Innovex International (NYSE:INVX) reported second-quarter financial results on Tuesday. The transcript from the company’s second-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/159948172
Summary
Innovex International reported Q2 2026 revenue of $245 million and adjusted EBITDA of $48 million, both at the high end of guidance, with an EBITDA margin of 20%.
The company completed the $95 million acquisition of TCO Group, a strategic addition that strengthens their presence in Norway and the UAE, and fits their high-margin, capital-light business model.
Innovex International secured significant subsea contracts, including a $20 million package in Malaysia, and completed a successful trial of the XPAC system in Asia Pacific.
Revenue from international and offshore markets increased by 11% sequentially, driven by strong international performance despite normal project timing variations.
The company remains focused on disciplined capital allocation and innovation, aiming for sustained profitable growth and long-term shareholder value.
Guidance for Q3 2026 includes expected revenue of $260 to $270 million and adjusted EBITDA of $51 to $57 million, with growth driven by international markets and new business from TCO.
Free cash flow for the quarter was $30 million, maintaining strong cash generation with capital expenditures aligned with historical targets.
Full Transcript
OPERATOR
Good morning and welcome to Innovex International’s second quarter 2026 earnings call. At this time, all participants are in listen-only mode, and there will be a question-and-answer opportunity at the end of this call. As a reminder, this call is being recorded. I will now turn the call over to Eric Wells, Chief of Staff. Eric, please go ahead.
Eric Wells, Chief of Staff
Good morning, everyone, and thank you for joining us. An updated investor presentation has been posted under the Investors tab on the company’s website along with the earnings press release. This call is being recorded, and a replay will be made available on the company’s website following the call. Before we begin, I would like to remind you that Innovex International’s comments may include forward-looking statements and discuss non-GAAP financial measures.
It should be noted that a variety of factors could cause Innovex International’s actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Please refer to the second quarter financial and operational results announcement that we released yesterday for a discussion of forward-looking statements and reconciliations of non-GAAP measures. Speaking on the call today from Innovex International, we have Adam Anderson, Chief Executive Officer, and Kendall Reed, Chief Financial Officer.
I will now turn the call over to Adam Anderson.
Adam Anderson, Chief Executive Officer
Good morning, and thank you for joining us today. I want to begin by thanking our employees across the organization for another quarter of strong execution. Our teams continue to focus on delivering a delightful customer experience, advancing customer-centric innovation, and leveraging the Innovex International platform to grow our business organically. That spirit of collaboration is at the heart of our no barriers culture and continues to shape how we operate every day.
On today’s call, I’ll begin with our second quarter performance and then discuss the recent acquisition of TCO Group and the opportunities we see for its technologies within the Innovex International platform. I’ll also highlight several important operational and commercial developments across our subsea and international businesses before turning the call over to Kendall for a more detailed review of our financial results, capital allocation priorities, and outlook for the third quarter.
Starting with performance, we delivered an excellent second quarter. Revenue totaled $245 million and adjusted EBITDA totaled $48 million, both at the high end of our guidance ranges and representing an adjusted EBITDA margin of 20%. These results were supported by improving activity levels across several international markets and growing commercial momentum within our subsea business. On July 1, we completed the acquisition of TCO Group and are excited to welcome the TCO team to Innovex International.
TCO has pioneered laminated glass plugs that create reliable, gas-tight downhole barriers. These plugs can subsequently be opened without intervention, reducing cost, time, and risk for customers. This novel technology is applicable across both onshore and offshore wells, including completion, well suspension, and casing or liner deployment. As a reminder, we apply stringent qualitative and quantitative criteria when evaluating acquisitions. TCO fits these criteria exceptionally well.
Its differentiated, largely consumable technologies fit with our big-impact, small-ticket business proposition. Like our core business, TCO’s products require limited sustaining capital. Additionally, TCO strengthens our presence in Norway and the UAE, two markets where we see meaningful long-term opportunity. TCO is a growth business. We believe Innovex International’s diversified portfolio, global reach, and established customer relationships can accelerate TCO technologies across new customers, applications, and geographies, driving value for our shareholders.
