Q1 2024 Oil States International Inc Earnings Call
Dee: Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oil States International First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is D and I will be your conference operator today at this time I would like to welcome everyone to the oil States International first quarter 2024 earnings call. All lines have been placed on mute to prevent any background nice up there to speak of she marks there will be a question and answer session.
Dee: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Ellen Pennington, Senior Counsel and Assistant Corporate Secretary. Please go ahead.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Alan Pangbourne Senior Counsel and assistant Corporate Secretary. Please go ahead.
Ellen Pennington: Thank you, Dee. Good morning, and welcome to Oil State's first quarter 2024 earnings conference call. Our call today will be led by our President and CEO, Cindy Taylor, and Lloyd Hajdik, Oil State's Executive Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law.
Alan Pangbourne: Thank you Dean good morning, and welcome to oil States' first quarter 'twenty 'twenty four earnings conference call. Our call today will be led by our President and C. E O Cindy Taylor and Lloyd hijacked oil States' executive Vice President and Chief Financial Officer before we begin we would like to caution listeners regarding.
Alan Pangbourne: Forward looking statements to the extent that our remarks today contain information other than historical information. Please note that we're relying on the safe Harbor protections afforded by federal law No. One should assume that these forward looking statements remain valid later in the quarter or beyond any such remarks should be weighed in the context of the many factors.
Ellen Pennington: No one should assume that these forward-looking statements remain valid later in the quarter or beyond. Any such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our Form 10-K, along with other SEC filings.
Alan Pangbourne: That affect our business, including those risks disclosed in our Form 10-K, along with other SEC filings. This call is being webcast and can be accessed at oil States' website. A replay of the conference call will be available two hours. After the completion of this call and we continue to be available for 12 months I'll now turn the call over to Cindy.
Ellen Pennington: This call is being webcast and can be accessed on Oil State's website. A replay of the conference call will be available two hours after the completion of this call and will continue to be available for 12 months. I will now turn the call over to Cindy.
Cynthia B. Taylor: Thank you, Ellen. Good morning, and thank you for joining our conference call today where we will discuss our first quarter 2024 results and provide our thoughts on market trends in addition to discussing our company specific outlook comments. I want to first draw your attention to certain segment changes that we have made to better reflect the underlying activity demand drivers for our business as well as how we manage our segments. Short cycle businesses previously reported within our offshore manufactured product segment are now being included in our downhole technology segment. All prior periods have been conformed to the current year presentation.
Cynthia B. Taylor: Thank you Ellen and good morning, and thank you for joining our conference call today, where we will discuss our first quarter 2024 results and provide our thoughts on market trends. In addition to discussing our company's specific outlook comments I want to first draw your attention to certain segment changes.
Cynthia B. Taylor: We have made to better reflect the underlying activity demand drivers for our business as well as how we manage our segment's short cycle businesses previously reported within our offshore manufactured products segment are now being included in our downhole technologies segment. All prior periods have been confirmed.
Cynthia B. Taylor: Armed with the current year presentation, our first quarter consolidated revenues and adjusted EBITDA decreased sequentially due primarily to the impacts of seasonality and the timing of revenue recognition for our percentage of completion projects in our offshore manufactured products segment, where revenues inquiry.
Cynthia B. Taylor: Our first quarter consolidated revenues and adjusted EBITDA decreased sequentially due primarily to the impacts of seasonality and the timing of revenue recognition for our percentage of completion projects in our offshore manufactured product segment, where revenues increased year over year but declined sequentially. We saw some slowing momentum from an order perspective in the first quarter of 2024 in terms of drilling and subsea equipment orders. Certain orders, which we have a high degree of confidence of being awarded, moved out of the quarter, resulting in a segment backlog of $305 million as of March 31st and a quarterly book-to-bill ratio of.8 times.
Cynthia B. Taylor: Year over year, but declined sequentially, we saw some slowing momentum from an order perspective in the first quarter of 2024 in terms of drilling and subsea equipment orders certain orders, which we have a high degree of confidence of being awarded moved out of the quarter Reis.
Cynthia B. Taylor: And so I'm a backlog of 305 million as of March 31st and a quarterly book to Bill ratio of 0.8 times.
Cynthia B. Taylor: Our completion services and downhole technologies businesses have begun to recover from the fourth quarter 2023 activity slowdown that the industry experienced, but progress in this recovery during the first quarter was slow. Cost control and other reduction measures are being implemented in the areas where we are experiencing lower levels of activity, particularly in the natural gas basins, as we do not expect to see much recovery in those basins over the next couple of quarters.
Cynthia B. Taylor: Our completion services and downhole technologies businesses have begun to recover from the fourth quarter 2023 activities slow down that the industry experienced but progress in this recovery during the first quarter was slow cost control and other reduction measures are being implemented.
Cynthia B. Taylor: <unk> in the areas, where we are experiencing lower levels of activity, particularly the natural gas basins as we do not expect to see much recovery in those basins over the next couple of quarters. However, we remain bullish on natural gas fundamentals over the longer term.
