Q1 2021 Civeo Corp Earnings Call
[music].
Good day, and that kind of data and CBS Corporation first quarter 2000, and 'twenty them on an earnings call. Today's conference is being recorded at this time I would like to turn the conference over T Reg and Nielsen Director Corporate development and Investor Relations. Please go ahead.
Thank you and welcome to <unk> first quarter, 2020, One earnings conference call.
Today, our call will be led by Bradley Dodson, <unk>, President and Chief Executive Officer, and Carolyn Stone, <unk>, Senior Vice President and Chief Financial Officer and Treasurer.
Before we begin we would like to caution listeners regarding forward looking statements to the extent that our remarks today contain information other than historical information. Please note that we're relying on the safe harbor protections afforded by federal law.
Any such remarks should be read and the context for the many factors that affect our business, including risks disclosed in our form 10-K, 10-Q and other SEC filings.
I'll now turn the call over to Bradley.
Yeah.
Thank you Reagan and thank you all for joining us today on our first quarter earnings call. We hope that you and your loved ones are staying safe and well.
On today's call I'll provide a brief summary of our performance for the quarter.
Carolyn will provide a financial and segment level review and I'll conclude with some directional commentary on our expectations for the second quarter as well as our updated full year guidance before we move to the question and answer portion of the call.
I'll start as I have on each of our earnings call emphasizing that its city Oh the <unk>.
<unk> and wellbeing of our employees guests and customers is always our top priority.
Our team continues to be vigilant and following our safety protocols, which aim to mitigate the risk of the virus spreading.
The key takeaways from our call today are <unk>.
Despite governmental restrictions and Canada, and a slow start to the year and Australia as Bowen Basin region, our business continue to generate cash, which we allocated to debt reduction.
And the first quarter severe reported $16 2 million of adjusted EBITDA and $16 1 million of free cash flow and we repaid $15 $6 million of debt.
Our leverage ratio was sequentially flat at two one times.
Delevering our balance sheet remains amongst the most important strategic mandates that we have and we should see our leverage ratio continue to decrease throughout 2021.
Consolidated adjusted EBITDA of $16 2 million was in line with our expectations.
As anticipated EBITDA in both Canada, and Australia declined sequentially and the first quarter due to a slow start.
So from year end holidays, coupled with the impact of head count and travel restrictions related to COVID-19.
The British Columbia, COVID-19, 19, public health order, which limits the allowable head count and industrial projects in the province continued to negatively impact the occupancy at our Sitka Lodge and Kitimat, British Columbia, as well as the occupancy and our mobile camps supporting the coastal gasoline pipeline project.
Our Australian business was negatively impacted and the first quarter by a slow start for the year and the Bowen basin villages and continued difficulty in sourcing labor and both our village operations and our integrated services business due to the COVID-19 related Interstate travel restrictions.
Nevertheless, we are cautiously optimistic that the outlook for the business remains healthy for the remainder of 2021.
We're focused on operating safely and generating free cash flow, reducing leverage and containing our costs.
We expect to continue to generate positive free cash flow and the second quarter and for the full year 2021.
Let me take a moment to provide a business update across our three segments.
And Canada, we saw sequential improvement and occupancy despite the British Columbia Health and public health order, which impacted the Sitka location lodge occupancy and the Oilsands started the year off consistent with our expectations as we prepare for turnaround season, that's set to start here and the second quarter.
The BC health order, however impacted our occupancy more than we anticipated during the quarter as.
As we had expected it would be lifted by now.
Yeah.
Our Australian business experienced a sequential and year over year decline in occupancy and margin due to and especially slow start to customer operations and the Bowen basin, coupled with labor supply issues due to further COVID-19 travel restrictions, which impacted margins.
Turning to the U S. Our team continued to navigate a challenging and fundamental environment due to subdued U S. E&P drilling and completion activity, which was compounded by temporary disruptions related to the Texas, Oklahoma freeze.
Adjusted EBITDA was down from pre pandemic levels.
Levels a year ago.
But improved modestly on a sequential basis.
At Silvio our near term strategy remains consistent to what we've said for the past two years.
Our priorities are one to keep our employees and guests safe.
And then financially maximize our free cash flow generation reduce our debt to enhance our financial flexibility.
