Q4 2021 Civeo Corp Earnings Call
Greetings and welcome to Silvio Corporation fourth quarter 2021 earnings call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Reagan Nielsen Senior director corporate development and Investor Relations. Thank you you may begin.
Thank you and welcome to <unk> fourth quarter 2021 earnings Conference call.
Our call will be led by Bradley Dodson, <unk>, President and Chief Executive Officer, and Carolyn Stone <unk> Senior Vice President Chief Financial Officer and Treasurer.
Before we begin we would like to caution listeners regarding forward looking statements.
The extent that our remarks today contain anything 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 in the context of the many factors that affect our business, including risks and uncertainties disclosed in our Form 10-K , 10-Q and other SEC filings.
Now I'll turn the call over to Bradley.
Yeah.
Thank you Reagan and thank you all for joining us today on our fourth quarter earnings call.
I'll start with the key takeaways and then I'll provide a brief summary of our fourth quarter and full year 2021 performance.
Carolyn will then provide a financial and segment level review.
I'll conclude our prepared comments.
Comments with our initial full year 2022 guidance and the regional assumptions underlying that guidance as well as some directional commentary.
And then we will open up the call for questions.
The key takeaways from our call today are the business continues to generate cash while supporting our ongoing debt reduction for the full year 2021, CBO generated $87 million and free cash flow and reduced total debt by $76 million.
To end the year at $179 million of total debt.
Fourth quarter results were better than we were expecting.
In the fourth quarter <unk> delivered $34 5 million of adjusted EBITDA and $26 1 million of free cash flow.
We reduced our total debt by $20 million in the fourth quarter, bringing our net leverage ratio down to 149 times as of December 31, 2021.
Delevering, our balance sheet remains our top financial priority and this quarter is the 11th straight quarter of leverage ratio a reduction.
Strategic investment in diversifying our revenue profile is pay dividends again in 2021 like it did in 2020 during the volatility experienced across all three of our segments.
While Australia activity declined in 2021 due to the China, Australia trade dispute.
And business experienced increased labor costs due to Covid, our Canadian business continued to recover from the trough of 2020 to offset the Australia decline.
If you recall the exact opposite happened in 2020, where Australia had significant growth while Canada struggled.
And the oil markets Ronald.
This diversity in revenue driver as a key component of Sirius free cash flow generation strategy, and we will continue to seek opportunities to expand our customer base and geographic footprint to reduce volatility in our free cash flow generation as we continue to reduce our debt.
Despite high prices across the core commodities that we support our customers continue to be focused on capital discipline and returning capital to share to their shareholders at the expense of spending on increased maintenance or increased increasing production.
This capital spending is ultimately what drives occupancy in our Canadian lodges in Australian villages.
<unk> announced a share repurchase program in the third quarter of 2021, and we began executing on that program throughout the end of the year with total 2020 on purchases under the program of approximately 217000 shares repurchased.
Return of capital to our shareholders is currently the secondary focus of our capital allocation strategy alongside our first priority of debt Paydown.
Our Australian business continues to be burdened with increased labor costs related to COVID-19 travel and border restrictions, coupled with subdued activity from our customers related to that.
<unk>, Australia trade dispute, which has led to lower billed rooms in our villages.
In total our team put together a solid fourth quarter. Despite the challenges of the pandemic trade disputes and limited capital deployment by our customers.
Let me take a moment to provide a business update across our three segments.
In Canada, our revenues and adjusted EBITDA increased sequentially and year over year, driven by our Canadian mobile camp activity.
As expected our largest did experienced lower billed rooms sequentially related to typical holiday downtime in the fourth quarter.
Our Australian results were above expectations, our Bowen basin.
Occupancy was better than expected, but did reflect some typical holiday downtime sequentially.
Adjusted EBITDA in the fourth quarter was down year over year as a result of weaker customer activity in the Bowen basin and increased labor costs in our Western Australia and integrated services business.
Turning briefly to the U S conditions for our U S business continued to be challenging in the fourth quarter, but increased year over year activity in our lodges and offshore business led to higher revenues and adjusted EBITDA versus the fourth quarter of 2020.
Adjusted EBITDA was also positively impacted by a $3 8 million dollar gain on sale of assets from the opportunistic fourth quarter 2021 sale of our West Permian launch.
