Good morning. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oil States International, Inc. 2024 Q4 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Ms. Ellen Pennington, you may begin your conference.

Thank you, Mark. Good morning, and welcome to Oil States International, Inc.'s fourth quarter 2024 earnings conference call. Our call today will be led by our President and CEO, Cindy Taylor, and Lloyd Hajdik, Oil States' Executive Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. No one should assume that these forward-looking statements remain valid later in the quarter or beyond. Any such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our 2023 Form 10-K along with other recent SEC filings. This call is being webcast and can be accessed at Oil States International, Inc.'s website. A replay of the conference call will be available two hours after the completion of this call and will continue to be available for twelve months. I'll now turn the call over to Cindy.

Thank you, Ellen. Good morning, and thank you for joining our conference call today where we will discuss our fourth quarter 2024 results and provide our thoughts on market trends in addition to discussing our company's specific outlook. Through the fourth quarter, we continued to build momentum towards achieving our strategic objectives, supported by strong demand in offshore and international markets while overcoming some headwinds in U.S. domestic land-based operations. With continued expansion of our international and offshore product offerings, along with the strategic optimization of our U.S. land-driven business, our international and offshore revenues by destination grew to 72% of our consolidated revenues for the quarter, while U.S. land-driven revenues represented 28%. As we have discussed in prior quarters, we have strategically streamlined our operations in the United States through the exit of underperforming locations and business lines. Our focus on business mix optimization continued during the fourth quarter. Along these lines, we completed the sale of a previously idled facility, netting cash proceeds of $24.8 million, resulting in a pre-tax gain of $15.3 million. Our offshore and international operations grew 6% sequentially in terms of revenue and bookings during the fourth quarter. However, improvements in these regions were offset by our U.S. land-driven operations due to a declining frac spread count triggered by typical fourth quarter seasonality. Our completion and production work in the Gulf of America has rebounded to higher activity levels early in 2025 from a slower second half of 2024 following adverse third quarter weather events. We remain dedicated to growing our operations and strategically investing in our most profitable business areas supported by advanced technologies. We will also continue to focus on the return of cash to our shareholders. During the quarter, we generated cash flows from operations totaling $18 million and repurchased $9 million of our common stock. During 2025, we expect to generate strong free cash flow, allowing for further shareholder returns. Lloyd will now review our operating results along with our financial position in more detail.

Thanks, Cindy. Good morning, everyone. During the fourth quarter, we generated revenues of $165 million and adjusted consolidated EBITDA of $19 million. Our adjusted net income totaled $5.5 million or $0.09 per share, after excluding a gain of $15.3 million associated with the sale of our previously idled facility, and $3.1 million of restructuring charges incurred in connection with certain U.S. land-based operations and facility closures. Our offshore manufactured product segment grew 5% sequentially, generating revenues of $107 million and adjusted segment EBITDA of $25 million, up 6% sequentially in the fourth quarter. Adjusted segment EBITDA margin was 23% in the fourth quarter, comparable to the third quarter. In our completion and production services segment, we generated revenues of $30 million and adjusted segment EBITDA of $3.5 million in the fourth quarter. Adjusted segment EBITDA excluded operating lease asset impairment charges of $1.2 million and facility closure and other charges totaling $1.9 million. Excluding these charges, adjusted segment EBITDA was 12% in the fourth quarter compared to 13% in the third quarter. Excluding the revenue impact of exited operations in both the third and fourth quarters, completion and production services segment revenues declined $1.6 million or 5% sequentially. In our downhole technology segment, we reported revenues of $27 million and breakeven adjusted segment EBITDA for the fourth quarter. Despite some large planned collections from customers moving into early January, Oil States International, Inc. generated $18 million in cash flows from operations during the quarter. We invested $14 million in CapEx, a portion of which was customer-funded, which was more than offset by the $25 million in net proceeds from the idle facility sale Cindy mentioned. Cash was used to buy back $9 million of our common stock.

