Innovex International Inc (INVX) 2025 Q3 法說會逐字稿

Good morning and welcome to Innovex's third-quarter '25 earnings call. At this time, all participants are in listen-only mode, and there will be a question-and-answer opportunity at the end of this call. As a reminder, this call is being recorded.

At this time, I would like to turn the call over to Avinash Cuddapah, Senior Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us on today's call. An updated investor presentation has been posted under the investors tab on the company's website, along with the earnings press release.

This call is being recorded and a replay will be available on the company's website following the call.

Before we begin, I would like to remind you that Innovex's comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause Innovex's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements.

Please refer to the third-quarter '25 financial and operational results announcement that we released yesterday for a discussion of forward-looking statements and reconciliations of non-GAAP measures. Taking on the call today from NFX, we have Adam Anderson, Chief Executive Officer, and Kendal Reed, Chief Financial Officer.

I would now like to turn the call over to Adam Anderson.

Thanks, Avi.

Good morning and thanks to everyone for joining us today.

Before I begin, I want to recognize our incredible team whose focus and commitment drove meaningful progress across all of our strategic initiatives in the third-quarter. On today's call, I'll discuss our third-quarter results and highlight the key developments shaping our performance, starting with continued market share gains, successful integration of the Citadel acquisition, and progress on key operational initiatives, particularly in our sub franchise.

After these operational and commercial updates, I'll then turn the call over to Kendal, who will review our financial results and provide more detail on our balance sheet, capital allocation priorities, and fourth-quarter outlook.

The third-quarter demonstrated the strength and resilience of the Innovex industrial platform. Our diversified portfolio of big impact small ticket products enables us to deliver exceptional service for our customers and strong returns for shareholders through all phases of the cycle. Our capital life business model requires just 2% to 3% of revenue to fund organic growth.

Low capital intensity enables high free cash flow conversion. In fact, we converted approximately 84% of our adjusted EBITDA into free cash flow in the quarter.

Strong free cash flow provides us with optionality to fund organic growth, invest in innovation, selectively add to our portfolio with acquisitions, and repurchase shares, all while generating strong financial returns for our shareholders.

Turning to Q3 results, I'm encouraged by our team's strong execution in what remains a challenging market environment.

A revenue of $240 million for the third-quarter represented an increase of $16 million sequentially.

Our North America land business grew approximately 10% sequentially, reflecting strong execution and resilience of our North American operations. While broader US land activity remains soft, Innovex once again outpaced the market, driven by market share gains in our drilling enhancement of well construction portfolios and the impact of a full quarter of contribution from Citadel.

Citadel continues to perform well, broadening our market position and driving meaningful cross-selling opportunities which will drive organic market share growth over time.

A key part of our thesis for Citadel was leveraging our international platform, a key tool in our proven M&A playbook. Although Citadel already had some exposure in the international markets, on a combined basis, we've been able to further expand its reach, a critical step in expanding market share in high value international markets.

Our international and offshore revenue grew 4% sequentially despite softness in some of our key markets such as Mexico and Saudi Arabia.

Despite these headwinds, I'm very pleased with our strong execution. Q3 marked the largest ever quarter for our subsea services related revenue in the US offshore market, highlighting our team's renewed focus on maximizing fixed asset utilization to support product installations. In the Middle East, we were able to be part of the longest well ever drilled. The 54,000 ft well utilized multiple Innovex technologies including the ripstick, swivel master, casing swivel, and a custom designed multi-stage liner system. This custom solution for a major national oil company is a prime example of the solutions Innovex's broad platform can deliver for our customers.

We also recently inaugurated a new manufacturing facility in Saudi Arabia, further solidifying our local content in one of our most important international markets.

Momentum is also building in Asia, with several significant orders received for subsidy equipment in Q3 and scheduled to be delivered in '26 and '27. Our Latin American market remains resilient thanks to market expansion and execution on revenue synergy opportunities.

Innovex continues to grow its market share, strengthening its position as a leading supplier of advanced completion solutions. In the third quarter, we grew our presence in Argentina with sales of our dissolvable plug technology.

