What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 100 added, 95 removed, 220 unchanged (47% of the section changed)

16 unchanged sentences

Our capital products are directed at drilling rig equipment for constructing new and upgrading existing rigs, subsea construction and development projects, pressure pumping equipment, the placement of production equipment on new producing wells, downstream capital projects and capital equipment for renewable energy projects.

For the six months ended June 30, 2023, approximately 65% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services.

For the nine months ended September 30, 2023, approximately 65% of our revenue was derived from consumable products and activity-based equipment, while the balance was primarily derived from capital products with a small amount from rental and other services.

A summary of the products and services offered by each segment is as follows:

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Utilization is a function of equipment capacity and durability in demanding environments.

Recent inflationary pressures, rising interest rates and volatility in the banking sector have created a heightened concern of a global recession.

Oil and natural gas prices softened in the first half 2023 in part as a result of such recessionary fears.

Recent inflationary pressures and rising interest rates have created a heightened concern of a global recession.

Oil and natural gas prices softened in the first half of 2023 as a result of such global recessionary fears, but rebounded during the third quarter as supply tightened from further OPEC+ production cuts.

The recent conflict in the Middle East could lead to a disruption to world energy markets and international supply chains.

Despite these near-term macroeconomic challenges, we expect that the world's long-term energy demand will continue to rise and may outpace global supply as OPEC+ remains committed to maintaining stable oil prices.

We expect that hydrocarbons will continue to play a vital role in meeting the world's energy needs while renewable energy sources continue to develop.

We expect that hydrocarbons will continue to play a vital role in meeting the world's long-term energy needs while renewable energy sources become increasingly prominent.

The price of oil has varied dramatically over the last several years.

The spot prices for West Texas Intermediate (“WTI”) and United Kingdom Brent crude oil (“Brent”) fell from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020.

Since that time, oil prices rebounded to highs above $120.00 per barrel in March 2022 but have softened in the second quarter 2023 to an average of $73.54 and $77.99, for WTI and Brent, respectively.

In addition, natural gas prices have decreased by 71.2% comparing the second quarter 2023 to the second quarter 2022.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which has increased to 1,796 rigs as of the end of the second quarter 2023 from a low of 1,030 rigs in the third quarter 2020.

The spot prices for West Texas Intermediate (“WTI”) and United Kingdom Brent (“Brent”) crude oil fell from $61.14 and $67.77 per barrel, respectively, as of December 31, 2019 to lows below $15.00 per barrel in April 2020.

Since that time, oil prices rebounded to highs above $120.00 per barrel in March 2022 but have softened to an average of $82.25 and $86.65, for WTI and Brent, respectively, in the third quarter 2023.

In addition, natural gas prices have decreased by 67.7% comparing the third quarter 2023 to the third quarter 2022.

Our revenues, over the long-term, are highly correlated to the global drilling rig count, which averaged 1,788 rigs during the third quarter 2023 from an average of 1,030 rigs in the third quarter 2020.

The average U.S.

rig count for the second quarter 2023 was 5.4% lower and 0.8% higher compared to the first quarter 2023 and second quarter 2022, respectively.

The international rig count for the second quarter 2023 was 4.9% higher and 17.6% higher compared to the first quarter 2023 and second quarter 2022, respectively.

rig count for the third quarter 2023 was 9.7% lower and 14.7% lower compared to the second quarter 2023 and third quarter 2022, respectively.

The international rig count for the third quarter 2023 was 0.9% lower and 11.0% higher compared to the second quarter 2023 and third quarter 2022, respectively.

Global drilling and completions activity remains below pre-pandemic levels.

However, international markets are expected to grow throughout 2023 and outpace the U.S.

In the U.S., publicly owned exploration and production companies are expected to continue to exercise disciplined capital spending while privately owned exploration and production companies fluctuate their activity in response to changes in oil and natural gas prices.

The table below shows average crude oil and natural gas prices for WTI, Brent, and Henry Hub natural gas:

Markets outside North America are expected to grow and outpace the U.S.

In the U.S., publicly owned exploration and production companies are expected to continue to exercise disciplined capital spending.

Privately owned exploration and production companies tend to fluctuate their activity more readily in response to changes in oil and natural gas prices.

