Good morning and welcome to Inovex's first quarter 2026 earnings call. At this time, all participants own a listen-only mode. And there will be a question and answer opportunity at the end of this call. As a reminder, this call is being recorded. I will now turn the call over to Eric Wells, Chief of Staff. Please go ahead.

Good morning, everyone, and thank you for joining us. An updated investor presentation has been posted under the Investors tab on the company's website, along with the earnings press release. This call is being recorded and a replay will be made available on the company's website following the call. Before we begin, I would like to remind you that Inovex's comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause Inovex's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Please refer to the first quarter financial and operational results announcement that we released yesterday for a discussion of forward-looking statements and reconciliations of non-GAAP measures. Speaking on the call today from Inovex, we have Adam Anderson, Chief Executive Officer, and Kendall Reed, Chief Financial Officer. I will now turn the call over to Adam Anderson.

Good morning. Thank you for joining us today. I want to start by thanking our teams across the organization for another quarter of strong execution. We continue to operate in a dynamic environment, but our people have remained focused on serving customers leveraging our unique platform, and growing our business through relentless innovation and a commitment to delighting our customers. That commitment is reflected in our first quarter performance. Since the merger with DrillQuip, we've stayed disciplined in how we run the company, improving the cost structure, expanding the technology portfolio, and focusing on cash flow and returns. Quarter-hour successes are no-barriers culture, which means we tear down barriers between ourselves, our teams, and our customers. We operate as one team across regions and product lines, not as a collection of separate businesses. That remains a real source of competitive advantage for us. On today's call, I'll walk through our first quarter performance, highlight several important commercial and operational developments from the quarter, and then turn the call over to Kindle for a more detailed review of our financial results, capital allocation priorities, and outlook for the second quarter. Starting with performance, we delivered a strong start to 2026. First quarter revenue totaled $239 million, dollars which exceeded the high end of our guidance range and adjusted EBITDA totaled 49 million dollars with an adjusted EBITDA margin of 21 percent well above the high end of our guidance range these results reflect continued strong operational execution organic growth from new product introductions cross-selling across our global platform we've benefited from a favorable mix in the quarter and we also saw further than expected benefits from the exit of the legacy Eldridge facility. More broadly, the quarter reinforces our view that our subsea business can generate margins above 20% when operated with the same discipline, cost focus, and a commercial approach that we apply across the rest of Inovex. Our no-barriers culture has unlocked the potential of our combined team. I've been particularly impressed by the contributions from our colleagues who joined Inovex as a part of the drill-quit merger. They bought into the culture and are unlocking the embedded value and technology in the subsea portfolio. Commercial performance remained healthy across our core markets. In U.S. land, we continue to outperform underlying activity levels. Organic growth was driven by cross-selling as well as new product introductions. As a reminder, we've curated a portfolio of big impact, small-ticket products, and services. In aggregate, our offering represents just 2% to 3% of total well cost. Despite representing a small proportion of the cost of a well, our technologies are critical to well performance. Therefore, the purchase decision is driven primarily by performance, not price. Offshore and internationally, we continue to build momentum in subsea. During the quarter, we secured two significant project awards in Asia, each exceeding $20 million in value, reflecting the strength of our specialized technology portfolio and our ability to win complex, high-specification work. These awards span multiple parts of the well system, reinforcing the breadth of our subsea technology portfolio. We also delivered the first subsea wellhead order in Southeast Asia under the One Subsea Alliance, representing an important milestone in expanding our presence in integrated offshore projects. Beyond Asia, we continue to make encouraging commercial progress across key offshore basins, where we see attractive long-term opportunities for our portfolio. More broadly, we're seeing a growing pipeline of subsea opportunities, which supports our confidence in the trajectory of the business. In the Middle East, first quarter activity was softer than we had anticipated. driven primarily by project timing and conflict-related disruptions. We remain encouraged by our recent commercial progress, including multiple offshore rewards in the Kingdom of Saudi Arabia, as well as a contract extension for our off-bottom liner systems and lower-completion technologies. We continue to view the Middle East as an important long-term growth market. We recently completed the acquisition of drilling innovative solutions for $16 million, or approximately four times trailing 12-month EBITDA. This is exactly the type of transaction that we believe drives value, one that is priced reasonably and offers substantial opportunity for organic growth by leveraging our platform. DIS brings differentiated production technologies that complement our existing completions offering, strengthening our U.S. offshore market position, and create additional opportunities to grow with both existing and new customers. We believe the DIS portfolio has applicability across global deepwater markets as well as select onshore markets. DIS fits squarely with our model of curating a portfolio of big impact, small-ticket products with strong margins, low capital intensity, and meaningful room for growth. Setting back, our priorities remain unchanged, gaining share, expanding our technology portfolio, driving innovation, improving efficiency, and disciplined capital allocation. We believe the combination of innovation, execution, and capital discipline continues to differentiate InnoVex, and we see a strong pipeline of opportunities across both organic initiatives and inorganic opportunities. As we move through 2026, we remain confident in the trajectory of the business and our ability to create durable value for shareholders over time. I will now turn the call over to Kendall to walk through our financial results and outlook in more detail.

