Oil States International ((OIS)) has held its Q2 earnings call. Read on for the main highlights of the call.

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Oil States International’s latest earnings call struck a cautiously upbeat tone, blending solid operational progress with acknowledgment of real near‑term challenges. Management highlighted sequential growth in revenue and adjusted EBITDA, a decade‑high backlog, and strong segment performance, while warning that geopolitical delays, cost inflation, and working‑capital needs could blur the path from earnings to cash.

Sequential Top-Line and EBITDA Growth

Oil States reported Q2 2026 revenue of $157 million and adjusted EBITDA of $19 million, marking sequential increases of 8% and 14% respectively. Management framed this improvement as evidence that the company is benefiting from stronger offshore and international activity, even as North American markets remain mixed.

Backlog at Decade High and Healthy Book-to-Bill

Backlog climbed to $451 million, its highest level in more than ten years, up 5% sequentially and 24% year over year. Quarterly bookings of $114 million produced a book‑to‑bill ratio of 1.2x, and the company reiterated expectations for full‑year book‑to‑bill of at least 1.0x.

Offshore Manufactured Products Margin Momentum

The Offshore Manufactured Products segment delivered $93 million of revenue and $18 million of segment EBITDA, implying a margin of about 19.3%. Management is targeting roughly 20% segment margins near term and sees a pathway to mid‑20s margins as backlog grows and higher‑margin projects move into execution.

Completion & Production Services Outperformance

Completion & Production Services posted $24 million in revenue and $7 million in segment EBITDA, translating to a robust margin of around 27%. Revenue rose 13% and segment EBITDA increased 7% sequentially, underscoring steady demand and strong cost control in this shorter‑cycle business.

Downhole Technologies Recovery Driven by New Products

Downhole Technologies generated $40 million of revenue and $4 million of segment EBITDA, reaching its highest revenue level since Q2 2023. Volumes in perforating and completion products doubled quarter over quarter, supported by adoption of newer offerings such as Flex precision guns and Flex Orbit systems.

Earnings Quality and Capital Structure Actions

Adjusted net income, excluding charges, came in at $8 million or $0.14 per share, reflecting improved earnings quality. The company retired $53 million of convertible senior notes, repurchased $5 million of common stock, and ended Q2 with $20 million of cash and $18 million of debt, while targeting full‑year free cash flow of $35–$40 million plus possible proceeds from asset sales.

Strategic Shift Toward Offshore and International Markets

More than 70% of first‑half 2026 revenue stemmed from offshore and international activity, up from roughly 50% in 2023. Management emphasized that this mix shift positions Oil States to benefit from longer‑cycle deepwater and international investment, potentially smoothing volatility relative to purely U.S. shale exposure.

Geopolitical Volatility and Award Timing Delays

Executives flagged conflicts in the Middle East and related geopolitical uncertainty as key obstacles for near‑term revenue conversion. Connector and production facility orders tied to Middle East customers have been delayed, pushing some revenue that had been expected in 2026 into 2027.

Elevated Raw Material Costs Squeezing Margins

Input costs for shaped charges, including tungsten, explosive powder, and copper, remain high and are restraining margins in the Downhole Technologies segment. Management stressed that disciplined pricing and careful inventory management will be needed to offset these pressures as supply and cost conditions normalize.

Working Capital Investment Dragging Current Cash Flow

Operating activities consumed $6 million of cash in Q2, with first‑half inventory investment totaling $27 million in long lead‑time and higher‑cost materials. While this has depressed near‑term free cash flow, executives expect the working‑capital build to unwind in the second half of the year and support the company’s free‑cash‑flow targets.

Non-Recurring Charges and Reported Earnings

Reported net income was $6 million, or $0.10 per share, after incorporating several one‑time items. These included charges linked to the extinguishment of convertible notes, facility exit costs, and executive transition expenses, which weighed on GAAP profitability despite the underlying operational improvement.

Backlog Mix and Slower Near-Term Conversion

Approximately 48% of the company’s backlog is tied to multi‑year military product contracts, changing the cadence of revenue recognition. As a result, near‑term 12‑month backlog conversion is expected at around 55%, down from the historical 65–70%, implying more earnings will be realized over several years rather than immediately.

Asset Monetization and Liquidity Considerations

Assets held for sale total $19 million, and management remains focused on converting them to cash to supplement liquidity. With $20 million of cash on hand and relatively low debt, the balance sheet is lean but offers limited flexibility if current macro and cost headwinds last longer than expected.

Forward-Looking Guidance and Outlook

Oil States guided Q3 revenue to a range of $157–$167 million and adjusted EBITDA to $18–$20 million, essentially extending current run‑rate performance. For full‑year 2026, the company reaffirmed revenue of $640–$660 million and adjusted EBITDA of $77–$83 million, alongside expected free cash flow of $35–$40 million and potential extra proceeds from remaining asset sales.

Oil States International’s call painted a picture of a company benefiting from structural offshore and international growth while navigating the usual cyclical and geopolitical bumps. For investors, the key takeaway is that earnings and backlog are moving in the right direction, but the ultimate translation into cash and margin expansion will hinge on easing cost pressures and timely conversion of delayed awards.