S-1/A: HMH Holding Inc. Files S-1/A for IPO, Reveals Mixed Q3 2025 Results

HMH Holding Inc., a leading provider of drilling equipment and services, filed an S-1/A for its initial public offering on Nasdaq, reporting a 0.7% revenue increase but a 30% net income decrease for the nine months ended September 30, 2025.

Summary

• HMH Holding Inc. (HMH Inc.) is preparing for an Initial Public Offering (IPO) of its Class A common stock on Nasdaq under the symbol HMH, utilizing an Up-C structure.
• The company is a global leader in highly engineered, mission-critical equipment solutions, services, and systems for oil and gas drilling (offshore and onshore), with a growing presence in mining.
• For the nine months ended September 30, 2025, total revenue increased by 0.7% to $619.1 million, driven by increases in service revenue (+6.4%) and product revenue (+8.4%), partially offset by a decrease in spare parts revenue (-12.0%).
• Net income for the nine months ended September 30, 2025, decreased by 30.0% to $31.5 million, compared to $44.9 million in the same period of 2024.
• Adjusted EBITDA for the nine months ended September 30, 2025, decreased by 10.3% to $102.2 million, from $113.8 million in the prior year period.
• Free Cash Flow saw a favorable change of $34.2 million, moving from a negative $16.3 million in 9M 2024 to a positive $18.0 million in 9M 2025.
• Adjusted Return on Capital Employed (ROCE) decreased to 13.2% for 9M 2025 from 16.7% for 9M 2024.
• The company's asset-light business model resulted in capital expenditures, including development costs, representing only 1.6% of revenue for 9M 2025.
• HMH B.V. was formed on October 1, 2021, through the combination of Baker Hughes' Subsea Drilling Systems and Akastor's MHWirth drilling equipment business.
• The IPO proceeds will be used to purchase B.V. Voting Class A and B shares from Principal Stockholders and to repay $140.8 million in outstanding Shareholder Loans, with remaining funds for general corporate purposes.
• The company has a backlog of $364.6 million as of September 30, 2025, with $117.8 million from projects and products and $246.8 million from services, expecting to recognize most of this revenue within 12 months.
• HMH Inc. identified a new material weakness in internal control over financial reporting related to operational finance activities in certain subsidiaries, specifically concerning revenue cutoff and process level controls.

Sentiment

Score: 6

Explanation: While the company shows strong strategic positioning, market growth, and R&D, the recent decline in net income and Adjusted EBITDA for 9M 2025, coupled with identified material weaknesses in internal controls, introduces caution. The positive Free Cash Flow and long-term industry outlook provide a balanced, but not overwhelmingly positive, sentiment.

Positives

• Revenue increased by 0.7% for the nine months ended September 30, 2025, reaching $619.1 million.
• Service revenue increased by 6.4% and product revenue increased by 8.4% for the nine months ended September 30, 2025, indicating growth in core offerings.
• Free Cash Flow significantly improved, turning from a negative $16.3 million in 9M 2024 to a positive $18.0 million in 9M 2025.
• The company maintains an asset-light business model with low capital expenditures, representing only 1.6% of revenue for 9M 2025.
• Strong market position as a leading provider of mission-critical equipment, particularly in the highly regulated offshore drilling market (75% of installed base).
• Anticipates recurring and resilient revenues from aftermarket services and spare parts due to a large installed base and expected increase in drilling activity.
• Active investment in Research & Development (R&D) for cutting-edge technologies like fully electric BOPs, riserless drilling, and digital solutions (DrillPerform, RiCon, DrillCERT, SeaLytics, DEAL).
• Experienced management team with a proven track record in scaling revenue, developing new technologies, and executing over 100 M&A transactions.
• Strategic expansion into adjacent industries like onshore and subsea mining, leveraging existing expertise and products like slurry pumps.
• Global footprint with operations in 15 countries and sales in over 90 countries in 2024, providing customer proximity and supply chain efficiency.
• Successful refinancing of Senior Secured Floating Rate Bonds in November 2023, resulting in a new $200.0 million Senior Secured Bond at a reduced cost of capital (9.875% from 10.01944%).
• Cost optimization efforts led to a 15.7% decrease in selling, general and administrative expenses for 9M 2025.

