Good morning. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oil States International, Inc. 2024Q4 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Ms. Ellen Pennington, you may begin your conference.

Thank you, Mark. Good morning, and welcome to Oil States International, Inc.'s fourth quarter 2024 earnings conference call. Our call today will be led by our President and CEO, Cindy Taylor, and Lloyd Hajdik, Oil States' Executive Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. No one should assume that these forward-looking statements remain valid later in the quarter or beyond. Any such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our 2023 Form 10-K along with other recent SEC filings. This call is being webcast and can be accessed at Oil States International, Inc.'s website. A replay of the conference call will be available two hours after the completion of this call and will continue to be available for twelve months. I'll now turn the call over to Cindy.

Thank you, Ellen. Good morning, and thank you for joining our conference call today where we will discuss our fourth quarter 2024 results and provide our thoughts on market trends in addition to discussing our company's specific outlook. Through the fourth quarter, we continued to build momentum towards achieving our strategic objectives, supported by strong demand in offshore and international markets while overcoming some headwinds in US domestic land-based operations. With continued expansion of our international and offshore product offerings, along with the strategic optimization of our US land-driven business, our international and offshore revenues by destination grew to 72% of our consolidated revenues for the quarter, while US land-driven revenues represented 28%. As we have discussed in prior quarters, we have strategically streamlined our operations in the United States through the exit of underperforming locations and business lines. Our focus on business mix optimization continued during the fourth quarter. Along these lines, we completed the sale of a previously idled facility, netting cash proceeds of $24.8 million, resulting in a pre-tax gain of $15.3 million. Our offshore and international operations grew 6% sequentially in terms of revenue and bookings during the fourth quarter. However, improvements in these regions were offset by our US land-driven operations due to a declining frac spread count triggered by typical fourth quarter seasonality. Our completion and production work in the Gulf of America has rebounded to higher activity levels early in 2025 from a slower second half of 2024 following adverse third quarter weather events. We remain dedicated to growing our operations and strategically investing in our most profitable business areas supported by advanced technologies. We will also continue to focus on the return of cash to our shareholders. During the quarter, we generated cash flows from operations totaling $18 million and repurchased $9 million of our common stock. During 2025, we expect to generate strong free cash flow, allowing for further shareholder returns. Lloyd will now review our operating results along with our financial position in more detail.

Thanks, Cindy. Good morning, everyone. During the fourth quarter, we generated revenues of $165 million and adjusted consolidated EBITDA of $19 million. Our adjusted net income totaled $5.5 million or $0.09 per share, after excluding a gain of $15.3 million associated with the sale of our previously idled facility, and $3.1 million of restructuring charges incurred in connection with certain US land-based operations and facility closures. Our offshore manufactured product segment grew 5% sequentially, generating revenues of $107 million and adjusted segment EBITDA of $25 million, up 6% sequentially in the fourth quarter. Adjusted segment EBITDA margin was 23% in the fourth quarter, comparable to the third quarter. In our completion and production services segment, we generated revenues of $30 million and adjusted segment EBITDA of $3.5 million in the fourth quarter. Adjusted segment EBITDA excluded operating lease asset impairment charges of $1.2 million and facility closure and other charges totaling $1.9 million. Excluding these charges, adjusted segment EBITDA was 12% in the fourth quarter compared to 13% in the third quarter. Excluding the revenue impact of exited operations in both the third and fourth quarters, completion and production services segment revenues declined $1.6 million or 5% sequentially. In our downhole technology segment, we reported revenues of $27 million and breakeven adjusted segment EBITDA for the fourth quarter. Despite some large planned collections from customers moving into early January, Oil States International, Inc. generated $18 million in cash flows from operations during the quarter. We invested $14 million in CapEx, a portion of which was customer-funded, which was more than offset by the $25 million in net proceeds from the idle facility sale Cindy mentioned. Cash was used to buy back $9 million of our common stock. Now Cindy will offer some market outlook and concluding comments.

