Oceaneering Second Quarter 2026 Earnings Results

Welcome to Oceaneering's second quarter 2026 earnings conference call. My name is Rob and I will be your conference operator. All lines have been placed on mute to prevent any background noise. There will be a question and answer period after the speaker's remarks. With that, I will now turn the call over to Hilary Frisby, Oceaneering's Senior Director of Investor Relations.

Thanks, Rob. Good morning and welcome to Oceaneering's second quarter 2026 results conference call. Today's call is being webcast and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer, and Mike Sumrall, Senior Vice President and Chief Financial Officer. Rod and Mike will provide our prepared remarks and then we'll take your questions. Before we begin, please note that statements made on this call about our future financial performance, business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the private securities litigation reform Act of 1995. Our remarks also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our second quarter press release, which is available on our website. With that, I'll turn the call over to Rod.

Good morning, and thanks for joining the call today. Our second quarter results, which exceeded the high end of our EBITDA guidance range, reflected strong operational execution at EBITDA of $115 million, represented our high for OPG, led our year-over-year largest contributor to our second quarter. Those results were in subsea robotics, or SSR, the Ocean Intervention II, and is now performing surveyed projects that are expected to keep the vessel utilized through enabling multiple surveys. We also took steps through and good morning.

Our results exceeded. Compared to the second quarter of 2025, operating income increased 11% to 8%. Net income attributable to Oceaneer increased 19%. EBITDA increased 11%. Turning through our cash flow and liquidity, we generated $55.2 million of cash from operating activities. The year-over-year decrease primarily reflected the timing of $23.2 million in organic capital. Approximately 34% allocated to growth. Free cash flow was $32 million. We resumed share buybacks during the quarter, repurchasing $10 million of common stock. And we ended the quarter with a cash balance of $629 million, total liquidity of $844 million, dollars and no borrowings. As Rod mentioned, in late June, we initiated a serious position and extend our debt maturities. We successfully placed $500 million of seniors. We used the proceeds together with cash on hand to retire our $500 million of seniors. We also amended our security. Increasing commitments and extending its maturity to July. These transactions will be completed this month. Look at our business operations by segment for the second quarter of 2026 as compared to the second quarter of 2025. FSR results improved year-over-year, supported by higher average ROV revenue per day utilized and increased survey activity. Revenue increased 6% to 200. Average ROV revenue per day utilized increased from $11,000 to $1,894 on continued improvements. The SSR EBITDA margin was flat at 35%, but by geographic contribution from service, ROV utilization was slightly lower at 66%, and solid activity levels in Europe and West Africa, largely offset lower activity in the U.S. Gulf. Section 2 commenced ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 77%. This shift reflects the increased contribution from our survey business. ROV days utilized in drill support were 64%, while vessel-based services were 36%. Compared to 63% and 37% respectively. As of June 30, 2026, we had ROV contracts on 82 of the 139 floating rigs under contract, or 59%. We maintained our fleet count of 250 ROV systems. Manufactured products, revenue increased 3% to $149 million, and operating income increased 7%, resulting in an operating income margin of 15%. Of 178 basis points, the improvements were largely driven by continued conversion of higher margin backlog, increased volume in our rotator balance business, and improved results in our mobility solution. Backlog decreased to $445 million on June 30, 2026, reflecting execution of previously awarded work. Our book-to-bill ratio for the trailing 12 months was 0.88, compared to 0.65 for the same period last year. We won multiple awards early in the third quarter, and we anticipate additional awards in enforcing our expectation that backlog will improve in the second half of the year and meet our full-year book-to-bill guidance with revenue increasing 22% to $183 million and operating income increasing 39% to $30 million, producing a 16% operating income margin. Execution on international and special utilization levels declined year-over-year, but as we continue to support customers, MDS's revenue, operating income, and margin decreased Due to low increased personnel, operations in the Middle East have begun to stabilize, which should support improved. We continue to face uncertainty regarding overall activity in those regions. $33 million and operating income was up slightly at $16.4 million. Operating income margin declined to 12%, reflecting changes in program mix and timing in our Oceaneering Technologies, or OTEC, business lines. Unallocated expenses of $46.6 million were in line relatively flat. year-over-year, 2026, and for the second half of the year.

Thanks, Mike. The state revenue to increase in the third quarter and adjusted EBITDA to be in the range of $115 million. Comparing our third quarter, 2026, as RV utilization in pretty continuous, pretty slightly, improved results from our unveilables and rotator valves business are expected to largely offset $100 million.

We will now begin the question and answer session. If you'd like to ask a question, please press star 1 in your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Your first question comes from a line of Keith Energy Partners. Your line is open.

Hey, thanks for taking my question. And congrats on the quarter, guys. My first question is just, obviously, we've got the refinancing this quarter. You guys have kind of built a nice cash position. And, you know, you kind of $10 million a quarter buybacks now for a little while. I just wanted to get your thoughts on does capital allocation change at all and maybe what opportunities are out there given you guys got a longer runway now.

I would say, you know, we still say organic first, inorganic growth second, and then return of capital to the shareholders, again, with the share buybacks being primary right now. So let me walk down those three. When I think about organic, one of the things I – Thanks for giving me the opportunity to point this out. We still are very proud of our energy business, and so we look for ways to invest and grow that energy business. And I would just say, think about investing more around it. And sometimes people wonder, well, you know, how much more capacity can you absorb? It's not really just about capacity. I mean, we think about the way we deliver value, and that's through automation, through high-tech services, you know, being the best provider out there. We're giving the customer very focused on a specific set of services done really reliably, high availability, high availability, those kinds of things.

