Legal charge pushes Innovex (NYSE: INVX) to Q1 2026 net loss
Rhea-AI Filing Summary
Innovex International reported mixed first quarter 2026 results, combining strong cash generation with a headline legal charge. Revenue was $239 million, down 13% sequentially and 1% year-over-year, while the company recorded a net loss of $16.7 million and a net margin of (7)%.
Excluding one-time items, performance was stronger: Adjusted EBITDA was $49.3 million with a 21% margin, and Free Cash Flow was $14.0 million, supported by net cash from operations of $19.8 million and modest capital expenditures. Innovex ended the quarter with $200.7 million in cash and cash equivalents and no bank debt, highlighting a solid balance sheet.
Results were heavily impacted by a $48.8 million provision for legal settlement and related defense costs linked to ongoing litigation, which turned income from operations negative despite otherwise profitable operations. Strategically, Innovex closed the $16 million acquisition of Drilling Innovative Solutions, repurchased $14.1 million of its shares, substantially completed the exit of its Eldridge facility, and won two subsea projects in Asia, each valued above $20 million. For Q2 2026, management guides to revenue of $235–$245 million and Adjusted EBITDA of $43–$48 million, reflecting a slightly less favorable mix and potential disruption from conflict in the Middle East.
Positive
- Robust profitability on an adjusted basis: Q1 2026 Adjusted EBITDA was $49.3 million with a 21% margin, and twelve-month ROCE reached 12%, indicating strong underlying returns despite reported GAAP losses.
- Solid cash generation and balance sheet: Innovex produced $19.8 million of operating cash flow and $14.0 million of Free Cash Flow in Q1 2026, ending with $200.7 million in cash and cash equivalents and no bank debt.
- Strategic growth moves and subsea momentum: The company closed the $16 million acquisition of Drilling Innovative Solutions, substantially exited its Eldridge facility, won two subsea projects in Asia each above $20 million, and delivered its first OneSubsea alliance wellhead order.
Negative
- Large litigation-related charge driving net loss: A $48.8 million provision for legal settlement plus related legal defense costs turned income from operations into a $21.8 million loss and net income into a $16.7 million loss in Q1 2026.
- Revenue contraction versus prior quarter: Q1 2026 revenue of $239.0 million declined 13% sequentially and 1% year-over-year, with softer activity in certain international markets and some conflict-related disruption in the Middle East.
- Lower outlook for near-term profitability: Q2 2026 guidance for Adjusted EBITDA of $43–$48 million is below Q1’s $49.3 million, reflecting a marginally less favorable product mix and potential sales disruptions and higher costs in the Middle East.
Insights
Strong underlying operations and cash, but a large legal charge drives a quarterly loss.
Innovex delivered Q1 2026 revenue of $239 million, down 13% sequentially and 1% year-over-year. Despite this, core profitability remained solid, with $49.3 million of Adjusted EBITDA and a 21% Adjusted EBITDA margin, supported by subsea wins and favorable product mix.
The key swing factor was a $48.8 million provision for legal settlement plus related defense costs tied to the Impulse litigation, which pushed income from operations to a $21.8 million loss and net income to a $16.7 million loss. Excluding these items, the business remained profitable and generated $14.0 million of Free Cash Flow.
Balance sheet strength stands out: cash and cash equivalents were $200.7 million with no bank debt as of March 31, 2026, and ROCE over the twelve months ended that date was 12%. Q2 2026 guidance calls for revenue of $235–$245 million and Adjusted EBITDA of $43–$48 million, implying slightly lower margins due to mix and potential Middle East disruptions.