Strong long-term prospects for oil, natural gas, and LNG, coupled with growing global power demand, are expected to drive ongoing capital investments in offshore and international projects, led by developments in Latin America, the United States, Asia, and Africa. Recently announced FIDs, which have resulted in production orders with major subsea OEMs and associated industry backlog builds, should continue to translate into increased demand for our products, driving higher bidding activity, bookings, and ultimately revenue growth. We are successfully marketing our managed pressure drilling systems, which received further market acceptance with key customer approval to operate in South America during the fourth quarter. We are also seeing positive market momentum across our conductor connector products and our flagship flex joint deepwater riser connector product. In the shallow water environment, project opportunities for fixed platform foundations, subsea pipeline, and associated repair systems, as well as topside equipment, are emerging. These opportunities, combined with the low capital intensity of our global manufacturing operations, position us for strong future growth and shareholder returns. While domestic market conditions and activity levels are expected to remain relatively flat throughout 2025, we expect profitability to improve within our completion and production services and downhole technology segments, given our restructuring initiatives undertaken in 2024, coupled with what is expected to be a more energy-friendly regulatory environment. Domestic revenue opportunities for new technology introductions, including our open architecture perforating systems and digital technologies for wireline service providers, should support market share gains. Internationally, our initiatives to secure contracts with our customers for the supply of perforating products are gaining traction with recent awards in Latin America and the Eastern Hemisphere that are scheduled to commence in 2025. Given a solid offshore and international outlook, combined with the potential for incremental margin improvement across our US land-driven businesses, we…

Absolutely. At this time, I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad. I'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Stephen Gengaro with Stifel. Your line is now open.

Thanks. Good morning, everybody. Cindy, you kind of alluded to free cash flow of looks like $40 million to $50 million next in 2025. What do you are you focused on buybacks over debt reduction at this point? Like, how do you think about the allocation of the free cash?

We feel very comfortable with our debt levels. I think you saw we executed in Q4 with share repurchases. Yes, we do have our debt maturing in April, but at the end of the year, we noted we had roughly $60 million of net debt. In Lloyd's comments, we had some very large receivable collected on January ninth, I think. And so I think the point of that is we were roughly net debt $45 million in January. And so we're really not concerned with the level of debt that we have at this point. And I think it is prudent to focus on shareholder returns.

Great. Thanks. And one of the things that kinda keeps surfacing in conversations is this sort of lack of offshore production capacity that sort of delayed rig activity. When we think about FPSO growth, can you give us a sense or remind us sort of the revenue opportunity you have on the FPSO side? I think one of the big players is sort of suggested seven to nine per year that are gonna be ordered in the next couple of years. Can you just kinda frame your opportunity?

Well, I can. I mean, we're, you know, embedded in our guidance on the know you need to work through the numbers, but there's revenue growth in our offshore manufactured products business, and that's really grounded on, one, existing backlog indicating growth in certain regions. Our bidding and quoting activity particularly in North America, i.e., Brazil, Ghana, etcetera, give us the indication that the revenue growth appears solid coupled with new technology introductions. And so I tend to get a bit more granular when we give our guidance, and it's really predicated on existing bidding and quoting activity that we have coming in. And I you know as well, Stephen, we actually try to schedule that as best we can. It's never exact in terms of receiving the orders on a quarter by quarter basis. I think maybe we are a little bit different. Everybody tends to focus on white space for drillers or any kind of new React stations or rigs coming out of market, and we're a little more production infrastructure oriented, and I accept and realize that for analysts that follow it, it's a little harder because you don't ever see the back end on the deployment of production infrastructure. And I think you're asking me in a given FPSO opportunity, how big could that be? And it varied I hate to tell you, it varies greatly depending on how that field is designed. We're really largely driven by the number of import lines, export lines on a facility. Sometimes they will phase those over a period of time. Sometimes you'll do a larger build out. So if I were giving you a range, just on the large the key connectors, it's probably anywhere from $15 to $25 million order of magnitude. And so they're important to us without question. And it's also some of our leading technology. I hope that answers your questions. I know it's kinda hard to model. But I think important for this call, we are planning for revenue growth in this environment, and I know that the macro suggests kind of a flattish international activity, but new product development, our new Baton facility, and kind of the existing backlog and bidding and quoting activity, give us a level of confidence to guide to higher revenues.