And reduce our costs without compromising service quality.
With that I'll turn it over to Carolyn and thank.
Thank you Bradley and thank you all for joining us this morning.
Today, we reported total revenues and the first quarter at $125 $4 million.
Net loss on a GAAP basis, and 10 million or 70 cents per diluted share.
During the first quarter, we generated adjusted EBITDA of $16 2 million operating cash flow of $12 8 million and free cash flow of $16 1 million.
The lower adjusted EBITDA, we experienced in the first quarter of 2021 as compared to the same period and 2020 was largely due to a better pre COVID-19 operating environment and January and February of last year.
We experienced decreased year over year Bell drums, and that's our Canadian and Australian segments.
And as well as labor supply issues affecting operating costs.
Which were partially offset by proceeds from the Canada and emergency wage subsidy program as well as a favorable foreign currency translation impact.
Let's now turn to the first quarter results for our three segments I'll begin with a review of the Canadian segment performance compared to the performance a year ago and the first quarter of 2020.
Revenue from our Canadian segment were $61 9 million as compared to revenue of $79 3 million and the first quarter of 2020 and.
Adjusted EBITDA and Canada was $10 8 million a decrease from 11 4 million and the first quarter of last year.
The decline in revenues and adjusted EBITDA was largely caused by the protracted decline and oil prices as well as the effects of the COVID-19 pandemic.
Adjusted EBITDA and <unk>.
2021 quarter for our Canadian segment included $2 8 million related to proceeds for let's see E Ws program and.
0.9 million from a gain on sale of our Canadian manufacturing facility.
During the first quarter billed rooms in our Canadian lodges totaled 480000, which was down 32% year over year from 708000, and the first quarter of 2020.
Do you and large parts of the factors just discussed.
Our daily room rate for the Canadian segment and U S dollars was 97.
Which is a 5% year over year increase and is primarily due to the appreciation of the Canadian dollar.
Turning to Australia during the first quarter, we recorded revenues of $59 6 million up from $49 1 million and the first quarter of 2020.
Adjusted EBITDA was $12 8 million.
Representing a decrease from $16 2 million during the same period of 2020.
These results were driven by lower village occupancy due to extended customer holiday downtime in January.
And COVID-19 related travel restrictions that necessitated the use of more expensive temporary labor, especially in our integrated services business.
These factors were partially offset by the impact of the strengthened Australian dollar relative to the U S dollar.
Billed rooms, and a quarter were 425000 down from 472000, and the first quarter of 2020, due again to a slower start for the year for some of our customers' operations.
The average daily rate for Australian villages and U S dollars was $79 and the first quarter up from $69 in 2020.
This increase was entirely driven by the impact of the strength and Australian dollar.
Moving to the U S revenues for the first quarter were $3 9 million as compared to $10 3 million and the first quarter of 2020.
The U S segment generated negative adjusted EBITDA at $1 2 million and the first quarter down from adjusted EBITDA and 0.3 million during the same period last year.
But sequentially up from negative adjusted EBITDA of $1 4 million and the fourth quarter of 2020.
The year over year declines were primarily due to a challenging fundamental environment caused by subdued U S. E&P drilling and completion activity compounded by temporary disruptions related to the Texas, Oklahoma Freeze in February.
On a consolidated basis capital expenditures were $3 4 million and the first quarter up from $2 7 million and first quarter of last year cash.
Capex and bad quarters was predominantly for maintenance needs.
Our total debt outstanding on March 31st 2021 was 238 million 0.1, and $238 $1 million or 13 million decrease since December 31st.
The decrease consisted of $15 6 million and debt payments from cash flow generated by the business.
Fully offset by an unfavorable foreign currency translation impact of $2 5 million.
Our leverage ratio for the quarter was sequentially flat at two one times as of March 31st compared to 2.11 times at December 31st 2020.
As of March 31st Silvio had total liquidity of approximately $112 $4 million, consisting of 107 million available under our revolving credit facilities and $5 5 million of cash on hand.
Bradley will now provide some closing commentary and discuss our outlook as we look into the remainder of 2021 Bradley.
Thank you Carolyn.