8-K Event Classification
Key Figures
Key Terms
Adjusted EBITDA financial
Free Cash Flow financial
Return on Capital Employed financial
non-GAAP financial measures regulatory
Impulse litigation regulatory
provision for legal settlement financial
Earnings Snapshot
For Q2 2026, Innovex expects total revenue of $235–$245 million and Adjusted EBITDA of $43–$48 million, reflecting a marginally less favorable product mix and potential sales disruptions and higher costs related to ongoing conflict in the Middle East.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading symbol(s) |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company |
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☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Item 2.02 |
Results of Operations and Financial Condition. |
On May 4, 2026, Innovex International, Inc. (the “Company”) issued a press release announcing its results for the quarter ended March 31, 2026. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The Company’s press release announcing its results for the quarter ended March 31, 2026 contain certain non-GAAP financial measures (as defined under the Securities and Exchange Commission’s Regulation G). Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP. The Company has provided reconciliations within the press release of the non-GAAP measures to the most directly comparable GAAP financial measure.
The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
Item 7.01 |
Regulation FD Disclosure. |
On May 4, 2026, the Company issued a press release announcing its results for the quarter ended March 31, 2026. A copy of the press release is set forth in Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01, is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
The Company announces material information to the public through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, and on the Company’s investor relations website (https://investors.innovex-inc.com) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description |
99.1 |
Press Release issued May 4, 2026 |
104 |
Cover Page Interactive Data File (formatted as inline XBRL) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Innovex International, Inc. |
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Date: May 4, 2026 |
By: |
/s/ Kendal Reed |
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Kendal Reed |
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Chief Financial Officer |
Innovex Announces First Quarter 2026 Results
HOUSTON, May 4, 2026 – Innovex International, Inc. (NYSE: INVX) (“Innovex,” the “Company” or “we”) today announced financial and operating results for the first quarter of 2026.
First Quarter Highlights
Adam Anderson, CEO, commented, “We delivered a strong start to 2026, with revenue and Adjusted EBITDA both exceeding the high end of our guidance range. Revenue benefited from strong operational execution, new product introductions, and cross-selling across our global platform. Adjusted EBITDA benefited from favorable mix and earlier than anticipated benefits from the exit of the legacy Eldridge facility. These strong results reinforce our view that our subsea businesses can generate margins in excess of 20% when we apply our proven, capital-light business model. As we look forward, we continue to focus on both organic and inorganic investment opportunities, as well as generating strong free cash flow and exceptional shareholder returns. We believe the quarter demonstrates that our strategy is working. During the quarter, we completed the acquisition of DIS, which adds differentiated production technologies that complement our existing portfolio, strengthen our position in the U.S. offshore market, and create additional opportunities for organic growth. We continue to gain share across multiple markets through innovation, service quality, and the breadth of our integrated platform. We believe this combination of innovation, execution, and capital discipline continues to differentiate Innovex and supports our ability to deliver durable and profitable growth."
Kendal Reed, CFO, continued, “Our first quarter results reflect the strength of our capital-light, returns-focused business model. Adjusted EBITDA and margins benefited from favorable mix, as well as earlier-than-expected benefits from the transition out of the legacy Eldridge facility, which reduced the manufacturing footprint of our subsea businesses by approximately 85%. We generated strong Free Cash Flow in the quarter, converting approximately 28% of Adjusted EBITDA into free cash flow, and ended the quarter with approximately $201 million of cash and no bank debt, providing significant financial flexibility. The acquisition of DIS exemplifies our focus on returns. We believe we can grow this business significantly through our global distribution, further strengthening the attractive returns on this acquisition, which was purchased approximately at 4x TTM EBITDA. We also repurchased $14.1 million of our shares in the quarter
for a price of $24.59 per share, underscoring our confidence in the intrinsic value of Innovex and our commitment to thoughtful capital allocation."
