Innovex’s Earnings Call: Tariff Refund Claims and U.S. Land Market Outlooks Don’t Match

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $245 million, up 2% sequentially and up 9% year-over-year
• Operating Margin: Adjusted EBITDA margin of 20%, compared to 21% in Q1 2026 and Q2 2025

Guidance:

• Revenue for Q3 2026 expected in the range of $260 to $270 million.
• Adjusted EBITDA for Q3 2026 expected in the range of $51 to $57 million.

Business Commentary:

Revenue and EBITDA Performance:

• InnoVEX reported revenue of $245 million for Q2 2026, an increase of 2% sequentially and 9% year-over-year. Adjusted EBITDA was $48 million, resulting in a margin of 20%.
• The improvement was supported by better activity levels in international markets and growing momentum in the subsea business.

Impact of TCO Group Acquisition:

• InnoVEX completed the acquisition of TCO Group, adding its innovative laminated glass plug technology to its portfolio.
• This acquisition is expected to enhance InnoVEX's presence in Norway and the UAE, contributing to future growth and innovation opportunities.

International and Offshore Revenue Growth:

• International and offshore revenue for Q2 2026 was $113 million, an 11% sequential increase, driven by strength across the international portfolio.
• The increase was partly due to new awards and improved activity levels in key markets like Asia and the Middle East.

North American Land Market Dynamics:

• North America land revenue was $131 million, down 4% sequentially, impacted by seasonally lower activity in Canada.
• Despite this, InnoVEX maintained resilience in the North American market, supported by its differentiated technology portfolio.

Strategic Focus on Subsea Business:

• InnoVEX secured an additional $20 million subsea tension riser package and completed the first XPAC trial, indicating strong commercial momentum in the subsea segment.
• The strategic alliance with One Subsea and optimized manufacturing capabilities strengthened its competitive position in complex offshore work.

Sentiment Analysis:

Overall Tone: Positive

• "We delivered an excellent second quarter. Revenue totaled $245 million and adjusted EBITDA totaled $48 million, both at the high end of our guidance ranges." "I believe the second quarter demonstrates that InnoVEX is entering a new phase." "We are pleased with our second quarter performance."

Q&A:

• Question from Don Crist (Johnson Rice): Can you give us kind of the game plan as you see that progressing over the next couple of quarters or years? Are you planning to make a big push into the U.S. to try to unseat the major competitor in the U.S. right now?
  Response: Focus is on growing thermal wellhead markets in Canada, international opportunities like Mexico, and evaluating slower growth in the U.S. land market.

• Question from Don Crist (Johnson Rice): Can you classify it? Has customer behavior changed or is there just more conviction today versus...?
  Response: Strong offshore pipeline and commercial momentum, including recent awards and ability to take market share, driven by talent and technology from the DrillQuip deal.

• Question from Keith Beckman (Pickering Energy Partners): I just wanted to get a sense of maybe quarter over quarter kind of what's baked into your 3Q guidance...
  Response: Q3 guide includes $15M revenue and $3M EBITDA from TCO, with legacy InnoVex revenue around $250M, driven by subsea opportunities and North America land growth.

• Question from Keith Beckman (Pickering Energy Partners): What's the next biggest thing to attack here to kind of continue improving margins...
  Response: Margin improvement expected from resolution of Middle East conflict reducing logistics costs, plus incrementals from new subsea, TCO, Mexico, and Saudi opportunities.

• Question from Scott Gruber (Citigroup): Can you provide some more call on how you see that base kind of growing year and year relative to your key end markets?
  Response: Business is slightly up year-over-year despite a broadly down market, driven by consistent market share gains from customer-centric execution.

• Question from Rahul Kakar (Jefferies): How do you see that progressing considering the conflict has resumed?
  Response: Strong growth in U.S. land in Q3/Q4 driven by customer responsiveness to market signals, with uncertainty beyond that.

• Question from Rahul Kakar (Jefferies): What factors could drive you beating the third quarter being at the high end of the guide as well?
  Response: Timing of TCO deliveries between Q3/Q4 and resolution of Middle East conflict impacting logistics costs are key factors.

• Question from Eddie Kim (Barclays): How involved are you currently in Jafura? And do you see that as a growing opportunity...
  Response: Growth in unconventional applications in Saudi, including Jafura, seen as a future driver, but currently more levered to legacy oil land market.

