NESR Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: Achieved a record $520.8 million, up 28.7% sequentially and 59.1% year-over-year, primarily driven by the Jafurah contract in Saudi Arabia.

Adjusted EBITDA: Reached $106.2 million, with a margin of 20.4%. Margins were impacted by $4 million in additional freight and logistics costs due to geopolitical disruptions.

Adjusted Net Income: Increased to $45.5 million, up 70.1% sequentially and 125.9% year-over-year. Adjusted diluted EPS was $0.44.

Operating Cash Flow: Rose to $174 million, with free cash flow at $99.9 million, reflecting strong working capital management.

Debt: Gross debt decreased to $274.6 million, with a net debt of $99.6 million, resulting in a conservative net debt to adjusted EBITDA ratio of 0.3x.

2Strategic Updates and Business Highlights

NESR's strategy emphasizes local content leadership, supply chain resilience, and technology development, positioning itself as a national champion in the MENA region.

The company is on track to achieve its 3B3 strategy, targeting a $3 billion revenue run rate within three years, with significant growth potential in various segments.

Recent contract awards in Kuwait and the establishment of a Master Technology Agreement are expected to enhance NESR's technological capabilities and revenue streams.

The company has maintained uninterrupted operations during regional conflicts by diversifying its supply chain and ensuring the availability of critical materials.

3Forward Guidance and Outlook

NESR anticipates continued strong revenue growth in Q3, supported by the ongoing ramp-up of the Jafurah contract and new contract awards across Kuwait, the UAE, and North Africa.

The company has raised its full-year revenue target to a minimum of $2 billion, two quarters ahead of schedule.

Expected full-year capital expenditures are projected at $210 million to $215 million, with a focus on maintaining a free cash flow conversion rate of approximately 35% to 40% of adjusted EBITDA.

4Bad News, Challenges, or Points of Concern

Geopolitical Risks: Ongoing regional disruptions, particularly in Iraq, continue to pose challenges, impacting activity levels and creating additional costs.

Logistics Costs: Increased freight and logistics costs due to geopolitical tensions affected margins, although the company has managed these impacts effectively.

Market Conditions: While NESR is optimistic about growth, the timing of contract awards may be delayed due to the ongoing geopolitical situation, which could affect revenue realization.

5Notable Q&A Insights

Management indicated that the Jafurah contract remains a significant growth driver, with plans to deploy additional frac fleets as demand increases.

There is optimism regarding the pipeline of tenders, with expectations of winning a fair share of contracts, which could accelerate the timeline to reach the $3 billion target.

The company is actively exploring opportunities in North Africa, with potential for accelerated project timelines as regional stability improves.

The establishment of technology centers in Kuwait and Saudi Arabia is expected to facilitate knowledge transfer and enhance operational efficiencies across the MENA region. Overall, NESR demonstrated robust financial performance in Q2 2026, driven by strategic initiatives and resilience in the face of geopolitical challenges, while maintaining a positive outlook for future growth.