Q3 2025 Innovex International Inc Earnings Call

Good morning and welcome to invex third quarter 2025 earnings call. At this time, all participants are in listen-only mode and there will be a question and answer opportunity at the end of this call.

This call is being recorded.

Avinash Cuddapah: Good morning, everyone, thank you for joining us on today's call. An updated investor presentation has been posted under the Investors tab on the company's website, along with the earnings press release. This call is being recorded and a replay will be available on the company's website following the call. Before we begin, I would like to remind you that Innovex's comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause Innovex's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Please refer to the Q3 2025 financial and operational results announcement that we released yesterday for a discussion of forward-looking statements and reconciliations of non-GAAP measures. Speaking on the call today from Innovex, we have Adam Anderson, Chief Executive Officer, and Kendal Reed, Chief Financial Officer.

It should be noted that a variety of factors could cost Enix is actual results to differ, materially from the anticipated results or expectations expressed in these forward-looking statements.

Please refer to the third quarter 2025 financial and operational results announcement that we released yesterday for a discussion of forward-looking statements and reconciliations of non-gaap measures.

Avinash Cuddapah: I would now like to turn the call over to Adam Anderson.

Adam Anderson: Thanks, Avi. Good morning, and thanks to everyone for joining us today. Before I begin, I want to recognize our incredible team, whose focus and commitment drove meaningful progress across all of our strategic initiatives in Q3. On today's call, I'll discuss our Q3 results and highlight the key developments shaping our performance. Starting with continued market share gains, successful integration of the Citadel acquisition, and progress on key operational initiatives, particularly in our subsea franchise. After these operational and commercial updates, I'll then turn the call over to Kendall, who will review our financial results and provide more detail on our balance sheet, capital allocation priorities, and Q4 outlook. Q3 demonstrated the strength and resilience of the Innovex industrial platform.

Speaking on the call today from NX, we have Adam Anderson, Chief Executive Officer, and Kendall Reid, Chief Financial Officer. I would now like to turn the call over to Adam Anderson.

Thanks Abby. Good morning and thanks to everyone for joining us today.

Before I begin, I want to recognize our incredible team who focus and commitment drove, meaningful progress across all of our strategic initiatives. In the third quarter on today's call, I'll discuss our third quarter results and highlight the key development shaping, our performance, starting with continued market, share gains successful, integration of the Citadel acquisition and progress on key. Operational initiatives, particularly in our subsidy franchise,

after these operational and Commercial updates, I'll then turn the call over to Kindle who will review our financial results and provide more detail on our balance sheet Capital, allocation priorities in fourth quarter Outlook,

Adam Anderson: Our diversified portfolio of big impact, small ticket products enables us to deliver exceptional service for our customers and strong returns for shareholders through all phases of the cycle. Our capital light business model requires just 2% to 3% of revenue to fund organic growth. Low capital intensity enables high free cash flow conversion. In fact, we converted approximately 84% of our adjusted EBITDA into free cash flow in the quarter. Strong free cash flow provides us with optionality to fund organic growth, invest in innovation, selectively add to our portfolio with acquisitions, and repurchase shares, all while generating strong financial returns for our shareholders. Turning to Q3 results, I'm encouraged by our team's strong execution in what remains a challenging market environment. Our revenue of $240 million for Q3 represented an increase of $16 million sequentially.

The third quarter, demonstrated the strength and resilience of the inovex industrial platform. Our Diversified portfolio of big impact. Small ticket products enables us to deliver exceptional service for our customers and strong returns for shareholders, through All Phases of the cycle.

Our Capital life, business model requires, just 2 to 3% of Revenue to fund organic growth.

Low Capital intensity enables High free cash flow conversion. In fact, we converted approximately 84% of our adjusted. Eva into free cash flow in the quarter.

Strongly cash flow provides us with optionality to fund. Organic growth, invest in Innovation selectively, add to our portfolio with Acquisitions and repurchase shares. All while generating strong financial returns for our shareholders.

Turning the Q3 results, I'm encouraged by our team's strong execution, in what remains a challenging Market environment.

Adam Anderson: Our North America land business grew approximately 10% sequentially, reflecting strong execution and resilience of our North American operations. While broader US land activity remains soft, Innovex once again outpaced the market, driven by market share gains in our drilling enhancement and well construction portfolios and the impact of a full quarter of contribution from Citadel. Citadel continues to perform well, broadening our market position and driving meaningful cross-selling opportunities which will drive organic market share growth over time. A key part of our thesis for Citadel was leveraging our international platform, a key tool in our proven M&A playbook. Although Citadel already had some exposure in the international markets, on a combined basis, we've been able to further expand its reach, a critical step in expanding market share in high-value international markets.

Our revenue is 240 million for the third, quarter represented, an increased of 16 million sequentially.

Our North America land business, grew approximately 10%, sequentially reflecting, strong execution, and resilience of our North American operations, while. Broader us land activity remains soft in effect. Once again, outpaced the market driven by market share gains in our drilling enhancement and well construction portfolios and the impact of a full quarter of contribution from Citadel.

Citadel continues to perform well, broadening our Market position and driving meaningful cross-selling opportunities, which will drive organic market, share growth over time.

Adam Anderson: Our international and offshore revenue grew 4% sequentially, despite softness in some of our key markets, such as Mexico and Saudi Arabia. Despite these headwinds, I'm very pleased with our strong execution. Q3 marked the largest ever quarter for our subsea services related revenue in the US offshore market, highlighting our team's renewed focus on maximizing fixed asset utilization to support product installations. In the Middle East, we were able to be part of the longest well ever drilled. The 54,000 ft well utilized multiple Innovex technologies, including the RIPstick, SwivelMASTER, CasingSWIVEL, and a custom-designed multi-stage liner system. This custom solution for a major national oil company is a prime example of the solutions Innovex's broad platform can deliver for our customers. We also recently inaugurated a new manufacturing facility in Saudi Arabia, further solidifying our local content in one of our most important international markets.

The key part of our thesis, for Citadel was leveraging, our International platform a key tool in our proven m&a, Playbook, although Citadel already had some exposure in the international markets, on a combined basis, we've been able to further, expand its reach, a critical step in expanding market share in high-value international markets.

our International and offshore Revenue group 4% sequentially despite softness in some of our key markets such as Mexico and Saudi Arabia,

despite these headlines. I'm very pleased with our strong execution.

Q3 marked a largest ever quarter for our subsea Services related Revenue in the US offshore markets, highlighting our team's renewed, focus on maximizing fixed asset utilization to support product installations.

In the Middle East, we were able to be part of the longest well ever drilled the 544,000 foot well utilized multiple invex Technologies including the RipStik SLO Master casing swivel and a custom-designed multi-stage liner system. This custom solution for a major national oil. Company is a prime example of the solutions. Inovex is Broad platform can deliver for our customers.

Adam Anderson: Momentum is also building in Asia, with several significant orders received for subsea equipment in Q3 and scheduled to be delivered in 2026 and 2027. Our Latin American market remains resilient, thanks to market expansion and execution on revenue synergy opportunities. Innovex continues to grow its market share, strengthening its position as a leading supplier of advanced completion solutions. In Q3, we grew our presence in Argentina with sales of our dissolvable plug technology. We still view Argentina as a market with significant potential for our entire product suite, as there are applications for a majority of our existing products in the Vaca Muerta field. In Mexico, we were able to successfully combine the installation of an XPak expandable liner hanger system, a legacy Dril-Quip product, with Citadel float equipment, another example of our execution on cross-selling opportunities.