Financial Summary
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Three months ended |
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(in thousands) |
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March 31, |
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December 31, |
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March 31, |
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Revenue |
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$ |
239,031 |
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$ |
273,602 |
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$ |
240,415 |
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Net income (loss) |
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(16,671 |
) |
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13,968 |
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14,757 |
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Net income (loss) % revenue |
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(7 |
)% |
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5 |
% |
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6 |
% |
Adjusted EBITDA (1) |
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49,286 |
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52,108 |
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45,921 |
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Adjusted EBITDA Margin (1) |
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21 |
% |
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19 |
% |
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19 |
% |
Net cash provided by operating activities |
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19,840 |
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52,238 |
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31,090 |
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Free Cash Flow (1) |
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14,013 |
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43,311 |
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24,034 |
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Income (loss) from operations |
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(21,832 |
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25,796 |
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21,850 |
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Twelve Months Ended |
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March 31, |
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December 31, |
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March 31, |
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ROCE (1) |
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12 |
% |
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10 |
% |
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12 |
% |
(1) Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Return on Capital Employed (“ROCE”) are non-GAAP financial measures. See definition of these measures and the reconciliation of GAAP to non-GAAP financial measures in the Supplemental Information tables below.
Operational & Financial Results
Kendal Reed, CFO commented, “We made progress against our margin goals in the first quarter, while also benefiting from favorable product mix. Strength in NAM Land and a meaningful increase in activity in Mexico helped offset softer activity in other international markets, which we view as timing-related and consistent with historical variability. We also saw modest operational impact from conflict-related disruptions in the Middle East, which partially offset the strength in NAM Land and Mexico during the quarter. From a capital allocation perspective, we remain focused on balancing organic investment with disciplined M&A. Our M&A pipeline remains robust, including a mix of smaller, bolt-on opportunities like DIS, as well as larger opportunities. We will only execute against this playbook if the opportunity aligns with our ‘big impact, small ticket’ proposition, can generate high gross margins with low capital expenditures, and can be acquired at a reasonable multiple."
Adam Anderson, CEO, concluded, “We are off to a strong start to 2026. I am particularly excited by the momentum in our subsea business. Not only are our margins improving, but we are also gaining share organically by focusing on customer pain points. In the quarter, we secured two major subsea awards in Asia, each exceeding $20 million in value. We also delivered the first subsea wellhead order under the OneSubsea alliance for a customer in Southeast Asia. In the Middle East, softer first quarter activity was driven primarily by timing-related factors. We remain encouraged by recent commercial progress in the region, including an offshore gas award in the Kingdom of Saudi Arabia, as well as a contract extension for off-bottom liner systems and lower completions technologies. We continue to view the Middle East as an important long-term growth market. We continue to evaluate a number of inorganic growth opportunities but will only execute on these opportunities if they fit our unique value proposition, generate strong free cash flow, and are priced at a reasonable multiple. We look forward to discussing these should we decide to execute on them."
Balance Sheet, Debt, Cash Flow & Other
Net cash provided by operating activities was $20 million for the first quarter of 2026, while capital expenditures totaled $6 million (approximately 2.4% of revenue) for the first quarter of 2026.
Innovex generated Free Cash Flow of $14 million during the first quarter of 2026 and ended the quarter with approximately $201 million of cash and cash equivalents and no bank debt.
Innovex maintains a strong liquidity position and disciplined balance sheet to preserve flexibility and support high-return capital allocation opportunities. We continue to focus on M&A opportunities with strong quantitative and qualitative characteristics.
Return on Capital Employed (“ROCE”)
Innovex’s efficient capital allocation and capital-light business model enable the Company to generate strong returns on our invested capital. Income from operations for the twelve months ended March 31, 2026 was $89 million. Return on Capital Employed (“ROCE”) for the twelve months ended March 31, 2026 was 12%. We remain focused on capital efficiency, which we believe is a key driver of sustainable value creation for our stockholders.
Q2 2026 Guidance
Looking to the second quarter of 2026, Innovex expects to generate $235 - $245 million in total revenue and Adjusted EBITDA of $43 - $48 million. Our guidance reflects our expectation for a marginally less favorable product mix in Q2, as well as the potential for sales disruptions and higher costs associated with the ongoing conflict in the Middle East.
