Oil States Announces Second Quarter 2023 Results

By: Oil States International, Inc. via Business Wire

July 27, 2023 at 07:00 AM EDT

Net income of $0.6 million, or $0.01 per diluted share, reported for the quarter
Revenue of $183.5 million, while down 6% sequentially, increased 1% year-over-year
Adjusted EBITDA (a non-GAAP measure⁽¹⁾) of $19.0 million decreased $2.4 million sequentially but increased $2.0 million year-over-year
Generated operating cash flow of $44.7 million in the quarter
Offshore/Manufactured Products segment's backlog increased sequentially for a fourth consecutive quarter totaling $338 million as of June 30, with a quarterly book-to-bill ratio of 1.1x
Invested $3.0 million in share repurchases

Oil States International, Inc. (NYSE: OIS):

	Three Months Ended									% Change
(Unaudited, In Thousands, Except Per Share Amounts)	June 30, 2023			March 31, 2023			June 30, 2022			Sequential		Year-over-Year
Consolidated results:
Revenues	$	183,529		$	196,199		$	181,834		(6	)%	1%
Operating income (loss)	$	3,269		$	5,875		$	(1,090	)	(44	)%	nm
Net income (loss)	$	558		$	2,158		$	(5,144	)	(74	)%	nm
Diluted earning per share	$	0.01		$	0.03		$	(0.08	)	(67	)%	nm
Adjusted EBITDA⁽¹⁾	$	19,016		$	21,407		$	16,988		(11	)%	12%

Revenues by segment:
Offshore/Manufactured Products	$	94,086		$	98,199		$	96,467		(4	)%	(2)%
Well Site Services		64,536			67,058			54,819		(4	)%	18%
Downhole Technologies		24,907			30,942			30,548		(20	)%	(18)%

Operating income (loss) by segment:
Offshore/Manufactured Products	$	11,253		$	11,090		$	9,441		1	%	19 %
Well Site Services		4,732			6,966			601		(32	)%	nm
Downhole Technologies		(2,536	)		(1,519	)		(1,485	)	(67	)%	(71)%

Adjusted Segment EBITDA (a non-GAAP measure⁽¹⁾):
Offshore/Manufactured Products	$	15,981		$	15,923		$	14,735		—	%	8 %
Well Site Services		11,425			13,223			8,874		(14	)%	29 %
Downhole Technologies		1,639			2,756			2,854		(41	)%	(43)%

___________________

(1)

Adjusted EBITDA and Adjusted Segment EBITDA are non-GAAP measures, see "Reconciliations of GAAP to Non-GAAP Financial Information" tables below for reconciliations to their most comparable GAAP measures as well as further clarification and explanation.

Oil States International, Inc. reported net income of $0.6 million, or $0.01 per share, for the second quarter of 2023 on revenues of $183.5 million and Adjusted EBITDA of $19.0 million. These results compare to revenues of $196.2 million, net income of $2.2 million, or $0.03 per share, and Adjusted EBITDA of $21.4 million reported in the first quarter of 2023.

Oil States' President and Chief Executive Officer, Cindy B. Taylor, stated,

"Our reported second quarter results reflect the dueling trends of activity declines in U.S. shale basins with offsetting growth in offshore and international regions. Despite sequentially weaker second quarter revenues and Adjusted EBITDA, we confirm our full-year guidance of $92 to $100 million of Adjusted EBITDA based upon expected contributions from the ongoing recovery in offshore activity. Our forecast is supported by the backlog growth that we have witnessed at our Offshore/Manufactured Products segment, which increased to $338 million in the second quarter of 2023 – a quarter-end level last observed at the end of 2015.

"We generated very strong cash flow from operations of $45 million in the second quarter, invested $11 million in capital equipment, repurchased $3 million of our common stock and repaid all amounts outstanding under the revolving credit facility. With cash on-hand of $42 million and no significant debt maturities until 2026, we are in a strong position to create stockholder value.