Negatives

• Net income decreased by 30.0% to $31.5 million for the nine months ended September 30, 2025, compared to $44.9 million in the prior year period.
• Adjusted EBITDA decreased by 10.3% to $102.2 million for the nine months ended September 30, 2025, from $113.8 million in the prior year period.
• Adjusted ROCE decreased to 13.2% for 9M 2025 from 16.7% for 9M 2024.
• Cost of sales increased by 10.1% for the nine months ended September 30, 2025, primarily due to revenue mix and lower utilization of service and spare parts facilities.
• Spare parts revenue decreased by 12.0% for the nine months ended September 30, 2025, due to lower volume from current market conditions.
• Restructuring and other expenses increased to $4.4 million for the nine months ended September 30, 2025, from zero in the prior year period, due to lease exits and cost reduction programs.
• Identified a new material weakness in internal control over financial reporting related to operational finance activities in certain subsidiaries, specifically concerning revenue cutoff and process level controls.
• Significant customer concentration, with the top five customers accounting for 41.8% of total consolidated revenues for 9M 2025, and one customer alone accounting for 17.3%.

Risks

• The cyclical nature of the oil and natural gas E&P industry and volatility of oil and natural gas prices directly affect demand for products and services.
• Intense competition in the oilfield services industry, including from larger companies with greater resources and numerous small local companies, could lead to market share loss or price reductions.
• Dependence on suppliers and a limited number of customers exposes the company to product shortages, long lead times, price increases, and potential loss of significant business.
• Risks associated with certain contracts for products and services, including financial challenges for customers, payment defaults, cost over-runs on fixed-price contracts, and contractual penalties.
• Unforeseen interruptions and hazards inherent in the oil and natural gas industry (e.g., equipment defects, accidents, natural disasters) could result in substantial losses and impact customer relationships.
• Failure of equipment to perform to specifications could lead to liability for environmental contamination, personal injury, or property damage.
• Inadequate insurance coverage for potential environmental, product, or personal injury liabilities could result in significant financial impact.
• Limited combined historical financial statements may not be indicative of future performance due to recent formation and public company cost structure changes.
• Terrorist attacks or armed conflicts could harm the business by reducing demand for oil and gas or damaging infrastructure.
• Exposure to environmental liabilities and complex laws and regulations (e.g., Clean Water Act, Clean Air Act, RCRA, EU CSRD, CS3D, NTA) could increase costs, delay projects, or result in penalties.
• Risks related to climate change, including physical risks (adverse weather) and transition risks (evolving regulations, alternative fuels, shifting consumer preferences), could increase operating expenses, capital costs, or decrease resources.
• Imposition of laws, executive actions, or regulatory initiatives to restrict, delay, or cancel leasing, permitting, or drilling activities could reduce demand for services and products.
• Increased activism against oil and natural gas exploration and development activities could lead to decreased drilling, reputational harm, reduced access to capital, and increased regulatory burdens.
• Material weaknesses in internal control over financial reporting could result in financial statement restatements, adverse stock price impact, or litigation.
• Changes in tax laws, regulations, and treaties (e.g., Pillar Two, IRA 2022, One Big Beautiful Bill Act) could adversely affect the effective tax rate and worldwide tax liabilities.
• Violations of anti-corruption laws and regulations (e.g., FCPA, UK Bribery Act) could result in penalties, fines, or operational restrictions.
• Impairment in the carrying value of long-lived assets, goodwill, or other intangible assets could reduce earnings.
• Oilfield anti-indemnity provisions in many U.S. states may restrict or prohibit indemnification, increasing financial exposure.
• New technology from competitors may cause the company to become less competitive or require substantial development costs.
• Inadequate intellectual property rights protection could have a material adverse effect on the business.
• Inability to obtain and retain licenses to third-party intellectual property could negatively impact prospects and financial results.
• Involvement in intellectual property litigation could result in substantial costs, diversion of management resources, or loss of competitive advantage.
• Errors or failures of proprietary software may result in liability or reputational damages.
• Cybersecurity attacks, IT system failures, and network disruptions may lead to liability, reputational damage, or operational disruptions.
• Indebtedness could materially adversely affect financial condition, limit additional financing, and require a substantial portion of cash flows for debt service.
• Inability to generate sufficient cash to service indebtedness could force actions like asset sales or refinancing, which may not be successful.
• Restrictions in existing and future debt agreements could limit growth and ability to engage in certain activities, potentially leading to default.
• An increase in interest rates would increase the cost of servicing variable-rate indebtedness.
• As a holding company, dependence on distributions from HMH B.V. to pay taxes and Tax Receivable Agreement obligations.
• Lack of an existing public market for Class A common stock may lead to trading at a discount or difficulty in selling shares.
• Payments under the Tax Receivable Agreement could be significant and potentially accelerated, exceeding actual tax benefits.
• The Principal Stockholders' ability to direct voting of a majority of capital stock may lead to conflicts of interest with other stockholders.
• A significant reduction in ownership by Principal Stockholders could adversely affect the company's success.
• Risk of HMH B.V. becoming a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, leading to significant tax inefficiencies.
• Immediate and substantial dilution for purchasers of Class A common stock in the offering.
• Stock price volatility due to various factors unrelated to operating performance.
• Lack of or cessation of research coverage by securities analysts could negatively impact stock price and trading volume.
• Taking advantage of reduced disclosure requirements as an emerging growth company may make Class A common stock less attractive to investors.
• Significantly increased costs and management time required for public company compliance.
• Future sales by existing stockholders could cause the market price to decline.
• Anti-takeover provisions in organizational documents could delay or prevent a change of control.
• Board of directors authorized to issue preferred stock without stockholder approval, potentially reducing Class A common stock value.
• Designation of Delaware Court of Chancery as sole forum for certain actions may limit stockholders' ability to obtain a favorable judicial forum.
• No dividends expected in the foreseeable future, with existing debt agreements restricting payments.

