Earnings call transcript: Innovex tops Q2 2026 guidance as shares rise

Oil prices turn lower as Bessent says U.S. may have Iran deal "today or tomorrow"

Innovex said second-quarter revenue and adjusted EBITDA landed at the high end of its guidance range, while cash generation stayed strong and the company added a new acquisition to its portfolio. The oilfield-services company reported Q2 2026 revenue of $245 million, up 2% from the first quarter and 9% from a year earlier, with adjusted EBITDA of $48 million and a 20% margin. The stock last traded at $55.42, up about 6.5% from the previous close of $52.04, suggesting investors welcomed the results and the company’s outlook.

Key Takeaways

• Revenue of $245 million and adjusted EBITDA of $48 million both came in at the high end of guidance.
• Free cash flow reached $30 million, equal to 63% of adjusted EBITDA.
• The company ended the quarter with about $222 million in cash and no bank debt.
• International and offshore revenue grew 11% sequentially, offsetting a seasonal dip in North American land.
• Innovex completed the $95 million purchase of TCO Group on July 1, expanding its technology base and international reach.

Company Performance

Innovex delivered a solid quarter, with growth led by international and offshore markets. Revenue rose to $245 million from $240 million in the first quarter, while adjusted EBITDA held near the 20% level that management has said it wants to sustain after the Dril-Quip integration.

The company’s performance reflected a mixed market backdrop. North American land revenue fell 4% sequentially to $131 million, mainly because of seasonal weakness in Canada. U.S. land was roughly flat, though management expects improvement in the second half as rig activity picks up.

By contrast, international and offshore revenue climbed to $113 million, up 11% from the first quarter. Management described that segment as the company’s growth engine, supported by stronger activity in Asia Pacific, Latin America and the Middle East.

Financial Highlights

• Revenue: $245 million, up 2% sequentially and 9% year over year.
• Adjusted EBITDA: $48 million, with a 20% margin.
• North American land revenue: $131 million, down 4% sequentially.
• International and offshore revenue: $113 million, up 11% sequentially.
• Cost of sales, excluding depreciation and amortization: about $161 million.
• SG&A: $39 million, down about $3 million sequentially.
• Free cash flow: $30 million, or 63% of adjusted EBITDA.
• Capital expenditures: $7 million, or 2.7% of revenue.
• Cash and cash equivalents: about $222 million.
• Bank debt: none.

Earnings vs. Forecast

The company did not provide a per-share earnings figure in the materials reviewed, so a direct EPS comparison with Wall Street estimates was not available. Revenue and adjusted EBITDA, however, both finished at the high end of management’s guidance range.

That outcome suggests a modest positive surprise relative to expectations embedded in the company’s own outlook. The result was not a large beat, but it was a clean quarter with no major execution issues. The 20% adjusted EBITDA margin was slightly below the 21% margin reported in both the prior quarter and the year-earlier period, but the company still held margins above 20% while absorbing higher freight costs tied to Middle East conflict.

Compared with recent quarters, the quarter showed steady improvement in revenue and continued cash generation rather than a sharp acceleration. That kind of result often supports a stable valuation, especially when paired with guidance that points to further growth.

Market Reaction

Innovex shares last traded at $55.42, compared with a previous close of $52.04. That implies a gain of about 6.5%. The move points to a favorable investor response after the company reported results at the top end of guidance and outlined a stronger third quarter.

The stock’s move also appears to reflect confidence in the company’s balance sheet and capital allocation. Innovex ended the quarter with $222 million in cash and no bank debt, and it used part of that flexibility to buy TCO Group. In addition, management pointed to margin support from the completed Eldridge facility exit and to future growth from subsea awards and international markets.

No unusual trading volume was provided, and no reliable 52-week range was available in the data.

Outlook & Guidance

For the third quarter, Innovex guided for revenue of $260 million to $270 million and adjusted EBITDA of $51 million to $57 million. At the midpoint, that implies revenue of $265 million and adjusted EBITDA of $54 million, or a margin of about 20.4%.

Management said the guidance includes about $250 million from the legacy Innovex business and $15 million from TCO, with about $3 million of EBITDA contribution from the acquired company. The forecast assumes relatively flat activity in the Middle East, seasonal improvement in Canada and stronger U.S. land activity as rig additions begin to flow through.

Beyond the third quarter, management pointed to several growth drivers:

• subsea awards that should begin converting into revenue, with more meaningful contribution expected in 2027;
• continued growth in Mexico, where activity through the second quarter already exceeded all of 2025;
• market share gains in Saudi Arabia;
• cross-selling opportunities from TCO, especially in Brazil;
• margin support from the Eldridge exit and supply-chain consolidation.

Executive Commentary

Chief Executive Adam Anderson said the company was “pleased with our second quarter performance” and noted that revenue and adjusted EBITDA came in at the high end of guidance. He said Innovex is entering “a new phase” as integration and manufacturing changes begin to translate into commercial wins.