Importantly, we see potential for future innovation leveraging our suite of technologies. However, this potential upside is not reflected in the purchase price. The financial characteristics of the transaction are compelling, something Kendall will discuss in more detail later in the call. We’re also encouraged by the progress of Drilling Innovative Solutions following its acquisition last quarter. The business continues to mature within the Innovex International platform, and we are already seeing evidence of its growth potential.
One recent example: a major North Sea operator—one that DIS would not have been able to access on its own—identified its technology as a critical solution for a specific field development. This is how our acquisition playbook is designed to work, by adding differentiated technologies and leveraging the Innovex International platform to accelerate their growth. Turning back to the quarter, we saw meaningful progress in our subsea businesses. We secured an additional $20 million subsea tension riser package for an operator in Malaysia, with follow-on wellhead orders anticipated.
We also successfully completed the first XPAC trial with a major international operator in Asia Pacific following a multi-year qualification effort. XPAC is a high-performance expandable liner hanger system which helps improve well geometry and simplify architecture in technically demanding applications. Together with several important awards secured over the past few months, these developments reinforce the growing momentum we’re seeing across our subsea business.
While improving offshore markets have certainly provided a welcome tailwind, we believe our no barriers commercial mindset, optimized manufacturing footprint, and strategic alliance with OneSubsea have strengthened our ability to compete effectively and profitably for complex offshore work. Innovation continues to drive organic growth. During the quarter we completed the first installation of our Argo Latch subsea release plug in Brazil. The system enabled the customer to complete cementing in a single step, eliminating the need for a sub-mudline system and second cement job, saving time and cost.
The Argo Latch was deployed in the same operation as our 18-inch by 22-inch XPAC system, combining capabilities from both Legacy Innovex International and Legacy Dril-Quip. This successful deployment demonstrates how collaboration across the combined organization can create integrated solutions that simplify well construction and improve execution for customers. Outside of Subsea, we’re seeing additional avenues for growth across several growing international markets by deploying our technologies and capabilities with both new and existing customers.
Activity in Mexico increased substantially during the quarter, with completion activity through the second quarter already exceeding the total number of jobs performed during all of 2025. Across Latin America, we continue to build stronger customer relationships and see additional opportunities developing. For example, we’re seeing increased customer engagement and quotation activity in Venezuela. While we have not yet recognized meaningful revenue in Venezuela, we believe Innovex International is well positioned to participate as customer activity develops.
Importantly, our capital-light business model does not require significant fixed assets in the country. Our Canadian Wellhead team also completed its first surface wellhead delivery to Mexico while continuing to support commercial developments in other international markets. Mexico represents a large and growing market for surface wellhead technology, making this first delivery an important commercial milestone for our Wellhead strategy. These developments demonstrate how we can use product expertise developed in one region to create opportunities across the broader Innovex International platform.
Our Middle East performance also improved during the quarter. In Saudi Arabia, we gained market share in expandable liner hanger technologies and continue to grow our presence in unconventional applications. We also secured our first direct contract through an Innovex International Saudi entity, further strengthening our customer relationships and positioning us well for future opportunities in the region. Stepping back, I believe the second quarter demonstrates that Innovex International is entering a new phase.
The integration, manufacturing optimization, and cultural transformation of the past two years are increasingly translating into commercial wins, differentiated technologies, and expanding market position across our global platform. Our priorities remain unchanged. We will continue to invest in differentiated technologies, improve customer experience, and allocate capital with discipline. We believe that approach positions Innovex International to deliver sustainable, profitable growth and long-term value for our shareholders.
I’ll now turn the call over to Kendall to review our financial results and outlook in more detail.
Kendall Reed, Chief Financial Officer
Thanks, Adam, and good morning, everyone. I’d now like to review our second quarter 2026 financial results. For the second quarter of 2026, revenue totaled $245 million, up 2% sequentially from the first quarter of 2026 and up 9% year over year. Adjusted EBITDA totaled $48 million, resulting in an adjusted EBITDA margin of 20% compared to 21% in Q1 2026 and Q2 2025. We were pleased to achieve the high end of our guidance ranges for both revenue and adjusted EBITDA.
We’re encouraged by the trajectory of our margins as the benefits of our operating model and commercial execution continue to build. NAM land revenue for the second quarter was $131 million, down 4% sequentially from $137 million in the first quarter. We are pleased with the resilience of our NAM land revenue relative to underlying North American market conditions, which included the impact of seasonally lower Q2 activity in Canada. We believe our differentiated technology portfolio and customer-focused business model will continue to support long-term market share gains in North America.
