Oceaneering International Inc.

04/23/2026 | Press release | Distributed by Public on 04/23/2026 15:13

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements we make in this quarterly report on Form 10-Q are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our expectations about:
•increased costs to operate our business, including the availability and market for our chartered vessels;
•future demand, order intake and business activity levels;
•the collectability of accounts receivable and realizability of contract assets at the amounts reflected on our most recent balance sheet;
•the backlog of our Manufactured Products segment, to the extent backlog may be an indicator of future revenue or productivity;
•our tax payments and projected capital expenditures for 2026;
•the adequacy of our liquidity, cash flows and capital resources to support our operations and internally generated growth initiatives;
•increased costs and other effects of tariffs imposed by the United States ("U.S.") government, and any effects on trading relationships among the U.S. and other countries;
•transactions we may engage in to manage our outstanding debt prior to maturity;
•shares that may be repurchased under our share repurchase plan;
•seasonality; and
•industry conditions.
These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we have referred to under the headings "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors" in Part I of our annual report on Form 10-K for the year ended December 31, 2025. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.
The following discussion should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report on Form 10-K for the year ended December 31, 2025.
Overview of our Results
Our diluted earnings (loss) per share for the three-month period ended March 31, 2026 were $0.36, as compared to $0.49 for the corresponding period of the prior year. Our operating results for the three months ended March 31, 2026, as compared to the corresponding period of the prior year, decreased by 21% on a 3% increase in revenue. Our first quarter 2026 results unfolded largely as expected, driven by strong activity levels in our Aerospace and Defense Technologies ("ADTech") segment. All of our energy segments produced results that were consistent with expectations, with the exception of our Integrity Management & Digital Solutions ("IMDS") segment, which was impacted by the conflict in the Middle East.
Consistent with recent years, our cash balance declined during the first quarter of 2026. We utilized $59 million of cash in operating activities along with $8.0 million of cash for maintenance capital expenditures and $9.4 million for growth capital expenditures in the first quarter of 2026. These items were the largest contributors to our $81 million cash reduction during the first quarter of 2026,as compared to a $116 million cash reduction during the first quarter of 2025.
Results of Operations
We operate in five business segments. Our segments are contained within two businesses-services and products provided primarily to the oil and gas industry, and to a lesser extent, the mobility solutions and offshore renewables industries, among others ("Energy"), and services and products provided to non-energy industries ADTech. Our four
business segments within the Energy business are Subsea Robotics, Manufactured Products, OPG and IMDS. We report our ADTech business as one segment. Our Unallocated Expenses are those not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance units, performance stock units, and bonuses, as well as other general expenses, including corporate administrative expenses.
Consolidated revenue and profitability information are as follows:
Three Months Ended
(dollars in thousands) Mar 31, 2026 Mar 31, 2025
Revenue $ 692,429 $ 674,523
Operating Income (Loss) 57,788 73,472
Operating Income (Loss) % 8 % 11 %
We generate a material amount of our consolidated revenue from contracts for services in the U.S. Gulf in our OPG segment, which is usually more active in the second and third quarters, as compared to the rest of the year. Notably, however, the first quarter of 2025 represented a positive exception to this pattern. Revenue in our Subsea Robotics segment is subject to seasonal variations in demand, with our first quarter generally being the low quarter of the year. The level of our Subsea Robotics seasonality depends on the number of remotely operated vehicles ("ROVs") we have engaged in vessel-based subsea infrastructure inspection, maintenance, repair and installation, which is more seasonal than drill support. Revenue in each of our Manufactured Products, IMDS and ADTech segments generally has not been seasonal.
Energy
The primary focus of our Energy business is to continue driving the positive momentum associated with the operational efficiency programs that leverage our asset base and capabilities for providing services and products for offshore energy operations and subsea completions. These efforts continue to benefit us during the current upstream spending cycle that is consistent with the ongoing increase in global demand for energy. We are also focused on deploying our capabilities to grow our business in integrity management, survey services, mobile robotics, offshore wind installations, nuclear and other clean energy solutions.
The table that follows sets out revenue and profitability for the business segments within our Energy business. In the Subsea Robotics section of the table that follows, "ROV days utilized" is the number of ROV days for which we earn revenue during a specified period. "ROV days available" includes all days from the first day that a ROV is placed into service until the ROV is retired. All days in this period are considered available days, including periods when a ROV is undergoing maintenance or repairs. Our ROVs do not have scheduled maintenance or repair that requires significant time during which the ROVs are not available for utilization. "ROV utilization" percentage is defined as "ROV days utilized" divided by "ROV days available."