The table below shows average crude oil and natural gas prices for WTI, Brent, and Henry Hub:

Three Months Ended

June 30, March 31, June 30,

September 30, June 30, September 30,

2023 2023 2022

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Three Months Ended

June 30, March 31, June 30,

September 30, June 30, September 30,

2023 2023 2022

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The table below shows the amount of total inbound orders by segment:

(in millions of dollars) Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2023 2023 2022 2023 2022

Three Months Ended Nine Months Ended

September 30, June 30, September 30, September 30, September 30,

(in millions of dollars) 2023 2023 2022 2023 2022

Drilling & Downhole $ 95.0 $ 82.1 $ 73.3 $ 258.1 $ 218.6

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Results of operations

Three months ended June 30, 2023 compared with three months ended June 30, 2022

Three Months Ended June 30, Change

Three months ended September 30, 2023 compared with three months ended September 30, 2022

Three Months Ended September 30, Change

(in thousands of dollars, except per share information) 2023 2022 $ %

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Operating margin % 3.1 % 4.2 %

Loss (gain) on disposal of assets and other 542 (908) 1,450 *

Gain on disposal of assets and other (145) (52) (93) *

Operating income 5,671 7,702 (2,031) (26.4) %

Interest expense 4,504 8,143 (3,639) (44.7) %

Foreign exchange losses (gains) and other, net 6,436 (12,838) 19,274 *

Total other (income) expense, net 11,125 (4,996) 16,121 322.7 %

Income (loss) before income taxes (4,718) 10,980 (15,698) (143.0) %

Foreign exchange gains and other, net (8,279) (18,288) 10,009 *

Total other income (3,775) (10,145) 6,370 62.8 %

Income before income taxes 9,446 17,847 (8,401) (47.1) %

Income tax expense 1,477 1,370 107 7.8 %

Net income (loss) $ (6,579) $ 9,264 $ (15,843) (171.0) %

Net income $ 7,969 $ 16,477 $ (8,508) (51.6) %

Weighted average shares outstanding

1 unchanged sentence

Diluted 10,393 10,552

Earnings (loss) per share

Earnings per share

Basic $ 0.78 $ 2.85

1 unchanged sentence

* not meaningful

Our revenue for the three months ended June 30, 2023 was $185.4 million, an increase of $13.2 million, or 7.7%, compared to the three months ended June 30, 2022.

For the three months ended June 30, 2023, our Drilling & Downhole, Completions, and Production segments comprised 43.5%, 38.7%, and 17.8% of our total revenue, respectively, which compared to 44.4%, 38.3%, and 17.3% of our total revenue, respectively, for the three months ended June 30, 2022.

The overall increase in revenue is primarily related to increases in market activity and global rig count in the second quarter 2023 compared to the second quarter 2022.

Our revenue for the three months ended September 30, 2023 was $179.3 million, a decrease of $2.6 million, or 1.4%, compared to the three months ended September 30, 2022.

For the three months ended September 30, 2023, our Drilling & Downhole, Completions, and Production segments comprised 45.3%, 34.1%, and 20.6% of our total revenue, respectively, which compared to 41.6%, 39.6%, and 18.8% of our total revenue, respectively, for the three months ended September 30, 2022.

The overall decrease in revenue is primarily related to lower U.S.

hydraulic fracturing activity in the third quarter 2023 compared to the third quarter 2022.

The changes in revenue by operating segment consisted of the following:

Drilling & Downhole segment — Revenue was $80.7 million for the three months ended June 30, 2023, an increase of $4.2 million, or 5.5%, compared to the three months ended June 30, 2022.

This increase was led by a $11.7 million, or 35.0%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of both consumable products and capital equipment driven by increased market activity and global rig count.

Revenue for our Downhole Technologies product line increased by $0.7 million, or 3.0%, primarily due to higher sales volumes of artificial lift products in the second quarter 2023 compared to the second quarter 2022.

Revenue for our Subsea Technologies product line decreased by $8.2 million, or 38.0%, from lower volumes of ROVs and Launch and Recovery Systems (“LARS”) partially offset by an increase in after-market part sales and service.

Completions segment — Revenue was $72.1 million for the three months ended June 30, 2023, an increase of $6.0 million, or 9.1%, compared to the three months ended June 30, 2022.