Conference Call Details
Management will host a conference call and a webcast to discuss the financial results on May 5, 2026, at 9:00 a.m. Eastern Time / 8:00 a.m. Central Time. The call will be open to all interested parties and may include forward-looking statements. To access the call, please dial in approximately ten minutes prior to the start time.
Date / Time: May 5, 2026 - 8:00 a.m. Central Time
Webcast: https://events.q4inc.com/attendee/364412720
U.S. Toll-Free Dial-In: (800) 715-9871
International Dial-In: +1 (646) 307-1963
Conference ID: 1801745
For those unable to participate in the live call, an audio replay will be available following the call through midnight Wednesday, May 13, 2026. To access the replay, please call (800) 770-2030 or +1 (609) 800-9909 (International) and enter playback ID 1801745 followed by the # key. A replay of the webcast will also be archived shortly after the call and can be accessed on the Company’s website.
About Innovex International, Inc.
Innovex International, Inc. (NYSE: INVX) is a Houston-based company established in 2024 following the merger of Dril-Quip, Inc. and Innovex Downhole Solutions, Inc.
Innovex’s comprehensive portfolio extends throughout the lifecycle of the well, and innovative product integration ensures seamless transitions from one well phase to the next, driving efficiency, lowering costs, and reducing the rig site service footprint for the customer.
With locations throughout North America, Latin America, Europe, the Middle East, and Asia, no matter where you need us, our team is readily available with technical expertise, conventional and innovative technologies, and ever-present customer service.
Forward-Looking Statements
Certain statements contained in this press release and oral statements made regarding the matters addressed in this release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Innovex’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking terminology including “may,” “believe,” “expect,” “intend,” “anticipate,” “plan,” “should,” “estimate,” “continue,” “potential,” “will,” “hope” or other similar words and include the Company’s expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risks related to the Company’s merger and acquisition activities, including the ultimate outcome and results of integrating operations, the effects of the Company’s merger and acquisition activities (including the Company’s future financial condition, results of operations, strategy and plans), potential adverse reactions or changes to business relationships resulting from the completion of mergers and acquisitions, expected benefits from mergers and acquisitions and the ability of the Company to realize those benefits, the significant costs required to integrate operations, whether merger or acquisition-related litigation will occur and, if so, the results of any litigation, settlements and investigations, operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; acts of terrorism, war or political or civil unrest in the United States or elsewhere; loss or corruption of our information or a cyberattack on our computer systems; uncertainties pertaining to the Impulse litigation; the risks related to economic conditions and other factors noted in the Company’s Annual Report on Form 10-K, any Quarterly Reports on Form 10-Q and the other documents that the Company files with the Securities and Exchange Commission. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement. Innovex disclaims any duty to update and does not intend to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release, except as may be required by law.
Investor Relations Contact
Eric Wells
Chief of Staff
investors@innovex-inc.com
(346) 398-0000
Innovex International, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
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Three months ended |
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(in thousands, except share and per share amounts) |
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March 31, |
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December 31, |
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March 31, |
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Revenues |
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$ |
239,031 |
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$ |
273,602 |
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$ |
240,415 |
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Cost of revenues |
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154,522 |
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194,488 |
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163,911 |
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Selling, general and administrative expenses |
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41,748 |
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32,035 |
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32,349 |
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(Gain) loss on sale of assets |
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(2,020 |
) |
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1,364 |
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148 |
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Depreciation and amortization |
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16,222 |
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15,461 |
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14,945 |
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Impairment of long-lived assets |
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— |
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— |
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2,924 |
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Acquisition and integration costs |
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1,588 |
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4,458 |
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4,288 |
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Provision for legal settlement |
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48,803 |
