Oceaneering International, Inc. Stock

Welcome to Oceaneering's Second Quarter 2026 Earnings Conference Call. My name is Rob and I will be your conference operator. [Operator Instructions]

With that, I will now turn the call over to Hilary Frisbie, Oceaneering's Senior Director of Investor Relations.

Thanks, Rob. Good morning and welcome to Oceaneering's Second Quarter 2026 Results Conference Call. Today's call is being webcast and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer; and Mike Sumruld, Senior Vice President and Chief Financial Officer. Rod and Mike will provide our prepared remarks and then we'll take your questions.

Before we begin, please note that statements made on this call about our future financial performance, business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our remarks also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our second quarter press release, which is available on our website.

With that, I'll turn the call over to Rod.

Good morning and thanks for joining the call today. Our second quarter results, which exceeded the high end of our EBITDA guidance range, reflected strong operational execution across our diversified portfolio. Our adjusted EBITDA of $115 million represented our highest quarterly level since the third quarter of 2015, underscoring the momentum that we're building across the business. The Offshore Projects Group, or OPG, led our year-over-year improvements and was the largest contributor to our second quarter EBITDA outperformance. Those results were driven by a favorable project mix of international intervention and installation projects. These projects included ongoing light well intervention services in the Caspian Sea and an installation project in offshore Egypt.

In Subsea Robotics, or SSR, the Ocean Intervention II entered service following significant upgrades in 2025 and is now performing survey projects that are expected to keep the vessel utilized through most of the remainder of the year. We expect to conduct a simultaneous operations, or SIMOPs project from the vessel later this year, enabling multiple survey activities to be performed concurrently and improving overall operational efficiency for our customers. We also continue to secure contract awards and extensions across our energy segments, including a recently announced award for ROV services in Brazil that improves our visibility into future demand. In ADTech, we secured new contract awards across a range of defense and subsea applications, including subsea robotics, subsea systems, submarine rescue and submarine maintenance, construction and installation services.

Among these awards was a joint contract from the Defense Innovation Unit to support development of an extra-large unmanned underwater vehicle. This award highlights the continued evolution of our strategy to deploy dual-use technologies that serve both energy and government customers, while demonstrating our ability to collaborate with partners to meet defense industry needs. In addition, our space systems team was recognized as a best-in-class supplier by Lockheed Martin for their work on the Artemis program. We also took steps during the quarter to strengthen our capital structure and liquidity position by extending our debt maturities and increasing the size of our credit facility. These actions provide us with additional financial flexibility to support our strategic priorities and pursue future growth opportunities.

So with that context, I'll turn the call over to Mike to summarize our second quarter results and to provide more details on our financing transactions and then I'll be back to discuss our outlook for the third quarter and for the rest of 2026. Mike?

Thanks, Rod and good morning. Let me start by sharing our consolidated financial results for the second quarter 2026. Overall, our results exceeded the high end of our guidance range, led by a particularly strong performance from OPG as well as improved results from SSR, Manufactured Products and ADTech. Compared to the second quarter of 2025, revenue increased 10% to $768 million with growth in every segment except Integrity Management and Digital Solutions, or IMDS. Operating income increased 11% to $88.2 million. Net income attributable to Oceaneering increased 19% to $65 million or $0.65 per share and adjusted EBITDA increased 11% to $115 million.

Turning to our cash flow and liquidity. We generated $55.2 million of cash from operating activities. The year-over-year decrease primarily reflected the timing of project milestones, customer receipts and vendor payments. We invested $23.2 million in organic capital expenditures with approximately 34% allocated to growth and 66% allocated to maintenance. Free cash flow was $32 million. We resumed share buybacks during the quarter, repurchasing $10 million of common stock. And we ended the quarter with a cash balance of $629 million, total liquidity of $844 million and no borrowings under our revolving credit facility. As Rod mentioned, in late June, we initiated a series of transactions to strengthen our liquidity position and extend our debt maturities. We successfully placed $500 million of senior notes due in 2034 and used the proceeds together with cash on hand to retire our $500 million of senior notes due in 2028. We also amended our secured revolving credit facility, increasing commitments from $215 million to $345 million and extending its maturity to July 2031. These transactions will be completed this month.

Now let's look at our business operations by segment for the second quarter of 2026 as compared to the second quarter of 2025. SSR results improved year-over-year, supported by higher average ROV revenue per day utilized and increased survey activity. Revenue increased 6% to $232 million and operating income increased 3% to $66.3 million. Average ROV revenue per day utilized increased from $11,265 to $11,894 on continued improvements in contract pricing. SSR EBITDA margin was flat at 35% as higher average ROV pricing was offset by geographic and service mix, including a greater contribution from survey, which carries lower margins than our core ROV business. ROV utilization was slightly lower at 66% compared to 67% during the same period last year as solid activity levels in Europe and West Africa largely offset lower activity in the U.S. Gulf. Survey activity increased as the Ocean Intervention II commenced operations.

For the quarter, the revenue split between our ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 77% and 23%, respectively, compared to 79% and 21% during the second quarter of 2025. This shift reflects the increased contribution from our survey business. ROV days utilized in drill support were 64%, while vessel-based services were 36% compared to 63% and 37%, respectively, in the prior year quarter. As of June 30, 2026, we had ROV contracts on 82 of the 139 floating rigs under contract or 59% market share. We maintained our fleet count of 250 ROV systems.

Turning to Manufactured Products. Revenue increased 3% to $149 million and operating income increased 17% to $21.9 million, resulting in an operating income margin of 15%, up 178 basis points year-over-year. The improvements were largely driven by continued conversion of higher-margin backlog, increased volume in our rotator valves business and improved results in our mobility solutions product line. Backlog decreased to $445 million on June 30, 2026, reflecting execution of previously awarded work. Our book-to-bill ratio for the trailing 12 months was 0.88 compared to 0.65 for the same period last year. We won multiple awards early in the third quarter and expect to finalize those contracts in the coming weeks.

Based on our sales funnel, we anticipate additional awards in the third and fourth quarters, reinforcing our expectation that backlog will improve in the second half of the year and meet our full year book-to-bill guidance of 0.9 to 1.0. OPG delivered impressive year-over-year improvements with revenue increasing 22% to $183 million and operating income increasing 39% to $30 million, producing a 16% operating income margin. These results were supported by a favorable project mix and disciplined execution on international intervention and installation projects that are expected to continue into the third quarter. Vessel utilization levels declined year-over-year but are expected to improve in the third quarter as we continue to support customers under several frame agreements.

IMDS' revenue, operating income and margin decreased due to lower activity levels and related cost absorption as well as increased personnel-related costs in West Africa and the Middle East. While operations in the Middle East have begun to stabilize, which should support improved cost absorption in future quarters, we continue to face uncertainty regarding overall activity in those regions. ADTech revenue increased 22% to $133 million and operating income was up slightly at $16.4 million. Operating income margin declined to 12%, reflecting changes in program mix and timing in our Oceaneering Technologies or OTECH business line. Unallocated expenses of $46.6 million were in line with our guidance for the quarter and relatively flat year-over-year.

Now I'll turn the call back to Rod to discuss our outlook for the third quarter of 2026 and for the second half of the year.

Thanks, Mike. We expect to build on our positive first half results as we anticipate revenue to increase in the third quarter and adjusted EBITDA to be in the range of $115 million to $125 million. Comparing our third quarter 2026 to 2025 by segment, for SSR, we expect increased revenue and operating income as ROV utilization improves and survey activity continues. For Manufactured Products, we expect revenue and operating income to decrease slightly. Improved results from our umbilicals and rotator valves business are expected to largely offset decreases in hardware production, pipeline repair and our Grayloc connectors. For OPG, we expect revenue and operating income to increase with higher vessel utilization in the U.S. Gulf and West Africa and the continuation of international intervention and installation projects. For IMDS, we expect revenue to increase and operating income to be relatively flat.

For ADTech, we expect revenue and operating income to increase with higher activity levels in OTECH and marine services. We project unallocated expenses to be approximately $50 million. Returning to our 2026 outlook. Our first half performance has increased our confidence in our full year outlook and supports raising the low end of our adjusted EBITDA guidance range. We now expect consolidated adjusted EBITDA to be between $400 million and $440 million for 2026. At the same time, we've updated our IMDS outlook to reflect ongoing uncertainty in the Middle East and reduced activity in West Africa. We now expect IMDS operating income to decrease significantly compared to the full year of 2025 and for operating income margin to be in the low single-digit percentage range. The outlook for other operating segments remains unchanged with performance trending in line with or ahead of our prior expectations.

In summary, we are pleased with our performance in the second quarter and first half of the year. Disciplined execution, healthy demand across most of our businesses and a strengthened financial position support our confidence in the remainder of 2026. While we continue to navigate challenges in our IMDS business, our other operating segments have contributed to first half results that exceeded our guidance. We remain focused on delivering value to our customers and shareholders. We appreciate everyone's continued interest in Oceaneering and we'll now be happy to take any questions.

[Operator Instructions] Your first question comes from the line of Keith Beckmann from Pickering Energy Partners.

Congrats on the quarter, guys. Yes. My first question is just, obviously, we got the refinancing this quarter. You guys have kind of built a nice net cash position and kind of $10 million a quarter buybacks now for a little while. Just wanted to get your thoughts on this capital allocation change at all and maybe what opportunities are out there given you guys got a longer runway now?

I would say, we still say organic first, inorganic growth second and then return of capital to the shareholders, again, with the share buybacks being primary right now. So let me walk down those 3. When I think about organic, one of the things I -- thanks for giving me the opportunity to point this out. We still are very proud of our energy business. And so we look for ways to invest and grow that energy business. And I would just say, think about investing more around the core, the highest performing parts of that energy business, especially like SSR, for example. And sometimes people wonder, well, how much more capacity can you absorb? It's not really just about capacity. I mean we think about the way we deliver value and that's through automation, through high-tech services, being the best provider out there, giving the customer what they really want.

