Hilary Frisbie: Today's call is being webcast and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer, who will provide our prepared comments, and Mike Sumruld, Senior Vice President and Chief Financial Officer. After Rod's remarks, we will open the call up to your questions. Before we begin, please note that statements made on this call about our future financial performance, business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our remarks also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our Q3 press release, which is available on our website. With that, I will turn the call over to Rod.
Rod Larson: Good morning, everybody, and thanks for joining the call today. As Hilary mentioned, I am going to be handling all of our prepared remarks today. So Mike is saving his voice for all of your math questions. So be ready. Our Q3 performance demonstrates the earnings potential of our portfolio with favorable pricing activity and project mix alignment. Consolidated adjusted EBITDA was $119 million, in line with our guidance and our highest quarterly level since Q4 2015. These results reflect solid performance in Subsea Robotics, or SSR, resilience in the Offshore Projects Group, or OPG, and improvement in Integrity Management & Digital Solutions, IMDS. Highlights from the quarter include SSR delivered increased revenue, operating income and EBITDA margin, with the latter reaching its highest level since we resegmented our businesses in 2020.
Rod Larson: We also won approximately $180 million of ROV and survey contracts across multiple regions, with contract terms extending into 2031. OPG saw steady demand for its higher revenue services with a favorable mix of installation projects contributing to Q3 performance. Manufactured Products secured awards of approximately $160 million during the quarter, supporting our expectation for stronger order intake in H2 of the year. Aerospace and Defense Technologies, or ADTech, secured follow-on contracts for two strategically important US Navy programs, Dry Deck Shelters and Submarine Rescue Systems. The Dry Deck Shelter contract, a program we have supported for over 20 years, has a total potential value of $154 million over five years, while the Submarine Rescue System contract has a potential value of $67 million over 18 months.
Rod Larson: Today, I will focus my comments on our Q3 2026 results, our outlook for Q4 2026, and our initial guidance for 2027. Starting with our consolidated results for Q3 2026 compared to Q3 2025. We delivered revenue of $785 million, a 6% increase with growth across every operating segment. Operating income of $92 million, a 7% increase, and adjusted EBITDA of $119 million, also a 7% improvement. Net income attributable to Oceaneering was $52.6 million or $0.52 per share, a decrease of 26%. The decrease was primarily attributable to a one-time loss related to the refinancing of our long-term debt completed during Q3. Adjusted EBITDA increased 7% to $119 million. Turning to our cash flow and liquidity. We generated $163 million of cash from operating activities.
Rod Larson: Capital expenditures were $21.1 million, with approximately 31% allocated to growth and 69% allocated to maintenance. This investment was less than anticipated, largely due to timing, with most of the deferred spending now expected in Q4. Free cash flow was $142 million, reflecting strong Q3 results, as well as lower cash taxes and deferred capital expenditures. We expect both cash taxes and capital expenditures to increase in Q4, resulting in more moderate free cash flow generation to close the year. During the quarter, we also repurchased shares of approximately $5 million, with a focus on mitigating dilution associated with employee equity grants. We ended the quarter with a cash balance of $735 million, total liquidity of more than $1 billion, and no borrowings under our revolving credit facility.
Rod Larson: Now let's look at our business operations by segment for Q3 2026, also compared to Q3 2025. SSR delivered revenue of $233 million and operating income of $75.4 million, both higher year over year. These results benefited from improved ROV pricing, with average revenue per day utilized increasing to $11,781 from $11,254, as well as higher survey activity. SSR EBITDA margin improved to 39%, primarily driven by ROV pricing improvements in Europe, West Africa, and Norway. Increased survey activity and a one-time contractual cost recovery related to US Gulf operations also contributed to higher margins. ROV fleet utilization remained stable at 65% as higher activity levels in Europe, Guyana and West Africa largely offset lower activity within the US Gulf.
Rod Larson: For the quarter, the revenue split between our ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 75% and 25%, compared to 77% and 23% in Q3 2025. ROV days utilized in drill support were 62%, while vessel-based services were 38%, compared to 63% and 37% respectively in the prior year quarter. As of 30 September 2026, we had ROV contracts on 80 of the 136 floating rigs under contract for 59% market share. We maintained our fleet count of 250 ROV systems. Manufactured Products generated operating income of $25.1 million, relatively flat with the prior year quarter, while operating income margin decreased slightly to 15% on an 8% increase in revenue. These results were impacted by the final resolution of a legacy mobility solutions contract, including recognition of the previously unresolved contract value.
