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Oil States International (OIS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Jul 30, 2026

Source: earnings call transcript

Executive summary

Oil States International, Inc. Q2 FY26 — Backlog Reaches Decade High Amid Offshore Strength

Oil States International delivered a strong second quarter, driven by sequential growth in revenues and adjusted EBITDA, with its backlog reaching a decade-high. The company's strategic shift towards offshore and international markets is yielding results, though geopolitical uncertainties and commodity price volatility continue to impact near-term order timing. Management remains confident in long-term growth, supported by a robust backlog and disciplined capital allocation, with a focus on cash generation and margin improvement.

Highlights

5

  • Revenues increased 8% sequentially to $157 million in Q2 FY26.

  • Adjusted EBITDA rose 14% sequentially to $19 million in Q2 FY26.

  • Backlog reached a decade-high of $451 million as of June 30, 2026, up 24% YoY.

  • Achieved a strong book-to-bill ratio of 1.2 times in Q2 FY26.

  • Offshore and international activity drove over 70% of consolidated revenues in H1 FY26, up from 50% in 2023.

Concerns

4

  • Middle East conflict contributed to certain contract award delays, tempering near-term revenue conversion.

  • Headwinds remain elevated related to charge powder availability and raw material cost increases (tungsten, explosive powder, copper) in Downhole Technology.

  • Working capital investments totaled $27 million in H1 FY26, primarily due to long-lead time materials and rising raw material costs.

  • Delay in receiving certain drilling, connector, and production facility product orders will push some 2026 revenue recognition into 2027.

Guidance & targets

CategoryTargetConfidence
Q3 FY26 Revenue
$157 million to $167 million
high materiality
High
Q3 FY26 Adjusted EBITDA
$18 million to $20 million
high materiality
High
Full-year FY26 Revenue
$640 million to $660 million
high materiality
High
Full-year FY26 Adjusted EBITDA
$77 million to $83 million
high materiality
High
Full-year Book-to-bill ratio
one time or greater
medium materiality
High
Full-year FY26 Free Cash Flow
$35 million to $40 million
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Offshore Manufactured Products
Generated sequential revenue growth and strong segment EBITDA margins, driven by production platform and connector products, and higher service activity. Backlog reached its highest level in over a decade.
Segment EBITDA margin: >19%Backlog: $451 million (as of June 30)Sequential backlog increase: 5%YoY backlog increase: 24% (vs June 30, 2025)Book-to-bill ratio: 1.2 times
$93 million——$18 million
Completion and Production Services
Reported sequential revenue and segment EBITDA growth with a strong margin profile, resulting from efforts to high-grade the portfolio of technologies and service lines.
Segment EBITDA margin: ~27%Sequential segment EBITDA increase: 7%
$24 million—13%$7 million
Downhole Technology
Revenue and segment EBITDA improved materially, supported by stronger perforating and completion product sales and favorable product mix. Revenues were at the highest level since Q2 2023.
$40 million——$4 million

Orderbook & backlog

Total Backlog $451 million June 30, 2026

up 5% sequentially, up 24% from June 30, 2025

Highest reported level in over 10 years. Approximately 48% tied to multi-year military product contracts, converting over 4-5 years. Historical conversion rate of 65-70% for 12 months now weighted down to ~55% due to multi-year military orders.

Military Products Backlog 48% of total backlog June 30, 2026

Multi-year orders from Block 6 awards (booked Q3/Q4 2025) will unwind/convert to revenue over the next 4-5 years, primarily generating revenue in 2027.

Risks & headwinds

Geopolitical developments and Middle East conflict Near-term

Contributed to certain contract award delays

Mitigation:Focus on long-term offshore and international opportunity set; national oil companies and major operators expected to refocus on secure resource development.

Commodity price volatility Ongoing

WTI prices ranged from $74 to $95, now around $80-$85

Mitigation:Operators demonstrating capital discipline and prioritizing operational efficiency; company focused on higher margin, differentiated products.