We still view Argentina as a market with significant potential for our entire product suite, as there are applications for a majority of our existing products in the [vari the field]

Additionally, in Mexico, we were able to successfully combine the installation of an XPak Expandable Liner Hanger system, a legacy driller product, with citadel float equipment, another example of our execution on cross-selling opportunities.

This early win exemplifies the kinds of synergy opportunities we are exploiting across the platform.

A key part of our investment thesis for the merger with Dril-Quip was that we could drive organic share growth by improving operational execution and the customer experience, particularly on on-time delivery.

We continue to make progress this quarter, improving on-time delivery to 76%. As expected, strong execution is now driving market share growth. For instance, we recently announced an exclusive subsea wellhead supply agreement with one subsea. This partnership makes Innovex the exclusive wellhead provider on bundled subsea packages, giving us access to the significant portion of the global subsea wellhead market currently served by one subsea.

There will be a phased approach to execution. We expect our first orders to come in '26 with deliveries to begin in '27. Separately, we see emerging opportunities in the Asia Pacific markets which we believe will drive further growth for our subsea wellhead franchise in '26.

Overall, Q3 was a quarter of solid execution and progress on our long-term strategic initiatives. We added significant cash to our net cash balance sheet. We continued to integrate Citadel successfully, driving share gains in key product lines, improving reliability for our customers, and positioning our subsidy business for profitable growth in '26.

These efforts give us confidence in our ability to keep expanding adjusted even margins towards our long-term goal of 25%, which should drive a step change in financial returns for our shareholders. I will now turn the call over to Kendal to go over our financial results in more detail.

Thanks, Adam, and good morning, everyone. Just as a general reminder before we review the Q3 results, we closed on the merger with Dril-Quip on September 6, 2024, and Innovex was the accounting acquirer in the merger, meaning that the Q3 '24 comparative period results reflect legacy Innovex results for the full period prior to the closing of the merger and the combined company results, including Dril-Quip results for September 6 through September 30, 2024.

Our third-quarter revenue was $240 million which is an increase of 58% year-over-year and an increase of 7% sequentially.

Adjusted EBITDA Q3 was $44 million, which is a decrease of $3 million sequentially. Adjusted EBITDA margin for Q3 decreased sequentially to 18% from 21%. The decline in margin is mainly attributed to increased near-term expenses associated with our integration efforts, including the exit of the Eldridge facility.

As we have discussed previously, we believe exiting this facility unlocks the first major step in our aspirations of mid-20s adjusted EBITDA margins. While we are confident in achieving these goals, the progress will be lumpy as the transition of facilities and legacy products will still lay on margins for a few more quarters.

Importantly, however, these near-term costs are far outweighed by the $87 million of net proceeds generated by the sale of the facility. We evaluate our revenue geographically by separating our shorter cycle onshore US and Canadian operations, which we refer to as NAM land, from our longer cycle international and offshore operations, which include the Gulf of America.

Our Q3 NAM land revenue of $132 million was up 10% sequentially driven by growth in US land, primarily as a result of one full quarter of Citadel revenue and our drilling enhancement portfolio continuing to gain share in the US land market.

Our US land business continued to outperform the broader US market, which remained under pressure during Q3. Our international and offshore revenue during the third-quarter of '25 was $108 million an increase of 4% sequentially. We still see softness in a few of our key international markets such as Saudi Arabia and Mexico. However, strong performance in our other Middle Eastern markets helped offset these headwinds.

Our Q3 cost of sales, exclusive of depreciation and amortization, increased by $11 million sequentially to $164 million maintaining flat gross margins quarter-over-quarter, despite headwinds from ongoing integration initiatives in a challenging operating environment. This quarter we began to feel the impact of higher tariffs as changes in US tariff policy, particularly the phase in of broad steel tariffs and the increase in those tariff rates in June, began to impact our business.

We continue to manage supply chains and customer contracts to minimize any exposure to tariffs and remain confident in our ability to successfully offset these headwinds, consistent with our historical track record of maintaining margins in dynamic cost environments.