Rod Larson: The decline in operating income margin was primarily due to lower Grayloc Products activity and profitability following a particularly profitable quarter in the prior year quarter. Our backlog as of 30 September 2026 was $435 million and was largely sustained by order intake during the quarter of $160 million. Our book-to-bill ratio was 0.77 for the trailing 12-month period. Based on these recent bookings, together with our sales funnel, we remain confident in our ability to achieve a full-year book-to-bill ratio of 0.9 to 1.0. OPG revenue, operating income and operating income margin were relatively flat. Results benefited from international installation projects that concluded during the quarter, which more than offset lower activity in West Africa and a less favorable project mix in the US Gulf.
Rod Larson: IMDS revenue increased 7%, while operating income and operating income margin were relatively flat, reflecting increased activity in the Middle East, Europe, and the US Gulf, which was partially offset by lower activity in West Africa, the changing project mix, and increased costs in the Middle East. ADTech revenue increased 7% to $135 million as our previously announced large-scale program reached its full staffing levels for its current phase. Operating income decreased by 11% to $14.7 million and operating income margin decreased to 11% due to increases in pass-through activities during the quarter and increases in certain program. Unallocated expenses of $50 million were consistent with our guidance for the quarter. Turning to our outlook for Q4 2026 compared to Q4 2025.
Rod Larson: We expect consolidated revenue to increase year over year and consolidated EBITDA to be in the range of $85 to $95 million. By segment, for SSR, we expect revenue to increase, supported by higher ROV revenue per day utilized and increased survey activity. Operating income is expected to decrease due to changes in ROV geographic mix, additional mobilization costs as rigs relocate from the US Gulf to other regions, and a greater mix of lower-margin survey activity. For Manufactured Products, we anticipate higher revenue and operating income. For OPG, we expect revenue to remain relatively flat and operating income to decrease due to changes in project mix, including the completion of an international intervention project that benefited the prior year quarter and a shift to lower-margin work in the US Gulf. For IMDS, we anticipate higher revenue and operating income.
Rod Larson: For ADTech, we expect both revenue and operating income to be higher. We project unallocated expenses to be in the $50 million range. Now I'll discuss our initial outlook for 2027. Looking ahead to 2027, the outlook for global deepwater markets remains constructive, with industry forecasts pointing to higher spending and activity. Floating rig activity is expected to strengthen over the course of the year as rigs complete transit to new regions and begin drilling programs. These trends provide a favorable backdrop as we establish our initial 2027 guidance. The US defense environment also remains supportive, particularly across subsea programs. However, the continuing resolution and uncertain timing of appropriations process could affect the timing of program activity within ADTech. These industry conditions support our expectations for improved performance in 2027.
Rod Larson: As we announced yesterday, we are initiating consolidated EBITDA guidance in the range of $430 to $480 million, with free cash flow expected to exceed our anticipated 2026 level. At the segment level, compared to the full year of 2026, for SSR, we expect that higher ROV utilization levels and similar pricing levels, together with improved results in survey and tooling, will generate increases in revenue and operating income and stable EBITDA margins. For Manufactured Products, revenue, operating income, and operating margin are projected to be relatively flat. For OPG, we expect revenue to decrease, operating income to be flat, and operating margin to improve due to changes in project mix and similar utilization levels in the US Gulf. For IMDS, we expect increased revenue, significantly increased operating income, and improved operating margin.
Rod Larson: For ADTech, we expect significantly higher revenue and operating income and improved operating margin, and we expect a slight increase in unallocated expenses. We also plan to continue share repurchases in 2027, with approximately 5 million shares remaining under our existing repurchase authorization. As we move through the planning cycle and our customers finalize their 2027 budgets, we expect to gain greater visibility into activity levels and the timing of opportunities across our businesses. We will provide more detailed guidance for 2027 during the year-end reporting process. In summary, we remain focused on executing through the remainder of 2026 while positioning the business for opportunities we see developing in 2027. Our priorities remain disciplined execution, cash generation, and maintaining financial flexibility to support our longer-term objectives. Thanks for your continued interest in Oceaneering. We will now be happy to take your questions.
Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question for optimum sound quality, and if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Eddie Kim with Barclays. Your line is open. Please go ahead.
Eddie Kim: Hi, good morning. Just wanted to touch on the-
Rod Larson: Go ahead, Eddie.
Eddie Kim: preliminary 2027 EBITDA guidance of $430 to $480 million, which spans a fairly wide range there. Just curious, which two or three are the largest operational assumptions separating the low end from the high end there, and which segments account for most of that $50 million spread?
Rod Larson: I think it is the normal characters, Eddie. We have, as always, SSR has some of that based on, we have the rig moves this year, and we have some of those things that are a little bit timing based. I think that is a part of it. Some of it will be ADTech, like we said, because we talked about some of these programs. When do the programs kick off? How does appropriations work out, and some of the continuing resolutions? If it gets resolved sooner, that brings things forward in the year and gives us more opportunity in the year. If it pushes back a little bit, it brings us to the lower end of the range. Finally, OPG.
Rod Larson: OPG has room to pick up more international opportunities, and I think, actually, probably, if I think about OPG, it drives us to the higher end of the range. If we can put more things in that bucket, which we hope to resolve some of that between now and when we report next time, I think OPG could bring more goodness to the mix as well. I think those are the typical ones. I do not expect a big change in Manufactured Products because that is long lead time stuff, and I would not expect a whole lot of change in IMDS just because of the relative scale.
Eddie Kim: Got it. Understood. I just wanted to touch on the low end of that range, $430 million, does not represent that big of an increase over 2026, which is surprising just in light of the strong growth you are expecting to see in ADTech next year. It almost implies sort of a flattish trajectory in the energy segments, which is almost counter to kind of the constructive outlook in the offshore inflection that is expected next year. Does the low end of that guidance imply spending slowing down? Is that based on customer conversations you are having or an assumption that oil prices are going to be substantially less next year than they are now? Any more color on that low end of the guidance would be great.
Rod Larson: I think it is mostly timing, Eddie. I think everybody thinks that things are constructive. They expect some of these pickups throughout the year, next year. We have to make sure that we are not overstating when it starts. I think that is always the trick here is a lot of times we get the story right, but we get the timing wrong, so we are a little bit cautious on how fast some of these things will come to fruition when they start spending. It is more about that. I think we truly believe that the thesis is right, the expectation for the macros is right. We are just being a little bit cautious because, like I said, rigs will be moving. Some of the other projects for OPG are being contemplated, but they have not been hard scheduled. So some of that stuff is what we are. I think it is more the timing.
Rod Larson: Mike, would you add anything?
Mike Sumruld: Yeah, I think it is early days, too. This is only October. I think as we start to wrap up the year, talk to our customers, they solidify their CapEx budgets, and we start to see what is happening with the rig movements. That could change.
Eddie Kim: Right.
Mike Sumruld: It is just a little early.
Eddie Kim: Got it. Understood. Appreciate all that color. I will turn it back.
Operator: Your next question comes from the line of Keith Beckmann with Pickering Energy Partners. Your line is open. Please go ahead.
Keith Beckmann: Hey, good morning, and thanks for taking my question. Obviously we had. Hey, how is it going? With the refinancing that was completed during the summer and maybe the significant net cash position you guys have here, how are you guys thinking about capital deployment heading into 2027 and maybe more specifically within ADTech? What is maybe an example of a business that could make sense from an M&A perspective versus something that does not, if you guys went that route, and then maybe how are you weighing that against buybacks? So thank you.
Rod Larson: Sure, Keith. I appreciate that question. You led into that. I think capital deployment, we expect to continue to make investments in our core energy businesses. There may be even some opportunity to bolt on some technology, some things that we can be a little disruptive with in the energy side, on that side of the business. But on the ADTech side, it is a lot of focus around are there some inorganic opportunities, some acquisitions that make sense. I would say the things that make sense are things that are normally valued. Things like machining capacity or workforce capacity that we can bring to bear on the SUBSAFE programs we work on, the new submarine build, things like that we could say we can use our certifications to bring them up to government specs faster.
