OIS - Earnings call transcript Q2 2019 | Oil States International, Inc.

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Operator

Good morning, and welcome to the Oil States International Second Quarter 2019 Earnings Conference Call. My name is Dinara, and I will be the operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. conference recorded. this that note is being Please

I Patricia may Gil, turn the begin. to Ms. call over Investor will now Relations. Patricia, you

Patricia Gil

States' Thank welcome conference good and second Oil call. you, earnings quarter morning XXXX Dinara, to and

Oil call Operations. and Oil President Taylor, by we Hajdik, States' are and by and President Cragg, Lloyd States' Executive Officer; joined today Vice will States’ Executive Chief Our President, led Oil Cindy Executive be Vice Chief Financial Chris Officer;

by caution to XX-K the those information SEC listeners forward-looking we information, business, begin, afforded be like Before our relying including law. contain the would the along To today should filings. please disclosed are affect remarks that weighed context our Harbor in with our protections other regarding extent risks in other the Form we we statements. Any historical Safe on note many federal such remarks that than of factors that

being and available Oil call one This be will the accessed half replay site. and will one And completion at Web a States' for call hours month. webcast the call be and the a after is of conference of can available be

turn Cindy. over call I to now will the

Cindy Taylor

today and XXXX Thank thank our in morning of conference to joining us you, call. Patricia. quarter all to earnings you Good you participate for second

business results reported respectively. consolidated with segments revenues three in for and and our XX%, Our the up of second improvements quarter sequential two EBITDA X% showed

segment was EBITDA of ranges. Product stand-out margin Offshore/Manufactured end and our exceeding our particular, revenue upper the provided In a in quarter, previously the guidance

totaled quarter. book-to-bill sequential in quarter project increase the ratio June XXth X.Xx XX% resulting leading a received for $XXX we notable at two second addition, during the million In in backlog which a to awards

levels segment, Site of the is changes. the activity Our $X.X June in Technologies of to our impacted development Well trials were coupled three in with our increased results it’s highest system, negatively years. for our Completion segment, recovery ongoing some the XXXX stronger In business design revenues our by X% inventory to international our operations. due costs in Downhole and the field Services product gun In backlog drilling sequentially Services land been XX, of perforating level due quarter write-offs million integrated

from provide Our revolving was portion outstanding. was of million. flow debt operations of take in guidance cash at additional credit follow million details used you I details also $XX facility our and highlights quarter through our position. results more cash additional our strong comments repay the outlook. that our with on market of provide and segment will $XX Lloyd A to will consolidated financial and regarding flow by

Lloyd Hajdik

Cindy, and morning, good everyone. Thanks,

of second revenues generated share. quarter, $XXX million a or reporting per million, $XX During we net while the of loss $X.XX

XX%. impacted Our margin we to of second the XX EBITDA Reported totaled by percentage facility to an adjust with of EBITDA structure million industry EBITDA cost was negatively align with operations right-size charges better our severance as continue and global our and outlook. X.X million quarter closure

of design write-offs our of system. We associated also due the perforating reported development continued gun to integrated million with product inventory X.X changes

During we credit outstanding basis, borrowings the down June from of facility. have flow free $XX in generated $XX million capital paid we operations have cash in million in million flow invested year-to-date $XX On second million generated revolving a under XX expenditures. cash $XX quarter, and and our

totaling on liquidity ratio end our inclusive approximately was was XX% at net June XX quarter available the cash position of hand and XXX of XX, million. debt-to-book At capitalization our million, the second

XX, XXXX. share for Regarding program, to our common extended stock our Board one year of program repurchase Directors the July

the under million repurchase $XXX authorization. have We available remaining

are total we quarter to expect XX projected corporate interest expense million. XX Further, expense to third In XXXX to expenses total of consolidated net depreciation we million amortization our expect guidance, terms and million. and X.X

We prior between to million range million of XX capital lowering and to compared XX million total the are XX to for guidance XXXX expenditures year XX full our million.

take At of this back segments. time, I’d our like details will Cindy you who over business each for the through the turn to call to

Cindy Taylor

generated with Thank $XX off a segment you, in revenues EBITDA sequential segment our a second Offshore/Manufactured EBITDA of Lloyd. Products Leading in segment, $XXX of and represented revenues a during EBITDA. the increase sequential XX% XX% margin increase we XX% and million This segment million, of quarter.

