Oil States International, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless stated otherwise. The company supplies manufactured products and services to energy, industrial and military customers through Offshore Manufactured Products, Well Site Services and Downhole Technologies.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $167.3 million | $196.2 million |
| Gross profit (revenue less cost of revenues) | $35.3 million; 21.1% margin | $45.5 million; 23.2% margin |
| Operating income (loss) | $(11.2) million; (6.7)% margin | $5.9 million; 3.0% margin |
| Net income (loss) | $(13.4) million; $(0.21) per diluted share | $2.2 million; $0.03 per diluted share |
| Cash flow from operations | $(11.4) million | $(5.9) million |
| Capital expenditures | $10.1 million | $6.6 million |
Revenue fell 15%, as services declined 24% and products declined 6%. The operating loss included a $10.0 million non-cash goodwill impairment and $2.5 million of facility consolidation and other charges. Excluding those charges, operating income still declined about $4.5 million year over year. Net interest expense was $2.1 million; income tax expense was $24,000 on a pretax loss of $13.4 million.
Segments and business changes
- Offshore Manufactured Products: Revenue rose 8% to $86.9 million; operating income was $10.6 million, including $1.5 million of consolidation charges. Backlog was $305 million, down from $327 million at year-end; quarterly bookings were $66 million and book-to-bill was 0.8x.
- Well Site Services: Revenue fell 29% to $47.3 million; operating loss was $0.4 million, including approximately $1.0 million of facility-exit and other charges.
- Downhole Technologies: Revenue fell 32% to $33.1 million; operating loss was $12.1 million, including the $10.0 million goodwill impairment. Excluding impairment, results declined year over year, primarily on lower revenue and manufacturing volumes.
In Q1, certain short-cycle consumable product operations were moved from Offshore Manufactured Products to Downhole Technologies; historical segment comparisons were recast. The transferred $10.0 million of goodwill was fully impaired after an interim valuation assessment. Management attributed the broader downturn to lower U.S. completions, particularly amid weak natural-gas prices; offshore and international project growth partly offset the decline.
Cash, debt and liquidity
Cash was $24.1 million at March 31, 2024, down from $47.1 million at December 31, 2023. Total debt was $136.2 million, including $135.0 million principal of 4.75% convertible notes due April 2026; net debt was approximately $112.1 million. There were no ABL borrowings, $15.9 million of letters of credit and $86.3 million available to draw. The $125 million asset-based facility was amended to mature February 16, 2028, subject to a springing maturity provision. The company reported compliance with debt covenants.
Operating cash use increased year over year, with working capital using $21.8 million, primarily from payment of accrued 2023 incentives and lower accounts payable. Investing activities used $7.8 million; financing activities used $3.7 million. Management said cash on hand, operating cash flow and ABL availability should meet liquidity needs for the next 12 months. Working capital was approximately $328.3 million at quarter-end.
Outlook, risks and contingencies
- Management expects approximately $40 million of 2024 capital expenditures, including a new Batam, Indonesia facility, and anticipates selling facilities in Singapore and Houston for approximately $35 million in total proceeds.
- Remaining backlog for contracts with original durations over one year was $203 million at March 31; approximately 43% is expected to be recognized in the remaining nine months of 2024, 33% in 2025 and the rest thereafter. This is distinct from Offshore Manufactured Products segment backlog.
- No specific revenue or earnings guidance is provided in the filing. Management is continuing cost-reduction measures in areas with lower activity.
- Key exposures include volatile oil and gas prices and customer spending, U.S. completion activity, competitive conditions, inflation and supply-chain/tariff risks, geopolitical disruptions, currency movements, climate-related regulation and access to capital. The company reported a $3.0 million currency translation loss in Q1.
- The company is involved in various pending or threatened claims and proceedings; management does not expect any ultimate uninsured liability to materially affect its financial position, results or liquidity. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether U.S. completions and demand for short-cycle products recover, and whether offshore project activity offsets continued weakness.
- Subsequent segment performance and bookings against the $305 million Offshore Manufactured Products backlog and 0.8x Q1 book-to-bill.
- Execution, timing and proceeds for planned facility sales, and delivery of the Batam project within the stated capital budget.
- Cash conversion and working-capital trends, ABL borrowing-base availability and covenant headroom, and the 2026 notes maturity and conversion terms.
- Assumptions behind the Downhole Technologies goodwill impairment valuation and the continuing costs or savings from facility consolidation.