Turning to our balance sheet, our net leverage ratio declined to 149 times at year end from 186 times at the end of the third quarter and 2.06 times at the end of 2020.
Proactively dedicating free free cash flow to reducing debt remains our primary financial priority.
With that I will turn the call over to Carolyn.
Thank you Bradley and thank you all for joining us this morning.
Today, we reported total revenue in the fourth quarter of $159 $8 million with GAAP net income of $9 8 million or 58 cents per diluted share.
During the fourth quarter, we generated adjusted EBITDA of $34 5 million operating cash flow of $25 3 million.
And free cash flow of $26 1 million.
The increased adjusted EBITDA, we experienced in the fourth quarter of 'twenty, one as compared to the same period in 2020 was largely due to increased build brands and our Canadian oil sands lodges and increased Canadian mobile camp activity.
Partially offset by lower Australian village build brands and increased labor costs.
COVID-19.
For the full year 2021, we reported revenue of $594 5 million and a net loss of Drs Drs.
<unk> 6 million or <unk> <unk> per share.
In 2021, we generated adjusted EBITDA of $109 1 million a modest increase from our 2020 full year adjusted EBITDA of $108 1 million.
Results from the full year 2021 reflects the impact of a strengthened Australian and Canadian dollar relative to the U S dollar.
Which increased revenue and adjusted EBITDA by $40 6 million and $9 8 million respectively.
On a constant currency basis decreased build rents related to the China, Australia train speed and increased labor costs across the Australian segment were offset by increased level came back activity and increased scale brands in our Canadian segment.
Let's now turn to the fourth quarter results for our three segments.
I'll begin with a review of the Canadian segment performance compared to its performance a year ago in the fourth quarter of 2020.
Revenue from our Canadian segment was $92 2 million as compared to revenue of $65 5 million in the fourth quarter of 2020.
Adjusted EBITDA in Canada was $23 1 million, an increase from $13 8 million in the fourth quarter of 2020.
The increase in revenue and adjusted EBITDA was largely caused by a meaningful increase in billed rooms in 2021 related to the recovery in oil prices and the reduced effects of the COVID-19 pandemic, especially in our oil sands lodges.
This was coupled with increased level camp activity.
Our U S. Dollar results further reflect the impact of a strengthening Canadian dollar relative to the U S dollar.
During the fourth quarter billed rooms in our Canadian lodges totaled 588000, which was at 25% year over year from 469000 in the fourth quarter of 2020 due to the factors we just discussed.
Our daily room rate for the Canadian segment in U S. Dollars was 106, which represents an 8% year over year increase.
Turning to Australia during the fourth quarter, we recorded revenue of $62 3 million down from $63 7 million in the fourth quarter of 2020.
Adjusted EBITDA was $13 6 million down from $17 2 million during the same period of 2020.
These results, which represent a cheap percent period over period topline decrease on a constant currency basis.
Well driven by decreased activity in villages as.
As well as increased labor costs, which were largely the result of COVID-19 related travel and border restrictions.
Australian billed rooms in the quarter were 465000 down from 480000 in the fourth quarter of 2020.
Could you again, the continued uncertainty related to the ongoing China, Australia trade dispute.
The average daily rate for Australian villages in U S dollars was $77 in the fourth quarter, which is consistent with the fourth quarter of 2020.
Moving to the U S revenues for the fourth quarter was $5 3 million as compared to $4 2 million in the fourth quarter of 2020.
The U S segment, adjusted EBITDA was $3 3 million in the fourth quarter, which was an increase from a negative adjusted EBITDA of $1 4 million during the same period last year.
These year over year increases were related to increased activity in our lodges and our offshore business as well as the gain on sale of our West Permian launch.
On a consolidated basis capital expenditures for the full year 2021 was $15 6 million, which was up from $10 1 million during 2020. This.
This increase is primarily due to increased Canadian lodge maintenance, coupled with increased Canadian mobile camp capital expenditures related to the awarded pipeline contracts.
Our total debt outstanding on December 31, 21 was $175 million $175 1 million, which represents a $21 million decrease since September 30th.
And a $76 million decrease from year end 2020.