"We remain encouraged by the continued recovery in offshore activity coupled with future benefits to be gained from new product introductions."

Business Segment Results

(See Segment Data and Adjusted Segment EBITDA tables below)

Offshore/Manufactured Products

Offshore/Manufactured Products reported revenues of $94.1 million, operating income of $11.3 million and Adjusted Segment EBITDA of $16.0 million in the second quarter of 2023, compared to revenues of $98.2 million, operating income of $11.1 million and Adjusted Segment EBITDA of $15.9 million reported in the first quarter of 2023. Adjusted Segment EBITDA margin in the second quarter of 2023 was 17%, compared to 16% in the prior quarter.

Backlog totaled $338 million as of June 30, 2023, an increase of $12 million, or 4%, from March 31, 2023 and $97 million, or 40%, from June 30, 2022. The current quarter-end backlog is at its highest level since December 31, 2015. Second quarter 2023 bookings totaled $106 million, yielding a quarterly book-to-bill ratio of 1.1x (1.2x year-to-date).

Well Site Services

Well Site Services reported revenues of $64.5 million, operating income of $4.7 million and Adjusted Segment EBITDA of $11.4 million in the second quarter of 2023, compared to revenues of $67.1 million, operating income of $7.0 million and Adjusted Segment EBITDA of $13.2 million reported in the first quarter of 2023. Adjusted Segment EBITDA margin was 18% in the second quarter of 2023, compared to 20% in the first quarter of 2023.

Downhole Technologies

Downhole Technologies reported revenues of $24.9 million, an operating loss of $2.5 million and Adjusted Segment EBITDA of $1.6 million in the second quarter of 2023, compared to revenues of $30.9 million, an operating loss of $1.5 million and Adjusted Segment EBITDA of $2.8 million reported in the first quarter of 2023. The segment's second quarter operating results included a $1.0 million non-cash provision for excess and obsolete inventory. Adjusted Segment EBITDA margin in the second quarter of 2023 was 7%, compared to 9% in the first quarter of 2023.

Corporate

Corporate operating expenses in the second quarter of 2023 totaled $10.2 million.

Interest Expense, Net

Net interest expense totaled $2.1 million in the second quarter of 2023, which included $0.4 million of non-cash amortization of deferred debt issuance costs.

Income Taxes

The Company recognized tax expense of $0.9 million on pre-tax income of $1.4 million during the second quarter of 2023. In the first quarter of 2023, the Company recognized a tax expense of $1.6 million on pre-tax income of $3.8 million.

Cash Flows

During the second quarter of 2023, the Company generated cash flows from operations of $44.7 million and invested $10.8 million in new equipment to support future growth.

The Company also repurchased 439 thousand shares of its common stock for $3.0 million in the second quarter of 2023. A total of $22.0 million remains available under the share repurchase authorization, which extends through February 2025.

Financial Condition

No borrowings were outstanding under the Company's asset-based revolving credit facility (the "ABL Facility") at June 30, 2023. Cash on-hand increased from $15.8 million at March 31, 2023 to $42.4 million at June 30, 2023. Liquidity (cash plus borrowing availability) totaled $133.4 million at June 30, 2023, with amounts available to be drawn under the ABL Facility totaling $90.9 million.

Conference Call Information

The call is scheduled for July 27, 2023 at 10 a.m. Central Daylight Time, is being webcast and can be accessed from the Company's website at www.ir.oilstatesintl.com. Participants may also join the conference call by dialing 1 (888) 210-3346 in the United States or by dialing +1 (646) 960-0253 internationally and using the passcode 7534957. A replay of the conference call will be available approximately two hours after the completion of the call and can be accessed from the Company's website at www.ir.oilstatesintl.com.

About Oil States

Oil States International, Inc. is a global provider of manufactured products and services to customers in the energy, industrial and military sectors. The Company's manufactured products include highly engineered capital equipment and consumable products. Oil States is headquartered in Houston, Texas with manufacturing and service facilities strategically located across the globe. Oil States is publicly traded on the New York Stock Exchange under the symbol "OIS".