short-cycle with higher and improved levels. absorption by improved increase cost Our project-driven driven results coupled revenue facility in at were an product the revenue sales,

margins EBITDA incremental at Our strong were a result. as XX%

project during introductory we for XXXX, connector two of comments, Asia the which quarter second Southeast facility As received included for East. production destined and awards products I my the Middle in destined notable mentioned equipment

backlog quarter the a is book-to-bill $XXX XX% XXth, in in a backlog sequential X.Xx. in favorably as which At since resulting totaled reported project increase of booked visibility half orders second into June June XX, remained into is backlog Our totaled awards of developing ratio XXXX. highest XXXX million progress $XXX our our we conversations and constructive additional million for and XXXX. the Customer and

we our averaged U.S. Well in XXXX the second XX% Site EBITDA $XX international quarter earlier our million million quarter. the to XXXX higher quarter segment quarter. in preceding XX% Services reported segment, of of margins to the results of of drilling margin These compared improved benefitted averaged generated revenues, Utilization in XX% In in and compared land our $XXX from our operations. activity EBITDA XX% rigs second the both and in

was services completion which In revenues driven sequentially by our grew primarily activity. international X% business, our

services improved we markets our completion international time, international completion incremental of Over completions-related our are we Gulf XXX%, expanding were abroad. proactively Our offerings work. Mexico that grow activity and and an to continue in of believe sequentially reflecting will initiative and services margins EBITDA cost mix reduction

lateral the offerings currently growing in customers’ on and technology equipment and completion internationally, step-out In addition By leadership services within and invest longer completions to to services we length offer to we industry. to focused and that well our business in in research unconventional, to to are a able product are continuing lines development developing U.S. responsive the efforts needs. that role are the we are maintain tied

XX significant the line limits coiled a plugs product milled Tempress in out Texas XX of without run. tubing and single short which such Bottom our mills for pushing without customers. cost Tool Hole that technology is frac the where in and All Assembly were West plugs hole in savings in of HydroPull XX it out trip hours resulting One record our out tripping well holds the completions is

In EBITDA reported X% margin our segment, $XX with of an Technologies $X in revenues million generated Downhole of second we quarter. of and EBITDA million the

sequential million the impacted to in segment quarter, costs design trials addition of ongoing system associated unabsorbed integrated to revenues write-offs field results negatively the our inventory were due coupled during decline for of $X.X product the changes. In with gun by impact with

These development design and changes of considered trialing, are testing products. and one-off items of the new part field

technical As market, our group more and products to are become brought costs. trialed billable revenues offset generate solutions should will to their sufficient

share We in to gun solutions commercialized. perforating proprietary recover expect engineered our integrated business sales our system market once and fully is

on in associated Delays to Field switches testing products our and technologically continue inherent bringing early and commercialization other integrated market. gun advanced are Downhole tools. addressable system, efforts

improve fourth design changes. to to we commercialize to trial quarter plan continue This learnings the gun delay is We to quarter. key product ultimate one system, the in field incorporate integrated a which due

the now quarter. third I like outlook our to on thoughts would for share

by third in generated that expected sequential American down. be is of land We third expect growth is our quarter quarter Products Downhole and EBITDA to our a the Technologies despite The be to to expected to and continue slightly show majority North growth the revenue market in Offshore/Manufactured segments.

into product improved our demand level major will forecasting EBITDA are Segment the that are a for XX% our with backlog segment along project depending begin to $XXX segment, $XXX revenues million service for to third short-cycle starting and expected In on buoyed Products greater by and quarter to products. range average we between will XX% Offshore/Manufactured revenues margins million higher mix. convert which

that XX%. XXXX with expected $XXX and Services Site for EBITDA $XXX to estimate million average Well third segment should XX% We million between quarter to revenues margins range segment our

our range revenues $XX will we For our segment million between Technologies and estimate EBITDA averaging Downhole million $XX XX%. segment, currently with to margins XX% that

generate third to to the an compared our free business returns while sustained quarter to cash invest for our to to conclude, customers, in and research of efforts quarter, generate in and we to all the continue to industry market a positive expectations flow, the second increasing efficiencies strive stockholders continuing across To challenging carefully in modestly bring segments effort our costs environment. our we and development controlling for

I close, of improvement for would as what States. we like highlight Before I the see Oil drivers near-term to

our costs in First, the to higher future. deliver our Offshore/Manufactured we margins. baseline improved are into absorb able provides segment revenue expanding backlog by a generating Also better revenues Products the segment, in of and visibility

the of Second, in increasingly to and months important years international our to contributions come. become will each segments

the outside positioning We our are of United revenue operations States. capture to incremental

Third, recover Downhole we doing focused share on we so. our are to need perforating Technologies business in market and

been have lines a over product and within rewards in span and term. industry for our initiatives to and development bear technology initiatives. new product leader research, continue we years invest the multiple Lastly, These should longer

this call prepared answers for our up open at completes comments. would and time. That you questions the Dinara,

Operator

Yes, absolutely. Thank you.

We [Operator begin the will now Instructions]. question-and-answer session.

Marshall comes from Please from Raymond ahead. go Our first Adkins question James.