Cynthia B. Taylor: However, we remain bullish on natural gas fundamentals over the longer term. Our investments in technology and innovation were again highlighted by the Offshore Technology Conference with the announcement that we are the recipient of two 2024 Spotlight on New Technology awards for our SWIFT Ultra Deepwater Connector and our Active Hub platform with Active Latch. Both of these new technologies are explained in more detail in our press release. We remain encouraged by the continued expansion in offshore activity globally coupled with enhanced competitive positioning in each of our business segments through our recent new technology introductions. Benefits of our expanded technology offering are expected to extend well beyond the next couple of years. Lloyd will now review our results of operations and financial position in more detail.
Cynthia B. Taylor: Our investments in technology, and innovation, where again highlighted by the offshore technology conference with the announcement that we are the recipient of two 2024 spotlight on New Technology Awards for our Swift Ultra deepwater connector and our active hub platform.
Cynthia B. Taylor: With active latch both of these new technologies are explained in more detail in our press release, we remain encouraged by the continued expansion in offshore activity globally, coupled with enhanced competitive positioning in each of our business segments through our recent new technology introductions.
Cynthia B. Taylor: Benefits of our expanded technology offering are expected to extend well beyond the next couple of years.
Cynthia B. Taylor: Lloyd will now review our results of operations and financial position in more detail.
Lloyd A. Hajdik: Thanks, Cindy. Good morning, everyone.
Lloyd: Thanks, Cindy and good morning, everyone. During the first quarter, we generated revenues of $167 million.
Lloyd A. Hajdik: During the first quarter, we generated revenues of $167 million, adjusted consolidated EBITDA of $15 million, and a net loss of $13 million, or $0.21 per share. Our net loss for the first quarter included a non-cash goodwill impairment charge of $10 million. Facility consolidation and other charges of $2.5 million. Excluding these charges, our adjusted net loss was $1.9 million, or a net loss of $0.03 per share. In the first quarter, certain short cycle manufacturing operations historically reported within the offshore manufactured product segment, such as legacy frac plugs and elastomer products, were integrated into the downhole technology segment to better align with the underlying activity demand drivers and current segment management structure as well as to provide for additional operational synergies.
Lloyd: Adjusted consolidated EBITDA of $15 million in it.
Lloyd: Net loss of $13 million or 21 cents per share.
Lloyd: Our net loss for the first quarter included a noncash goodwill impairment charge of $10 million.
Lloyd: Facility consolidations and other charges of $2 $5 million.
Lloyd: Excluding these charges our adjusted net loss was $1 $9 million or a net loss of three cents per share.
Lloyd: In the first quarter certain short cycle manufacturing operations historically reported within the offshore manufactured products segment.
Lloyd: Such as legacy Frac plugs and elastomer products were integrated into the downhole technologies segment.
Lloyd: To better align with the underlying activity demand drivers and current segment management structure as.
Lloyd: As well as to provide for additional operational synergies.
Lloyd A. Hajdik: Historical segment, financial, backlog, and other information was also conformed with the first quarter 2024 revised segment presentation. Our offshore manufactured products segment generated revenues of $87 million, operating income of $11 million, and adjusted segment EBITDA of $16 million in the first quarter. During the first quarter, the segment recorded charges of $1.5 million associated with the consolidation of certain manufacturing and service locations, excluding facility consolidation charges. Adjusted segment EBITDA margin was 18% in the first quarter.
Lloyd: Historical segment financial backlog and other information. We're also conformed with the first quarter 2020 for revised segment presentation.
Lloyd: Our offshore manufactured products segment generated revenues of $87 million operating income of $11 million and adjusted segment EBITDA of $16 million in the first quarter.
Lloyd: During the first quarter the segment recorded charges of $1.5 million associated with the consolidation of certain manufacturing and service locations.
Lloyd: Excluding the facility consolidation charges adjusted segment EBITA margin was 18% in the first quarter.
Lloyd A. Hajdik: Regarding facility planning, we consolidated certain facilities in Houston and are in the process of strategically relocating our Asian manufacturing and service operations from Singapore to Batam, Indonesia. We own two facilities that are classified as held for sale assets as of March 31. Proceeds from the sales of our facilities in Singapore and Houston, which are anticipated to close in 2024, are expected to total approximately $35 million, significantly exceeding the costs associated with our planned investment in our new BATAM facility.
Lloyd: Regarding our facility planning, we consolidated certain facilities in Houston and are in the process of strategic strategically relocating our Asian manufacturing and service operations from Singapore to Baton Indonesia.
Lloyd: We own two facilities that are classified as held for sale assets at March 31.
Lloyd: Proceeds from the sales of our facilities in Singapore in Houston.
Lloyd: You are anticipated to close in 2024.
Lloyd: Are expected to total approximately $35 million significantly exceeding the cost associated with our planned investment in our new Bytom facility.
Lloyd: Land was purchased in but Tom this quarter and we commenced construction with completion targeted for the first half of 2025.