Chief Financial Officer Kendal Reed said the company was encouraged by the “trajectory of our margins” and emphasized that Innovex’s cash conversion remains a key strength. He also described TCO as a good fit for the company’s strategy because it brings “differentiated, largely consumable technologies” with limited capital needs.

Anderson also highlighted the subsea business, saying the company sees a “really robust pipeline of activity” and expects several awards to support growth into 2027. He pointed to the combination of legacy Innovex and Dril-Quip technologies as a source of competitive advantage.

Risks and Challenges

• North American land softness: U.S. land was flat in the quarter, and Canada remains seasonal, which can pressure near-term growth.
• Margin pressure from logistics: About $1.5 million in extra freight costs tied to Middle East conflict hurt margins in the quarter and may continue.
• Timing risk in offshore projects: Several large awards are expected to contribute more in 2027 than in 2026, so revenue timing could be uneven.
• Integration execution: One final ERP conversion remains in the Dril-Quip integration, and any delay could slow efficiency gains.
• Acquisition integration: TCO and prior deals add growth potential, but they also require successful cross-selling and operational integration.

Q&A

Analysts focused on four main areas: North American land, offshore momentum, margins and the TCO acquisition.

Questions about Canada and U.S. land centered on whether Innovex would push harder into the U.S. market. Management said the company remains strongest in Canada and sees more immediate opportunity in Canada’s thermal market, Mexico and other international regions. It described U.S. land as attractive but slower to develop.

On offshore markets, analysts asked whether customer behavior had improved. Management said the difference is not just sentiment; it sees real project awards, including three Asia projects worth $60 million to $80 million in future revenue, along with a strong pipeline in the U.S. Gulf and other regions.

Margin questions focused on the Eldridge exit and the impact of Middle East freight costs. Management said the facility consolidation should improve efficiency and delivery performance, while the conflict-related logistics burden could ease if regional conditions improve.

Analysts also asked about TCO’s contribution and cross-selling potential. Management said the acquisition should add about $15 million in revenue in the third quarter and pointed to Brazil as a key opportunity for combining TCO technology with Innovex’s subsea wellhead business. The company also said TCO strengthens its position in Norway and the UAE.

Full transcript - Innovex International Inc (DRQ) Q2 2026:

Operator: Good morning. Welcome to Innovex’s second quarter 2026 earnings call. At this time, all participants are in 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. Eric, please go ahead.

Eric Wells, Chief of Staff, Innovex: Good morning, everyone. 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 Innovex’s comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause Innovex’s actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Please refer to the second 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 Innovex, we have Adam Anderson, Chief Executive Officer, and Kendal Reed, Chief Financial Officer.

I will now turn the call over to Adam Anderson.

Adam Anderson, Chief Executive Officer, Innovex: Good morning. Thank you for joining us today. I want to begin by thanking our employees across the organization for another quarter of strong execution. Our teams continue to focus on delivering a delightful customer experience, advancing customer-centric innovation, and leveraging the Innovex platform to grow our business organically. That spirit of collaboration is at the heart of our no barriers culture and continues to shape how we operate every day. On today’s call, I will begin with our second quarter performance and then discuss the recent acquisition of TCO Group and the opportunities we see for its technologies within the Innovex platform. I will also highlight several important operational and commercial developments across our subsea and international businesses before turning the call over to Kendal for a more detailed review of our financial results, capital allocation priorities, and outlook for the third quarter. Starting with performance.

We delivered an excellent second quarter. Revenue totaled $245 million and adjusted EBITDA totaled $48 million, both at the high end of our guidance ranges and representing an adjusted EBITDA margin of 20%. These results were supported by improving activity levels across several international markets and growing commercial momentum within our subsea business. On July 1st, we completed the acquisition of TCO Group and are excited to welcome the TCO team to Innovex. TCO has pioneered laminated glass plugs that create reliable gas-tight downhole barriers. These plugs can subsequently be opened without intervention, reducing cost, time, and risk for customers. This novel technology is applicable across both onshore and offshore wells, including completion, well suspension, and casing or liner deployment. As a reminder, we apply stringent qualitative and quantitative criteria when evaluating acquisitions. TCO fits these criteria exceptionally well.

Its differentiated, largely consumable technologies fit with our big impact, small ticket business proposition. Like our core business, TCO’s products require limited sustaining capital. Additionally, TCO strengthens our presence in Norway and the UAE, two markets where we see meaningful long-term opportunity. TCO is a growth business. We believe Innovex’s diversified portfolio, global reach, and established customer relationships can accelerate TCO’s technologies across new customers, applications, and geographies, driving value for our shareholders. Importantly, we see potential for future innovation leveraging our suite of technologies. However, this potential upside was not reflected in the purchase price. The financial characteristics of the transaction are compelling, something Kendal will discuss in more detail later in the call. We are also encouraged by the progress of Drilling Innovative Solutions following its acquisition last quarter. The business continues to mature within the Innovex platform, and we are already seeing evidence of its growth potential.