And that's -- they're very focused on a specific set of services done really reliably, high availability, high availability in any weather, those kinds of things. With a greater automation, I think that's where we're really pushing that core business. And we intend to not just defend but to grow that core part of our business. So there will be investment made there. And then when we switch to sort of the other part of our core business, that defense side, where we know that it could be bigger and we really see opportunities for us to expand in that space. And that may require not just some organic investment like we have made around the big projects that we've been winning but also around some inorganic things, some places where we think we can really add value but not go out and compete with some of these, I mean, just unbelievable valuations around some of the tech and defense.

So while we are definitely playing in that space, we have tech of our own. We think of our specialty really being about the people who have proven experience, getting the stuff offshore, off and on a boat, that really making these things work in real time. And so we think we can partner with other companies there but we also think there are some other businesses that we can either increase their participation in defense or even bring existing businesses to have a greater, I think, greater volume in defense business. So I -- there are some really good opportunities there. And I think out with any big shifts, we'd like to continue to do our share buybacks. We think if the opportunities are there, we are opportunistic but we're not taking them off the table in lieu of something else.

Awesome. That's really helpful. And then my second question is just here -- don't want to get too ahead of myself but thinking into 4Q and then into next year, offshore, just wanted to think about the SSR, how do you expect ROV utilization to be potentially into next year? And then kind of twofold, on the OPG side of the business, really strong beat, 3Q looks good as well. How sustainable is that going forward? It sounded like Caspian and Egypt did really well but just trying to think about the growth trajectory of OPG after a really strong quarter there.

Yes. Let me start with SSR. I mean we see, just like so many other people are calling out, greater rig utilization, which means, I think, greater use for ROVs. Also on the tree installation side, the tree orders and tree installations being strong, that bodes well for ROVs as well, our ROVs on vessels. So I think we see both of them. We've got some, for example, some rigs that are still being contracted but they may be moving from region to region. So I think you see some increase. And then we see as those rigs get into position, another increase kind of in that range of time that you mentioned. So I think SSR looks good. Again, continued utilization of the survey vessel, which is the other part of SSR. So that also looks strong. And then tooling, which goes along with the ROVs, right. I would say that's good.

For OPG, I think the thing to watch is, a lot of people said, hey, an increased share price should drive, OPG intervention work should be happening, people should be picking up rigs on U.S. land if the commodity price stays high. As we -- I think everybody sees it. We see discipline around that. We don't see people just going crazy but we do see, I think, increased interest and increased activity. So it's not -- while it's not a big spike, I think we see that happening. I think more importantly, it's longer term. I think we see more longer-term confidence in doing projects and thinking about things. We don't see this as being a short burst in time. I think people see more the demand being up for a longer period of time and geopolitical issues moving around from here to there but we'll continue to leverage the infrastructure we have in place and to make new developments. So I think that longer-term outlook is actually boding as strongly for OPG as just the near-term commodity price.

Mike, would you add anything to that?

Yes, I would. And just to that last point, I think, with rigs, also, you're seeing longer-term contracts, which is a great indicator of the operator recognizing that they're -- they need to lock into these rigs now at the prices, which are still fairly favorable to a few years back and extending those out and we're going to extend along with them. So I do think it's good from a macro perspective as well.

Yes. I mean ROV contracts reflect the same. We're getting longer -- more longer ROV contracts as well. So...

[Operator Instructions] Your next question comes from the line of Josh Jayne from Daniel Energy Partners.

One of the things we've heard from some of the diversifieds, is they alluded to a change in tone and conversations with NOCs around energy security, how they're framing spending moving forward. I think, Rod, you alluded to it a little bit in your last answer. But any insight you could provide with NOC discussions and maybe walk around the world a bit to offer where you think you could see most growth over the next couple of years, just in light of everything that's happened in the Middle East.

Yes, sure. I mean I think the first one I'd call out is Brazil. Brazil is definitely active again. Petrobras, very interested in leveraging their strength as being a very large producer out with the Middle East. And so I think there's a really strong one. And we see that, right? I mentioned the ROV contract but we see other activity down there as well, some umbilical contracts coming out and stuff like that. So I think Brazil is the first one I'd call out. Africa. I think Africa is still strong. There's a lot of good projects in the works, people looking -- going back and looking at places that haven't been as active recently and then, of course, the new stuff.

So things around Namibia and Senegal and others, again, we saw the Total announcement in the Orange Basin. So I think watch Africa, definitely. And when you think about energy security, Australia and Australia and the Far East, again. So I kind of rank them in that direction, not necessarily because that's where the biggest opportunities lie. But I think we've got a lot of weight in the first 2. So for us, I think they'll affect us most. But Australia is a really interesting one. I think I'd watch that because certainly, they have the ability to move fast relative to, say, Africa or somewhere else because they've already got so much infrastructure on the ground.

Yes, proximity to China and the demand economies and where the demand sits is high. And I would also say Equinor, right, in North Sea, right? A lot of activity there. 30% of their gas goes to Europe. So talked about security, does that grow? And do you see more activity with some of the tiebacks in Norway? I think you're going to see more of that as well.

And they don't have as much pushback as the U.K. Continental shelf. I mean the Norwegian continental shelf, they go fast.

Yes. Exactly.

And then as my follow-up, I wanted to just go into sort of the defense contracts and spending a little bit more. You talked about and highlighted the relationship with Kongsberg. And maybe you could just talk about this partnership. And then also, as we have seen your relationship expand with the government and the Navy, do you view these announcements as sort of lumpy and that they're going to be moving forward? Or are we just in the early innings of sort of a structural change in what the opportunity set is around defense spending and autonomy? And just maybe just your thoughts today on where you are in the cycle and then ultimately, how that frames your business over the next couple of years and maybe margins moving forward in that business would be helpful.

I think it's an interesting thing. It's lumpy now because we -- like that project we won was huge, right? So it's the biggest project we've ever won in the company, not just in ADTech. So that's a good lumpy, I would call it that. We're participating in bigger things. As that business grows, I think it does start to stabilize. These are longer-term projects. So they spread over a number of years, unlike some of the stuff we see in energy sometimes where you go on a season campaign and stuff like that. These are multiyear contracts and projects. So we start layering more of them in, it becomes less lumpy. The business grows, it becomes less lumpy. But also, I mean, you mentioned it. The kinds of things we're participating in, it's becoming more broad.

And so we've got more things going -- and I got to call out, space systems is working on the same side, right? They -- we have more customers in more places. We're getting a lot of respect as being a great partner to have because of our offshore experience because we're -- I mentioned this before, we have got a lot of time invested into getting things into other parts of the world, getting equipment in and out of the water, making things work the first time. So I think all of that experience is attracting the attention of partners, especially when you think in the defense space, there's a lot of folks out there that are fairly new, right? They're technology people. They've got really cool, bright, shiny objects, great technology that they're trying to launch but they don't have a long history of experience of putting the stuff to work. And so that's where the partnerships, I think, are really important to us.

And that's been true with government contracting for a while. A lot of these big projects involve consortiums of people. We were a subcontractor on a lot of them before moving to prime or even more of a ballast partner, is fairly new but it's not different in the way we do work in that space. But it's exciting. I mean it's -- the amount of times that we get reached out to compared to 3 or 4 years ago has definitely changed.

Yes. And I love the fact that on the defense side, specifically, we play in a couple of key arenas, right? One is submarine repair and construction. So more of the older school that's going to go on for years because the government is so far behind, specifically in the U.S., so far behind where they need to be, but also on the OTECH side, all of the autonomy. And of course, we're seeing more and more of that sadly in the Middle East and in Ukraine and Russia. But that technology and that need, that lower cost option is big. And I think it's great that we play in both sides.

Your next question comes from the line of Eddie Kim from Barclays.

Just curious on your thoughts on timing of sort of this offshore inflection and activity turning higher. Do you -- and where you would see that most is probably your ROVs business and drill support. Do you expect that to be a late '26 event? Or do you think that's maybe getting pushed to mid-'27, even second half of '27. There's a large service provider -- service company earlier this week that alluded to maybe timing getting pushed back to mid-'27. So just curious on your thoughts there. And related to that is sort of your ROV utilization, which has been trending in the 60s for the past several years now. Are we setting up for a move potentially into the 70s, maybe high 70s in the next couple of years? I have to look back in my model to 2013, 2014 to see your utilization in the high 70s and 80s. So just curious if high 70s utilization is an achievable target for you maybe in the next 2 to 3 years.

So Eddie, a couple of things here. Let me start with the first one. I -- sometimes I get into colorful metaphors but I feel like we're frogs in the pot here, right? It's coming up already. I think, we talk about an inflection point. It does -- I don't know that we're going to see a really well-defined inflection point but I feel like we're already starting to see the activity raise, right? We see these contracts extending both for the rigs and for us. We do see greater rig utilization and greater rigs contracted. So I think we're already in that period. It just hasn't -- I don't see a real pronounced inflection point but it's happening. For us, it's a little bit muted because, like I said, some of the rigs we're on are actually going to move from region to region. So that will create a little bit of downtime.

But I think longer term, if you look across a couple of quarters, 3 quarters or whatever, it's definitely building like we said it would. So it goes through the -- this half of the year, it probably goes into the first part of '27 but it's happening. And I think the -- follow the money, the contracts really speak to that. So that I would feel really good about. When you say about utilization, one of the things I -- we've talked a little bit about, maybe not enough, is that to really get into the high 70s, we have to have that high percentage of ROVs on drillships. And so we won't have the same probably percentage of ROVs on drillships as we did in the 2014 range but we'll have closer to that, right?

