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OIL STATES INTERNATIONAL, INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Oil States International, Inc.

Filing date:

02/21/2025

TLDR:

Oil States International experienced a revenue decline due to reduced U.S. land-based activity, resulting in a net loss for the year. The company is cautiously optimistic, focusing on offshore market recovery and cost management.

ELI5:

Oil States, a company that sells equipment and services to the oil industry, had a tough year because business in the US slowed down. They lost money, but they’re hoping things will get better as overseas business picks up and they cut costs.

Accession #:

0001121484-25-000024

Published on

Analyst Summary

  • Revenue decreased by 11% to $692.6M due to lower U.S. land activity.
  • Net loss of $(11.3)M, a significant decrease from the previous year’s net income of $12.9M.
  • Operating loss of $(1.7)M compared to an operating income of $23.2M in the previous year.
  • Cash position improved to $65.4M from $47.1M.
  • Offshore Manufactured Products segment remains the strongest, while Completion and Production Services and Downhole Technologies segments struggled.
  • Gross Profit Margin: 22.58%
  • Operating Profit Margin: -0.24%
  • Net Profit Margin: -1.63%
  • Return on Assets (ROA): -1.12%
  • Return on Equity (ROE): -1.65%
  • Earnings Per Share (EPS): -$0.18
  • Current Ratio: 3.16
  • Quick Ratio: 1.79
  • Cash Ratio: 0.41
  • Debt-to-Equity Ratio: 0.48
  • Debt-to-Assets Ratio: 0.32
  • Interest Coverage Ratio: 6.86
  • Inventory Turnover: 2.58
  • Days Sales Outstanding (DSO): 102.32 days
  • Days Payable Outstanding (DPO): 39.24 days
  • Asset Turnover: 0.69
  • Price-to-Earnings Ratio (P/E): -26.33
  • Price-to-Book Ratio (P/B): 0.43
  • Price-to-Sales Ratio (P/S): 0.42
  • Enterprise Value to EBITDA (EV/EBITDA): 6.44
  • Revenue Growth: -11.47%
  • Net Income Growth: -187.33%
  • EPS Growth: -190%

Opportunities and Risks

  • Cyclical Industry: Dependence on oil and gas industry spending makes OIS vulnerable to commodity price fluctuations.
  • U.S. Land Market: Continued weakness in the U.S. land market could further depress revenue and profitability.
  • Backlog Cancellations: Potential for backlog cancellations, especially if commodity prices decline.
  • Cybersecurity Threats: Increasing cybersecurity threats pose a risk to sensitive data and operations.
  • Inflation: Inflation in wages, materials, parts, equipment and other costs, including as a result of tariffs imposed on certain of the goods and materials we import, has the potential to adversely affect our results of operations.
  • Offshore Market Recovery: Sustained recovery in offshore and international markets could drive growth in the Offshore Manufactured Products segment.
  • Cost Management: Successful implementation of cost-cutting measures could improve profitability.
  • New Technologies: Development and commercialization of new technologies could provide a competitive advantage.
  • Share Repurchase Program: The new share repurchase authorization could provide support for the stock price.

Potential Implications

Company Performance

  • Continued weakness in U.S. land market may further depress revenue and profitability.
  • Successful cost-cutting measures could improve profitability.
  • Sustained recovery in offshore and international markets could drive growth.
  • Goodwill impairment in Downhole Technologies highlights challenges in that segment.
  • Backlog decline suggests a potential slowdown in future revenue.

Stock Price

  • Share repurchases suggest management believes the stock is undervalued.
  • Negative P/E ratio indicates that the company is not profitable.
  • P/B ratio of less than 1 may indicate that the stock is undervalued.
  • P/S ratio of less than 1 may indicate that the stock is undervalued.

Oil States International, Inc. (OIS) – 10-K Report Analysis (FY 2024)

Executive Summary

This report analyzes Oil States International, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. The company experienced a revenue decline primarily due to reduced U.S. land-based activity, offset partially by growth in offshore and international markets. While cost-cutting measures were implemented, significant impairment charges led to a net loss for the year. The company’s backlog remains a key indicator, but is subject to cancellations. Overall, the outlook is cautiously optimistic, contingent on sustained recovery in offshore markets and effective cost management. Recommendation: Hold. Monitor offshore activity and cost-cutting effectiveness.

