Good morning, everyone, and welcome back to Sidoti's December Virtual Investor Conference. I'm Steve Ferazani, an analyst at Sidoti. We're expecting about a 20-minute presentation followed by a 10-minute Q&A this morning. If you have any questions, I'd just like to remind everyone before we get started: press that Q&A button at the bottom of your screen, type in the questions, and we're going to get to as many as we can, time permitting, and I don't want to take up too much time, so let me start by introducing Vice President of Investor Relations for Oil States, the ticker is OIS, and Brian Mazzell. Brian.
Thank you very much, Steve. Good morning and welcome to our Sidoti conference presentation. Our presentation today will be led by our President and CEO, Cindy Taylor, Lloyd Hajdik, Oil States Executive Vice President and Chief Financial Officer, and Scott Moses, our Executive Vice President and Chief Operating Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the Safe Harbor protections afforded by federal law.
No one should assume that these forward-looking statements remain valid later in the quarter or beyond. Any such remarks will be weighed in the context of many of our factors that affect our business, including those risks disclosed in our 2024 Form 10-K, along with other recent SEC filings. This call will be available on our website and other social media following the call for a period of time.
I just wanted to have the pleasure of also introducing just to further Cindy Taylor, who's been with our company for over 25 years now, a leader in the industry, but also in other aspects of business. She's also served in other leadership roles, both in the Dallas Fed as well as the Director of the Board of AT&T. W ith that, I want to turn the call over to Cindy. Thank you.
Thank you, Brian. F irst of all, thank all of you for joining us today. We look forward to telling you more about Oil States, going through our key technologies, our market positioning, and importantly, giving you a view about investment considerations around Oil States. We do offer global exposure to the energy industry. There's a lot of drivers we're going to talk to you about through our three business segments. We'll go through more detail in each of those segments as we go through the presentation. As Brian mentioned to you, New York Stock Exchange listed under the ticker symbol OIS. A gain, we've been public since February of 2001.
We have a very long history. I n fact, the company as a whole originated over 85 years ago. A lot of technology that is very well known in the industry. Our market capitalization as of November 18, you can see on the slide, was $372 million. We believe we offer a compelling option for investors vis-à-vis that market capitalization, particularly given the technology-driven nature of our company and the cash-generating capability that we have. We've tried to highlight some key investment theses for you to consider. Again, offshore and international growth that is accelerating for us. We have the highest backlog that we've had in over a decade.
That gives us visibility as we move forward into 2026. For those of you that have followed our company, we are in the process of high-grading our U.S. domestic business mix. You've seen a refocus towards our key technologies, capital allocation to those key technologies that should provide more stable revenue, higher margins, and importantly, free cash flow generation. On a TTM basis, our free cash flow yield stood at 19%. We think that is very attractive relative to our size and to our peer group. As we move forward, we focus on what we think are the key catalysts for us from an industry perspective.
Again, global in scope and scale, exposed to international deep-water activity, as well as a smaller footprint towards U.S. shale-driven activity in the United States. We have a growing presence in Latin America, particularly Brazil and Guyana, the Middle East, West Africa, and also Southeast Asia. As we have high-graded our business mix, we are looking forward to revenue growth and improved margins as we've talked about. A gain, the focus in these areas is led by long-standing technology that we've had in the marketplace, coupled with some new product introductions that I'll share with you.
Again in our third quarter call, we guided to strong free cash flow generation, likely north of $100 million this year. You put that in the context of a $372 million market capitalization, you can see that is very strong. Given that, we are progressing to net debt zero towards the end of this year and therefore have been accelerating stockholder returns via share repurchases, and we will continue to do so as we move forward. We tend to look at our valuation relative to our technology and trading at 5.2 times seems to be very low, offering a compelling investment opportunity for potential shareholders. A gain, the theses are very straightforward and clear. They're laid out on this slide.