And I think that's – and we intend to – the other part of our – it could be bigger, but also around – And then my second question is just here around – I don't want to get too ahead of myself, but tanking into 4Q and then into next year. Offshore, just wanted to think about, you know, the SSR, how do you expect ROV utilization to be potentially in the next year, and then kind of twofold on the OPG side of the business, really strong beat, 3Q, looks good as well. How sustainable is that going forward? You know, it sounded like TASP being in Egypt did really well, but just trying to think about the growth trajectory of OPG after a really strong quarter there.

Yeah, let me start with SSR. I mean, we see, just like so many other people are calling out, greater rig utilization, which means, I think, greater use for ROVs. Also, we see both of them. We've got some, for example, some regions, so continued utilization of the survey vessel, which is the other part of SSR. OPG, I think the thing to watch is, you know, a lot of people said, hey, an increased share price should drive, you know, OPG intervention work should be happening on U.S. land if the commodity price stays high. You know, I think everybody sees it. We see discipline around that. We don't see people just going crazy, but we do see, I think, continue to leverage the infrastructure we have in place.

It's a great indicator of the prices, which are still fairly favorable to a few years back, and extending those out, and we're going to extend along with them. So I do think it looks good.

I really appreciate the time, guys, and congrats on the quarter again. Thank you, Keith.

Again, if you'd like to ask a question, press star 1 in your telephone keypad. Your next question comes from a line of Josh Jean from Daniel Energy Partners. Your line is open.

Good morning. Thanks for taking my question. One of the things we've heard from some of the diversifieds is they alluded to a change in tone in conversations with NOCs around energy security, how they're framing spending moving forward. I think, Rod, you alluded to it a little bit in your last answer. But any insight you could provide with NOC discussions and maybe walk around the world a bit to offer where you think you could see the most growth over the next couple of years just in light of everything that's happened in the Middle East?

Yeah, sure. I mean, I think the first one I call out is Brazil. You know, Brazil is definitely active against Petrobras, leveraging their strength, and we see that, right? I mentioned the ROC.

And then as my follow-up, I wanted to just go into sort of the defense contracts and spending a little bit more. You talked about and highlighted the relationship with Collinsburg. And maybe you could just talk about this partnership. And then also, as we've seen your relationship expand with the government and the Navy, do you view these announcements as sort of lumpy and that's what they're going to be moving forward? or are we just in the early innings of sort of a structural change in what the opportunity set is around defense spending and autonomy and maybe just where you are in the cycle and then ultimately how that frames your business over the next couple of years and maybe margins moving forward in that business would be helpful.

The biggest project we've ever done, that's a good lump, yeah, we call it that. We're participating in bigger things as that business.

I'll turn it back. Thanks for taking my questions.

It comes from a line of Eddie Kim from Barclays. Your line is open.

I'm curious on your thoughts on timing of inflection and activity turning higher. Where you would see that most is probably your RODs business and drill support. Do you expect that to be a late 26 event, or do you think that's maybe getting pushed to mid-27, even second half of 27 as a large service company earlier this week that alluded to maybe timing getting pushed back to mid-27. So just curious on your thoughts there. And related to that is sort of your ROV utilization, which has been trending in the 60s for the past several years now. Are we setting up for a move potentially into the 70s, maybe high 70s in the next couple of years? I have to look back in my model to, you know, 2013, 2014, this year utilization in the high 70s and 80s. So just curious if high 70s utilization is an achievable target for you maybe in the next two to three years.

So, Eddie, a couple of things here. Let me start with the first one. Sometimes I get into colorful metaphors, but I feel like we're frogs in the pot here, right? It's coming up already. We talk about an inflection point. I don't know that we're going to see a really well-defined inflection point, but I feel like we're already starting to see these contracts greater regularly. So I think we're already in that period. It just hasn't. I don't see a real pronounced inflection point, but it is happening. For us, it's a little bit muted because, like I said, some of the rigs we're on are actually going to move from region to region, so that will create a little bit of downtime. But I think longer term, if you look across, it's definitely into, you know, it's happening. And I think to follow the money, when you say about, you know, one of the things we've talked a little bit about, maybe not enough, is that to really get into the high 70s, We have to have that high percentage of ROVs on drill ships as we did in the 2014 range, but we'll have closer to that, right? We'll creep above two-thirds probably when we think about activity. So I think that's one of the things to watch. When I think about activity level on the range.

Got it. That's very helpful, Collar. My follow-up is on this recent announcement you made last week that you're still in Combsburg. to be selected by the U.S. Department of War to support the development of uncrewed undersea vehicles for Navy missions. Just curious if that selection was maybe accelerated by what's going on in the Middle East, and it looks like you said the design is expected to be delivered in the third quarter of this year, which is this current quarter. Or how should we think about, you know, potential revenue generation from this opportunity?

Hey, so first of all, let me speak to interest level. I've got to give the customer credit. These things have – we've been – This is the operator.

We're experiencing some technical difficulties. Please stay on the line. We'll resume momentarily.

So I give them credit for that. But right now is one of the first times we actually see this technology being used out in the open, right, in both the Gulf and some of the aerial stuff we've seen in Ukraine. But definitely, is there more interest? I think one of the things is a lot of what we're seeing now is the surface vessels are getting a lot of play and that everybody thinks, well, we want to have the underwater stuff as well. So that does add a little interest as well. So, yeah, I think that's good. Revenue question. This program is really just about delivering the design. So until we sort of see what does the design look like, what's the use case look like, what's the budget look like, everything else, I can't really say what comes after this yet. But, you know, we're very confident that the design is going to be good. And if the customer has the budget, the use case, we'll see what comes next.

I'll turn it back.

And that concludes our question and answer period. I will now turn the call back over to Mr. Rod Larson for some final closing comments.

Well, since there are no more questions, I'll just wrap up by thanking everybody for joining the call. This concludes our second quarter of 2026 conference call. Have a great day.

And you may now disconnect.