Your open. line is

Marshall Adkins

and morning, guys. Good Cindy

from the a and at Number talk a feeding two, about So setting in Offshore – have of kind versus continuing theme, Offshore to Is it grow we We’ve to absorption? of international heard could that like this that relatively we’re the years. looking what’s the one. bigger next commodity via they’re guys Number in for improvement this the couple price. pricing business? you improvement on flat for seems margin up grow ability sustained

Cindy Taylor

your morning, Marshall, and for Yes. thanks questions. Good

I think great ones. absolutely they’re

the derisking shift we’ve most project and from you really customers project, and overall rebid you completed time. kind to lower deepwater of over their themselves that now, will created CapEx of sustain lower to high just a at away customers grade think their believe some projects level of in which track a commodity tried I years their if the right of that to order four activity kind know prices spent investment respond to three of industry people course costs dollars

technology we economic And clearly really positioning we’ve backlog our always from commodity improving key is enjoyed could I And of we and up think reflected are those now high activity think now to customers is at get market. do pretty right come to on is tailwinds happening three-year think prices always little a high I what’s that just at we’ve have which if proprietary that that least. felt bit products and projects that very lower landed in well. a beginning to are they

products to of But and repositioning we also we months generation. market XXXX. attained in waited should fairly the Offshore a three land about newer the terms forecasting and backlog like around the go improvements revenue market in market years even such work, course cost We’ve of now are four XX% companies in of again, more our products recover We’ve and our had as is capacity in had important sat is back that terms respond return. revenue which, absorption. least project over XX us for terms backlog and we’ve feel at we’re suite towards be Like And incremental days that visibility have those capture we streamlining resilient manufacturing and of a responsive little build we enjoying cost gives that rationalization, to more not already with generation early centered to for think be We’re major some this levels that to lot our brought though to many we to thing facility in sequential peak The good demand. us sensitive. of for near-term the done seeing we’re in that. does I to we in that margins haven’t

work that But as I feel higher we runway out load have like hope for that well. we improved, continue as that clearly cost a revenues absorption, of retain we short-cycle do service do again, better and that backlog. are sustained work base we So margins build to

Marshall Adkins

it there like is in have of at it margins sound all So better all you of these absorption, any through improvement absorption? products. getting Are you you’re just pricing some new a is or making the lot but traction

Cindy Taylor

permeates would of in may to every Well, Offshore have that technology and on development products, new say to most to product we’ve business to relates research technology, any but we is Offshore every with every have product fruit. development This had has you be bear to specifically and continuing backlog kind and of we many been upgraded I’m yet new to had We’ve invest existing as introductions honest year But – kind speaking and our efforts. I deliveries though that been it really. even costs date we’ve we’re segment working existing products. of

Marshall Adkins

you. Thank Okay.

Cindy Taylor

Thanks, Marshall.

Operator

you. Thank

question from ahead. next Our Simmons. comes Macpherson from go Please Ian

Your line open. is

Ian Macpherson

I you’re you well to mentioned Yes. were be to X.X an orders half is looking target visibility too for you second the ahead have year, into for share Cindy, book-to-bill second willing the you as that. or products updated Thanks. with think you And that X.X coming Would the it visibility positive early? in based on well. of half for

Cindy Taylor

biased to just X.X know the backlog say would time, low bit. of end I but I little are quarter clearly we want obviously based is up two factor It’s this things and billings range book-to-bill hit, as what take and always moves a bookings to out just upside awards don’t so say up to growing a probably target at X.X. my keep generally revenue, maybe I first But and that X.X would go the the well. it worrisome if I which half. the on to of to would

Ian Macpherson

was Downhole, the gun? it side, the slow Is play the with end about you pressure within of – you the quarter, low market sequentially that or of think commercialization you that towards normalization. second you one integrated up of down under the in second just at talked do in that was Yes, share margin quarter and besides well But besides XX% thing that pricing the the that the the was with pathway and this recapture? showing the else in there sure. but what was the outside revenues kind now expectations a is at think absorption role write-downs quarter can issues you’ve see On

Cindy Taylor

for the the this quarter is tough this you’ve on particularly long I’m the sure all that, an the maybe first of conference short rapidly example, in things market number changing competitors that all heard the response thing. customers looking Downhole moved at more from guns throughout we’ve guns. Yes, and of from to well space what half site. to the that’s in a of but year, There’s side are calls. With as second pretty

well And the long you so you sites. everybody’s the up guns, key reduced with competitors Most that means short that talking at But to third-party of have about. inventory the have offering lighten on are including pricing. gun

is of that’s It’s has the technology responding So about all at yes, part of of mix end my changed. that of market that pricing the also day. and customers ahead even staying changes

that think did we’re best solutions field perfectly thing inventory always of of individual still more build level which system that It I the appropriate as market. more sales we work again, in some trials. market. But fact from kind a item. We and I’ve for things mentioned large to And technology the one improving. leader have things technology. did field all be as up and moving changes conduct order communicated we an sales clearly we working a so probably in to product one-off can progressively those We’ve around view we this before. things a that But I’d up what our some design to perforating the quality of space make stay the way. there factor, that is couple to you have write-off that of high changes investors is will sense that the one, a on on but keep But But the lead along been of good I or market are trials changes a had is, along think of market ahead number systems those in good the the doesn’t point to

you’ve The the got directly. other kind and contracting of just is thing customer E&Ps base