Thanks, Adam, and good morning, everyone. I'd now like to review our first quarter 2026 financial results. For the first quarter 2026, revenue totaled $239 million, down 13% sequentially from the fourth quarter of 2025, and down 1% year-over-year versus Q1 2025. Adjusted EBITDA totaled $49 million, resulting in an adjusted EBITDA margin of 21%, compared to 19% in Q4 2025 as well as Q1 2025. We were pleased to exceed the high end of our guidance range on both revenue and adjusted EBITDA despite a dynamic operating environment during the quarter. Profitability in the quarter benefited from favorable product mix and improved manufacturing efficiency associated with the transition out of the Eldridge facility. As we consolidated our footprint and improved throughput, we saw better absorption and stronger operating leverage within the subsea business. Reported SG&A was higher sequentially due to several discrete items, including legal, transaction-related, and other temporary costs. Excluding these items, underlying SG&A remains well-controlled, reflecting our continued focus on cost discipline. During the quarter, we recorded a $49 million legal accrual related to patent infringement litigation between Impulse Downhole Tools USA and Inovex's wholly-owned subsidiary, DWS, following the previously disclosed jury verdict. No judgment has been entered at this time. We strongly disagree with the jury verdict and intend to pursue post-trial motions and, if necessary, appeal any resulting judgment to the U.S. Court of Appeals for the Federal Circuit. From a geographic standpoint, NAM land remained a source of strength, with revenue holding essentially flat at $137 million compared to $139 million in the fourth quarter, despite weather-related disruption during the quarter. International and offshore revenue declined 24% sequentially to $102 million from $135 million in Q4. As we discussed previously, the fourth quarter benefited from an unusually high level of subsea deliveries, including approximately $15 million of shipments that we had originally expected to occur in the first quarter, creating a tough year-over-year comparison. Lower subsea delivery volumes, softer activity in certain international markets, and modest disruptions related to the ongoing conflict in the Middle East contributed to the sequential decline. A meaningful increase in activity in Mexico partially offset the softness. We view quarterly volatility as timing-related and consistent with the normal variability that can occur in offshore and project-oriented markets. Importantly, underlying commercial momentum remains solid, and we remain constructive on the long-term outlook, expecting significant subsea momentum in the back half of 2026. Capital expenditures in the first quarter 2026 totaled $6 million, down 35% sequentially, representing approximately 2.4% of revenue. CapEx remained in line with Inovex's historical range of 2 to 3% of revenue, despite ongoing facility integration efforts associated with the exit of the legacy Eldridge facility. Free cash flow was $14 million in the quarter, representing approximately 28% conversion of adjusted EBITDA. As a reminder, the first quarter is typically our weakest free cash flow quarter due to the timing of certain annualized cash payments. We also saw a temporary working capital build in the quarter, primarily related to the timing of collections and normal inventory movements, which we expect to moderate as the year progresses. Our capital-wide model continues to support strong through-cycle free cash flow generation. We ended the border with approximately $201 million of cash and cash equivalents and no bank debt, providing significant financial flexibility. Our balance sheet strength supports a disciplined capital allocation framework centered on balancing organic investment with selective, high-return M&A opportunities and opportunistic share repurchases. Our M&A pipeline remains robust, including a mix of smaller, bolt-on opportunities like DIS as well as larger opportunities. That said, we will only execute where opportunities align with our big impact small ticket strategy, can generate high gross margins with low capital expenditures, and can be acquired at reasonable multiples. This disciplined approach remains central to how we intend to create long-term shareholder value. Consistent with that discipline, we also repurchased over $14 million of our shares at a price of $24.59 per share, underscoring our confidence in the intrinsic value of N of X and our commitment to thoughtful capital allocation. We were also pleased to see Amberjack complete a secondary sale of shares during the quarter. We believe the transaction broadened our public float and enhanced trading liquidity. Amberjack remains a valued long-term shareholder and partner. Return on capital employed for the 12 months ended March 31, 2026 was 12%. ROCE is impacted by our net cash balance sheet. We remain focused on achieving a long-term target of high-teams ROCE via margin expansion, high-return M&A, and shareholder returns. Looking ahead to the second quarter of 2026, we expect revenue in the range of $235 to $245 million and adjusted EBITDA of $43 to $48 million. Our guidance reflects a less favorable product mix in the second quarter, as well as the potential for sales disruptions and higher costs associated with the ongoing conflict in the Middle East. Even with those near-term pressures, we remain confident in our margin improvement trajectory as 2026 progresses, supported by continued share gains in U.S. lands, improving international activity, and the growing subsea opportunity set that Adam discussed earlier. I'll now turn the call back to Adam.

