Executive Summary / Key Takeaways

• Innovex International (NYSE: INVX) is strategically transforming into a global leader in well-centric products and technologies, driven by a "small ticket, big impact" philosophy and a "No Barriers" culture that fosters innovation and customer loyalty.
• Recent acquisitions, including the Dril-Quip merger, DWS, SCF Machining, and Citadel Casing Solutions, have significantly expanded INVX's product portfolio, global footprint, and manufacturing capabilities, contributing to substantial revenue growth and synergy realization.
• The company's differentiated technologies, such as SubZERO centralizers and XPak liner hangers, offer quantifiable benefits to customers through reduced costs and improved operational efficiencies, creating a strong competitive moat.
• Despite macro uncertainties and market volatility, INVX maintains a robust financial position with a net cash balance and strong free cash flow generation, enabling opportunistic capital deployment through M&A and share repurchases.
• Operational improvements, including the divestment of the Eldridge facility and ERP system implementation, are expected to further enhance margins and on-time delivery, positioning INVX for long-term EBITDA margins of 25% or greater.

A Transformed Powerhouse in Oil & Gas Technology

Innovex International, Inc. (NYSE: INVX), founded in 2016, has rapidly evolved into a formidable player in the global oil and natural gas industry, specializing in mission-critical engineered products and technologies. The company's foundational strategy centers on a "small ticket, big impact" value proposition, delivering reliable, technology-enabled consumable products and high-margin rental solutions that significantly reduce customer costs and operational time across the well lifecycle. This approach, coupled with a "No Barriers" culture that prioritizes customer responsiveness and internal innovation, underpins Innovex's ability to drive exceptional value for both its clients and shareholders.

The company's journey has been marked by strategic expansion, notably through a series of disciplined acquisitions designed to bolster its global presence and technological edge. A pivotal moment arrived on September 6, 2024, with the merger of Legacy Innovex and Dril-Quip, Inc., which subsequently adopted the Innovex International name. This transformative merger aimed to leverage Dril-Quip's expertise in high-performance offshore and international markets, particularly its advanced subsea wellheads and large-bore expandable liner hangers, thereby enhancing the combined entity's global scale and financial flexibility. This was followed by the full acquisition of Downhole Well Solutions, LLC (DWS) in November 2024, integrating its market-leading drilling optimization tools, and further strategic additions like SCF Machining Corporation in February 2025 for low-cost manufacturing and Citadel Casing Solutions, LLC in May 2025 to enrich its product portfolio.

Innovex operates in a competitive landscape dominated by larger, diversified oilfield service providers such as Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BKR), and TechnipFMC (FTI). While these industry giants boast extensive global reach and deep resource pools, Innovex differentiates itself through its agility, specialized expertise, and a focus on niche, high-impact technologies. The company's "No Barriers" culture enables it to innovate faster and be more responsive to customer needs than some of its larger competitors, particularly in targeted regional markets. This allows Innovex to secure and expand market share, as evidenced by its cementing tool product line in U.S. land, which increased its market share by 100 basis points in 2024 to 28%.

Technological Edge: Driving Efficiency and Value

Innovex's competitive advantage is deeply rooted in its differentiated technology, which provides tangible and quantifiable benefits to its customers. A prime example is the SubZERO centralizer technology, designed for offshore wells. This innovation eliminates the need for traditional centralizer subs, saving customers an estimated $300,000 on a single well and reducing lead time by 60% compared to conventional methods. This not only streamlines operations for customers but also enhances Innovex's margins and returns. The company estimates this technology is applicable to approximately 50% of U.S. offshore wells, with current market penetration at about 10%, indicating significant growth potential.

Another key differentiator is the XPak expandable liner hanger system, a legacy Dril-Quip product. In deep-water exploratory wells, this system significantly reduces non-productive time and costly mud losses, translating into potential savings of millions of dollars for operators. A recent successful integration of Innovex centralizers with the XPak system for a major international operator in the Gulf of Mexico demonstrated the combined value, with the total value for Innovex on that single well being approximately $2 million. The company estimates that at least 50 wells annually could benefit from this integrated solution. Furthermore, the successful first installation of the VXTE tree for Petrobras (PBR) in the Buzios field, which integrated products from both legacy companies, is estimated to save up to seven days of installation time in offshore deep-water environments. This success has led to an order for ten additional liner hanger systems, highlighting the untapped organic growth and synergy opportunities.

Innovex's commitment to innovation extends to its strategic R&D and manufacturing initiatives. The acquisition of SCF Machining Corporation in Vietnam, for instance, is aimed at establishing a low-cost country supply chain, which is expected to improve gross margins and enhance service capabilities for its growing international operations. This focus on technological leadership and operational efficiency is critical for Innovex to maintain its competitive moat against rivals who also invest heavily in R&D, such as Schlumberger's digital innovation or Baker Hughes' integrated technology platforms.