One recent example, a major North Sea operator, one that DIS would not have been able to access on its own, identified its technology as a critical solution for a specific field development. This is how our acquisition playbook is designed to work, by adding differentiated technologies and leveraging the Innovex platform to accelerate their growth. Turning back to the quarter. We saw meaningful progress in our subsea businesses. We secured an additional $20 million subsea tension riser package for an operator in Malaysia, with follow-on well head orders anticipated. We also successfully completed the first XPak trial with a major international operator in Asia Pacific following a multi-year qualification effort. XPak is a high-performance expandable liner hanger system, which helps improve well geometry and simplify architecture in technically demanding applications.

Together with several important awards secured over the past few months, these developments reinforce the growing momentum we are seeing across our subsea business. While improving offshore markets have certainly provided a welcome tailwind, we believe our no barriers commercial mindset, optimized manufacturing footprint, and strategic alliance with OneSubsea has strengthened our ability to compete effectively and profitably for complex offshore work. Innovation continues to drive organic growth. During the quarter, we completed the first installation of our ArgoLATCH Subsea Release Plug in Brazil. The system enabled the customer to complete cementing in a single step, eliminating the need for a submudline system and second cement job, saving time and cost. The ArgoLATCH was deployed in the same operation as our 18-inch by 22-inch XPak system, combining capabilities from both legacy Innovex and legacy Dril-Quip.

This successful deployment demonstrates how collaboration across the combined organization can create integrated solutions that simplify well construction and improve execution for customers. Outside of subsea, we’re seeing additional avenues for growth across several growing international markets by deploying our technologies and capabilities with both new and existing customers. Activity in Mexico increased substantially during the quarter, with completion activity through the second quarter already exceeding the total number of jobs performed during all of 2025. Across Latin America, we continue to build stronger customer relationships and see additional opportunities developing. For example, we’re seeing increased customer engagement and quotation activity in Venezuela. While we have not yet recognized meaningful revenue in Venezuela, we believe Innovex is well-positioned to participate as customer activity develops. Importantly, our capital-light business model does not require significant fixed assets in the country.

Our Canadian wellhead team also completed its first surface wellhead delivery to Mexico while continuing to support commercial developments in other international markets. Mexico represents a large and growing market for surface wellhead technology, making this first delivery an important commercial milestone for our wellhead strategy. These developments demonstrate how we can use product expertise developed in one region to create opportunities across the broader Innovex platform. Our Middle East performance also improved during the quarter. In Saudi Arabia, we gained market share in expandable liner hanger technologies and continue to grow our presence in unconventional applications. We also secured our first direct contract through our Innovex Saudi entity, further strengthening our customer relationships and positioning us well for future opportunities in the region. Stepping back, I believe the second quarter demonstrates that Innovex is entering a new phase.

The integration, manufacturing optimization, and cultural transformation of the past two years are increasingly translating into commercial wins, differentiated technologies, and expanding market position across our global platform. Our priorities remain unchanged. We will continue to invest in differentiated technologies, improve customer experience, and allocate capital with discipline. We believe that approach positions Innovex to deliver sustainable, profitable growth and long-term value for our shareholders. I’ll now turn the call over to Kendal to review our financial results and outlook in more detail.

Kendal Reed, Chief Financial Officer, Innovex: Thanks, Adam, and good morning, everyone. I’d now like to review our second quarter 2026 financial results. For the second quarter of 2026, revenue totaled $245 million, up 2% sequentially from the first quarter of 2026 and up 9% year-over-year. Adjusted EBITDA totaled $48 million, resulting in an adjusted EBITDA margin of 20%, compared to 21% in Q1 2026 and Q2 2025. We were pleased to achieve the high end of our guidance ranges for both revenue and adjusted EBITDA. We’re encouraged by the trajectory of our margins as the benefits of our operating model and commercial execution continue to build. NAM land revenue for the second quarter was $131 million, down 4% sequentially from $137 million in the first quarter.

We are pleased with the resilience of our NAM land revenue relative to underlying North American market conditions, which included the impact of seasonally lower Q2 activity in Canada. We believe our differentiated technology portfolio and customer-focused business model will continue to support long-term market share gains in North America. International and offshore revenue during the second quarter of 2026 was $113 million, an increase of 11% sequentially, driven by continued strength across our international portfolio and partially offset by normal project timing within our offshore business. Within subsea, we continue to secure meaningful customer awards that provide increasing visibility. Although project timing will create some quarter-to-quarter variability, we expect these awards to support attractive growth over the next one to two years.

We remain encouraged by activity levels across several key international markets and continue to see a healthy pipeline of opportunities heading into the second half of the year. Cost of sales, excluding depreciation and amortization, was approximately $161 million during the quarter. Gross margins remained healthy, reflecting the strength of our product portfolio, disciplined pricing, and continued operational execution. Selling, general, and administrative expenses for the quarter decreased by approximately $3 million sequentially to $39 million. As we fully complete the Dril-Quip integration and continue to grow the business, we expect to leverage our existing platform to reduce SG&A as a percentage of revenue and further strengthen margins while maintaining disciplined cost control across the organization. Free cash flow for the quarter was $30 million, representing 63% of adjusted EBITDA.