• Question from Blake McLean (Daniel Energy Partners): Can you talk a little bit about those markets, specifically the opportunity set...
  Response: TCO strengthens position in Norway (under-penetrated, long-term value) and UAE (niche technologies, helps with complex wells).

• Question from Blake McLean (Daniel Energy Partners): How do you think about the organizational side capacity to take on incremental deals...
  Response: Confidence in internal team for integration; bandwidth is freeing up as DrillQuip integration concludes, allowing for more M&A.

Contradiction Point 1

Tariff Refunds Impact and Timeline

Contradictory statements on whether tariff refunds were received and their financial materiality.

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2026Q2: The company did receive some modest tariff refunds, primarily for the 232 tariff on steel, which will be recognized in Q3. However, the amount is immaterial to the overall business. - [Kendall Reed](CFO)

What was the impact of any tariff refunds received by the company? - Don Crist (Johnson Rice)

2026Q2: The company applied for and received modest tariff refunds, which will be recognized in Q3. However, the impact is immaterial. The 232 steel tariff was not part of the recent refund program. - [Kendal Reed](CFO)

Contradiction Point 2

North American Land Market Growth Outlook

Contradiction on the expected growth rate and market behavior for the U.S. land market.

What are Johnson Rice's key financial highlights for the quarter? - Don Crist (Johnson Rice)

2026Q2: The U.S. land market is also attractive but is expected to be a slower evolution for growth compared to the international focus. - [Adam Anderson](CEO)

What is the strategy for expanding the Canadian wellhead business into the U.S. market and the potential for an aggressive strategy to challenge major competitors? - Rahul Kakar (Jefferies)

2026Q2: The U.S. land market is seeing growth, with Q3 activity expected to be strong. InnoVEX has a strong position there... The market remains customer-responsive to signals, with strength expected to continue into Q3 and Q4. - [Kendall Reed](CFO)

Contradiction Point 3

Impact and Outlook of the Middle East Conflict

Contradictory assessments of the business impact and future implications of the Middle East conflict.

What were the key earnings results or updates provided by Keith Beckman from Pickering Energy Partners during the call? - Keith Beckman (Pickering Energy Partners)

2026Q2: The conflict in the Middle East is creating a drag on margins via increased logistics costs (~$1.5M in Q2), and a resolution would help improve margins. - [Kendall Reed](CFO)

What is baked into the Q3 guidance, specifically regarding the Middle East and the full-quarter contribution from the TCO acquisition, and how are you thinking about the back half of the year with the ongoing conflict? - Don Crist (Johnson Rice)

2026Q1: There was some impact in Q1... Q2 is expected to see similar impacts, but now includes **incremental costs** as the company shifts from sea freight to more expensive air freight... - [Adam Anderson](CEO)

Contradiction Point 4

Drivers for Near-Term Margin Improvement

Contradictory emphasis on the primary levers for achieving margin targets in the coming period.

Keith Beckman (Pickering Energy Partners) - Keith Beckman (Pickering Energy Partners)

2026Q2: Key drivers for future margin improvement are: 1) Resolving the logistics cost issue in the Middle East. 2) Leveraging the incrementals from new subsea awards and the expected return of the TCO business to its historical run rate. - [Kendall Reed](CFO)

What are the key opportunities to focus on in order to continue improving margins? - Don Crist (Johnson Rice)

2026Q1: Q1 margin improvement was driven roughly equally by favorable product mix and **improved manufacturing efficiency**... The major initiative is the **complete exit from the Eldridge facility by mid-year**, which will allow for better production absorption. - [Kendal Reed](CFO)

Contradiction Point 5

Near-term Margin Progression and Pressures

Contradiction on the expected timeline for margin recovery and specific pressures.

Keith Beckman (Pickering Energy Partners) - Keith Beckman (Pickering Energy Partners)

2026Q2: Key drivers for future margin improvement are: 1) Resolving the logistics cost issue in the Middle East. 2) Leveraging the incrementals from new subsea awards and the expected return of the TCO business to its historical run rate... The conflict in the Middle East is creating a drag on margins via increased logistics costs (~$1.5M in Q2), and a resolution would help improve margins. - [Kendall Reed](CFO)

What are the key opportunities to focus on to drive continued margin improvement? - Derek Podhazer (Piper Sandler)

2025Q4: Low-margin subsea deliveries will weigh on Q1 and Q2 2026 margins.... Despite these near-term pressures, the long-term margin progression to the 25% target remains intact, with expected improvement in the back half of 2026 and beyond. - [Adam Anderson](CEO)