Selling general and administrative expenses for the third-quarter increased by $7 million sequentially to $36 million. This incremental increase is driven by the inclusion of a full quarter of Citadel results as well as temporary costs associated with our ERP integration project and facility consolidation efforts as we exit the Eldridge facility. Free cash flow for the third-quarter was $37 million a sequential decrease of $15 million.

As a reminder, last quarter, free cash flow benefited from the proceeds received from our sub tree divestiture. Year-to-date through September 30, 2025, we have generated $112 million of free cash flow, a conversion rate from adjusted EBITDA to free cash flow of approximately 83%. Under normal business conditions, we aim to convert 50% to 60% of our adjusted EBITDA into free cash flow.

During periods of slower activity, however, we typically convert an even higher percentage of our adjusted EBITDA into cash, as evidenced by our strong cash flow performance in '25.

Capital expenditures in the third-quarter were $12 million representing approximately 5% of revenue. The sequential increase is due primarily to facility consolidation and integration efforts. We estimate approximately $4 million of our Q3 CapEx spend was one time in nature related to these integration efforts. We expect CapEx to remain slightly above our historical level of 2% to 3% of revenue through the end of the year as we continue staging operations at the two new facilities which are replacing Eldridge. However, this marginal increase in CapEx is far outweighed by the net proceeds of the sale of Eldridge. We expect CapEx to return to more normalized levels in '26.

After closing on the sale of Eldridge, our balance sheet is drawn with cash equivalents totalling $163 million and nothing drawn on our revolving credit facility.

Our total debt as of September 30, 2025 was $26 million consisting entirely of finance leases. Our return on capital employed for the 12-months ended September 30, 2025 was 13%, which remained flat compared to the 12-months ended June 30, 2025. We place a heavy emphasis on returning this number to the high teens, in line with Innovex's historical average of 18% pre-merger.

Turning to our outlook for the fourth-quarter, we expected just a of $42 million to $47 million and revenues of $235 million to $245 million assuming generally flat activity across our key markets.

We expect our ongoing integration efforts, tariff uncertainty, and product mix with subsea product deliveries to lay on margins for at least another quarter. But as discussed, we believe the exit of the Eldridge facility will unlock meaningful margin improvement in '26.

Following the Eldridge sale, Innovex once again ends the quarter in a strong net cash position, reinforcing our ability to be opportunistic in both organic and inorganic growth. Our M&A pipeline remains active with several high-quality capital efficient businesses under review that align with our big impact small ticket strategy.

We're looking forward to the coming quarters as we exit Eldridge and continue to execute on our proven playbook. I'll now turn the call back to Adam.

Thanks, Kendal. To close, I want to reiterate how proud I am of the progress our team is making. Despite persistent volatility in markets, we are executing on our strategy, strengthening our balance sheet and positioning Innovex to the next phase of growth.

The successful close of the Eldridge sale early commercial win from Citadel.

Steady improvement in on-time delivery performance and our new partnership with One subsea all underscore the quality of the Innovex platform. We're building a business that can perform across cycles, leveraging our strong balance sheet, disciplined capital allocation, and a differentiated portfolio of technology driven high return big impact small ticket products.

As we move towards the end of the year, we remain focused on continuing to enhance the customer experience, capturing additional market share and driving sustained margin expansion for our long-term goal of 25%.

Thank you once again to our employees, customers, and shareholders for your trust and partnership, operator, we can now open the line for questions.

Thank you. We will now begin a question-and-answer session.

(Operator Instructions)

Keith Blackman, Pickering Energy Partners. Please go ahead.

Hey, good morning, and congrats on another strong quarter of free cash flow generation.

So last quarter you noted a downfall operational issue. I believe it was kind of a short-term product specific headwind.

On the international offshore side with a particular customer, are there any corrective actions that you've kind of implemented there and how should we kind of think about that going forward, just any additional color you can provide there?

Hey Keith, thanks for joining the call and thanks for the question. We, yeah, so we have done a lot of work over the last couple of months to make some pretty robust improvements to that product to address the issue that we saw. We got through all the qualification and did some customer witnessing of that. We're in a good spot with it. We've gotten a green light to go run three jobs with that tool. The first one should happen in the next week. We're on location with tools just waiting to run them in the hole. And then from there we should start to build back to where we were.