International and offshore revenue during the second quarter of 2026 was $113 million, an increase of 11% sequentially driven by continued strength across our international portfolio and partially offset by normal project timing within our offshore business. Within subsea, we continue to secure meaningful customer awards that provide increasing visibility. Although project timing will create some quarter-to-quarter variability, we expect these awards to support attractive growth over the next one to two years.
We remain encouraged by activity levels across several key international markets and continue to see a healthy pipeline of opportunities heading into the second half of the year. Cost of sales, excluding depreciation and amortization, was approximately $161 million during the quarter. Gross margins remained healthy, reflecting the strength of our product portfolio, disciplined pricing, and continued operational execution. Selling, general, and administrative expenses for the quarter decreased by approximately $3 million sequentially to $39 million.
As we fully complete the Dril-Quip integration and continue to grow the business, we expect to leverage our existing platform to reduce SG&A as a percentage of revenue and further strengthen margins while maintaining disciplined cost control across the compensation. Free cash flow for the quarter was $30 million, representing 63% of adjusted EBITDA. Our ability to consistently generate strong cash conversion remains a key differentiator of the Innovex International business model and reflects our capital-light operating structure, disciplined working capital management, and limited capital expenditure requirements.
Capital expenditures in the second quarter totaled $7 million, representing approximately 2.7% of revenue, in line with our historical target of 2% to 3% of revenue. We ended the quarter with approximately $222 million of cash and cash equivalents and no bank debt. On July 1, we completed the acquisition of TCO for $95 million, consisting of $65 million of cash and $30 million of Innovex International common stock. We believe the transaction represents an attractive use of excess balance sheet cash, allowing us to deploy a portion of our excess cash into a high-quality, cash-generative business while preserving significant financial flexibility.
As Adam discussed, TCO is an excellent example of our acquisition strategy in action. We remain focused on acquiring product- and technology-driven businesses that complement our portfolio, can benefit from the Innovex International platform, and are available at reasonable valuations. TCO fits that playbook exceptionally well through its differentiated, largely consumable technologies and attractive margins, strong cash generation, and limited capital requirements.
Our M&A pipeline remains robust and includes a mix of smaller bolt-on acquisitions as well as larger strategic transactions. We will remain disciplined and pursue opportunities that strengthen our portfolio, leverage the Innovex International platform, and meet our stringent qualitative and quantitative return criteria. This disciplined approach remains central to how we intend to create long-term shareholder value. Return on capital employed for the 12 months ended June 30, 2026 was 12%.
ROCE is reduced by our net balance sheet cash position. We remain focused on achieving a long-term target of high-teens ROCE via margin expansion, high-return M&A, and shareholder returns. Looking ahead to the third quarter of 2026, we expect revenue in the range of $260 to $270 million and adjusted EBITDA of $51 to $57 million. As we move through the second half of the year, we will remain focused on accelerating the integration and growth opportunities associated with TCO, capturing operational efficiencies across the business, investing in customer-centered innovation, and maintaining a disciplined approach to capital allocation.
Our strong balance sheet, cash, and free cash flow generation position us well to continue creating long-term shareholder value across a range of market conditions. With that, I’ll turn the call back to Adam for closing remarks before we open the line for questions.
Adam Anderson, Chief Executive Officer
Thanks, Kendall. We are pleased with our second quarter performance. We delivered revenue and adjusted EBITDA at the high end of our guidance ranges, generated strong free cash flow, and continued to build commercial momentum across our subsea and international businesses. With the acquisition of TCO, we’ve added differentiated, high-margin, and capital-light technologies to the Innovex International platform. I want to reiterate that Innovex International is entering a new phase.
We now have a stronger and more efficient customer-centric operating platform, a broader portfolio of differentiated technologies, and greater opportunities to extend those technologies across customers, applications, and geographies. Our focus is on converting these advantages into consistent, profitable growth while maintaining our discipline around execution and capital allocation. Thank you again to our employees, customers, and shareholders for your continued trust and support.
Operator, we can now open the line.
OPERATOR
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dawn Christ with Johnson Rice.
Dawn, your line is now open. Please go ahead.