We'll have -- we'll creep above 2/3 probably when we think about activity in any quarter. So I think that's one of the things to watch. When I think about activity level on the rigs, when they're all really busy, can we see it get above where we are today? Absolutely. I can -- will we get into the 70s? I would expect that there will be -- we'll see numbers in the 70s as well. But high 70s, I think, would really mean that we have a greater percentage. And I'm not sure we get there without more drilling rigs. So...

Got it. That's very helpful color. And my follow-up is on this recent announcement you made last week about yourselves and Kongsberg being selected by the U.S. Department of War to support the development of uncrewed undersea vehicles for Navy mission. Just curious if that selection was maybe accelerated by what's going on in the Middle East. And it looks like you said the design is expected to be delivered in the third quarter of this year, which is this current quarter. How should we think about potential revenue generation from this opportunity?

So first of all, let me speak to interest level. I got to give the customer credit. These things have -- we've been working on different versions of these things for 10 years. So it's -- while they [Technical Difficulty]

Ladies and gentlemen, this is the operator. We are experiencing some technical difficulties. Please stay on the line. We'll resume momentarily.

Ladies and gentlemen, thank you for standing by. We will now resume.

[indiscernible] technical difficulties there. But like everything else we do, we had a backup. So Eddie, I was saying, when I think about what the government has been doing, they've been working on this stuff for a long time. I mean we've been involved in different projects for more than 10 years. So I give them credit for that. But right now, it's one of the first times we actually see this technology being used out in the open, right, in both the Gulf and some of the aerial stuff we've seen in Ukraine. So -- but definitely, is there more interest? Sure. I think one of the things is a lot of what we're seeing now is the surface vessels are getting a lot of play and that everybody thinks, well, we want to have the underwater stuff as well.

So that does add a little interest as well. So yes, I think that's good. Revenue question, this program is really just about delivering the design. So until we sort of see -- where does -- what does the design look like? What's the use case look like? What's the budget look like, everything else? I can't really say what comes after this yet. But we're very confident that the design is going to be good. And if the customer has the budget and the use case, we'll see what comes next.

And that concludes our question-and-answer period. I will now turn the call back over to Mr. Rod Larson for some final closing comments.

Well, since there are no more questions, I'll just wrap up by thanking everybody for joining the call. This concludes our second quarter 2026 conference call. Have a great day.

And you may now disconnect.

Hello. Welcome to Oceaneering's First Quarter 2026 Earnings Conference Call. My name is Sarah, and I will be your conference operator. [Operator Instructions] With that, I will now turn the call over to Hilary Frisbie, Oceaneering's Senior Director of Investor Relations. Please go ahead.

Thanks, Sarah. Good morning, and welcome to Oceaneering's First Quarter 2026 Results Conference Call. Today's call is being webcast, and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer; and Mike Sumruld, Senior Vice President and Chief Financial Officer. Rod and Mike will provide our prepared remarks, and then we'll take your questions.

Before we begin, please note that statements made on this call about our future financial performance, business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Our remarks also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our first quarter press release, which is available on our website.

I'll now turn the call over to Rod.

Good morning, and thanks for joining the call today. I'm pleased with our first quarter results, which reinforce our confidence in the year ahead. We generated consolidated revenue and adjusted EBITDA consistent with our guidance and drove strong commercial momentum, capturing new awards and extensions across the portfolio.

At the segment level, Aerospace and Defense Technologies or ad tech posted significant year-over-year revenue growth as expected, indicating steady demand across our defense portfolio. Despite softer energy center activity, subsea robotics or SSR and manufactured products, both delivered year-over-year increases in revenue, demonstrating the resilience of our portfolio.

Overall, this positions us well to deliver on our full year guidance. Importantly, we further solidified our outlook with a strong first quarter order intake of approximately $1 billion, 1 of the healthiest intake since 2020, which resulted in a constructive first quarter book-to-bill ratio. SSR awards totaled approximately $300 million, including projects extending to 2031, which improves our visibility into utilization levels across the next several years.

In addition, we secured multiple survey contracts for the Ocean Intervention 2 that will keep the vessel highly utilized for the next 3 quarters and showcase its range of capabilities, including simultaneous operations. Ad Tech added approximately $175 million in new contract awards, exercised options and increases to existing contract values.

We also progressed on the technology front. As we shared on our last earnings call, we formally introduced Momentum, our next-generation electric work-class ROV, which delivers improvements in supervised autonomy, endurance and reliability. We expect to mobilize it on one of our U.S. Gulf vessels during the second quarter.

We continue to develop our autonomous systems portfolio, including our Freedom platform. One commercial unit is currently operating in West Africa and we are moving towards testing and customer demonstration of a specialized Freedom vehicle for the Defense Innovation Unit or DIU, which reinforces our position as a provider of dual-use technology in the energy and growing defense markets.

In ad tech, we delivered the U.S. Navy submarine rescue diving and recompression system following a multiyear complex rebuild and recertification of this globally deployable mission-critical capabilities. Beyond our subsea markets, I am very proud of the support we provided to NASA's Artemis program and the safety of its astronauts, applying decades of deep sea harsh environment experience to the unique demands of space.

The successful launch and return of ARTEMIS I showcased this work, incorporating our advanced products and technologies. We value NASA's trust in us. Alongside these milestones, we are always navigating an evolving geopolitical environment. Let me address the impact of Middle East conflict on ocean nearing before Mike gets into our detailed financial results. First and foremost, the safety of Oceaneering is our top priority and all in the region are accounted for and safe.

We have enacted established protocols are in frequent contact with our teams in the region and are taking necessary precautions to safeguard our people and property. Operationally, we've experienced intermittent disruption during this period, though the consolidated financial impact has thus far been modest. Integrity Management and Digital Solutions, or IMDS, has the greatest exposure in the region and has therefore been the most effective. We are coordinating closely with our customers and partners to manage these impacts and are monitoring conditions closely.

So with that context, I'll turn the call over to Mike to summarize our first quarter results, and then I'll be back to provide our outlook for the second quarter and full year of 2026.

Mike?

Thanks, Rod, and good morning. Let me share our first quarter 2026 consolidated financial results. Overall, results were in line with the guidance we provided last quarter. As expected, we saw lower activity in our energy portfolio and significant improvement for AdTech. Compared to the first quarter of 2025, revenue was $692 million, representing a 3% improvement with year-over-year revenue increases in SSR, manufactured products and ad tech. Operating income was $57.8 million, down 21% and Net income was $36 million or $0.36 per share, down 28% and adjusted EBITDA was $83.7 million, down 13%.

The consolidated year-over-year comparisons are materially impacted by the record first quarter that our offshore project Group, or OPG delivered last year. Turning to our cash flow and liquidity. We utilized $59.1 million of cash for operating activities, largely for payment of performance-based incentive compensation and increased customer receivables.

We invested $17.4 million in organic capital expenditures with approximately 54% allocated to growth and 46% allocated to maintenance. This resulted in negative free cash flow of $76.5 million, an improvement of $30 million compared to the first quarter of 2025. We ended the quarter with a cash balance of $607 million and $215 million available under our secured revolving credit facility, resulting in total liquidity of $822 million.

Since we're discussing liquidity, let me address our share repurchase activity. We remain committed to an opportunistic and disciplined approach. Given the heightened market volatility tied to the Middle East conflict and the resulting swing in our share price, we chose not to repurchase shares in the first quarter. We will evaluate share repurchases as the year progresses as returning capital to our shareholders continues to be an important component of our capital deployment strategy.

Now let's look at our business operations by segment for the first quarter of 2026 as compared to the first quarter of 2025. The SSR operating income of $55.5 million was down 7% on higher revenue. Average ROV revenue per day utilized increased from $10,788 and to $12,401 driven by improved pricing and discrete first quarter items that boosted ROV revenue are not expected to repeat. Specifically, we mobilized ROV systems for upcoming projects, which contributed revenue without associated ROV days utilized.

We also completed a discrete cost reimbursement scope of work that contributed revenue with minimal margin. Looking ahead, we expect full year 2026 average ROV revenue per day utilized to exceed 2025, but we do not expect to maintain the first quarter rate. SSR EBITDA margin declined to 32%, driven primarily by lower ROV utilization, which decreased to 61% and as activity softened in both drill support and vessel services.

We also saw our geographic mix shift somewhat to lower profitability regions as expected. We incurred cost to prepare the Oceaneering Intervention 2 for operations and continue to invest in the Freedom vehicle ahead of upcoming defense customer trials. We expect SSR margins to rebound in the second quarter as utilization increases in ROV and survey. For the quarter, the revenue split between ROV business and our combined tooling and survey businesses, as a percentage of our total SSR revenue was unchanged from the first quarter of 2025 at 79% and 21%, respectively.

Our OV days utilized in favor of drill support was 67%, while vessel-based services were 33% compared to 62% and 38%, respectively, in the first quarter of 2025. As of March 31, 2026, we had ROV contracts on 83 of the 143 floating rigs under contract or 58% market share. We maintained our fleet count of 250 ROV systems. Turning to manufactured products. Revenue increased 6%. Operating income was $26.1 million or 18% of revenue, which is up 37%, excluding the $10.4 million theme park ride inventory reserve taken in the first quarter of 2025.

Revenue results benefited from the receipt of steel tubes, but at no margin, while operating income improved on continued execution of higher-margin backlog and strong performance from our rotator valves business. Our backlog was $492 million on March 31, 2026, down $51 million from the first quarter of 2025. Our book-to-bill ratio of 0.91 was similar to the same period last year. We've seen backlog decline over the past 2 quarters, largely due to the timing of awards. While this segment is a lumpy project-based business, where backlog can change meaningfully from quarter-to-quarter, we have not seen a change in underlying demand.

Our sales pipeline is healthy with a robust level of tendering activity and substantial opportunity value, and we expect to rebuild backlog in the coming quarters as projects move to award. OPG's results decreased as activity returned to more typical seasonal levels compared to a record first quarter last year, which included higher vessel utilization and a better service mix in the U.S. Gulf and international locations. Revenue was $135 million and operating income was $18 million resulting in a 14% margin.