Three Months Ended
(dollars in thousands)
Mar 31, 2026 Mar 31, 2025
Subsea Robotics
Revenue $ 214,273 $ 205,976
Operating Income (Loss) 55,508 59,632
Operating Income (Loss) % 26 % 29 %
ROV Days Available 22,500 22,500
ROV Days Utilized 13,674 15,093
ROV Utilization 61 % 67 %
Manufactured Products
Revenue 143,648 135,037
Operating Income (Loss) 26,085 8,667
Operating Income (Loss) % 18 % 6 %
Backlog at End of Period 492,000 543,000
Offshore Projects Group
Revenue 135,376 164,941
Operating Income (Loss) 18,344 35,666
Operating Income (Loss) % 14 % 22 %
Integrity Management & Digital Solutions
Revenue 67,884 71,418
Operating Income (Loss) (998) 3,462
Operating Income (Loss) % (1) % 5 %
Total Energy
Revenue $ 561,181 $ 577,372
Operating Income (Loss) 98,939 107,427
Operating Income (Loss) % 18 % 19 %
Subsea Robotics. We believe we are the world's largest provider of ROV services and this business segment is the largest contributor to our Energy business operating income. Our ROV business, within our Subsea Robotics segment, reflects the utilization percentages, fleet sizes and average pricing in the respective periods. Our ROV tooling provides an additional operational interface between an ROV and equipment located subsea. Our survey services business provides survey, positioning, and geoscience services. The following table presents revenue from ROV services as a percentage of total Subsea Robotics revenue:
Three Months Ended
Mar 31, 2026 Mar 31, 2025
ROV 79 % 79 %
Other 21 % 21 %
During the first quarter of 2026, Subsea Robotics revenue increased as compared to the corresponding period of the prior year primarily due to higher average revenue per day in 2026, reflecting a mix of improved pricing and non-recurring benefits. During the first quarter of 2026, Subsea Robotics operating income decreased as compared to the corresponding period of the prior year primarily as a result of a decrease in ROV utilization, along with changes in the geographic mix and increased operating costs.
Fleet utilization was 61% in the three-month period ended March 31, 2026 as compared to 67% for the three-month period ended March 31, 2025. For the three-month period ended March 31, 2026, there was a decrease in ROV days utilized, primarily in the U.S. Gulf, when compared to the corresponding period in the prior year. Our ROV fleet use during the first quarter of 2026 was 67% in drill support and 33% in vessel-based activity, as compared to 62% in drill support and 38% in vessel-based activity in the first quarter of 2025. For each of the periods presented, we had a fleet of 250 work-class ROVs.
Manufactured Products. Our Manufactured Products segment provides distribution systems such as production control umbilicals and connection systems made up of specialty subsea hardware, along with clamp connectors and subsea and topside control valves. We also provide turnkey solutions that include project management, engineering design, fabrication, assembly and installation of autonomous mobile robotic technology to industrial, manufacturing, healthcare and warehousing markets.
Our Manufactured Products operating results in the first quarter of 2026 improved on higher revenue as compared to the corresponding period in the prior year primarily due to continued execution of higher-margin backlog and strong performance in our rotator products, partially offset with lower activity and changes in project mix in our Grayloc business. Additionally, we recorded an inventory reserve of $10 million in the first quarter of 2025 related to our theme park ride business.
Our Manufactured Products backlog was $492 million as of March 31, 2026 compared to $543 million as of March 31, 2025, with the decrease reflecting the timing of awards. Our book-to-bill ratio was 0.91 for the trailing 12 months ended March 31, 2026, as compared to 0.90 for the trailing 12 months ended March 31, 2025.
Offshore Projects Group. Our OPG segment provides a broad portfolio of integrated subsea project capabilities and solutions as follows:
•subsea installation and intervention, including riserless light well intervention ("RLWI") services, inspection, maintenance and repair ("IMR") services, principally in the U.S. Gulf and offshore Africa, utilizing owned and chartered vessels;
•installation and workover control systems ("IWOCS") and ROV workover control systems ("RWOCS");
•diving services;
•decommissioning services;
•project management and engineering; and
•drill pipe riser services and systems and wellhead load relief solutions.