For more information on the Company, please visit Oil States International's website at www.oilstatesintl.com.

Cautionary Language Concerning Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among others, the level of supply and demand for oil and natural gas, fluctuations in the current and future prices of oil and natural gas, the level of exploration, drilling and completion activity, general global economic conditions, the cyclical nature of the oil and natural gas industry, geopolitical tensions, the financial health of our customers, the actions of the Organization of Petroleum Exporting Countries ("OPEC") and other producing nations with respect to crude oil production levels and pricing, the impact of environmental matters, including executive actions and regulatory efforts to adopt environmental or climate change regulations that may result in increased operating costs or reduced oil and natural gas production or demand globally, our ability to access and the cost of capital in the bank and capital markets, our ability to develop new competitive technologies and products, and other factors discussed in the "Business" and "Risk Factors" sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and the subsequently filed Quarterly Report on Form 10-Q and Periodic Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
	Three Months Ended									Six Months Ended
	June 30, 2023			March 31, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Revenues:
Products	$	92,630		$	99,840		$	99,033		$	192,470		$	184,794
Services		90,899			96,359			82,801			187,258			161,084
		183,529			196,199			181,834			379,728			345,878

Costs and expenses:
Product costs		72,659			78,677			79,388			151,336			144,189
Service costs		69,371			72,058			62,768			141,429			124,571
Cost of revenues (exclusive of depreciation and amortization expense presented below)		142,030			150,735			142,156			292,765			268,760
Selling, general and administrative expense		23,528			24,016			23,757			47,544			47,590
Depreciation and amortization expense		15,537			15,256			17,239			30,793			35,056
Other operating (income) expense, net		(835	)		317			(228	)		(518	)		(102	)
		180,260			190,324			182,924			370,584			351,304
Operating income (loss)		3,269			5,875			(1,090	)		9,144			(5,426	)

Interest expense, net		(2,059	)		(2,391	)		(2,638	)		(4,450	)		(5,310	)
Other income, net		210			276			376			486			1,401
Income (loss) before income taxes		1,420			3,760			(3,352	)		5,180			(9,335	)
Income tax provision		(862	)		(1,602	)		(1,792	)		(2,464	)		(5,233	)
Net income (loss)	$	558		$	2,158		$	(5,144	)	$	2,716		$	(14,568	)

Net income (loss) per share:
Basic	$	0.01		$	0.03		$	(0.08	)	$	0.04		$	(0.24	)
Diluted		0.01			0.03			(0.08	)		0.04			(0.24	)

Weighted average number of common shares outstanding:
Basic		62,803			62,825			60,704			62,814			60,601
Diluted		63,174			63,072			60,704			63,161			60,601

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)
	June 30, 2023			December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	42,420		$	42,018
Accounts receivable, net		180,917			218,769
Inventories, net		205,132			182,658
Prepaid expenses and other current assets		28,217			19,317
Total current assets		456,686			462,762

Property, plant, and equipment, net		296,015			303,835
Operating lease assets, net		23,266			23,028
Goodwill, net		79,778			79,282
Other intangible assets, net		161,476			169,798
Other noncurrent assets		27,799			25,687
Total assets	$	1,045,020		$	1,064,392

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	513		$	17,831
Accounts payable		56,726			73,251
Accrued liabilities		42,987			49,057
Current operating lease liabilities		6,750			6,142
Income taxes payable		2,740			2,605
Deferred revenue		53,027			44,790
Total current liabilities		162,743			193,676

Long-term debt		135,273			135,066
Long-term operating lease liabilities		20,027			20,658
Deferred income taxes		8,601			6,652
Other noncurrent liabilities		20,271			18,782
Total liabilities		346,915			374,834

Stockholders' equity:
Common stock		772			766
Additional paid-in capital		1,125,647			1,122,292
Retained earnings		274,743			272,027
Accumulated other comprehensive loss		(71,522	)		(78,941	)
Treasury stock		(631,535	)		(626,586	)
Total stockholders' equity		698,105			689,558
Total liabilities and stockholders' equity	$	1,045,020		$	1,064,392