We also recently inaugurated a new manufacturing facility in Saudi Arabia further solidifying, our local content and 1 of our most important International markets.

Momentum is also building in Asia with several significant orders received for subsidy equipment in Q3 and scheduled to be delivered in 2026 and 27.

Our Latin American Market remains resilient thanks to Market expansion and execution on Revenue Synergy opportunities.

Market share strengthening its position as a leading supplier of advanced completion Solutions.

In the third quarter, we grew our presence in Argentina with sales of a resolvable plug technology.

We still view Argentina, as a market with significant potential for our entire product Suite, as there are applications for a majority of our existing products in the Baker at the field.

Adam Anderson: This early win exemplifies the kinds of synergy opportunities we are exploiting across the platform. A key part of our investment thesis for the merger with Dril-Quip was that we could drive organic share growth by improving operational execution and the customer experience, particularly on on-time delivery. We continued to make progress this quarter, improving on-time delivery to 76%. As expected, strong execution is now driving market share growth. For instance, we recently announced an exclusive subsea wellhead supply agreement with OneSubsea. This partnership makes Innovex the exclusive wellhead provider on bundled subsea packages, giving us access to the significant portion of the global subsea wellhead market currently served by OneSubsea. There will be a phased approach to execution. We expect our first orders to come in 2026, with deliveries to begin in 2027.

Additionally, in Mexico, we were able to successfully combine the installation of an X-Pack expandable liner hanger system, a legacy Dropout product, with Citadel fluid equipment. This is another example of our execution on crossing opportunities.

This early win exemplifies the kinds of synergy opportunities we are exploiting across the platform.

A key part of our investment thesis for the merger with drill clip, was that we could drive organic share growth by improving operational execution and the customer experience particularly on on-time delivery.

We continued to make progress this quarter, improving on-time delivery to 76%, as expected. Strong execution is now driving market share growth, for instance. We recently announced an exclusive subk Wellhead Supply agreement with 1 sub seat. This partnership makes Innovex the exclusive Wellhead provider on bundled subk packages, giving us access to a significant portion of the global subk Wellhead market currently served by 1 subcategory.

Adam Anderson: Separately, we see emerging opportunities in our Asia-Pacific markets, which we believe will drive further growth for our subsea wellhead franchise in 2026. Overall, Q3 was a quarter of solid execution and progress on our long-term strategic initiatives. We added significant cash to our net cash balance sheet. We continue to integrate Citadel successfully, driving share gains in key product lines, improving reliability for our customers, and positioning our subsea business for profitable growth in 2026. These efforts give us confidence in our ability to keep expanding adjusted EBITDA margins towards our long-term goal of 25%, which should drive a step change in financial returns for our shareholders. I will now turn the call over to Kendall to go over our financial results in more detail.

There will be a phased approach to execution. We expect our first orders to come in 2026 with deliveries to begin in 2027

Separately we see emerging opportunities in our asia-pacific markets, which we believe will drive further growth for our subsidy Wellhead franchise in 2026.

Overall Q3 was a quarter of solid execution and progress on our long-term strategic initiatives. We added significant cash to our net cash balance sheet. We continue to integrate, Citadel successfully, driving share gains in Key Products. Improving reliability for our customers and positioning our subsidy business for profitable growth in 2026.

Kendal Reed: Thanks, Adam, and good morning, everyone. Just as a general reminder, before we review the Q3 results, we closed on the merger with Dril-Quip on 06 September 2024, and Innovex was the accounting acquirer in the merger, meaning that the Q3 2024 comparative period results reflect legacy Innovex results for the full period prior to the closing of the merger and the combined company results, including Dril-Quip results for 06 September through 30 September 2024. Our Q3 revenue was $240 million, which is an increase of 58% year over year and an increase of 7% sequentially. Adjusted EBITDA for Q3 was $44 million, which is a decrease of $3 million sequentially. Adjusted EBITDA margin for Q3 decreased sequentially to 18% from 21%.

These efforts give us confidence in our ability to keep expanding adjusted, Evita margins towards our long-term goal of 25%, which should drive a step change in financial returns for our shareholders. I will now turn the call over to Kendall to go over our financial results in more detail.

Thanks Adam. Thank you. Good morning everyone. Just as a general reminder before we were reviewing the Q3 results. We closed on the merger with drip on September 6th, 2024 and inovex was the accounting acquirer in the merger, meaning that the Q3 2024 comparative, period results, reflect Legacy, and ofx results for the full period prior to the closing of the merger and the combined company results, including drug group results for September 6th, through September 30th 2024,

Our third quarter Revenue was 240 million, which is an increase of 58% year-over-year and an increase of 7% sequentially.

Adjusted debit do for Q3 was 44 million which is a decrease of 3 million sequentially.

Kendal Reed: The decline in margin is mainly attributed to increased near-term expenses associated with our integration efforts, including the exit of the Eldridge facility. As we have discussed previously, we believe exiting this facility unlocks the first major step in our aspirations of mid-twenties adjusted EBITDA margins. While we are confident in achieving these goals, the progress will be lumpy as the transition of facilities and legacy products will still weigh on margins for a few more quarters. Importantly, however, these near-term costs are far outweighed by the $87 million of net proceeds generated by the sale of the facility. We evaluate our revenue geographically by separating our shorter cycle onshore US and Canadian operations, which we refer to as NAM Land, from our longer cycle international and offshore operations, which include the Gulf of America.

Adjusted ebit do margin for Q3 decreased sequentially to 18% from 21%.

The decline in margin is mainly attributed to increased near-term. Expenses associated with our integration efforts including the exit of the elders facility.

As we have discussed previously We Believe exiting this facility unlocks, the first major step in our aspirations of mid 20s adjusted. I thought margins.

While we are confident in these goals, the progress will be lumpy as the transition of facilities and Legacy products will still weigh on March for a few more quarters.

Kendal Reed: Our Q3 NAM Land revenue of $132 million was up 10% sequentially, driven by growth in US Land, primarily as a result of one full quarter of Citadel revenue and our drilling enhancement portfolio continuing to gain share in the US Land market. Our US Land business continued to outperform the broader US market, which remained under pressure during Q3. Our international and offshore revenue during Q3 2025 was $108 million, an increase of 4% sequentially. We still see softness in a few of our key international markets, such as Saudi Arabia and Mexico. Strong performance in our other Middle Eastern markets helped offset these headwinds.

Importantly, however, these near-term costs are far outweighed by the 87 million of net proceeds generated by the sale of the facility. We evaluate our Revenue geographically by separating our shorter cycle on Shore us and Canadian operations which we refer to as Nam land from our longer cycle International and offshore operations which include the Gulf of America.

Our Q3 Nam land revenue of 132 million was up 10%. Sequentially driven by growth in US land primarily as a result of 1 full quarter of Citadel revenue and our drilling enhancement portfolio, continuing to gain share in the US land market.

Our US land business continued to outperform the broader US market, which remained under pressure during Q3.

Our international and offshore revenue during the third quarter of 2025 was $108 million, an increase of 4% sequentially.