This significant improvement includes a revenue increase of $9.1 million, or 24.3%, for our Stimulation & Intervention product line primarily due to higher demand of radiators, wireline cable and high-pressure hoses.

Revenue for our Coiled Tubing product line decreased by $3.0 million, or 10.6% in the second quarter 2023 compared to the second quarter 2022 due to lower sales volumes.

Production segment — Revenue was $33.0 million for the three months ended June 30, 2023, an increase of $3.2 million, or 10.6%, compared to the three months ended June 30, 2022.

The increase was driven by a $1.2 million, or 7.6%, primarily due to increased demand for our processing equipment and technologies within our Production Equipment product line, and a $1.9 million, or 14.3%, increase in sales of our valve products within our Valve Solutions product line.

Drilling & Downhole segment — Revenue was $81.2 million for the three months ended September 30, 2023, an increase of $5.5 million, or 7.2%, compared to the three months ended September 30, 2022.

This increase was led by a $4.8 million, or 12.6%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of capital equipment, partially offset by lower sales volumes of consumable products.

Revenue for our Downhole Technologies product line increased by $1.6 million, or 7.1%, primarily due to higher sales volumes of artificial lift products in the third quarter 2023 compared to the third quarter 2022.

Revenue for our Subsea Technologies product line decreased by $0.9 million, or 5.8%, from lower volumes of cable management systems partially offset by an increase from higher project revenue recognized from ROVs and after-market part sales.

Completions segment — Revenue was $62.5 million for the three months ended September 30, 2023, a decrease of $9.8 million, or 13.5%, compared to the three months ended September 30, 2022.

This change includes a revenue decrease of $11.1 million, or 25.4%, for our Stimulation & Intervention product line primarily due to lower U.S.

hydraulic fracturing activity levels and delays in capital equipment spending by customers during the third quarter 2023.

This decline was partially offset by a $1.3 million increase in revenue for our Coiled Tubing product line due to higher international sales volumes.

Production segment — Revenue was $36.9 million for the three months ended September 30, 2023, an increase of $2.6 million, or 7.7%, compared to the three months ended September 30, 2022.

The increase was driven by a $3.2 million, or 17.6%, increase in sales for our Production Equipment product line primarily due to an increase in revenues recognized from our processing oil treatment equipment, partially offset by a $0.6 million, or 3.8%, decrease in sales of our valve products within our Valve Solutions product line.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the three months ended June 30, 2023 was $6.9 million, a $1.9 million improvement compared to an income of $5.1 million for the three months ended June 30, 2022.

For the three months ended June 30, 2023, segment operating margin percentage was 3.7% compared to 2.9% for the three months ended June 30, 2022.

Segment operating income for the three months ended September 30, 2023 was $5.5 million, a $2.1 million decrease compared to an income of $7.7 million for the three months ended September 30, 2022.

For the three months ended September 30, 2023, segment operating margin percentage was 3.1% compared to 4.2% for the three months ended September 30, 2022.

Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period.

The change in operating income (loss) for each segment is explained as follows:

Drilling & Downhole segment — Segment operating income was $8.3 million, or 10.3%, for the three months ended June 30, 2023 compared to operating income of $8.5 million, or 11.1%, for the three months ended June 30, 2022.

The $0.2 million decrease in segment operating results is primarily attributable to lower volume and profitability of our Subsea product line projects, partially offset by higher gross profit from our Drilling Technologies product line revenue growth.

Completions segment — Segment operating income was $4.2 million, or 5.8%, for the three months ended June 30, 2023 compared to segment operating income of $3.6 million, or 5.4%, for the three months ended June 30, 2022.

The $0.6 million increase in segment operating results was primarily due to higher gross profit from the 9.1% increase in revenues, partially offset by unfavorable product mix in our Coiled Tubing product line.

Production segment — Segment operating income was $1.1 million, or 3.4%, for the three months ended June 30, 2023 compared to a loss of $0.2 million, or 0.5%, for the three months ended June 30, 2022.

The $1.3 million increase in segment operating results was driven by the 10.6% increase in revenues and favorable price recovery following materials cost inflation experienced in 2022.