Charge powder availability and raw material cost increases Ongoing

Input costs for tungsten, explosive powder, and copper remain elevated

Mitigation:Continued pricing discipline, product mix management, and inventory management are priorities.

Delay in contract awards Pushing some 2026 revenue recognition into 2027

Delayed receipt of certain drilling, connector, and production facility product orders

Mitigation:Expect to receive these orders in Q3 and Q4 2026; underlying fundamentals of the business remain strong.

What to watch in Q3 FY26

Offshore Manufactured Products EBITDA margin

Next quarter and beyond
Current >19%
Target ~20% (potential for 22-23% in 2027+)

Why it matters

Indicates the profitability and operational efficiency of the largest segment, crucial for overall company performance.

Overall, and for the segment, we guide to an overall EBITDA margin of around 20%. A little bit lighter this quarter, 19.3%, but kind of right at that 20% level. Historically, if you look back where we had higher levels of backlog, even dating back, call it 10 years ago, we had reached, you know, quarterly EBITDA margins of the low 20s, so 22%, 23%, and I could see us achieving that, not this year, but certainly in 2027 and beyond as our backlog continues to grow, buoyed by the more traditional production facility pipeline and drilling-type content.

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Q&A highlights

How are pricing and margins trending for new offshore orders, given the backlog growth and industry optimism?

New orders have accretive margins to existing backlog, with the Offshore Manufactured Products segment guiding to an overall EBITDA margin of around 20%. Historically, with higher backlog, margins reached low 20s (22-23%), which is achievable in 2027 and beyond, driven by traditional production facility, drilling, and new technology content.

“I would say in terms of the margins, they're accretive to the existing awards that are in backlog. Overall, and for the segment, we guide to an overall EBITDA margin of around 20%.”

asked by Connor Jensen · answered by Lloyd Hajdik

2 min read 5 chapters

Detailed narrative

Market Trends and Geopolitical Impact

The energy market continues to be influenced by constructive long-term fundamentals and near-term uncertainty. Commodity prices remained volatile due to geopolitical developments, supply disruptions, and moderated global economic growth expectations. The Middle East conflict specifically contributed to contract award delays, impacting revenue conversion in project-driven businesses. Despite this, the long-term offshore and international opportunity set remains strong, driven by the need for secure and diversified energy supply.

Strategic Shift to Offshore and International

Oil States has successfully shifted its business mix, with over 70% of consolidated revenues in the first half of 2026 derived from offshore and international activity, a substantial increase from approximately 50% in 2023. This strategic focus on higher-margin, differentiated products and technologies positions the company for sustained growth. National oil companies and major operators are expected to increase production capacity and make multi-year investments in deepwater resources once current disruptions subside.

Backlog Growth and Composition

The company's backlog reached its highest level in over a decade, totaling $451 million as of June 30, 2026. This was supported by Q2 bookings of $114 million and a book-to-bill ratio of 1.2 times. Approximately 48% of the current backlog is tied to multi-year military product contracts, which will convert to revenue over the next four to five years. This composition has adjusted the historical backlog conversion rate from 65-70% to approximately 55% for the next 12 months.

Downhole Technology Segment Performance

The Downhole Technology segment saw significant improvement, with revenues of $40 million and segment EBITDA of $4 million, marking the highest revenue level since Q2 2023. This was driven by stronger perforating and completion product sales and a favorable product mix, reflecting an improving U.S. land market and successful product line revamp. However, input costs for shape charges, particularly tungsten, explosive powder, and copper, remain elevated, pressuring margins.

Capital Allocation and Cash Generation

Oil States maintains a strong balance sheet with $20 million of cash and $18 million of outstanding debt as of June 30, 2026. The company retired $53 million of convertible senior notes in Q2. Cash used in operating activities was $6 million, reflecting working capital investments. Management expects full-year free cash flow of $35 million to $40 million, with working capital investments expected to unwind in the second half of the year. The company repurchased $5 million of common stock in Q2 and plans to remain opportunistic with further buybacks.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.