Kendal Reed: Our Q3 cost of sales, exclusive of depreciation and amortization, increased by $11 million sequentially to $164 million, maintaining flat gross margins quarter over quarter despite headwinds from ongoing integration initiatives and a challenging operating environment. This quarter, we began to feel the impact of higher tariffs as changes in US tariff policy, particularly the phase-in of broad steel tariffs and the increase in those tariff rates in June, began to impact our business. We continue to manage supply chains and customer contracts to minimize any exposure to tariffs and remain confident in our ability to successfully offset these headwinds, consistent with our historical track record of maintaining margins in dynamic cost environments. Selling, general, and administrative expenses for Q3 increased by $7 million sequentially to $36 million.

We still see softness in a few of our key. International markets such as Saudi Arabia and Mexico. However, strong performance in our other Middle Eastern markets, helped offset these headwinds

Our Q3 cost of sales, exclusive of depreciation and amortization, increased by $11 million sequentially to $164 million, maintaining flat gross margins quarter-over-quarter despite headwinds from ongoing integration initiatives and a challenging operating environment.

In a broad steel, tariffs and the increase in those tariff rates, in June began to impact our business.

We continue to manage Supply chains and customer contracts to minimize any exposure to tariffs and remain confident in our ability to successfully offset these headwinds consistent with our historical track record of maintaining margins in Dynamic cost environments.

Kendal Reed: This incremental increase is driven by the inclusion of a full quarter of Citadel results as well as temporary costs associated with our ERP integration project and facility consolidation efforts as we exit the Eldridge facility. Free cash flow for Q3 was $37 million, a sequential decrease of $15 million. As a reminder, last quarter, free cash flow benefited from the proceeds received from our Subsea Tree divestiture. Year to date through 30 September 2025, we have generated $112 million of free cash flow, a conversion rate from adjusted EBITDA to free cash flow of approximately 83%. Under normal business conditions, we aim to convert 50% to 60% of our adjusted EBITDA into free cash flow.

Selling General and administrative expenses for the third quarter increased by 7 million sequentially to 36 million.

This incremental increase is driven by the inclusion of a full quarter of Citadel results, as well as temporary costs associated with our Erp integration project and facility consolidation efforts as we exit the Eldridge facility.

Free cash flow for the third quarter was 37 million. A sequential decrease of 15 million

as a reminder, last quarter free cash flow benefited from the proceeds received from our subsidy tree divestiture.

Year to date, through September 30, 2025, we have generated $112 million of free cash flow.

A conversion rate from adjusted EV adaptive free cash flow of approximately 83%.

Kendal Reed: During periods of slower activity, however, we typically convert an even higher percentage of our adjusted EBITDA into cash, as evidenced by our strong cash flow performance in 2025. Capital expenditures in the Q3 were $12 million, representing approximately 5% of revenue. The sequential increase is due primarily to facility consolidation and integration efforts. We estimate approximately $4 million of our Q3 CapEx spend was one-time in nature related to these integration efforts. We expect CapEx to remain slightly above our historical level of 2% to 3% of revenue through the end of the year as we continue staging operations at the two new facilities which are replacing Eldridge. However, this marginal increase in CapEx is far outweighed by the net proceeds of the sale of Eldridge. We expect CapEx to return to more normalized levels in 2026.

Under normal business conditions, we aim to convert 50 to 60% of our adjusted Eva into free, cash flow.

During periods of slower, activity. However, we typically convert an even higher percentage of our adjusted Diva dot into cache, as evidenced by our strong cash flow performance in 2025,

Capital expenditures in the third quarter were 12 million representing approximately 5% of Revenue.

The sequential increase is due primarily to facility consolidation and integration efforts,

We estimate that approximately $4 million of our Q3 capex spend was one-time in nature related to these integration efforts.

We expect CapEx to remain slightly above our historical level of 2% to 3% of revenue through the end of the year as we continue staging operations at the two new facilities, which are replacing Eldridge.

However, this marginal increase in capex, is far outweighed by the net proceeds of the sale of Eldridge.

Kendal Reed: After closing on the sale of Eldridge, our balance sheet is strong, with cash and equivalents totaling $163 million and nothing drawn on our revolving credit facility. Our total debt as of 30 September 2025 was $26 million, consisting entirely of finance leases. Our return on capital employed for the 12 months ended 30 September 2025 was 13%, which remained flat compared to the 12 months ended 30 June 2025. We place a heavy emphasis on returning this number to the high teens, in line with Innovex's historical average of 18% pre-merger. Turning to our outlook for Q4, we expect adjusted EBITDA of $42 to 47 million and revenues of $235 to 245 million, assuming generally flat activity across our key markets.

We expect capex to return to more normalized levels in 2026.

After closing on the sale of Eldridge, our balance sheet is strong with cash and equivalents totaling 163 million and nothing drawn on our revolving credit facility.

Our total debt as of September 30th 2025 was 26 million. Consisting entirely of Finance leases

Our return on Capital employed for the 12 months. Ended September 30th 2025 was 13% which remained flat compared to the 12 months ended. June 30th 2025

We place a heavy emphasis on returning this number to the high teens in line with invex is historical average of 18% pre merger.

Kendal Reed: We expect our ongoing integration efforts, tariff uncertainty, and product mix with subsea product deliveries to weigh on margins for at least another quarter. As discussed, we believe the exit of the Eldridge facility will unlock meaningful margin improvement in 2026. Following the Eldridge sale, Innovex once again ends the quarter in a strong net cash position, reinforcing our ability to be opportunistic in both organic and inorganic growth. Our M&A pipeline remains active with several high-quality, capital-efficient businesses under review that align with our big impact, small ticket strategy. We're looking forward to the coming quarters as we exit Eldridge and continue to execute on our proven playbook. I will now turn the call back to Adam.

Turning to our outlook for the fourth quarter. We expected just to ibida of 42 to 47 million and revenues of 235 to 245 million. Assuming generally flat activity across our key markets,

We expect our ongoing integration efforts, tariff uncertainty, and product mix with subk product deliveries to weigh on margins for at least another quarter. But as discussed, we believe that the exit of the Eldridge facility will unlock meaningful margin improvement in 2026.

Following the Eldridge sale in ofx once again into the quarter in a strong, net cash position. Reinforcing our ability to be opportunistic in both organic and inorganic growth,

Our m&a pipeline remains active, with several high-quality Capital efficient, businesses under review that align with our big impact small ticket strategy.

We're looking forward to the coming quarters, as we exit Eldridge and continue to execute on our proven Playbook.

Adam Anderson: Thanks, Kendal. To close, I want to reiterate how proud I am of the progress our team is making. Despite persistent volatility in markets, we are executing on our strategy, strengthening our balance sheet, and positioning Innovex for the next phase of growth. The successful close of the Eldridge sale, early commercial wins from Citadel, steady improvement in on-time delivery performance, and our new partnership with OneSubsea all underscore the quality of the Innovex platform. We're building a business that can perform across cycles, leveraging our strong balance sheet, disciplined capital allocation, and a differentiated portfolio of technology-driven, high return, big impact, small ticket products. As we move towards the end of the year, we remain focused on continuing to enhance the customer experience, capturing additional market share, and driving sustained margin expansion toward our long-term goal of 25%.

I'll now turn the call back to Adam.

Thanks, Kendall, to close. I want to reiterate how proud I am of the progress our team is making despite persistent volatility in markets. We are executing on our strategy, strengthening our balance sheet, and positioning ourselves for the next phase of growth.

The successful closed. The Elder sale early commercial Winston Citadel.

