HP Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: $1 billion, maintaining the $1 billion mark for the third consecutive quarter.

Adjusted EBITDA: Exceeded expectations at $230 million, driven by strong performance in North America Solutions and Offshore Solutions.

Net Loss: Reported a net loss of $0.98 per diluted share, impacted by a non-cash impairment charge of $103 million; adjusted loss was $0.15 per share.

Capital Expenditures: $68 million, lower than anticipated due to timing changes in reactivation costs.

Free Cash Flow: Strong at $126 million, funding $25 million in dividends and significant debt repayment.

Rig Count: Averaged 143 rigs in North America Solutions, with expectations for a decline to 132-138 rigs in Q2.

2Strategic Updates and Business Highlights

Operational Performance: Continued strength in North America Solutions with average margins over $18,000 per day. Offshore Solutions maintained stable operations with long-term contracts.

Technology Initiative: Introduction of FlexRobotics, an automated drilling system, successfully deployed on multiple rigs, enhancing safety and operational efficiency.

International Growth: Reactivations in Saudi Arabia are underway, with expectations for further growth in the Middle East and North Africa.

Geothermal Projects: Increased interest and contracts for geothermal rigs in Europe and North America, indicating diversification in service offerings.

3Forward Guidance and Outlook

Q2 Guidance:

North America Solutions expected direct margins between $205 million to $230 million.

International Solutions anticipated rig count of 57-63 rigs, with direct margins of $12 million to $22 million.

Offshore Solutions to see margins between $20 million and $30 million.

Full-Year Outlook: Optimistic about activity improvement in the second half of FY 2026, with expectations for a gradual recovery in rig count and margins.

4Bad News, Challenges, or Points of Concern

Market Conditions: North America is expected to remain restrained, with operators focused on disciplined capital deployment and cautious spending due to fluctuating oil prices.

Impairment Charges: Non-cash impairment charges reflect challenges in the rig market and the need for rationalization of underperforming assets.

Operational Challenges: Some reactivation costs were pushed from Q1 to Q2, creating lumpiness in earnings and impacting short-term margins.

Competitive Pressures: Presence of "bad actors" in pricing within the North American market could pressure margins.

5Notable Q&A Insights

Reactivation Costs: Most reactivation costs in Saudi Arabia are expected to hit in Q2, with some continuing into Q3, affecting short-term profitability.

Pricing Stability: Despite competitive pressures, HP aims to maintain direct margins of 45%-50% without chasing market share.

FlexRobotics Potential: Strong customer interest in FlexRobotics, with expectations of meaningful long-term earnings contributions as more rigs are upgraded.

Free Cash Flow Outlook: Clear visibility on paying down the remaining $140 million of term loan by the end of Q3, indicating strong cash generation capabilities. Overall, HP demonstrated solid operational performance in Q1 2026, with a focus on technology advancements and international growth, while navigating challenges in the North American market and managing costs effectively.