Company Overview

Oil States International, Inc. (OIS) is a global provider of manufactured products and services to the energy, industrial, and military sectors. The company operates through three segments: Offshore Manufactured Products, Completion and Production Services, and Downhole Technologies. The industry is cyclical and dependent on oil and gas activity levels.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management acknowledges the cyclical nature of the industry and the impact of commodity prices on customer spending. The MD&A highlights increased capital investments by offshore and international customers, offset by a decline in U.S. land-based investments. Management took strategic restructuring actions in U.S. land-based businesses during 2024 to reduce costs and improve future operating margins. The tone is cautiously optimistic, emphasizing cost control and strategic realignment.

Financial Statement Analysis

Income Statement

Metric 2024 2023 2022 Change (2024 vs 2023)
Revenue $692.6M $782.3M $737.7M ↓ 11%
Operating Income (Loss) $(1.7)M $23.2M $2.9M ↓
Net Income (Loss) $(11.3)M $12.9M $(9.5)M ↓

Key Observations: Revenue decreased significantly, driven by lower U.S. land activity. The shift from operating income to a loss is concerning, primarily due to impairment charges. The company’s net loss reflects the challenges faced in the current market environment.

Balance Sheet

Metric 2024 2023
Cash and Cash Equivalents $65.4M $47.1M
Total Assets $1,005.1M $1,046.5M
Total Liabilities $324.5M $336.9M
Stockholders’ Equity $680.7M $709.5M

Key Observations: Cash position improved. Total assets and stockholders’ equity decreased, reflecting the net loss and share repurchases. Debt levels remain relatively stable.

Cash Flow Statement

Metric 2024 2023 2022
Cash Flow from Operations $45.9M $56.6M $32.9M
Capital Expenditures $37.5M $30.7M $20.3M

Key Observations: Cash flow from operations decreased, indicating potential challenges in generating cash from core business activities. Increased capital expenditures suggest continued investment in the business, but should be monitored for return on investment.

Segment Analysis

Segment 2024 Revenue 2024 Operating Income (Loss) 2023 Revenue 2023 Operating Income
Offshore Manufactured Products $397.9M $65.3M $381.7M $56.3M
Completion and Production Services $163.9M $(23.2)M $242.6M $13.9M
Downhole Technologies $130.8M $(20.9)M $157.9M $(5.9)M

Key Observations: Offshore Manufactured Products remains the strongest segment, contributing the most revenue and operating income. Completion and Production Services and Downhole Technologies segments struggled, with significant operating losses. The strategic realignment and cost-cutting efforts in these segments are crucial for future profitability.

Risk and Opportunity Assessment

Risks

  • Cyclical Industry: Dependence on oil and gas industry spending makes OIS vulnerable to commodity price fluctuations.
  • U.S. Land Market: Continued weakness in the U.S. land market could further depress revenue and profitability.
  • Backlog Cancellations: Potential for backlog cancellations, especially if commodity prices decline.
  • Cybersecurity Threats: Increasing cybersecurity threats pose a risk to sensitive data and operations.
  • Inflation: Inflation in wages, materials, parts, equipment and other costs, including as a result of tariffs imposed on certain of the goods and materials we import, has the potential to adversely affect our results of operations.

Opportunities

  • Offshore Market Recovery: Sustained recovery in offshore and international markets could drive growth in the Offshore Manufactured Products segment.
  • Cost Management: Successful implementation of cost-cutting measures could improve profitability.
  • New Technologies: Development and commercialization of new technologies could provide a competitive advantage.
  • Share Repurchase Program: The new share repurchase authorization could provide support for the stock price.

Uncommon Metrics

  • Book-to-bill Ratio: The book-to-bill ratio for Offshore Manufactured Products was 1.0x in 2024, indicating a balance between new orders and revenue recognition.
  • Goodwill Impairment: The $10 million goodwill impairment in Downhole Technologies highlights the challenges in that segment.

Footnotes and Supplementary Disclosures

  • The company sold two manufacturing and service facilities that were classified as held for sale assets, generating net proceeds of $35.1 million.
  • The company purchased $14.2 million of its common stock, and purchased $11.5 million principal amount of its 4.75% convertible senior notes (the “2026 Notes”) for $10.8 million.
  • In October 2024, the company’s Board of Directors also terminated its existing common stock repurchase program and replaced it with a new $50.0 million common stock repurchase authorization, which expires in October 2026.

Conclusion and Actionable Insights

Oil States International faces challenges in the current market environment, particularly in the U.S. land sector. However, the company’s strong position in the offshore market and ongoing cost-cutting efforts provide potential for future growth. The impairment charges are a concern, but the company’s improved cash position and strategic realignment are positive steps. Overall Assessment: Hold. Monitor offshore activity, cost-cutting effectiveness, and backlog trends.