Steady Improvement and on-time, delivery performance and our new partnership with 1 sub c, all underscore the quality of the index platform. We're building a business that can perform across Cycles leveraging. Our strong balance sheet, discipline Capital allocation and a differentiated portfolio technology-driven. I return, big impact small ticket products.

Adam Anderson: Thank you once again to our employees, customers, and shareholders for your trust and partnership. Operator, we can now open the line for questions.

As we move towards the end of the year, we remain focused on continuing to enhance the customer experience. Capturing additional market, share and driving sustained, margin expansion, but our long-term goal of 25%.

Thank you. Once again to our employees customers and shareholders for your trust and partnership.

Operator. We can now open the line for questions.

Operator 2: 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 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Our first question comes from Keith Beckman from Pickering Energy Partners. Please go ahead.

Thank you. We will now begin the question and answer session. If you have dialed in, I would like to ask a question. Please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again,

Your question.

Our first question comes from Keith, Beckman from Pickering Energy Partners. Please go ahead.

Keith Beckman: Hey, good morning, congrats on another strong quarter of free cash flow generation. Last quarter, you noted a downhole operational issue. I believe it was kind of a short-term product-specific headwind on the international offshore side with a particular customer. Are there any corrective actions that you've kind of implemented there? How should we kind of think about that going forward? Just any additional color you can provide there.

Hey, good morning, and congrats on another strong quarter of free cash flow generation. Um, so last quarter you noted a downfall operational issue. I believe it was kind of a short-term, product-specific headwind. Um,

Adam Anderson: Hey, Keith. Thanks for joining the call and thanks for the question. We, yeah, so we have done a lot of work over the last couple of months to make some pretty robust improvements to that product to address the issue that we saw. We got through all the qualification or did some customer witnessing of that. We're in a good spot with it. We've gotten the green light to go run three jobs with that tool. The first one should happen in the next week. We're on location with tools, just waiting to run them in the hole. Then from there, we should start to build back to where we were.

On the international offshore side with a particular customer. Uh, are there any corrective actions that you've kind of implemented there? And uh, how should we kind of think about that going forward, just any additional color? You can provide their

Adam Anderson: I think I would emphasize that, hey, in our business, we periodically have a couple of these bumps in the roads, and one of the key ways that we have differentiated ourselves and built relationships with customers is to do a really great job at identifying what the root cause of the issue is, building a better, more robust product and/or service to satisfy them, and have typically come out of it in a stronger position than we went in. Short term, definitely a little bit annoying and staying on results a little bit in Q2, Q3, and even a little bit into Q4. In Q1, we should see things starting to get a little bit better.

Uh hey hey Keith, thanks for thanks for joining the call. And, um, thanks for the question we. Um, yeah, so we have done a lot of work over the last couple of months, to, um, make some pretty robust improvements to that product to address. The issue that we saw. We got through all the qualification or did some customer witnessing of that. Um, we're in a good spot with it. We've gotten the green light to go, run 3 jobs with that tool. The first 1 should happen in the next week, we're on location with tools, just waiting to run them in the hole. Um and then from there, we should start to to build, um, back to where we were. Um, I think I would, I would emphasize that hey, in our business. We periodically have a couple of these bumps in the roads and 1 of the key ways that we have differentiated ourselves and built, the relationships with customers is to do a really great job at identifying, what the root cause of the issue is building a better. More robust product Andor service.

To, um, to satisfy them and have typically come out of it in a stronger position than we went in. So short-term definitely a little bit annoying and saying, on results a little bit in Q2, um, Q3 even a little bit into Q4, but in q1, we should things.

Keith Beckman: Okay. Awesome. That's very helpful. Just kind of as a follow-up here. On the OneSubsea exclusive subsea wellhead agreement that you guys signed up, can you kind of frame typical lead times from award to delivery? I know you said that you're kind of expecting some orders in 2026 and some of that shows up in 2027. How should we kind of think about sequencing? Just any more color you can give there on when that should be more impactful to you?

Should see things starting to get a little bit better.

Awesome. It's very helpful and then uh, just kind of as a follow up here on the uh 1 sub c exclusive well had agreements that you guys signed up, can you kind of frame? Um, typical lead times from award to delivery, I know you said that you're kind of expecting some

Adam Anderson: Yeah. Just to say a little bit about that agreement in general, we're really excited about the OneSubsea partnership. Obviously, they're a really important player in the subsea space, and this is gonna really set us up well to partner with them to provide all of the wellheads and should provide an avenue for us to sell other products below the wellhead, particularly in these integrated service contracts that Innovex/Dril-Quip had historically really struggled to compete in. I think it's opening up a whole new market opportunity for us over the next couple of years. We will both be supplying the legacy Innovex/Dril-Quip wellhead systems.

So so uh orders in 26 and some of that shows up in 27. So how should we kind of think about sequencing just any more color you can give their um on when that should be more impactful to you?

Adam Anderson: In fact, we have a delivery we're making in Q4, which might bleed a little bit over into Q1 for a project we've been working on with OneSubsea in Asia. The biggest part of this, the biggest revenue driver for this agreement in the near term will really be helping take over some of OneSubsea's legacy subsea wellhead business. We expect to get the first order maybe late this year, more likely first part of next year. Those orders probably take 9 months, maybe 1 year to be on the safe side, between when we get the order and when we deliver. We've shifted to a invoicing or recognizing the revenue once we deliver the product rather than along the way through manufacturing.

Yeah. So just to and to say a little bit about that agreement in general or we're really excited about the the 1 sub c partnership. Obviously, they're really important player in the subk space and this is going to really set us up well to to partner with them, to provide all of the wellheads and and should allow us should provide an Avenue for us to sell other products below the well head, particularly in these integrated service contracts, um, that innovac had historically, really struggled to compete in. So I think it's opening up a whole new market opportunity for us over the next couple of years. We will both be supplying, the Legacy innovac um slash real quick, Wellhead systems. Um in fact we have a delivery. We're making in Q4 might bleed a little bit over into q1 for a a project we work. We've been working on with 1 sub c in Asia.

Uh, but the biggest part of this, the biggest Revenue driver for this agreement, in the near term will really be helping take over some of 1 subsidies Legacy, subsidy Wellhead business.

We expect to get the first order, maybe late this year, more likely the first part of next year. Um, we really need those orders. Probably take um 9 months, maybe a year to be on the safe side, um, between when we start manufacturing, we get the order, and we need to deliver. And bear in mind, we shifted to a, um, um.

Adam Anderson: We should get a few orders next year. Probably won't really see revenue start to come in until 2027, and it might be 2028 before it's kind of fully up and running is our expectation. Exciting agreement for us, and I think it really helps both Innovex as well as OneSubsea be more competitive in that space.

Keith Beckman: Awesome. That's very helpful. I will turn it back. Congrats again on the quarter.

Invoicing or recognizing the revenue once we deliver the product rather than along the way through manufacturing. So we we should get a few orders next year. Probably won't really see Revenue start to come in until 2027 and there might be 28 before its kind of fully up and running as our expectation but but exciting agreement for us and I think it really helps both invex as well as 1. Subsidy be more competitive in that space.

Adam Anderson: Thanks, Keith.

Awesome. That's very helpful. I will, uh, turn it back to congrats again on the quarter.

thanks, you

Operator 2: Our next question comes from Don Crist from Johnson Rice. Please go ahead.

Don Crist: Morning, guys. Hopefully y'all are doing well this morning.