Dawn Christ, Analyst at Johnson Rice
Morning, guys. Thanks for letting me in here on a busy morning. I wanted to start on the Canadian wellheads. You know, obviously that is a dominant position up there, but really doesn’t have a big position in the U.S., but you sold some into Mexico. Can you give us kind of the game plan? How did you see that progressing over the next couple quarters or years? Are you planning to make a big push into the U.S. to try to unseat the major competitor in the U.S. right now?
Adam Anderson, Chief Executive Officer
Hey. Morning, Don. Thanks for the question. Yeah, so that, like you said, really strong position we have in Canada in the wellhead space. We’ve got a great team up there. Definitely one of the market leaders in a pretty consolidated space up there. I think one of the things we’re really excited about is the thermal space in Canada. We’re still one of the smaller of two players, probably the smaller player up there, but consistently growing market share, and I’m pretty excited about our trajectory up there.
That’s a really nice market. I think the second place where we’re seeing traction is these international opportunities. Mexico is a really good one for a variety of technical reasons, and then we are really well established there, and we’re selling these to the service companies that we’ve had good experience with, where we can create value in that relationship. And then I think there’s a myriad of other international places that we’ve had some success and then a big pipeline of opportunities in.
So I would say the international land region is probably the second biggest area that we’re excited about. We are evaluating—we’ve done a little bit of work in U.S. land. It’s still relatively small, so I wouldn’t bake in a ton of growth there, but that is certainly a pretty attractive market where we’ve got a really strong distribution network, know all the major customers well. So that’s certainly an area that we’ll be looking at over the next couple of years, but probably a little bit slower to evolve than those first two that I just mentioned.
Dawn Christ, Analyst at Johnson Rice
Okay. And I wanted to ask about offshore. Obviously you had some strong comments and we’re seeing some very strong comments from many other people this earning cycle on the offshore side of the business. But can you classify, has customer behavior changed or is there just more conviction today versus, you know, kicking the tires in the past? Any kind of comments around the offshore space that gives you more confidence as we move, you know, towards the end of ’26 and into ’27?
Adam Anderson, Chief Executive Officer
Yeah. So we’ve seen really strong offshore pipeline, I think, in a couple of different areas. Some of these Asia projects that we’ve won—so we’ve announced three big Asia projects in total—are somewhere in the $60 to $80 million worth of revenue, which will probably start coming meaningfully in next year. Those are areas where we were kind of the incumbent as a result of the legacy Dril-Quip relationship with these folks. So those are projects that got sanctioned and approved in the last few months—last six months, let’s say—some of that tied to just a desire to get more energy security in local markets.
And then we currently have a pretty strong pipeline of things that are pretty close to converting to awards over the next six months, both in the Western Hemisphere, like in the U.S. Gulf, as well as some of these big international awards, which we expect to get announced over the next six months. So I think across the board we see both a really robust pipeline of activity. And then I’m really pleased with the commercial momentum of both our ability to convert some of these legacy contracts and get really nice awards, but then really taking market share.
I think a couple of things we’ll announce over the next six months will demonstrate our ability, with the really great talent and technology we inherited from the Dril-Quip deal, combined with just being a little bit more aggressive in a number of different ways commercially, is going to allow us to take some market share in that space. Really excited with how that offshore space is progressing for us.
Dawn Christ, Analyst at Johnson Rice
I appreciate that. If I could sneak in one for Kendall. We saw a couple other companies get tariff refunds. Anything on the playbook for y’all to get anything back from a tariff perspective? I didn’t see anything in your release.
Kendall Reed, Chief Financial Officer
Yeah, thanks, Don. So it’s a good question. I mean, as a reminder, the tariff that’s really more meaningful to our business is the 232 tariff around raw material steel, which was not included in that kind of refund program. But we have applied for and received some, I would say, modest tariff refunds that we’ll see coming in the door in Q3 here. So we’ll get something back, but it’s immaterial in the grand scheme of things for our business.
Dawn Christ, Analyst at Johnson Rice
Okay, I appreciate the color. I’ll turn it back. Thanks, guys. Good quarter.
Adam Anderson, Chief Executive Officer
Thanks, Donna.
OPERATOR
Your next question comes from the line of Keith Beckman with Pickering Energy Partners. Keith, your line is now open. Please go ahead.