Our net leverage ratio for the quarter decreased to 149 times from 186 times as of September 30th.
And as of December 31, 2021, we had total liquidity of approximately $92 8 million, which consists of $86 5 million available under our revolving credit facilities as well as $6 3 million of cash on hand.
Bradley will now discuss our outlook for the full year 2020 to Bradley.
Thank you Carolyn.
I'd like to discuss our full year 2022 guidance on a consolidated basis, including the underlying outlook for each of the regions as well as the underlying assumptions related to our guidance.
Alright, we are initiating full year 2022 guidance of revenues between 600 and $615 million.
EBITDA between 90 and $95 million.
Our full year 2022 capital expenditures.
Forecast is a range of $20 million to $25 million.
Capital expenditures are expected to be higher year over year in 2022, as we normalize our maintenance capital spending for our Canadian lodges and Australian villages. After several years of prioritizing free cash flow.
That being said our primary financial objective continues to be maximizing free cash flow generation.
But based on the EBITDA and Capex guidance, just outlined unexpected interest expense of $10 million for 2022, and minimal expected cash taxes and working capital investment, we expect 2022 free cash flow to range between $55 million and $65 million.
To bridge, our 2022 guidance from the 2021 actuals and our 2021 adjusted EBITDA included approximately $13 million of nonoperating items comprised of $3 5 million of Canadian emergency wage subsidy proceeds.
$2 million in gains on sale of those assets and $3 4 million from other miscellaneous items, such as insurance proceeds and contract settlements.
Excluding those items from the 2021 results our 2021 adjusted EBITDA would've been approximately $95 million in line with our 2020 due guidance EBITDA guidance of $90 million to $95 million.
We've not included any nonoperating items in our 2022 guidance figures and are not aware of any such items at this time.
The single largest uncertainty and our 2022 guidance as the timing and duration of the pipeline.
Projects in British Columbia that we are currently supporting with our mobile camp assets.
Should these projects extend further into 2022 or even into 2023, we could see adjusted EBITDA in 2020 to improve by up to approximately $7 million to $10 million.
I will now provide the regional outlooks in corresponding underlying assumptions by region.
In Canada as we look into 2022, we are encouraged by the recent uplift in oil prices. We know that our customers are currently prioritizing return of capital to shareholders and need to be convinced of the longer term stability across commodity prices and the broader economy as well as improving COVID-19 dynamics before materially increase.
Capital investment in Canada.
While activity in our largest should remain steady 2022 mobile camp activity will be negatively impacted by the completion of pipeline construction projects throughout the year, including the incurrence of the related to demobilization costs.
Yeah.
We currently expect relatively consistent year over year turnaround activity in the second and third quarters of 2022, but as discussed in prior years, we won't get a more accurate view on this until at least March when customers look to secure turnaround rooms.
[noise] Canadian mobile camp activity related to the coastal gasoline pipeline will remain relatively strong throughout the first nine months of the year after which.
The three mobile camps are currently expected to wind down by the end of 2022.
However, our mobile camp supporting the <unk> pipeline expansion is expected to continue into 2023.
When these pipeline related mobile camps projects roll off we incur the costs associated with the demobilization of these assets.
We have currently included all three do mobilizations and our current 2022 guidance.
With costs of approximately $7 million to $10 million in total or approximately $2 million to $4 million of demobilization costs per count.
If one of the fourth quarter demobilization slips into 2023, we expect the demobilization costs of approximately $2 million to $4 million to also slip into 2023.
Yeah.
Our Canadian guidance, primarily depends on the following three assumptions.
Decreasing COVID-19 infections and hospitalizations from current levels.
And that do not impact industrial activity.
Customers are currently prioritizing return of capital to shareholders versus deploying capital into their operations and this is reflected in our guidance.
But that being said customer 2022, capex budgets are marginally higher than 2021.
W. Gi oil trading at over $90 a barrel, we're cautiously optimistic that customers will could increase capital expenditures further later in 2022.
Lastly, availability of skilled labor continues to be an issue limiting our customers' ability to increase staffing levels, particularly for turnarounds or construction projects as well as impacting our ability to.
Increase our head count.
Turning to Australia, we are encouraged by the significant increase in metallurgical coal prices in the back half of 2021 and into early 2022.