Our next question comes from Don Chris from Johnson rice. Please go ahead.

Adam Anderson: Hey, Don.

Don Crist: I wanted to start with the increase in margins. Can you walk around the world? You've been doing a lot of work on consolidating operations, whether it be in the Middle East or Vietnam or wherever else around the world. Is that a bigger factor in boosting margins than just closing Eldridge? Or am I thinking about that wrong? Can you just expand on what the puts and takes are in boosting your margins here over the next couple quarters?

Morning, guys. Hopefully you all are doing well this morning.

Um I wanted to start with the uh the increase in margins. I mean, can you kind of walk around the world? You've been doing a lot of work on consolidating operations, whether it be in in the Middle East, or Vietnam, or or wherever else around the world is is that a bigger Factor, um, in boo

Interesting margins than just closing Aldrich or am I kind of thinking about that wrong and can you just kind of expand on what the puts and takes are and and kind of boosting your margins here, over the next couple quarters?

Kendal Reed: Absolutely. I think that is a really good question. Maybe the way I would frame it is Eldridge is really the first step to be able to do some of that meaningful facility manufacturing footprint consolidation that you're mentioning there. The way that we're thinking about it is the move out of Eldridge, which we expect to be substantially complete by the end of the year, but we'll be finishing up some projects for different customers and things over the course of Q1, say fully complete by the end of Q1, that'll unlock meaningful savings just directly related to that footprint, right? Being in a smaller facility, all those different things. That could be on the order of 1 percentage point of margin improvement just related to Eldridge itself. That'll phase in over the course of Q1.

Kendal Reed: Fully impact Q2 of next year is how we're thinking about that. You're right, that unlocks a few different things, which is gonna allow us to further consolidate the manufacturing footprint into a few different facilities that can be much more fully utilized, drive all the underabsorption out of the system, as well as further trim the SG&A cost structure as we do some of those consolidations. Again, first step being Eldridge, but that is gonna be a big improvement as well. Probably similar amount of improvement from that step 2, let's call it facility consolidation, once we're able to get out of Eldridge. Between those two things, I think that's gonna be sufficient to get us back into, call it, the low 20s EBITDA margins at roughly current revenue levels.

Consolidation that you're mentioning there. So, the way that we're thinking about it is the move out of Eldridge, which we expect to be substantially complete by the end of the year. But we'll be finishing up some projects for different customers. Um, and things over the course of q1, so say fully complete uh, by the end of q1, that'll unlock meaningful savings, just directly related to that footprint, right? Being in a smaller facility, all those different things, um, and that could be on the order of the percentage point of margin Improvement, just related to Eldridge. It's itself. Um, so that'll phase in over the course of q1 fully impact. Q2 of next year, is, is how we're thinking about that. But then you're right that unlocks a few different things, which is going to allow us to further. Consolidate the manufacturing footprint into a few different. Um, facilities that can be much more fully utilized drive, all the under absorption out of the system. Um, as well as further trim, the sgna cost structure as we do some of those consolidations. Um, so again, First Step being Eldridge, but that, that is going to be a big Improvement as well so probably

Kendal Reed: We talk about the 25% EBITDA margin target. I think to get there, we'll need a little bit of cooperation from the market, you know, in particular improvement in some of our key places like Saudi and Mexico that have been really depressed this year. If we see some improvement there, that would help us get to that long-term 25%.

Similar amount of improvement from that step 2. Let's call it facility consolidation. Um, once we're able to get out of Eldridge. So, between those 2 things, I think that's going to be sufficient to get us back into the call at the low 20s. Even without margins at roughly current Revenue levels. And then we, we talked about the 25%, Evita margin Target. I think to get there, we'll need a little bit of cooperation from the market, you know, in particular Improvement in some of our key places like Saudi and Mexico that have been really depressed this year. If we see some improvement there that would help us get to that.

Don Crist: I appreciate all that color. It's a big job. On Saudi in particular, you know, a couple days ago, we saw a couple rigs that were suspended that are now being notified that they're going back to work in kind of early 2026. How do you kind of see Saudi progressing? You know, are you in line to get kind of any of those contracts directly, or are you working through kind of third parties, whether it be a house sub, you know, Halliburton or SLB or anybody else in the region to kind of drive revenue in the Saudi particular region?

I I appreciate all that color. It's uh, it's a, it's a big job. Um,

On Saudi in particular, you know this a couple days ago, we saw a couple rigs that were suspended that are now being notified that they're going back to work and kind of early 26. Um,

You kind of see Saudi progressing and, you know, were you in in line to get kind of any of those?

Adam Anderson: Yeah. I'll answer the second part then come back to the first one. Our model in Saudi is mostly directly to the NOC there, maybe 70% or 80%. We do some work through the larger service companies as well. When we work for the service companies, though, it still has to be qualified by the end user. We're sometimes selling through the service companies, but that's really a market that the NOC is still very involved with driving whose product goes in the hole. As far as activity, yeah, I was there a few weeks ago when we inaugurated our manufacturing facility, and we did get good vibes coming from Aramco that we're gonna pick up some rigs and get busier.

Contracts directly, or are you working through kind of third parties? Whether it be a house of, you know, how, or SOB, or anybody else in the region to kind of drive revenue in that, in the Saudi particular region.

Yeah, I'll answer the second part and then come back to the first 1. So our our model in Saudi is is mostly directly to uh the NOC there, maybe 70 or 80%. We do, do some work through the larger um service companies as well. When we work for the service companies though, they're they're it still has to be qualified by the end user so we're sometimes selling through the service companies but that's really a market that the, the nooc is still very involved. With driving who's who's product goes in the hole?

Adam Anderson: I think we're in a little bit wait and see mode, given the way it has trended over the last year and a half. We've been getting more and more positive signs that it is, we're gonna see it ramp up. Like, certainly in the gas, certainly unconventional, but it sounds like offshore oil as well as some onshore oil and some workover stuff where we've really, like, the onshore oil stuff has really been our core market over the years. I think all that will start to get a little bit better in 2026.

Um, as far as activity, I was there a few weeks ago, when we inaugurated our manufacturing facility and we did get good. Um, we got Good Vibes coming from a ramco that we're going to pick up some rigs and get busier. Um, but I think where it was in a little bit. Wait and see mode. Um, given the way it has trained it over the last year and a half and uh, yeah, we've been getting more and more positive signs. That it is, we're going to see it ramp up and that's kind of like certainly in the gas. Certainly unconventional. But it sounds like offshore oil as well as some onshore oil and some work over stuff where we really like the, the onshore oil stuff is really been our core Market over the years.

Adam Anderson: I think that's pretty exciting for us. Particularly as we get this operational issue I talked about earlier resolved, that should set us up well for Saudi to be a return to more, you know, it's been a really growthy market for us over the last decade, and I think we can kind of see a return to that over the next year or two.

I think all that will start to get a little bit better in um 2026. So I think that that's pretty exciting for us.

Don Crist: Okay. The last one for me is, you know, obviously you have your share buyback in place, and you have a lot of cash in the balance sheet. Is the preference to go after M&A instead of, you know, buying back stock or putting in a dividend or anything like that? What does that M&A market look like now? I know a lot of private smaller guys are hurting in the current environment. Is that the preference to do M&A?

