HMH (NASDAQ:HMH) revised its 2026 earnings outlook as delayed equipment orders, slower rig reactivations and disruptions in the Middle East weighed on third-quarter results and cash flow. Executives said they expect activity to improve in 2027, particularly among the offshore floating rigs that use the company’s equipment.
The company now expects full-year adjusted EBITDA of $135 million to $140 million. Chief Financial Officer Tom McGee said fourth-quarter adjusted EBITDA would be roughly flat to slightly below the third quarter’s $38 million. The transcript did not specify the company’s previous guidance range.
Third-quarter revenue was $171 million, while orders rose 12% from a year earlier to $191 million, driven by services and partly offset by lower product bookings. Orders declined 7% from the prior quarter. Adjusted EBITDA fell 3% year over year but rose 13% sequentially, and the adjusted EBITDA margin was 22.3%.
Equipment delays pressure cash flow
Chief Executive Officer Eirik Bergsvik said some drilling contractors secured contracts later than expected, leaving less time and flexibility for larger equipment upgrades. Other customers deferred project decisions as they maintained a disciplined approach to capital spending.
“We have not seen these opportunities disappear,” Bergsvik said. “Rather, the timing of the associated order intake has shifted to the right.”
Product revenue fell 69% year over year to $17 million, while product order intake was $16 million. McGee said the low revenue level prevented the business from fully absorbing its global cost base. In response to an analyst’s question, he estimated the resulting quarterly earnings headwind at about $5 million to $6 million.
Aftermarket services revenue fell 7% from a year earlier to $97 million, while service orders rose 16% to $115 million, helped by repairs and field services. Spares revenue declined 2% to $57 million; spares orders increased 7% to $60 million.
Free cash flow was negative $12 million in the quarter. Management said it bought long-lead materials ahead of purchase orders to shorten delivery times and prepare for expected demand, increasing working capital in the near term. McGee said that, barring a major project order, the company expects inventory to be released primarily in the first and second quarters of 2027.
Floater outlook and Middle East weakness
HMH expects activity across its key floater fleet to increase approximately 10% to 25% in 2027 from 2026, with particular strength in the second half. Bergsvik said roughly 85% of the expected base-case activity level is supported by firm customer backlog or contractual options.
McGee told analysts that the lower end of the range reflects signed contracts and options the company expects to be exercised. The higher end would require additional contracting and some rig reactivations that were postponed this year.
Bergsvik said global floater contracting through September totaled approximately 110 rig years, compared with 59 rig years in the same period of 2025. By contrast, global jackup contracting fell to approximately 146 rig years from 195 rig years. He cited additional Saudi Aramco rig suspensions and tender delays among the sources of Middle East weakness.
HMH estimates lower regional activity will reduce its 2026 order intake by approximately $50 million to $60 million. McGee said the Middle East conflict had affected revenue by roughly $17 million and adjusted EBITDA by roughly $8 million in the first nine months of the year. He characterized most of the impact as deferred work, though he said the timing of a return in deferred maintenance was difficult to estimate.
The company expects a full push into 2027 for Middle East equipment orders. Bergsvik said growth in floater activity and North American land business could mitigate some of the regional weakness.
Acquisitions and capital priorities
HMH announced its acquisition of Deepwater Riser Services on September 21. McGee said the deal expands the company’s riser inspection, recertification, refurbishment and storage services in the U.S. Gulf and allows operations to be centralized in Houma, Louisiana.
Asked about acquisitions, debt reduction and potential share repurchases, McGee said mergers and acquisitions are the current priority as HMH seeks to add capabilities and scale. He said the company has additional debt capacity and expressed confidence in its ability to address its 2028 maturities.
HMH ended the quarter with $90 million in cash and cash equivalents and approximately $165 million in total liquidity, including its revolving credit facility. Its revolving credit facility extends through June 2028, and it has no bond maturities until December 2028.
About HMH (NASDAQ:HMH)
We are a leading provider of highly engineered, mission-critical equipment solutions, providing customers with a comprehensive portfolio of drilling equipment, services and systems utilized in oil and gas drilling operations, both offshore and onshore. Our global reach, technical expertise and innovative product offerings, coupled with our integrated operations from manufacturing to aftermarket services, allow us to provide customers with first class technology, engineering and project management services through the entire asset lifecycle of the equipment we provide.