Strong long-term prospects for oil, natural gas, and LNG, coupled with growing global power demand, are expected to drive ongoing capital investments in offshore and international projects, led by developments in Latin America, the United States, Asia, and Africa. Recently announced FIDs, which have resulted in production orders with major subsea OEMs and associated industry backlog builds, should continue to translate into increased demand for our products, driving higher bidding activity, bookings, and ultimately revenue growth. We are successfully marketing our managed pressure drilling systems, which received further market acceptance with key customer approval to operate in South America during the fourth quarter. We are also seeing positive market momentum across our conductor connector products and our flagship flex joint deepwater riser connector product. In the shallow water environment, project opportunities for fixed platform foundations, subsea pipeline, and associated repair systems, as well as topside equipment, are emerging. These opportunities, combined with the low capital intensity of our global manufacturing operations, position us for strong future growth and shareholder returns. While domestic market conditions and activity levels are expected to remain relatively flat throughout 2025, we expect profitability to improve within our completion and production services and downhole technology segments, given our restructuring initiatives undertaken in 2024, coupled with what is expected to be a more energy-friendly regulatory environment. Domestic revenue opportunities for new technology introductions, including our open architecture perforating systems and digital technologies for wireline service providers, should support market share gains. Internationally, our initiatives to secure contracts with our customers for the supply of perforating products are gaining traction with recent awards in Latin America and the Eastern Hemisphere that are scheduled to commence in 2025. Given a solid offshore and international outlook, combined with the potential for incremental margin improvement across our U.S. land-driven businesses, we expect 2025 full-year revenues to range between $700 and $735 million and full-year EBITDA to range between $88 and $93 million. Our first quarter guidance calls for revenues in a range of $160 to $170 million and EBITDA of $17.5 to $18.5 million. Cash flows from operations are expected to remain strong in 2025 in a range of $65 to $75 million, with CapEx of approximately $25 million planned, providing opportunities for ongoing share repurchases during the year. I would remind listeners that we generally see lower cash flows in the first quarter of each year, driven by the timing of funding short and long-term incentives. Our capital allocation priorities remain very focused. We are committed to investing in organic growth opportunities, prioritizing growth CapEx, and funding organic research and development, which will provide for sustained competitive advantages. Our strategic priorities center on driving long-term profitability and growth by optimizing our global operations, capitalizing on the strength of offshore and international markets, and focusing on our core competencies and technology differentiators. By leveraging our expanded portfolio of technologies and specialized services, we aim to deliver superior value to our customers and generate strong returns for our stockholders. That completes our prepared comments. Mark, would you open up the call for questions and answers at this time, please?

Absolutely. At this time, I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad. I'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Stephen Gengaro with Stifel. Your line is now open.

Thanks. Good morning, everybody. Cindy, you alluded to free cash flow of $40 million to $50 million in 2025. Are you focused on buybacks over debt reduction at this point? How do you think about the allocation of the free cash?

We feel very comfortable with our debt levels. I think you saw we executed in Q4 with share repurchases. Yes, we do have our debt maturing in April, but at the end of the year, we noted we had roughly $60 million of net debt. In Lloyd's comments, we had some very large receivables collected on January ninth, I think. And so I think the point of that is we were roughly net debt $45 million in January. And so we're really not concerned with the level of debt that we have at this point. And I think it is prudent to focus on shareholder returns.

Great. Thanks. One of the things that keeps surfacing in conversations is this sort of lack of offshore production capacity that has delayed rig activity. When we think about FPSO growth, can you give us a sense or remind us of the revenue opportunity you have on the FPSO side? I think one of the big players has suggested seven to nine per year that are going to be ordered in the next couple of years. Can you frame your opportunity?