Particularly as we get this operational issue, I talked about earlier resolved so I should set us up well for um, Saudi to be a return to more. You know, it's been a really growing market for us over the last decade and I think we can kind of see a return to that over the next year or 2

Okay? And and the, the last 1 for me is, um, you know, obviously you have your share buyback in place and you have a lot of cash on the balance sheet is, is the preference to

Go after m&a and and instead of you know buying back stock or putting in a dividend, or anything like that, and what does that m&a market? Look like now? I know a lot of private smaller guys are are hurting in the current environment is is that the preference to do m&a.

Kendal Reed: I mean, I think as we've said all along, we're kind of balancing shareholder returns against pursuing accretive M&A. If you just look at where we've deployed capital over the last year, I think that would tell you that we really do like the M&A space. I think it's a way that allows us to grow in a very accretive manner and is beneficial to shareholders over the long run. If you look over the last 12 months, we've deployed more than $190 million worth of capital towards acquisitions. We've been able to find good businesses that we feel like complement our strategy. You know, if you look at the transaction level returns to capital for those meaningful deals we've done, it's nearly 20%. These are highly accretive investments we're talking about.

Kendal Reed: You know, as long as there's still a good robust pipeline of those opportunities, I think that's where we're inclined to look. We mentioned on the call we do have a few very high quality businesses that are currently under review. As you know, with M&A, it's really impossible to handicap whether any individual transaction's gonna get done or what the timing would be. Having that really strong net cash position, like, puts us in a position to be opportunistic, let's say, and also to offer sellers a high degree of certainty of closing if we are able to reach a deal, which can be a big advantage in this type of market environment. I think that's, long story short, that's why you see us keeping a little bit powder dry for the time being.

Don Crist: I appreciate the color. I'll turn it back.

Mentioned on the call, we do have a few very high quality businesses that are currently under review. But as you know with m&a, it's really impossible to handicap whether any individual transactions going to get done or what the timing would be. But having that really strong net cash position like puts us in an a position to be opportunistic, let's say. And also to offer sellers a high degree of certainty of closing. If we are able to reach a deal, which can be a big advantage in this type of Market environment. So I think that's long story short. That's why you can see us keeping a little bit powdered dry for the time being

I appreciate the caller. I'll turn it back.

Operator 2: Our next question comes from Derek Podhaizer from Piper Sandler. Please go ahead.

Derek Podhaizer: Hey, good morning. Just wanted to go back to your mid 20% target that you've laid out for about over 1 year now. Maybe just some more color on timing around that. When should we expect to reach that number? Kind of separately, when we think about the ramp-up of the OneSubsea business, how should this complement this mid 20% margin target? You talk about ramping up the business in 2027, 2020. Should we expect this to be accretive to that long-term goal that you have?

Our next question comes from. Derek 5% sir. Please go ahead.

Hey, um, good morning. Uh, just wanted to go back to your mid 20% Target that you that you've laid out for, uh, for about over a year now. Um, maybe just some more color on timing around that, when should we expect to reach that number and then kind of separately? But when we think about the ramp up of the 1 Sub C Business, how should we how should this complement? This mid mid 20% margin Target, can you talk about ramping up the business in 2027 2020? I mean should we expect this to be a creative for that long term goal that you have?

Kendal Reed: Yeah. Maybe I'll Thanks, Derek. I'll hit kind of the first part of the question and then Adam can kind of weigh in on the Subsea piece. In terms of timing, you know, as we've said, really getting out of Eldridge is that first step. That'll phase in over the course of Q1, then kind of right on the heels of that, we'll be doing some of these other initiatives that probably phase in over, you know, Q1, so maybe first part of Q2. Kind of middle of next year, I would think from a cost rationalization perspective, we're gonna be in a spot where obviously, there's 1,000 variables, you know, that go into this.

Kendal Reed: If we're at similar revenue levels, I think we'll be able to do enough on the cost side to get to that low 20s margin percentage. I think beyond that, it's gonna be dependent on some of these places we've talked about, like Saudi and Mexico, and what do we see there in terms of a little bit of improvement to get to that mid-20s level. Maybe short way to say it is getting to call it the low 20s we feel like was within our control, and then a little bit of help from the market next year could get us back to that mid-20s level.

Adam Anderson: Yeah.

Yeah, so maybe I'll thanks, Derek. I'll I'll hit kind of the first part of the question and then um, Adam can kind of weigh in on the subk piece, but in terms of timing, um, you know, as we've said really getting out of Eldridge is that first step that'll phase in over the course of q1 and then kind of right on the heels of that. We'll be doing some of these other initiatives that probably phase in over, you know, q1s. And maybe first part of Q2. So kind of middle of next year. I would think, from a cost rationalization perspective, we're going to be in a spot where and obviously, there's 1,000 variables, you know that go into this. But if we're at similar Revenue levels, I think we'll be able to do enough on the cost side to get to the that low 20s, uh, margin percentage. And then I think beyond that it's going to be dependent on. Um, some of these, these places we've talked about, like, Saudi and Mexico and, and what do we see there? Um, in terms of a little bit of improvement to get to that mid 20s level. So maybe a short way to say it is getting to call the low 20s. We feel like it was within our control and then a little bit of help from the market. Uh, next year, could get us back to that mid 20s level.

Derek Podhaizer: Got it.

Adam Anderson: with respect to OneSubsea.

Derek Podhaizer: Yeah.

Adam Anderson: Oh, go ahead. I was just gonna round that out and say with respect to OneSubsea, the Subsea stuff is generally a little bit dilutive to that margin target today. I think with some of the actions we're putting in place, that can get more to being closer to average, but because of the nature of that business, I think it's always gonna be a little bit lower than our average margin. I think on the OneSubsea thing specifically, that should get to, you know, My guess is it will short term be a little bit dilutive. Longer term, it'll probably be in that, similar to that long-term 25% EBITDA margin target.

Yeah, and then then we expect the 1 subsequent, go ahead. I was just going to wrap around that and say with respect to 1 sub c. The sub c stuff. Is generally a little bit diluted to that margin Target. Uh today I think with some of the actions we're putting in place uh that can get more to being closer to average but it's always going to be a little because of the nature of that business. I think it's always going to be a little bit lower than our average margin. I think on the 1 sub seeds thing specifically that should get to, you know.

My my guess is it will short-term be a little bit diluted longer term, will probably be in that.

Derek Podhaizer: Got it. Okay. That's super helpful. You've already talked about Saudi return. There were obviously the unconventional basins that we really see picking up here, UAE, Argentina. Also the other piece of, I think, the puzzle next year is this offshore inflection in the H2 2026. Could you help re-educate us as far as your exposure and position as you think about drilling and completion for offshore markets picking up as we work towards the H2 of next year, and how impactful that can be for you guys?

It's similar to that that long-term 25%, even that margin Target.

Adam Anderson: Yeah, sure. I think if you just look at the most important markets for us offshore, the biggest is the US offshore. Second would probably be Brazil, followed by the North Sea and Asia. Africa today is pretty small for us, but I think provides a pretty large growth potential. As far as activity ramping up, I mean, I think it might get a little bit better next year. I'm a little bit skeptical that it's gonna be like a tremendous rebound the back half of next year, but I do think it'll pick up a little bit from where we're at today.

Got it. Okay. That's super helpful. Um, so you've already talked about Saudi return to work. Obviously, the unconventional patients that we really see. Uh, pick it up here, UAE, Argentina. Uh, also the other piece of I think the puzzle next year is this offshore inflection in the second half of 2026. Maybe could you help re-educate us as far as your exposure and position as we think about drilling and completion for offshore markets picking up as we work towards the back half of next year and how impactful that can be for you guys.