Lloyd A. Hajdik: Land was purchased in Batam this quarter, and we commenced construction with completion targeted for the first half of 2025. In the meantime, temporary manufacturing operations have been established in Batam so that we can efficiently execute both our contracted backlog and subsequent orders during the construction phase.
Lloyd: In the meantime, temporary manufacturing operations had been established and Vitol. So that we can efficiently execute both our contracted backlog.
Lloyd: Subsequent orders during the construction phase.
Lloyd A. Hajdik: Backlog total $305 million at March 31, a decrease of 7% from December 31, 2023. In our well site services segment, we generated revenues of $47 million, an operating loss of $0.4 million or $400,000, and adjusted segment EBITDA of $7 million in the first quarter. During the quarter, the segment recognized $0.7 million, or $700,000, in costs associated with the consolidation and exit of three facilities. Additionally, the segment recorded costs of $0.4 million, or $400,000, associated with the defense of certain patents related to its proprietary technology.
Lloyd: Backlog totaled $305 million at March 31, a decrease of 7% from December 31 2023.
Lloyd: In our well site services segment, we generated revenues of $47 million and operating loss of <unk> 4 million or $400000 in adjusted segment EBITDA of $7 million in the first quarter.
During the quarter the segment recognized recognized <unk> 7 million or $700000 in costs associated with the consolidation and exit of three facilities.
Lloyd: Additionally, the segment recorded costs of <unk> 4 million or $400000 associated with the defense of certain patents related to its proprietary technologies.
Lloyd A. Hajdik: Excluding these charges, adjusted segment EBITDA margin was 14% in the first quarter compared to 12% in the fourth quarter. In the downhole technology segment, we reported revenues of $33 million, an operating loss of $12 million, and adjusted segment EBITDA of $2 million for the quarter. These results included a non-cash goodwill impairment charge of $10 million recorded in connection with the first quarter 2024 segment realignment. As is usually the case, during the first quarter, we used cash flows from operations totaling $11 million and invested $8 million in land and capex net of proceeds from sales of equipment.
Lloyd: Excluding these charges adjusted segment EBITDA margin was 14% in the first quarter compared to 12% in the fourth quarter.
Lloyd: In our downhole technologies segment, we reported revenues of $33 million and operating loss of $12 million and adjusted segment EBITDA of $2 million for the quarter.
Lloyd: These results included a noncash goodwill impairment charge of $10 million recorded in connection with the first quarter of 2024 segment realignment.
Lloyd: As is usually the case during the first quarter, we used cash flows from operations totaling $11 million and invested $8 million landed in land and Capex net of proceeds from sales of equipment.
Lloyd A. Hajdik: Net CapEx in the first quarter was primarily used to purchase land for our Nupitam, Indonesia manufacturing facility. As of March 31, no outstanding balances were outstanding under our revolving credit facility, while amounts available to be drawn totaled $86 million, together with cash on hand, resulting in available liquidity of $110 million. In February, we extended the maturity date of our revolving credit facility to February 2028. Now Cindy will offer some market outlook and concluding comments.
Lloyd: Net capex in the first quarter was primarily used to purchase land for our new Baton Indonesia manufacturing facility.
Lloyd: As of March 31, no borrowings were outstanding under our revolving credit facility.
Lloyd: While amounts available to be drawn totaled $86 million, which together with cash on hand resulted in available liquidity of $110 million.
Lloyd: February we extended the maturity date of our revolving credit facility to February 2028.
Speaker Change: Now. So then he will offer some market outlook and concluding comments.
Cynthia B. Taylor: U.S. land activity levels took a negative turn in 2023 with softening global demand, higher production, and resultant elevated inventories, which led to an approximate 20 percent activity decline in the U.S. by the end of the year. While Brent and WTI crude oil prices were up approximately 10 and 15 percent, respectively, at March 31st, compared to the prices in effect at December 31st, this improvement developed later in the quarter and did not translate into activity increases. Natural gas U.S.-driven basins where we operate remain weak given the low commodity price. Global inventories are slightly below their 5-year seasonal average for crude oil but remain well above the 5-year average for natural gas.
Speaker Change: Thank you U S land activity levels took a negative turn in 2023 with softening global demand higher production and resultant elevated inventories, which led to an approximate 20% activity decline in the U S. By the end of the year, while Brent and W. T I crude oil prices were up.
Speaker Change: Approximately 10, and 15% respectively at March 31st compared to the prices in effect at December 31st. This improvement developed later in the quarter and did not translate into activity increases natural gas U S driven basins, where we operate remain weak given the low.
Speaker Change: Commodity price.
Speaker Change: Global inventories are slightly below their five year seasonal average for crude oil, but remain well above the five year average for natural gas given current industry dynamics, we expect U S land drilling and completion spending in 2024 to remain at or near current levels, but do think we could see increased.
Cynthia B. Taylor: Given current industry dynamics, we expect U.S. land drilling and completion spending in 2024 to remain at or near current levels but do think we could see increased spending in international and offshore markets. Despite the seasonally slow start in the first quarter of 2024, revenues in our offshore manufactured product segment are expected to grow year over year given the level of bidding and quoting activity. New Product Introductions, Strong Levels of Backlog, and the Timing of the Expected Execution of Major Project Milestones
Speaker Change: Spending in international and offshore markets.