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— |
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— |
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Income (loss) from operations |
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$ |
(21,832 |
) |
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$ |
25,796 |
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$ |
21,850 |
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Interest (income) expense, net |
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(388 |
) |
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654 |
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700 |
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Other (income) expense, net |
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150 |
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(1,825 |
) |
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(214 |
) |
Income (loss) before income taxes |
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$ |
(21,594 |
) |
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$ |
26,967 |
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$ |
21,364 |
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Income tax expense (benefit), net |
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(4,923 |
) |
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12,999 |
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6,607 |
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Net income (loss) |
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$ |
(16,671 |
) |
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$ |
13,968 |
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$ |
14,757 |
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Earnings (loss) per common share |
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Basic |
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$ |
(0.24 |
) |
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$ |
0.20 |
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$ |
0.21 |
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Diluted |
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$ |
(0.24 |
) |
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$ |
0.20 |
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$ |
0.21 |
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Weighted average common shares outstanding |
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Basic |
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68,940,260 |
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68,994,818 |
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69,290,100 |
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Diluted |
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68,940,260 |
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69,641,691 |
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69,477,519 |
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Other comprehensive income (loss) |
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Net income (loss) |
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$ |
(16,671 |
) |
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$ |
13,968 |
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$ |
14,757 |
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Foreign currency translation adjustment |
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1,750 |
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289 |
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4,616 |
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Comprehensive income (loss) |
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$ |
(14,921 |
) |
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$ |
14,257 |
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$ |
19,373 |
|
Innovex International, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and par value amounts) |
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March 31, |
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December 31, |
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March 31, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
200,707 |
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$ |
203,407 |
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$ |
68,116 |
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Trade receivable, net |
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245,633 |
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237,774 |
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236,020 |
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Inventories, net |
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252,987 |
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248,433 |
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269,251 |
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Other current assets |
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53,564 |
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38,433 |
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59,251 |
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Total current assets |
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752,891 |
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728,047 |
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632,638 |
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Noncurrent assets |
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Property and equipment, net |
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163,328 |
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158,874 |
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188,426 |
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Goodwill and net intangibles |
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211,738 |
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215,950 |
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180,314 |
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Right of use leases - operating, net |
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51,213 |