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	2,716		$	(14,568	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		30,793			35,056
Stock-based compensation expense		3,361			3,504
Amortization of deferred financing costs		892			944
Deferred income tax provision		997			2,584
Gains on disposals of assets		(561	)		(1,185	)
Settlement of disputes with seller of GEODynamics, Inc.		—			620
Other, net		(267	)		360
Changes in operating assets and liabilities, net of effect from acquired business:
Accounts receivable		39,042			(20,469	)
Inventories		(21,197	)		(14,664	)
Accounts payable and accrued liabilities		(25,924	)		(5,994	)
Deferred revenue		8,237			4,647
Other operating assets and liabilities, net		653			(870	)
Net cash flows provided by (used in) operating activities		38,742			(10,035	)

Cash flows from investing activities:
Capital expenditures		(17,338	)		(6,453	)
Proceeds from disposition of property and equipment		690			1,652
Acquisition of business, net of cash acquired		—			(8,125	)
Other, net		(66	)		(85	)
Net cash flows used in investing activities		(16,714	)		(13,011	)

Cash flows from financing activities:
Revolving credit facility borrowings		35,592			9,725
Revolving credit facility repayments		(35,592	)		(9,725	)
Repayment of 1.50% convertible senior notes		(17,315	)		(6,272	)
Other debt and finance lease repayments		(226	)		(359	)
Payment of financing costs		(95	)		(74	)
Purchases of treasury stock		(3,001	)		—
Shares added to treasury stock as a result of net share settlements due to vesting of stock awards		(1,948	)		(1,002	)
Net cash flows used in financing activities		(22,585	)		(7,707	)

Effect of exchange rate changes on cash and cash equivalents		959			147
Net change in cash and cash equivalents		402			(30,606	)
Cash and cash equivalents, beginning of period		42,018			52,852
Cash and cash equivalents, end of period	$	42,420		$	22,246

Cash paid (received) for:
Interest	$	4,060		$	4,105
Income taxes, net		(1,475	)		291

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
SEGMENT DATA

(In Thousands)
(Unaudited)
	Three Months Ended									Six Months Ended
	June 30, 2023			March 31, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Revenues⁽¹⁾:
Offshore/Manufactured Products
Project-driven:
Products	$	32,210		$	39,132		$	41,098		$	71,342		$	74,942
Services		24,846			24,630			23,995			49,476			48,293
		57,056			63,762			65,093			120,818			123,235
Military and other products		7,965			6,997			7,763			14,962			13,109
Short-cycle products		29,065			27,440			23,611			56,505			44,235
Total Offshore/Manufactured Products		94,086			98,199			96,467			192,285			180,579
Well Site Services		64,536			67,058			54,819			131,594			102,991
Downhole Technologies		24,907			30,942			30,548			55,849			62,308
Total revenues	$	183,529		$	196,199		$	181,834		$	379,728		$	345,878

Operating income (loss):
Offshore/Manufactured Products	$	11,253		$	11,090		$	9,441		$	22,343		$	19,637
Well Site Services		4,732			6,966			601			11,698			(2,794	)
Downhole Technologies		(2,536	)		(1,519	)		(1,485	)		(4,055	)		(2,990	)
Corporate		(10,180	)		(10,662	)		(9,647	)		(20,842	)		(19,279	)
Total operating income (loss)	$	3,269		$	5,875		$	(1,090	)	$	9,144		$	(5,426	)

________________

(1)

The Company revised its supplemental disclosure of disaggregated revenue information in the second quarter of 2023. Prior-period disclosures of disaggregated revenue information were conformed with the current-period presentation.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL INFORMATION
ADJUSTED EBITDA (A)
(In Thousands)
(Unaudited)
	Three Months Ended							Six Months Ended
	June 30, 2023		March 31, 2023		June 30, 2022			June 30, 2023		June 30, 2022