Corporate — Selling, general and administrative expenses for Corporate were $6.6 million for the three months ended June 30, 2023 compared to $6.9 million for the three months ended June 30, 2022.

Drilling & Downhole segment — Segment operating income was $8.4 million, or 10.4%, for the three months ended September 30, 2023 compared to operating income of $9.5 million, or 12.5%, for the three months ended September 30, 2022.

The $1.0 million decrease in segment operating results is primarily attributable to lower volume and profitability of our Subsea product line projects, partially offset by higher gross profit from our Downhole Technologies product line.

Completions segment — Segment operating income was $2.1 million, or 3.4%, for the three months ended September 30, 2023 compared to segment operating income of $5.9 million, or 8.2%, for the three months ended September 30, 2022.

The $3.8 million decrease in segment operating results was primarily due to lower sales volumes of our well stimulation products.

Production segment — Segment operating income was $1.8 million, or 4.9%, for the three months ended September 30, 2023 compared to an income of $0.7 million, or 1.9%, for the three months ended September 30, 2022.

The $1.1 million increase in segment operating results was driven by an increase in project revenue recognized from our process oil treatment equipment driving higher gross profit.

Corporate — Selling, general and administrative expenses for Corporate were $6.9 million for the three months ended September 30, 2023 compared to $8.4 million for the three months ended September 30, 2022.

This decrease was primarily related to lower variable compensation costs.

Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel;

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Other income and expense includes interest expense and foreign exchange gains (losses) and other.

We incurred $4.7 million of interest expense during the three months ended June 30, 2023, a decrease of $3.2 million compared to the three months ended June 30, 2022, due to the decline in the balance of 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023.

We incurred $4.5 million of interest expense during the three months ended September 30, 2023, a decrease of $3.6 million compared to the three months ended September 30, 2022, due to the decline in the balance of 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023.

See Note 6 Debt for further details related to the 2025 Notes and Credit Facility.

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dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S.

We recorded tax expense of $1.9 million and tax expense of $1.7 million for the three months ended June 30, 2023 and 2022, respectively.

The estimated annual effective tax rates for the three months ended June 30, 2023 and 2022 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

We recorded tax expense of $1.5 million and $1.4 million for the three months ended September 30, 2023 and 2022, respectively.

The estimated annual effective tax rates for the three months ended September 30, 2023 and 2022 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

Six months ended June 30, 2023 compared with six months ended June 30, 2022

Six Months Ended June 30, Change

Nine months ended September 30, 2023 compared with nine months ended September 30, 2022

Nine Months Ended September 30, Change

(in thousands of dollars, except per share information) 2023 2022 $ %

19 unchanged sentences

Total other (income) expense, net 14,871 (13,503) 28,374 210.1 %

Income (loss) before income taxes (5,388) 3,634 (9,022) (248.3) %

Income before income taxes 4,058 21,481 (17,423) (81.1) %

Income tax expense 6,154 4,939 1,215 24.6 %

3 unchanged sentences

Diluted 10,208 10,489

Earnings (loss) per share

Earnings per share

Basic $ (0.21) $ 2.88

1 unchanged sentence

* not meaningful

Our revenue for the six months ended June 30, 2023 was $374.4 million, an increase of $47.0 million, or 14.4%, compared to the six months ended June 30, 2022.

For the six months ended June 30, 2023, our Drilling & Downhole, Completions, and Production segments comprised 42.1%, 38.7%, and 19.2% of our total revenue, respectively, which compared to 45.1%, 36.2%, and 18.7% of our total revenue, respectively, for the six months ended June 30, 2022.

The overall increase in revenue is primarily related to increases in market activity and global rig count in the first half of 2023 compared to the first half of 2022.

Our revenue for the nine months ended September 30, 2023 was $553.7 million, an increase of $44.4 million, or 8.7%, compared to the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, our Drilling & Downhole, Completions, and Production segments comprised 43.1%, 37.2%, and 19.7% of our total revenue, respectively, which compared to 43.9%, 37.3%, and 18.8% of our total revenue, respectively, for the nine months ended September 30, 2022.

The overall increase in revenue is primarily related to increases in market activity and global rig count in 2023 compared to 2022.

