Oceaneering International, Inc. (OII) Earnings

Management highlights

- Overall Consolidated Financial Performance * Consolidated revenue increased 10% YoY to $768 million, with growth across all segments except IMDS. * Operating income increased 11% YoY to $88.2 million; adjusted EBITDA increased 11% to $115 million, the highest quarterly adjusted EBITDA since Q3 2015, exceeding the high end of prior guidance. * Net income attributable to Oceaneering increased 19% YoY to $65 million (65 cents per share). * Operating cash flow was $55.2 million; organic capital expenditures totaled $23.2 million (34% for growth, 66% for maintenance); free cash flow was $32 million. * Ended the quarter with $629 million in cash, $844 million in total liquidity, and no outstanding revolving credit facility borrowings. * Resumed share buybacks, repurchasing $10 million of common stock during the quarter. - Capital Structure Improvements * Successfully placed $500 million of 2034 senior notes; proceeds will be used with on-hand cash to retire $500 million of 2028 senior notes. * Amended the secured revolving credit facility to increase commitments from $215 million to $345 million and extend maturity to July 2031. These transactions will close in July 2026, improving long-term liquidity and financial flexibility. - Operational Milestones & Contract Awards * The upgraded Ocean Intervention II vessel entered service for SSR and is fully utilized for survey projects through most of 2026, with a simultaneous operations (SimOps) project scheduled for later this year to improve efficiency. * Secured a new ROV service contract award in Brazil, improving future demand visibility for the energy segment. * ADTECH secured multiple new defense and subsea contracts, including a joint Defense Innovation Unit award for extra large unmanned underwater vehicle development, advancing the firm's dual-use technology strategy serving both energy and government customers. * Oceaneering's space systems team was recognized as a best-in-class supplier by Lockheed Martin for work on the Artemis program.

Guidance

- Third quarter 2026 guidance: * Total consolidated revenue is expected to increase sequentially; adjusted EBITDA is projected to be between $115 million and $125 million. * SSR: Expected revenue and operating income growth on improved ROV utilization and continued survey activity. * Manufactured Products: Expected slight decreases in revenue and operating income. * OPG: Expected revenue and operating income growth from higher vessel utilization in the U.S. Gulf and West Africa, and continued international project work. * IMDS: Expected revenue increase, with operating income holding relatively flat. * ADTECH: Expected revenue and operating income growth from higher activity in OTEC and marine services. * Unallocated expenses are projected to be approximately $50 million. - Full year 2026 guidance: * The low end of the adjusted EBITDA guidance range was raised; consolidated adjusted EBITDA is now projected between $400 million and $440 million. * IMDS operating income is now expected to decrease significantly compared to 2025, with operating margin projected to land in the low single-digit percentage range, reflecting ongoing regional uncertainty. Guidance for all other segments remains unchanged, with performance tracking in line with or ahead of prior expectations. * Full-year book-to-bill ratio for Manufactured Products is maintained at 0.9 to 1.0, with backlog expected to improve in H2 2026.

Segment performance

- Subsea Robotics (SSR): Revenue increased 6% year-over-year to $232 million, 30% of total consolidated revenue; operating income increased 3% to $66.3 million. EBITDA margin held flat at 35%. ROV utilization dipped slightly to 66% from 67% YoY; 77% of SSR revenue came from ROV business, 23% from combined tooling and survey (up from 21% YoY, reflecting increased survey activity). SSR holds 59% market share (82 out of 139 contracted floating rigs) and maintains a fleet of 250 ROV systems. - Manufactured Products: Revenue increased 3% YoY to $149 million (19% of total consolidated revenue); operating income increased 17% to $21.9 million, with a 15% operating income margin (up 178 basis points YoY). Trailing 12-month book-to-bill ratio is 0.88, up from 0.65 YoY. - Offshore Projects Group (OPG): Revenue increased 22% YoY to $183 million (24% of total consolidated revenue); operating income increased 39% to $30 million, with a 16% operating income margin. Strong results driven by favorable project mix of international intervention and installation projects. - Integrity Management and Digital Solutions (IMDS): Revenue, operating income, and margin all decreased YoY due to lower regional activity and higher personnel costs in West Africa and the Middle East. - ADTECH: Revenue increased 22% YoY to $133 million (17% of total consolidated revenue); operating income increased slightly to $16.4 million, with a 12% operating income margin (down YoY due to program mix and timing changes in the OTEC business line). - Unallocated expenses: $46.6 million, flat YoY and in line with guidance.

Risks & headwinds

- Lower activity levels and ongoing uncertainty in the Middle East and West Africa have negatively impacted IMDS revenue, margin, and operating income, and this headwind is expected to persist through full-year 2026. * ROV utilization may see near-term volatility from rigs moving between regions, creating temporary downtime. * Defense contract awards are currently lumpy, though this is expected to moderate as more multi-year projects are added to the ADTECH segment.

Analyst Q&A

• Q: With the completed refinancing and strong net cash position supporting resumed share buybacks, what is Oceaneering's updated capital allocation priority? /

  A: Management's priority order remains organic growth first, inorganic growth second, and returning capital to shareholders second, with share buybacks as the primary current return method. Organic investment will focus on expanding high-performing core energy businesses (especially SSR) via automation and high-reliability service improvements, and expanding the defense business. Inorganic and partnership opportunities in defense are prioritized, leveraging Oceaneering's proven offshore operational experience to partner with younger technology-focused defense firms rather than overpaying for expensive new defense tech. Share buybacks will continue opportunistically alongside these growth investments.

• Q: What is the outlook for SSR ROV utilization next year, and how sustainable is OPG's recent strong growth? /

  A: Management expects SSR utilization to rise alongside growing floating rig utilization and strong subsea tree installation activity, with longer-term rig and ROV contracts signaling sustained demand growth. For OPG, while near-term activity is increasing gradually rather than spiking, longer-term industry confidence in sustained offshore demand supports continued growth beyond the recent strong quarter, with Oceaneering leveraging its existing infrastructure to capture new projects.

• Q: What regional offshore growth opportunities does management see amid shifting NOC spending priorities around energy security? /

  A: The top near-term opportunity for Oceaneering is Brazil, where Petrobras has increased activity and new contract opportunities are already materializing. Africa (including new developments in Namibia and Senegal) remains a strong growth market, followed by Australia, which has existing offshore infrastructure and can bring new projects online faster than other regions. The Norwegian Continental Shelf is also expected to see increased tie-back activity driven by European energy security demand for Equinor gas.

• Q: Is the offshore activity inflection expected in late 2026 or pushed back to 2027, and can SSR ROV utilization reach the 70s range over the next few years? /

  A: Offshore activity growth is already occurring gradually, with no sharp defined inflection point; growth will continue through the second half of 2026 into early 2027, in line with contracting trends. ROV utilization is expected to rise into the 70% range over the next two to three years as rig activity grows, though a return to the high 70s/80s levels seen in 2013-2014 would require a larger increase in active drilling rigs than is currently projected.