Our ability to consistently generate strong cash conversion remains a key differentiator of the Innovex business model and reflects our capital-light operating structure, disciplined working capital management, and limited capital expenditure requirements. Capital expenditures in the second quarter totaled $7 million, representing approximately 2.7% of revenue, in line with our historical target of 2%-3% of revenue. We ended the quarter with approximately $222 million of cash and cash equivalents and no bank debt. On July 1st, we completed the acquisition of TCO for $95 million, consisting of $65 million of cash and $30 million of Innovex common stock. We believe the transaction represents an attractive use of excess balance sheet cash, allowing us to deploy a portion of our excess cash into a high-quality, cash-generative business while preserving significant financial flexibility. As Adam discussed, TCO is an excellent example of our acquisition strategy in action.

We remain focused on acquiring product and technology-driven businesses that complement our portfolio, can benefit from the Innovex platform, and are available at reasonable valuations. TCO fits that playbook exceptionally well through its differentiated, largely consumable technologies, attractive margins, strong cash generation, and limited capital requirements. Our M&A pipeline remains robust and includes a mix of smaller bolt-on acquisitions as well as larger strategic transactions. We will remain disciplined and pursue opportunities that strengthen our portfolio, leverage the Innovex platform, and meet our stringent qualitative and quantitative return criteria. This disciplined approach remains central to how we intend to create long-term shareholder value. Return on capital employed for the 12 months ended June 30th, 2026 was 12%. ROCE is reduced by our net balance sheet cash position. We remain focused on achieving a long-term target of high teens ROCE via margin expansion, high return M&A and shareholder returns.

Looking ahead to the third quarter of 2026, we expect revenue in the range of $260 million-$270 million and adjusted EBITDA of $51 million-$57 million. As we move through the second half of the year, we will remain focused on accelerating the integration and growth opportunities associated with TCO, capturing operational efficiencies across the business, investing in customer-centered innovation, and maintaining a disciplined approach to capital allocation. Our strong balance sheet cash and free cash flow generation position us well to continue creating long-term shareholder value across a range of market conditions. With that, I’ll turn the call back to Adam for closing remarks before we open the line for questions.

Adam Anderson, Chief Executive Officer, Innovex: Thanks, Kendal. We are pleased with our second quarter performance. We delivered revenue and adjusted EBITDA at the high end of our guidance ranges, generated strong free cash flow, and continued to build commercial momentum across our subsea and international businesses. With the acquisition of TCO, we’ve added differentiated high margin and capital-light technologies to the Innovex platform. I want to reiterate that Innovex is entering a new phase. We now have a stronger and more efficient customer-centric operating platform, a broader portfolio of differentiated technologies, and greater opportunities to extend those technologies across customers, applications, and geographies. Our focus is on converting these advantages into consistent, profitable growth while maintaining our discipline around execution and capital allocation. Thank you again to our employees, customers, and shareholders for your continued trust and support. Operator, we can now open the line for questions.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Don Crist with Johnson Rice. Don, your line is now open. Please go ahead.

Don Crist, Analyst, Johnson Rice: Morning, guys. Thanks for letting me in here on a busy morning. I wanted to start on the Canadian wellheads. Obviously, that is a dominant position up there, but really doesn’t have a big position in the U.S., but you sold some into Mexico. Can you give us kind of the game plan? How do you see that progressing over the next couple of quarters or years? Are you planning to make a big push into the U.S. to try to unseat the major competitor in the U.S. right now?

Adam Anderson, Chief Executive Officer, Innovex: Morning, Don. Thanks for the question. That’s, like you said, really strong position we have in Canada in the wellhead space. We’ve got a great team up there. Definitely one of the market leaders in a pretty consolidated space up there. I think one of the things we’re really excited about is the thermal space in Canada, where we’re still one of the smaller of two players, probably the smaller player up there, but consistently growing market share, and I’m pretty excited about our trajectory up there. That’s a really nice market. I think the second place where we’re seeing traction is these international opportunities. Mexico is a really good one for a variety of technical reasons. We are really well established there, and we’re selling these to the service companies that we’ve had good experience with, where we can create value in that relationship.

I think there’s a myriad of other international places that we’ve had some success and a big pipeline of opportunities in. I would say the international land region is probably the second biggest area that we’re excited about. We are evaluating. We’ve done a little bit of work in U.S. land. It’s still relatively small, so I wouldn’t bake in a ton of growth there, but that is certainly a pretty attractive market where we’ve got a really strong distribution network, know all the major customers well. That’s certainly an area that we’ll be looking at over the next couple of years, but probably a little bit slower to evolve than those first two that I just mentioned.

Don Crist, Analyst, Johnson Rice: Okay. I wanted to ask about offshore. Obviously, you had some strong comments, and we’re seeing some very strong comments from many other people this earnings cycle on the offshore side of the business. Can you classify, has customer behavior changed, or is there just more conviction today versus kicking the tires in the past? Any kind of comments around the offshore space that gives you more confidence as we move towards the end of 2026 and into 2027?

