Revenue of $265.054 million missed the $265.6406 million API Ninjas estimate, and GAAP diluted EPS of $0.37 missed the $0.3914 estimate. Revenue was up 8% quarter-over-quarter and 10% year-over-year.
Q4 2026 guidance calls for revenue of $260 - $270 million and Adjusted EBITDA of $53 - $58 million, bracketing the third quarter's $265 million and $55 million.
Profitability stepped up: Adjusted EBITDA of $55.4 million compares with $43.6 million a year ago, with margin at 21% versus 18%; free cash flow was $32.4 million and the quarter ended with $189 million of cash and no bank debt.
Subsea wins are accumulating: a $30+ million subsea wellhead contract in Indonesia, $9+ million of additional OneSubsea Alliance work, and the first installation of the 20K psi wellhead system Offshore US.
The one thing that matters: The small misses hide a better operating quarter. Margin expanded and cash ran ahead of earnings, while the lower GAAP net income reflects last year's asset-sale gain. But a quarter of acquisition spending means some growth is bought, and the flat Q4 guide does not yet show the subsea backlog management points to for 2027.
Key metrics
Metric
Reported
Prior year
Change
Revenue
$265 million
—
up 10% year-over-year
Net Income
$26 million
—
—
Adjusted EBITDA
$55 million
—
—
Adjusted EBITDA Margin
21%
—
—
Free Cash Flow
$32 million
—
—
Cash and cash equivalents at quarter-end
$189 million
—
—
Guidance changes
Item
New guidance
Prior guidance
Q4 2026 total revenue
$260 - $270 million
—
Q4 2026 Adjusted EBITDA
$53 - $58 million
—
Quality of earnings
The year-over-year GAAP decline is a gain comparison, not weakness. Net income of $26.3 million compares with $39.2 million a year ago, when results included a $40.9 million gain on sale of assets; this quarter's gain was $0.1 million while Adjusted EBITDA rose to $55.4 million from $43.6 million.
Cash backs the earnings. Net cash from operating activities of $38.8 million ran ahead of net income of $26.3 million despite a $19.4 million working-capital outflow, with inventories up to $299.7 million from $264.8 million in June.
A lighter tax charge helped sequentially. Income tax expense fell to $8.5 million from $10.4 million in Q2 on similar pretax income of $34.8 million versus $35.4 million, while income from operations slipped to $32.3 million from $33.8 million.
Gotchas & watch items
Some growth is bought: the quarter included $63.3 million of acquisition payments and goodwill and net intangibles rose to $288.4 million from $221.3 million in June, yet the release does not quantify acquired revenue.
Cash fell despite free cash flow: cash and equivalents dropped to $188.8 million from $222.1 million in June as acquisition payments outran the $32.4 million of free cash flow.
Litigation cost sits outside the adjusted figures: a $53.4 million legal settlement accrual for the Impulse litigation is on the balance sheet, and Adjusted EBITDA and ROCE exclude the provision, $1.8 million this quarter.
Backlog signals are building: contract liabilities rose to $17.5 million from $14.5 million in June and $10.3 million a year ago, alongside the subsea awards.