Speaker Change: Despite the seasonally slow start in the first quarter of 2024.
Speaker Change: Revenues in our offshore manufactured products segment are expected to grow year over year, given the level of bidding and quoting activity.
Speaker Change: New product introductions strong levels of backlog and the timing of expected educate execution of major project milestones.
Cynthia B. Taylor: We expect our well site services and downhole technology segments to continue to perform in line with market activity indicators. However, increased contributions from the commercialization of new technologies that I have discussed previously, along with cost reduction initiatives, should improve our results. Considering these market conditions and a slower start to the year, we expect to generate EBITDA ranging from $85 to $90 million in 2024, which represents an approximate 5% reduction from the midpoint of our prior guidance range.
Speaker Change: We expect our well site services and downhole technologies segments to continue to perform in line with market activity indicators.
Speaker Change: However increased contributions from the commercialization of new technologies that I have discussed previously along with cost reduction initiatives should improve our results considering these market conditions and a slower start to the air we expect to generate EBITDA ranging from 85 to nine.
Speaker Change: <unk> million dollars during 2024, which represents an approximate 5% reduction from the midpoint of our prior guidance range in terms of free cash flow generation, we expect to generate $40 million in free cash flow during 2024, implying a free cash.
Cynthia B. Taylor: In terms of free cash flow generation, we expect to generate $40 million in free cash flow during 2024, implying a free cash flow yield of 10% or greater. Various facility sales could increase our free cash flow, but the timing of closing remains uncertain. Now, I would like to offer some concluding comments.
Speaker Change: Cash flow yield of 10% or greater various facility sells could increase our free cash flow, but timing of closing remains uncertain now I would like to offer some concluding comments, we remain focused on optimizing our operations and pursuing profitable activity and support.
Dee: We remain focused on optimizing our operations and pursuing profitable activity in support of our global customer base. As market opportunities unfold both in the U.S. and in international and offshore markets, we will continue to focus on core areas of expertise with the deployment of our recently enhanced equipment and technologies to further differentiate our products and service offerings. Our core competencies are well entrenched in the markets we serve, and we continue to bid on potential opportunities supporting our traditional subseed floating and fixed production systems, drilling, and military customers, while also bidding to support multiple new customers and projects involved in developments such as deep sea minerals gathering, fixed and floating offshore wind developments, carbon capture and storage, geothermal applications, and other renewable and clean tech energy opportunities.
Speaker Change: Our global customer base as market opportunities unfold, both in the U S and in international and offshore markets. We will continue to focus on core areas of expertise with the deployment of our recently enhanced equipment and technologies to further differentiate our products and service offerings.
Speaker Change: Our core competencies are well entrenched in the markets, we serve and we continue to bid on potential opportunities supporting our traditional subsea floating and fixed production systems drilling military customers. While also bidding to support multiple new customers and projects involved in development such as <unk>.
Speaker Change: <unk> see minerals gathering fixed and floating offshore wind developments carbon capture and storage geothermal applications and other renewable and clean Tech energy opportunities. These new energy transition opportunities create strong potential for us to expand our product and service offerings.
Dee: These new energy transition opportunities create strong potential for us to expand our product and service offerings and our revenue base over the longer term. Oil States will continue to conduct safe operations and will remain focused on providing technology leadership in our various product and service offerings with value-added products and services available to meet customer demands globally. That concludes our prepared comments. Dave, would you open up the call for questions and answers at this time, please?
Speaker Change: And our revenue base over the longer term.
Speaker Change: Oil states will continue to conduct safe operations and will remain focused on providing technology leadership and our various product and service offerings with value added products and services available to meet customer demands globally.
Speaker Change: That completes our prepared comments, Dave would you open up the call for questions and answers at this time please.
Dee: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker in your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue, and your first question comes from the line of Jim Rollyson from Raymond James. Please ask your question.
Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star wanting a telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask your question or listening via loudspeakers into our device.
Speaker Change: Please speak up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again press star one to trying to Q and your first question comes from the line of Jim Rollyson from Raymond James Please ask your question.
James Michael Rollyson: Hey, good morning, Cindy and Lloyd.
James Michael Rollyson: Hey, good morning, Cindy and Lloyd.
Cynthia B. Taylor: Hi Jim. Hi Jim.
James Michael Rollyson: Hi, Jim Hi, Jim.
Cynthia B. Taylor: How are you guys today? So Cindy, in the offshore manufactured products business, you obviously order slips. You've had, I think, two quarters of sub one times back booked a bill, but you kind of continue to talk as do others in the industry around. General Spend, and a Strong Outlook for Offshore. Maybe just a little color around what you're seeing from bidding. It sounds like orders slipped, and maybe some commentary around when you think you'll capture that, and then the other part I wanna get into is just maybe the timing of how your backlog is set to play out through this year, so we make sure we kinda get the timing of revenues in that segment correct.