Rod Larson: These are things that you would pay sort of normal amounts for and then be able to add value through our competencies. I think those things make sense. I think when we are working on some of the more highly technical vehicle-type programs, we could be looking at some of our partners, some of the people that work as subcontractors for us or bring a unique piece of technology to the mix, whether that is for electronics or a different type of sensor technology or something like that. I think those are things that are kind of niche-y maybe, or a little bit bigger than niche-y. They make sense. What does not make sense is us. We have got an established brand. I do not think we need to go buy one of the big, super, what I consider overvalued, flashy names just to try to buy credibility with the customer.
Rod Larson: I do not think we need to go into that ridiculous multiple range to try to get a foot in the door. We are already there. We have got one of the strongest operational reputations in the business. They know we have been here. Some people forget that we have been in that government business. We are a 60-year-old company. We have been in the government side more than 40 years. It is not like we are new to the game. We do not need to buy presence, so to speak.
Keith Beckmann: Okay, perfect. That is really helpful. My second question is maybe any more color we can get around the ongoing continuing resolution going on with the government spending. I am just trying to get a sense on the potential range of outcomes for 2027, like what could be more of the low end versus the high end. I guess more specifically, those are words still be there, right? It is more of a function of timing rather than actually things going away. Is that the right way to think about it? Just when things start. Sorry, I will turn it over.
Rod Larson: Yeah, that is exactly. It is really the sensitivity is more on new project starts, right? Continuing resolution means if you are doing it, you get to continue doing it. I think a lot of those things, we have got a pretty good support from nearly all the work we are doing. Some of the newer things we have won could get slowed down. On the other hand, I will say while there is always this risk, right now I feel better about what we are hearing coming off the Hill and what we are hearing about potential resolution for a defense spending bill, for example. It seems like even for an election year, people are really keen to get a defense bill in place. Probably not surprising given the geopolitical climate. I am not as worried about the defense portion of that. I think there really is a lot of cooperation going on.
Rod Larson: I remain quite optimistic that while it is an unknown out there and we do think it is appropriate to call caution to it or call attention to it, I do feel like we have probably got better information coming back to us than we have in past years.
Keith Beckmann: Awesome. I really appreciate it, and I will turn it back. Thanks, guys.
Rod Larson: Thanks, Pete.
Operator: Your next question comes from the line of Colby Sasso with Daniel Energy Partners. Your line is open. Please go ahead.
Colby Sasso: Hi, thanks for taking my question. Just was thinking about 2027. Could you talk about where you see the most growth from a geographical standpoint next year?
Rod Larson: Sure. I think a lot of it is Brazil, of course, we still see growing. We see Guyana growing. We also see rest of Africa. We see opportunities in the rest of Africa. I think those are good. One of the things we call out is the Gulf of Mexico. It is just the Gulf of Mexico already has slowed down. We got to see how much resilience the Gulf of Mexico has, and that is one that we would be keeping our eye on. Mike, what else would you call on?
Mike Sumruld: Well, I think rest of Africa is a good one. Mozambique is seeing a lot of activity, boring back in again, all across West Africa. It is a challenging place to work, but we have done work there for years and years and got some work lined up there as well.
Rod Larson: Yeah, I do not know that everybody realizes, but Mozambique could have as much drilling activity as Guyana within a year or two.
Colby Sasso: How are you thinking about inflation across your supply chain? Is this dragging on margins at all today? If so, how long will this take to ultimately push through to your customer base? Could it potentially be a tailwind for margins in 2027?
Rod Larson: I cannot call that out as a huge factor, Colby. Most of it, where we see the biggest part of it has been Manufactured Products obviously, especially with some of the bigger components to go into an umbilical. Those things are almost always price adjusted or cost adjusted into the price. So, those we recover on the same product, in the same bid. That is not such a big one. It would be the biggest impact if it were not. The rest of it is within our reach. We are able to mitigate a lot of it. For example, what shows up in R&M in the ROV business, we can mitigate that just by being more efficient, being more careful about where we are buying things, how we are sending around the world. I think the mitigations have been pretty effective.