Sometimes integration work There’s on with we amounts wireline certain market. vertical of the companies. going in

Number this mix. that would you the But in of that I And guess have just we leave shift impact. So bit want. around little technology pivot a some is have of just customer our all thought. kind to like one, they a customers with margin key all to I on

end my customers. is XX% very We technology delivering our segment now, top revenue are to the Right of base. to committed whole

And company gun quality a certainly on bringing I integrated this product so market, just focused And about is not lines top build not the integrated while even it’s gun. very am what to all the upon. many has segment obviously

Ian Macpherson

QX ramp say commercial and now QX That��s And I helpful. before you the did not for is hear Thanks. integrated the --? that

Cindy Taylor

we customer about and that went it very Yes. sales we had to think and in performing it cautious quarter. system process a we’ve we we just before do us and through systems bring I addition We high our contacts believe the that a to be top obviously. delayed commercial are though about feedbacks multiple want – to

Ian Macpherson

Thank Okay. you.

Cindy Taylor

And of have any quarter predicated is guidance our don’t We gun. on maybe that I emphasis should point an revenue add a integrated third in on that.

Ian Macpherson

Got it.

Operator

you. Thank

go from question Fargo. Our ahead. Cole comes next Sullivan Please from Wells

line open. Your is

Cole Sullivan

Hi. Good morning.

Cindy Taylor

Cole. Hi,

Cole Sullivan

completion I’m you achieve guys XXXX You internationally any CapEx get [ph] to then does higher see mentioned 'XX? more services. And that meant need versus that impact growing levels in or that that the that. assuming to bias

Cindy Taylor

that not What doing intensive. we’re really CapEx is

markets working personnel basis. facilities. of lot really in on to CapEx spending on-the-ground on equipment as working with a We’ve regions partners consigned for many We’re and various opposed been of some these rotating

and to international we’re not We are beginning really leverage improved deeply finding have markets. been our penetrated that of in some strategies also go-to-market tools

key margins of activity. was very Mexico opposed range notes, increasing Well American modestly I better my international of in largely as significant to relative base a as incremental of our North associated part it. mentioned, work with we’re guidance and mix actually reducing commented Gulf Sites And in of So Lloyd our to terms CapEx as success

Cole Sullivan

strong year. had have good guys you cash And flow free Okay. this

With you tools peak CapEx in XXXX half? then versus the 'XX? guys half back with And do also North initial movements how trending capital the over headwinds, kind how about of and into thinking the second are Downhole of working see kind American any you

Cindy Taylor

comments working Yes, contribution you specific I’m generally I of Lloyd have let that give just and around say it’s ebbs there. going towards to we segmental mix flows, would if capital. generally

you needs I does have X.Xx begin also Offshore with ratio, what Well, happy line products with so But my that. expect I leave revenues to top free working to as mean? because book-to-bill business you’ll me a I’ll I thought that Now capital have fully increase be that segment flow have. happens be that highest I as can makes as the that cash generating some

so And I’m business, over going Lloyd capital really time have I’m question. we But little if answer fine if that I your with a expand leave to that. working to

Lloyd Hajdik

positive she like question of further I’m think and build of for be in I to to the and second we’ll Yes, half largely did fourth expect capital a answer the cash forecasting No, year reductions. cash and flow we the first working third the free slight in target designated exactly. did And debt free quarter certainly the the year. half flow

Cole Sullivan

XXXX then on initial levels of off kind Okay. any CapEx And peak 'XX?

Lloyd Hajdik

Not yet.

Cole Sullivan

Okay. Thanks. back. I’ll turn it

Operator

Thank you.

from Our ahead. next George O’Leary comes Please question Pickering, Holt. from go Tudor,

is open. line Your

George O’Leary

Cindy, Chris. morning, Good Lloyd and

Cindy Taylor

Hi, George.

Lloyd Hajdik

morning. Good

George O’Leary

overall the in just modestly, curious, completion seems at was second it of up the the tailing the quarter. end U.S. question, albeit First off quarter for like activity

and sell? for like and seemed what similar in about but seem for that bit were tools have just the guns perforation someone we’ve thinking to taking and little seen guys stuff folks been lower. and even not have just you a selling Generally from volumes businesses what volumes energetics So to it all they’re quarter perforations just share, other who lower

kind one just the business? it by it see that or someone completions or that guys Was So aggressively quarter out they’re part own activity, Just destock share just internal if pushing customers lowered like was may you in more typically as another, behave gains to looks market? curious curious, of their player it going customers kind is inventory? of what into of really playing do slow have how this activity

Cindy Taylor

gains really Yes, were in result I’m focused decommissioning plugs, if I we example, lines, toe had some because of solely increases a on say other some downhole I our with But product non-perforating going some product to as at think lines there. products, an actually perforating. look it there share whether valves, kind of there just it’s mixed

an inventory us isolate just wouldn’t hold on And some I field. channels specific some think or all I could lot out have the that of stocking that I’d inventory So out probably of It to don’t delay, kind be if modest say -- really perforating. But think on one item in really don’t industry perforating. I that it’s or of there. a kind is some have customer distribution there’s of destocking customers

[Technical Difficulty]

George O’Leary

Cindy?