Thanks, Kendall. We are pleased with our start to 2026. We exceeded the high end of our guidance range, continued to improve margins, generated positive free cash flow, and strengthened our portfolio through the DIS acquisition. Just as importantly, we continue to build momentum commercially, particularly in sub-seat, where recent wins reinforce the progress we're making with customers around the world. While near-term market conditions may create some quarterly variability, our priorities remain unchanged. We will continue to focus on gaining share, expanding our technology offering through innovation, improving operational efficiency, and deploying capital in a disciplined manner. We believe our integrated platform, strong balance sheet, the no-barriers culture positions Inovex well to create durable, long-term value. Thank you again to our employees, customers, and shareholders for your continued trust and support. Operator, we can now open the line for questions.

If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. And your first question comes from the line of Derek Podhazer from Piper Sandler. Your line is open.

Hey, good morning, guys. Maybe I'll first start on U.S. land growth from here. obviously a great quarter um what are you seeing when you look out in second quarter maybe the back half of the year one of the biggest emps in the permian just just gave the industry the green light uh to add rigs and activity um and completion so maybe just help us understand your exposure into that which specific product lines you're seeing gain the most traction or or have the most potential to grow here and really take advantage of the emps restarting a bit of work yeah morning Derek thanks for the question so I think up until now the tone we've largely heard from our customers is say on the margin they're going to do a little bit of extra work really run like work over maybe a couple of incremental ducks that they were going to frack which would

all that would largely benefit our fishing tool and production accessory business it does feel like in the last couple of weeks there's been acceptance that maybe the the price signals a little bit stronger for longer than people were expecting a couple weeks ago. So I would expect that the rig count ticks up a little bit in North America land the rest of the year. That particular customer, Diamondback is an important partner of ours. We'd expect to benefit on all of our technologies leveraged to the drilling of new well count. So hard to tell from here. I don't think it's going to be a big, big ramp up, but I think we do see a little bit of incremental addition to rig count between now and the end of the year. The other thing is the benefit of our business models, we don't have to be great at predicting forward activity. We just have to be highly responsive to that activity as it picks up or down. So it feels good right now, but we all know that that could change a little bit in the near term.

Yeah, that is for sure. Maybe on your latest acquisition, drilling innovation solutions, interesting here, maybe just help us understand exactly what they do, maybe describe to us their product line, their service. Really curious around the commercial rationale with, you know, the platform that you created at Inovex, driving those revenue synergies, putting it on the global platform, similar to what you've been able to really successfully accomplish with DWS and Citadel. So maybe just help understand this a little bit better on what you plan to do with DIS here.

Yeah, so really excited about the DIS deal like you said it's it's very similar to the citadel dws acquisitions really great products that fit nicely with our strategy of big impact small ticket capital like products and an area where they can help us and we can help them and what i mean by that is in in this case really strong team and products that our customers really are asking our sales people about have been doing for a while so it really helps we think their team and kind of that halo effect of their products will help us on the margins pull through more downfall tools in their core market, which today is largely the U.S. offshore. And then similarly, there's a home for their products in some of the international offshore markets, as well as potentially on U.S. land. That was probably going to be hard for DIS to realize in the short term on a standalone basis. So we can help them there. With respect to their product, they really have two big products, one being the Gatekeeper product which is a valve run in the shoe track of liners in the u.s offshore fits great with our float equipment business we're running other products at that shoe track as well as our liner hanger business so this is just an integrated part of that portfolio and then they've got a valve called the sentinel valve which is a drill pipe float valve used in under balanced drilling applications used a lot again in u.s offshore there's a variant for the u.s market that they're just starting to roll out that again fits really nicely with the legacy the Inovex, and our drilling enhancement business that we got through the DWS business. So, yeah, this is, I think, a great deal both for DIS as well as Inovex. So, we're really excited about it.