Based on our improving outlook for the remainder of the year, we are adjusting the eye and of our full year 2020, one revenue and adjusted EBITDA guidance up.
Revenue is expected to range between $555 million to $580 million.
With adjusted EBITDA, ranging from $90 million for a 100.
We are maintaining.
Turning our 2021 capex guidance of $20 million to $25 million.
We are primarily raising the upper end and difference range due to potential upside and Canada.
From turnaround and activity and mobile camp activity, while still recognizing the uncertainty of the current macro and microeconomic environment.
Our primary financial objective is free cash flow generation based on the EBITDA and just.
Outlines.
And expected for the interest expense of $15 million for 2020 one and.
And no expected cash taxes or working capital investment, we expect our 2020, one free cash flow to range between 50 million $65 million.
And.
I will now provide the regional outlooks for our business with corresponding market assumptions.
Yeah.
The prognosis for the remainder of 'twenty, one and our Canadian segment is improving and despite the enduring and uncertainties from the pandemic.
And pandemic related restrictions.
The extension of the B C health order is expected to temporarily constrain occupancy at our Sitka facility for most of the second quarter of 2021.
Additionally, travel restrictions and the eastern Maritime provinces, which are an important source of contract labor for the oil sands remain in place negatively impacting our customers' ability to secure turnaround personnel.
While we are mindful of these limitations we are encouraged by the potential expanded work on the C. G L contract improving.
Improving turnaround activity.
And a more constructive oil and gas price environment, which will equate to higher revenues and adjusted EBITDA relative to the first quarter for the balance of 2020 one.
And Australia, we anticipate improved revenues and adjusted EBITDA for the remainder of the year.
Iron ore prices, which impact on western Australia, and activity are hovering near and non year highs.
Due to easy and COVID-19 restrictions and offline Brazilian production, well and allergic low coal prices, which impact our village operations and Eastern Australia.
Have recovered some ground previously surrendered surrender due to Chinese import restrictions.
The outlook for met coal and iron ore markets and Australia for 2020 one is generally constructive.
But we were but we continue to monitor the potential impacts to our business as the COVID-19 related labor restrictions Chinese trade policy delayed reopening of India, and the timing of customer capital deployment on major projects.
Given the supportive commodity price environment, we nonetheless remain optimistic that our team will deliver another strong year and 2021.
Moving to the U S. After exceedingly difficult 2020, and our U S segment, we're beginning to see signs of recovery and demand for occupancy and our facilities.
Oil and gas operators are selectively, adding rigs and completion activity and response to higher commodity prices and we've picked up a one year contract for our Pecos location and the Permian.
As a result, we expect to return to positive EBITDA for the U S segment, and the second half of 2021.
As we continue to navigate these uncertain times, we remain focused on the key elements of our strategic playbook, which are as follows.
We will prioritize the safe and what the safety and wellbeing of our guests employees and customers.
We will manage our cost structure and accordance with the outlook region by region. We will continue to enhance our best in class hospitality offerings.
And financially, we will maximize free cash flow generation and allocate capital prudently, while we continue to reduce debt.
Before I proceed to the Q&A section on the call I would like to recognize the unyielding dedication of our employees around the world.
Your commitment to keeping guests safe comfortable and healthy is the foundation of our business and we thank you for all that you do.
With that operator, we're happy to take questions at this time.
Thank you and if you would like to ask a question. Please sigma by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signature each hour equipment again please.
Please press star one to ask a question.
You start off first question Steven.
And the Jin Gyro from Stifel. Please go ahead your line is open.
Thanks, Good morning, everybody.
Good morning, Stephen how are you.
I am good thanks.
A few things that I wanted to ask about and I'll start with and you just noted capital allocation.
How are you thinking about and I know debt reductions and a big.
And a big focus and as as free cash flow continues and as you continue to be able to reduce your debt levels.
Have you thought about using and sort of a portion of the proceeds to buy back stock as opposed to.
And reduce debt, especially given a pretty good outlook here.
Certainly I mean, we're in the beginning portions of those conversations internally.
I would say that at this point given the level of uncertainty related.
Related to a couple of key assumptions.
One we need to see.
The turnaround activity in Canada.
Uh huh.
Materialize.
And given the level of infection rate recently that is a concern.