However, customers are still focusing on capital discipline them through the volatility in met coal prices linear weather and the lingering China, Australia trade disputes.
Our current guidance reflects continued capital discipline.
Uh huh.
Rather than the current price for met coal.
Iron ore prices remain at extremely healthy levels and customer activity in Western Australia remains strong, but COVID-19 related travel and border restrictions continue to significantly increase.
Labor costs for our integrated services business we.
We are beginning to see signs of <unk>.
Restriction relief throughout Australia, but we believe labels labor shortages will remain throughout the year of 2022.
For our U S business, the oil and gas price environment has improved significantly in recent months, but similar to our Canadian Australian customers. There has been an emphasis on living within cash flow versus growth, we expect our well site and offshore businesses to improve throughout the year, but this was offset by lower contributions from our U S launch.
Due to the sale of the West Permian launch in October 2021.
I will conclude our prepared comments by underscoring the key elements of our strategy as we navigate this extraordinary market climate.
Our mandate is as follows.
We will prioritize the safety and wellbeing of our guests employees and the communities we work in.
We will manage our cost structure in accordance with the occupancy outlook across our three regions.
We will continue to enhance our best in class hospitality offerings.
We will allocate capital prudently to maximize free cash flow generation, while we continue to reduce debt and begin to return capital to shareholders through our share repurchase program.
As we continue to reduce debt, we will seek opportunities to further <unk>.
Diversify our revenue and free cash flow generation through organic opportunities.
With that we're happy to take any questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may.
Be necessary to pick up your handset before pressing the star key our first question comes from the line of Stephen <unk> with Stifel. Please proceed with your question.
Thanks, and good morning, everybody.
Thanks, David.
I think I think the first question is.
It was just kind of use of use of cash I mean, you have the share repurchase program in place.
When I look at.
What you have done I mean, you've done a great job paying down debt, you're going to generate apparel, we think pretty good free cash flow next year.
What will it take and why not just get ultra aggressive on the on the buyback.
Well as we've talked about in the past we put the program in place in September .
Give us a very large open window before.
Third quarter in a blackout period, but if you look at the disclosure in the 10-K, which we'll file later today or early tomorrow you'll.
You'll see that the pace of us buying back stock throughout the last four months of the year picked up each month.
And so as we stand here today with about four months underneath our belt, where about a third 30% a third.
Complete under the authorization of 700, plus thousand shares and so I think we've made a good good pace and we will certainly look to be opportunistic.
Around buying back stock here as we move forward into 2022.
Okay. Thanks has there been any thought to.
I think you'd have to do a more complete filing in Canada to expand it.
Larger buyback has there been any thought to that.
We're continuing to evaluate that certainly.
We've made some progress, but we'll need to continue to evaluate that and should become an option that we want to take advantage of and we can certainly look at that.
Great. Thanks, two other things one is on the on the Canadian front, just listening to your commentary you've got a lot of color.
The mobile camp side.
You talked about the <unk> and I think that.
That kind of leads to them.
The sharp drop off in <unk> EBITDA in Canada, just because of the depot Cros.
Could you give us any sense for the revenue.
Of the two major pipeline projects I mean is it is it half the mobile camp.
Revenue in Canada.
How should we think about that.
Well in terms of the Kansas, we have supporting coastal gas link and <unk> that is the totality of our mobile camp revenue.
None.
19, 95% to 100% of it is.
Those two projects.
Okay. Okay.
That makes sense and then just a final one can you give us.
So the U S market has been has been interesting when you think about activity growth.
You sold.
The West Permian facility.
How much revenue does.
Does that.
No.
It's not a huge piece, but is that is.
How should we think about the revenue contribution that that facility had and then when we think about EBITDA in that business kind of run EBITDA breakeven give or take for most of the 22 is that how we should be thinking about it.
So the revenue from the West Permian Lodge.
As you May recall we.
At least out the facility in totality I believe it was in April of 2021.
To a third party, who then operated that asset.
We did have a little less than $2 million in revenues from the West Permian launch lashed in 2021 before we.
Sold the asset.
And then total for 2022.
If you'll allow me a range I would expect will be breakeven to maybe a $2 million EBITDA loss in the U S.