No. Great. No. That's great color. And if I could just ask one more quick one, and that is, without asking you sort of specifics, you've sort of talked about streamlining opportunities and focusing on more value-added product lines. Of the revenue guidance you gave, if you just kinda use that as a framework or even 2024, like, what percentage of that do you think falls in that category? Of sort of stuff that's kinda you know, if we could if we found a way to divest it, we would. Is it ten percent or is it greater?

I'm not sure I understand what you're asking, Steven.

So first off, what we we did put in the press release that the revenue impact from the exited operations in 2024 was $41 million. So that's I think that's your starting point.

Yeah. I said I think the point of what Lloyd is saying you're may be modeling different revenue mix. Right. Because of these exited businesses. But, fundamentally, the mix and the margin profile has improved, and it is more exposed to offshore and international and more differentiated technology than it was before.

And so that if we're answering your specific question.

Yep. No. That helps. That helps. Thank you. But we did put all of that information on the exited information.

It'll be in the 10-K to help you model.

It's in the press release too, and that's just specific to the completion of production services segment.

Yeah. No. That is helpful. But I think I probably asked the question poorly, but I think my question was, of the remainder of the business, so of what's left, what percentage of that kind of revenue base is kind of would you sort of think about as sort of lower margin of stuff that would be expedited?

Well, Virginia, you've followed us a long time. The key initiatives are oftentimes around kind of our Downhole Technologies business. I mean, you look at the overall results that they were relatively breakeven, but it was a very weak market in November, December with the holidays and shutdown of completion activity, but a huge focus of us has been and will be in this year improving the margin profile for the Downhole Technologies segment. The international expansion efforts are already beginning to pay off in the sense of new contract opportunities internationally, and then we're rolling out new technology domestically, and we're seeing early indications of market share gains. There as well.

Great. It's a great call. Thank you.

Thank you, Stephen.

And your next question comes from the line of Jim Rollyson with Raymond James. Please go ahead.

Hey. Good morning, everyone. Maybe taking Stephen's questions a step further just so he talked about the revenue side of that. You know, the other part you put in the press release on completion and production services was the kinda $20 million type of purchase or just under $20 million of operating losses of stuff that you got rid of. And your full year to date number was low $20 million operating loss. So just kind of trying to bridge the gap here on as we think about 2025 and what the margin profile in that business segment. How are you thinking about that when you look at what you've done to get rid of the kinda bad mix of stuff they got you got rid of. The new tech and international rollout opportunities and the margins embedded there, like, do we think about maybe for the full year or however you wanna talk about it? Like, the margin profile and completion production for 2025 given what happened in 2024?

Yeah. I'm looking to Lloyd to kinda tell me what it was for 2024, but I think it was mid-teens range. I'm sure you have that in front of you. And we are trying to move those margins more into the 19% to 20% range in 2025. So very substantial EBITDA these are EBITDA margins. Improvement. And even last year, a lot of those were impairment charges. They weren't necessarily cash cost. Some were. But as we go forward, this is a much cleaner year. We envision that today. We've gotten through a lot of this work. You know, our employees on the phone should know that this is largely behind us. And it'll pay off. And I should also mention, in completion and production services, we have a mix of businesses, part of which is international weighted to the Middle East, part of which is Gulf of Mexico, and I meant or Gulf of America as it is now called. So that mix shifts to, again, a little more international, offshore, mix of business, which generally is a little higher margin, and more resilient, albeit, you know, the Gulf of America rig count low. It's beneficial work at good margins. And so that mix helps us as we go forward. And then again, the drag has been just the cost structure and some of the low to no margin contributing businesses that are no longer in our portfolio.

Got it. That's very helpful, Cindy. Appreciate that. Following up on that, one of the things kinda heard over the course of the last I don't know, three or four quarters from other manufacturers of various products is kind of this theme that backlog is kinda been gradually rolling from lower margin work that was priced back coming out of COVID to gradually higher priced backlog as pricing has gotten better because the market got stronger. Maybe just a little bit of commentary around, you know, you talk about bidding opportunities and the general thesis seems to be your OMP revenues will grow year over year, but maybe talk about the kind of margin profile.