Adam Anderson, Chief Executive Officer, Innovex: Yeah. We’ve seen really strong offshore pipeline, I think, in a couple of different areas. Some of these Asia projects that we’ve won. We’ve announced three big Asia projects that in total are somewhere in the $60 million to $80 million worth of revenue, which will probably start coming meaningfully in next year. Those are areas where we were kind of the incumbent as a result of the legacy Dril-Quip relationship with these folks. Those are projects that got sanctioned and approved in the last six months, let’s say. Some of that tied to just a desire to get more energy security in local markets.

We currently have a pretty strong pipeline of things that are pretty close to converting to awards over the next 6 months, both in the Western Hemisphere, like in the U.S. Gulf, as well as some of these big international awards that we expect to get announced over the next 6 months. Across the board, we see both a really robust pipeline of activity, and then I’m really pleased with the commercial momentum of both our ability to convert some of these legacy contracts and get really nice awards, but then really taking market share.

I think a couple of things we’ll announce over the next 6 months will demonstrate our ability with the really great talent and technology we inherited from the Dril-Quip deal, combined with just being a little bit more aggressive in a number of different ways commercially, is going to allow us to take some market share in that space. Really excited with how that offshore space is progressing for us.

Don Crist, Analyst, Johnson Rice: I appreciate that. If I could sneak in one for Kendal. We saw a couple other companies get tariff refunds. Anything on the playbook for you all to get anything back from a tariff perspective? I didn’t see anything in your release.

Kendal Reed, Chief Financial Officer, Innovex: Yeah. Thanks, Don. It’s a good question. As a reminder, the tariff that’s really more meaningful to our business is the 232 tariff around raw material steel, which was not included in that kind of refund program. But we have applied for and received some, I would say, modest tariff refunds that we’ll see coming in the door in Q3 here. We’ll get something back, but it’s immaterial in the grand scheme of things for our business.

Don Crist, Analyst, Johnson Rice: Okay. I appreciate the color. I’ll turn it back. Thanks, guys. Good quarter.

Adam Anderson, Chief Executive Officer, Innovex: Thanks, Don.

Operator: Your next question comes from the line of Keith Beckmann with Pickering Energy Partners. Keith, your line is now open. Please go ahead.

Keith Beckmann, Analyst, Pickering Energy Partners: Hey, good morning. Thanks for taking my question. I just wanted to get a sense of maybe quarter-over-quarter, what’s baked into your 3Q guidance. Trying to get a sense on Middle East here, as well as TCO contribution for a full quarter of that. Just how you’re thinking about third quarter and potentially back half of the year here, with the conflict resuming.

Kendal Reed, Chief Financial Officer, Innovex: Yeah, Keith. Good question. I think in terms of what we have baked into the Q3 guide, maybe just to start with the TCO piece. Really pleased to get that deal closed on July 1st. We’ll get a full quarter of impact from the acquisition there. As a reminder, with that business being nearly 100% focused on international and offshore markets, it’ll have this same variability around delivery and project timing that the rest of our international and offshore business has. With that in mind, what we’re baking into the Q3 guide is $15 million of revenue from TCO and about $3 million of EBITDA. I think what that implies to us is we’re going to see some nice growth in that TCO business as we go into future quarters. We’re obviously not guiding out that far.

I think the Q3 guide is nice and conservative based on the orders that we can see and the delivery timing we’ve got scheduled today. That implies around $250 million of revenue from the legacy Innovex business. You touched on Middle East there. We’re seeing things relatively flat in Q3 to Q2 in the Middle East region. Again, hopefully some nice long-term opportunities if the conflict clears up and we can see some activity growth in the region there. Really a lot of what’s driving that quarter-over-quarter growth in the legacy Innovex business, let’s say, is some of these subsea opportunities that Adam talked about are just starting to kick in. That’s going to be more of a 2027 than a 2026 driver, but we’re starting to see some nice green shoots there.

Obviously from a North America land perspective, we’ll have breakup in Canada. I won’t recurse. We’ll see some nice Q2 to Q3 growth, then starting to see some nice growth in the U.S. land business as well, driven by some building rig count activity. I think across the board, relatively positive outlook for Q3 and then building into Q4 next year.

Keith Beckmann, Analyst, Pickering Energy Partners: That’s very helpful. My second question was just a little bit around, I believe you guys are probably fully out of Eldridge, but any update there? The bigger question really more broadly, what’s the next biggest thing to attack here to continue improving margins and maybe just talk about the different improvements that you could see in increasing margins from here. Thanks.

Kendal Reed, Chief Financial Officer, Innovex: Definitely. As we mentioned, we completed the move out of Eldridge in Q2. We’re excited about that. The consolidation of the supply chain, I think will enable us to not only be more efficient, drive better margins, but be more responsive to customers, improve our delivery, all those types of things. In terms of where we go from here, we’re really pleased to see some nice consistency over the last couple of quarters, right in that 20% EBITDA range. Building as we go into Q3, we talked about being consistently north of 20% post the exit of Eldridge. I think where we go from here, one thing we didn’t hit on it specifically, but that did weigh on Q2 and we expect to weigh on Q3, is the increased logistics cost hitting the Middle East around this conflict that’s going on.

