Oil States Announces Second Quarter 2023 Results

Business Wire
12 min read
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In this article:

  • 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

HOUSTON, July 27, 2023--(BUSINESS WIRE)--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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727426999/en/

Contacts

Company Contact:
Lloyd A. Hajdik
Oil States International, Inc.
Executive Vice President, Chief Financial Officer and Treasurer
(713) 652-0582

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