You know, we really didn't have the adverse mark. We didn't take a lot of loss leaders, if you will, during the down market. And so ours tends to be mix oriented, if you go back for the last five years, our offshore manufactured product business has been very solid in terms of growth and margin profile over the years. And cash flow generation. I mean, it's a great business. And what we are looking for really is increased market share, top line growth, incremental come through very well. But we've I can't say that the margin profile is really that different in totality. Just higher revenues helps with absorption and incrementals.

Got it. Got it. And then one last follow-up is just kind of circling back to the to the $40, $50 million of free cash flow. If Steven asked the question about debt repayment and that that makes sense, especially given where your converts are trading. How do you think about deploying that free cash flow between buying back stock and just kind of building more cash given kind of where you are now and presumably, where you are as of January with the extra collections?

Oh, we favor share repurchases. No shareholder pays us to sit on cash and we've got plenty of balance sheet working capital to support repayment of the debt. I'm very fine with our debt level. But I don't think you sit for a year and not return cash to shareholders.

Awesome. Thanks for all the color. Appreciate it, guys.

Thanks, Jim.

Again, if you would like to ask a question, and our next question comes from the line of Blake McLean with Daniel Energy Partners. Please go ahead.

Hey. Good morning, y'all. I was hoping maybe on the international and offshore opportunity set. You could just maybe provide a bit more color on the various markets and how they differentiate and what those outlooks look like? From an activity perspective, from an Oil States International, Inc. technology adoption perspective, maybe just a little more color on specific markets.

Well, I will. I mean, I've hit on some of it already, but some of our most differentiated technology is the Connection Tech technology we put into production facilities specifically FPSOs and others. And that has been and will continue the Brazil, Diana, and on an emerging basis, tsunami as an example, where we have active bidding and quoting activity that aligns very well with the industry dynamics. Petrobras is the largest deepwater driller and producer in the world. So one would think it that we would have significant exposure there, and we do and have for years. And a growing presence i.e., expanding into other product lines into the region, even including perforating products as an example. We probably have had static or shrinking market share in Southeast Asia because of a higher cost base of manufacturing. That was the specific objective in building this new facility in Baton. And with that, we do expect to take on incremental market share. We have very active bids and quotes of consequence around our large OD conductor casing connectors in that region, and we have the potential longer-term opportunity to move more manufacturing into that region. You know, our, quote unquote, transitional energy activities are not that big as a percentage. But we do have some exposure obviously to fix foundation wind. We talked about that in our conference call notes. We're doing some around CCS and GEO and we have longer-term potential for offshore wind, not in the United States, but really in the European region. But we're not counting on much growth there. It's more our traditional products coupled with new technology introductions, including the managed pressure drilling system.

Got it. That's helpful. Thank you. I guess just I guess my last one. Maybe on US land, you talked about sort of flattish activity, although you guys will have improving profitability. But how do you think about the trajectory of activity here? You know, going forward through the rest of this year, you know, hope springs return on. On the dry gas basins, I guess. But any color you would provide on how you're thinking about that or things you're looking at or customer conversations?

Yeah. I mean, ours we've seen a lift in activity as early as January and taken on incremental frac fleets. We are very selective with our product offering on land. It's generally frac and isolation. And extended reach technology for the most part. And we're very region specific and customer specific in doing so. So we have got to think about how it run an efficient operation and gain market share with the in in the regions and with the customers that give us continuous work. We're not trying to be all things to all people in this. And, again, we've augmented our operations with new technology introductions in that space, specifically the active seats gate valves that are used in fracking isolation. And more recently, we're introducing our automation equipment into that market. Just think about us being more high end and very selective in terms of capital allocation to that business. You know, as an example, we did show a little higher CapEx in this segment in Q4, but this was stuff we already had in inventory. We're moving it into the manufacture of the valves. So supporting the new frac leak that have we have gained in January. But very selective in terms of that capital allocation.

Got it. Cindy, Lloyd, thank you all very much for your time.

Thanks, Blake.

There are no further questions at this time. I turn the call back over to you, Ms. Cindy Taylor.

Okay. Thank you, Mark. I just want to thank all of you for joining the call today and for your continued interest and support in Oil States International, Inc. We know we have some conferences coming up, and we hope to catch up with you more fully in the coming weeks and months. Have a great earnings season, and hope to see some of you soon.

Take care. That concludes today's conference call. You may now disconnect.