Operator

Please is stand is conference This operator. conference operator. by. the the This

difficulties. patience. technical some having you Thank are by. your We Please stand for

Lloyd Hajdik

George?

Cindy Taylor

I don’t still know if he’s on.

Operator

on to me to Would the you next go question? like

Cindy Taylor

call. to That would be gone phone line great. We on apparently everybody has phone the apologize Every down.

Operator

problem. a Not

Please next ahead. comes Our Hallead go from question RBC. Kurt from

is Your open. line

Kurt Hallead

Good Hi. morning.

Cindy Taylor

Kurt. Hi,

Kurt Hallead

It’s you have Thank the American far, that along I for provided of momentum North the American question and so question North all a international the dynamics in lot you follow-up has marks shipping the lines clearly pretty market. have business guess of I the clear And the would Offshore does good as some Cindy. market. around the pretty color be

Cindy Taylor

Yes.

Kurt Hallead

just would on actually sure have conversations is client to make bringing having on like that a to you’re cycle really you technology, structural let’s business are dynamics. the about already insights of third Do you’re place changes we beyond base you move and that mentioned, helpful? be you to just through to get quarter, bit and thinking for with start And you the little Cindy, and discussion how be run when of cost the bringing? the to business? in new we some Any your going compensated kind structure technology really guys the this As have say going see overall different

Cindy Taylor

as as the oil I ahead are can at as in it and prices those But been you fairly grow all really stories are alone degree questions not market And productivity. That successful it as or investing we a before technical returns of and of well just has that high, don’t now I it. to some the to one whole need have we’ve you But the it’s that. for as have I and we mean? achieve in of demonstrated stop ourselves to multifaceted. prices And CapEx, greatest industry production. probably want all know obviously access crude for a to been market too. fantastic success everything is impact I we’ve Whether a customers much oil and reality think Shareholders see R&D company that we’re obviously number in need differentiator will and in When significant say one, know, work followed production. just always to that respond technology. of the from you on the you budget trying that say an been you religion characterize and industry we’ve States as so gotten to I’ll environment. capabilities our benefitted here. I of we terms our fairly global stand really Kurt, target does a we’re was doing of to you’d associated fairly U.S. price. had No. if terms and just like what United to is of it’s to committed guilty industry I’ve to customers, crude we’ve a precisely, have an been But us also long to that balance out in and number that balance investments think has got happened movements do in exceeded significant what’s and meaning it of demand years underperformance terms has production it situation it’s what know small created question, think just this it in I’ll that the answer challenging need expected lower to crude overall We making your you with at supply/demand growth

characteristic years, lose as thought activity. kind have would. we a 'XX But as you those always and to we you so paper target the our mid-cycle continue I had the the do XX% would been of you with that really cycles cost targeting that do the to call a extreme over from to our get But that. But you everybody you on be think like on off say And I say investments. peak is we of we have any other unscathed. payback you’re we when return. look towards I clearly this great did I’ll to hearing what revenue to done all 'XX XX% frankly towards rationalization recovering business has question probably to CapEx returns industry for that facility have and challenge constantly the for will tend structure, of to you segments to company looks now geared a ought the streamlining mid-cycle of We it and But live CapEx came that out for from returns.

be higher day. own. our at end the better We therefore their healthy efficient, generating of on to helps wells to are and They more become when us more be flow customers the cash healthy for technology it more be investing in make have

we’re it’s competitive in best you’ve States, the say but technical, of we’ve more highly frustrated one – differentiated the international to highly profile it big when United it’s rig real a to with and the macro a is to land count land, and shift basin challenging, we’ve deepwater, that got particularly not leave been you that I’d again, the participation shift would one which is all some it of So us degree is I but private the the responded other activity in want that and coming do market and out in that XX% is wane it to think free to. equity I going flow think cash sustained generating also some of this startups to the market call frustrating. to frustration the and given technical I’ll yet what always been been quality lower having in freely procedures customers a piggyback give has reputation, the It’s money end a the having basin capabilities, you basin us.

they and – market characteristics plenty we’d out firmer in So see market have think the think to I like in competitor course they’re the still customers and of support I of our of I healthy taking well. through has to as industry also it recognize negotiation. that be to they ROIC price for But generating whole do sustainable and anybody think the advantage a

So for call underway. line that what while I it’s in is improvement terms been painful of sustainable you trend the think clearly many,

Kurt Hallead

answer, I but terms what not That’s well. and what business are in really expansive dynamics challenging, of Cindy. investors facing know thinking are as you’re thoughtful obviously

So that insight. Thank appreciate I and all you. color

Cindy Taylor

Thank you, Kurt.