Favorable project mix partially offset the lower activity supported by installation work and continued execution on an international intervention project. [ IMDS' ] revenue, operating income and margin decreased due to lower activity in West Africa and Australia, the latter of which was the result of our decision to exit a low-margin contract. We entered 2026 expecting growth in the Middle East based on several recent contract awards and initially realized some of these benefits as the year started. However, the Middle East conflict and associated activity declined led to regional results that were essentially flat compared to the first quarter last year. Ad Tech revenue increased to $131 million, reflecting higher volumes in our Oceaneering Technologies, or OTC and Marine Services division, or MSD, business lines.

In OTECH, growth was primarily tied to the large contract awarded in 2025, which is progressing on schedule. MSD results improved due to increased volume in submarine, maintenance and repair work and an increase in dry deck shelter overhauls. Operating income and margin decreased primarily due to a net $5.5 million accrual related to the expected resolution of a previously disclosed contract dispute. While the agreement remains subject to final approval, we expect that it will resolve the matter, reduce uncertainty and enable the team to focus on program execution and continued customer support.

We anticipate settling our obligation over the life of the associated multiyear contract. Our unallocated expenses of $49.3 million were consistent with our expectations for the quarter and increased year-over-year due to a combination of wage inflation, foreign exchange impacts and increased IT costs. Let me turn the call back to Rod to discuss our outlook for the second quarter of 2026.

Thanks, Mike.

We expect to build on our first quarter results with sequential improvement. The quarter is shaping up as planned to support our guidance, even though we expected our consolidated results to be down year-over-year. On a consolidated basis, we expect our revenue to increase and EBITDA to be in the range of $100 million to $110 million.

Comparing our second quarter 2026 to 2025 by segment, for SSR, we expect increased revenue and flat operating income due to changes in geographic mix and increased survey activity. As previously communicated, we anticipate an improving geographic mix and higher utilization in the second half of 2026. For manufactured products, we expect revenue and operating income to both increase by a mid-single-digit percentage. For OPG, we expect flat revenue and decreased operating income with modestly lower vessel utilization in the U.S. and West Africa and a project mix shift to lower-margin inspection, maintenance and repair, or IMR work.

For MDS, we expect revenue and operating income to decrease due to lower activity in West Africa and Australia. Middle East activity remains uncertain and will depend on how regional conditions evolve. For Ad Tech, we expect significantly higher revenue and higher operating income. We project unallocated expenses to be approximately $50 million as wage inflation, foreign exchange impacts and increased IT costs are expected to persist.

Returning to our 2026 outlook. Our full year plan is progressing as expected despite the uncertainty in the Middle East. We anticipate an acceleration in energy market activity in the second half of the year, with the potential to add incremental work in our OpEx-oriented work streams earlier. Against that backdrop, we are reaffirming our consolidated guidance ranges of low to mid-single-digit revenue growth and EBITDA of $390 million to $440 million.

Comparing our full year 2026 to 2025 by operating segment. For SSR, we continue to forecast low to mid-single-digit percentage revenue growth. Average ROV revenue per day utilized is expected to increase slightly compared to our 2025 average. We anticipate that our ROE fleet utilization will be in the mid-60% range with higher activity levels during the second and third quarters that we will maintain our drill support market share in the 55% to 60% range.

Tooling and survey results are expected to increase with improved utilization of the Ocean Intervention II based on recent contract wins. For the year, SSR EBITDA margins are forecasted to be in the mid-30% range. For manufactured products, we expect higher operating income on slightly lower revenue with operating income margins to range in the mid-teens. We expect high absorption in our umbilicals plants and a strong year from rotator products, which recently won its largest ever contract.

Based on our current sales funnel, which indicates that backlog will build in the second and third quarters, We forecast the book-to-bill ratio will be in the range of 0.9 to 1.0 for the full year. For LPG, we expect lower revenue and significantly lower operating income with margins to range in the mid-teens. This reflects our forecast for lower margin IMR work in the U.S. Gulf and lower activity in West Africa, which we expect will be partially offset by ongoing intervention work in the Caspian and an upcoming installation project in North Africa.

For MDS, despite the recent drop in Middle East activity, we continue to forecast revenue growth, supported by demand for our digital and engineering services. Operating income is still expected to increase, but by less than we previously anticipated, with margins in the mid-single-digit range. For AdTech, operating income is expected to increase on significantly higher revenue with margins in the low teens. Demand for our OTEC and MSD services should increase and recent government actions have provided funding consistency across our larger programs, giving us increased confidence in our outlook for 2026 and beyond.

In summary, while conditions remain fluid, our expectations for the second quarter and full year of 2026 are unchanged. We are confident in our ability to deliver, supported by our first quarter order intake and our sales funnel for the rest of the year. The visibility provided by our consolidated backlog, the breadth of the geographies and end markets we serve, the flexibility provided by our healthy balance sheet and the commitment of Oceaneers worldwide.

We appreciate everyone's continued interest in Oceaneering, and we'll now be happy to take your questions.

[Operator Instructions] Your first question comes from Eddie Kim with Barclays.

The SSR awards of $300 million you booked in the quarter was a big number. Just curious how much of it was secured before or after the Iran conflict. And just broadly, as the Iran conflict and the resulting increase in oil prices we've seen, has that sort of increased customer inbounds for more ROVs and other parts of your business?

I'd characterize it this way, I think you'd be hard-pressed to try to see an inflection point or anything in the orders. I think everything was kind of underway anyway. So not a big thing. I will call out this, but 1 of the things that's interesting about the order is that when you think about it is just a near-term or long-term effect on oil prices, we had an increase in longer-term contracts. So we averaged above 1 year for the contracts that were awarded, and we had some out to 5 years. So I think the longer term says that there's more than just a blip going on here. .

Got it. Got it.

And just sticking on SSR, your ROVs full year utilization you maintained at sort of the mid-60s even though first quarter was a little bit low. -- at 61%. Obviously, you expect utilization to increase the remainder of the year. What gives you that confidence? Is it just more rigs -- offshore rigs going to work in the back part of the year or something else?

Yes. Yes, and definitely, the back half helps, but also just -- I mean, the biggest part is the seasonality, right? We do get busier on vessels, especially in the second and third quarter. So we've got that going on plus some of these contracts that I just talked about will pick up in the fourth quarter. So we'll have some mobilizations in there as well.

Understood. And if I could just squeeze 1 more in, if I could. The ad tech contract dispute impact in the first quarter, it seems like on EBITDA, maybe it was a couple of million dollars and then how much -- what do you say is the be Iran war impact. Is that another couple of million? And is that going to linger into second quarter, which I assume is embedded in your second quarter guide, but just curious on both fronts...

I don't think Iran affected the results on that. What I would say is I think it did help us clear up the funding. We mentioned that we got the funding came through and people back and made sure that the programs continue. It was more about just making sure the funding was in place than it was about any activity directly related to Iran. .

Yes. And the overall impact on our EBITDA was a net $5.5 million just when you're building out your model versus 2.

Your next question comes from Keith Bachman with Pickering Energy Partners. .

I just kind of -- I wanted to dig into the ROV pricing discussion a little bit more. Obviously, it looks -- it was up in 1Q pretty significantly. You guys talked about some items that may not be repeatable. Is the -- is the 4Q 25% exit rate on revenue, kind of the right way to think about things going forward given some of the earlier impacts that you guys have mentioned or just anything on pricing on that front?

I think revenue per day, yes, it is. I mean, we're still expecting to average higher year-over-year. So I think it's still a good starting point. We -- like we said, there were some one-offs that topped up revenue but didn't have much of an effect on EBITDA. Some of those things fall back and then we kind of go back to a more normal continuous improvement of the day rate.

Awesome. That's really helpful. And then the second question I wanted to ask was just around -- you guys have brought up this, I think, a few times before, but I just wanted to get a sense of kind of talk about lower profitability depending on working in certain regions. Could you kind of outline maybe higher profitability versus lower profitability regions a little bit for me?

Yes, sure, sure. What we've referenced before in the Q4 call and here is the geographic mix for SSR. And typically, what we see, although not bad, and we've seen improvement over the last year, The margins in the North Sea and Brazil tend to trail the Gulf of America or Gulf of Mexico, your choice and West Africa. And we just see that mix shift towards those lower-margin locations in the first part of this year. I think we're seeing that come to fruition. But do based on line of sight, I think that, that shift is going to move back towards really, Gulf of America as we move into the latter part of the year. .

And then the second thing to watch is just the mix of work because the IMR work tends to be less differentiated, which means it's not as high margin as, say, the well remediation type work, the light well intervention or construction. So those are the things. As we get more of that work, we start to see the margins go up.

Yes, which you could potentially see with everything going on to hope, but I think it's a possibility that you might see more of that intervention work.

Awesome. That's really helpful. I appreciate it. If I could slide 1 more and if you guys all fine. I wanted to ask around the -- you guys have brought up no share repurchase activity this quarter. Is there a chance that there could be a change of how you guys are thinking about deploying capital given maybe energy security risks create opportunities that could be there, maybe not in the immediate term. But I'm just trying to get thoughts on capital deployment, maybe if CapEx and returns there could be a better way to utilize capital. Just your thoughts on that right now, given we're in a much different situation than we were to start the year.

You're thinking about it the right way. I mean, we definitely -- we've always said organic growth, potential inorganic growth that we think is really good and then return to shareholders. And so -- as those things become more attractive, you see -- 1 of the things I would tell you, as we work -- do this work with ad tech, we're prime on projects now. We're starting to see people that we work with that we think we look really good as potentially being part of Oceaneering those things -- the more work we do, the more we see those opportunities.

So yes, if we have an opportunity to deploy capital that way, we would definitely redirect.