James Michael Rollyson: Hi, how are you guys today.
James Michael Rollyson: So cindy on the on the offshore manufactured products business, you, obviously orders slips you've had I think two quarters of sub one times book to Bill but.
James Michael Rollyson: You kind of continue to talk as those others in the industry around just general spend and strong outlook for offshore may be just a little color around what youre seeing from bidding it sounds like orders slipped and just some maybe commentary around when you think you capture that in.
James Michael Rollyson: Then the other part I want to get into is just maybe the timing of how your backlog is set to.
James Michael Rollyson: To play out through this year. So we make sure we kind of get the timing of revenues in that segment correct.
Cynthia B. Taylor: Yeah, thank you, Jim. Those are great questions, and I'll just kind of reflect a little bit on Q4 and recall that we were very heavy on our major projects. Obviously, a lot of material receipts came in, which accelerated revenue recognition in Q4 around those major projects because it's cost-incurred, obviously, the total cost expected for those jobs. And so even though our book-to-bill was below one, with those heavy revenues, our bookings were fairly strong in Q4. I kind of want to throw that out.
Speaker Change: Thank you Jim those are great questions and I'll, just kind of reflect a little bit on Q4 and recall that we were very heavy on our major projects.
Speaker Change: Obviously, a lot of material receipts came in with accelerated revenue recognition in Q4 around those major projects because it's cost incurred obviously, the total cost expected for those jobs and so even though our book to Bill was below one with those heavy revenues our bookings were fairly strong.
Speaker Change: In Q4, I kind of want throw that out specific to Q1 I would speak to you know why it wasn't one to one which was shy of our expectations, but in particular, we had.
Cynthia B. Taylor: Specific to Q1, I would speak to why it wasn't one-to-one, which was shy of our expectations, but in particular, we had a large order where we secured long-lead time orders but not the full orders that flipped over into Q2. So I kind of look at the.8 differently than if we just weren't; we didn't have anything active that we thought was coming in. So, as I mentioned in the notes, we feel very secure about getting those orders because the customer has already ordered the lead time pieces of that order.
Speaker Change: A large order, where we secure a long lead time orders, but not the full orders that slipped over into Q2, So I kind of look at the 0.8 differently than if we just weren't we didn't have anything active that we thought was coming and so as I mentioned in the notes we feel very secure about.
Speaker Change: Getting those orders because the customer is party order les.
Speaker Change: Lead times are.
Speaker Change: The pieces of that order, so, let's say that that kind of explains the 0.8 book to Bill we still expect that our book to Bill for the year will be north of one I always say that the viagra. These quarter by quarter are very difficult for just an example of the raise and I just talked about on timing.
Cynthia B. Taylor: So let's say that that kind of explains the.8 book-to-bill. We still expect that our book-to-bill for the year will be north of one. I always say though, the vagaries quarter by quarter are very difficult, as an example of the reason I just talked about regarding timing of orders. So I don't see a massive acceleration of orders, nor do I see any real delays in orders. They're always going to be very dependent on when the larger ones come in during a given quarter, and they can move between quarters.
Speaker Change: Of orders, so I don't see a massive acceleration of orders nor do I see any real delays in the orders, they're always going to be very dependent on when the larger ones come in in a given quarter and they can move between quarters I wish it werent that way, but I will tell you if I ever see a slow.
Cynthia B. Taylor: I wish it weren't that way, but I will tell you if I ever see a slowdown, I expect our book-to-bill to go below one, and at this point, it does not. Right now, our forecast for Q2 is to be slightly north of one, and it's predicated obviously on the order I just talked about, plus some pipeline orders that are fairly broad-based across the globe, as well as some service bookings that we expect in Brazil. So those are kind of the lay of the land from an order perspective, but our outlook for overall bookings over the year really hasn't changed.
Speaker Change: Down that I expect our book to Bill to go below one and at this point I do not right now our forecast for Q2 is to be slightly north of one and it's predicated obviously on the order I just talked about plus some pipeline orders that are fairly broad based.
Speaker Change: Across the globe as well as some service bookings that we expect in Brazil.
Speaker Change: So those are kind of the lay of the land from an order perspective.
Speaker Change: But our outlook for overall bookings over the year really haven't changed.
Speaker Change: Okay.
Cynthia B. Taylor: Okay, and then just as you look at it, you have better insight, obviously, than we do on how the revenue progression should play out. And I recognize some of its backlog-driven and some of its shorter cycle stuff. But just as you look at backlog and the way things are supposed to play out in a calendar, which they don't always do, just how do you think this year will proceed? Because you gave the color for the full year being actually up year over year. But just maybe how you lay that out from a quarter to quarter perspective.
Speaker Change: Okay and then just on as you look at you have better insight obviously than we do on.
Speaker Change: How the revenue progression should play out and I recognize some of its backlog driven and some of the shorter cycle stuff, but just as you look at backlog and the way things are supposed to.
