Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Oil States International Inc (NYSE:OIS) met or exceeded its financial guidance for Q1 2025, with revenues reaching $160 million and adjusted EBITDA of $19 million.
• The company achieved its highest level of backlog since September 2015, with strong bookings totaling $136 million and a book-to-bill ratio of 1.5 times.
• OIS generated $9 million of cash flow from operations, reversing a historical trend of negative cash flow in the first quarter.
• The company successfully monetized equipment and inventory, receiving $9 million in proceeds, which were used to fund CapEx and share repurchases.
• OIS's offshore and international operations remain strong, with significant global diversification and minimal expected impact from new tariffs.

Negative Points

• OIS's stock price suffered a material decline due to the announcement of broad-based tariffs by the United States, creating market uncertainty.
• Global crude oil prices declined significantly in April, negatively impacting market conditions.
• The company's domestic operations could face pressure due to weaker crude oil prices and potential tariff impacts on imported goods.
• Tariffs on imported steel tubing and other components are expected to increase the cost of completed perforating systems.
• OIS's adjusted segment EBITDA margin for the offshore manufacturing product segment decreased from 23% in Q4 2024 to 19% in Q1 2025.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with OIS.

Q: Cindy, given the strong bookings and backlog, how do you see the willingness of customers to proceed with plans amidst current macroeconomic uncertainties? A: Cindy Taylor, President and CEO: Development drilling programs, which are multi-year in nature, typically don't depend on short-term commodity price movements. Our strong bookings, especially from Brazil, reflect this trend. We are also seeing benefits from our new Batam facility and expanding our service and repair business, which supports our guidance and revenue expectations for the year.

Q: Can you elaborate on the sequential improvement in your Completion and Production Services (CPS) business and its sustainability? A: Cindy Taylor, President and CEO: The improvement was driven by recovery in Gulf operations, which support higher margins. We've also made strategic decisions around product lines and cost reductions. Our CPS margins were 25% in Q1, and while we aim for 20%+ margins, ongoing Gulf activity will be crucial for sustaining these levels.

Q: With your strong balance sheet, how do you prioritize between share repurchases and debt reduction? A: Lloyd Hodrick, CFO: Given our low stock price, we plan to be opportunistic and aggressive with share repurchases. While there's an opportunity to buy back some of the convertibles trading below par, our primary focus is on share repurchases and debt reduction leading into next year's maturity.

Q: What is the expected impact of tariffs on your operations, particularly in the downhole technology segment? A: Lloyd Hodrick, CFO: The impact is expected to be minimal, likely in the range of 5-10% cost increase, primarily affecting the perforating business. Since competitors face similar cost increases, we anticipate adjusting our selling prices accordingly.

Q: How are you mitigating the potential impacts of tariffs on your operations? A: Cindy Taylor, President and CEO: We are focusing on strategic sourcing, using temporary import bonds, and optimizing our supply chain. Our global diversification and limited reliance on imports for domestic operations help mitigate these impacts. We are also adjusting pricing where necessary.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.