Net income (loss)	$	558	$	2,158	$	(5,144	)	$	2,716	$	(14,568	)
Interest expense, net		2,059		2,391		2,638			4,450		5,310
Income tax provision		862		1,602		1,792			2,464		5,233
Depreciation and amortization expense		15,537		15,256		17,239			30,793		35,056
Settlement of disputes with seller of GEODynamics, Inc.		—		—		620			—		620
Gains on extinguishment of 1.50% convertible senior notes		—		—		(157	)		—		(157	)
Adjusted EBITDA	$	19,016	$	21,407	$	16,988		$	40,423	$	31,494

________________

(A)

The term Adjusted EBITDA consists of net income (loss) plus net interest expense, taxes, depreciation and amortization expense, and loss on settlement of disputes with the seller of GEODynamics, Inc., less gains on extinguishment of 1.50% convertible senior notes (the "2023 Notes"). Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should not be considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with GAAP or as a measure of profitability or liquidity. Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Adjusted EBITDA as a supplemental disclosure because its management believes that Adjusted EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses Adjusted EBITDA to compare and to monitor the performance of the Company and its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth reconciliations of Adjusted EBITDA to net income (loss), which is the most directly comparable measure of financial performance calculated under GAAP.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL INFORMATION
ADJUSTED SEGMENT EBITDA (B)
(In Thousands)
(Unaudited)
	Three Months Ended									Six Months Ended
	June 30, 2023			March 31, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Offshore/Manufactured Products:
Operating income	$	11,253		$	11,090		$	9,441		$	22,343		$	19,637
Other income, net		81			165			45			246			86
Depreciation and amortization expense		4,647			4,668			5,249			9,315			10,579
Adjusted Segment EBITDA	$	15,981		$	15,923		$	14,735		$	31,904		$	30,302

Well Site Services:
Operating income (loss)	$	4,732		$	6,966		$	601		$	11,698		$	(2,794	)
Other income, net		129			111			878			240			1,864
Depreciation and amortization expense		6,564			6,146			7,395			12,710			15,327
Adjusted Segment EBITDA	$	11,425		$	13,223		$	8,874		$	24,648		$	14,397

Downhole Technologies:
Operating loss	$	(2,536	)	$	(1,519	)	$	(1,485	)	$	(4,055	)	$	(2,990	)
Other expense, net		—			—			(84	)		—			(86	)
Depreciation and amortization expense		4,175			4,275			4,423			8,450			8,807
Adjusted Segment EBITDA	$	1,639		$	2,756		$	2,854		$	4,395		$	5,731

Corporate:
Operating loss	$	(10,180	)	$	(10,662	)	$	(9,647	)	$	(20,842	)	$	(19,279	)
Other expense, net		—			—			(463	)		—			(463	)
Depreciation and amortization expense		151			167			172			318			343
Settlement of disputes with seller of GEODynamics, Inc.		—			—			620			—			620
Gains on extinguishment of 1.50% convertible senior notes		—			—			(157	)		—			(157	)
Adjusted Segment EBITDA	$	(10,029	)	$	(10,495	)	$	(9,475	)	$	(20,524	)	$	(18,936	)

________________

(B)

The term Adjusted Segment EBITDA consists of operating income (loss) plus other income (expense), depreciation and amortization expense, and loss on settlement of disputes with the seller of GEODynamics, Inc., less gains on extinguishment of the 2023 Notes. Adjusted Segment EBITDA is not a measure of financial performance under GAAP and should not be considered in isolation from or as a substitute for operating income (loss) or cash flow measures prepared in accordance with GAAP or as a measure of profitability or liquidity. Additionally, Adjusted Segment EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Adjusted Segment EBITDA as supplemental disclosure because its management believes that Adjusted Segment EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses Adjusted Segment EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth reconciliations of Adjusted Segment EBITDA to operating income (loss), which is the most directly comparable measure of financial performance calculated under GAAP.