Keith Beckman, Analyst
Hey, good morning. Thanks for taking my question. I just wanted to get a sense of maybe quarter over quarter kind of what’s baked into your 3Q guidance. Trying to get a sense on Middle East here as well as TCO contribution for a full quarter of that and just how you’re thinking about third quarter and potentially back half of the year here with the conflict resumed.
Kendall Reed, Chief Financial Officer
Yeah, good question. So I think in terms of what we have baked into the Q3 guide, maybe just to start with TCO. Really pleased to get that deal closed on July 1st, so we’ll get a full quarter of impact from the acquisition there. But as a reminder, with that business being nearly 100% focused on international and offshore markets, it’ll have the same variability around delivery and project timing that our international offshore business has. So with that in mind, what we’re baking into the Q3 guide is 15 million of revenue from TCO and about 3 million of EBITDA.
And I think what that implies to us is we’re going to see some nice growth in that TCO business as we go into future quarters. We’re obviously not guiding out that far, but I think the Q3 guide is nice and conservative based on the orders that we can see and the delivery time we’ve got scheduled today. So that implies around 250 million of revenue from the Legacy Innovex International business. You kind of touched on Middle East there. We’re seeing things relatively flat in Q3 to Q2 in the Middle East region.
So again, hopefully some nice long-term opportunities if the conflict clears up and we can see some activity growth in the region there. And really a lot of what’s driving that quarter-over-quarter growth in the Legacy Innovex International business, let’s say some of these subsea opportunities that Adam talked about are just starting to kick in. That’s going to be more of a 27 than a 26 driver, but we’re starting to see some nice green shoots there.
And then obviously from a North America land perspective, we’ll have, you know, breakup in Canada won’t recur. We’ll see some nice Q2 to Q3 growth and then starting to see some nice growth in the US land business as well, driven by some building rig count activity. So I think across the board, relatively positive outlook for Q3 and then building into Q4 next year.
Keith Beckman, Analyst
So that’s very helpful. And then my second question was just a little bit around, I believe you guys are probably fully out of Eldridge, but any update there? And then the bigger question really more broadly, I mean, what’s the next biggest thing to attack here to kind of continue improving margins, and maybe just talk about the different improvements that you could see in increasing margins from here.
Kendall Reed, Chief Financial Officer
Thanks. Yeah, definitely. So as we mentioned, we completed the move out of Eldridge in Q2, so we’re excited about that. The consolidation in the supply chain I think will enable us to not only be more efficient, drive better margins, but be more responsive to customers, improve our delivery, all those types of things. And then in terms of where we go from here, we’re really pleased to see some nice consistency over the last couple of quarters right in that 20% range, and building as we go into Q3.
We kind of talked about being consistently north of 20% post the exit of Eldridge. I think where we go from here, one thing we didn’t hit on specifically but that did weigh on Q2 and we expect to weigh on Q3 is the increased logistics cost hitting the Middle East around this conflict that’s going on. We had around $1.5 million of increased freight expense related to air freight or just additional costs of moving things around. That’s been a lot more difficult.
So I think you get some resolution there, even without revenue growth, that’s going to drive a bit of margin improvement. And then what’s really going to help us are the incrementals as you see these big subsea awards converting to revenue, as we see TCO getting back to that more average quarter that they’ve had over the last couple of years, which we fully expect. And then the two places we’ve talked about that are improving, kind of slowly building up that low base from last year, are Mexico—that’s a very good market for us.
We generate great margins with some differentiated technology—and then Saudi being the last piece of that where we’ve seen some nice growth there in Q2, but expect that to be a market that has a lot of running room for us as well at high incremental margins. So those are the pieces we’re looking at. I think there’s some more trimming we can do around the edges on the cost side to try and continue to be more efficient. But really from here it’s getting some resolution on what’s going on in the Middle East and then driving incrementals on a lot of the new work we have coming through the pipeline.
Keith Beckman, Analyst
That’s really helpful. I will turn it back. Congrats, guys.
OPERATOR
Thanks, Keith.
Your next question comes from the line of Scott Gruber with Citigroup. Scott, your line is now open. Please go ahead.