Future Outlook

The company has an overall positive outlook for global oil and gas activity, with a specific emphasis on tailwinds in global offshore E&P spending and onshore E&P spending in the Middle East. It believes increased E&P activity, particularly offshore, will be required to meet expected growth in global demand, as current low levels of E&P capital spending are not sustainable. Rystad Energy forecasts a compounded annual growth rate of over 6% for floater rigs between 2024 and 2027, and offshore production is expected to grow 16% between 2024 and 2030. The company expects recurring revenues from aftermarket services and spare parts to benefit from this increased activity, along with opportunities for newbuild offshore rigs. It also anticipates continued growth in demand for mining-related equipment due to large-scale electrification and renewable energy initiatives. The company plans to focus R&D efforts on 'game-changing technologies' like open water drilling and the electric BOP.

Management Comments

• We believe that we are well-positioned to continue supporting and building our presence in the offshore drilling market as a result of our full, integrated suite of mission-critical drilling solutions, highly technical expertise, aftermarket services offerings and long experience providing and maintaining equipment in this industry.
• Our asset-light business model through the leveraging of our existing operating footprint and original equipment manufacturer (OEM) business model and are well positioned to grow and scale our business with low incremental investment and capital expenditures.
• We believe we have developed trusted relationships with our customers and a strong reputation across industries with recognizable brand names, such as Hydril Pressure Control (Hydril), VetcoGray, Wirth and Maritime Hydraulics.
• Our management team has established conservative financial principles to guide us through decision-making in any potential commodity cycle.
• We believe that we have been, and will continue to be, at the forefront of technological and digital innovation in the drilling industry.
• We plan to focus our development efforts in the coming years on what we believe are game-changing technologies like open water drilling and the electric BOP.

Industry Context

The filing highlights a significant recovery and expected growth in the global oil and gas drilling industry, particularly offshore, after years of underinvestment and the impact of COVID-19. Rystad Energy projects global greenfield and brownfield oil and gas capital expenditures to exceed $700 billion annually from 2025-2027, a nearly 60% increase from 2020. The offshore rig market is nearing decade-high activity levels, with floater rigs expected to grow over 6% CAGR between 2024 and 2027. This shift is driven by declining rates in existing wells, underinvestment in long-cycle offshore developments, and the lower GHG emissions intensity of deepwater production compared to shale. The company is also expanding into the critical minerals mining industry, which is experiencing increasing demand due to renewable energy technologies and electrification infrastructure build-out. Geopolitical events and changing regulatory landscapes (e.g., climate change policies, tariffs) introduce uncertainty and potential cost increases across the energy sector.