Moving from the left, the long-term macro of expanded globalization, increased energy demand, broad-based energy demand, particularly with a lot of the offshore basins leading that, plays very well into our product offering. As I mentioned, our mix should be more differentiated going forward and more cash flow generating. These are areas where we can generate strong margins, high free cash flow, and manageable CapEx, given that we are more asset-light than we have been in the past. Our balance sheet, again our net debt at September 30 was specifically $38 million.
You can see we are aggressively reducing debt while returning cash to shareholders via share repurchases. 've already mentioned the valuation that we are trading at today. Next slide. We are providing technology-focused manufacturing products as well as services. As we put more and more products in the market, we also have the opportunity for ongoing repair and maintenance services that leverage the revenue base over time. As I mentioned on the first slide, we deliver our products and services through three business segments. Those are our Offshore Manufactured Products, Completion and Production Services, and our Downhole Technologies segments.
If you look to the right, you can see the TTM revenue and adjusted segment EBITDA by segment. Y ou'll observe that our Offshore Manufactured Products business is by far the largest piece of that business. It is also the one that is more global in scope and scale and has exposure to all of the key oil and gas basins in the world. It is very differentiated in terms of technology delivery as well. Completion and Production Services has been a focus for us over the last two years where we have made the decision to exit certain of the business lines that we view as more commoditized and lower margin and not generating our targeted cash flow returns, and so that business should exit this year on a much more streamlined basis with the opportunity going forward for both higher margins and greater cash flow generation.
Our Downhole Technologies segments, these are manufactured products consumed downhole. This business has performed at break-even levels this year, largely because of the reduction in U.S. shale activity that the industry has experienced, not just Oil States. As we move forward, we're focused on new technology that we're delivering to the U.S. shale market, coupled with international expansion. Both efforts should improve, again, our margin profile and the cash flow generating nature of the business. This also focuses on the different mix that we're focused on going forward.
Again, the bullets there, increasing exposure to offshore and international basins. We're very well dispersed now. We've introduced a new facility in our Batam, Indonesia area to replicate what we were previously doing in a higher cost place in Singapore. We've got state-of-the-art facilities in the U.K., the U.S., Brazil, etc., in addition to many other smaller manufacturing operations across the globe. A very good base to drive growth off of going forward. When we've exited some of the land-based operations, you'll see a better mix there. A gain, the focus going forward is more on research development, new product, new technology development, and organic growth as we move forward.
I wanted to highlight here some of the key products that we have brought to market. We are very well known for our Flex Joint connector technology. You can see a picture on the left-hand side of the slide. This technology has been introduced in the very origination of deep-water activity. To my knowledge, there is not a floating rig in the world that does not have this technology as part of the equipment that is used in deep-water areas. Clearly have number one market position with this technology and probably an 80%-85% market share. This technology has grown and expanded as we've moved into deeper water, more challenging environments, and it is a standard used on FPSOs in the market today.
We don't just sit and rest on existing technology. We're trying to introduce new and improved technology to the market. We wanted to highlight a recent technology introduction through our MPD, or Managed Pressure Drilling Systems, that has gotten very good market reception. It is in operation today and has brought a significant number of operating advantages to our customer base. You've seen recent orders there go into our backlog, and we think we will only grow in terms of market penetration with this system. We work, again, all over the world and collaborate with all the major IOCs, NOCs, the major EPIC provider and subsea providers.
Very good exposure across the entire deep-water international ecosystem, if you will, with our technology, our products, and our services. Next slide, please. We wanted to give you a visual of basically the types of activities and operations that we participate in through our various product and service offerings. We're focused on harsh environment, deep-water operations, and provide deep-water riser systems, Subsea pipeline infrastructure, associated repair equipment that's used on most of these floating facilities that you see in the chart. I've already mentioned our Managed Pressure Drilling system, and I would highlight that we offer those for sale or for rental, depending upon the operator and the unique need for the equipment.
We have legacy advanced casing conductor connectors that we've offered to the market on a global basis, and again, I mentioned our new manufacturing operation in Batam, Indonesia. That is one state-of-the-art and two, it offers us a lower-cost basis to manufacture out of. I mentioned Fixed Platform foundations, cranes, critical valves. Historically, a lot of our Fixed Platform work has been around infrastructure in shallower waters, if you will. We also have application for new energy sources around offshore wind as an example.