Yes. And I think it's fair to say that we feel like we've got the capital necessary to return some to the shareholders. We just need to be cautious about when we're choosing to do so and find those opportunistic moments. And it was just such a challenge in the first quarter, Keith, to do that. It was just swinging too much either direction, in our opinion.

Your next question comes from Josh Jane with Daniel Energy Partners.

First question from me. It sounds like you're anticipating some incremental spending on OpEx items later in '26 and into '27. Maybe just some incremental color would be great and just maybe weave in some of the sense of urgency from customers just given what's happened over the last 8 weeks.

Yes. I mean 2 really kind of -- it's 2 different stories. So if I start with -- we talked a little bit earlier about the increased oil price puts more money in the customers' pockets also improves the economics on well intervention and workovers and well remediation. And we've already seen customers starting to ask about, hey, is there going to be vessel availability during the season, right, so Q2, Q3. So I think some of that could come in. I mean, those things are pretty quick to turn around, so we could pull some of that into Q2, but definitely could fall into this year. .

The other side is we see some resolution of the conflict in the Middle East. All those facilities that are close to the action are going to have to be looked at before they start up. So we think that there could actually be a little bit of a way of coming here on the Middle East IMBS activity because that would definitely have a scramble to put resources there to check these things out so they can start up the plants and the refineries there.

So I think those are the 2 fronts we're watching carefully.

Yes. And on the latter, the couple of contracts that we won earlier this year, at the end of last year that started up before the activity declined due to what happened I think that just bodes well for us moving into the latter part of this year as well if that additional activity shows up.

Exactly. It was a great time for us to improve our footprint there.

Understood. And then just my second one. You mentioned the Ocean Intervention too. I think that was the vessel that I board last summer. And from the commentary, it sounds like the opportunities are accelerating for simultaneous operations. Could you just talk a bit more in detail on the scope of work and how eager customers are to book an asset like this today versus where you were maybe 6 to 9 months ago?

Yes, absolutely. I think for us, the exciting part is it's given us a chance to flex a little bit on the autonomous side or the remote operations that when we talk about SIMOPs, we're talking about operating the the ASP, the autonomous surface vessel that we bought. So that we're doing surveys with that along with doing the towed sonars and things off of the OI and some of the other things that we deploy from the Ocean Intervention too. .

So it's this ability to almost do the work at 2 boats at once using lower cost, more efficient technology and the customers are really getting excited about it. Especially when we go into remote areas where there's not as many assets available I think that tends to be pretty exciting. So we did some trial work here in the Gulf and then we hope to get outside the Gulf and user as well.

This concludes the question-and-answer session. I'll turn the call to Rod Larson for closing remarks.

Well, since there are no more questions, I'll just wrap up by thanking everybody for joining the call. This concludes our first quarter 2026 conference call. Have a great day. .

This concludes today's conference call. Thank you for joining. You may now disconnect.

Hello, and welcome to Oceaneering's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Sarah, and I will be your conference operator. [Operator Instructions]

With that, I will now turn the call over to Hilary Frisbie, Oceaneering's Senior Director of Investor Relations.

Thanks, Sarah. Good morning, and welcome to Oceaneering's Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being webcast, and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer, who will provide our prepared comments; and Mike Sumruld, Senior Vice President and Chief Financial Officer. After Rob's remarks, we will open the call for questions.

Before we begin, please note that statements made during this call regarding our future financial performance, business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter press release, which is posted on our website.

I'll now turn the call over to Rod.

Good morning, and thanks for joining the call today. We closed out 2025 with strong execution across the business, making continued progress against our strategic priorities. Our performance reflected continued pricing progression in key businesses strong operational delivery and growing contributions from Aerospace and Defense Technologies or ADTech. Importantly, this translated into meaningful cash generation with our cash balance increasing to $689 million at year-end, further strengthening our financial flexibility.

During 2025, we generated order intake of $3.7 billion, which represented a book-to-bill ratio of 1.33, up from 1.1 in 2024. Expanded adjusted EBITDA margins by 140 basis points with each operating segment realizing year-over-year improvements. Achieved 99% ROV uptime for the second consecutive year and for the seventh time in the past 10 years. Improved ROV -- improved pricing in our ROV business by 7% over the course of the year, one of the highest-ever initial contract award in Oceaneering's history through our ADTech business, integrated GDi into our Integrity Management and Digital Solutions or IMDS segment, repurchased approximately 1.8 million shares for $40 million and grew our cash balance by $191 million.

As safety remains foundational to everything we do, I'm especially proud of our record low total recordable incident rate, or TRIR, of 0.22 achieved in 2025. Today, I'll cover our fourth quarter and full year 2025 results, our market outlook for 2026, our consolidated guidance for 2026 and our segment outlook for the full year and first quarter of 2026.

I'll start by reviewing our fourth quarter 2025 results. We delivered a solid fourth quarter in line with typical seasonality, driven by strong operational execution in several of our business segments. Compared to the fourth quarter of 2024. Consolidated revenue of $669 million was driven by substantial growth in ADTech, which partially offset lower revenue in our energy-focused businesses, resulting in a 6% decline from the same period last year. The revenue decrease in energy was primarily due to the unusually high number of international intervention and installation projects that our Offshore Projects Group, or OPG, performed in the fourth quarter of 2024 that did not repeat in the fourth quarter of 2025.

Consolidated operating income of $65.4 million also declined year-over-year with increases in ADTech manufactured products and Subsea Robotics or SSR, partially offsetting significantly lower results in OPG stemming from the intervention and installation projects in the fourth quarter of 2024 that I mentioned previously. IMBS was also lower compared to last year. We reported net income of $178 million or $1.76 per share, a 217% increase year-over-year. This improvement was largely due to a $156 million discrete tax benefit related to the release of U.S. valuation allowances.

Our consolidated adjusted EBITDA of $90.5 million was at the high end of our guidance range, but as expected to decline year-over-year for the same reasons that revenue and operating income declined. Additionally, during the fourth quarter, we generated $221 million of cash from operating activities and invested approximately $30 million in organic capital expenditures with approximately 55% allocated to growth and 45% to maintenance.

Free cash flow for the quarter was $191 million, benefiting from the timing of customer payments, including early receipt of payments originally due in the first quarter of 2026. As of December 31, 2025, our cash balance was $689 million, a 38% increase compared to the end of 2024.

Now let's look at our segment results for the fourth quarter of 2025 as compared to the fourth quarter of 2024. SSR operating income of $67.8 million was 7% higher on relatively flat revenue. EBITDA margins improved to 38% from 36% largely due to improved ROV pricing and increased tooling volumes. Survey results decreased on lower activity levels in the Americas as certain projects originally planned for the fourth quarter of 2025 shifted to the first quarter of 2026. The revenue split between our ROV business and our combined Tooling and Survey businesses as a percentage of our total SSR revenue was relatively flat at 78% and 22%, respectively.

Average ROV revenue per day utilized increased 7% from $10,481 in 2024 to $11,210 in 2025, with a fourth quarter exit rate of $11,550. These pricing improvements offset the impacts of lower ROV fleet utilization during the quarter, which declined to 62%. Most of the decline came from vessel support of our OPG vessels as drill support utilization was slightly higher compared to the fourth quarter of 2024. During the quarter, 67% of ROV days utilized for drill support and 33% were for vessel services.

As of December 31, 2025, we had 60% of the contracted floating rig market with ROV contracts on 81 of the 136 floating rigs under contract. We ended the quarter with the year of we ended the quarter and the year with a fleet of 250 ROV systems, including 16 upgraded world-class ROV systems that replace 16 systems that were retired in 2025.

Turning to Manufactured Products. Our fourth quarter revenue of $132 million decreased 7% year-over-year. Operating income of $20.4 million and operating income margin of 15% and increased considerably due to conversion of high-margin backlog in our [indiscernible] business and improved results in our nonenergy projects. Year-end 2025 backlog was $511 million, a decrease of 15% compared to December 31, 2024. The book-to-bill ratio of 0.84 for the full year of 2025 declined compared to 0.97 in the full year of 2024, largely based on the timing of orders.

It is worth noting that Manufactured Products full year 2025 revenue of $569 million and operating income of $72 million represented their highest level since 2020, when we combine our energy and nonenergy products into the same segment.

OPG revenue of $131 million decreased 29% compared to the same quarter last year, while operating income decreased to $15 million and operating income margin declined to 11%. This was expected and as noted earlier, primarily due to large international intervention and installation projects that OPG performed in the fourth quarter of 2024 that did not repeat in the fourth quarter of 2025.

For IMDS, fourth quarter revenue declined due to lower activity levels in Europe and West Africa. Operating income declined by $2 million due to a combination of lower revenue and a loss associated with the resolution of a commercial dispute.

Our ADTech fourth quarter 2025 operating income increased 43% and operating income margin improved to 11% on a 29% increase in revenue as compared to the same period last year. These improvements are the result of new contracts awarded during the year and reflect our strategic initiative to increasingly leverage our offshore knowledge and capabilities to grow this segment. In addition to previously announced contract awards, ADTech completed 2025 with 2 fourth quarter awards on unexercised options that are expected to generate meaningful revenue in 2026. ADTech's current backlog established a strong multiyear foundation for revenue growth, extending beyond the traditional 5-year planning horizon.

Fourth quarter 2025 unallocated expenses of $52 million increased 26% compared to the same period last year, primarily for increased accruals for performance-based compensation.

Now I'll turn my focus to our consolidated full year 2025 results compared to 2024. For 2025 consolidated revenue increased 5% to $2.8 billion, marking our fifth consecutive year of revenue growth. With the exception of IMDS, each of our operating segments achieved revenue increases. Consolidated 2025 operating income of $305 million improved by $58 million or 24%, and adjusted EBITDA of $401 million improved by $54 million or 16% compared to 2024. EBITDA growth was realized for all of our operating segments.