Comparison to Industry Standards

• HMH is one of only a few providers of subsea BOPs accepted by major drilling contractors and operators in key offshore geographies like the Gulf of Mexico and the Norwegian sector of the North Sea, indicating a strong competitive position in this specialized segment.
• The company is, along with NOV Inc. (NOV) and Schlumberger Limited's Cameron International (Schlumberger), a main provider of full equipment packages for the offshore drilling market.
• Within the global offshore drilling fleet, HMH has the second-largest installed base of topside drilling equipment and risers and the third-largest installed base within main pressure control equipment categories (BOPs and diverters), demonstrating significant market penetration.
• Deepwater production is estimated to have a GHG emissions intensity of 10 kg CO2e per Boe, which is 15% to 20% below that of shale and approximately 50% below conventional onshore, aligning with the ESG focus of E&P operators.
• The company's Adjusted ROCE of 13.2% (9M 2025) and 22.2% (FY 2024) is a metric used to evaluate profitability of capital employed compared with peers, suggesting a focus on capital efficiency.
• The company's R&D efforts, such as the fully electric BOP in development, are positioned as 'first of its kind' and 'game-changing technologies,' aiming to differentiate from traditional hydraulic systems and competitors.

Management Changes

Corporate Governance

Legal Proceedings

• The company is a party to ongoing legal proceedings in the ordinary course of business, but does not believe the results will have a material adverse effect on its business, financial condition, results of operations, or liquidity.

Related Party Transactions

• HMH B.V. is a joint venture between Baker Hughes (50% ownership) and Akastor (50% ownership).
• Shareholder Loans: HMH B.V. entered into a loan agreement with Baker Hughes Holdings LLC ($80.0 million) and Akastor AS ($20.0 million) on October 1, 2021, bearing 8.0% interest per annum. As of September 30, 2025, $140.8 million (including accrued interest) was outstanding, which will be repaid with IPO proceeds.
• Shareholder Note: On March 17, 2023, HMH B.V. extended credit of $3.45 million to Baker Hughes Holdings LLC and $3.49 million to Akastor AS, accruing 8.0% interest per annum.
• Baker Hughes License Agreements: On October 1, 2021, HMH B.V. entered into license agreements with a Baker Hughes subsidiary for limited rights to use 'Vetco' and 'VetcoGray' trademarks and other intellectual property. The IP license is perpetual, and the trademark license has a renewable five-year term.
• Baker Hughes Remarketing Agreement: On October 1, 2021, HMH B.V. agreed to provide services to Baker Hughes for the sale, leasing, or remarketing of certain BOPs and associated equipment returned from third-party leases, in exchange for reimbursement of out-of-pocket costs.
• Baker Hughes Transition Services Agreement: On October 1, 2021, Baker Hughes provided transitional administrative, finance, and digital services to HMH B.V. for up to 12 months, for a total fee of $15.8 million. All obligations are now complete.
• Baker Hughes Servicing Agreement and Long-Term Incentive Offset: On October 1, 2021, HMH B.V. agreed to service and collect on $54.6 million of account receivables owned by Baker Hughes. On March 17, 2023, Baker Hughes assigned $6.8 million of remaining account receivables to HMH B.V. as full payment for a $2.5 million excess long-term incentive liability.
• Akastor Step Oiltools: Akastor's subsidiary, Step Oiltools B.V., was to be contributed to HMH B.V. but was liquidated due to the Russia-Ukraine conflict. Akastor agreed to settle a $16.0 million sellers credit by transferring liquidation proceeds to HMH B.V. The fair value of this receivable was remeasured to zero as of December 31, 2024 and 2023.
• Akastor Payment of Pension Benefits: Pursuant to the JV Transaction Agreement, Akastor is responsible for certain carved-out pension liabilities of MHWirth AS prior to HMH B.V.'s formation. HMH B.V. recorded a receivable of $19.9 million (2024) and $21.9 million (2023) from Akastor for these payments.
• Akastor Financial Guarantees: As of December 31, 2024, Akastor had issued approximately $35.1 million in financial guarantees for MHWirth AS's lease obligations and operational support frame agreements.
• Akastor Transition Services Agreement: On October 1, 2021, Akastor provided transitional finance, IT, and treasury services to HMH B.V. for a term that concluded at the end of 2023, for a total fee of $0.4 million. All obligations are now complete.
• Indemnification Asset: The company obtained an indemnification asset related to pension liabilities Akastor sold to the company, with Akastor contractually obligated to indemnify HMH B.V. for this liability.