We are embedded in our guidance, so you will need to work through the numbers, but there's revenue growth in our offshore manufactured products business, and that's really grounded on, one, existing backlog indicating growth in certain regions. Our bidding and quoting activity, particularly in North America, i.e., Brazil, Ghana, etc., gives us the indication that the revenue growth appears solid, coupled with new technology introductions. I tend to get a bit more granular when we give our guidance, and it's really predicated on existing bidding and quoting activity that we have coming in. As well, we actually try to schedule that as best we can. It's never exact in terms of receiving the orders on a quarter-by-quarter basis. We are a little different; everybody tends to focus on new rigs coming out of the market, and we're a little more production infrastructure oriented. I accept and realize that for analysts that follow it, it's a little harder because you don't ever see the back end on the deployment of production infrastructure. Regarding a given FPSO opportunity, how big could that be? It varies greatly depending on how that field is designed. We're really largely driven by the number of import lines and export lines on a facility. Sometimes they will phase those over a period of time. Sometimes you'll do a larger build-out. If I were giving you a range, just on the large key connectors, it's probably anywhere from $15 to $25 million order of magnitude. They are important to us without question. It's also some of our leading technology. I hope that answers your question. I know it's hard to model. But it's important for this call that we are planning for revenue growth in this environment, and while the macro suggests relatively flat international activity, new product development, our new Baton facility, and existing backlog and bidding and quoting activity give us a level of confidence to guide to higher revenues.

No, that's great color. If I could ask one more quick question: without asking specifics, you've talked about streamlining opportunities and focusing on more value-added product lines. Of the revenue guidance you gave, or even 2024, what percentage of that do you think falls in that category—stuff that, if you could divest, you would? Is it 10% or greater?

I'm not sure I understand what you're asking, Stephen.

So first off, we did put in the press release that the revenue impact from the exited operations in 2024 was $41 million. So I think that's your starting point.

Lloyd's point is that you may be modeling a different revenue mix because of these exited businesses. Fundamentally, the mix and the margin profile has improved, and it is more exposed to offshore and international and more differentiated technology than it was before.

If we're answering your specific question, the press release details the exited operations for the completion and production services segment.

That helps. Thank you.

It will be in the 10-K to help you model.

It's in the press release too, and that's specific to the completion and production services segment.

No, that is helpful. I probably asked the question poorly, but my question was: of the remainder of the business, what percentage of that revenue base would you think of as lower margin items that could be expedited?

You've followed us a long time. The key initiatives are often around our Downhole Technologies business. If you look at the overall results, they were relatively breakeven, but it was a very weak market in November and December with holidays and shutdown of completion activity. A huge focus of ours this year is improving the margin profile for the Downhole Technologies segment. International expansion efforts are beginning to pay off in the sense of new contract opportunities internationally, and we're rolling out new technology domestically, seeing early indications of market share gains as well.

Great. It's a great call. Thank you.

Thank you, Stephen.

And your next question comes from the line of Jim Rollyson with Raymond James. Please go ahead.

Hey. Good morning, everyone. Maybe taking Stephen's questions a step further: you talked about the revenue side. The press release noted about $20 million of operating losses from items you exited, and your full year to date number was low $20 million operating loss. As we think about 2025 and the margin profile in that business segment, how are you thinking about that given what you've done to remove the bad mix? With the new tech and international rollout opportunities, do we think about the completion and production segment margin profile for 2025 improving? What should we expect?

I'm looking to Lloyd to give the 2024 number, but I think it was in the mid-teens range for 2024. We are trying to move those margins more into the 19% to 20% range in 2025. That's a substantial improvement in EBITDA margins. Last year, many items were impairment charges and not necessarily cash costs. As we go forward, this will be a much cleaner year. We've gotten through a lot of this work. Our employees should know that this is largely behind us, and it will pay off. In completion and production services, we have a mix of businesses, some of which are international weighted to the Middle East and some Gulf of America work. That mix shifts to more international and offshore work, which generally carries higher margins and is more resilient. The Gulf of America rig count is low, but the work there is beneficial and at good margins. The drag has been the cost structure and some low- to no-margin contributing businesses that are no longer in our portfolio.