Cash flow from operations increased $116 million to $319 million, primarily due to timing of customer collections in the fourth quarter. We invested 101 -- excuse me, we invested $111 million in organic capital expenditures, representing a 4% increase over 2024 levels. For the full year of 2025, free cash flow was $208 million compared to $96.1 million in 2024. At year-end, we had total liquidity of $904 million comprised of $689 million in cash and cash equivalents and $215 million declared from our undrawn revolving credit facility.

Now turning to our 2026 market outlook. We expect ADTech to be our primary growth driver in 2026 based on our current backlog and expectations for increased spending across defense and government markets. In the U.S., we anticipate a well-funded defense environment with steady activity and subsea critical infrastructure protection, unmanned subsea systems and submarine sustainment. Internationally, geopolitical tensions and increased allied spending create additional opportunities for our AUVs, resident systems and subsea monitoring solutions.

For our energy base -- energy-focused businesses, we expect 2026 results to reflect a global oil market that remains oversupplied early in the year and gradually tightens as the year progresses. Consistent with that backdrop, offshore activity levels are expected to be relatively flat in the first half of 2026 with increased activity in the second half of the year and into 2027. According to the U.S. Energy Information Administration, Brent crude oil prices are expected to average in the mid-$50 to low $60 range in 2026, a level we believe is supportive of deepwater activity broadly consistent with 2025.

[ Synergy ] forecasts the deepwater rig demand, which is indicative of ROV activity will remain relatively flat in 2026. Independent research indicates that final investment decisions, or FIDs, for deepwater projects are expected to increase in 2026. The FIDs and subsea tree awards are key leading indicators for offshore activity over a 2- to 5-year horizon, including installations, equipment orders and overall offshore spending. These indicators help inform the expected timing of demand for umbilicals, subsea hardware and other subsea products, such as our rotator valves, all of which are typically ordered 3 to 6 months following tree awards.

According to [ Rystad Energy ], 42 deepwater FIDs are expected in 2026 compared to 37 in 2025 and increasing to approximately 75 in 2027. Subsea tree awards are forecasted to increase to approximately 300 awards in 2026 compared to 190 in 2025. Tree installations are expected to increase modestly to approximately 370 installations in 2026 compared to 343 in 2025.

Now I'll turn to our consolidated 2026 outlook. Based on our current backlog, anticipated order intake and market fundamentals we project consolidated revenue in 2026 to grow in the low to mid-single-digit percentage range. Year-over-year ADTech revenue will improve significantly. SSR and IMDS revenue improvement will largely offset anticipated declines in OPG and manufactured products. Our current energy-related backlog includes a mix of multiyear contracts, including awards announced across multiple geographies and business segments such as multiyear SSR contracts for ROV services in Angola and ROV and survey services in Brazil, and multiyear OPG contracts for Inspection, Maintenance and Repair, or IMR, contract in [ Mauritania ] and for [ Riserleight ] well intervention in the Caspian Sea.

For the year, we anticipate generating $390 million to $440 million of EBITDA with year-over-year improvements in all of our segments, except for OPG. At the midpoint of this range, our 2026 EBITDA would represent a modest increase over our 2025 adjusted EBITDA. EBITDA margins are expected to improve in Manufactured Products and IMDS remain stable in SSR and ad tech and decrease for PG.

We anticipate generating positive free cash flow of $100 million to $120 million. The year-over-year reduction in free cash flow primarily reflects the early receipt of approximately $37 million in customer payments in the fourth quarter of 2025 that were originally scheduled for the first quarter of 2026. At the midpoint of our EBITDA and free cash flow ranges, our cash conversion rate for '25 and '26, combined will be almost 40%. As has been the case over the last several years, we anticipate a substantial cash draw during the first quarter related to working capital changes associated with lower customer receipts associated with early collections in 2025 that were scheduled for 2026 and the payment of performance-based incentive compensation.

For 2026, we forecast our organic capital expenditures to total between $105 million and $115 million with approximately 40% allocated to growth and 60% to maintenance. Compared to 2025, our energy-focused capital expenditures are projected to be down 12%, while ADTech spending is up to support recent contract awards. We forecast our 2026 interest expense net of interest income to be in the range of $21 million to $26 million. We expect our cash 2026 tax payments to be in the range of $95 million to $105 million.

Directionally, in 2026, for our operations by segment. We expect continued improvements in SSR based on increased Tooling volume, improved results from our Survey business and the full year benefit of pricing improvements achieved throughout 2025. Revenue growth is expected to be in the low to mid-single-digit percentage range and EBITDA margins are expected to average in the mid-30% range for the full year.

For ROVs, we project a service mix of approximately 65% drill support and 35% vessel services consistent with 2025. Our overall ROV fleet utilization is forecasted to be in the mid-60% range with higher activity levels during the second and third quarters. We expect to sustain our ROV market share in the 55% to 60% range for drill support services. Average ROV revenue per day utilized in 2026 is expected to be relatively flat compared to our 2025 exit rate. Survey results are expected to improve in 2026, supported by increased utilization of our Ocean Intervention 2 vessel, which we upgraded in 2025 to enable simultaneous autonomous survey operations.

We have also deployed our Freedom autonomous underwater vehicle, or AV on commercial operations in West Africa. We expect to deliver a second commercial second Freedom vehicle to the defense innovation unit in the first half of 2026.

Finally, as part of our fleet transition plan, we are pleased to announce that our newest electric world-class ROV momentum is expected to be deployed on vessel support operations in the U.S. Gulf later this year. For Manufactured Products, we expect meaningful improvements in operating income on slightly lower revenue, driven by continued conversion of our existing umbilical backlog, high absorption levels across our 3 umbilical plants increased order activity in rotator and cost reductions in our nonenergy product lines. Operating income margin is expected to average in the mid-teens for the year.

For OPG, revenue is expected to decrease in operating income is expected to decrease significantly as projects shift toward traditional IMR work from installation and intervention work. We also project lower activity levels in the U.S. Gulf and West Africa, partially offset by higher activity levels in Brazil, the Caspian and the Middle East. Overall, for 2026, OPG operating income margins are expected to average in the mid-teens range for the year.

IMDS operating income is forecasted to improve significantly on increased revenue with growth opportunities in digital and engineering services. Operating income margin is expected to improve to be in the mid-single-digit range for the year. ADTech operating income is expected to improve on significantly higher revenue, with revenue and operating income growth in all 3 of our government-focused businesses. Operating income margins are expected to average in the low teens for the year.

Our growth expectations are underpinned by 2025 contract awards that span product development, maintenance, inspection, specialized technical services and ongoing operations in complex maritime space and security environments, supporting mission-critical defense and space operations.

For 2026, we anticipate unallocated expenses to average approximately $50 million per quarter with increases associated with the wage inflation, IT costs and foreign exchange impacts.

Now I'll discuss our outlook for the first quarter of 2026 as compared to the first quarter of 2025. On a consolidated basis, we expect our consolidated revenue to decrease and EBITDA to be in the range of $80 million to $90 million. This guidance range is driven by our expectation for lower activity levels in energy markets at the start of 2026, which we expect to improve as the year progresses.

For SSR, we project revenue to increase slightly in operating income to decrease given the geographic mix of ROV activity. We anticipate the mix to be more favorable as we progress through the year. In Manufactured Products, we forecast operating income to increase significantly on slightly lower revenue due to continued backlog conversion and the absence of the inventory release that impacted our theme park ride business in the first quarter of 2025.

We expect OPG revenue and operating income to decrease significantly on lower vessel utilization and changes in project mix in the U.S. Gulf and lower international activity. We project IMDS revenue and operating income to be relatively flat. For ADTech, we expect significantly higher revenue and increased operating income on changes in project mix. We forecast unallocated expenses to be in the range of $50 million.

In closing, I want to thank our employees for their dedication throughout 2025. Through their efforts, we saw momentum in each of our segments that gives us increased visibility into the future, including strengthening contributions from ADTech growing opportunities in digital and software services and expanding opportunities in international projects.

As we move into 2026, we remain focused on working safely and reliably, supporting our customers and creating value for our shareholders. We appreciate everyone's continued interest in Oceaneering, and we'll now be happy to take any questions you may have.

[Operator Instructions] Your first question comes from Keith Backman with Pickering Energy Partners.

I wanted to ask kind of around, I noticed you guys have talked about increased defense and government spending, ADTech looks to be stronger throughout the year with some awards. What is the what's kind of the typical lead time and process of government services type of projects from the time that they're awarded to kind whenever they would show up for you typically. Is there a rough time line on that or lead time?

It's really hard. It varies quite a bit. I mean, some things depending on like if there are services for existing products, they ramp up quickly. Some of the things where we're working on new things that starts with -- like every other project starts with engineering studies and then you go to prototyping and all those kinds of things. So it really is -- it's hard to call. And I would -- just to give you an idea, it's a mix right now. Some of the things we've been talking about are a mix of the two.

No, that's very helpful. Makes sense. And then the other question that I had was around ADTech as well again. Whenever you think about kind of the other segments in your business, how have those really helped supplement what ADTech does and kind of the growth we've seen in that segment. I think it's kind of like your knowledge on ROVs and maybe how that helps, but any color on that?

No, I think you're right on. And so we work in different places, right? So one of them is more about just sort of that offshore operations, ROVs, vehicles, that kind of stuff. That's one of the groups that we talk about. The other one is just our experience in maritime and working on things. It started with a lot of our welder expertise and the things we were doing offshore. So in that case, we do sub-safe work. So we're doing what we call -- you'll hear us talk about submarine sustainment. And that's because we're doing a lot of the mechanical haul repairs, sale repair, things like that. When a submarine comes in a dry dock for nuclear refueling. So we do a lot of that pressure vessel maintenance, if you will.

