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

Oil States International (OIS) delivered Q3 2025 adjusted consolidated EBITDA of $21 million on $165 million revenue, within guidance, largely propelled by its strategic shift towards offshore and international markets, which now constitute 75% of revenues. The Offshore/Manufactured Products segment demonstrated strong performance with a 2% sequential revenue increase, 6% adjusted EBITDA growth, and a decade-high backlog of $399 million, supported by a 1.3x book-to-bill ratio including significant military orders. While U.S. land-based segments faced declines and the Downhole Technologies segment incurred an EBITDA loss due to unexpected tariffs, OIS generated robust cash flow from operations of $31 million, projecting over $100 million for the full year. The company forecasts Q4 revenue growth of 8-13% sequentially and adjusted EBITDA of $21-22 million, emphasizing its focus on higher-margin offshore projects, deleveraging, and shareholder returns amidst a subdued U.S. land outlook.

Analysis

Oil States International (OIS) delivered Q3 2025 adjusted consolidated EBITDA of $21 million on $165 million revenue, within guidance, largely propelled by its strategic pivot towards offshore and international markets. These segments now constitute 75% of consolidated revenues, reflecting a multiyear effort to grow longer-cycle, higher-margin work. The Offshore/Manufactured Products segment demonstrated strong sequential growth, with revenues up 2% and adjusted EBITDA rising 6%, culminating in a decade-high backlog of $399 million and a robust 1.3x book-to-bill ratio, including significant military orders.

Conversely, U.S. land-based activity declined significantly, with the average U.S. frac spread count down 11% sequentially, impacting the Completion and Production Services and Downhole Technologies segments. The Downhole Technologies segment recorded an EBITDA loss due to unexpected tariff increases on imported gun steel, a material cost increase from 25% to 88-98%. Management expects these tariffs to be passed on to customers after working through existing inventory.

Despite these headwinds, OIS generated strong cash flow from operations of $31 million, a 105% sequential increase, and $23 million in free cash flow. The company projects Q4 revenue to increase 8-13% sequentially and adjusted EBITDA to range from $21 million to $22 million, with full-year cash flow from operations expected to exceed $100 million. This strong cash generation supports ongoing deleveraging efforts and opportunistic share repurchases and convertible note buybacks, aiming to unlock equity value for stockholders.

Key Decisions for Investors

• Monitor the continued shift towards offshore and international markets for sustained margin expansion and backlog growth, particularly given the decade-high backlog and strong book-to-bill ratio.
• Assess the company's ability to effectively pass on increased tariff costs in the Downhole Technologies segment and the timing of its return to profitability.
• Evaluate the strong free cash flow generation and capital allocation strategy, including deleveraging and share repurchases, as key drivers for potential equity value unlocking.