We had around $1.5 million of increased freight expense related to air freight or just additional costs of moving things around, that’s been a lot more difficult. I think you get some resolution there, even without revenue growth, that’s going to drive a bit of margin improvement. What’s really going to help us are the incrementals, as you see these big subsea awards converting to revenue, as we see the, let’s say, TCO getting back to that more average quarter that they’ve had over the last couple of years, which we fully expect. The two places we’ve talked about that are, one is improving, slowly building off that low base from last year is Mexico. That’s a very good market for us. We generate great margins with some differentiated technology.

Saudi being the last piece of that, where we’ve seen some nice growth there in Q2, but expect that to be a market that has a lot of running room for us as well at high incremental margins. Those are the pieces we’re looking at. I think there’s some more trimming we can do around the edges on the cost side to try and continue to be more efficient. Really from here, it’s getting some resolution on what’s going on in the Middle East and then driving incrementals on a lot of this new work we have coming through the pipeline.

Keith Beckmann, Analyst, Pickering Energy Partners: Awesome. That’s really helpful. I will turn it back. Congrats, guys.

Kendal Reed, Chief Financial Officer, Innovex: Thanks, Keith.

Operator: Your next question comes from the line of Scott Gruber with Citigroup. Scott, your line is now open. Please go ahead.

Scott Gruber, Analyst, Citigroup: Yes, good morning.

Kendal Reed, Chief Financial Officer, Innovex: Morning, Scott.

Scott Gruber, Analyst, Citigroup: Morning. With your TCO acquisition, obviously, you continue to execute on your M&A strategy. I’m curious, you guys kind of do the look-back analysis, and measure the kind of pace of growth within the base business. I know you’ve been adding pieces over time. Can you provide some more color on how you see that base kind of growing year-on-year relative to your key end markets, just to kind of peel back the onion a bit for us?

Kendal Reed, Chief Financial Officer, Innovex: Yeah. I guess maybe give a little bit more general answer rather than just kind of focusing on TCO. Yeah, I think if you were to pro forma in all the various acquisitions that we’ve done and look at how we’re thinking about, let’s say, first three quarters of this year versus first three quarters of last year. I think we’re up slightly year-over-year, in the face of the market broadly being down a bit. We’ve seen, obviously, U.S. land activity just starting to turn around a bit in Q2. I think, if we look at the broader world picture, activity’s been slowing down over the last couple of years, and our business to be kind of slightly up year-over-year over that time period gives us some good confidence.

We’re continuing to grow share across the board, not just filling in with acquisitions, if that kind of hits on your question.

Adam Anderson, Chief Executive Officer, Innovex: Yeah, I would just add to that.

Adam Anderson, Chief Executive Officer, Innovex: It’s a good question because we ask ourselves the same thing. How do we measure our organic improvement? We’ve had a strong track record over the last decade of growing market share on the back of our approach to the market, as we characterize it, this no barriers culture of really trying to lean into the understanding what our customers’ problems, issues are, whether that’s technical or commercial, and finding a way to be a little bit more nimble and better than the competitors at solving those problems has led us to pretty consistently over the last decade, growing pretty meaningful market share to the point where we’re number 1, 2, or 3 in just about everything we do in North America.

In spots internationally, the same kind of ranking, and then looking at growing that to being the top player in what we do and everything internationally over time as well.

Scott Gruber, Analyst, Citigroup: That’s helpful. Helpful. There’s a couple mentions of Mexico. Obviously, you guys saw your first wellhead delivery there and some broader pickup in activity. Just maybe some more color for us on what you’re seeing out of that country as it kind of comes out of the doldrums and you make some progress, with additional product sales into the country and maybe some color just on the kind of broader LatAm market as well.

Adam Anderson, Chief Executive Officer, Innovex: Yeah. Mexico has been a really good market both for legacy Innovex as well as Dril-Quip prior to the combination. Mostly because they drill some very technically demanding wells, in some ways, the most demanding wells in the world in Mexico in terms of depth and pressure and temperature. In many of those areas, there’s some technologies, liner hangers, some float equipment technology that is really, we have the best fit for purpose technology for that market. We’ve got really strong market share and can create value for ourselves in what can be a challenging market in some ways. Similarly, on the wellhead side, we’ve got a really nice portfolio of technology that came to us through the Dril-Quip combination, and a really strong team in Mexico to help pull that in.

It’s a little bit less of a higher barrier to entry market than, say, the U.S. land market. That’s why we’re kind of focusing on that, starting to see some success and have a couple other things we’re working on that are pretty exciting. Yeah, I think Mexico was a big headwind for us last year. Starting to get better this year, and we’ll see where it goes from here. I think in terms of our technology and commercial acumen in that market, that’s something that’s really a positive for us.