Got it. That's very helpful. Following up, a theme we heard over the last several quarters from other manufacturers is backlog gradually rolling from lower-margin work priced back during COVID to higher-priced backlog as pricing improved. Maybe comment on bidding opportunities and margin profile for OMP revenues year over year.

We didn't take a lot of loss leader positions during the down market, so ours tends to be mix oriented. Over the last five years, our offshore manufactured product business has been solid in growth, margin profile, and cash flow generation. What we are looking for is increased market share and top-line growth. Incremental revenue generally comes through well. I can't say the margin profile is dramatically different in totality; higher revenues help with absorption and incrementals.

Got it. One last follow-up: circling back to the $40 to $50 million of free cash flow. If you're favoring buybacks over debt repayment, how do you think about deploying that free cash between buybacks and building more cash given where you are now and where you were in January with extra collections?

We favor share repurchases. No shareholder pays us to sit on cash, and we've got ample balance sheet working capital to support debt repayment. I'm comfortable with our debt level, but we should return cash to shareholders; we won't just sit on it for a year.

Awesome. Thanks for all the color. Appreciate it, guys.

Thanks, Jim.

Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Blake McLean with Daniel Energy Partners. Please go ahead.

Hey. Good morning. On the international and offshore opportunity set, could you provide more color on the various markets and how they differentiate and what the outlooks look like from an activity perspective and technology adoption?

Some of our most differentiated technology is the connection technology we put into production facilities, specifically FPSOs and others. That has been and will continue to be relevant in Brazil, Ghana, and on an emerging basis, Trinidad as an example, where we have active bidding and quoting activity that aligns well with industry dynamics. Petrobras is the largest deepwater driller and producer in the world, and we have significant exposure there and have for years, with a growing presence expanding into other product lines into the region, including perforating products. We have had static or shrinking market share in Southeast Asia due to a higher cost base of manufacturing. That was the objective in building the new facility in Baton. With that facility, we expect to take on incremental market share. We have very active bids and quotes of consequence around our large OD conductor casing connectors in that region, and we have the potential longer-term opportunity to move more manufacturing into that region. Our transitional energy activities are not a large percentage, but we do have some exposure to fixed foundation wind; we are doing some around CCS and geo projects, and we have longer-term potential for offshore wind, primarily in the European region. We're not counting on much growth there; it's more our traditional products coupled with new technology introductions, including the managed pressure drilling system.

Got it. That's helpful. One last question on U.S. land: you talked about flattish activity but improving profitability. How do you think about the trajectory of activity through the rest of the year, including on dry gas basins? Any color on customer conversations?

We've seen a lift in activity as early as January and have taken on incremental frac fleets. We are very selective with our product offering on land; it's generally frac, isolation, and extended reach technology. We are region specific and customer specific. We focus on running efficient operations and gaining market share in regions and with customers that give us continuous work. We are not trying to be all things to all people. We've introduced new technology in that space, specifically active gate valves used in fracking isolation, and more recently automation equipment. Think of us as more high-end and very selective in capital allocation to that business. As an example, we showed a little higher CapEx in this segment in Q4, but this was stuff already in inventory; we're moving it into manufacture to support the new frac fleets we gained in January. We remain very selective in capital allocation.

Got it. Cindy, Lloyd, thank you very much for your time.

Thanks, Blake.

There are no further questions at this time. I turn the call back over to you, Ms. Cindy Taylor.

Okay. Thank you, Mark. I just want to thank all of you for joining the call today and for your continued interest and support in Oil States International, Inc. We know we have some conferences coming up, and we hope to catch up with you more fully in the coming weeks and months. Have a great earnings season, and hope to see some of you soon.

Take care. That concludes today's conference call. You may now disconnect.