Yeah sure. Um, so I think if you just

Look at the most important markets for us offshore. Um, the, the biggest is the US offshore. Um, second would probably be Brazil. Um, and Then followed by the North Sea and then, then Asia and Africa. Today is pretty small for us, but I think, um, provides a pretty large growth potential. Um, as far as activity ramping up. I mean, I I think it might get a little bit better next year. I I'm a little bit. Um,

Skeptical that it's going to be like a, a tremendous Rebound in the back half next year, but I do think it will. Um pick up a little bit from where we're at at today.

Derek Podhaizer: Got it. Very helpful. Turn it back.

Adam Anderson: Thanks, Derek.

Got it very helpful. Turn it back.

Thanks sir.

Operator 2: Our next question comes from Eddie Kim from Barclays. Please go ahead.

Eddie Kim: Hey, good morning. Just wanna circle back on the OneSubsea agreement. Could you just talk about how this came about and how impactful it is for you? I thought, or I was under the assumption that Legacy Dril-Quip was being selected as the wellhead provider even on bundled packages previously, unless I'm mistaken there. Separately, what sort of brought OneSubsea kind of over the fence in terms of finalizing this exclusive partnership? Was it the improvement in on-time deliveries over the past several quarters or something else? Just any thoughts there would be great.

Our next question comes from Eddie Kim from Barclays. Please go ahead.

Adam Anderson: There's a lot there. I think this is really the culmination of many years of work from the legacy Dril-Quip team with OneSubsea. We're definitely the beneficiary of a lot of work that has gone into this. There, there had been a, like, a frame agreement for some time, but I think the only meaningful award is this award in Asia, or meaningful amount of revenue work that had been done is this work in Asia I mentioned a little bit earlier in the call, one specific project for kind of an independent out in one of the less active markets in Asia. It hasn't been material to the legacy results at all. I think going forward, it could help us.

Good morning. Uh just want to Circle back on the uh 1 sub c. Could you could you just talk about how this came about and and how impactful it it is for you. I, I thought, or I was under the assumption that Legacy drill quip was being selected as the Wellhead provider, even on bundled packages, um, previously. Unless I'm mistaken there and it's separate what, what sort of brought 1, sub c kind of over the fence in terms of uh finalizing. This exclusive partnership was it the Improvement in on-time deliveries uh over the past several quarters or or something else just any thoughts there would be great

Yeah.

Um, so I think this, this is really the culmination of many years of work, um, from the Legacy drill quip team with 1 sub seeds. We're definitely the beneficiary of a lot of work that has gone into this. Um, there there have been a, like a frame agreement for some time, but I think the only meaningful award is this um award in Asia, meaningful amount of Revenue, work, they've been done. Is this work in Asia? I mentioned a little bit earlier in the call with 1 specific project for, for kind of an independent out in, um,

Adam Anderson: I mean, I'd be thinking about it in a once we 2027, 2028, that it could represent 2% or 3% of revenue would be a really good outcome for us. That kind of order of magnitude, to at least to start with, over time, maybe it could grow from there. It's, it's exciting. It's a really nice leg of growth for us. I think what really brought Maybe to answer your last part of that, I don't wanna speak for OneSubsea, but I guess I will to some extent, is they've got a, they've got a wonderful Subsea franchise. I think their subsea wellhead business has been a little bit more of a struggle over the last few years. With the, I think looking at our, we really have the best technology in the space.

1 of the um, less active, uh, markets in Asia. Uh, so it hasn't been material to the Legacy results at at all. Um, it's I think going forward, um, it could help us, I mean, I'd be thinking about it in a once we 2728 that it could be represent 2 or 3% of Revenue would be a really good outcome for us.

Um, that kind of order of magnitude uh to at least to start with an overtime, maybe it could grow from there. So it's it's exciting. It's a really nice.

I think what really brought maybe to answer your last part of that. I don't want to speak for for 1 sub c, uh, but I I guess I will to some extent is they've got a, um, they've got a wonderful subk franchise. I think they're Wellhead, business has been a little bit more of a struggle over the last few years.

Adam Anderson: I think they saw that, hey, we were together gonna be as effective as we could be in the market if we paired their great Subsea technology with our leading wellhead technology, that would be a really powerful package and could help both companies be really successful.

Eddie Kim: Got it. Got it. Thanks for that. My follow-up is just on your business in Saudi Arabia. You mentioned some softness here in Q3, but as was mentioned earlier in Q&A, there's some reports of suspended rigs in Saudi going back to work, so it feels like the outlook is better in Saudi for next year. You just mentioned that historically, your exposure has been on oil, onshore oil in that market. Do you expect to have significant market penetration into the unconventional gas as that ramps up? Or is your exposure continuing to be kind of on the onshore oil side in that country?

And then with the, the um, I think looking at our, we really have the best technology in the space. And so I think they saw that. Hey, if they're really going to, um, we were together going to be as effective as we could be in the market, if we paired their great subk technology with our leading Wellhead technology, that that would be a really powerful package and could help both companies be really successful.

Got it, got it, thanks for that. Uh, my follow-up is just on your business in Saudi Arabia. Uh you mentioned some softness here in the third quarter but as was mentioned uh earlier in Q&A, there's some uh reports of suspended rigs in Saudi going back to work. So it feels like the Outlook is better in Saudi for next year. You you just mentioned that historically. Your exposure has been on on uh, on an oil. Um, Honore oil in that market. Uh, do you expect to uh, have

Adam Anderson: Yeah. It's worth talking about a little bit more. When we first entered Saudi a decade ago, we really focused on the conventional oil, kind of their Arab-D oil activity. We have over the years done work in other areas, so it's not to say that we don't provide products in the unconventional gas offshore, but it's historically been more than 50% has been the conventional oil. Over this year, we've done a lot of work. We've run a number of liner hanger systems in the conventional gas.

Significant Market penetration into to unconventional gas as that ramps up or uh or is is do you do you see your exposure continuing to be um kind of on the on the on the side in that country?

Yeah. So uh

It's, it's worth talking about a little bit more. So, our, when we first entered Saudi a decade ago, we really focused on the conventional oil, kind of their Arab D. Um oil, um activity. Uh we did do we have over the years done, work in other areas. So, it's not to say that we don't provide products in the unconventional, um, gas offshore but it's it's historically been

Adam Anderson: We've run a lot of legacy Innovex cementing tools in the unconventional, and then we've got a trial we're expecting to get late this year or early next year with the Trenchard technology from Citadel that'll be really impactful in the unconventional space. We absolutely for a number of years have been working on diversifying that revenue stream, and I think that will over the next 5 years be a really good avenue for growth as we kind of replicate the success we had on the onshore oil in a couple of those other really important markets within the kingdom.

More than 50% has been the conventional oil over the last over this year. We've done a lot of work. We've we've run a number of minor hanger systems in the conventional gas. We've run a lot of um Legacy inovex seeming tools in the unconventional and then we've got a trial. We're expecting to get late this year or early next year with the trench put technology from Citadel. That'll be really, um, impactful in the unconventional space. So we will we absolutely, for a number of years have been working on diversifying that Revenue stream,

Eddie Kim: Okay. Great. Thanks for that color. I will turn it back.