Our OPG operating results decreased in the first quarter of 2026 as compared to the corresponding period of the prior year, on lower revenue. These declines are primarily due to an unusually strong first quarter of 2025, with the first quarter of 2026 reflecting more typical seasonality in the U.S. Gulf and decreased activity internationally.
We have several deepwater vessels under a mix of short-term charters where we can see firm workload and spot charters as market opportunities arise. We have a total of five long-term charters as of March 31, 2026: one that began in 2024, two that began in 2023, and two that began in 2022. We signed extensions in the third quarter of 2025 for three of these long-term vessel charters that began in the first quarter of 2026. These charters have staggered maturity dates with none extending past the first quarter of 2029. Depending on market conditions, we may add additional chartered vessels throughout the year to align with our strategy that balances vessel cost, availability and capability to capture work. We expect to do this through the continued utilization of a mix of short-term, spot and long-term charters.
Integrity Management & Digital Solutions. Our IMDS segment provides asset integrity management, corrosion management, inspection and nondestructive testing services, principally to customers in the oil and gas, power generation and petrochemical industries. We perform these services on both onshore and offshore facilities, both topside and subsea. We also provide software, digital and connectivity solutions for the energy industry.
Our IMDS operating results for the first quarter of 2026 were lower on decreased revenue, as compared to the corresponding period of the prior year primarily due to lower activity in Africa and Australia.
Aerospace and Defense Technologies. Our ADTech segment provides services and products, including engineering and related manufacturing in defense and space exploration activities, principally to U.S. government agencies and their prime contractors. Many of the services and products utilized in ADTech are applied technologies based on our core competencies and knowledge derived from decades of working in the offshore markets and solving complex problems in harsh environments.
Revenue and operating income (loss) information for our ADTech segment are as follows:
Three Months Ended
(dollars in thousands) Mar 31, 2026 Mar 31, 2025
Revenue $ 131,248 $ 97,151
Operating Income (Loss) 8,111 10,665
Operating Income (Loss) % 6 % 11 %
Our ADTech segment revenue for the first quarter of 2026 increased as compared to the corresponding period of the prior year primarily due to increased activity and margins in our Oceaneering Technologies ("OTECH") and Marine Services Division. Our ADTech segment operating results for the first quarter of 2026 decreased as compared to the corresponding period of the prior year primarily due to a one-time accrual recorded in connection with an agreement in principle with an ADTech customer to resolve a previously disclosed contract dispute. In the first quarter of 2026, we recorded $6.8 million in expense and recognized related current and long-term liabilities based on the proposed repayment schedule. Offsetting this amount was the release of a $1.3 million accrual that was recorded in a previous period related to the same matter. Although the agreement is subject to final approval by both parties, based on the information currently available, we do not expect any additional material obligations related to this matter. We anticipate settling our obligation over the life of the associated multi-year contract.
Unallocated Expenses
Our Unallocated Expenses (i.e., those not associated with a specific business segment) within operating expense consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance units and bonuses, as well as other general expenses plus general and administrative expenses related to corporate functions.
The following table sets forth our Unallocated Expenses for the periods indicated:
Three Months Ended
(dollars in thousands)
Mar 31, 2026 Mar 31, 2025
Operating expenses $ (49,262) $ (44,620)
Operating expenses % of revenue 7 % 7 %
Our unallocated operating expenses for the first quarter of 2026 were higher as compared to the corresponding period of the prior year primarily due to higher information technology costs.
Other
The following table sets forth our significant financial statement items below the income (loss) from operations line:
Three Months Ended
(in thousands) Mar 31, 2026 Mar 31, 2025
Interest income $ 5,061 $ 3,644
Interest expense, net of amounts capitalized (9,105) (9,075)
Equity in income (losses) of unconsolidated affiliates 277 362
Other income (expense), net 808 975
Provision (benefit) for income taxes 18,722 19,001
Interest income for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 increased primarily due to higher average interest-earnings cash balances in 2026.
In addition to interest on borrowings, interest expense includes amortization of loan costs and debt discount, and fees for lender commitments under our senior secured revolving credit agreement and standby letters of credit and bank guarantees that banks issue on our behalf for performance bonds, bid bonds and self-insurance requirements. Interest expense for the three months ended March 31, 2026 as compared to the corresponding period of the prior year was relatively flat. We recorded capitalized interest of $0.3 million and less than $0.1 million for the three months ended March 31, 2026 and 2025, respectively, related to the planned implementation of our new enterprise resource planning system.
Foreign currency transaction gains and losses are the principal component of other income (expense), net. In the three-month periods ended March 31, 2026 and 2025, we incurred foreign currency transaction gains (losses) of $0.7 million and $1.1 million, respectively, primarily resulting from foreign currency fluctuations in multiple countries. We could incur further foreign currency exchange gains (losses) in countries where we operate due to foreign currency exchange fluctuations.
Our tax provision is based on (1) our earnings for the period and other factors affecting the tax provision and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographical mix of our results. The effective tax rate for the three-month periods ended March 31, 2026 and 2025 was different than the U.S. federal statutory rate of 21%, primarily due to the geographical mix of revenue and earnings, changes in valuation allowances and uncertain tax positions, changes in permanent book and tax differences, and other discrete items. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur material tax consequences upon the distribution of such earnings.
Our income tax payments for the full year of 2026 are estimated to be in the range of $95 million to $105 million, which includes taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the profitability of such operations.
Liquidity and Capital Resources
We consider our liquidity and capital resources adequate to support our operations, capital commitments and strategic growth initiatives, as well as any opportunistic returns of capital to shareholders. Our material cash commitments consist primarily of obligations for long-term debt, purchase obligations as part of normal operations, and operating leases for land, buildings, vessels and equipment for the support and operation of our business. Our purchase obligations include agreements to purchase goods and services as well as commitments for capital assets used in the normal operations of our business. We are committed to maintaining strong liquidity and believe that our cash position, undrawn Revolving Credit Agreement (as defined below) and long-term debt maturity profile provide us with ample resources and time to address our liquidity needs, including potential future growth opportunities and working capital needs.
As of March 31, 2026, we had working capital of $788 million, including cash and cash equivalents of $607 million. Additionally, as of March 31, 2026, we had $215 million of unused commitments through our senior secured revolving credit agreement that we entered into in April 2022 (as amended by an Agreement and Amendment No. 1 to Credit Agreement, dated September 20, 2023, the "Revolving Credit Agreement"). Availability under the $215 million revolving credit facility ("Revolving Credit Facility") may be limited by certain financial covenants and the requirement that any borrowing under the Revolving Credit Facility not require the granting of any liens to secure any senior notes issued by us. The indenture governing the 2028 Senior Notes (defined below) generally limits our ability to incur secured debt for borrowed money (such as borrowings under the Revolving Credit Facility) to 15% of our Consolidated Net Tangible Assets (as defined in such indentures).
Our nearest maturity of indebtedness is $500 million of our 2028 Senior Notes (defined below). From time to time, we may engage in certain transactions in order to manage our outstanding debt prior to maturity, including repurchases via open-market or privately negotiated transactions, redemptions, exchanges, tender offers or otherwise. We can provide no assurance as to the timing of any such repurchases or whether we will complete any such repurchases at all. We do not intend to disclose further information regarding any such repurchase transactions, except to the extent required in our subsequent periodic filings on Forms 10-K or 10-Q, or unless otherwise required by applicable law.
Cash flows for the three months ended March 31, 2026 and 2025 are summarized as follows:
Three Months Ended
(in thousands) Mar 31, 2026 Mar 31, 2025
Changes in Cash:
Net Cash Used in Operating Activities $ (59,118) $ (80,718)
Net Cash Used in Investing Activities (15,329) (24,305)
Net Cash Used in Financing Activities (8,794) (15,615)
Effect of exchange rates on cash 1,837 5,106
Net Increase (Decrease) in Cash and Cash Equivalents $ (81,404) $ (115,532)
Operating activities
Our primary sources and uses of cash flows from operating activities for the three months ended March 31, 2026 and 2025 are as follows:
Three Months Ended
(in thousands) Mar 31, 2026 Mar 31, 2025
Cash Flows from Operating Activities:
Net income (loss) $ 36,107 $ 50,377
Non-cash items, net 36,339 38,877
Accounts receivable and contract assets (70,957) (61,266)
Inventory (6,638) (8,280)
Current liabilities (32,840) (90,411)
Other changes (21,129) (10,015)
Net Cash Provided by (Used in) Operating Activities $ (59,118) $ (80,718)
The decrease in cash related to accounts receivable and contract assets in the three months ended March 31, 2026 reflects the timing of project milestones and customer payments. The decrease in cash related to inventory in the three months ended March 31, 2026 was primarily due to higher activity and related increases in our Manufactured Products inventory. The decrease in cash related to current liabilities in the three months ended March 31, 2026 reflects the timing of vendor payments and payout of incentive compensation accruals.
Investing activities
Our capital expenditures of $17 million were lower during the first three months of 2026, as compared to $26 million in the first three months of 2025, primarily due to higher capital expenditures in our Subsea Robotics segment in the first quarter of 2025 related to our survey services business.
In 2026, we expect our organic capital expenditures to total between $105 million to $115 million, exclusive of business acquisitions, which we expect to fund using our available cash.
Financing activities
In the three months ended March 31, 2026 and 2025, we used $8.8 million and $16 million, respectively, of cash in financing activities primarily due to the payment of tax withholding related to vesting of stock awards in both periods and the repurchase of approximately 0.5 million shares of our common stock for approximately $10 million in the three months ended March 31, 2025.
In February 2018, we completed the public offering of $300 million aggregate principal amount of 6.000% Senior Notes due 2028 (the "Existing 2028 Senior Notes") and on October 2, 2023, we completed a private placement of $200 million aggregate principal amount of additional 2028 Senior Notes (the "New 2028 Senior Notes" and, together with the Existing 2028 Senior Notes, the "2028 Senior Notes"). As of March 31, 2026, we had long-term debt in the principal amount of $500 million outstanding consisting of our 2028 Senior Notes. We pay interest on the
2028 Senior Notes on February 1 and August 1 of each year, and the 2028 Senior Notes are scheduled to mature on February 1, 2028. In the three months ended March 31, 2026 and 2025, we did not repurchase or redeem any of the 2028 Senior Notes. For more on the 2028 Senior Notes, see Note 6-"Debt" in the Notes to Consolidated Financial Statements included in this quarterly report.
As of March 31, 2026, we had $215 million of unused commitments under our Revolving Credit Facility. As of March 31, 2026, we were in compliance with all of the financial covenants set for in the Revolving Credit Agreement. For more on our Revolving Credit Facility (including the financial covenants thereunder), see Note 6-"Debt" in the Notes to Consolidated Financial Statements included in this quarterly report.
Share Repurchase Program. In December 2014, our Board of Directors approved a plan to repurchase up to 10 million shares of our common stock on a discretionary basis. Under this program, which has no expiration date, we repurchased 2.0 million shares of our common stock for approximately $100 million in 2015. We did not repurchase any shares from January 2016 through August 2024. In the year ended December 31, 2024, we repurchased 0.8 million shares for approximately $20 million. In the year ended December 31, 2025, we repurchased 1.8 million shares for approximately $40 million. In the three months ended March 31, 2026, we did not repurchase any shares. From the inception of this program through March 31, 2026, we have repurchased approximately 4.6 million shares of our common stock for a total cost of approximately $161 million. As of March 31, 2026, we retained 11 million of the shares we had repurchased through this and a prior repurchase program. We account for the shares we hold in treasury under the cost method, at average cost. The timing and amount of any future repurchases will be determined by our management. We expect that any additional shares repurchased under the plan will be held as treasury stock for possible future use. The plan does not obligate us to repurchase any particular number of shares.
Off-Balance Sheet Arrangements
We have not guaranteed any debt not reflected on our Consolidated Balance Sheets as of March 31, 2026, and we do not have any off-balance sheet arrangements, as defined by Securities and Exchange Commission's rules.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. These principles require us to make various estimates, judgments and assumptions that affect the reported amounts in our financial statements and accompanying notes. We disclose our significant accounting policies in Notes to Consolidated Financial Statements-Note 1-"Summary of Significant Accounting Policies" in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2025, in Part II. Item 7. "Financial Statements and Supplementary Data-Note 1-Summary of Significant Accounting Policies."
For information about our critical accounting policies and estimates, see Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" in our annual report on Form 10-K for the year ended December 31, 2025. As of March 31, 2026, there have been no material changes to the judgments, assumptions and estimates upon which our critical accounting policies and estimates are based.
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