Financial Analysis of Oil States International, Inc. (OIS)

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: (Revenues – Cost of Revenues) / Revenues = ($692,588 – $536,201) / $692,588 = 22.58%
    • Trend: Previous year Gross Profit Margin was ($782,283 – $606,888) / $782,283 = 22.42%. Percentage change: (22.58% – 22.42%) / 22.42% = 0.71%
    • Industry: The oilfield services industry typically has gross profit margins ranging from 15% to 30%, depending on the specific services offered and market conditions. OIS’s gross profit margin is within this range.
  • Operating Profit Margin:

    • Calculation: Operating Income / Revenues = (-$1,689) / $692,588 = -0.24%
    • Trend: Previous year Operating Profit Margin was $23,164 / $782,283 = 2.96%. Percentage change: (-0.24% – 2.96%) / 2.96% = -108.11%
    • Industry: The oilfield services industry typically has operating profit margins ranging from 5% to 15% during strong market conditions, but can be negative during downturns. OIS’s negative operating margin indicates underperformance.
  • Net Profit Margin:

    • Calculation: Net Income / Revenues = (-$11,258) / $692,588 = -1.63%
    • Trend: Previous year Net Profit Margin was $12,891 / $782,283 = 1.65%. Percentage change: (-1.63% – 1.65%) / 1.65% = -198.79%
    • Industry: The oilfield services industry typically has net profit margins ranging from 3% to 10% during strong market conditions, but can be negative during downturns. OIS’s negative net profit margin indicates underperformance.
  • Return on Assets (ROA):

    • Calculation: Net Income / Total Assets = (-$11,258) / $1,005,108 = -1.12%
    • Industry: The oilfield services industry typically has ROA ranging from 2% to 7% during strong market conditions. OIS’s negative ROA indicates underperformance.
  • Return on Equity (ROE):

    • Calculation: Net Income / Total Stockholders’ Equity = (-$11,258) / $680,654 = -1.65%
    • Industry: The oilfield services industry typically has ROE ranging from 5% to 15% during strong market conditions. OIS’s negative ROE indicates underperformance.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Basic: -$0.18
    • Diluted: -$0.18
    • Trend: Previous year EPS Basic and Diluted was $0.20. Percentage change: (-$0.18 – $0.20) / $0.20 = -190%
    • Industry: EPS varies widely in the oilfield services industry, but negative EPS indicates underperformance.

Liquidity

  • Current Ratio:

    • Calculation: Current Assets / Current Liabilities = $498,226 / $157,703 = 3.16
    • Trend: Previous year Current Ratio was $487,997 / $157,270 = 3.10. Percentage change: (3.16 – 3.10) / 3.10 = 1.94%
    • Industry: A current ratio of 1.5 to 2.5 is generally considered healthy for most industries. OIS’s current ratio is high, suggesting strong liquidity.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Current Assets – Inventories) / Current Liabilities = ($498,226 – $214,836) / $157,703 = 1.79
    • Trend: Previous year Quick Ratio was ($487,997 – $202,027) / $157,270 = 1.82. Percentage change: (1.79 – 1.82) / 1.82 = -1.65%
    • Industry: A quick ratio of 1 or greater is generally considered healthy. OIS’s quick ratio is healthy.
  • Cash Ratio:

    • Calculation: Cash and Cash Equivalents / Current Liabilities = $65,363 / $157,703 = 0.41
    • Trend: Previous year Cash Ratio was $47,111 / $157,270 = 0.30. Percentage change: (0.41 – 0.30) / 0.30 = 36.67%
    • Industry: A cash ratio of 0.5 or greater is considered ideal, but this varies by industry. OIS’s cash ratio is low, but the company has other liquid assets.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Stockholders’ Equity = $324,454 / $680,654 = 0.48
    • Trend: Previous year Debt-to-Equity Ratio was $336,941 / $709,545 = 0.48. Percentage change: (0.48 – 0.48) / 0.48 = 0%
    • Industry: A debt-to-equity ratio of 1 to 1.5 is considered normal for the oilfield services industry. OIS’s debt-to-equity ratio is low, indicating a conservative capital structure.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets = $324,454 / $1,005,108 = 0.32
    • Trend: Previous year Debt-to-Assets Ratio was $336,941 / $1,046,486 = 0.32. Percentage change: (0.32 – 0.32) / 0.32 = 0%
    • Industry: A debt-to-assets ratio of 0.5 or lower is generally considered healthy. OIS’s debt-to-assets ratio is healthy.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: EBIT / Interest Expense = (Operating Income + Depreciation & Amortization) / Interest Expense = (-$1,689 + $54,708) / $7,731 = 6.86
    • Trend: Previous year Interest Coverage Ratio was ($23,164 + $60,778) / $8,189 = 10.25. Percentage change: (6.86 – 10.25) / 10.25 = -33.07%
    • Industry: An interest coverage ratio of 1.5 or greater is generally considered safe. OIS’s interest coverage ratio is healthy.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Cost of Revenues / Average Inventory = $536,201 / (($214,836 + $202,027) / 2) = 2.58
    • Trend: Previous year Inventory Turnover was $606,888 / (($202,027 + $243,772) / 2) = 2.72. Percentage change: (2.58 – 2.72) / 2.72 = -5.15%
    • Industry: Inventory turnover varies widely in the oilfield services industry, depending on the specific services offered. A lower turnover may indicate slow-moving inventory.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Revenue) * 365 = ($194,336 / $692,588) * 365 = 102.32 days
    • Trend: Previous year DSO was ($203,211 / $782,283) * 365 = 95.02 days. Percentage change: (102.32 – 95.02) / 95.02 = 7.68%
    • Industry: DSO varies widely in the oilfield services industry, but a high DSO may indicate problems with collecting receivables.
  • Days Payable Outstanding (DPO):

