us the indication that the revenue growth appears solid. The revenue opportunity varies greatly depending on how the field is designed, but it’s probably anywhere from $15 to $25 million order of magnitude.

Q:What percentage of the revenue guidance do you think falls in the category of lower margin products that could be divested?

A:I’m not sure I understand what you’re asking, Steven.

Q:How are you thinking about the margin profile in the completion and production services segment for 2025?

A:We are trying to move those margins more into the 19% to 20% range in 2025. This is a much cleaner year, and we envision that today. The mix shifts to a little more international, offshore, which generally is a little higher margin.

Q:Can you provide more color on the various international markets and their outlooks?

A:Some of our most differentiated technology is the Connection Tech technology we put into production facilities specifically FPSOs. We have significant exposure in Brazil and are expanding into other product lines. We expect to take on incremental market share in Southeast Asia.

Q:How do you think about the trajectory of activity in the US land market?

A:We’ve seen a lift in activity as early as January and taken on incremental frac fleets. We are very selective with our product offering on land, focusing on frac and isolation technology.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer to the question about what percentage of the revenue guidance falls in the category of lower margin products that could be divested, as Cindy Taylor stated, "I’m not sure I understand what you’re asking, Steven." This indicates a lack of clarity in the response.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

OIS Transcript

Oil States International, Inc. (OIS) Q3 2025 Earnings Call Transcript

Unknown10-31

The earnings call reveals mixed signals: strong cash flow and backlog, but challenges like tariffs and revenue decline in U.S. land-based activity. Optimistic guidance on future cash flow and backlog supports a neutral sentiment. However, unclear management responses and negative EBITDA in the Downhole Technologies segment temper positive aspects. Given these factors, stock price movement is expected to remain stable in the short term.

Oil States International, Inc. (OIS) Q2 2025 Earnings Call Transcript

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The earnings call reveals strong financial metrics, including a high backlog, robust bookings, and a positive book-to-bill ratio. The company is strategically exiting low-margin operations, resulting in improved EBITDA and free cash flow. Despite a decline in U.S. land-based revenues, the focus on offshore and international markets offers stability. The Q&A highlights management's confidence in future growth and margin improvement. Although CapEx is slightly above initial guidance, it's offset by asset sales. Overall, the positive outlook and strategic focus on high-margin areas suggest a positive stock price movement.

Oil States International, Inc. (OIS) Q1 2025 Earnings Call Transcript

Positive5-1

The earnings call highlights strong international growth, met or exceeded financial guidance, and strategic streamlining. Despite challenges like tariffs and oil price declines, management's proactive measures and strong demand (book-to-bill ratio of 1.5) are promising. The Q&A indicates sustained drilling programs and margin improvements. Share repurchases and a high backlog further support a positive outlook. Given these factors, a positive stock price movement is likely, with potential for a 2% to 8% increase.

Oil States International, Inc. (NYSE:OIS) Q4 2024 Earnings Call Transcript

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OIS Report

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2025-02-21

OIL STATES INTERNATIONAL, INC 10-Q

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2024-10-30

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