Operator

you. Thank

Stifel. question from Stephen next Our Gengaro Please ahead. go comes from

open. Your line is

Stephen Gengaro

start and pricing and a business quarters here Two Offshore and guess quarters? everybody. potential when thinking morning, next structure really might the about earlier. quarter things the for missed you out how now should good and you also and looking how good Thanks the that in few be obviously I’ll for order forward I look with flow/book-to-bill the quarter, if this But mind, you don’t you’re the guess I go like have we as few in bookings I we the does next had

Cindy Taylor

lock Well, this engineered our segment. margins I – It’s and think we’ve bring Products To product our specs is have operators. degree, for obviously done be to do been some content, a We do our down greater to successful at to There expense responsive as advance, specifically pricing obviously that scenario. There’s well, And for of I our in Offshore/Manufactured reengineering But cost us those and Sites Well of that we’ve material customers therefore material that capable clearly hold projects. to been in are market. bringing are the had the margins. in down some obviously, when prices. well. really times We internal our segment. not of well in these in in contrast Services to all all

So of is felt and we I genesis the just to had out the buy haven’t go like question. backlog

Stephen Gengaro

I more your all. just was about implying curious I wasn’t to at seems was work. sort you a think improving. lot – margin just about of how we Obviously, It products, trajectory forward? of that the activity be won Offshore have I was thinking advanced margins going

Cindy Taylor

at were incrementals our again, Well, XX%. strong

year our think had the in segment in high the guided I Earlier exit margins overall at rate the came XX%. we teens. in for

of ahead coming are tells second the we terms game quarter. in of kind a just that in bit it the of so me achieving little with in, And XX%

there. So pretty happy progression the about

top other that I’ll we can a in we’re believe exactly $XXX not But it to The is below we respond will quarter, top similarly absorption accordingly. million When cost margins where line, matters. continue our be. would revenue just we thing is accelerate say if line of have

Stephen Gengaro

critical see initially just seem that be with pretty that And system you’d far to is kind of Downhole delivery to – good at Great. Thank high the the what this you traction. certainly the I’ve really geodynamics you. systems. up, And the a leading rolled over very integrated start I to even high as or and it then And out, would it the as get there what product get spectrum. end that in a the ballistics I’ve were the years end the Downhole the very spectrum integrated follow was as at obviously market’s ballistics perceived are curious, the system as was heard as always But of moving you the – concerned? field of

Cindy Taylor

yes. Well,

all, with shape say would this we we are leader do very, to charges shape would just charge that our of technology. in response downhole that very that think we First a the I do we and and important respect believe generally to terms are agree of others

I those. the to lot other going delivery it [indiscernible] preference to of a still And sell commonalities there equipment. more are individually this integrated gun is more I’m and is where wholeheartedly our and are. system We there associated in direct is field Stephen great terms and the are industry but I what understand But with we gun speaking well people charges competitors agree an that’s what the integrated as system. think characterizing differences And So heard perforating research you’ve on do it, the an as though and I’ll variety guns done of that. sell We from you’ve you some in know are of extensive majors of, that tell basis. into there

on being the an Sites challenges on gun quarter going integrated just wiring that gun their a other they invested the focus may of the does pretty integrated upon system loaders during the if best You’re you generic for. to of improve But That’s and gun an gun have the who’s use company are and to of But offering facilities, no specification the more market. location. generally characteristics little there that’s we’re broad I’m factory many that in at that and market kind offer mean? the the a system of fully characteristics to highly of is what in along offering. technical working but performs with intrinsic And But product want needs capabilities from gun what differ though in site looking only some word operator is going wants not loaded it. – integrated integrated telling wireline where Well to things to we’ve on on. just in already say that want with delivered, the you if contrast had trying go it summarize, a We’re generally you to the spectrum loaded market

of And evolved kind gun an already you the understand you’ve and think be research appreciate that. system. of with integrated done And so may market the versions that I it again, around

Stephen Gengaro

very you. That’s Thank Great. helpful.

Cindy Taylor

Thank you.

Operator

Thank you.

Our comes ahead. go from next from question JPMorgan. Please Meakim Sean

open. is line Your

Sean Meakim

morning. Thank you. Good

Cindy Taylor

Good morning, Sean.

Sean Meakim

my biggest out So That feedback. top the was thank on question so that I for the the for Downhole. release, line appreciate of commentary you probably

pieces the the you as we well comfort in moving As can XQ? uncertainty and your North all American range generally level? that the that guidance just built how you XQ Given market you put the through as as look out, activity talk we system about broader get power to in and

Cindy Taylor

specific to speaking a you Are segment?