The changes in revenue by operating segment consisted of the following:

Drilling & Downhole segment — Revenue was $157.5 million for the six months ended June 30, 2023, an increase of $9.7 million, or 6.6%, compared to the six months ended June 30, 2022.

This increase was led by a $23.3 million, or 37.1%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of both consumable products and capital equipment driven by increased market activity and global rig count.

Revenue for our Downhole Technologies product line increased by $4.3 million, or 10.5%, primarily due to higher sales volumes of artificial lift products and casing equipment in the first half of 2023 compared to the first half of 2022.

Revenue for our Subsea Technologies product line decreased by $17.8 million, or 40.6%, from lower volumes of ROVs and LARS, partially offset by an increase in after-market part sales and service.

Completions segment — Revenue was $145.8 million for the six months ended June 30, 2023, an increase of $27.1 million, or 22.9%, compared to the six months ended June 30, 2022.

This significant improvement includes a revenue increase of $26.2 million, or 38.9%, for our Stimulation & Intervention product line primarily due to higher demand of radiators, wireline cable, power ends and high-pressure hoses.

Revenue for our Coiled Tubing product line remained relatively flat compared to the first half of 2022.

Production segment — Revenue was $72.0 million for the six months ended June 30, 2023, an increase of $10.7 million, or 17.4%, compared to the six months ended June 30, 2022.

The increase was driven by a $6.0 million, or 18.9%, increase in demand for our processing equipment and technologies within our Production Equipment product line, and a $4.7 million, or 15.7%, increase in sales of our valve products within our Valve Solutions product line.

Drilling & Downhole segment — Revenue was $238.7 million for the nine months ended September 30, 2023, an increase of $15.2 million, or 6.8%, compared to the nine months ended September 30, 2022.

This increase was led by a $28.1 million, or 27.8%, increase in revenue for our Drilling Technologies product line due to higher sales volumes of both consumable products and capital equipment driven by increased market activity.

Revenue for our Downhole Technologies product line increased by $5.9 million, or 9.3%, primarily due to higher sales volumes of artificial lift products in 2023 compared to 2022.

Revenue for our Subsea Technologies product line decreased by $18.7 million, or 31.4%, from lower project revenue recognized from ROVs and cable management systems, partially offset by an increase in part sales.

Completions segment — Revenue was $208.2 million for the nine months ended September 30, 2023, an increase of $17.4 million, or 9.1%, compared to the nine months ended September 30, 2022.

This change includes a revenue increase of $15.1 million, or 13.6%, for our Stimulation & Intervention product line primarily due to higher demand of radiators and wireline cable, partially offset by lower sales volumes in power ends and high-pressure hoses.

Production segment — Revenue was $108.9 million for the nine months ended September 30, 2023, an increase of $13.3 million, or 13.9%, compared to the nine months ended September 30, 2022.

The increase was driven by a $9.2 million, or 18.4%, increase in project revenue recognized from our process oil treatment equipment within our Production Equipment product line, and a $4.1 million, or 9.0%, increase in sales of our valve products.

Segment operating income (loss) and segment operating margin percentage

Segment operating income for the six months ended June 30, 2023 was $13.5 million, a $14.2 million increase compared to a loss of $0.6 million for the six months ended June 30, 2022.

For the six months ended June 30, 2023, segment operating margin percentage was 3.6% compared to (0.2)% for the six months ended June 30, 2022.

Segment operating income for the nine months ended September 30, 2023 was $19.1 million, a $12.0 million increase compared to an income of $7.0 million for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, segment operating margin percentage was 3.4% compared to 1.4% for the nine months ended September 30, 2022.

Segment operating margin percentage is calculated by dividing segment operating income (loss) by revenue for the period.

The change in operating income (loss) for each segment is explained as follows:

Drilling & Downhole segment — Segment operating income was $16.7 million, or 10.6%, for the six months ended June 30, 2023 compared to operating income of $14.5 million, or 9.8%, for the six months ended June 30, 2022.

Drilling & Downhole segment — Segment operating income was $25.2 million, or 10.5%, for the nine months ended September 30, 2023 compared to operating income of $24.0 million, or 10.7%, for the nine months ended September 30, 2022.

The $1.2 million increase in segment operating results is primarily attributable to higher gross profit from the 6.8% increase in segment revenues and favorable product mix.

