Innovex International, Inc. (INVX)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $240.4M, below prior guidance ($245–$255M) due to sharper-than-expected Mexico softness and lower U.S. offshore deliveries; Adjusted EBITDA was $45.9M (19% margin), near the low end of guidance ($45–$50M) .
• Free cash flow was $24.0M on $31.1M cash from operations (52% conversion of Adjusted EBITDA), underscoring the capital-light model; quarter-end net cash was ~$43M (cash $68.1M vs total debt $25.2M) .
• Management lowered Q2 2025 revenue guidance to $225–$235M and Adjusted EBITDA to $40–$45M as Mexico weakness persists; sale of the Eldridge facility for $95M (expected Q3 close) and active buybacks ($100M authorization) are key balance sheet/capital return catalysts .
• Strategic narrative centers on transforming the legacy Dril‑Quip business (ERP rollout, footprint consolidation, OneSubsea MSA) while growing North American Land via DWS; call commentary highlighted Mexico down ~80% YoY and an expected U.S. Gulf ramp in Q4 2025 .

What Went Well and What Went Wrong

What Went Well

• Maintained margins despite lower activity: Adjusted EBITDA of $45.9M (19%) with ~52% conversion to free cash flow (“capital‑light business model”); CFO: “we converted approximately 52% of our Adjusted EBITDA into Free Cash Flow” .
• Execution on strategic transformation: announced $95M Eldridge campus sale to shrink Houston subsea footprint by ~82% and improve delivery; CEO called it “a key enabler of the next step‑change in margins and operational performance” .
• NAM Land resilience and accretive M&A: sequential growth driven by full-quarter DWS, with ongoing market share gains and a robust pipeline of high‑return acquisitions (“small ticket, big impact”) .

What Went Wrong

• Revenue miss vs guidance: Q1 revenue $240.4M vs guided $245–$255M on Mexico weakness and U.S. offshore lumpiness; Adjusted EBITDA near low end of guide .
• Mexico downturn materially worse than expected; management cited revenue in Mexico down sharply and broader international softness; call Q&A noted Mexico now ~80% down YoY and ~5% of FY revenue last year .
• Higher near‑term capex/transition costs tied to facility moves and ERP rollout may pressure short‑term cash conversion even as structural margin benefits accrue; management flagged temporary increases to support transformation .

Financial Results

Core metrics vs prior quarters

Notes: Q3 net income includes a bargain purchase gain from the merger which inflated GAAP net results .

Year-over-year comparables (Q1)

Geographic/Category breakdown

KPIs and balance sheet

Non‑GAAP definitions and reconciliations for Adjusted EBITDA, FCF, and ROCE are provided in company filings and press releases .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “The expected sale of the Eldridge facility will free up $95 million of capital and be a key enabler of the next step‑change in margins and operational performance for the subsea business… Although activity declined more than anticipated in Mexico… We have a well‑worn playbook for industry cycles, and are ready to take advantage of volatility” .
• CFO: “Despite activity being lower than anticipated, we were able to maintain margins… we converted approximately 52% of our Adjusted EBITDA into Free Cash Flow, which further strengthened the balance sheet” .
• Q4 call (context for transformation): “We expect the net results of these changes to be an approximate 82% reduction in the operating footprint and a significant improvement in service quality” (on Eldridge) and ERP rollout to improve on‑time delivery toward >95% .

Q&A Highlights

• Mexico exposure: “Mexico accounted for roughly 5% of Innovex's total company revenue last year… current run rate is down approximately 80% year‑over‑year” (C‑suite on Q1 call) .
• U.S. Gulf outlook: “Q1 was softer than Q4, but [we] expect a slight pickup in Q2 and a stronger ramp in Q4… overall flat year‑over‑year in 2025” .
• Capital returns vs M&A: “$100 million share repurchase program… evaluate M&A vs buybacks to maximize returns; spread out deployment based on valuation and liquidity” (Q4 call, policy context) .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable; we anchor comparisons to the company’s prior guidance and reported results. Values retrieved from S&P Global were not available.*

Where guidance applied, revenue missed the prior range ($240.4M vs $245–$255M) while Adjusted EBITDA was near the low end ($45.9M vs $45–$50M) .

Key Takeaways for Investors

• Near-term revenue pressure from Mexico and offshore delivery timing led to a guidance‑miss on top line; watch Q2 guidance ($225–$235M revenue, $40–$45M EBITDA) for continued softness and operational execution .
• Free cash flow durability (52% conversion in Q1) and net cash balance underpin flexibility for buybacks and disciplined M&A—potential supports for equity value through cycles .
• Structural margin/operational improvements (ERP rollout, Eldridge sale, footprint consolidation) are key medium‑term drivers; expect staged benefits through 2H 2025 and beyond .
• Subsea growth vector via OneSubsea MSA and integrated solutions (e.g., XPak liner hangers + Innovex centralizers) expands high‑barrier markets; delivery reliability remains critical to unlock share gains .
• NAM Land outperformed market trends with DWS share gains; resilience in rental/tooling mix helps offset international volatility .
• Trading implications: any confirmation of Eldridge transaction close and incremental buyback activity are positives; sustained Mexico weakness or further guide‑downs are negatives. Monitor Q2 print against lowered guidance for inflection potential .
• Non‑GAAP adjustments (acquisition/integration costs, impairment) remain in the mix; investors should focus on Adjusted EBITDA, FCF trends, and ROCE trajectory as transformation progresses .

Sources: SEC filings and company press releases as cited above; Q1 2025 earnings call highlights/transcript references via GuruFocus and related links .