I think I would emphasize that, hey, in our business we periodically have a couple of these bumps in the roads, and one of the key ways that we have differentiated ourselves and built relationships with customers is to do a really great job at identifying what the root cause of the issue is building a better, more robust. And or service to satisfy them and typically come out of it in a stronger position than we went in. So short-term definitely a little bit annoying and staying on results a little bit in Q2, Q3, even a little bit into Q4, but in Q1 we should see things starting to get a little bit better.

Okay awesome it's very helpful and then just kind of a follow-up here on the, one that's the exclusive wellhead agreement that you guys signed up, can you kind of frame typical lead times from award to delivery?

I know you said that you're kind of expecting some orders in '26 and some of that shows up in '27, so how should we kind of think about sequencing just any more color you can give there on when that should be more impactful to you.

Yeah, so just to say a little bit about that agreement in general, we're really excited about the one subsea partnership. Obviously, they're a really important player in the subsea space, and this is going to really set us up well to partner with them to provide all of the wellheads and should allow us, should provide an avenue for us to sell other products below the wellhead, particularly in these integrated service contracts. Innovex Dril-Quip had historically really struggled to compete in.

So, I think it's opening up a whole new market opportunity for us over the next couple of years. We will both be supplying the legacy Innovex / Dril-Quip Wellhead systems. In fact, we have a delivery we're making in Q4, might bleed a little bit over into Q1 for a project we've been working on with one sub in Asia. But the biggest part of this, the biggest revenue driver for this agreement in the near term will really be helping take over some of OneSubsea's legacy sub wellhead business.

We expect to get the first order maybe late this year, more likely first part of next year. We those orders probably take nine months, maybe a year to be on the safe side between when we start a manufacturing when we get the order and when we deliver and bear in mind, we shifted to an Invoicing or recognizing the revenue once we deliver the product rather than along the way through manufacturing.

So, we should get a few orders next year. Probably won't really see revenue start to come in until '27 and it might be '28 before it's kind of fully up and running is our expectation, but exciting agreement for us, and I think it really helps both Innovex as well as OneSubsea be more competitive in that space.

Awesome, that's very helpful. I will, turn it back. Congrats again on the quarter.

Thank you.

Don Krisp, Johnson Rice. Please go ahead.

I wanted to start with the increase in margins. I mean, can you kind of walk around the world? You've been doing a lot of work on consolidating operations, whether it be in the Middle East or Vietnam or wherever else around the world.

Is that a bigger factor in boosting margins than just closing Eldridge, or am I kind of thinking about that wrong? And can you just kind of expand on what the puts and takes are and kind of boosting your margins here over the next couple quarters?

Yeah, it's a really good question. So maybe the way I would frame it is Eldridge is really the first step to be able to do some of that meaningful facility manufacturing footprint consolidation that you're mentioning there. So, the way that we're thinking about it is the move out of Eldridge, which we expect to be substantially complete by the end of the year, but we'll be finishing up some projects for different customers and things over the course of Q1 so say fully complete by the end of Q1, that'll unlock meaningful savings just directly related to that footprint right being in a smaller facility, all those different things. And that could be on the order of a percentage point of margin improvement just related to Eldridge itself.

So that'll phase in over the course of Q1, fully impact Q2 of next year is how we're thinking about that. But then you're right, that unlocks a few different things which is going to allow us to further consolidate the manufacturing footprint into a few different facilities that can be much more fully utilized, drive all the under absorption out of the system.

As well as further turn the SG&A cost structure as we do some of those consolidations.

So again, first step being Eldridge, but that that is going to be a big improvement as well. So probably similar amount of improvement from that step two, let's call it facility consolidation once we're able to get out of Eldridge so between those two things, I think that's going to be sufficient to get us back into call it the low 20s EBITDA margins at roughly current revenue levels, and then we talk about the 25% EBITDA margin target.

I think to get there we'll need a little bit of cooperation from the market, in particular improvement in some of our key places like Saudi and Mexico that have been really depressed this year. If we see some improvement there that would help us get to that that long-term 25%.