Sean Meakim

sorry. Yes,

I out line was release morning. the in biggest top quarter the question of this second the think So Downhole the

I quarter to trend appreciate well just a the plenty for the quarter. terms top Downhole quarter moving through going and hoping moving there’s guidance You you’ve third maybe activity the range is that or within in gave then that those as business was how how some pieces unpack parts of your the as of of I feedback of uncertainty market given in to in processing the lot all America. for second in on North built a line

So detail I was please. get there to hoping more

Cindy Taylor

would And that continue to focus think lines. from where growing of impact things range pretty certainly end in end QX. of non-perforating kind obviously low three good we’re we non-heroic, I call both Okay. a of were it. that revenues and that. gave the on will of one, really I we share the in kind do I of movement and will is some The you Number product our range range suggest upper market we would And margins.

growth. we’ve are and not And you products that’s can lineup some embedded – so come is And for. in hope is this really got say early quarter. just the right we now to that Where having in customers

little probably and with costs got to last product improved our the if better obviously line we And obviously, margins then development the quarter. is the That’s margins our softens we that doing Now profile better Number of that’s switch. mean even QX sustained absorption this unabsorbed integrated solutions quarter? revenues get obviously, cost mentioning development the bit two, of and we but a and the this more can a of to a locations of QX course that of it’s on integrated non-recurrence North grow solutions year gun this will the first system, that’s does if that that customer part of a top believe one. technical been but thing design, the technical Clearly, it margin. of million have based has margins. that indications more half I write-off number No, through associated – of sequentially significant bit still which American the non-perforating benefits group, again I should in some group keep mentioned the in has inventory the a X.X throughout of early changed that is are market it that

And we switch a as to so that in QX. beginning individually product will think revenue with market we do bring

segment. major that with to to improved on kind none the are those efficiencies three as well. And of Technologies suffice say segment. in addition performance focused areas were major were lead We kind improving us the for cost highly some in So are of Downhole. for sequential Those the Downhole to elements manufacturing that quarter improved really the of it second three satisfied margins

Sean Meakim

that. very some the exactly taken understand. for the the In That the shifts in place. Offshore/Manufactured given I mix downturn, That’s you what to was Thank efforts through looking business was Products, all of improve helpful. were to

pretty backlog growing now significantly. You’re

year, that to and we at should last backlog a throughput to about going be cycle How curious this progression cycle throughput three-year this high. you from that modeling how think do cycle? to we now how look You’re How Just does build about started perspective forward? a times compared that around does work? should continue so thinking time times

Cindy Taylor

the also connector Yes, we’ve we’re right because the backlog production that past our in to times building that now is key lead major product it’s of comparable had products the and our infrastructure.

service XX-month not So They intensive. right are the very of revenue very short-cycle and forward generation, the with. you’re lines in trend now familiar similar are terms backlog

sequentially that past flat the there that So if that can a update you on be we have gained backlog is and some there. is received. depending say and we would and in incremental somewhat likelihood more to work some model services that ebbs order military talked when focused, short-cycle I will but on We’ve multiyear military and you flows we tends

Sean Meakim

helpful. for that Very Thank feedback. you

Cindy Taylor

you. Thank

Operator

you. Thank

go Our next question Lynagh comes ahead. from from Connor Please Morgan Stanley.

is line open. Your

Connor Lynagh

if this cost some everyone. Cindy, morning, I product guess earning on aren’t particular. least any have Obviously I in but that could earning further? least anything, cost around could, back in the in North and Good potential was in your challenges where go – services one comments U.S., discuss America wondering you is back areas just your businesses of to Thanks. you are returns we assume step to to that. you these at portfolio capital there and their cut if or I thoughts at feel

Cindy Taylor

we’re heavy again the to every product every one, is the free things. degree Number EBIT generation end return flow interest line CapEx and and from business on Yes, two of really day and and and focused ROIC to cash taxes, before years. some our earnings earlier our at burned line by

lower to bit you. a how and I’ll an on return little XXXX to than the don’t responsive most being with There our of we that do manage Lloyd but are talk You focused on right-size can else declines, activity But commodity CapEx I a and business to couple shift know just on, you also been I we’re other challenge review. a price update tell particularly the swings to dramatic continue to about that. capital. a invested assure it’s focus a heard areas

again achieve in sustainable right-sized reduction small we’re weighted Offshore the cost we it line. of quarter severance second time. But a And Our we utilization quarter, was had check XX. drilling everything business first And in initiatives. in and kind gut it ROIC? XX% we We to is when the at improve the services this this products In with have more did very, continual is to Services. venture doing can. of But Well ways trying even of indicative can which incremental quarter business think question and piece that’s your business it a small in in be QX. that very and But why find Well year, Sites last late Services is year. our we’re had to every really Sites that’s – rationalized early we business more But I over we’ve costs XXX% QX even the this

think only I that if company effort can I this of it, we and office terms can. for can sustainable to service assure you ROIC. of not it’s returning also size do our in you will lack of in So any I tell

Connor Lynagh

for you for just couple Yes, today of called and where a the you makes over is next services to here? give potential so big feel an years where that as see out area completion you international theme, the with Can that how see in opportunity sense. you international sticking Maybe opportunity. be us

Cindy Taylor

bucket of in the was we’ll Gulf that. throw QX, completion and of Gulf international was XX% combined with contribution we as generally QX, services Mexico non-North Mexico revenue; of of so XX%. Yes, in In the America, it that

on value well. more in today. in but it we’re products. tell It incremental introducing certainly are is is not is Downhole focused creating. Technologies But And is think Sites is segment, Obviously, longer-term also to so it I’ll They’re something of process. kind we as what that’s Services our of our That Well you international stages the gain we introducing immediate. early traction a true

Connor Lynagh

Okay, I Thank it. you. appreciate

Operator

Simmons. Ian ahead. go from from Our Macpherson next question comes Please

is line Your open.