A lot of the technology, legacy oil and gas technology, can be adapted into new energy markets as well. W e've listed some of those on the right-hand side, our riser systems for subsea minerals. You hear a lot about rare earth metals. They do sit at the seabed, and so there's opportunities there to retrieve those if the permitting gets approved for our customer base. Many years ago, we were very well known for our TLP connectors that went on tension platforms and oil and gas applications. We have adapted that technology into offshore wind platforms. That is all upside should that market develop going forward.
I'd say particularly around the Aberdeen, North Sea, possibly even Southeast Asian area, we have good exposure to carbon capture and geothermal opportunities as well. I did also want to focus on. I did briefly mention a newer technology we're offering to the market is our low-impact workover riser package. This will be a new product for us, and it's very integral to intervention and P&A work, particularly those where you have very aged wells that are sensitive to the P&A removal and abandonment process. T his could be another good incremental opportunity for us going forward. I wanted to highlight, again, a big driver for this business that gives visibility given the global nature of our operation is backlog.
As of September 30, it totaled $399 million. Again, as I mentioned, it's the highest backlog that we have had since 2015. Our book-to-bill ratio was 1.3 times year-to-date in 2025. Our guidance calls for a strong revenue quarter and a very strong bookings quarter as well in the fourth quarter, supported by good market trends as we exit 2025 and move into 2026. Our next segment that we'll talk about is Completion and Production Services. Again, the theme here is the decision that we have to exit some of the more marginal product offerings that we have and focus on high-grading the differentiated product lines we have on a rental and service basis going forward.
We'll be less exposed to frack and isolation, which we deem more commoditized, particularly in the Permian Basin. We'll have more of a weighting and therefore more focus on our extended-reach technology offered through the brand name of Temporis, and then as it relates to production services, wireline services, a focus there will be more offshore than onshore. W e also have a very good presence, I'd say largely in the Middle East for frack and isolation equipment, and that will continue to be a focus. W e'll still have some activities on U.S. land, but much smaller footprint than what we've had before.
These have been more commoditized, lower margin, and actually probably cash flow was my word, using as opposed to generating. G oing forward, you should see more stable revenues, number one. Number two, higher margins and greater free cash flow after CapEx out of the business. The last segment we'll talk about is our downhole perforating and completions technology. These are downhole consumables. We are a manufacturer here as opposed to a service provider.
Given that it tends to be an asset-light piece of the business, the products are consumables, and therefore, based on market demand, they'll be remanufactured and consumed downhole over time. This has been a bit more challenged segment this year. One, the U.S. rig count and completion count has been down fairly consistently for the last 21 months, kind of that slow bleed down. T hat's taken top-line revenue off for us. W ith that, you get lower absorption and put pressure to our margins just a bit. What we've tried to do to counter that trend and then participate in our recovery going forward is improving our domestic technology offering.
We've got the technology right with our EPIC Precision and EPIC Flex perforating systems. We're getting new contracts there, not really contracts, but individual product demand awards going forward and high reliability out of those new perforating systems. The second leg of the strategy is to expand internationally with probably near-term opportunities and sites in Brazil and more weighted focus in the Middle East. That should drive higher revenues, better margins, and greater free cash flow than it has this year going forward. Again, I want to just kind of go through a little bit of the step back. What does this mean for our company?
Our fourth quarter guidance that we provided. The market is strong revenue growth led by our Offshore Manufactured Products segment, up 13%-18% sequentially. A gain, that's on the heels of higher backlog, decade-high backlog that we project coming into the revenue stream in the fourth quarter with adjusted EBITDA of $21 million-$22 million. We refer to that as adjusted EBITDA because, as a reminder, we're exiting several basins and business lines in our Completion and Production Services segment.