Speaker Change: Play out on the calendar, which they don't always do just how do you think this year proceeds because you gave the color for the full year being actually up year over year.
Speaker Change: But just maybe how you lay that out from a quarter to quarter perspective.
Cynthia B. Taylor: Just basically, as is typical, if you even look at history, that's why I kind of said, you know, this quarter looks kind of rough for offshore products, but it's actually up year over year. There's always that seasonal element to it, but what you're going to see, I think, is kind of a steady ramp as we progress throughout Q2, Q3, and Q4 for offshore products, and those are the kind of trends we've seen consistently in recent years.
Speaker Change: Yeah, just basically as it typically be even look at history. That's why I kind of said you know this quarter looks kind of rough for offshore products, but it's actually up year over year. There is always that seasonal element to it.
Speaker Change: But what youre going to see I think is kind of a steady ramp as we progress throughout Q2, Q3, and Q4 for offshore products at NASDAQ trends, we've seen consistently in past years and again. It obviously is dependent on the timing of getting the backlog in the door, but a lot of it is our.
Cynthia B. Taylor: And again, it obviously is depending on the timing of getting the backlog in the door, but a lot of it is already secured at this point in time. I would focus on, to some degree, the service orders, because mix always plays a bit of an impact as well, and service tends to be higher-margin. But overall, just assume a steady ramp from Q1 throughout the year in terms of revenues and EBITDA generation. Got it.
Speaker Change: Already secured at this point in time I would focus on to some degree the service orders because mix always plays a bit of an impact as well in service tends to be higher margin.
Speaker Change: But overall just consent at same a steady ramp from Q1 throughout the year in terms of revenues and EBITDA generation.
Speaker Change: Got it I'll turn it back I appreciate the comments.
Dee: Got it. I'll turn it back. Appreciate the comments.
Speaker Change: Thank you Jim.
Luke Michael Lemoine: Our next question comes from the line of Luke Lemoine from Piper Sandler. Please ask your question.
Speaker Change: Our next question comes from the line of Luke Lemoine from Piper Sandler. Please ask your question.
Luke Michael Lemoine: Yeah, hey, good morning. Good morning, Luke. Cindy, you touched on some of the pieces earlier, but can you just refresh us on where you are in the downhole evolution, you know, what are some of the key initiatives, you know, and kind of where you are on the new product and technology rollout?
Luke Michael Lemoine: Yeah, Hey, good morning.
Luke Michael Lemoine: Good morning, Luke Cindy anyway.
Luke Michael Lemoine: You touched on some of the pieces earlier, but can you just refresh us on where you are on.
Luke Michael Lemoine: On the downhole evolution, what are some of the key initiatives and kind of where you are on the new product.
Speaker Change: <unk> rollout.
Cynthia B. Taylor: That is also a great question, Luke. And what we've done and why we're blending these groups together is that we have a more integrated downhole technologies offering, and this is how we're managing the business now to where the short cycle offshore products are getting highly integrated with our downhole technologies segment from a leadership perspective, reporting perspective, everything, procurement, and support. And so I think the go forward for the business is in improved shape. The base business before the segment reallocation did improve sequentially, both in terms of revenue and EBITDA. And so we're seeing results now.
Speaker Change: No that was it that it's also a great question look and what we've done and why we are blending makes groups together, we have a more integrated downhole technologies offering and this is how we're managing the business now to where the short cycle offshore products are getting highly integrated with our downhole.
Speaker Change: Technologies segment from a leadership perspective, Reportings perspective, everything procure them procurement and support.
Speaker Change: And so I think the go forward part of the business is an improved shape.
Speaker Change: The what I'll call the base business before this segment reallocation did improve sequentially are both in terms of revenue and EBITDA and so we're seeing results now we expect further improvement in Q2 and that is predicated on some.
Cynthia B. Taylor: We expect further improvement in Q2, and that is predicated on some improved interest, I'll call it, on the domestic perforating side in addition to higher international sales. So the keys there are technology rollout, market share in the U.S., and further international penetration on the perforating side, which, you know, honestly, our plug business is fine. And it's both, you know, getting good market share and making margins. So that's really not the focus. The focus has been on the perforating side of the business. And I'm always – don't get me excited about it, but I am saying we're seeing improvements at this point in time. Okay, I got it.
Speaker Change: Improved interest I'll call. It on the domestic perforating side in addition to higher.
Speaker Change: Higher international sales. So the keys, there are technology roll out market share in the U S and Internet further international penetration on the perforating side.
Speaker Change: That you know are honestly are plug business is fine and it's both you know getting good market share and making margin. So that's really not the focus the focus has been on the perforating side of the business.
Speaker Change: And I'm always.
Speaker Change: Don't get me excited about it but I am saying, we're seeing improvements at this point in time.
Speaker Change: Okay got it.
Luke Michael Lemoine: Thanks so much, Cindy.
Speaker Change: Thanks, a lot.
Thanks Luke.
Dee: Once again, if you would like to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Our next question comes from the line of Stephen Gengaro from Stiefel. Please ask your question.