Stakeholder Impact

• Shareholders: New investors will experience immediate and substantial dilution. Principal Stockholders will retain significant voting power post-IPO, potentially influencing corporate decisions. The Tax Receivable Agreement could result in substantial payments to Principal Stockholders, potentially reducing funds available for other purposes or impacting consideration in a change of control.
• Employees: Restructuring plans in January 2025 involve global workforce reductions, impacting employees in Norway and Germany. The company prioritizes employee well-being, development, and engagement through flexible work, wellness programs, and professional development opportunities.
• Customers: The company aims to enhance customer offerings through technological innovation and digital solutions, increasing efficiency, safety, and reducing costs. Long-term contractual service agreements (CSAs) provide predictable pricing and enhanced equipment availability.
• Suppliers: Dependence on a broad range of raw materials and components, with reliance on certain key vendors, exposes the company to product shortages, long lead times, and price increases. Supply chain disruptions could impact the ability to meet customer demands.
• Creditors: IPO proceeds will be used to repay $140.8 million in Shareholder Loans, reducing debt. Existing debt agreements contain restrictive covenants and financial ratios that could limit the company's growth and activities, and an increase in interest rates could raise servicing costs.
• Regulatory Bodies: The company is subject to extensive and evolving environmental, health, safety, and climate change regulations globally, which could lead to increased compliance costs, litigation risks, and potential operational restrictions.

Next Steps

• Complete the Initial Public Offering (IPO) and list Class A common stock on Nasdaq under the symbol HMH.
• Implement the corporate reorganization, including the stock split and recapitalization of HMH B.V. shares.
• Utilize IPO net proceeds to purchase B.V. Voting Class A and B shares from Principal Stockholders and repay $140.8 million in Shareholder Loans.
• Continue to invest in R&D for cutting-edge technologies such as the fully electric BOP and open water drilling solutions.
• Pursue organic and inorganic growth investments, including identifying and integrating acquisition targets.
• Remediate the newly identified material weakness related to operational finance activities by adding qualified personnel.
• Comply with new or revised accounting standards, including ASU 2023-09, ASU 2024-03, ASU 2025-05, and ASU 2025-06, as they become effective.
• Continue to monitor and adapt to evolving environmental, social, and governance (ESG) regulations and market perceptions.
• Management will have significant flexibility in applying the remaining net proceeds from the IPO for general corporate purposes.

Key Dates

Recommendation

The S-1/A filing presents a mixed financial picture for HMH Holding Inc. While the company operates in a growing industry with a strong market position, particularly in offshore drilling and emerging mining sectors, recent financial performance shows a decline in net income and Adjusted EBITDA for the nine months ended September 30, 2025. The identified material weakness in internal controls adds a layer of operational risk. The IPO and associated corporate reorganization are significant events, but the substantial payments under the Tax Receivable Agreement and the concentrated voting power of Principal Stockholders introduce complexities. The long-term growth strategy, R&D investments, and improved Free Cash Flow are positive, but the short-term financial headwinds and governance structure warrant a 'hold' recommendation. Investors should monitor the successful remediation of internal control weaknesses, the impact of the IPO on the balance sheet, and the company's ability to translate industry tailwinds into improved profitability.

Keywords

Oil & Gas Drilling, Offshore Drilling, Onshore Drilling, Drilling Equipment, Aftermarket Services, Spare Parts, Pressure Control Systems, BOPs, Topside Equipment, Digital Solutions, Mining Equipment, IPO, SEC Filing, S-1/A, HMH Holding Inc., Up-C Structure, Energy Services, Capital Expenditures, Adjusted EBITDA, Free Cash Flow, Corporate Governance, Risk Management, Financial Reporting, Nasdaq Listing