And I think that will over the next 5 Years. Be a really good Avenue for growth as we kind of replicate the success. We had on the onshore oil in a couple of those other really important markets within uh within the kingdom.

Adam Anderson: Thanks, Eddie.

Okay, great. Thanks for that call. I'll turn it back.

Operator 2: Our next question comes from Josh Jayne from Daniel Energy Partners. Please go ahead.

Thanks.

Josh Jayne: Good morning. Thanks for taking my questions. First one is, could you just update us on how integration is going with Citadel? Any success yet with penetrating their customer base? Just maybe elaborate on the plans for integration moving forward over the next, let's call it 6 to 12 months.

Our next question comes from Josh, Jane from Daniel Energy Partners, please go ahead.

Adam Anderson: Yeah. I think it's going well. I think that is a great deal, I think for both Innovex as well as legacy Citadel. It added a couple of really nice niche technologies, such as the Trenchard technology that's been really growing nicely in the US, continues to grow. I think we've mentioned on the very, maybe when we announced the deal, that they had been working on a qualification with one of the largest drillers in West Texas and we've consistently picked up more work with that driller over the last couple months as we've owned Citadel. I think as far as the mechanics of the integration, that's all largely complete.

Good morning. Thanks for taking my questions. Uh, first 1 is, could you just update us on how integration is going with Citadel? Um, any success yet with penetrating your customer base and just maybe elaborate on the plans for integration moving forward. Over the next, let's call it 6 to 12 months.

Yeah. So I

was going well I think that that is a great deal. I think for both NX as well as Legacy Citadel at added a couple of really nice niche Technologies such as the trench foot technology. That's been really growing nicely in. The US continues to grow. I think we've mentioned on the very maybe when we announced the deal that they had been working on a um,

uh, qualification with 1 of the largest Drillers in West, Texas. And um, had we've consistently picked up more work with that driller. Um,

Adam Anderson: I think the next stage of the integration is really about combining the best of both the technology from both sides, like the Innovex and the legacy Citadel products, to make a better than product that can really allow us to extend our market share lead in North American cementing tools and really help us grow that product portfolio internationally. We mentioned, I think I already mentioned that working together, this was already in progress, but I think we've helped accelerate getting Trenchard trial in the Middle East. We've run a fair bit of Citadel, legacy Citadel, equipment in Mexico underneath some expandable liner hangers that were a legacy Dril-Quip product. In a couple other areas, we've had nice success of being able to cross-sell products across some of the legacy portfolios.

Allow us to extend our market share lead in North America and seamen who tools and really help us grow that product portfolio internationally. We mentioned, um, I think I already mentioned that working together. This was already in progress, I think we've helped accelerate getting um transfer trial in the Middle East. Um, we've run a fair bit of Citadel, um, Legacy Citadel equipment in Mexico. Underneath some expandable liner hangars that were a legacy, broker product, and a couple other areas we've had nice success of being able to cross sell products across some of the Legacy portfolios.

Josh Jayne: Okay. Thanks. As my follow-up, you talked only briefly about tariffs. Could you just give an update on how they're impacting business today? I know they're consistently a moving target, maybe how much success you're having with the ability to pass increases along to customers and maybe just some things that you're doing to ultimately mitigate the impact of everything that's going on right now.

Kendal Reed: Yeah, definitely. I mean, it's hard to give a succinct answer. Like you said, it's very much a moving target with tariff policy. From the Innovex perspective, you know, we do many different things, so you kind of have a lot of complexity in the supply chain around different products, different vendors, all that kind of stuff. I think if I zoom out, what we really like about our business is we have a very flexible business model where we have very little locked in long-term pricing. That allows us to work with both our suppliers and our customers as, you know, you see these cost fluctuations come through the supply chain to do our best to manage that on both sides.

Okay. Thanks. And then uh as my follow-up, you talked only briefly about tariffs, could you just give an update on how they're impacting the business today? I know, there are consistently and moving Target but um maybe how the how much success you're having with the ability to pass increases along the customers and maybe just some things that you're doing to ultimately mitigate the impact of uh everything that's going on right now.

Yeah, definitely. I mean, it's it. It's hard to give a succinct answer. Like you said, it's very much a moving Target with tariff policy and then from the end of next perspective, you know, we do many different things. So you kind of have a lot, a lot of complexity in the supply chain, around different products, different vendors, all that kind of stuff. But I, I think if I zoom out what we really like about our business is we have a very flexible business model where we have very little locked in long term pricing so that allows us to work with both our suppliers and our customers. As you know, you see these cost FL

Kendal Reed: That's what the team's really been focused on now around how can we be efficient, drive costs out of the system, kind of share the pain with suppliers, on the other side, it's a conversation with our customers as well. It's to some extent, you know, these costs need to get passed through. I would say that's all been in action over the last several months as the steel tariffs in particular are the ones that impact Innovex, those have really come into force. You can see kind of in the flat gross margins quarter over quarter, I think the team's done a great job mitigating impacts thus far, but still very much an active dialogue with both our supply chain partners as well as our customers.

Josh Jayne: Just when you think about the, I guess, the long-term margin target, is that one of the things that's potentially a tailwind for you as, things get resolved? Is that really not being factored into the long-term margin targets?

Situations come through the supply chain, to do our best to, to manage that on both sides. And that's what the team's really been focused on. Now around, how can we be efficient drive cost out of the system? Um, kind of share the pain with suppliers but then also on the other side it's it's a conversation with our customers as well. It's to some extent. You know, these costs need to get passed through. So I would say that's all been in action over the last several months as the the steel tariffs in particular, are the ones that impact invex. So those are really come into Force. Um, and you can see kind of in the flat gross margins quarter over quarter. I think the team's done a great job mitigating impacts thus far but still very much, uh, an active dialogue with both our supply chain Partners, as well as our customers.

Kendal Reed: Yeah, it's not really factored in one way or the other right now. I think there's just so much uncertainty that it's hard to know how that's gonna play out.

It, it just when you think about the, I guess, the long-term margin Target. Is that 1 of the things? That's potentially a Tailwind for you, is is, uh, things get resolved or is that really not being, uh, factored into the long term, margin targets.

Josh Jayne: Understood. Thank you. I'll turn it back.

Yeah, it's it's not really factored in 1 way or the other right now. I think it's just there's just so much uncertainty that it's hard to know how that's going to play out.

Understood, thank you. I'll turn it back.

Operator 2: That concludes the question and answer session. I would now like to turn the call back over to Adam Anderson for closing remarks.

Adam Anderson: Thank you. Thanks to everybody for joining the call. In particular, we said it a couple of times, but thanks to the entire Innovex team. It's We've really done a ton of good work over the last year or two to bring all these different businesses together, continue to perform very well in an otherwise challenging market, and it's all 'cause of the great team that we have at Innovex. My sincere thanks to everybody out there. Please have a great week. Appreciate the time.

That concludes the question and answer session. I would now like to turn the call back over to Adam Merson for closing remarks.

Thank you and uh thanks to everybody for joining. The call in particular, we said it a couple of times but but thanks to the entire end of next team. It's uh, we we really done a ton of good work over the last year or 2 to bring all these different businesses together. Continue to perform very well in an otherwise, uh, challenging market and it's all because of the, the great team that we have at nvx. So my, my sincere, thanks to everybody out there. Um, please have a great week, appreciate time.

Operator 2: This concludes today's conference call. You may now disconnect.

Includes today's conference call.

you may now disconnect