As we do that, we're incurring lease exits, facility closures, severance, and the like, and hopefully, we'll be largely through this transition at that segment level by the end of the year. Again, this particular year is very, very strong in terms of Free Cash Flow generation that we guided to the year being over $100 million, which is extraordinarily strong relative to the size and market cap of the company. Again, strong Free Cash Flow generation has yielded a very solid and strong balance sheet. I mentioned earlier our net debt was only $38 million as of September 30.
With the strong free cash flow that I just told you, we are projecting, we expect to be net debt zero by the end of the year, and that is in advance of our convertible notes maturing in April of 2026. That maturity will be settled with cash on hand and, if need, any small amounts under our credit facility, and I say that just because we have cash needs all over the world. Some of that cash is international, and the waiting, of course, is domestic, but we'll work through that fairly comfortably come April. We've had very strong cash flow to date. We've highlighted a lot of that in the bullets.
Our cash on hand as of September 30 totaled $67 million, and with the strong cash flow profile, we have been more aggressive with shareholder return via stock repurchases. We have been buying in on an early basis, convertible notes when we can get a seller to let us buy those in. Right now, there's been no one really wanting to sell it. W e expect that we'll just deal with the maturity in April when they come due. Okay. Brian, could we just go to the next slide? That's going into the appendix. A lot of what I want to focus on is the technology differentiation that we have as a company. We have legacy products with extraordinarily strong market share.
Importantly, we're trying to focus on organic growth going forward. T his just validates that, I think, with the number of recent awards that we've been recognized for over the last five years. These are spotlight on new technology awards by OTC during the year with other recognition by Gulf Energy, Hart, ENP, etc. T hat gives you a good view of the initiatives that we have in place to bring new technology to bear, both for conventional oil and gas as well for new energy opportunities that may present themselves over time.
With all of that said, t he strength of the company, the strength of the technology, very clean balance sheet, great free cash flow allows us to be very well positioned for sustained value creation going forward. I hope you find that interesting from an investor perspective as well. Again, thank you for joining us today. W e look forward to further conversations about the company going forward.
Thanks so much, Cindy. T hat was an extremely informative presentation. We have a couple of minutes left for questions. We've gotten a couple of questions in the queue already. I do want to start, Cindy, though, by asking about the decision to shift the focus more international, more offshore. Certainly, you highlighted the challenges in the U.S. land market, even heightened by consolidation by producers. Can you talk a little bit about the timing of that decision and what it means? Y ou noted margins has probably reduced competition. There's typically a little bit less cyclicality. If you can work through that decision and what that's producing so far for you.
Yeah, I can, and Brian introduced basically my career here, which was 25 years, but I've been in the energy industry all of my working life, and I've seen probably every cycle you can think of.
I can imagine.
The Asian flu to the global financial crisis to COVID. There's just a number, and I have to look. I try to always focus quarter by quarter because of the needs of investors, but I also have to look long-term, and I've had everything from the peak cycle of 2014 to the trough cycle driven by global financial crisis or COVID, and there is a difference just in terms of the market generally. Anything on U.S. shale we characterize as short cycle, meaning it can inflect up and down very quickly. In a period like the global financial crisis or COVID, we lost roughly 80% of the rig count in 90 days.
That can work as long as you know how to manage it and that your cost structure can adapt to changes that rapidly. It is a bit different in offshore and international for us for many reasons, but number one, we have backlog. Number two, these are multi-period, multi-quarter type projects. From the standpoint of our backlog, from the standpoint of the operator, they are multi-decade projects, not as susceptible to short-term change just because of the commodity.
People tend to look longer-term focused, and the walk-away cost becomes significant. People start thinking about incremental economics rather than field economics, if you will, and so that's the industry that has a little more predictable revenues and operating structure, particularly in deep water, but internationally generally than shale. For us specifically, our technology differentiators are just much higher in our global operations and deep water operations than they are in U.S. shale. I'll also tell you, when we used to be 80% of the rig count were drilling for gas and 20% for oil, and then shale changed everything.