Speaker Change: Once again, if you would like to ask a question. Please press star one on your telephone keypad and wait for a name to be announced our next question comes from the line of Steve <unk> from Stifel. Please ask your question.
Stephen Gengaro: Good morning, everybody. Oh, hi, David. Two for me, first, with the recasting of the segments and just thinking about offshore manufactured products, should we think about the potential margin profile and or sort of incrementals in that business any differently as we look out over the next several quarters?
Steve: Good morning, everybody.
Steve: Hi, Steven.
Steve: For me first with the.
Steve: With the recasting of the segments and just thinking about offshore manufactured products.
Steve: Should we think about the potential margin profile <unk> sort of incrementals in that business any differently as we look out over the next several quarters.
Cynthia B. Taylor: No, not at this point in time. It was interesting when we did the recast, the margin profile ended up in similar positions. And so we don't expect incrementals. Obviously, incrementals should go up if we get the top-line growth that we're looking for, but that's not unique to the mix of businesses. That's just cost absorption.
Steven: No not at this point in time it was interesting when we did that recap kind of the margin profile and ended up in similar positions.
Steven: And so we don't expect Incrementals.
Steven: That obviously incrementals should go up if we get the top line growth that we're looking for but that's not unique to the mix of businesses. That's just cost absorption.
Cynthia B. Taylor: Okay, thanks, and I got dialed in a little late so I apologize if you address this, but when you think about the change in your full-year guide from the prior guidance, is most of that just kind of US land activity related, or is there anything else in there we should be thinking about?
Speaker Change: Okay. Thanks.
Speaker Change: I got dialed in a little late so I apologize if you addressed this but when you think about.
The change in your full year guide from the prior guidance is most of that just just kind of U S land activity related or is or is there anything else in there we should be thinking about.
Cynthia B. Taylor: You know, at this point in time, we obviously have a lower quarter in our offshore manufactured products business than we expected to have, with a little bit of these orders pushed out, and so I'm putting a little downward pressure on offshore manufactured products. And you know, the key to U.S. land for us is kind of managing through the exposure that we have in the gas plays efficiently this year, given the very low activity levels, but staying prepared for what should be an uplift in those plays, you know, whether as early as 2025.
Speaker Change: At this point in time.
Speaker Change: You know.
Speaker Change: We obviously had a lower quarter in our offshore manufactured products business than we expected to have.
Speaker Change: With a little bit of these orders pushed out and so I'm, putting a little downward pressure on offshore manufactured products and you know.
Speaker Change: The key to U S land for US is kind of managing through the exposure that we have in the gas plays efficiently outside this year, given the very low activity levels, but staying prepared for what should be an uplift on those plays.
Speaker Change: As our latest 2025, and so controlling cost in the natural gas plays really is going to be the game for the next couple of quarters as it relates to U S land, but we are proactively doing what we need today. So there's not a terrible drag on the overall results.
Cynthia B. Taylor: And so controlling costs in the natural gas plays really is going to be the game for the next couple of quarters as it relates to U.S. land, but we are proactively doing what we need to do so it's not a terrible drag on the overall results.
Speaker Change: Okay, Great and then maybe just one final one.
Cynthia B. Taylor: Okay, great. And then maybe just one final point on the perforating side, there's been a lot of movements over the last couple years, I think just in the competitive landscape, and you have one competitor, I think he's trying to sell his business. Can you just speak to the dynamics there? Have you seen any changes there? As far as the perforating side is concerned, and what do you see from a pricing perspective?
Speaker Change: On the perforating side, there's been a lot of movement over the last couple of years I think just in the competitive landscape and you have one competitor I think is trying to seller.
All of our business.
Speaker Change: Can you just speak to the dynamics there have you seen any any changes there.
Speaker Change: As far as the perforating side is concerned.
Speaker Change: What are you seeing there from a pricing perspective.
Cynthia B. Taylor: No, I'll be honest. Yeah, there is a larger player that is looking to monetize, and there are actually a couple of smaller competitors looking to monetize, so that could lend itself to a healthier market going forward for the business. We are committed to the business, and we're committed to delivering the technology it takes to be successful in it. I'll just kind of, you know, generally say that from a competitive landscape, it's hard for me to say that it isn't getting a little bit better or will be as some of these transactions occur.
Speaker Change: Well I'll be honest, yes, there is a large a larger player that is looking to monetize and theres actually a couple of smaller competitors looking to monetize so that could lend itself to a healthier.
Speaker Change: Market going forward for the business, we are committed to the business and we're committed to.
Speaker Change: Delivering the Titan ology it takes to be successful in it.
Speaker Change:
Speaker Change: And I'll just kind of you know generally say that from a competitive landscape. It's hard for me to say that it's not getting a little bit better or will be as some of these transactions occur in that tight more important for us specifically is the investment we made last year and the new technology rollout and importantly to go to.
Cynthia B. Taylor: And I think more important for us specifically is the investment we made last year in the new technology rollout and, importantly, the go-to-market strategy, which has evolved from moving away from wireline companies to E&Ps and back, and we just want to support our customers regardless of where they are in the supply chain. And I think that's going to benefit us over a longer period of time.