And we're actually one of the only ones that's actively doing that other than the submarine builders. So that's a sub-safe certification they call, which is pretty unique. And then the third part is, of course, Oceaneering space systems. And the space systems stuff, we do everything from the things that astronauts need to do in space. So creating tools, habitats, human interface, and not surprisingly, that's about working in low gravity environments, right, like a diver does. So our expertise with divers and tooling kind of translate into that business.

And then the other part that came with that is suits and then finally, thermal protection systems, which is sort of a -- if you think about this, this is the shrouding that goes around the rockets a fabric routing that's sacrificial. It burns up basically when the rocket launches, and of course, that business is pretty hot right now with both the return to space but also with the Golden Dome.

Your next question comes from Josh Jayne with Daniel Energy Partners.

First one, I was just curious, could you talk about the future of IMDS, and then also your digital software offerings and how you could potentially expand them sort of outside what you're doing within energy?

Yes. And those are kind of linked at the hip. It -- for us, it's exciting because it's 1 of the first times we see sort of machine vision, machine learning and AI coming to play. So we're going out to a rig and instead of just having people crawl all over into spot checks with hammers and cameras and chip and paint and things looking at pressure vessels and primary containment on the surface side of the offshore platform. We actually are doing laser scanning. We're being able to take that laser scanning and build a 3D model of the rig and detect corrosion at a very precise level. So you detect that corrosion, so you can be able to do a much more comprehensive scan of the facility, but you can also quantify the corrosion and then start to predict how long till failure, what are the parts we need to check more regularly.

So it's a huge advantage to catching things early to being a lot more, I would say, precise with how you want to go out and do your inspections thereafter. The cool part and the thing we're really excited about is while that really improves the topside inspection for our customers, we have had some really successful tests about taking that underwater. And so if we can inspect subsea infrastructure the same way with the laser scanning and the 3D model we can be deploying that off in OPG vessel with an ROV. And so we expect that we'll solve the customer's problem, but it will also create demand for ROVs investments.

That's helpful. And then just one more that I wanted to ask. I want to dig into M&A a little bit. I know it obviously hasn't been as much of a focus for you in the last couple of years. But just given that we've seen some on the rig side, recently announced some larger deals. And I would say the current administration is pretty favorable towards moving deals to. Has any of this changed your thoughts moving forward on M&A? Or should we expect Oceaneering just to sort of operate how they've been over the last couple of years and sort of sticking to your knitting and with the focus on free cash flow generation, and returning it to shareholders with your capital allocation?

I don't think it's going to change my mind on big industry consolidation, right, to try to go and put things together that if you squint really hard, look like they might go together. Just to create a bigger company. But it does -- I mean, it does give us a little bit of confidence as we go forward. The GDi acquisition was something we love, a bolt-on of technology that gave us this laser scanning thing I just talked about.

I think the more we can look at how do we move to what the oilfield needs next or what the defense side needs next picking up new technologies that are great bolt-ons that either give us broader participation in the market or up our technology game, I think those are really attractive. And hey, if they -- if it's easier to do, it will also, along with the financial wherewithal we're building with a strong balance sheet may encourage us to move into slightly bigger things.

Yes. I was going to add the same thing. I think for sure, the balance sheet strength and the growth in cash over the last several years, given the excellent work that's happened here just gives us opportunity, more flexibility and opportunity to do more when the time is right.

[Operator Instructions] Your next question comes from [ Brandon Carnevale with Half Moon Capital ].

Congrats on a great trend. So curious if or if you're seeing any traction on the autonomous forklift side after kind of the big delivery I think you had kind of exiting last year.

There's -- I would say there is a lot of interest and different people are looking at whether they want to use it for truck loading and unloading, which is a huge opportunity for us, and we've been working on improving the capabilities for doing that. But also wherever it's just operating in places where it's not as conducive to have a driver on the forklift. So it's a lot of interest, I would say, it's spread out over a lot of what was a get-to-know-you kind of activity, somebody who wants to pick up 2 or 3 and do a test.

I think one of the things we learned is that the adoption, we're going to be really keen on are you ready to adopt. If it's a brownfield application are the people ready for it is the location ready for it to make sure that those adoptions are smooth. But yes, the interest is high. I think we just got to see how fast these things pick up. So we're still encouraged and the list is long. So we'll keep knocking on the doors and keep answering those calls.

This concludes the question-and-answer session. I'll turn the call to Rod Larson for closing remarks.

Well, since there's no more questions, I'll just wrap up by thanking everybody for joining the call. This concludes our fourth quarter and full year 2025 conference call. Have a great day.

This concludes today's. Thank you for joining. You may now disconnect.

Welcome to the Oceaneering's Third Quarter 2025 Earnings Conference Call. My name is Tina, and I will be your conference operator. [Operator Instructions]

With that, I will now turn the call over to Hilary Frisbie, Oceaneering's Senior Director of Investor Relations.

Thanks, Tina. Good morning, and welcome to Oceaneering's Third Quarter 2025 Earnings Conference Call. Today's call is being webcast, and a replay will be available on Oceaneering's website.

Joining us on the call are Rod Larson, President and Chief Executive Officer, who will be providing our prepared comments; Alan Curtis, Senior Vice President and Chief Financial Officer; and Mike Sumruld, Senior Vice President of Finance. After Rod's remarks, we will open the call up for questions.

Before we begin, I would like to remind participants that statements we make during this call regarding our future financial performance, business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter press release, which is posted on our website.

I'll now turn the call over to Rod.

Thanks for joining the call today. In the third quarter, we surpassed the high end of our guidance range, generating consolidated adjusted EBITDA of $111 million marking our highest quarterly performance since the fourth quarter of 2015. These results were largely driven by the ongoing conversion of higher-quality backlog in manufactured products, continued high activity levels and a favorable project mix in our Offshore Projects Group, or OPG. Progression in Aerospace and Defense Technologies or ADTech as they onboard personnel and subcontractors to support large-scale programs and sustained remotely operated vehicle, or ROV pricing and performance.

Today, I'll focus my comments on our results for the third quarter of 2025, our outlook for the fourth quarter of 2025. Our consolidated EBITDA and free cash flow guidance for the full year of 2025 and our initial full year 2026 guidance. Starting with our third quarter 2025 consolidated results as compared to the third quarter of 2024. We generated revenue of $743 million, representing a 9% increase and operating income rose 21% to $86.5 million. We made meaningful progress in free cash flow generating $77 million after utilizing $24.2 million for investments in the business. We continue to return capital to shareholders, repurchasing approximately $10 million worth of our common stock shares, resulting in an ending cash position of $506 million.

Now let's look at our results by business segment for the third quarter of 2025 also compared to the third quarter of 2024. Subsea Robotics, or SSR revenue and operating income were essentially flat as was the EBITDA margin of 36%. ROV revenue per day utilized increased to $11,254 from $10,576 offsetting the effects of lower but still solid ROV fleet utilization of 65%. Fleet use of 63% in drill support and 37% in vessel-based activity was similar to the same period last year. The revenue split between our ROE business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 77% and 23%, respectively, consistent with last year.

As of September 30, 2025, we had 60% of the contracted floating rig market with ROV contracts on 78 of the 131 floating rigs under contract. We maintained our fleet count of 250 ROV systems. During the quarter, we sold a vessel which was underutilized in the survey market. We believe this will yield positive results in our survey business by reducing costs and focusing our efforts on delivering increased efficiencies through the enhanced simultaneous operations capabilities of the Ocean Intervention II.

Manufactured Products operating income of $24.7 million and operating income margin of 16% doubled on a 9% increase in revenue. These results were driven by the continued execution of higher-margin backlog through our umbilical manufacturing plants as well as pricing improvements in our Grayloc and Rotator product lines. Order intake during the quarter of $208 million was solid, and our backlog on September 30, 2025, was $568 million. Our book-to-bill ratio was 0.82 for the trailing 12-month period.

OPG operating income increased 17% to $23.7 million on a 16% increase in revenue, with the operating income margin flat at 14%. These results reflect healthy vessel utilization in the U.S. Gulf and a favorable mix of intervention and installation projects for the quarter.

For Integrity Management and Digital Solutions, or IMDS, operating income and operating income margin improved on a slight decline in revenue. These results reflect the absence of a onetime noncash charge associated with the divestiture of our Marine -- Maritime Intelligence division in the third quarter of 2024.

ADTech operating income significantly increased by 36% to $16.6 million on a 27% increase in revenue with operating income margin improving slightly to 13%, driven largely by increasing activity levels associated with contract wins in our defense business. Unallocated expenses of $46.3 million were in line with our guidance for the quarter.

Turning to our outlook for the fourth quarter of 2025 as compared to the fourth quarter of 2024. We expect revenue to be lower as improvements in ADTech and SSR will only partially offset the reduction in international OPG projects. Consolidated EBITDA is projected to be in the range of $80 million to $90 million. By segment, for SSR, we anticipate increased revenue and operating income with the EBITDA margin expected to be in the mid- to upper 30% range. Our expectation for improved results is based on continued progression of ROV revenue per day utilized and improved utilization in our survey group with projects starting in the fourth quarter in the U.S. Gulf, Europe and West Africa.

For Manufactured products, we expect significantly improved operating income on lower revenue with continued conversion of higher-margin backlog and cost reductions associated with our nonenergy products.

For OPG, we project revenue and operating income to decrease significantly due to the absence of large-scale international intervention and installation projects that favorably impacted the fourth quarter of 2024, lower vessel activity levels in the U.S. Gulf and the project timing. With respect to our leased vessel fleet, we have one charter in the international market that is expiring during the quarter that we do not intend to renew due to our expectation for seasonally lower activity and allowing us to better match lease costs to future projects.

For IMDS, we forecast revenue to decrease in operating income to decrease significantly due to lower activity. For ADTech, we anticipate significant increases in both revenue and operating income on higher activity levels in our Defense business. We project unallocated expenses to be in the $45 million range.