Ian Macpherson

of follow the question international/Gulf contemplate XX to of what? That what up. I quarter numbers services? your entail Lower completion for services to helped. range my completion the But the mine. wanted actually Those outlook might for kernel guidance Mexico/drilling third get Lower I or compared Thanks guess does into services the or is, of was XX middle flat down

Cindy Taylor

bit little we I is count. at right the North least a – see see rig the that weighted too now more to want continuing of would say towards American flattening not a and Mexico. mix international modest Gulf We of softening

are definitely heard, There’s no it. you’ve as spending. the controlling customers, every ways focused on cash and Our flow customer. everything free not their for generating same capital about But is

really give go end. know I of XX quarter X%. and context, in with since we weekly who’s – rig into that guidance, rigs – dropping if sites. various adding various sites customer who’s and we meetings by I’d a rigs all count’s take when about dropped we have But all That’s have to customer about we’re rigs the So out in

to it’s but is least in as it I here, going see we’re talking North big the we quarter hard think say America no So exit be today. best and numbers as don’t to softer at that about QX, modestly

Ian Macpherson

again, Makes sense. Thanks Cindy.

Cindy Taylor

Thank you, Ian.

Operator

Thank you.

Our from Please next Gengaro question Stifel. Stephen ahead. comes from go

open. is line Your

Stephen Gengaro

sort remind us intensity to completion wells Can you’re now? are on up. businesses U.S. follow right a the of completion exposed what drilled intensity when of land sort taking your percentage the seeing we for front versus exposure, thanks think and the just about and which Thanks you just of

Cindy Taylor

call, mentioned the catch footage. for on everybody focus Well, leading now I of on a tends to think moving horizontal There’s leading edge. kind wells right operators I up other and towards the edge

Chris’ communication do I fundamental and clusters lot of of terms on. still stage. it And trialing try tailwinds type there’s tailwinds And lot for count horizontal going And higher interference. assessment and I’ll mitigate per just so there’s on some a importantly I of think a there in technology footage, But to there’s parent-child going just for such us nonetheless stage call think that more significant personnel type are intensity equipment downhole and environments. you even they in share leading business, market the our of longer tool the the laterals, torturous as gain does the the I Technologies But And it. call in edge are service, the on get segment. Downhole really are there equipment majority as more that will Tempress

becomes And a for that. so differentiator it

I more safer We’re equipment investing various efficient. customers call the to site; de-cluttering bridge and make manifolds. one, well it site the obviously for around well some two,

have. plan won’t speak some and direct complex because talk it’s while offering, we think some But the other We’re to investing not it. we I believe about in probably personnel correlation, a behind a higher-end again that do equipment wells we more of to of which that I file IP technology

Stephen Gengaro

Thank you. Great.

Operator

our you. Weil. from Boltryk Please question Emily from Thank ahead. go Scotia last And comes Howard

Your line mute. be Emily, is open. on you may

Cindy Taylor

want you on. move sounds to Dinara, might like have It dropped. she might

Operator

this At time, I any further you. showing Thank not am questions.

Cindy Taylor

results before All on right. you phone so that to Dinara, staying our thank the discuss call. Again, of interruption the the today. going for apologize the you we from of close for we quarter segment, technical But could results fully our appreciate hosting call the provider. the kind we’re I of

towards we’ve of North of kind a just emotional seen do kind and lot of of of segments America back with we penetration the that comes from step over I years international. all offering towards great balance and all our ask that more We couple investing from segments. kind a and in you almost it that deepwater believe emotional away of have these last

while challenging it I will you Offshore keep And products. I us, in know of hope for strengthening a modestly this quarter in you as or view disappointing many context

doing development, and terms we’re what want line growth margin. think in you absolutely improved of backlog I to do us top

segment, Services had in more to deploy we’ve too services incremental Sites very line completion into our resilient product differentiated very, revenues the margins; that Well offerings our and strong and some tried they In market. very improved fully

free product R&D cash standpoint. would lone was investments And the of from the generating strength run. a our like Technologies, I this flow not quarter, to disappointment of the kind company we’re but Downhole in and development off again, pay the do making in long believe leave I

our been for is It differentiator last years. think as several that the I company has a well. for

comments. with look feel you. again, to confident complete and for do better our able this joining to thank today turn conversations we’ll does future That I forward And that towards be I you generating over ROIC time. a us And performance

Operator

today’s Thank you. Ladies for concludes conference. and gentlemen, Thank this participating. you

disconnect. now may You

Oil States International (OIS) 29 Jul 192019 Q2 Earnings call transcript