Financial Strength and Strategic Execution

Innovex's financial performance reflects its strategic growth and operational transformation. For the nine months ended September 30, 2025, total revenues reached $704.65 million, a substantial increase from $410.12 million in the same period of 2024. This growth was primarily driven by the impact of the Dril-Quip and DWS acquisitions, along with organic market share gains. The company reported net income of $69.33 million for the nine months ended September 30, 2025.

Profitability metrics demonstrate the positive impact of synergy realization. Selling, General, and Administrative (SG&A) expenses as a percentage of revenue decreased from approximately 25% in Q3 2024 to 13% in Q1 2025, aligning with Innovex's historical cost structure. This efficiency, coupled with strong execution on synergies, contributed to an increase in EBITDA margin from 18% in Q3 2024 to 19% in Q1 2025, despite some revenue pullback. The company has fully realized its merger cost synergy target of $30 million in annualized cost savings faster than anticipated, primarily from SG&A overhead. Management believes the combined Innovex platform can achieve long-term EBITDA margins of 25% or greater, consistent with its historical performance.

Liquidity remains a core strength for Innovex. As of September 30, 2025, the company held $163.40 million in cash and restricted cash, with an additional $132.80 million available under its Revolving Credit Facility. Total indebtedness stood at a manageable $26.40 million. This robust balance sheet, characterized by a net cash position and leverage well below one turn of debt to EBITDA, provides Innovex with significant financial flexibility. The company's capital-light business model, which typically requires only 2% to 3% of revenue for capital expenditures, allows for a strong conversion of EBITDA into free cash flow, generally between 50% to 60% under normal conditions. For the nine months ended September 30, 2025, net cash provided by operating activities increased by $81.60 million to $138.70 million. Free cash flow for Q1 2025 was $24 million, in line with its conversion goal.

A key operational and financial initiative is the divestment of the Eldridge facility, which was completed in September 2025 for $95 million. This sale is expected to further bolster the net cash position, enable facility consolidation, and drive considerable operational savings and margin expansion by the end of 2026. The company's board has also authorized a $100 million share repurchase program, providing an additional avenue for capital deployment and shareholder returns, especially in volatile market conditions.

Outlook and Strategic Positioning

Innovex's outlook for the near term reflects a blend of strategic optimism and cautious realism regarding market dynamics. For the second quarter of 2025, the company anticipates adjusted EBITDA of $40 million to $45 million on revenues of $225 million to $235 million. This sequential decrease is attributed to continued weakness in Mexican drilling activity, seasonal declines in Canada due to spring breakup, and the inherent lumpiness of Subsea deliveries, which are expected to be back-half weighted in 2025. Management has also shifted its accounting for wellhead deliveries away from a percentage of completion basis, a move expected to improve earnings quality and cash conversion, and drive on-time delivery rates above 90% (up from 72% in Q1 2025 and below 50% at the time of the merger).

Despite the near-term lumpiness and macro uncertainties, Innovex remains confident in its "through-cycle playbook." The company views oil cycles as a "feature, not a bug" of its business model, leveraging its strong balance sheet and flexible operations to exploit opportunities during down cycles. The growing energy demands from data centers, driven by Artificial Intelligence, are expected to contribute to natural gas consumption for power generation, creating a supportive backdrop for the industry. Furthermore, multiple years of underinvestment in oil and natural gas development, coupled with public E&P operators' conservative capital spending, are seen as factors supporting commodity prices and a sustained spending cycle.

Innovex is actively pursuing growth in international and offshore markets, which are characterized by longer-cycle investments and relatively less cyclicality than the North American land market. The Middle East, particularly Saudi Arabia, is a key growth region where Innovex is establishing an in-kingdom operating team and new facilities. The enhanced alliance with One Subsea to supply wellheads for EPCI or bundled contracts is also expected to expand Innovex's addressable market, as evidenced by a recent order for six wellheads in Asia Pacific for 2025 delivery.

Conclusion

Innovex International stands as a compelling investment proposition, having successfully transformed its business through strategic acquisitions and a relentless focus on technological innovation and operational excellence. The company's "small ticket, big impact" product philosophy, coupled with its "No Barriers" culture, has created a robust foundation for sustainable growth and superior returns. Its differentiated technologies, such as the SubZERO centralizers and XPak liner hangers, provide quantifiable benefits to customers, establishing a strong competitive moat against larger, more generalized rivals.

While the oil and gas industry faces inherent volatility and macro uncertainties, Innovex's strong financial position, characterized by a net cash balance and significant free cash flow generation, enables it to capitalize on opportunistic M&A and share repurchases. The ongoing operational enhancements, including the Eldridge facility divestment and ERP system implementation, are poised to further boost profitability and efficiency, supporting the long-term target of mid-20s EBITDA margins. Innovex's strategic positioning in key growth markets and its ability to adapt to evolving industry dynamics underscore its potential to deliver long-term value for discerning investors.