I appreciate all that color. It's it's a big job. On Saudi in particular, this a couple of days ago we saw a couple rigs that were suspended that are now being notified that they're going back to work in kind of early '26.

How do you kind of see Saudi progressing and, are you in line to get kind of any of those? Contracts directly or are you working through kind of third parties, whether it be a house or SOB or anybody else in the region to kind of drive revenue in that, in the Saudi particular region.

Yeah, I'll answer the second part and then come back to the first one. So, our model in Saudi is mostly directly to the NOC there, maybe 70% or 80%. We do some work through the larger service companies as well. When we work for the service companies though, they're, it still has to be qualified by the end user. So we're sometimes selling through the service companies, but that's really a market that the NOC is still very involved with driving whose product goes in the hole.

As far as activity, yeah, I was there a few weeks ago when we inaugurated our manufacturing facility, and we did get good, we got good vibes coming from a [ramco] that we're going to pick up some rigs and get busier, but I think we're in a little bit of wait and see mode, given the way it has trended over the last year and a half.

Yeah, we've been getting more and more positive signs that it is we're going to see it ramp up and that's kind of like certainly in the gas, certainly unconventional, but it sounds like offshore oil as well as some onshore oil and some workover stuff where we really like the onshore oil stuff has really been our core market over the years. I think all that will start to get a little bit better in '26. So, I think that that's pretty exciting for us.

Particularly as we get this operational issue I talked about earlier, resolved that should set us up well for Saudi to be a return to more, it's been a really growing market for us over the last decade, and I think we can kind of see a return to that over the next year or two.

Okay, and the last one for me is, obviously you have your share buyback in place and you have a lot of cash on the balance sheet. Is is the preference to go after M&A and and instead of, buying back stock or putting in a dividend or anything like that? And what does that M&A market look like now? I know a lot of private smaller guys are hurting in the current environment. Is that the preference to do M&A?

Yeah, I mean, I think as we've said all along we're kind of balancing shareholder returns or against pursuing a creative M&A, and if you just look at Where we've deployed capital over the last year, I think that would tell you that we really do like the M&A space. I think it's a way that allows us to grow in a very accretive manner and is beneficial to shareholders over the long run. So, if you look over the last twelve months, we've deployed more than $190 million worth of capital towards acquisitions, and we've been able to find good businesses that we feel like complement our strategy and if you look at the transaction level returns to capital for those meaningful deals we've done, it's nearly 20%.

So, these are highly creative investments we're talking about. And as long as there's still a good robust pipeline of those opportunities, I think that's where we're inclined to look. We mentioned on the call we do have a few very high-quality businesses that are currently under review, but as with M&A, it's really impossible to handicap whether any individual transactions going to get done or what the timing would be, but having that really strong net cash position like puts us in a position to be opportunistic, let's say, and also to offer sellers a high degree of certainty of closing if we are able to reach a deal, which can be a big advantage in this type of market environment. So, I think that's long story short, that's why you see us keeping a little bit of powder dry for the time being.

I appreciate the colon. I'll turn it back.

Derek Podhaizer, Piper Sandler. Please go ahead.

I just wanted to go back to your mid 20% target that you that you've laid out for about over a year now, maybe just a more color around timing around that when should we expect to reach that number and then kind of separately, but when we think about the ramp up of the one subsea business, how should we, how should this complement this mid 20% margin target you talk about ramping up the business in '27, [2028] should we expect this to be accretive that long-term goal that you have?

Yeah, so maybe I'll, thanks Eric. I'll hit kind of the first part of the question and then Adam can kind of weigh in on the subsea pieces, but in terms of timing, as we've said, really getting out of Eldridge is that first step that'll phase in over the course of Q1 and then kind of right on the heels of that we'll be doing some of these other initiatives that probably phase in over, Q1s and maybe first part of Q2. So, kind of middle of next year I would think from a cost rationalization perspective we're going to be in a spot where, and obviously there's. 1,000 (technical difficulty)

You know that go into this, but if we're at similar revenue levels, I think we'll be able to do enough on the cost side to get to that low 20s margin percentage. And then I think beyond that it's going to be dependent on some of these places we've talked about like Saudi and Mexico and what do we see there in terms of a little bit of improvement to get to that mid-20s level so. Maybe a short way to say it is get to call the low 20s and feel like it's within our control and then a little bit of help from the market next year could get us back to that mid-twenties level.