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52,204 |
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56,960 |
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Deferred tax asset, net |
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98,226 |
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102,375 |
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128,992 |
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Other long-term assets |
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10,281 |
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10,857 |
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8,673 |
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Total noncurrent assets |
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534,786 |
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540,260 |
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563,365 |
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Total assets |
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$ |
1,287,677 |
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$ |
1,268,307 |
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$ |
1,196,003 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
74,888 |
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$ |
60,711 |
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$ |
76,391 |
|
Accrued expenses |
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|
35,232 |
|
|
|
49,148 |
|
|
|
37,116 |
|
Operating lease liabilities |
|
|
12,643 |
|
|
|
12,670 |
|
|
|
11,535 |
|
Contract liabilities |
|
|
11,144 |
|
|
|
11,986 |
|
|
|
11,128 |
|
Other current liabilities |
|
|
7,685 |
|
|
|
6,940 |
|
|
|
4,093 |
|
Current portion of long-term debt and finance lease obligations |
|
|
6,170 |
|
|
|
6,709 |
|
|
|
5,556 |
|
Total current liabilities |
|
|
147,762 |
|
|
|
148,164 |
|
|
|
145,819 |
|
Noncurrent liabilities |
|
|
|
|
|
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|
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|
|||
Long-term debt and finance lease obligations |
|
|
18,042 |
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|
18,922 |
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|
|
19,679 |
|
Operating lease liabilities |
|
|
39,349 |
|
|
|
40,986 |
|
|
|
45,962 |
|
Legal settlement accrual |
|
|
48,803 |
|
|
|
— |
|
|
|
— |
|
Other long-term liabilities |
|
|
2,816 |
|
|
|
2,536 |
|
|
|
6,167 |
|
Total noncurrent liabilities |
|
|
109,010 |
|
|
|
62,444 |
|
|
|
71,808 |
|
Total liabilities |
|
|
256,772 |
|
|
|
210,608 |
|
|
|
217,627 |
|
Total stockholders’ equity |
|
|
1,030,905 |
|
|
|
1,057,699 |
|
|
|
978,376 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,287,677 |
|
|
$ |
1,268,307 |
|
|
$ |
1,196,003 |
|
Innovex International, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three months ended |
|
|||||||||
(in thousands) |
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
$ |
(16,671 |
) |
|
$ |
13,968 |
|
|
$ |
14,757 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
73,676 |
|
|
|
28,065 |
|
|
|
29,045 |
|
Changes in operating assets and liabilities, net of amounts related to acquisitions |
|
|
(37,165 |
) |
|
|
10,205 |
|
|
|
(12,712 |
) |
Net cash provided by operating activities |
|
$ |
19,840 |
|
|
$ |
52,238 |
|
|
$ |
31,090 |
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
|
|||
Payments on acquisitions, net of cash acquired |
|
|
— |
|
|
|
(2,499 |
) |
|
|
(17,413 |
) |
Capital expenditures |
|
|
(5,827 |
) |
|
|
(8,927 |
) |
|
|
(7,056 |
) |
Proceeds from sale of property and equipment |
|
|
202 |
|
|
|
1,468 |
|
|
|
1,003 |
|
Cash acquired in stock based business combination |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
$ |
(5,625 |
) |
|
$ |
(9,958 |
) |
|
$ |
(23,466 |
) |
Cash flows provided by financing activities |
|
|
|
|
|
|
|
|
|
|||
Net borrowings (repayments) on line of credit |
|
|
— |
|
|
|
— |
|
|
|
1,600 |
|
Net repayments on term loan |
|
|
— |
|
|
|
— |
|
|
|
(11,429 |
) |
Payments on finance leases |
|
|
(2,070 |
) |
|
|
(2,243 |
) |
|
|
(1,630 |
) |
Other financing |
|
|
(14,840 |
) |
|
|
(542 |
) |
|
|
(1,940 |
) |
Net cash provided by (used in) financing activities |
|
$ |
(16,910 |
) |
|
$ |
(2,785 |
) |
|
$ |
(13,399 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(5 |
) |
|
|
538 |
|
|
|
613 |
|
Net change in cash and cash equivalents |
|
$ |
(2,700 |
) |
|
$ |
40,033 |
|
|
$ |
(5,162 |
) |
Non-GAAP Measures
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA (a non-GAAP measure) as net income (loss) before interest (income) expense, income tax expense (benefit), net, depreciation and amortization, (gain) loss on sale of assets and other expense, net, further adjusted to exclude certain items which we believe are not reflective of our ongoing performance or which are non-cash in nature. Management uses Adjusted EBITDA to assess the profitability of our business operations and to compare our operating performance to our competitors without regard to the impact of financing methods and capital structure and excluding costs that management believes do not reflect our ongoing operating performance. We track Adjusted EBITDA on an absolute dollar basis and as a percentage of revenue, which we refer to as Adjusted EBITDA Margin.
Free Cash Flow
We also utilize Free Cash Flow (a non-GAAP measure) to evaluate the cash generated by our operations and results of operations. We define Free Cash Flow as net cash provided by operating activities less capital expenditures, as presented in our Consolidated Statements of Cash Flows. Management believes Free Cash Flow is useful because it demonstrates the cash that was available in the period that was in excess of our needs to fund our capital expenditures. We track Free Cash Flow both on an absolute dollar basis and as a percentage of revenue. Free Cash Flow does not represent our residual cash flow available for discretionary expenditures, as we have non-discretionary expenditures, including, but not limited to, any principal payments required under the terms of our credit facility, which are not deducted in calculating Free Cash Flow.