Scott Gruber, Analyst at Citigroup
Yes. Good morning. Morning. You know, with your TCO acquisition, obviously you continue to execute on your M&A strategy. But I’m curious, you know, you guys kind of do the look-back analysis and kind of measure the pace of growth within the base business. And I know you’ve been adding pieces over time, but can you provide some more color on how you see that base kind of growing year on year relative to your key end markets, just to kind of peel back the onion a bit for us?
Kendall Reed, Chief Financial Officer
Yeah, so I guess maybe give a little bit more general answer rather than just focusing on TCO. But I think if you were to pro forma in all the various acquisitions that we’ve done and look at how we’re thinking about, say, first three quarters of this year versus first three quarters of last year, I think we’re up slightly year over year in the face of the market broadly being down a bit. We’ve seen, obviously, US land activity just starting to turn around a bit in Q2.
But I think if we look at the broader world picture, activity has been slowing down over the last couple of years, and our business to be slightly up year over year over that time period gives us some good confidence we’re continuing to grow share across the board, not just filling in with acquisitions. If that kind of hits on your question.
Adam Anderson, Chief Executive Officer
Yeah, and I would just add to that. It’s a good question because we ask ourselves the same thing—how do we measure our organic improvement? And we’ve had a strong track record over the last decade of growing market share on the back of our approach to the market, as we characterize it, this no-barriers culture of really trying to lean into understanding what our customers’ problems and issues are, whether that’s technical or commercial, and finding a way to be a little bit more nimble and better than the competitors at solving those problems.
That has led us to, pretty consistently over the last decade, growing pretty meaningful market share to the point where we’re number 1, 2, 3 in just about everything we do in North America and then, in spots internationally, the same kind of ranking, and then looking at growing that to being the top player in what we do in everything internationally over time as well.
Scott Gruber, Analyst at Citigroup
That’s helpful. And then, you know, there’s a couple mentions of Mexico. Obviously you guys saw your first wellhead delivery there and some broader pickup in activity. Just maybe some more color for us on what you’re seeing out of that country as it kind of comes out of the doldrums and you make some progress with additional product sales into the country, and leave some comment just on the broader LatAm market as well.
Adam Anderson, Chief Executive Officer
Yeah, so Mexico has been a really good market both for Legacy Innovex as well as Dril-Quip prior to the combination, and mostly because they drill some very technically demanding wells—in some ways the most demanding wells in the world in Mexico—in terms of depth and pressure and temperature. And in many of those areas there are some technologies—liner hangers, some float equipment technology—that really, we have the best fit-for-purpose technology for that market.
So we’ve got really strong market share and can create value for ourselves in that somewhat what can be a challenging market in some ways. Similarly, on the wellhead side, we’ve got a really nice portfolio of technology that came to us through the Dril-Quip combination and a really strong team in Mexico to help pull that in. And it’s a little bit less of a higher-barrier-to-entry market than, say, the US land market. So that’s why we’re kind of focusing on that, starting to see some success, and have a couple other things we’re working on that are pretty exciting.
So yeah, I think Mexico was a big headwind for us last year, starting to get better this year, and we’ll see where it goes from here. But I think in terms of our technology and commercial acumen in that market, that’s something that’s really a positive for us.
Scott Gruber, Analyst at Citigroup
That’s great. I appreciate the color. I’ll turn it back. Thank you.
OPERATOR
The next question comes from the line of Rahul Kakar with Jefferies. Rahul, your line is now open. Please go ahead.
Rahul Kakar, Analyst at Jefferies
Hey, good morning, guys. Thanks for taking my question. I just want to touch a little bit on the North American land market—just your view on how you see that progressing considering the conflict has resumed, how the conversations are going with the customers, and just overall your positioning in the market for the second half and going into 2027.
Adam Anderson, Chief Executive Officer
Yeah, very good question. We’ve got a really strong position in US land again across most of the things that we do. We have seen, much like the rest of the market participants, a pickup in activity. A couple of the larger independent majors have announced some rig additions. But what’s less obvious to the public markets probably is a lot of these smaller one- or two-rig operators have added a rig or something like this. And so we’re seeing pretty strong growth that Kendall said is baked into our Q3 forecast in US land.
And then we’ll see where it goes from there. Obviously, our customers in North America are very efficient, very responsive to what the market signals are telling them. So we’re expecting strength in Q3 and Q4, and then it’s a little bit hard to predict out farther than that in that market.