It could impact both the oil sands operations as well as Zika and the C. G L pipeline camps.
In addition.
We are the team is working diligently to resolve the labor shortage and Australia.
Through recruiting and HR efforts as well as we need to see some improvement.
Improvement and the occupancy and the Bowen basin.
So what that all comes together as I'd like to see.
The second quarter results I'd like to see us continue to materialize and I'd like to see that number come down.
As you know are our busiest time period.
Every year is the second and third quarters, and that's principally because we get out of holiday downtime and the first quarter, we get into turnaround season in Canada.
And as a result, that's usually.
We generally generate 60% to 70% of our EBITDA and the second and third quarters I'd like to see at least some of that materialize and the second quarter and then I think we'll be in a position both from a balance sheet and and outlook and.
The confidence that I think the financial flexibility to change the capital allocation could be possible and the second half of the year.
Thanks.
You mentioned I think you said 60 to 70 per cent of EBITDA and the middle two quarters.
Looking at.
Historical patterns and.
It sounds like.
This is accurate but.
There's no change to those historical patterns relative to sort of your your full year EBITDA guidance versus what you've done in prior years as far as EBITDA allocation across the various cores.
No that's right that's right.
That's why I gave a little bit of a wide range of 60% to 70% of EBITDA coming from the second and the.
For the third quarters. The then the question art comes the fourth quarter are and whether or not any of the turnaround activity, particularly in Canada start to spread into the into the fourth quarter, which as you recall we saw that.
Turnaround activity being fairly strong at the beginning of the fourth quarter of 2019, which.
Led to a strong quarter for Canada.
Quarter. It wasn't as strong last year, obviously, largely because of the oil price environment and and COVID-19.
But the turnaround activity and the fourth quarter of 2020 wasn't quite as strong.
But yes that the seasonal.
Patterns should be consistent.
Okay, Great and then.
The other thing I just wanted to hit on is.
In Australia there.
And there's two.
Two parts for question. One is just an update on the on the action acquisition and and what Youre seeing on that front and then.
Just secondly.
Just given given where where met coal prices have been and just given the overall inflationary environment, we seem to be and for commodities, how how the outlook for Australia is evolving both you know and the back half of this year also looking forward.
Sure.
Oh on the action business day, and which we've rebranded as severe of integrated services.
Which is again for the for the listeners on the call. This is a business. We acquired in July of 2019, it's and Western Australia, providing managed services to customer owned assets predominantly iron ore producers.
The business had a very difficult first quarter and that is largely.
The basis for the comments that we made around labor availability.
On the Interstate border to Western Australia was has been largely closed for the last year year and a half. It is briefly opened at times that has allowed us to move relief crews from predominantly Queensland enter into W. A.
But it has been open and closed several times and the last two months, which is making.
Operational efficiency difficult and.
On the team is on top of the situation and addressing and accordingly are ultimately I'm cautiously optimistic that we will be able to resolve the labor issues that we're having.
Casual or temporary labor impacts our operations from the standpoint that it.
It takes longer to onboard people, you're the turnover of that personnel as higher their productivity is lower.
Cost on a per hour basis is higher ultimately driving.
A negative impact to our margins from the <unk>.
And a great services business and the first quarter, but we're expecting that we'll be able to resolve that here and the second quarter and and are optimistic for a stronger second half for for that business.
As it relates to met coal activity.
Thus far we've not seen a tangible impact of the Chinese Trey.
Trade dispute with Australia as it relates to met coal.
However, we have had one customer that just.
Had a slow start to the year, but that does not appear to be and a result of.
The Chinese trade dispute so we're cautiously optimistic.
And activity and the Bowen basin will improve as we move into the second quarter and particularly in the second half.
Got it okay, great. Thank you.
Once again, if you would like to ask a question. Please press star one.
It appears there are no further questions at this time I'd like to turn the conference back to Bradley Dodson for any additional or closing remarks.
Thank you.
Thank you all for joining us on the call today and we.
We hope that you're staying safe.
And your families are staying safe and healthy.
And we'll look forward to talking to you and late July as we reported second quarter earnings.
Take care.
Okay.
This concludes today's call. Thank you for your participation you may now disconnect.
[music].