Return on Capital Employed (ROCE)
We utilize Return on Capital Employed (“ROCE”) (a non-GAAP measure) to assess the effectiveness of our capital allocation over time and to compare our capital efficiency to our competitors. We define ROCE as income from operations excluding acquisition and integration costs, litigation related expenses not reflective of our ongoing operating performance, and income tax expense (resulting in Adjusted Income from Operations, after tax) divided by average capital employed. Capital employed is defined as the combined values of debt and stockholders’ equity. We revised our definition of ROCE and Adjusted Income from Operations, after tax to exclude litigation related expenses not reflective of our ongoing operating performance, which for the twelve months ended March 31, 2026 is reflective of the costs related to the Impulse Litigation. In particular, we believe that the exclusion of the aforementioned litigation related expenses eliminated in calculating Adjusted Income from Operations, after tax and ROCE provides useful measures for period-to-period comparisons of our business. We did not revise prior years’ Adjusted Income from Operations, after tax or ROCE because there were no other charges similar in nature to these costs.
Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and ROCE do not represent and should not be considered alternatives to, or more meaningful than, net income and net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Our computation of Adjusted EBITDA, Free Cash Flow and ROCE may differ from computations of similarly titled measures of other companies. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure, see tables below.
Management has provided outlook regarding Adjusted EBITDA, which is a non-GAAP financial measure and excludes certain charges. A reconciliation of this non-GAAP financial measure to the corresponding GAAP financial measure has not been provided because guidance for the various reconciling items is not provided. The Company is unable to provide guidance for these reconciling items because they cannot determine their probable significance, as certain items are outside of the Company’s control and cannot be reasonably predicted since these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measures are not available without unreasonable effort.
Innovex International, Inc.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Unaudited)
|
|
Three months ended |
|
|||||||||
(in thousands) |
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|||
Revenue |
|
$ |
239,031 |
|
|
$ |
273,602 |
|
|
$ |
240,415 |
|
Net income (loss) |
|
|
(16,671 |
) |
|
|
13,968 |
|
|
|
14,757 |
|
Interest (income) expense, net |
|
|
(388 |
) |
|
|
654 |
|
|
|
700 |
|
Income tax expense (benefit), net |
|
|
(4,923 |
) |
|
|
12,999 |
|
|
|
6,607 |
|
Depreciation and amortization |
|
|
16,222 |
|
|
|
15,461 |
|
|
|
14,945 |
|
EBITDA |
|
$ |
(5,760 |
) |
|
$ |
43,082 |
|
|
$ |
37,009 |
|
Other non-operating expense (income), net (1) |
|
|
150 |
|
|
|
(1,825 |
) |
|
|
(214 |
) |
(Gain) loss on sale of assets |
|
|
(2,020 |
) |
|
|
1,364 |
|
|
|
148 |
|
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
|
|
2,924 |
|
Acquisition and integration costs (2) |
|
|
1,588 |
|
|
|
4,458 |
|
|
|
4,288 |
|
Provision for legal settlement (3) |
|
|
48,803 |
|
|
|
— |
|
|
|
— |
|
Legal defense costs (4) |
|
|
2,430 |
|
|
|
— |
|
|
|
— |
|
Transaction costs (5) |
|
|
1,128 |
|
|
|
— |
|
|
|
— |
|
Stock based compensation |
|
|
2,967 |
|
|
|
5,029 |
|
|
|
1,766 |
|
Adjusted EBITDA |
|
$ |
49,286 |
|
|
$ |
52,108 |
|
|
$ |
45,921 |
|
Net income (loss) % revenue |
|
|
(7 |
)% |
|
|
5 |
% |
|
|
6 |
% |
Adjusted EBITDA Margin |
|
|
21 |
% |
|
|
19 |
% |
|
|
19 |
% |
(1) Primarily represents foreign currency exchange (gain) loss, (gain) loss on lease terminations, and other non-operating items.
(2) Consists of legal, accounting, advisory fees, move, severance and other integration costs associated with acquisitions, primarily related to Dril-Quip, DWS, SCF and Citadel. These costs are one-time in nature and represent expenses that we do not view as normal operating expenses necessary to operate our business.
(3) Includes monetary damages awarded by a jury and estimated future awards related to the Impulse Litigation, which is not reflective of our ongoing operating performance.