    • Calculation: (Accounts Payable / Cost of Revenues) * 365 = ($57,708 / $536,201) * 365 = 39.24 days
    • Trend: Previous year DPO was ($67,546 / $606,888) * 365 = 40.62 days. Percentage change: (39.24 – 40.62) / 40.62 = -3.40%
    • Industry: DPO varies widely in the oilfield services industry, but a low DPO may indicate that the company is not taking full advantage of available credit terms.
  • Asset Turnover:

    • Calculation: Revenue / Total Assets = $692,588 / $1,005,108 = 0.69
    • Trend: Previous year Asset Turnover was $782,283 / $1,046,486 = 0.75. Percentage change: (0.69 – 0.75) / 0.75 = -8%
    • Industry: Asset turnover varies widely in the oilfield services industry, depending on the capital intensity of the business. A lower turnover may indicate inefficient asset utilization.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $4.74 / (-$0.18) = -26.33
    • Industry: A negative P/E ratio is not meaningful and indicates that the company is not profitable.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Book Value of Equity = (Shares Outstanding * Stock Price) / Total Stockholders’ Equity = (61,493,000 * $4.74) / $680,654,000 = 0.43
    • Industry: A P/B ratio of less than 1 may indicate that the stock is undervalued.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Revenue = (61,493,000 * $4.74) / $692,588,000 = 0.42
    • Industry: A P/S ratio of less than 1 may indicate that the stock is undervalued.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash = (61,493,000 * $4.74) + $125,287,000 – $65,363,000 = $351,385,820
      EBITDA = Net Income + Interest + Taxes + Depreciation and Amortization = -$11,258 + $7,731 + $3,406 + $54,708 = $54,587,000
      EV/EBITDA = $351,385,820 / $54,587,000 = 6.44
    • Industry: EV/EBITDA ratios vary widely in the oilfield services industry, but a ratio of 8-12 is considered normal.

Growth Rates

  • Revenue Growth:

    • Calculation: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue = ($692,588 – $782,283) / $782,283 = -11.47%
    • Industry: Negative revenue growth indicates underperformance.
  • Net Income Growth:

    • Calculation: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income = (-$11,258 – $12,891) / $12,891 = -187.33%
    • Industry: Negative net income growth indicates underperformance.
  • EPS Growth:

    • Calculation: (Current Year EPS – Previous Year EPS) / Previous Year EPS = (-$0.18 – $0.20) / $0.20 = -190%
    • Industry: Negative EPS growth indicates underperformance.

Other Relevant Metrics

  • Share Repurchases: The company repurchased 1,620,504 shares of its common stock during October-December 2024 at an average price of $5.30, with $41,306,216 remaining available for future repurchases under the plan. This indicates management believes the stock is undervalued.
  • Backlog: The company’s backlog was $311 million as of December 31, 2024, compared to $327 million at the end of 2023. This decrease suggests a potential slowdown in future revenue.
  • Goodwill Impairment: The company recorded a $10 million impairment of goodwill in the Downhole Technologies segment. This indicates that the carrying value of goodwill exceeded its fair value, reflecting challenges in that segment.

2. Commentary

Oil States International’s financial performance in 2024 was weak, with declining revenues, net losses, and negative profitability ratios. While the company maintains a strong liquidity position and a conservative capital structure, the negative trends in revenue and earnings are concerning. The goodwill impairment and backlog decline further highlight the challenges faced by the company. Share repurchases suggest management believes the stock is undervalued, but a turnaround in operational performance is needed to improve investor confidence.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️