Good stuff. Appreciate it. I'll turn it back. Thanks, Derek.

Your next question comes to the line of Don Christ from Johnson-Rice. Your line is open.

Good morning, guys. Thanks for letting me in. I wanted to ask about the Middle East. Obviously, there's a lot of talk about it. It doesn't feel like there's that many impacts in the first quarter. Can you just kind of explain whether or not you were running through inventory in the first quarter and that could have a bigger impact in the second quarter, or just kind of any comments around the Middle East, given that the conflict continues to rage on?

So, yeah, we did have some impact in Q1. Expect to have some impact in Q2 as well from the conflict. that for us the biggest areas of some of the offshore markets particularly in Saudi has been impacted the most most of the land activity is is still going perhaps at a slightly lower pace than it was before so we saw some impact it's a little hard to quantify precisely certainly our thoughts and prayers are with everybody in the region and are pulling for a pretty quick resolution to the to the conflict for everybody's best interest I think going forward the other impact we're of seeing q2 that we didn't have as much of in q1 it's just a logistical cost to your point we were pulling down we were serving our ongoing operations with inventory in the region could withstand a little bit of disruption in the supply chain q2 we're having to air freight some things in that we previously would have see freighted in and those as you can imagine uh those air freight rates are pretty high right now so we will see a little bit of incremental cost burden uh tied to that as well as some other kind of one-time expenses all that's baked into our q2 guidance okay but going forward it shouldn't be that big of an impact obviously uh there will be some impact but you are getting things into the region yeah for now that's correct so we're kind of what's baked into our forecast is we are able to continue to get products equipment and region everyone is

kept safe over there um and that activity levels are kind of what we see today is what we see for rest of the quarter and that there's no meaningful change one way or the other um okay okay and and just turn it over to the to the uh optimization of the businesses and the manufacturing around the world are obviously we we saw some good margins in the first quarter your goal is to is to come up a couple quarter a couple more percentage points as we move through the year but are there any milestones that we're really looking for? Is it Singapore ramping up or is it Vietnam ramping up or something like that that's going to drive a lot of it or is Eldridge enough for it to see a boost as we kind of move through the rest of the year?

Yeah, so I think what we're really pleased with in the first quarter was how much progress we've made on that. What we had kind of told everyone previously is we're looking to be out of Eldridge by the middle of this year, which is still the target, but we were able to make a lot more progress on the manufacturing efficiency side in Q1 than even we had hoped. It's been a core initiative internally and kind of testament to all the good work that our team's been doing. So if you look at the gross margin improvement from Q4 to Q1, rough numbers, about half of that's going to be driven by product mix and about half of that's driven by improved manufacturing efficiency. So that was a big driver for the Q1 margin performance. Now, like we've always said, that's not going to be a smooth, linear thing. We will make the final push here in Q2 to fully exit that Eldridge facility. We'll incur some moving costs to do that. So not to say it's going to continue to take up at the same pace, but I think we've seen a big improvement on our manufacturing cost structure that we're really excited about through the rest of the year. But like you said, the big domino that has to fall as to fully exit Eldridge, get all that demand flowing through the other plants and really realize the full benefits of that absorption.

So I think that's what we're really focused on here in Q2 so that back half of the year we're kind of in that consistently north of 20% EBITDA margin range like we've talked Okay, and if I could sneak in one more, obviously a good couple orders in Asia, but just more broadly, can you talk about the offshore? Is energy security becoming more top of mind and you're seeing more operators accelerate plans or get more aggressive on plans going forward? Just kind of any comments around that.

I think there's some talk of that. As you know, that's a really long cycle business in the offshore markets. We're not forecasting a really robust recovery in offshore right now as a direct result of the geopolitical situation we've seen over the last couple of months. We still feel like it probably does tick up a little bit here later this year into next year, but there hasn't been a massive response that we've seen from the customers yet.

I appreciate the color. I'll turn it back. Thanks, John. Your next question comes to the line of Keith Beckman from Pickering Energy Partners. Your line is open.