Rod Larson: Labor rates are always probably the thing that we are most sensitive to, so I would say that the customers are pretty good about recovering labor rates because they value their crews. If they like the people who work for them, they are very well. I think they are very well aware of what is going on in the labor market because they have to deal with it to some degree as well. So, getting adjustments for labor rates has been pretty effective so far. I cannot hang a lot of things up on that, although the more efficient we get, the smarter we get at operating the business, all of those things can help us get into cost reductions to make us more competitive.
Mike Sumruld: Yeah. The escalation clauses in our contracts really help on the labor side. Plus, the more we do from a remote operating perspective, I think also reduces our footprint and our costs.
Rod Larson: Absolutely.
Mike Sumruld: I think we just haven't had a major issue, I don't think, that I could tell from inflation right now. I'm not overly concerned about it.
Colby Sasso: That's all for me. I'll turn it back.
Rod Larson: Thanks, Colby.
Operator: As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of James West with Melius Research. Your line is open. Please go ahead.
James West: Hey, good morning, Rod, Mike.
James West: Good morning, James.
James West: I am curious.
Rod Larson: Morning.
James West: Rod, you talked about Guyana growing, other Africa growing. Mozambique was highlighted as well. What are you seeing outside of Brazil, Africa, maybe a little bit of Gulf of Mexico? What about Mediterranean, offshore North Africa? What are you guys seeing in those regions of the world, just as gas-heavy areas where gas is just becoming a much more important product these days? Just curious your thoughts there.
Rod Larson: I think the Eastern Med definitely is still a lot of opportunity, tempered a little bit by activity or by that geopolitical situation over there, but there is still a lot of interest. You have ENI working over there on the Chevron projects and others. I think that is one that has a lot of upside potential, to your point. One of our really good projects was offshore Egypt. We had a great installation project there this year, and I think we see opportunity for more of that kind of work. The Med is an interesting one. We do not call it out because I would call it a little more sporadic, but it could be meaningful for sure. Norway is always an interesting one.
Rod Larson: Norway is persistent, and as Equinor starts to find things, the other thing we see from Norway is the potential for a lot of subsea tiebacks. They have talked about improving seismic resolution through AI, and that can light up some spots in existing fields that make really good opportunities for subsea tiebacks. We love those because we can do a full installation project there and provide the umbilical and a lot of engineering. I think the more we see tiebacks in the near future, which again, if we have a continued strong commodity price, tiebacks are one of those things that is easiest to get on the budget. That could affect Norway for sure, but if that becomes a greater interest, it definitely could affect the independents of the Gulf of America.
James West: Okay. That is very helpful. Then maybe a follow-up question, not necessarily related to that, but how are you thinking about capital allocation on your oil and gas business versus your military business, which has been growing? Because there are upside capital cycles happening in both areas right now, and so you have to, I would think, balance where you see the best returns. I am curious how you are thinking about that.
Rod Larson: I think there are still opportunities. When we talk about, Mike mentioned earlier in one of the questions about more remote work, being able to do more remote work, being able to do work differently, things that we can do that improve the efficiency of both the work we do and the customer's work. There is a chance to be a little disruptive with technology, and so I think investments in the energy side are going to make sense. We are going to find things that make a lot of economic sense, both from their value standalone, but also from the value they bring to protecting our core, right? Things that we enhance ROV operations with that make us even stronger within those pieces of the business really makes sense.
James West: Right.
Rod Larson: Subsea inspection, let me use that one as an example. Doing more and more digital twin modeling, building a digital twin from ROV video and then using that to devise a risk-based inspection program for subsea assets as we try to keep subsea assets going longer, tying back more things to existing infrastructure, stuff like that, keeping TLPs running longer. All of these things require more inspection while in service. The more of that we can do with technology, and of course, there is a lot of really cool technology out there that can be leveraged here. I think that is the kind of stuff that really does warrant continued investment inside the energy business.
James West: Got it. Thanks for addressing it. Thanks, guys.
Mike Sumruld: Yeah. Thanks, James.
Operator: There are no further questions at this time. I will now turn the call back to Rod Larson for closing remarks.
Rod Larson: Well, since there are no more questions, I will just wrap up by thanking everybody for joining the call. This concludes our Q3 2026 conference call.
Operator: Thank you for attending. You may now disconnect.