All of a sudden, we're 80% oil, 20% gas, and a huge migration of people and equipment into the Permian where over 50% of the rig count sits today. It's a whole lot easier for an experienced service hand to get capital backing and work in an isolated basin in the United States than it is going to a deep water field globally. T he differentiators are just higher and richer there that creates barriers to entry for us as a company.
That is on the backdrop of just looking over decades of experience that we have where not only are you more cyclical on shale, it is more capital-intensive for the products and services that we had. I feel like if I can't generate free cash flow after CapEx over the last five years, what's going to make me do it prospectively? And if you're not going to, you really have no business being in the market of the size and scale that we are.
We do have a couple of questions about both the valuation, the multiple. I know you talked about it five times EBITDA, but do you think the issue is investors aren't giving you the credit for the transformation? Because five times would be you're getting comp to U.S. domestic shale-focused capital-intensive businesses, which is what it looks like right now.
You're absolutely right. I will go back to 10 years ago. We were about 50/50 weighted toward U.S. shale and offshore international. Going back, we're small cap. N ot everybody does the groundwork of detailed research that you would hope. T here was a time that we had land drilling services. We had flowback services, well testing services, very commoditized.
We don't have those anymore, and that's why what you should be looking at is the technology-rich technology that I reviewed on that last slide that is a differentiator, but I can say that all day long. I can also tell my team what we are compelled to do is grow the top line, improve the margins, generate the free cash flow, pay down the debt, and then return cash to shareholders. If shareholders trust us to do those five things, the stock price will respond.
I agree. Speaking of that, you're saying net zero by year-end. You are generating this year a significant amount of cash flow. The 19% yield is mind-blowing to some degree. How do you think about cash flow use over the next multi-years in terms of if you've got the balance sheet in such great shape? Is that share buybacks? Is that M&A? Is that further investments in technology? Is it all of the above?
Well, again, many years of experience here. You need to grow from the size we are, but we are focused on organic growth, R&D, and new technology deployments. We will look for M&A, but nearly all of what we see are the types of businesses we're getting out of. if we've done some small tuck-ins, if you will, one that is just it was about $10 million, but it was a critical part of our MPD offering that we brought to market the last two years. Those are the types of tuck-ins we love. They're just infrequent.
We're going to focus again on what's the product offering of the future? What do the next 10 years look like? What can we adapt out of existing technologies? We've done riser systems in oil and gas for decades. W hy not do it for offshore rare earth metals and minerals recovery? We already have pilot systems working. They work very well. They're in the market. Now, the question is, does that advance or not? Does offshore wind? We adapted our oil and gas TLP system to a more compact, more efficient wind system. We have that in place if that market moves forward. Same thing is true, CCS, geothermal, MPD.
I mentioned what are the market needs? They're struggling with P&A of older wells and wellheads. How do you do that safely? We're introducing a low-impact workover riser system to be able to fill that need in the marketplace. Now, we have a great global base of operations with many new facilities. Our CapEx was elevated a bit this year. It's about $32 million-$33 million for the year because we were finishing the new facility in Batam. We don't build a new facility maybe every decade. T he CapEx requirements for the installed base go down over time. Therefore, that 19% free cash flow yield we talk about is sustainable.
That's the more important message. Again, trading at 5.2 times, what kind of acquisition do I get that is better than buying a share of Oil States stock? I don't think there is one. W e have upped our share repurchase authorization. A gain, it's just math. If your market cap is $372 million and you're generating close to $100 million a year of free cash flow, you could almost argue you take yourself private in the process.
These are high-class problems to have. T he stock price elevates over time. We will evaluate a dividend if we hear that shareholders would like a mix. Some retail holders in particular might want a dividend in addition to a higher weighting towards share repurchases over time. I'll just tell you, we're not likely to do commoditized M&A at all. I t'll be very strategic if we do it, but that's not the primary focus at this point.
Got it. I wish we could continue this for another half hour. T he people in the room and myself have a ton more questions, but just a great half hour. Cindy Taylor from Oil States, really appreciate you joining us today and very informative half hour. Thanks so much.
Thank you. Appreciate it.