(4) Reflects legal defense costs associated with the Impulse Litigation, which is not reflective of our ongoing operating performance. These costs are recorded in Selling, general and administrative expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income.
(5) Reflects transaction costs associated with the secondary offering in February 2026.
Innovex International, Inc.
Reconciliation of Income from Operations to ROCE
(Unaudited)
|
|
Twelve Months Ended |
|
|||||||||
(in thousands) |
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|||
Income from operations |
|
$ |
88,943 |
|
|
$ |
132,625 |
|
|
$ |
48,614 |
|
Plus: Acquisition and integration costs |
|
|
14,818 |
|
|
|
17,518 |
|
|
|
36,815 |
|
Plus: Provision for legal settlement (1) |
|
|
48,803 |
|
|
|
— |
|
|
|
— |
|
Plus: Legal defense costs (1) |
|
|
2,430 |
|
|
|
— |
|
|
|
— |
|
Less: Income tax expense |
|
|
(33,701 |
) |
|
|
(45,231 |
) |
|
|
(3,971 |
) |
Adjusted income from operations, after tax |
|
$ |
121,293 |
|
|
$ |
104,912 |
|
|
$ |
81,458 |
|
Beginning debt |
|
|
25,235 |
|
|
|
35,368 |
|
|
|
43,242 |
|
Beginning equity |
|
|
978,376 |
|
|
|
958,156 |
|
|
|
344,305 |
|
Ending debt |
|
|
24,212 |
|
|
|
25,631 |
|
|
|
25,235 |
|
Ending equity |
|
|
1,030,905 |
|
|
|
1,057,699 |
|
|
|
978,376 |
|
Average capital employed |
|
$ |
1,029,364 |
|
|
$ |
1,038,427 |
|
|
$ |
695,579 |
|
ROCE |
|
|
12 |
% |
|
|
10 |
% |
|
|
12 |
% |
(1) As defined in our Reconciliation of Net Income (Loss) Adjusted EBITDA above.
Innovex International, Inc.
Reconciliation of Net Cash from Operations to Free Cash Flow
(Unaudited)
|
|
Three months ended |
|
|||||||||
(in thousands) |
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|||
Net cash provided by operating activities |
|
$ |
19,840 |
|
|
$ |
52,238 |
|
|
$ |
31,090 |
|
Capital expenditures |
|
|
(5,827 |
) |
|
|
(8,927 |
) |
|
|
(7,056 |
) |
Free Cash Flow |
|
$ |
14,013 |
|
|
$ |
43,311 |
|
|
$ |
24,034 |
|
Innovex International, Inc.
Geographic Revenue Details
(Unaudited)
|
|
Three months ended |
|
|||||||||
(in thousands) |
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|||
North America Onshore ("NAM") |
|
|
|
|
|
|
|
|
|
|||
Products |
|
$ |
89,522 |
|
|
$ |
93,767 |
|
|
$ |
75,255 |
|
Services |
|
|
17,020 |
|
|
|
15,981 |
|
|
|
16,749 |
|
Rental |
|
|
30,164 |
|
|
|
28,995 |
|
|
|
28,513 |
|
Revenue - North America Onshore |
|
|
136,706 |
|
|
|
138,743 |
|
|
|
120,517 |
|
International & Offshore |
|
|
|
|
|
|
|
|
|
|||
Products |
|
|
73,373 |
|
|
|
108,926 |
|
|
|
92,095 |
|
Services |
|
|
14,121 |
|
|
|
12,629 |
|
|
|
18,312 |
|
Rental |
|
|
14,831 |
|
|
|
13,304 |
|
|
|
9,491 |
|
Revenue - International & Offshore |
|
|
102,325 |
|
|
|
134,859 |
|
|
|
119,898 |
|
Total Revenue |
|
$ |
239,031 |
|
|
$ |
273,602 |
|
|
$ |
240,415 |
|