Hey, guys. Thanks for taking my question. I was wondering, you know, we talked a little bit about the Middle East and kind of the 1Q2. Q impacts, I was wondering maybe, kind of following a little bit on Don's question, what are the additional potential work scopes you guys think you may see following the conflict if activity really starts to ramp? Is there any sort of products or anything in particular you think could be helpful to maybe a recovery in the Middle East whenever we get to that point potentially?

Yeah, so in the Middle East, most of our, as it is true across the world, most of our business is tied to the number of new wells drilled and the complexity of those wells one thing we do a lot of in the middle east and saudi arabia in particular is we do a lot of work over work where they're taking existing wells and modifying them drilling longer laterals and we sell a lot of equipment and solutions into that application so if that were to ramp up meaningfully on the back end of that that's probably where we'd see the the biggest near-term tick up But as we talk about regularly, we have a nice fishing business, a nice artificial lift accessory business, which we do do is a nice chunk of our business in the Middle East, although smaller. I think those things would also see a nice boost if there's really a lot of work over work, fishing activity, things like this to get existing wells back on production.

Awesome. That's really helpful. And then on my second question, just wanted to ask around free cash flow conversion, how you guys are thinking about that now. Obviously, we're in a little bit of a different world. How should we be thinking about maybe working capital through the balance of the year? Is there potentially a little bit of a delay on customer payments that, you know, early on that could potentially get reversed into the back half of the year? Just any thoughts on free cash flow?

Yeah, thanks. That's a good question. So like we talked about on the Q4 call, Q1 is always seasonally our lowest free cash flow quarter. We have a number of annualized cash payments that hit in the first quarter. So not unexpected that cash was down. But as you pointed out, we did see a healthy working capital build in the quarter as well. Some of that's driven just by timing of customer payments that, yes, we would naturally expect to even out and be a nice tailwind to cash over the next few quarters. and then we did have some inventory build as well hopefully gearing up for for some increased customer activity so those two things i would expect to normalize and you know as we've talked about we're not going to specifically guide free cash flow but given the kind of market dynamic we're in we would expect to be kind of you know on or above the high end of that 50 to 60 percent through cycle conversion that we that we talked about so if you want i expect to kind of be the low point for 2026 free cash flow perfect it's really helpful i'll turn it back guys thank you

thanks thanks your next question comes from blake mclean from daniel energy partners your line is open morning guys morning hey uh a lot of uh a lot of good stuff on here i was hoping maybe we could just go back to the m a stuff um real quick you guys have talked a lot about your pipeline and the potential deals, both small and large, that are in the marketplace. I was just hoping maybe talk a little bit about how a choppy macro environment kind of impacts what that pipeline looks like, your ability to move deals forward. Is there anything that changes in a market that feels a little more uncertain?

No, it's a really good question. I mean, I guess I would say a couple of things about that. One is that when we're looking at acquisitions, we tend to underwrite deals over the long term right so one kind of building in a lot of room for error on the valuation side we try and be pretty disciplined on valuation and given the dynamic we've been in where just a lot more potential sellers than potential buyers I think we've been able to benefit from that over the last several years and then as Adam mentioned we don't have to be that great in our business at predicting the future you know what's activity going to do over the next couple of quarters, we're very responsive to that. And the types of businesses we look to acquire are generally more in line with that approach, right? These big impact small ticket products, very little CapEx. So we can kind of benefit and create value through the ups and downs of the cycle. So I wouldn't say that changes our thinking too much other than, yeah, it's going to have some impact on how you think about valuation and bid-ask spreads. And then, yeah, the other thing I would say is just generally the private markets where we're mostly looking at acquisitions react to news a lot slower than the public markets, which tend to be very forward-looking. A lot of times when we're looking at M&A deals, it's much more of a conversation about current run rate or trailing 12-month results, that type of thing. So it takes time for these things to get incorporated. So it doesn't have quite the same volatility in terms of valuation expectations.

All right. That's helpful. The rest of my stuff has been answered, so I'm squared away. Thanks very much for the time.

Thank you, sir. There are no further questions, so I'd like to hand back the closing comments.

This is Adam again. Thanks, everyone, for taking the time today. Thanks for the questions. And really, another great quarter really exceeded our expectations, and I just have to say thank you to our employees, our customers, for all of the good work. I think this is really an exciting time, and we're thrilled with how things are progressing and look forward to the next couple of quarters rolling out. So appreciate everyone joining us.

This concludes today's conference call. Thank you for participating. I think you may now just connect.