These gains were partially offset by higher freight costs.

Completions segment — Segment operating income was $7.7 million, or 5.3%, for the six months ended June 30, 2023 compared to segment operating income of $2.9 million, or 2.4%, for the six months ended June 30, 2022.

The $4.9 million increase in segment operating results was primarily due to higher gross profit from the 22.9% increase in revenues and favorable product mix.

These gains were partially offset by higher freight costs.

Production segment — Segment operating income was $2.7 million, or 3.8%, for the six months ended June 30, 2023 compared to a loss of $1.9 million, or (3.1)%, for the six months ended June 30, 2022.

The $4.6 million increase in segment operating results was driven by the 17.4% increase in revenues and improved cost management.

Corporate — Selling, general and administrative expenses for Corporate were $13.7 million for the six months ended June 30, 2023 compared to $16.1 million for the six months ended June 30, 2022.

These gains were partially offset by lower project revenue in Subsea Technologies product line.

Completions segment — Segment operating income was $9.9 million, or 4.8%, for the nine months ended September 30, 2023 compared to segment operating income of $8.8 million, or 4.6%, for the nine months ended September 30, 2022.

The $1.1 million increase in segment operating results was primarily due to higher gross profit from the 9.1% increase in revenues and favorable product mix, partially offset by higher freight costs.

Production segment — Segment operating income was $4.5 million, or 4.2%, for the nine months ended September 30, 2023 compared to a loss of $1.2 million, or 1.3%, for the nine months ended September 30, 2022.

The $5.8 million increase in segment operating results was driven by the 13.9% increase in revenues and increased operating leverage.

Corporate — Selling, general and administrative expenses for Corporate were $20.5 million for the nine months ended September 30, 2023 compared to $24.5 million for the nine months ended September 30, 2022.

This decrease was primarily related to a charge recognized in the nine months ended September 30, 2022 related to a modification of long-term incentive awards associated with executive leadership transition and lower variable compensation costs.

Corporate costs include, among other items, payroll related costs for management, administration, finance, legal, and human resources personnel;

5 unchanged sentences

Other income and expense includes interest expense and foreign exchange gains (losses) and other.

We incurred $9.2 million of interest expense during the six months ended June 30, 2023, a decrease of $6.2 million compared to the six months ended June 30, 2022, due to the decline in the balance of our 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023.

We incurred $13.7 million of interest expense during the nine months ended September 30, 2023, a decrease of $9.9 million compared to the nine months ended September 30, 2022, due to the decline in the balance of our 2025 Notes upon conversion of $122.8 million aggregate principal amount of our 2025 Notes to common stock in January 2023.

See Note 6 Debt for further details related to the 2025 Notes and Credit Facility.

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dollar denominated cash, trade account receivables and net intercompany receivable balances for our entities using a functional currency other than the U.S.

We recorded tax expense of $4.7 million and tax expense of $3.6 million for the six months ended June 30, 2023 and 2022, respectively.

The estimated annual effective tax rates for the six months ended June 30, 2023 and 2022 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

We recorded tax expense of $6.2 million and $4.9 million for the nine months ended September 30, 2023 and 2022, respectively.

The estimated annual effective tax rates for the nine months ended September 30, 2023 and 2022 were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company’s relative mix of earnings and losses by jurisdiction.

5 unchanged sentences

Our future success and growth will be highly dependent on our ability to generate positive operating cash flow and access outside sources of capital.

As of June 30, 2023, we had $134.2 million principal amount of 2025 Notes outstanding and $10.0 million of borrowings outstanding under our revolving Credit Facility.

As of September 30, 2023, we had $134.2 million principal amount of 2025 Notes outstanding and no borrowings outstanding under our revolving Credit Facility.

The 2025 Notes mature in August 2025 and, subject to certain exceptions, the Credit Facility matures in September 2026.

See Note 6 Debt for further details related to the terms for our 2025 Notes and Credit Facility.

As of June 30, 2023, we had cash and cash equivalents of $24.8 million and $145.5 million of availability under the Credit Facility.

As of September 30, 2023, we had cash and cash equivalents of $37.2 million and $154.8 million of availability under the Credit Facility.

