This article first appeared on GuruFocus .
Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record quarterly revenue of $714.1 million, up 24.4% year-over-year, and highest-ever quarterly EBITDA of $119.2 million, up 35%.
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EBITDA margin of 16.7% exceeded the high end of the 15.5%-16.5% guidance range.
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Achieved industry-leading market share: 29.7% in North American land rigs, 40.6% in Canada, and 25.5% in U.S. land rigs.
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Strong growth in U.S. production chemicals (JChem Catalyst) with a 21% market share, and AES Completion Services revenue grew over five times since acquisition.
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Successful refinancing reduced annual interest costs by ~$2 million and extended debt maturity to 2033, maintaining leverage at 1.15 times.
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Improved cash conversion cycle to 95 days from 112 days year-over-year, and strong return on capital employed of 22%.
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Continued share buybacks with 780,000 shares repurchased in Q2 and accelerated post-quarter purchases.
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Positive outlook for 2027 with higher activity levels in Canada and U.S. due to infrastructure and LNG demand.
Negative Points
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Cost pressures and supply chain challenges from the Iran conflict impacted the business, requiring significant effort to manage pricing.
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Free cash flow conversion was only 21% in Q2 due to strategic working capital investments, down from 37% trailing 12 months.
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Cash flow from operations decreased to $60 million from $69 million in Q1, driven by working capital needs.
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Offshore Gulf of America production chemicals business is still in early stages, with margins below corporate average and long timelines for meaningful contribution.
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Heavy oil trials are complex and may take months or years to convert into awards, with no immediate revenue impact.
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International expansion opportunities in the Middle East have been delayed indefinitely due to the Iran conflict.
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The company remains cautious about raising margin guidance despite recent outperformance, citing market volatility.
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Total debt increased by $21 million in Q2, and net draw on credit facility rose to $172 million post-quarter.
Q & A Highlights
Q: The margin in the quarter was quite strong at 16.7%. Can you parse out the strength of that margin and what led margins to reach this level when they are normally a little bit seasonally weaker? (Keith Mackey, RBC) A: The 16.7% margin included a one-time project in a Canadian division, a benefit from a weaker Canadian dollar, and a bump from standard cost accounting on increased product values. Excluding these one-timers, the margin would have been in the 16% to 16.5% range. The bigger takeaway is that all divisions grew into their higher SG&A, and we expect to live at the higher end of our 15.5% to 16.5% guidance range and potentially beyond. (Tony, CFO)
Q: What's keeping you from raising your margin guidance to 17% or 17.5% given you've exceeded the top end of the range in seven of the last 10 quarters? (Keith Mackey, RBC) A: We are avoiding misleading investors when we don't have a clear-cut path to a higher level. When we achieved steady 17% margins in 2024, the market was stable. The current Middle East conflict has created shortages, shipping problems, and price fluctuations, making it difficult to cost products. We are proud of the team's work to navigate these challenges, but we are not ready to raise guidance. (Tony, CFO; Ken, CEO)
Q: How should we think about margins through the back half of the year given incremental costs? (John Gibson, BMO) A: You should expect more of the same, meaning the higher end or higher half of our 15.5% to 16.5% EBITDA margin target range. (Tony, CFO)
Q: Of the growth opportunities (US onshore production chemicals, offshore, heavy oil), which could come first? (John Gibson, BMO) A: US onshore market share gains are the number one thing we are having everyday success with, showing up in real-time results. Offshore and heavy oil are longer-term, with trials ongoing, but we will update when we have wins. The timelines for those are measured in months and years, not days and weeks. (Ken, CEO)
Q: What would incremental margins be on the SAGD and U.S. offshore work relative to your base business? (John Gibson, BMO) A: When ChampionX was a stand-alone public company, they talked about those margins being in the 20% to 30% range, which is definitely higher than our current corporate average. (Tony, CFO)
Q: Of all the trials and projects you're looking at, is there any play or project you're particularly excited about? (Jonathan Goldman, Scotiabank) A: The clear number one is US land production chemicals. We are taking market share every day and looking at big opportunities. We have big chunks of business coming through all the time, and that business is hitting on all cylinders. That will be the thing we see growth in first and most steadily. (Ken, CEO)
Q: Are the share gains in the production chemicals business coming at the expense of specific competitors? (Jonathan Goldman, Scotiabank) A: There have been changes in the market, and the bigger we get, the more credibility we gain, which gets us onto more bids. In Canada, we are about a third of the conventional production chem market. In the Permian, we think we are a much higher percentage than the 21% we rank overall in North America. About 90% of our revenue comes from sizable companies ($10 billion to $900 billion market cap) that are gaining share, and we support them well. (Ken, CEO; Tony, CFO)
Q: In terms of M&A, is there anything missing in your portfolio from a product or region perspective? (Jonathan Goldman, Scotiabank) A: We look at everything, but we don't believe we have a hole in our arsenal. We have the full slate, and there's nothing burning a hole. We are content to continue buying our shares because at these levels, that's the best thing we can do with our capital. If we found high-quality businesses that could advance our three key strategic growth opportunities, we would take a serious look. (Ken, CEO; Tony, CFO)
Q: On the offshore business, are the current margins accretive or dilutive, and at what scale do you start to see benefits? (Tim Monticello, ATV Coremark) A: We are not achieving 20% to 30% margins in that part of the business yet because we have built a world-class offshore lab and hired top talent. Those extra costs are higher than current revenue levels require. We made a conscious decision to invest in growth. As we get through the next few years, we should start getting to and through our corporate average EBITDA levels. (Tony, CFO)
Q: What is your revenue split between production chemicals and drilling fluids, and how could that mix trend? (Tim Monticello, ATV Coremark) A: It's currently 53% production chemicals and 47% drilling fluids. The growth opportunities are more geared towards production chemicals, but the drilling fluids divisions have been winning big pieces of business and increasing their "magic number" (revenue per rig per day), which has grown 40% over the last three years. (Tony, CFO; Ken, CEO)
Q: Is there any appetite for acquiring technology verticals or software platforms like ChampionX had? (Tim Monticello, ATV Coremark) A: We have been focused on the chemical side. If it related to what we're doing downhole with chemistry, it would be interesting. We are not spending a lot of time looking at things outside the breadth of what we do. We focus on financial profiles like ROCE, ROIC, and free cash flow conversion. (Ken, CEO; Tony, CFO)
Q: Can you walk me through what you're seeing with respect to volumes on a per lateral foot basis? (John Daniel, Daniel Energy Partners) A: Our "magic number" (revenue per rig per day) is trending up, up 40% over the last three years. As you go further
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