For the full year of 2025, based on our fourth quarter EBITDA guidance, combined with our year-to-date EBITDA results, we expect to generate adjusted EBITDA in the range of $391 million to $401 million. Our strong free cash flow generation in the third quarter gives us confidence to maintain our full year guidance range of $110 million to $130 million.

Now looking forward, I'd like to provide you with our initial outlook for 2026. As we announced yesterday, we are initiating consolidated EBITDA guidance in the range of $390 million to $440 million, driving similar levels of free cash flow as we expect to generate in 2025. This is based on our expectations for significant growth in ADTech and stable activity levels across our energy-focused businesses. In particular, for SSR, we forecast similar ROV utilization levels since 2025 at improved pricing levels together with increased volume from survey will generate slight increases in revenue and operating income and stable EBITDA margins.

For Manufactured products, we project significantly improved operating income and improved operating margins on decreased revenue due to the continued conversion of higher-margin backlog as well as improved performance and cost reductions from our nonenergy product lines. For OPG, we expect revenue and operating income to decrease on changes in project mix, while significant opportunities exist, customer schedules have not yet finalized.

For IMDS, we forecast increased revenue and operating income. And for ADTech, revenue and operating income are expected to increase significantly and operating income margins are expected to be similar to 2025 levels as we execute large-scale projects that have been ramping up throughout the year.

Our 2026 forecast is based on the expectation that the government shutdown will be resolved in 2025. We plan to continue share repurchases in 2026 with approximately 5.8 million shares remaining under our existing repurchase authorization. We will provide more detailed guidance for 2026 during the year-end reporting process.

In summary, we continue to see growth opportunities in each of the markets we serve beyond 2025, driven by supportive long-term commodity prices improving visibility into an increasing number of contracted floating rigs in the second half of 2026 and beyond. Stability in ROV revenue per day utilized, our ability to optimize our revenue mix between our customers' CapEx and OpEx spend, growth in global defense spending and increased market demand for our mobile robotics technologies.

Now before we take questions, I want to take a moment to acknowledge an important milestone. As we previously announced, Alan plans to retire from his role as CFO on January 1. During his 30 years with Oceaneering and 10 years as CFO, Alan has been more than a financial steward. He's been a trusted adviser, a steady hand and a thoughtful leader. His ability to challenge assumptions while remaining open to the perspectives of our employees, customers, investors and other stakeholders has helped us to shape our strategy in meaningful ways. More than that, Alan is a true Oceaneer, embodying our culture of innovation, collaboration and a relentless commitment to excellence. His steady presence to shape not only our financial direction but also the way we lead and work together. Alan, on behalf of all Oceaneers' and our Board of Directors, thank you for all you've done for our team and for Oceaneering. We look forward to your continued contributions as you transition to an advisory role.

I'm also happy to introduce Mike Sumruld, our Senior Vice President of Finance, who joined the call today. Mike brings deep industry experience, and we look forward to his contributions to Oceaneering's continued growth. And we'll now be happy to take any questions you may have.

[Operator Instructions] Our first question comes from the line of Josh Jayne with Daniel Energy Partners.

First one for me, just when I think about the business moving forward toward the Ocean Intervention II, I think it was in August, and it was helpful to see the scale and capabilities of the vessel. One of my takeaways from the upgrades was how you'll ultimately be able to perform simultaneous autonomous survey operations. Maybe you could speak to that a little bit more, the advantages that's going to provide and how we should think about that -- those capabilities and the business moving forward?

Sure. I think, Josh, I mean, you saw some of that in the tour, but the main takeaway is being able to do more with less. So you decrease the service expression, you decrease fuel usage, you decrease personnel on board. So much more efficient, not just from a cost standpoint, but also from a time standpoint, being able to do more.

The other thing that isn't necessarily intuitively obvious because we're doing these things simultaneously and we're gathering this data, you're actually cross-checking data. So you're getting data from 2 different sources at the same time, you get a better idea early about your data quality. So I think all in all, it just provides the customer a more robust solution and getting that data into their hands sooner.

Okay. And then also this quarter, you announced a significant Subsea Robotics contract with Petrobras. I think it was $180 million. Could you speak to that market in 2026. How you expect it to hold up versus other geographies? And do you expect your market share in Brazil to increase moving forward for your other energy business lines?

Sure. I would just say, first of all, I was down there just about a month ago and got to meet with customers, including Petrobras. And the market is really robust. I mean they've got some pretty significant plans. They've got -- they've got Pelotos, which is coming up. They've got the -- we just got an approval, I think some of you might have seen in the news. They just got approval to drill up north near the mouth of the Amazon, which kind of puts them in that at Atlantic margin along with Suriname and Guyana. So I mean, very exciting stuff up there. So it is ever forward in Brazil. They're looking really hard at what they have ahead of them. And these are as big opportunities we've probably ever seen in Brazil.

I think market share continues to increase. My conversations certainly led me to believe like I would say, even more in the past, but coming back recently, their interest in technology is really big. And they are first adopters of a lot of the most interesting things we do. We've got things like we've got a riser inspection that will actually fly and do riser inspections. And we've done mooring line inspections and some of the things. So both -- I think both those things that drive them to exploration places, but also with an aging infrastructure, the ability to continue to work in places and exploit those investments they've already made in the existing fields. So I just think Brazil is a very exciting market, and we're well positioned there.

Okay. And then maybe just one more quick one. Just on the ADTech business, which continues to grow from a number of the awards you announced and you highlighted in your '26 guidance. It sounds like there's confidence it will be an increasing portion of your business going forward. Can you just speak to how that business is expected to compete for capital moving forward and where you ultimately see it as a percentage of your business over the next 3 to 5 years? And then I'll turn it back.

Sure. I think the nicest thing about it is that business grows, it's really low capital intensity. And so that's one of the most exciting things about scaling up that business. It's a lot of engineering know-how. It's a lot of products we build. It actually allows us to sweat the footprint we already have currently. I've talked a lot about this that people ask about we've got this defense business and we've got this energy business. They're really hard to separate. We do a lot of robotics. We do a lot of vehicle work. And all of those things happen throughout Oceaneering, right?

So some of the things those customers want are really well aligned with our IMDS business, for example. Some of them are really well aligned with the SSR business, obviously, with vehicles. But I think that's the exciting part is we are able to scale that up significantly without a lot of capital.

The other thing that we're starting to see more and more, as you see NATO spending increase, you see some of the other areas of the world, bearing more of the cost and more of the responsibility for defense. We're seeing more international opportunities come up as well. And that's everything from things we've seen in Taiwan, things that we've seen in -- with August, the Australian, U.K. and U.S. submarine build. So it's growing on all fronts. The big beautiful bill really put a lot of money back in the coffers for this work to go forward.

Yes. I'll just add one quick comment. It was -- we had management meetings last week and just to see the whole team rallying around this growth aspect of ADTech and all of the people from the energy side of the business. It was just nice to see 80 people sit there and rally around how can we get there faster.

Our next question comes from the line of Scott Gruber with Citigroup.

I wanted to get some more color on one of the segments in 4Q of Manufactured product, that's been a big source of growth this year. You mentioned the continued strength on a year-over-year basis in 4Q on operating income, but on lower revenues. It looks like it's implying maybe a double-digit decline on revenues. What do you think that means for margins? And kind of what's driving the revenue decline? So maybe I'll pack that for us a bit more.

Yes. Give me one second here, Scott. I'm looking at -- I don't know if we're implying double-digit decline in revenue. And I think it's really the quality of earnings is where we see the increase in the operating income and EBITDA for the segment. So a lot of the backlog we've been talking about for the last 2 years where we received the improved pricing, a lot of that is starting to flow through as you witnessed this year. There's a good part of that still in backlog that we expect to execute in '26. And at the same time, we've taken some I'll say, operational excellence focus in this area as well and continue to look at how we can improve our cost structure across the board. And I think we're expecting to realize some additional benefit in '26 there.

Yes, Scott, maybe just while they're doing the calculations, I mean, we're running the plants. The plants are booked. We -- I mean, we've got a great -- we've got a great runway for both what we did in '25, but through '26 as well as I think Alan has mentioned it before, having good backlog in all 3 of the umbilical plants. We've got good throughput at Grayloc and Rotator. Rotators having some of their best quarters ever. So I don't think there's a -- the revenue thing is not to imply that we're not going to have a large book of work. I think it's really just a matter of how that timing happens. I would say the sales funnel looks good. So we're booking into '27. So it's just a matter of when those larger projects hit, but I'm not I'm really -- I mean, Manufactured products is a good story for next year.

Yes. Yes, yes. I was just a bit surprised that the revenue would be declining sequentially here in the fourth quarter relative to last year. So moving on to ADTech, obviously, another great source of growth for you guys. Can you just give us some additional color on the kind of cadence of ADTech growth that's embedded in the '26 EBITDA guide?

Yes. I would kind of start with -- we've been talking through, we are adding additional contractors, subcontractors and personnel for the large-scale project that we announced in Q1. The team continues to onboard those subcontractors and looking at how we exit '25. I think, is a good beginning to how we think we'll start '26, but we expect to still continue to ramp up some of the revenue throughout the remainder of '26 as well. So we expect good progression year-over-year really with the new program that we have been awarded.

And that's just that program because it ramps through '27, but we've got some other things coming on as well, new opportunities yet to be determined. So there's just a lot, lot of excitement in ADTech. I think we talked on the previous -- to Josh as well. There's -- it's firing on all 3 cylinders actually in that business. So it's hard to really quantify until we get those other pieces booked. But we just talked about that one big project. Alan hit it well. It will ramp through '26 and into '27.

And with no further questions in queue. I will now turn the call back to Rod Larson for closing remarks.

Well, since there are no more questions, I'd like to wrap up by thanking everyone for joining the call. This concludes our third quarter 2025 conference call. Have a great day.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.