Yeah, and then with respect to one, go ahead. I was just going to wrap around that say with respect to one subsea, the subsea stuff is generally a little bit diluted to that margin target today, I think with some of the actions we're putting in place that can get more to being closer to average, but it's always going to be a little bit because of the nature of that business, I think it's always going to be a little bit lower than our average margin. I think on the one subsea thing specifically that should get to, my guess is it will short-term be a little bit diluted, longer-term will probably be in that similar to that that long-term 25% margin target.

Got it. Okay, that's super helpful. So, I, you've already talked about Saudi return to work, obviously the unconventional basements that we really see, picking up here, UAE, Argentina, but also the other piece of, I think the puzzle next year is this offshore inflection in the second half of '26. Maybe could you help re-educate us as far as your exposure position as you think about drilling and completion for offshore markets picking up as we work towards the back half of next year and how impactful that can be for you guys?

Yeah, sure, so I think if you just Look at the most important markets for us offshore.

The biggest is the US offshore.

Second would probably be Brazil and then followed by the North Sea and then then Asia and Africa today is pretty small for us, but I think provides a pretty large growth potential.

As far as activity ramping up, I mean, I think it might get a little bit better next year. I'm a little bit.

Skeptical that it's going to be like a tremendous rebound the back half next year, but I do think it'll pick up a little bit from where we're at today.

Got it. Very helpful. Turn it back.

Eddie Kim, Barclays. Please go ahead.

Hey, good morning. I just want to circle back on the one subsea agreement. Could you just talk about how this came about and how impactful it is for you? I thought, or I was under the assumption that legacy Dril-Quip was being selected as the wellhead provider even on bundled packages previously, unless I'm mistaken there, and Except, what sort of brought one subsea kind of over the fence in terms of finalizing this exclusive partnership? Was it the improvement in on-time deliveries over the past several quarters or something else? Just any thoughts that would be great.

Yeah, so there's a lot there, so I think this is really the culmination of many years of work from the legacy drill team with one subsidy. So we're definitely the beneficiary of a lot of work that has gone into this. There had been a like a frame agreement for some time, but I think the only meaningful award is this award in Asia, meaningful amount of revenue work that been done is this work in Asia I mentioned a little bit earlier in the call, one specific project for kind of an independent out in one of the less active markets in Asia, so it hasn't been material to the legacy results at all.

I think going forward, it could help us. I mean I'd be thinking about it in a once we '27, '28 that it could represent 2% or 3% of revenue would be a really good outcome for us, that kind of order of magnitude, at least to start with and over time, maybe it could grow from there. So it's exciting. It's a really nice.

League of Growth for us.

I think what really brought maybe to answer your last part of that, I don't want to speak for one subsea, but I guess I will to some extent is they've got a wonderful subsea franchise. I think their wellhead business has been a little bit more of a struggle over the last few years.

And then with the I think looking at art we really have the best technology in the space and so I think they saw that hey if they're really going to, we were together going to be as effective as we could be in the market if we pair their great subsea technology with our leading wellhead technology that would be a really powerful package and could help both companies be really successful.

Got it.

Thanks for that. My follow-up is just on your business in Saudi Arabia, you mentioned some softness here in the third-quarter, but as was mentioned earlier in Q&A that there's some reports of suspended rigs in Saudi going back to work. So it feels like the outlook is better in Saudi for next year. You just mentioned that historically your exposure has been on oil, onshore oil in that market.

Do you expect to have significant market penetration into the unconventional gas as that ramps up or is, do you see your exposure continuing to be kind of on the on the onshore oil side in that country?

Yeah, so it's worth talking about a little bit more. So, our when we first entered Saudi a decade ago, we really focused on the conventional oil, kind of their Arab oil activity. We did do work.