We anticipate that our future working capital requirements for our operations will fluctuate directionally with revenues.

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Shares may be repurchased under the program from time to time, in amounts and at prices that the company deems appropriate, subject to market and business conditions, applicable legal requirements and other considerations.

During the first half 2023, we repurchased approximately 139 thousand shares of our common stock for aggregate consideration of approximately $3.5 million with remaining authorization under this program of $2.4 million.

Our cash flows for the six months ended June 30, 2023 and 2022 are presented below (in millions):

Six Months Ended June 30,

During the first nine months of 2023, we repurchased approximately 139 thousand shares of our common stock for aggregate consideration of approximately $3.5 million with remaining authorization under this program of $2.4 million.

Our cash flows for the nine months ended September 30, 2023 and 2022 are presented below (in millions):

Nine Months Ended September 30,

Net cash used in operating activities $ (3.1) $ (32.1)

Net cash used in investing activities (4.2) (2.6)

Net cash provided by financing activities 4.1 32.6

Net cash provided by (used in) financing activities (6.9) 9.2

Effect of exchange rate changes on cash 0.3 (1.6)

1 unchanged sentence

Net cash used in operating activities

Net cash used in operating activities was $29.5 million for the six months ended June 30, 2023 compared to $50.6 million for the six months ended June 30, 2022.

This increase in operating cash flows is primarily attributable to net decrease in cash used for working capital, mainly accounts receivable and cost and estimated profit in excess of billings, which used cash of $43.8 million for the six months ended June 30, 2023 compared to used cash of $75.2 million for the six months ended June 30, 2022.

Net cash used in operating activities was $3.1 million for the nine months ended September 30, 2023 compared to $32.1 million for the nine months ended September 30, 2022.

This improvement in operating cash flow usage is primarily attributable to net decrease in cash used for working capital, mainly accounts receivable, which used cash of $36.8 million for the nine months ended September 30, 2023 compared to used cash of $85.6 million for the nine months ended September 30, 2022.

Net cash used in investing activities

Net cash used in investing activities was $1.7 million for the six months ended June 30, 2023, including $2.8 million of capital expenditures, partially offset by $1.1 million of proceeds from the sale of property and equipment.

Net cash used in investing activities was $1.4 million for the six months ended June 30, 2022, including $3.6 million of capital expenditures, partially offset by $2.6 million of proceeds from the sale of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was $4.1 million for the six months ended June 30, 2023 compared to $32.6 million of cash provided by financing activities for the six months ended June 30, 2022, respectively.

The change in net cash provided by financing activities primarily resulted from $10.0 million of net borrowings on the revolving Credit Facility, offset by $5.4 million of repurchases of common stock under our share repurchase program and long-term incentive awards during the six months ended June 30, 2023 compared to a net $33.6 million of borrowings on the revolving Credit Facility during the six months ended June 30, 2022.

Net cash used in investing activities was $4.2 million for the nine months ended September 30, 2023, including $5.5 million of capital expenditures, partially offset by $1.3 million of proceeds from the sale of property and equipment.

Net cash used in investing activities was $2.6 million for the nine months ended September 30, 2022, including $4.8 million of capital expenditures, partially offset by $2.7 million of proceeds from the sale of property and equipment.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $6.9 million for the nine months ended September 30, 2023 compared to $9.2 million of cash provided by financing activities for the nine months ended September 30, 2022, respectively.

The change in net cash used in financing activities primarily resulted from $6.0 million of repurchases of common stock under our share repurchase program and long-term incentive awards during the nine months ended September 30, 2023 compared to a net $10.7 million of borrowings on the revolving Credit Facility during the nine months ended September 30, 2022.

Supplemental Guarantor Financial Information

17 unchanged sentences

Summarized financial information for the year-to-date interim period and the most recent annual period was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

Summarized Statements of Operations 2023 2022 2023 2022

3 unchanged sentences

Net income (loss) 7,969 16,477 (2,096) 16,542

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Summarized Balance Sheet

5 unchanged sentences

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and procedures during the six months ended June 30, 2023.

There have been no material changes in our critical accounting policies and procedures during the nine months ended September 30, 2023.

For a detailed discussion of our critical accounting policies and estimates, refer to our 2022 Annual Report on Form 10-K.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis