OIL STATES INTERNATIONAL, INC 10-Q

ITEM 1. Financial Statements UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Products $ 100,798 $ 102,636 $ 303,706 $ 295,106 Services 73,550 91,653 224,287 278,911 174,348 194,289 527,993 574,017 Costs and expenses: Product costs 79,167 80,188 236,807 231,524 Service costs 57,422 70,239 173,766 211,668 Cost of revenues (exclusive of depreciation and amortization expense presented below) 136,589 150,427 410,573 443,192 Selling, general and administrative expense 22,754 24,241 71,623 71,785 Depreciation and amortization expense 13,635 15,416 42,528 46,209 Impairment of goodwill — — 10,000 — Impairments of intangible assets 10,787 — 10,787 — Impairments of operating lease assets 2,579 — 2,579 — Other operating (income) expense, net ( 955 ) ( 1,985 ) 76 ( 2,503 ) 185,389 188,099 548,166 558,683 Operating income (loss) ( 11,041 ) 6,190 ( 20,173 ) 15,334 Interest expense, net ( 1,824 ) ( 1,928 ) ( 5,986 ) ( 6,378 ) Other income, net 731 186 1,311 672 Income (loss) before income taxes ( 12,134 ) 4,448 ( 24,848 ) 9,628 Income tax provision ( 2,215 ) ( 236 ) ( 1,574 ) ( 2,700 ) Net income (loss) $ ( 14,349 ) $ 4,212 $ ( 26,422 ) $ 6,928 Net income (loss) per share: Basic $ ( 0.23 ) $ 0.07 $ ( 0.42 ) $ 0.11 Diluted ( 0.23 ) 0.07 ( 0.42 ) 0.11 Weighted average number of common shares outstanding: Basic 62,084 62,651 62,357 62,760 Diluted 62,084 63,060 62,357 63,135 The accompanying notes are an integral part of these financial statements. 3 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In Thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income (loss) $ ( 14,349 ) $ 4,212 $ ( 26,422 ) $ 6,928 Other comprehensive income (loss): Currency translation adjustments 9,567 ( 5,749 ) 3,389 1,670 Comprehensive income (loss) $ ( 4,782 ) $ ( 1,537 ) $ ( 23,033 ) $ 8,598 The accompanying notes are an integral part of these financial statements. 4 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Amounts) September 30, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 45,984 $ 47,111 Accounts receivable, net 182,536 203,211 Inventories, net 221,134 202,027 Prepaid expenses and other current assets 29,257 35,648 Total current assets 478,911 487,997 Property, plant, and equipment, net 267,388 280,389 Operating lease assets, net 21,601 21,970 Goodwill, net 70,439 79,867 Other intangible assets, net 129,866 153,010 Other noncurrent assets 25,936 23,253 Total assets $ 994,141 $ 1,046,486 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 634 $ 627 Accounts payable 55,506 67,546 Accrued liabilities 39,978 44,227 Current operating lease liabilities 7,295 6,880 Income taxes payable 2,616 1,233 Deferred revenue 34,742 36,757 Total current liabilities 140,771 157,270 Long-term debt 124,643 135,502 Long-term operating lease liabilities 19,392 18,346 Deferred income taxes 5,291 7,717 Other noncurrent liabilities 19,238 18,106 Total liabilities 309,335 336,941 Stockholders’ equity: Common stock, $ .01 par value, 200,000,000 shares authorized, 78,603,178 shares and 77,218,765 shares issued, respectively 786 772 Additional paid-in capital 1,135,634 1,129,240 Retained earnings 258,496 284,918 Accumulated other comprehensive loss ( 66,595 ) ( 69,984 ) Treasury stock, at cost, 15,492,349 and 13,892,049 shares, respectively ( 643,515 ) ( 635,401 ) Total stockholders’ equity 684,806 709,545 Total liabilities and stockholders’ equity $ 994,141 $ 1,046,486 The accompanying notes are an integral part of these financial statements. 5 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In Thousands) Three Months Ended September 30, 2024 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Balance, June 30, 2024 $ 786 $ 1,133,282 $ 272,845 $ ( 76,162 ) $ ( 640,362 ) $ 690,389 Net loss — — ( 14,349 ) — — ( 14,349 ) Currency translation adjustments (excluding intercompany advances) — — — 6,568 — 6,568 Currency translation adjustments on intercompany advances — — — 2,999 — 2,999 Stock-based compensation expense — 2,352 — — — 2,352 Surrender of stock to settle taxes on stock awards — — — — ( 9 ) ( 9 ) Stock repurchases — — — — ( 3,144 ) ( 3,144 ) Balance, September 30, 2024 $ 786 $ 1,135,634 $ 258,496 $ ( 66,595 ) $ ( 643,515 ) $ 684,806 Nine Months Ended September 30, 2024 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity Balance, December 31, 2023 $ 772 $ 1,129,240 $ 284,918 $ ( 69,984 ) $ ( 635,401 ) $ 709,545 Net loss — — ( 26,422 ) — — ( 26,422 ) Currency translation adjustments (excluding intercompany advances) — — — 5,594 — 5,594 Currency translation adjustments on intercompany advances — — — ( 2,205 ) — ( 2,205 ) Stock-based compensation expense 14 6,394 — — — 6,408 Surrender of stock to settle taxes on stock awards — — — — ( 2,596 ) ( 2,596 ) Stock repurchases — — — — ( 5,518 ) ( 5,518 ) Balance, September 30, 2024 $ 786 $ 1,135,634 $ 258,496 $ ( 66,595 ) $ ( 643,515 ) $ 684,806 The accompanying notes are an integral part of these financial statements. 6 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In Thousands) Three Months Ended September 30, 2023 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Balance, June 30, 2023 $ 772 $ 1,125,647 $ 274,743 $ ( 71,522 ) $ ( 631,535 ) $ 698,105 Net income — — 4,212 — — 4,212 Currency translation adjustments (excluding intercompany advances) — — — ( 4,429 ) — ( 4,429 ) Currency translation adjustments on intercompany advances — — — ( 1,320 ) — ( 1,320 ) Stock-based compensation expense — 1,796 — — — 1,796 Surrender of stock to settle taxes on stock awards — — — — — — Stock repurchases — — — — — — Balance, September 30, 2023 $ 772 $ 1,127,443 $ 278,955 $ ( 77,271 ) $ ( 631,535 ) $ 698,364 Nine Months Ended September 30, 2023 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Balance, December 31, 2022 $ 766 $ 1,122,292 $ 272,027 $ ( 78,941 ) $ ( 626,586 ) $ 689,558 Net income — — 6,928 — — 6,928 Currency translation adjustments (excluding intercompany advances) — — — 1,774 — 1,774 Currency translation adjustments on intercompany advances — — — ( 104 ) — ( 104 ) Stock-based compensation expense 6 5,151 — — — 5,157 Surrender of stock to settle taxes on stock awards — — — — ( 1,948 ) ( 1,948 ) Stock repurchases — — — — ( 3,001 ) ( 3,001 ) Balance, September 30, 2023 $ 772 $ 1,127,443 $ 278,955 $ ( 77,271 ) $ ( 631,535 ) $ 698,364 The accompanying notes are an integral part of these financial statements. 7 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income (loss) $ ( 26,422 ) $ 6,928 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization expense 42,528 46,209 Impairment of goodwill 10,000 — Impairments of operating lease assets 2,579 — Impairments of intangible assets 10,787 — Stock-based compensation expense 6,408 5,157 Amortization of deferred financing costs 1,168 1,344 Deferred income tax benefit ( 2,798 ) ( 66 ) Gains on disposals of assets ( 2,956 ) ( 3,335 ) Gains on extinguishment of 4.75 % convertible senior notes ( 515 ) — Other, net 83 ( 614 ) Changes in operating assets and liabilities: Accounts receivable 21,173 29,538 Inventories ( 18,406 ) ( 23,754 ) Accounts payable and accrued liabilities ( 17,554 ) ( 17,515 ) Deferred revenue ( 2,015 ) 5,580 Other operating assets and liabilities, net 3,624 2,905 Net cash flows provided by operating activities 27,684 52,377 Cash flows from investing activities: Capital expenditures ( 23,309 ) ( 23,370 ) Proceeds from disposition of property and equipment 15,411 4,374 Other, net ( 431 ) ( 120 ) Net cash flows used in investing activities ( 8,329 ) ( 19,116 ) Cash flows from financing activities: Revolving credit facility borrowings 22,678 35,693 Revolving credit facility repayments ( 22,678 ) ( 35,693 ) Purchases of 4.75 % convertible senior notes ( 10,846 ) — Repayment of 1.50 % convertible senior notes — ( 17,315 ) Other debt and finance lease repayments ( 481 ) ( 340 ) Payment of financing costs ( 1,119 ) ( 101 ) Purchases of treasury stock ( 5,149 ) ( 3,001 ) Shares added to treasury stock as a result of net share settlements due to vesting of stock awards ( 2,596 ) ( 1,948 ) Net cash flows used in financing activities ( 20,191 ) ( 22,705 ) Effect of exchange rate changes on cash and cash equivalents ( 291 ) 330 Net change in cash and cash equivalents ( 1,127 ) 10,886 Cash and cash equivalents, beginning of period 47,111 42,018 Cash and cash equivalents, end of period $ 45,984 $ 52,904 Cash paid (received) for: Interest $ 4,206 $ 4,353 Income taxes, net 2,695 ( 34 ) The accompanying notes are an integral part of these financial statements. 8 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Oil States International, Inc. and its subsidiaries (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial information. Certain information in footnote disclosures normally included with financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to these rules and regulations. The unaudited financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which the Company considers necessary for a fair statement of the results of operations for the interim periods covered and for the financial condition of the Company at the date of the interim balance sheet. Results for the interim periods are not necessarily indicative of results for the full year. The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include, but are not limited to, goodwill and long-lived asset impairments, revenue and income recognized over time, valuation allowances recorded on deferred tax assets, reserves on inventory, allowances for doubtful accounts, settlement of litigation and potential future adjustments related to contractual indemnification and other agreements. Actual results could materially differ from those estimates. In the first quarter of 2024, certain short-cycle, consumable product operations historically reported within the Offshore Manufactured Products segment (legacy frac plug and elastomer products) were integrated into the Downhole Technologies segment to better align with the underlying activity demand drivers and current segment management structure, as well as provide for additional operational synergies. Historical segment financial data and disaggregated revenue information as of and for the three and nine months ended September 30, 2023, as presented in Note 10, “Segments and Related Information,” were conformed with the 2024 segment presentation. Additionally, following the sale of its remaining U.S. land-based drilling rigs and the exit of the flowback and well testing service offering in the third quarter of 2024, the Company’s Well Site Services segment name was changed to the Completion and Production Services segment. From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, which are adopted by the Company as of the specified effective date. Management believes that recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption. The financial statements included in this report should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2023. 9 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Asset Impairments and Other Charges and Credits In 2023, the Company implemented initiatives to reduce future costs, which are continuing into 2024. These management actions included the consolidation, relocation and exit of certain manufacturing and service locations, the exit of certain service offerings, reductions in the Company’s workforce in the United States as well as the realignment of operations within two of the Company’s reportable segments. The Company has also incurred legal and other related costs to enforce certain patents related to its proprietary technologies. As a result of these events, actions and assessments, the Company recorded the following charges and credits in 2024 and 2023 (in thousands): Offshore Manufactured Products Completion and Production Services Downhole Technologies Corporate Total Three Months Ended September 30, 2024 Impairments of: Goodwill $ — $ — $ — $ — $ — Intangible assets — 10,787 — — 10,787 Operating lease assets — 2,092 487 — 2,579 Facility consolidation and exit, and other charges 354 2,982 123 34 3,493 Patent defense costs — 1,347 — — 1,347 Gains on extinguishment of debt — — — — — Pre-tax totals $ 354 $ 17,208 $ 610 $ 34 18,206 Income tax benefit 1,161 After-tax total $ 17,045 Nine Months Ended September 30, 2024 Impairments of: Goodwill $ — $ — $ 10,000 $ — $ 10,000 Intangible assets — 10,787 — — 10,787 Operating lease assets — 2,092 487 — 2,579 Facility consolidation and exit, and other charges 3,364 5,583 123 34 9,104 Patent defense costs — 2,671 — — 2,671 Gains on extinguishment of debt — — — ( 515 ) ( 515 ) Pre-tax totals $ 3,364 $ 21,133 $ 10,610 $ ( 481 ) 34,626 Income tax benefit 2,990 After-tax total $ 31,636 Offshore Manufactured Products Completion and Production Services Downhole Technologies Corporate Pre-tax Total Three and Nine Months Ended September 30, 2023 Facility consolidation and exit, and other charges $ 1,649 $ — $ — $ — $ 1,649 Income tax benefit 347 After-tax total $ 1,302 10 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Goodwill The Company does not amortize goodwill, but rather assesses goodwill for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded. Changes in the carrying amount of goodwill, by operating segment, for the nine months ended September 30, 2024 were as follows (in thousands): Offshore Manufactured Products Downhole Technologies Total Balance as of December 31, 2023 $ 79,867 $ — $ 79,867 Goodwill associated with transferred operations ( 10,000 ) 10,000 — Impairment of goodwill — ( 10,000 ) ( 10,000 ) Foreign currency translation 572 — 572 Balance as of September 30, 2024 $ 70,439 $ — $ 70,439 In connection with the first quarter 2024 realignment of the composition of two of its reportable segments discussed in Note 1, “Organization and Basis of Presentation,” goodwill of $ 10.0 million was reassigned from the Offshore Manufactured Products segment to the Downhole Technologies segment based on estimated relative fair values. The Company performed an interim quantitative assessment of goodwill recorded within the Offshore Manufactured Products segment as of February 29, 2024 (prior to realignment) which indicated that the fair value of the reporting unit exceeded its carrying value. The Company also performed an interim quantitative assessment of goodwill transferred to the Downhole Technologies segment (subsequent to the realignment). This interim assessment indicated that the fair value of the reporting unit was less than its carrying amount and the Company concluded that goodwill reassigned to the Downhole Technologies business was fully impaired. The Company therefore recognized a non-cash goodwill impairment charge totaling $ 10.0 million in the first quarter of 2024. This impairment charge did not impact the Company’s liquidity position, debt covenants or cash flows. Management used a combination of valuation methodologies including the income approach and guideline public company comparables. The fair values of each of the Company’s reporting units were determined using significant unobservable inputs (Level 3 fair value measurements). The income approach estimates fair value by discounting the Company’s forecasts of future cash flows by a discount rate (expected return) that a market participant is expected to require on its investment. Significant assumptions and estimates used in the income approach include, among others, estimated future net annual cash flows and discount rates for each reporting unit, current and anticipated market conditions, estimated growth rates and historical data. These estimates rely upon significant management judgment. Long-Lived Tangible and Intangible Assets An assessment for impairment of long-lived tangible and intangible assets is conducted when an event occurs or circumstances change that indicate that the carrying value of long-lived tangible and intangible assets may not be recoverable. In response to further reductions in customer activity in the United States during the third quarter of 2024, management made strategic decisions to exit its underperforming flowback and well testing service offering and sell the related equipment and inventory. Management also decided to exit six leased facilities. As a result of these events and actions, the Company recorded non-cash intangible asset (customer relationships and tradenames) impairment charges of $ 10.8 million associated with the exit of this service offering and operating lease impairments of $ 2.6 million related to facility closures. Additionally, the equipment and inventory of the exited service offering in the Completion and Production Services segment was reclassified to assets held for sale, and transferred from property, plant and equipment and inventory to prepaid and other current assets. The carrying value of assets held for sale totaled $ 13.4 million as of September 30, 2024. 11 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Details of Selected Balance Sheet Accounts Additional information regarding selected balance sheet accounts as of September 30, 2024 and December 31, 2023 is presented below (in thousands): September 30, 2024 December 31, 2023 Accounts receivable, net: Trade $ 129,597 $ 128,405 Unbilled revenue 20,018 27,756 Contract assets 30,762 46,746 Other 6,869 4,801 Total accounts receivable 187,246 207,708 Allowance for doubtful accounts ( 4,710 ) ( 4,497 ) $ 182,536 $ 203,211 Allowance for doubtful accounts as a percentage of total accounts receivable 3 % 2 % September 30, 2024 December 31, 2023 Deferred revenue (contract liabilities) $ 34,742 $ 36,757 As of September 30, 2024, accounts receivable, net in the United States and the United Kingdom represented 63 % and 18 %, respectively, of the total. No other country or single customer accounted for more than 10% of the Company’s total accounts receivable as of September 30, 2024. For the nine months ended September 30, 2024, the $ 16.0 million net decrease in contract assets was primarily attributable to $ 44.2 million transferred to accounts receivable, which was partially offset by $ 28.5 million in revenue recognized during the period. Deferred revenue (contract liabilities) decreased by $ 2.0 million in the first nine months of 2024, primarily reflecting the recognition of $ 14.2 million of revenue that was deferred at the beginning of the period, partially offset by $ 12.0 million in new customer billings which were not recognized as revenue during the period. The following provides a summary of activity in the allowance for doubtful accounts for the nine months ended September 30, 2024 and 2023 (in thousands): Nine Months Ended September 30, 2024 2023 Allowance for doubtful accounts – January 1 $ 4,497 $ 5,226 Provisions 855 23 Write-offs ( 726 ) ( 208 ) Other 84 18 Allowance for doubtful accounts – September 30 $ 4,710 $ 5,059 12 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) September 30, 2024 December 31, 2023 Inventories, net: Finished goods and purchased products $ 117,535 $ 103,599 Work in process 32,018 30,546 Raw materials 112,774 109,627 Total inventories 262,327 243,772 Allowance for excess or obsolete inventory ( 41,193 ) ( 41,745 ) $ 221,134 $ 202,027 September 30, 2024 December 31, 2023 Property, plant and equipment, net: Property, plant and equipment $ 734,468 $ 754,143 Accumulated depreciation ( 467,080 ) ( 473,754 ) $ 267,388 $ 280,389 For the three months ended September 30, 2024 and 2023, depreciation expense was $ 9.5 million and $ 11.1 million, respectively. Depreciation expense was $ 29.9 million and $ 33.3 million, respectively, for the nine months ended September 30, 2024 and 2023. September 30, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Other intangible assets: Customer relationships $ 123,050 $ 53,723 $ 69,327 $ 141,342 $ 56,499 $ 84,843 Patents/technology/know-how 70,301 38,452 31,849 70,113 34,541 35,572 Tradenames and other 47,750 19,060 28,690 52,505 19,910 32,595 $ 241,101 $ 111,235 $ 129,866 $ 263,960 $ 110,950 $ 153,010 For the three months ended September 30, 2024 and 2023, amortization expense was $ 4.1 million and $ 4.3 million, respectively. Amortization expense was $ 12.7 million and $ 12.9 million for the nine months ended September 30, 2024 and 2023, respectively. As further discussed in Note 2, “Asset Impairments and Other Charges and Credits,” during the third quarter of 2024 the Company made a strategic decision to exit an underperforming service offering within the Completion and Production Services segment. As a result of this action, the segment recognized non-cash impairment charges of $ 9.1 million related to customer relationships and $ 1.7 million related to tradenames. September 30, 2024 December 31, 2023 Other noncurrent assets: Deferred compensation plan $ 18,632 $ 17,255 Deferred financing costs 1,689 1,109 Deferred income taxes 2,425 2,211 Other 3,190 2,678 $ 25,936 $ 23,253 13 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) September 30, 2024 December 31, 2023 Accrued liabilities: Accrued compensation $ 18,995 $ 27,131 Accrued taxes, other than income taxes 4,444 2,076 Insurance liabilities 3,633 3,839 Accrued interest 3,014 1,690 Accrued commissions 3,466 3,060 Other 6,426 6,431 $ 39,978 $ 44,227 4. Long-term Debt As of September 30, 2024 and December 31, 2023, long-term debt consisted of the following (in thousands): September 30, 2024 December 31, 2023 Revolving credit facility (1) $ — $ — 2026 Notes (2) 122,303 133,037 Other debt and finance lease obligations 2,974 3,092 Total debt 125,277 136,129 Less: Current portion ( 634 ) ( 627 ) Total long-term debt $ 124,643 $ 135,502 ____________________ (1) Unamortized deferred financing costs of $ 1.7 million and $ 1.1 million as of September 30, 2024 and December 31, 2023, respectively, are presented in other noncurrent assets. (2) The outstanding principal amount of the 2026 Notes was $ 123.5 million and $ 135.0 million as of September 30, 2024 and December 31, 2023, respectively . Revolving Credit Facility The Company has a senior secured credit facility, which provides for a $ 125.0 million asset-based revolving credit facility (as amended, the “ABL Facility”), under which credit availability is subject to a borrowing base calculation. The ABL Facility is governed by a credit agreement, as amended, with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (as amended, the “ABL Agreement”). In February 2024, the Company amended the ABL Facility to extend the maturity date to February 16, 2028, with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $ 17.5 million. The ABL Agreement provides funding based on a borrowing base calculation that includes eligible U.S. customer accounts receivable and inventory and provides for a $ 50.0 million sub-limit for the issuance of letters of credit. Borrowings under the ABL Agreement are secured by a pledge of substantially all of the Company’s domestic assets (other than real property) and the stock of certain foreign subsidiaries. Borrowings under the ABL Agreement bear interest at a rate equal to the Secured Overnight Financing Rate (subject to a floor rate of 0 %) plus a margin of 2.75 % to 3.25 %, or at a base rate plus a margin of 1.75 % to 2.25 %, in each case based on average borrowing availability. Quarterly, the Company must also pay a commitment fee of 0.375 % to 0.50 % per annum, based on unused commitments under the ABL Agreement. The ABL Agreement places restrictions on the Company’s ability to incur additional indebtedness, grant liens on assets, pay dividends or make distributions on equity interests, dispose of assets, make investments, repay other indebtedness (including the 2026 Notes discussed below), engage in mergers, and other matters, in each case, subject to certain exceptions. The ABL Agreement contains customary default provisions, which, if triggered, could result in acceleration of repayment of all amounts then outstanding. The ABL Agreement also requires the Company to satisfy and maintain a fixed charge coverage 14 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ratio of not less than 1.0 to 1.0 (i) in the event that availability under the ABL Agreement is less than the greater of (a) 15 % of the borrowing base and (b) $ 14.1 million; (ii) to complete certain specified transactions; or (iii) if an event of default has occurred and is continuing. As of September 30, 2024, the Company had no borrowings outstanding under the ABL Facility and $ 15.1 million of outstanding letters of credit. The total amount available to be drawn as of September 30, 2024 was $ 76.4 million, calculated based on the current borrowing base less outstanding borrowings, if any, and letters of credit. As of September 30, 2024, the Company was in compliance with its debt covenants under the ABL Agreement. 2026 Notes The Company issued $ 135.0 million aggregate principal amount of its 4.75 % convertible senior notes due 2026 (the “2026 Notes”) pursuant to an indenture, dated as of March 19, 2021 (the “2026 Indenture”), between the Company and Computershare Trust Company, National Association, as successor trustee. The following table provides a summary of the Company's purchases of outstanding 2026 Notes during the nine months ended September 30, 2024, with non-cash gains reported within other income, net (in thousands): Principal Amount Carrying Value of Liability Cash Paid Non-cash Pre-Tax Gains Recognized Nine Months Ended September 30, 2024 $ 11,500 $ 11,361 $ 10,846 $ 515 The outstanding 2026 Notes bear interest at a rate of 4.75 % per year and will mature on April 1, 2026, unless earlier repurchased, redeemed or converted. Interest is payable semi-annually in arrears on April 1 and October 1 of each year. Additional interest and special interest may accrue on the 2026 Notes under certain circumstances as described in the 2026 Indenture. The initial conversion rate is 95.3516 shares of the Company’s common stock per $1,000 principal amount of the 2026 Notes (equivalent to an initial conversion price of $ 10.49 per share of common stock). The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the 2026 Indenture. The Company’s intent is to repay the principal amount of the 2026 Notes in cash and settle the conversion feature (if any) in shares of the Company’s common stock. As of September 30, 2024, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met. 2023 Notes On January 30, 2018, the Company issued $ 200.0 million aggregate principal amount of its 1.50 % convertible senior notes due 2023 (the "2023 Notes"). The 2023 Notes bore interest at a rate of 1.50 % per year, and the outstanding principal amount of $ 17.3 million matured and was repaid in full on February 15, 2023. 5. Fair Value Measurements The Company’s financial instruments consist of cash and cash equivalents, investments, receivables, payables and debt instruments. The Company believes that the carrying values of these instruments, other than the 2026 Notes, on the accompanying consolidated balance sheets approximate their fair values. The estimated fair value of the 2026 Notes as of September 30, 2024 was $ 120.9 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 123.5 million. 15 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Stockholders’ Equity Common and Preferred Stock The following table provides details with respect to the changes to the number of shares of common stock, $ 0.01 par value, outstanding during the first nine months of 2024 (in thousands): Outstanding Shares of common stock outstanding – December 31, 2023 63,327 Restricted stock awards, net of forfeitures 1,384 Shares withheld for taxes on vesting of stock awards ( 411 ) Purchases of treasury stock ( 1,189 ) Shares of common stock outstanding – September 30, 2024 63,111 As of September 30, 2024 and December 31, 2023, the Company had 25,000,000 shares of preferred stock, $ 0.01 par value, authorized, with no shares issued or outstanding. On February 16, 2023, the Company’s Board of Directors authorized $ 25.0 million for the repurchase of the Company’s common stock, par value $ 0.01 per share, through February 2025. Subject to applicable securities laws, such purchases will be at such times and in such amounts as the Company deems appropriate. During the three months ended September 30, 2024, the Company purchased 646 thousand shares of common stock under the program at a total cost of $ 3.1 million. During the nine months ended September 30, 2024, the Company purchased 1.2 million shares of common stock under the program at a total cost of $ 5.5 million. The amount remaining under the Company’s existing share repurchase authorization as of September 30, 2024 was $ 12.6 million. On October 24, 2024, the Company’s Board of Directors terminated the Company’s existing common stock repurchase program and replaced it with a new $ 50.0 million common stock repurchase authorization, which expires in October 2026. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss, reported as a component of stockholders’ equity, primarily relates to fluctuations in currency exchange rates against the U.S. dollar as used to translate certain of the international operations of the Company’s operating segments. Accumulated other comprehensive loss decreased from $ 70.0 million at December 31, 2023 to $ 66.6 million at September 30, 2024. For the three and nine months ended September 30, 2024 and 2023, currency translation adjustments recognized as a component of other comprehensive income were primarily attributable to the United Kingdom and Brazil. During the nine months ended September 30, 2024, the exchange rates for the British pound strengthened by 5 % compared to the U.S. dollar while the Brazilian real weakened by 11 % compared to the U.S. dollar, contributing to other comprehensive income of $ 3.4 million. During the nine months ended September 30, 2023, the exchange rates for the British pound and the Brazilian real strengthened by 1 % and 4 %, respectively, compared to the U.S. dollar, contributing to other comprehensive income of $ 1.7 million. 7. Income Taxes Income tax provision for the three and nine months ended September 30, 2024 and 2023 was calculated using a discrete approach. This methodology was used because changes in the Company’s results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate. For the three months ended September 30, 2024, the Company’s income tax expense was $ 2.2 million on a pre-tax loss of $ 12.1 million, which included unfavorable changes in valuation allowances recorded against deferred tax assets and certain non-deductible expenses. This compares to an income tax expense of $ 0.2 million on pre-tax income of $ 4.4 million, which included certain non-deductible expenses, discrete tax items and a reduction in valuation allowances recorded against deferred tax assets, for the three months ended September 30, 2023. 16 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended September 30, 2024, the Company’s income tax expense was $ 1.6 million on a pre-tax loss of $ 24.8 million, which included a $ 10.0 million goodwill impairment charge (approximately $ 7.7 million of which was non-deductible), other non-deductible expenses and unfavorable changes in valuation allowances recorded against deferred tax assets. This compares to an income tax expense of $ 2.7 million on pre-tax income of $ 9.6 million, which included certain non-deductible expenses, discrete tax items and a reduction in valuation allowances recorded against deferred tax assets for the nine months ended September 30, 2023. 8. Net Income (Loss) Per Share The table below provides a reconciliation of the numerators and denominators of basic and diluted net income (loss) per share for the three and nine months ended September 30, 2024 and 2023 (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Numerators: Net income (loss) $ ( 14,349 ) $ 4,212 $ ( 26,422 ) $ 6,928 Less: Income attributable to unvested restricted stock awards — ( 82 ) — ( 135 ) Numerator for basic net income (loss) per share ( 14,349 ) 4,130 ( 26,422 ) 6,793 Effect of dilutive securities: Unvested restricted stock awards — 1 — 1 Numerator for diluted net income (loss) per share $ ( 14,349 ) $ 4,131 $ ( 26,422 ) $ 6,794 Denominators: Weighted average number of common shares outstanding 63,620 63,892 63,843 64,007 Less: Weighted average number of unvested restricted stock awards outstanding ( 1,536 ) ( 1,241 ) ( 1,486 ) ( 1,247 ) Denominator for basic net income (loss) per share 62,084 62,651 62,357 62,760 Effect of dilutive securities: Performance share units — 409 — 375 Denominator for diluted net income (loss) per share 62,084 63,060 62,357 63,135 Net income (loss) per share: Basic $ ( 0.23 ) $ 0.07 $ ( 0.42 ) $ 0.11 Diluted ( 0.23 ) 0.07 ( 0.42 ) 0.11 The calculation of diluted earnings per share for the three and nine months ended September 30, 2024 excluded 77 thousand shares and 92 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect. The calculation of diluted earnings per share for the three and nine months ended September 30, 2023 excluded 159 thousand shares and 177 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect. Additionally, shares issuable upon conversion of the 2026 Notes were excluded due to, among other factors, the Company’s share price. 17 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Long-Term Incentive Compensation The following table presents a summary of activity for stock options, service-based restricted stock and stock unit awards, and performance-based stock unit awards for the nine months ended September 30, 2024 (in thousands): Stock Options Service-based Restricted Stock Performance- and Service-based Stock Units Outstanding – December 31, 2023 158 1,233 927 Granted — 990 317 Vested and distributed — ( 660 ) ( 444 ) Forfeited ( 81 ) ( 50 ) — Outstanding – September 30, 2024 77 1,513 800 Weighted average grant date fair value (2024 awards) $ 5.88 $ 5.77 The restricted stock program consists of a combination of service-based restricted stock and stock units, as well as performance-based stock units. Service-based restricted stock awards vest on a straight-line basis over a term of three years . Service-based stock unit awards ( 149 thousand outstanding as of September 30, 2024) vest over one year , with the underlying shares issued at a specified future date. Performance-based stock unit awards vest at the end of a three-year period, with the number of shares ultimately issued under the program dependent upon achievement of predefined specific performance objectives based on the Company’s cumulative EBITDA over a three-year period. In the event the predefined targets are exceeded for any performance-based award, additional shares up to a maximum of 200 % of the target award may be granted. Conversely, if actual performance falls below the predefined target, the number of shares vested is reduced. If the actual performance falls below the threshold performance level, no shares will vest. The Company issued conditional long-term cash incentive awards (“Cash Awards”) of $ 1.5 million in the first quarters of 2024 and 2023. The performance measure for each of these Cash Awards is relative total stockholder return compared to a peer group of companies over a three-year period. The ultimate dollar amount to be awarded for each annual grant may range from zero to a maximum of $ 3.1 million, limited to their targeted award value ($ 1.5 million) if the Company’s total stockholder return were to be negative over the performance period. Obligations related to the Cash Awards are classified as liabilities and recognized over their respective vesting periods. Stock-based compensation expense recognized during the three and nine months ended September 30, 2024 totaled $ 2.4 million and $ 6.4 million, respectively. Stock-based compensation expense recognized during the three and nine months ended September 30, 2023 totaled $ 1.8 million and $ 5.2 million, respectively. As of September 30, 2024, there was $ 9.2 million of pre-tax compensation costs related to service-based and performance-based stock awards, which will be recognized in future periods as vesting conditions are satisfied. 18 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Segments and Related Information The Company operates through three operating segments: Offshore Manufactured Products, Completion and Production Services (previously referred to as Well Site Services) and Downhole Technologies. Financial information by operating segment as of and for the three and nine months ended September 30, 2024 and 2023 is summarized in the following tables (in thousands). Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets Three Months Ended September 30, 2024 Offshore Manufactured Products (1) $ 102,234 $ 3,631 $ 19,310 $ 3,074 $ 506,563 Completion and Production Services (2) 40,099 5,749 ( 18,267 ) 4,084 158,338 Downhole Technologies (3) 32,015 4,121 ( 3,653 ) 270 273,093 Corporate — 134 ( 8,431 ) — 56,147 Total $ 174,348 $ 13,635 $ ( 11,041 ) $ 7,428 $ 994,141 ____________________ (1) Operating income included $ 0.4 million of facility consolidation and other charges. (2) Operating loss included $ 17.2 million of asset impairment, facility consolidation and exit, patent defense and other charges. (3) Operating loss included $ 0.6 million of asset impairment and other charges. Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets Three Months Ended September 30, 2023 Offshore Manufactured Products (4) $ 96,070 $ 4,405 $ 15,586 $ 2,712 $ 495,440 Completion and Production Services 59,831 6,313 3,285 2,602 201,384 Downhole Technologies 38,388 4,546 ( 1,900 ) 568 287,152 Corporate — 152 ( 10,781 ) 150 64,044 Total $ 194,289 $ 15,416 $ 6,190 $ 6,032 $ 1,048,020 ____________________ (4) Operating income included $ 1.6 million of facility consolidation and other charges. Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets Nine Months Ended September 30, 2024 Offshore Manufactured Products (5) $ 290,647 $ 11,571 $ 44,270 $ 11,847 $ 506,563 Completion and Production Services (6) 133,812 17,875 ( 19,221 ) 10,416 158,338 Downhole Technologies (7) 103,534 12,646 ( 16,873 ) 1,026 273,093 Corporate — 436 ( 28,349 ) 20 56,147 Total $ 527,993 $ 42,528 $ ( 20,173 ) $ 23,309 $ 994,141 ____________________ (5) Operating income included $ 3.4 million of facility consolidation and other charges. (6) Operating loss included $ 21.1 million of asset impairment, facility consolidation and exit, patent defense and other charges. (7) Operating loss included $ 10.6 million of asset impairment and other charges. Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets Nine Months Ended September 30, 2023 Offshore Manufactured Products (8) $ 255,222 $ 12,555 $ 32,122 $ 7,658 $ 495,440 Completion and Production Services 191,425 19,023 14,983 14,046 201,384 Downhole Technologies 127,370 14,161 ( 148 ) 1,239 287,152 Corporate — 470 ( 31,623 ) 427 64,044 Total $ 574,017 $ 46,209 $ 15,334 $ 23,370 $ 1,048,020 ____________________ (8) Operating income included $ 1.6 million of facility consolidation and other charges. 19 Table of Contents OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables provide supplemental disaggregated revenue from contracts with customers by operating segment for the three and nine months ended September 30, 2024 and 2023 (in thousands): Offshore Manufactured Products Completion and Production Services Downhole Technologies Total 2024 2023 2024 2023 2024 2023 2024 2023 Three Months Ended September 30 Project-driven: Products $ 58,164 $ 58,169 $ — $ — $ — $ — $ 58,164 $ 58,169 Services 32,754 30,391 — — — — 32,754 30,391 Total project-driven 90,918 88,560 — — — — 90,918 88,560 Military and other products 11,316 7,510 — — — — 11,316 7,510 Short-cycle: Products — — — — 31,318 36,957 31,318 36,957 Services — — 40,099 59,831 697 1,431 40,796 61,262 Total short-cycle — — 40,099 59,831 32,015 38,388 72,114 98,219 $ 102,234 $ 96,070 $ 40,099 $ 59,831 $ 32,015 $ 38,388 $ 174,348 $ 194,289 Offshore Manufactured Products Completion and Production Services Downhole Technologies Total 2024 2023 2024 2023 2024 2023 2024 2023 Nine Months Ended September 30 Project-driven: Products $ 171,053 $ 152,241 $ — $ — $ — $ — $ 171,053 $ 152,241 Services 89,011 79,867 — — — — 89,011 79,867 Total project-driven 260,064 232,108 — — — — 260,064 232,108 Military and other products 30,583 23,114 — — — — 30,583 23,114 Short-cycle: Products — — — — 102,070 119,751 102,070 119,751 Services — — 133,812 191,425 1,464 7,619 135,276 199,044 Total short-cycle — — 133,812 191,425 103,534 127,370 237,346 318,795 $ 290,647 $ 255,222 $ 133,812 $ 191,425 $ 103,534 $ 127,370 $ 527,993 $ 574,017 Revenues from products and services transferred to customers over time accounted for approximately 67 % and 66 % of consolidated revenues for the nine months ended September 30, 2024 and 2023, respectively. The balance of revenues for the respective periods relates to products and services transferred to customers at a point in time. As of September 30, 2024, the Company had $ 223 million of remaining backlog related to contracts with an original expected duration of greater than one year. Approximately 19 % of this remaining backlog is expected to be recognized as revenue over the remaining three months of 2024, with an additional 42 % recognized in 2025 and the balance thereafter. 11. Commitments and Contingencies The Company is a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its commercial operations, products, employees and other matters. Although the Company can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on the Company, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise covered by insurance, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity. 20 Table of Contents C autionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q and other statements we make contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors, including incorrect or changed assumptions. For a discussion of known material factors that could affect our results, please refer to “Part I, Item 1. Business,” “Part I, Item 1A. Risk Factors,” “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk” included in our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2024. You can typically identify “forward-looking statements” by the use of forward-looking words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” “forecast,” “proposed,” “should,” “seek,” and other similar words. Such statements may relate to our future financial position, budgets, capital expenditures, projected costs, plans and objectives of management for future operations and possible future strategic transactions. Actual results frequently differ from assumed facts and such differences can be material, depending upon the circumstances. While we believe we are providing forward-looking statements expressed in good faith and on a reasonable basis, there can be no assurance that actual results will not differ from such forward-looking statements. The following are important factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, us: • the impact of the ongoing military actions in Europe and the Middle East, including, but not limited to, energy market disruptions, supply chain disruptions and increased costs, government sanctions, and delays or potential cancellation of planned customer projects; • the ability and willingness of the Organization of Petroleum Exporting Countries (“OPEC”) and other producing nations to set and maintain oil production levels and pricing; • the level of supply of and demand for oil and natural gas; • fluctuations in the current and future prices of oil and natural gas; • the level of exploration, drilling and completion activity; • the cyclical nature of the oil and natural gas industry; • the level of offshore oil and natural gas developmental activities; • the financial health and consolidation of our customers; • the impact of environmental matters, including executive actions and regulatory or legislative efforts to adopt environmental or climate change regulations that may result in increased operating costs or reduced oil and natural gas production or demand globally; • new rules by the SEC relating to the disclosure of a range of climate-related information and risks; • political, economic and litigation efforts to restrict or eliminate certain oil and natural gas exploration, development and production activities due to concerns over the threat of climate change; • the availability of and access to attractive oil and natural gas field prospects, which may be affected by governmental actions or actions of other parties restricting drilling and completion activities; • general global economic conditions; • global weather conditions and natural disasters, including hurricanes in the Gulf of Mexico; • our ability to protect and enforce our intellectual property rights; • changes in tax laws and regulations as well as volatility in the political, legal and regulatory environments in connection with the upcoming U.S. presidential election; • supply chain disruptions, including as a result of labor unrest; • the impact of tariffs and duties on imported materials and exported finished goods; • our ability to timely obtain and maintain critical permits for operating facilities; • our ability to attract and retain skilled personnel; • negative outcome of litigation, threatened litigation or government proceedings; 21 Table of Contents • our ability to develop new competitive technologies and products; • inflation, including our ability to increase prices to our customers as our costs increase; • fluctuations in currency exchange rates; • physical, digital, cyber, internal and external security breaches and other incidents affecting information security and data privacy; • the cost of capital in the bank and capital markets and our ability to access them; • the impact of disruptions in the bank and capital markets; • our ability to complete the integration of acquired businesses and achieve the expected accretion in earnings; and • the other factors identified in “Part I, Item 1A. Risk Factors” in our 2023 Annual Report on Form 10-K, as well as in “Part II, Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should the assumptions on which our forward-looking statements are based prove incorrect or change, actual results may differ materially from those expected, estimated or projected. In addition, the factors identified above may not necessarily be all of the important factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by us, or on our behalf. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no responsibility to publicly release the result of any revision of our forward-looking statements after the date they are made. In addition, in certain places in this Quarterly Report on Form 10-Q, we refer to information and reports published by third parties that purport to describe trends or developments in the energy industry. We do so for the convenience of our stockholders and in an effort to provide information available in the market that will assist our investors in better understanding the market environment in which we operate. However, we specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.