Scott Gruber, Analyst, Citigroup: That’s great. I appreciate the color. I’ll turn it back. Thank you.

Kendal Reed, Chief Financial Officer, Innovex: Thanks.

Operator: The next question comes from the line of Rahul Kapar with Jefferies. Rahul, your line is now open. Please go ahead.

Rahul Kapar, Analyst, Jefferies: Hey, good morning, guys. Thanks for taking my question. I just want to touch a little bit on the North American land market, just your view on how do you see that progressing, considering the conflict has resumed, how are the conversations going with the customers, and just overall your positioning in the market, like for the second half and going into 2027?

Adam Anderson, Chief Executive Officer, Innovex: Fair. Good question. We’ve got a really strong position in US land, again, across most of the things that we do. We have seen, much like the rest of the market participants, a pickup in activity. A couple of the majors have, or majors, a couple of the larger independent majors have announced some rig additions. What’s less obvious to the public markets probably is a lot of these smaller one, two-rig operators have added a rig or something like this. We’re seeing a pretty strong growth that’s, as Kendal said, is baked into our Q3 forecast in US land. We’ll see where it goes from there. Obviously, our customers in North America are very efficient, very responsive to what the market signals are telling them.

We’re expecting strength in Q3 and Q4, it’s a little bit hard to predict out

Kendal Reed, Chief Financial Officer, Innovex: Farther than that in that market.

Rahul Kapar, Analyst, Jefferies: All right, great. Maybe the next one, I just want to touch a little bit more on the third quarter guide. I think that’s great color on the contribution from TCO. Just curious, like, the factors that could basically help you, I don’t know, maybe accomplish the high end of the guide. I understand that the midpoint is around a decent uplift in the margin quarter-over-quarter. What factors could drive you beating the third quarter, being at the high end of the guide as well? Any color on that front?

Kendal Reed, Chief Financial Officer, Innovex: I think from a revenue perspective, certainly, first quarter out of the gate, we want to be conservative with what we’re factoring in from TCO. I think from conversations with the team, there are a lot of good opportunities there. I think the second half of the year is going to be strong, so there’s just a question of timing of what gets delivered in Q3 versus Q4. That’s certainly one factor. Then from a margin perspective, the other thing I would highlight is just this conflict going on in the Middle East. That continues to be a drag on margins for us.

If you look at just the bottom line, if that were to somehow get resolved here tomorrow, that would be a nice boost to our margins in the region from a logistics cost perspective are probably the two things I would point to from a Q3 standpoint.

Rahul Kapar, Analyst, Jefferies: Awesome. If I can just ask one more on TCO overall. Obviously, you’ve been executing on your M&A strategy. You got the TCO completed. Obviously, you have a track record of cross-selling whenever we do an M&A. Can you just take us to the near term or the low-hanging cross-selling opportunities from this acquisition, where you can expand the product line, any color on that front from the TCO, like how you could basically accomplish-

Kendal Reed, Chief Financial Officer, Innovex: Yeah

Rahul Kapar, Analyst, Jefferies: commercial synergies on this?

Kendal Reed, Chief Financial Officer, Innovex: Yeah, we can hit on that real quick. There’s a lot of opportunities, especially with TCO, for us to cross-sell that across our platform. One prime example of that, I would argue, is in Brazil, where that’s a market TCO is already looking to enter. It never really done anything meaningful in historically, but there’s a really nice technology fit with some of the TCO emerging products that we think make a lot of sense for the Brazil market, and it happens to be sold to the exact same folks and used in the exact same well cycle as our subsea wellhead business, where we’re the number 1 provider of subsea wellheads into Brazil. I think that’s a place where we’ll have really great opportunity to partner together with the team there and see some nice growth.

Rahul Kapar, Analyst, Jefferies: All right. Great. Thank you. Good quarter.

Operator: Your next question comes from the line of Eddie Kim with Barclays. Eddie, your line is now open. Please go ahead.

Eddie Kim, Analyst, Barclays: Hi, good morning. Just wanted to touch on Saudi Arabia. You mentioned you grew share, in the expandable liner hangers business. Fair to say you’ve seen sort of very little disruption in that Saudi business despite everything that’s going on? Separately, you mentioned growth in unconventional applications in Saudi. How involved are you currently in Jafurah? Do you see that as a growing opportunity for you guys?

Kendal Reed, Chief Financial Officer, Innovex: Yeah, we had a nice uptick in business in Saudi. That’s an area that we talk about regularly, that we’ve got a really strong market position in Saudi, a great team there. Have signed our first contract direct with end user in Saudi and have a few other things coming down that pipeline. We’re really proud of the position we’ve built there. Yeah, I think two technologies to highlight there are that expandable liner that’s run a lot in the gas, more the legacy deep gas, in Saudi where we’re building really nice market share with that expandable liner hanger. And then in Jubail specifically, we do a couple of different things around well construction or cementing tool products, centralizers, some float equipment, some intermediate stage tools.

We have qualified now the TrenchFoot technology that came to us through the Citadel acquisition and think that there’s a lot of potential for that. I would say today, we’re still more levered to the legacy oil land market for Saudi, but we are definitely growing in the gas and the unconventional space, and think that can be a big driver of growth over the next couple of years for us.

Eddie Kim, Analyst, Barclays: Got it. That’s very helpful color. Thank you. My follow-up is on the NAM land region. Your second quarter revenue declined 4% sequentially. You mentioned that a lot of that was due to seasonally lower activity in Canada. Could you just remind us actually about the rough split in revenue between the Lower 48 and Canada? Is it sort of 60/40, 70/30? Any sense there would be great.

Kendal Reed, Chief Financial Officer, Innovex: Yeah. Hey, Eddie. Canada represents roughly 8% of our overall business and probably something like 15% of our North America Land business. Yeah, it’s the minority for sure, but they have some pretty hefty seasonality there, so that definitely weighs on Q2 each year in NAM land.

Eddie Kim, Analyst, Barclays: Got it. The U.S. Land portion of that, so Lower 48, did you see growth in that region in second quarter or was that also flat or a slight decline as well?

Kendal Reed, Chief Financial Officer, Innovex: Yeah, we were more flat in Q2 in U.S. Land. I think from what we’re seeing now, we’re expecting some nice growth in Q3, I think just based on timing of rigs coming on and when that translates to revenue for us. We did not see a lot of Q2 revenue growth, we’re expecting to see that pick up in the back half of the year.

Eddie Kim, Analyst, Barclays: Got it. Great. Thank you. I’ll turn it back.

Operator: Your next question comes from the line of Blake McLean with Daniel Energy Partners. Blake, your line is now open. Please go ahead.

Blake McLean, Analyst, Daniel Energy Partners: Hey, morning, guys.

Adam Anderson, Chief Executive Officer, Innovex: Morning.

Blake McLean, Analyst, Daniel Energy Partners: Yeah. Just one follow-up on the TCO. A lot of good color already here, I don’t want to beat a dead horse. On the TCO, you guys call out Norway and the UAE strengthening positions there. Can you talk a little bit about those markets, specifically the opportunity set and what this does for you guys there?

Adam Anderson, Chief Executive Officer, Innovex: Yeah. No, for sure. I think it’s a good question. Norway is a very attractive market for the things that we do. I think it’s one of the markets where we are definitely under-penetrated relative to where we want to be and where we should be over time. We’ve taken some steps with our team there, with our technology over the last couple of years, which is just starting to bear a little bit of fruit. Adding the TCO team, their just inherent knowledge, capability in Norway, I think is really going to help accelerate everything that we can do in the downhole tool and technology space. I think that’s really important, and we’re looking forward to what comes out of that. That is definitely a market that takes some time to identify the right technologies, get it qualified through the appropriate channels, et cetera.

It’ll take some time before you start to see that flow through to results. I think long-term, great market, strong barriers to entry, and a place you can really create value over time. In the UAE, we participate a little different than our position in Saudi. We do really well with certain niche technologies. We help with some of the most complicated wells that they drill, and those island wells that they drill, and some other areas. Similarly, TCO adds some technologies, kind of in a similar way, and some niche technologies that really help them be more efficient in their drilling and completion operations.

We see some potential to pull that technology into a couple areas, again, Saudi in particular, where I think we can help TCO be a lot more successful in Saudi as an area that they, again, have not focused on quite as much as UAE. Similarly, I think their position in UAE, combination with some of the niche technologies that we do in the Emirates is going to help us strengthen that position over time.

Blake McLean, Analyst, Daniel Energy Partners: Okay. Good color. Thank you. Just more broadly on the M&A front, you guys have got a fairly clear strategy that’s been well executed here. Three noteworthy acquisitions over the last year. How do you guys think about the integration bandwidth and the playbook sort of internally? I know there’s a really robust opportunity set, but how do you think about the organizational capacity to take on incremental deals as you think about the process moving forward?

Kendal Reed, Chief Financial Officer, Innovex: Yeah. No, it’s a really good question. I’ll brag on our team for a minute. We have a really great group of folks that we’ve done this a lot over the last 10 plus years, building Innovex, and are really at a place now where we have great confidence in the team of whatever acquisition comes through, we’re going to be able to integrate it, pull the systems together, get the organization all feeling like one team and pointed in the right direction. We’ve just been very pleased with how our team internally has come together around that integration skill set. I think the other thing that I would point out is we’re really getting to the end.

It’s been kind of a two-year journey, I would say, on the Dril-Quip integration, we are right at the end of that process where we’ve got the facility consolidation done. We have one more ERP conversion to do later this year, we’ll really be through that whole process. We have a lot of bandwidth freeing up as we look at new opportunities now to be able to take on as many or more as we’ve done over the last year or two.

Blake McLean, Analyst, Daniel Energy Partners: Awesome. Thank you very much for the time this morning.

Adam Anderson, Chief Executive Officer, Innovex: Thanks, Blake. Have a good one.

Operator: We have reached the end of the Q&A session. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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