HMH Q2 2026 Earnings: Revenue Falls as Adjusted EBITDA Margin Expands

HMH Holding Inc. (Nasdaq: HMH) reported second-quarter 2026 revenue of $170.8 million, down 16% from $203.5 million a year earlier, while net income attributable to HMH declined to $5.0 million from $8.9 million. For the quarter ended June 30, adjusted EBITDA increased 3% to $33.9 million and orders rose 19% to $205 million, showing better order intake and adjusted profitability despite lower product revenue.

Core earnings data

The revenue decline was primarily caused by a 65% drop in product revenue, reflecting a lower opening backlog and Middle East delays related to the regional conflict. Lower service revenue also weighed on the comparison, although stronger spare-parts demand provided a partial offset.

Profitability varied significantly by accounting measure. A more favorable revenue mix, cost optimization and execution improvements lifted gross margin and adjusted EBITDA margin, but a $22.0 million pre-IPO stock-based compensation expense contributed to a GAAP operating loss.

Adjusted EBITDA and free cash flow are non-GAAP measures. HMH’s free cash flow calculation for the quarter includes a $9.5 million noncash IPO-related settlement adjustment.

Business and segment performance

Product revenue was the main source of weakness, falling 65% year over year and 38% sequentially to $20.0 million. HMH attributed the decline to a lower backlog entering the quarter and project delays in the Middle East caused by the ongoing regional conflict.

Service revenue decreased 4% year over year to $89.1 million because of lower repair activity, partly offset by stronger digital technology volume. On a sequential basis, however, service revenue grew 24% as demand improved across repairs, digital technology and other services.

Spare-parts revenue increased 17% year over year to $61.2 million, supported by higher Equipment and System Solutions and Pressure Control Systems demand as customers prepared for upcoming contracts. It declined 8% from the first quarter.

Order intake was stronger than recognized revenue, providing a more constructive indicator for future activity. Total orders reached $205 million, up 19% year over year, and the book-to-bill ratio was 1.2 times. Service orders increased 50% to $118 million, driven by digital technology, while spare-parts orders rose 1% to $65 million.

Profitability, cash flow and balance sheet

Cost of sales declined 28% to $109.5 million, considerably faster than the 16% revenue decline. Cost of sales consequently fell to 64% of revenue from 75%, reflecting the shift away from lower-margin product revenue, continued cost optimization and stronger execution.

SG&A expense more than doubled to $60.4 million from $29.4 million. The largest disclosed factor was the $22.0 million pre-IPO stock-based compensation charge recognized when the IPO was completed. Excluding that expense, HMH said the remaining increase primarily reflected the costs of becoming and operating as a public company.

Operating cash flow improved to $17.9 million from an outflow of $21.1 million. Changes in operating assets and liabilities used $4.6 million of cash, compared with $46.2 million a year earlier, making the reduced working-capital drag an important contributor to the improvement.

HMH ended the quarter with $119.7 million of cash and cash equivalents, up from $96.6 million at the end of 2025, and approximately $195 million of total liquidity. Long-term debt was $196.4 million, with no long-term debt maturity until June 2028.

The IPO generated aggregate net proceeds of $210.7 million, including the underwriters’ partial exercise of their option. HMH used $137.1 million to repay its related-party shareholder loan, $39.5 million to purchase shares from its principal stockholders and $21.2 million to fund working capital.

Mix and cost discipline lifted adjusted margins, but IPO costs pressured GAAP results

HMH’s central Q2 dynamic was the divergence between declining revenue and improving adjusted profitability. Product revenue fell sharply, but a larger contribution from services and spare parts helped gross profit rise even as total revenue contracted. Cost reductions and operating execution further supported the 3.7-percentage-point increase in adjusted EBITDA margin.

That improvement did not carry through to GAAP operating income because SG&A absorbed the gross-profit gains. The $22.0 million pre-IPO compensation charge was the largest identified item, while public-company costs also increased. Adjusted EBITDA additionally excluded share-based compensation, restructuring expenses and foreign-currency losses, explaining much of the gap between adjusted EBITDA of $33.9 million and the reported operating loss.

Management perspective

CEO Eirik Bergsvik said geopolitical uncertainty, changing trade policies, project timing shifts and customer caution affected revenue. Delayed equipment and repair bookings were additional headwinds, while digital technology supported the 19% increase in total orders and the 1.2-times book-to-bill ratio.

Management pointed to improving customer visibility, a growing backlog and rising activity across key markets heading into the second half of 2026. However, the company did not provide quantitative revenue, earnings or cash-flow guidance.

Risks investors should monitor

• Product revenue and project timing: Product revenue fell 65%, and continued delays or a weak starting backlog could keep total revenue under pressure.
• Geopolitical exposure: Conflict-related delays in the Middle East directly affected equipment activity during the quarter and may continue to influence order conversion and delivery timing.
• Order conversion: Orders exceeded revenue and management cited a growing backlog, but customer caution and project shifts could delay the conversion of that demand into reported sales.
• Public-company cost base: IPO-related compensation was a one-time item, but HMH also reported higher ongoing costs associated with operating as a public company.
• Cash-flow measurement: Reported free cash flow benefited from a $9.5 million noncash IPO-related adjustment, so operating cash flow remains important when evaluating recurring cash generation.

Summary

HMH’s second-quarter revenue was pressured by lower product activity and project delays, but a favorable sales mix and cost discipline produced higher gross profit and adjusted EBITDA margins. Stronger orders, positive operating cash flow and repayment of the shareholder loan improved the operating and balance-sheet picture. The next key issue is whether the higher backlog and service-led order growth translate into increased second-half revenue without renewed project delays or additional cost pressure.