HMH Holding Inc.

Thank you for standing by. My name is Amy and I will be your conference operator for today. At this time, I would like to welcome everyone to the HMH Holding first quarter 2026 earnings call. All participants have been placed in a listen only mode. After the speaker's remarks, we will conduct a question and answer session. If you would like to join the queue to ask a question, simply press star followed by the number one on your telephone keypad. It is now my pleasure to turn the call over to David Bratton, Senior Vice President of Finance with HMH Holding. You may begin.

David Bratton Good morning, everyone, and thank you for joining us for HMH's first quarter results. Joining me today are Eirik Bersvik, our Chief Executive Officer, and Tom McGee, our Chief Financial Officer. Before we begin, we would like to remind you that this conference call may include forward-looking statements. which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release, as well as our filings with the SEC, which can be found on our website at investor.hmhw.com. We undertake no obligation to revise or update any forelooking statements or information except as required by law. Management statements may include non-GAAP financial measures. These reconciliations of these measures please refer to our earnings release and our SEC filings. For reconciliations of these measures, please refer to our earnings release and our SEC filings. Following our prepared remarks, we will open the call for your questions. I'll now turn the call over to Eric.

Thank you, David, and good morning, everyone. Before we discuss our performance, I want to take a moment to say thank you to every HMH employee around the world. Your hard work, your dedication, and your innovative spirit have been the driving force behind our successful IPO and the strong foundation we are building today. We could not have reached this milestone without you, and I'm truly excited about what we'll achieve together in the future. Now turning to our financial results. Our first quarter of 2026 results demonstrate resilience and quality of our business model. Orders for the quarter were $218 million, representing a book-to-bill ratio of 1.3 times in the first quarter. Total revenue for the quarter was $171 million, reflecting the expected softness relative to last year driven by the lower backlog coming into the quarter. Importantly, adjusted EBITDA margins grew year-over-year to 17.6%, driven by disciplined cost execution, favorable product mix in spare parts, and a continued focus on operational efficiency. Looking at revenue composition, spare parts revenue was a standout, increasing 11% year-over-year to $67 million, reflecting continued demand from our installed base and growing aftermarket activity. Service revenue of $72 million was as expected primarily due to the backlog of repairs as we entered the year. Product revenue of $33 million reflected the conclusion of capital equipment projects and lower backlog to start the year, which we expect to reverse in the second half of the year. Before turning to market developments, I want to briefly acknowledge the heightened geopolitical tension in the Middle East. While these dynamics have the potential to create some near-term disruption, particularly across certain onshore and jack-up activity in the Middle East, we continue to view their overall impact on HMH as manageable. Our exposure today is increasingly weighted toward offshore markets, where major long-cycle projects are progressing in regions outside the Middle East. As a result, while we remain vigilant, our overall outlook for HMH remains constructive. Turning to the overall market, over the past several weeks, the outlook for offshore drilling market has improved meaningfully. After several quarters of relatively soft contracting activity, the first quarter of 2026 marked a clear inflection point, with a notable increase in newly announced contracts, contract extensions, and letters of intent across multiple regions. In fact, this quarter represented the strongest quarter for offshore contracting activity in more than three years. Importantly, this momentum has carried into the second quarter, and market indications suggest that additional near-term awards are likely to be announced shortly. This improving contracts environment is now translating into rising backlog and improving utilization, reinforcing our view that the long-anticipated offshore market recovery is beginning to materialize. The recovery has been particularly strong within the floater segment. In the first four months of 2026 alone, approximately 110 rig years of floater awards, including options and letters of intent, have been announced. equating to roughly 75% of the total award volume seen during all of 2025. Similar to the overall market, conditions have also improved for HMH install base. A significant portion of recent awards have gone to high-spec units with HMH equipment and utilization across submersible rigs, with our install base is now moving back into the high 80% range, representing an important inflection point. We expect a similar trajectory for drill shifts as current tenders convert into firm awards. A significant portion of recent awards have come from Brazil, where we signed a development agreement with Petrobras focused on rotating control device technology, which is at the core of managed pressure drilling. We are also seeing encouraging momentum across other regions, including the North Sea, Canada, and Asia. While many of these awards were contemplated in our internal planning assumptions, their conversion into firm contracts materially enhanced our confidence in Outlook. Overall, these recent awards meaningfully support the floor of 2026 activity levels. While the near-term revenue impact of these announcements may be modest, they materially improve visibility and certainty for 2027 and beyond. It's also worth highlighting that several of the recent awards are long-term in nature, creating a more constructive environment for customers to evaluate future upgrades and enhancements, such as drilling automation solutions. In addition, a number of contracts have been awarded to key units with HMH equipment that have been ready-stacked for several quarters and are now either returning to work or scheduled to do so during 2026. Taken together, these developments increase our confidence that we are entering a period of sustained year-over-year growth, both in 2026 and into 2027. Turning to Jacob and land market, first quarter activity was impacted by geopolitical developments in the Middle East. We did see some temporary disruptions and contract suspension across the part of the Middle East region. However, many of these units have since returned to work, and we are seeing resilience across several key basins and provinces. At the same time, we are observing a growing appetite to accelerate drilling activity in other regions. Collectively, these signals support a constructive near- and medium-term outlook for both jack-up and land markets. Overall, we maintain a very positive outlook across both offshore and onshore drilling markets. Supported by rising oil prices and an increasing focus on energy security and energy independence, we see continued recovery in global drilling demand. We remain optimistic that future awards will drive additional reactivations across rigs with HMH equipment. As always, we continue to monitor geopolitical developments closely and assess whether they could have broader implications. At this stage, demand indicators across global drilling and mining markets remain solid, and overall market conditions continue to be supportive. While we are watching developments in the Middle East carefully and evaluating potential impacts on supply, demand, and capital allocation, the indicators today remain very constructive. To provide more detail on our financial results and outlook, I will now turn the call over to Tom McKee.