Rahul Kakar, Analyst at Jefferies
All right, great. And then maybe the next one, I just want to touch a little bit more on the third quarter guide. I think that’s great color on the contribution from TCO. Just curious, the factors that could basically help you accomplish the high end of the guide. I understand the midpoint is around a decent uplift in the margin quarter over quarter. What factors could drive you being at the high end of the guide as well? Any color on that front?
Kendall Reed, Chief Financial Officer
Yeah, I mean, I think, you know, from a revenue perspective, certainly the first quarter out of the gate, we want to be conservative with what we’re factoring in from TCO, but I think from conversations with the team, there are a lot of good opportunities there. I think the second half of the year is going to be strong. So there’s just kind of a question of timing, of what, you know, what gets delivered in Q3 versus Q4. So that’s certainly one factor.
And then from a margin perspective, the other thing I would highlight is just this conflict going on in the Middle East that continues to be a drag on margins for us. So if you look at just the bottom line, if that were to somehow get resolved here tomorrow, that would be a nice boost to our margins in the region. From a logistics cost perspective are probably the two things I would point to from a Q3 standpoint. Awesome.
UNKNOWN Analyst
If I can just ask one more on TCO overall. Obviously you’ve been executing on your M&A strategy. You got the TCO completed like this and obviously you have a track record of cross selling. Whenever we do an M&A, can you just take us to, like, the near term or the low-hanging cross-selling opportunities from this acquisition where you can expand the products line? Any color on that front from the TCO, like how you could basically accomplish commercial?
Adam Anderson, Chief Executive Officer
Yeah, we can hit on that real quick. Yeah. So there’s a lot of opportunities, especially with TCO, for us to cross-sell that across our platform. One prime example of that I would argue is in Brazil, where that’s a market TCO is already looking to enter. Never really done anything meaningful historically, but there’s a really nice technology fit with some of the TCO emerging products that we think make a lot of sense for the Brazil market. And it happens to be sold to the exact same folks and used in the exact same well cycle as our subsea wellhead business, where we’re the number one provider of subsea wellheads into Brazil.
So I think it’s going to mesh. That’s a place where we’ll have really great opportunity to partner together with the team there and see some nice growth. All right, great. Thank you. Good quarter.
OPERATOR
Your next question comes from the line of Eddie Kim with Barclays. Eddie, your line is now open. Please go ahead.
Eddie Kim, Analyst at Barclays
Hi, good morning. Just wanted to touch on Saudi Arabia. You mentioned you grew share in the expandable liner hangers business. Fair to say you’ve seen sort of very little disruption in that Saudi business despite everything that’s going on? And separately, you mentioned growth in unconventional applications in Saudi. How involved are you currently in Jafurah, and do you see that as a growing opportunity for you guys?
Adam Anderson, Chief Executive Officer
Yeah, so we were. We had a nice uptick in business in Saudi. That’s an area that we talk about regularly, that we’ve got a really strong market position in Saudi. A great team there, have signed our first contract direct with end user in Saudi, and have a few other things coming down that pipeline. So we’re really proud of the position we built there. Yeah, I think two technologies to highlight there are that expandable liner that’s run a lot in the gas—more the legacy deep gas in Saudi—where we’re building really nice market share with that expandable liner hanger.
And then in Jafurah specifically, we do a couple of different things around well construction: our cementing tool products, centralizers, some float equipment, some intermediate stage tools. And then we have qualified now the TrenchFoot technology that came to us through the Citadel acquisition and think that there’s a lot of potential for that. So I would say today we’re still more levered to the legacy oil land market for Saudi, but we are definitely growing in the gas and the unconventional space.
I think that can be a big driver of growth over the next couple of years for us.
Eddie Kim, Analyst at Barclays
Got it. That’s very helpful. Color. Thank you. Just my follow-up is on the North NAM land region. Your second quarter revenue declined 4% sequentially. You mentioned that a lot of that was due to seasonally lower activity in Canada. Could you just remind us, actually, the split, the rough split in revenue between the Lower 48 and Canada? Is it sort of 60/40, 70/30? Any sense there would be great.
Kendall Reed, Chief Financial Officer
Yeah. Hey, Eddie. So Canada represents, you know, call it roughly 8% of our overall business and probably something like 15% of our North America land business. So yeah, it’s the minority for sure. But, you know, they have some pretty hefty seasonality there. So that definitely weighs on Q2 each year in mainland.
Eddie Kim, Analyst at Barclays
Got it. And so the U.S. land portion of that Lower 48, did you see growth in that region in second quarter? Was that also flat or a slight decline as well?
Kendall Reed, Chief Financial Officer
Yeah, we were more flat in Q2 in U.S. land. I think from what we’re seeing now, we’re expecting some nice growth in Q3. I think just based on timing of rigs coming on and when that translates to revenue for us. We did not see a lot of Q2 revenue growth, but we’re expecting to see that pick up in the back half of the year.
Eddie Kim, Analyst at Barclays
Got it. Great. Thank you. I’ll turn it back.
OPERATOR
Your next question comes from the line of Blake McLean with Daniel Energy Partners. Blake, your line is now open. Please go ahead.
Blake McLean, Analyst at Daniel Energy Partners
Hey, morning guys. Yeah, just one follow-up on the TCO. A lot of good color already here, so I don’t want to be a dead horse, but on the TCO, you guys call out Norway and UAE, and the UAE, kind of strengthening positions there. Can you just talk a little bit about those markets specifically, the opportunity set, and what this does for you guys there?
Adam Anderson, Chief Executive Officer
Yeah, no, for sure. I think it’s a good question. Norway is a very attractive market for the things that we do. I think it’s one of the markets where we are definitely underpenetrated relative to where we want to be and where we should be over time. So we’ve taken some steps with our team there, with our technology over the last couple of years, which is just starting to bear a little bit of fruit. But adding the TCO team—their inherent knowledge and capability in Norway—I think is really going to help accelerate everything that we can do in the downhole tool and technology space.
So I think that’s really important, and we’re looking forward to what comes out of that. That is definitely a market that takes some time to identify the right technologies, get it qualified through the appropriate channels, etc. So it’ll take some time before you start to see that flow through to our results. But I think long term, great market, strong barriers to entry, and a place you can really create value over time. In the UAE, we participate a little different than our position in Saudi.
We do really well with certain niche technologies. We help with some of the most complicated wells that they drill—in the island wells that they drill—and some other areas. And similarly, TCO adds some technologies kind of in a similar way and some niche technologies that really help them be more efficient in their drilling and completion operations. And then we see some potential to pull that technology into a couple areas, again Saudi in particular, where I think we can help TCO be a lot more successful in Saudi as an area that they, again, have not focused on quite as much as UAE.
But similarly, I think their position in UAE, in combination with some of the niche technologies that we do in the Emirates, is going to help us strengthen that position over time.
Blake McLean, Analyst at Daniel Energy Partners
Okay, good color, thank you. And then just more broadly on the M&A front, I mean, you guys have got a fairly clear strategy that’s been well executed here—you know, three noteworthy acquisitions over the last year or so. How do you guys think about the integration bandwidth and the playbook sort of internally? I know there’s a really robust opportunity set, but how do you think about the organizational capacity to take on incremental deals as you think about the process moving forward?
Adam Anderson, Chief Executive Officer
Yeah, no, it’s a really good question. So, I mean, I’ll brag on our team for a minute. We have a really great group of folks that we’ve done this a lot over the last 10-plus years building Innovex International and are really at a place now where we have great confidence in the team of, whatever acquisition comes through, we’re going to be able to integrate it, pull the systems together, you know, get the organization all feeling like one team and pointed in the right direction.
So we’ve just been very pleased with how our team internally has come together around that integration skill set. I think the other thing that I would point out is we’re really getting to the end—it’s been kind of a two-year journey, I would say, on the Dril-Quip integration—and we are right at the end of that process, where we’ve got the facility consolidation done. We have one more ERP conversion to do later this year, and then we will really be through that whole process.
So we have a lot of bandwidth freeing up as we look at new opportunities now to be able to take on, you know, as many or more as we’ve done over the last year or two.
Blake McLean, Analyst at Daniel Energy Partners
Awesome. Thank you very much for the time this morning.
Adam Anderson, Chief Executive Officer
Thanks, Blake. Have a good one.
OPERATOR
We have reached the end of the Q&A session. This concludes today’s conference call. Thank you for participating. You may now disconnect.
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