HMH Q1 Earnings Call Highlights

Key Points

• HMH reported Q1 revenue of $171 million (down 14% YoY) with orders of $218 million for a 1.3x book-to-bill; adjusted EBITDA was $30 million and margin improved to 17.6% as cost actions and favorable spare-parts mix offset lower product and service volumes.
• Aftermarket strength helped offset product softness: spare-parts revenue rose 11% to $67 million, while product revenue fell 40% to $33 million and services were down 14% YoY (30% QoQ); management expects product/project revenue to recover in H2 as offshore activity and rig awards pick up.
• HMH finished the quarter with $101 million cash (total liquidity ~$175 million), completed an IPO that generated ~$21 million net proceeds (plus a May overallotment), and reiterated full‑year adjusted EBITDA guidance of $157 million–$177 million, weighted to the back half of 2026.

HMH NASDAQ: HMH reported first-quarter 2026 results that management said reflected expected revenue softness tied to lower backlog entering the year, while highlighting year-over-year margin improvement and an improving offshore contracting environment.

First-quarter results: lower revenue, steadier profitability

Orders in the quarter were $218 million, which Chief Executive Officer Eirik Bergsvik said translated into a 1.3x book-to-bill ratio. Total revenue was $171 million, which Bergsvik attributed to “the expected softness relative to last year, driven by the lower backlog coming into the quarter.”

Chief Financial Officer Tom McGee said revenue declined 14% year-over-year due to “lower product and service volumes, partially offset by higher spares volumes,” primarily because of “reduced product and services backlog entering the period.”

Adjusted EBITDA was $30 million, which McGee said was relatively flat year-over-year, as higher spares activity offset lower service and product volume. Adjusted EBITDA margin increased to 17.6%. Bergsvik attributed the margin improvement to “disciplined cost execution, favorable product mix in spare parts, and a continued focus on operational efficiency,” while McGee also pointed to favorable mix and cost actions from last year flowing through the income statement.

Aftermarket and spares offset product softness

Management broke out performance by revenue category:

• Spare parts revenue rose 11% year-over-year to $67 million, which Bergsvik described as reflecting demand from the installed base and growing aftermarket activity. McGee added spares growth was driven by “land and topside spares, slightly offset by pressure control spares.”
• Service revenue was $72 million. Bergsvik said results were “as expected,” tied primarily to backlog of repairs entering the year, while McGee reported services revenue was down 14% year-over-year and down 30% quarter-over-quarter, impacted by softer 2025 order intake and a non-repeat of contractual service volume.
• Product revenue was $33 million. Bergsvik said this reflected the conclusion of capital equipment projects and lower starting backlog, which he said the company expects “to reverse in the second half of the year.” McGee said projects, products and other revenue was down 40% year-over-year due to lower backlog stemming from customer capital spending deferrals in 2025.

On order trends, McGee told analysts the inbound activity has been “a combination of everything,” with product and project orders still “light,” while “spares, digital upgrades, and repair” are starting to show up “in advance of people going back to work.”

Offshore contracting inflection and installed base utilization

Bergsvik said offshore drilling market conditions improved “meaningfully” in recent weeks, describing the first quarter as “the strongest quarter for offshore contracting activity in more than three years,” with momentum continuing into the second quarter. He said this is translating into “rising backlog and improving utilization,” supporting management’s view that a recovery is beginning to materialize.

He emphasized strength in the floater segment, noting that in the first four months of 2026, about 110 rig-years of floater awards (including options and letters of intent) were announced, which he said equated to roughly 75% of the total award volume seen in all of 2025.

Within HMH’s installed base, Bergsvik said utilization across semisubmersible rigs with HMH equipment is “moving back into the high 80% range,” and he expects a similar trajectory for drillships as tenders convert into firm awards. He also said some awards have been for rigs that were ready-stacked for several quarters and are now returning to work or scheduled to do so during 2026.

Regionally, Bergsvik highlighted Brazil activity, where he said HMH signed a development agreement with Petrobras focused on rotating control device technology for managed pressure drilling. He also cited encouraging momentum in the North Sea, Canada, and Asia.

Cash flow, liquidity and IPO details

Free cash flow was positive at $4.6 million in the quarter, defined by the company as cash flow from operating activities less purchases of property, equipment and development costs. McGee said this reflected normal seasonality, with a lighter first half as the company prepares for a second-half uptick. CapEx and development costs were $2.7 million.

HMH ended the quarter with $101 million of cash and cash equivalents and total liquidity, including its revolving credit facility, of about $175 million, according to McGee. He said the company has no long-term debt maturity until June 2028.

McGee also detailed the company’s IPO activity shortly after quarter-end. On April 2, 2026, HMH completed an initial public offering of 10.52 million shares of Class A common stock, representing about 24% of the company, at $20 per share. He said net proceeds after underwriting discounts, commission costs and shareholder loan repayments were approximately $21 million, and that a portion of proceeds was used to repay outstanding shareholder loans in the second quarter. McGee noted that an overallotment option for 685,844 additional shares was exercised and closed May 5, 2026, with net proceeds of about $12.9 million paid entirely to principal shareholders.

McGee emphasized that the results discussed on the call reflect the historic financial results of predecessor entity HMH Holding B.V., and that HMH Holding, Inc. had not conducted operating activities as of March 31, 2026.

Guidance and what could move results within the range

For full-year 2026, management expects second-half revenue to be “meaningfully stronger” than the first half, driven by services and spares bookings translating into revenue as customers prepare for higher activity levels. McGee provided adjusted EBITDA guidance of $157 million to $177 million, weighted to the back half of the year, and said CapEx is expected to be about 2% of revenue for 2026.

Asked what could push results toward the low or high end of the EBITDA range, McGee said downside would largely come from items getting pushed out, while upside could come from “some larger equipment orders.”

On pricing, Bergsvik said the company is not seeing anything notable “when it comes to pricing at the moment.” McGee added that as markets tighten and day rates rise, the more important dynamic for HMH is whether customers broaden spending to “upgrade equipment, and upgrade capability.”

Management also addressed geopolitical tension in the Middle East. Bergsvik said potential near-term disruption could affect certain onshore and jackup activity in the region, but he views the overall impact on HMH as “manageable,” given the company’s increasing weighting toward offshore markets outside the Middle East.

In response to questions on strategy, McGee said HMH has “a very active M&A pipeline,” primarily smaller opportunities, and said the company’s approach is to “stick to the core” across land and offshore drilling equipment, parts and services, as well as mining and digital. Bergsvik added that expanding in mining is part of that strategy, including potential acquisitions and partnerships, and said the company is positive on mining as copper prices rise and more projects come online.

About HMH NASDAQ: HMH

Houghton Mifflin Harcourt (HMH) is an education and learning company that produces curricular content, instructional materials, assessment tools and digital learning platforms primarily for the K–12 market. The company develops and licenses print and digital resources designed to support classroom instruction, remote and blended learning, and student assessment across a range of subjects and grade levels.

HMH’s offerings include core and supplemental curricula, adaptive and online learning technologies, formative and summative assessments, and professional development services for educators.

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