We have over the years done work in other areas, so it's not to say that we don't provide products in the unconventional gas offshore, but it's historically been more than 50% has been the conventional oil. Over the last over this year, we've done a lot of work. We've run a number of liner hanger systems in the conventional gas. We've run a lot of legacy Innovex cementing tools in the unconventional. Then we've got a trial we're expecting to get late this year or early next year with the trench foot technology from Citadel that will be really impactful in the unconventional space. So, we will, we absolutely for a number of years have been working on diversifying that revenue stream.

And I think that will over the next five years be a really good avenue for growth as we kind of replicate the success we had on the onshore oil in a couple of those other really important markets within the kingdom.

Okay, great. Thanks for that call. I'll turn it back.

Joshua Jayne, Daniel Energy Partners. Please go ahead.

Good morning. Thanks for taking my questions. First one is, could you just update us on how integration is going with Citadel, any success yet with penetrating their customer base and just maybe elaborate on the plans for integration moving forward over the next, let's call it six to twelve months.

Yeah, so I think it's going well. I think that that's a great deal. I think for both Innovex as well as Legacy Citadel, it added a couple of really nice niche technologies such as the trench foot technology that's been really growing nicely in the US continues to grow. I think we've mentioned on the very maybe when we announced the deal that they've been working on a qualification with one of the largest drillers in West Texas and we've consistently picked up more work with that driller.

Over the last couple of months as we've owned Citadel, I think as far as the mechanics of the integration, that's all largely complete. I think the next stage of the integration is really about combining the best of both the technology from both sides and the legacy Citadel products to make a better than product that can really allow us to extend our market share lead in North America seeing tools and really help us. Grow that product portfolio internationally.

We mentioned, I think I already mentioned that working together, this was already in progress. I think we've helped accelerate getting trench foot trial in the Middle East. We've run a fair bit of Citadel legacy citadel equipment in Mexico underneath some expandable liner hangers that were a legacy broker product and a couple of other areas we've had nice success of being able to cross sell products across some of the legacy portfolios.

Okay, thanks. And then as my follow-up, you talked only briefly about tariffs. Could you just give an update on how they're impacting business today? I know they're consistently a moving target, but maybe how the, how much success you're having with the ability to pass increases along to customers and maybe just some things that you're doing to ultimately mitigate the impact of everything that's going on right now.

Yeah, definitely. I mean, it's hard to give a succinct answer like you said, it's very much a moving target with tariff policy and then from the Innovex perspective, we do many different things, so you kind of have a lot of complexity in the supply chain around different products, different vendors, all that kind of stuff.

But I think if I zoom out, what we really like about our business is we have a very flexible business model where we have very little locked in long-term pricing, so that allows us to work with both our suppliers and our customers as you see these cost fluctuations come through the supply chain to do our best to manage that on both sides, and that's what the team's really been focused on now around. How can we be efficient, drive costs out of the system, kind of show the pain with suppliers, but then also on the other side it's a conversation with our customers as well. It's to some extent; these costs need to get passed through.

So, I would say that's all been in action over the last several months as the steel tariffs in particular are the ones that impact Innovex, so those come into force. And you can see kind of in the flat gross margins quarter over quarter I think the team's done a great job mitigating impacts thus far, but still very much an active dialogue with both our supply chain partners as well as our customers.

It just when you think about the, I guess the long-term margin target, is that one of the things that's potentially a tailwind for you as things get resolved or is that really not being factored into the long-term margin targets?

Yeah, it's not really factored in one way or the other right now. I think it's there's just so much uncertainty that it's hard to know how that's going to play out.

Understood. Thank you. I'll turn it back.

That concludes the question-and-answer session. I would now like to turn the call back over to Adam Anderson for closing remarks.

Thank you and thanks to everybody for joining the call. In particular, we said it a couple of times, but thanks to the entire Innovex team. It's we've really done a ton of good work over the last year or two to bring all these different businesses together, continue to perform very well in an otherwise challenging market, and it's all because of the great team that we have at Innovex. So my sincere thanks to everybody out there. Please have a great week.

This concludes today's conference call. You may now disconnect.