Our market strategy, which has evolved from moving away from wireline companies to E&ps and back and we just want to support our customers regardless of where they are in the supply chain and I think that's going to benefit us over the longer period of time.
Cynthia B. Taylor: If I could slip in one more, Cindy, sorry, does the EMP consolidation and the larger operators' appreciation for that technology ultimately help you?
Speaker Change: If I could slip in one more semi sorry.
Speaker Change: There's the E&P consolidation and the larger operators appreciation for that technology ultimately help you.
Cynthia B. Taylor: Oh, I think it would, for sure. I mean, it all comes down to reliability. And in the world we work in, it's also got to be cost, and we've made significant improvements there. But I think the technology differentiators really play more probably in the international market, just because of the reliability factor that is necessary. And there's not quite as much competition, quite frankly, in international basins. And so those are going to be the key differentiators and drivers of our success going forward. Okay, great.
Speaker Change: Oh, I think it would for sure I mean, it all comes down to reliability and in the World. We work and it's also got a big cost and we've.
Speaker Change: We've made significant improvements on there, but I think the technology different are differentiators really play more probably in the international market just because of.
Speaker Change: The reliability factor that is necessary and there's not quite as much competition quite frankly and international basins and so those are going to be the key differentiators and are drivers of our success going forward.
Speaker Change: Okay, great. Thank you.
Cynthia B. Taylor: Okay, great. Thank you.
Speaker Change: Thanks Steven.
Dee: Our next question comes from the line of John Daniel from Daniel Energy Partners. Please ask your question.
Speaker Change: Our next question comes from the line of John Danielle from Daniel <unk> Chief Partners. Please ask your question.
John Daniel: Hey, good morning to me, Lloyd. Hi, John.
John Daniel: Hey, good morning, Jimmy.
Hi, John.
John Daniel: This sort of answers my question in response to Stephen's question, but I'll maybe rephrase it a little bit. I mean, the carnage in that gas market is growing, yet the medium to longer term outlook remains constructive. It's really just how you capitalize on the present disconnect. Because there are a lot of, as you all know, there are a lot of small service companies, regional ones, struggling, and those struggles probably intensify, thus seem to create opportunities. Well, I think, yeah.
John Daniel: You sort of answered just answered my question was in response to Steven's question, but I'll rephrase it a little bit.
John Daniel: The carnage in Nat gas markets is growing.
John Daniel: Yet the medium to longer term outlook.
John Daniel: Remains constructive and it's really just how do you capitalize on the present disconnect.
John Daniel: Because theres a lot of as you all know Theres a lot of small service companies regional ones struggling and those struggles probably intensify thus seem to create opportunities.
Speaker Change: Well I think.
Speaker Change: Yeah, they will net but actually a lot of people are shutting doors and you know that just farms that the competitive positioning in the plays we already work for particularly in the northeast some of the larger players that are active there, we're doing multi well pads as opposed to the lower tier type activity.
Cynthia B. Taylor: Yeah, they will, but actually, a lot of people are shutting their doors, and, you know, that just firms up the competitive positioning in the market. We already work for, particularly in the Northeast, some of the larger players that are active there. We're doing the multi-well pads as opposed to the lower tier type activities. So my singular focus right now is trying to mitigate losses and keep our field service technicians employed, and if that means rotating to other plays, and there'll be some incremental costs there, but it's better than losing your FSTs and having no profitability at all, right? And so the singular focus is on cost management and control and retaining those FSTs through the next three quarters. Okay.
Speaker Change: Match singular focus right now is trying to mitigate.
Speaker Change: And mitigate losses and keep our field service technicians employed and if that means rotating to other plays and there'll be some incremental costs, there, but its better than losing your F. S teeth in and having no profitability at all right and so singular focus is on cost management and control.
Speaker Change: Retaining those F S Ts through the next three quarters.
Speaker Change: Okay.
John Daniel: Well, that's all I had, so thanks for including me.
Speaker Change: That's all I had so thanks for including me.
Speaker Change: Thank you John.
Cynthia B. Taylor: That concludes our Q&A session. I will now turn the conference back over to Cindy Taylor for closing remarks.
Speaker Change: Yes.
Speaker Change: That concludes our Q&A session I will now turn the conference back over to Cindy Taylor for closing remarks.
Cynthia B. Taylor: All right. Thank you, Dee, and thanks to all of you for joining our call today. We always appreciate your interest in oil states and your continued support, not only for us but for the industry as a whole. I know it's a very, very busy period of time, but we'll catch up with all of you if you choose to give us a call back. So, thanks so much.
Cynthia B. Taylor: Alright, Thank you day and thanks to all of you for joining our call today. We always appreciate your interest in oil states and your continued support not only for us but for the industry as a whole I know, it's a very very busy period of time that will catch up with all of you achieve Tuesday that give us a call back. So thanks so much.
Dee: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for Chinese you may now disconnect.
Speaker Change: Okay.
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