Okay great.
Great. Thank you.
Okay.
Our next question comes from the line of Steve <unk>.
Arizona with Sidoti. Please proceed with your question.
Hi, good morning, everyone. Thanks for all the detail on the call.
When you think about.
If not expanding on the share buyback and your net leverage is probably to a point that you're comfortable with or maybe that's not or maybe you've changed the sort of target there.
Are you thinking about capital allocation, because your capex isn't going up huge.
Yeah.
So we have about.
$30 million and $32 million worth of amortization annually on the term loan.
So that that'll be the use.
Of the free cash flow and then would look to continue to reduce leverage on the revolver as well.
And then we will Opportunistically look to buy back stock as a secondary priority.
Okay.
Then.
The West Permian sale, which you mentioned was opportunistic and I know you have that.
Our relationship there beforehand, but would you are there any other assets you might consider divesting as you sort of reshape the portfolio.
Across all three regions, if we have assets that we can monetize.
Uh huh.
At at valuations that effectively bring forward the cash flow generating capability of that asset.
To the to the current date.
We'll certainly continue to look at that absolutely.
Okay.
What will bring down Australia on labor costs, and how are you thinking about that when you when you provided the guidance.
They need to open the international borders, which they have we need to see the <unk> border.
Open the internally the state border opened.
And consistently be open and it has been opened from time to time over the last 12 or 15 months.
But then it will close again with very short notice, which makes it very difficult to source labor from Eastern Australia NCWA.
I think.
Businesses across the world are dealing with limited availability of labor as.
As well as higher labor costs for us, it's a double whammy.
If we can't get full time hires when we get temporary hires that are both more expensive on an hourly basis and then less efficient.
So our team has been working diligently to.
Recruit folks to bring in foreign <unk>.
<unk> as well.
I do think that that process to kind of unwind whats already happened will likely take the balance of the full balance of 2022. So our guidance effectively looked at looked at it was based off of the cost structure that was present in the second half of 2021.
So it assumes that it doesn't get better but it assumes it doesn't get worse as well.
Okay Fair enough. Thanks, and just last one for me is what would get you more positive on expectations for Canadian turnaround activity. It doesn't sound like you're super optimistic on a huge jump this year, even though we've seen you know the capex budgets the initial ones at least be higher.
I mean, we all see oil prices.
What's your thoughts there and what would get you more optimistic.
Well, it's it's.
It's one of those times are topics, where some of the public statements made by our customers don't exactly line up with what they're telling us on the detailed level on a site by site basis. So.
Right now our I would say two underlying your question.
We're probably fairly conservative on our our overall occupancy in Canada for 2022, but it's based on the best information we have from our clients.
Should that should their actual activity lineup more with what they've said about their capex than we could have some upside for sure.
Great. Thanks, so much everyone.
Thank you.
Okay.
We have a follow up question from the line of Steven <unk> with Stifel. Please proceed with your question.
Thanks.
Robert I was curious you talked about uses of cash has there been.
Any thought of additional M&A, whether it's like the action deal you were successful at that in Australia or or or other.
Potential deals and then maybe beyond that has there been any thought to other end markets when as it pertains to M&A.
Sure.
Well the action transaction, we did in July of 2019 gave us our foothold in Western Australia gave us critical mass in that region expanded our.
Service only business model significantly.
And we're very pleased to do that it also gave us exposure to iron ore, which we did not have a significant exposure to that commodity prior to the transaction.
In terms of priority M&A would be last so in our in our view of capital allocation.
Debt pay down one by that too.
Look for organic.
Capital growth organic.
Expansionary opportunities and then M&A would be last when we think about the value that our stock is trading at right. Now we believe that the buyback program presents better returns than typically you can receive at least at this point and M&A.
Ideally longer term.
We'd like to expand the business by kind of expanding within our fairway.
But looking for ways that give us greater customer.
Larger customer base or expand our geographies.
But but keeping to our knitting in terms of the services that we're providing.
So we have looked at other geographies.
Other regions, but typically closer to home than really going out and.
Sure.
A completely different.
Yeah.
Geography in the world.
Thank you and just one final when you.
I think traditionally they have to go back and look at the exact numbers, but I think about 60% of your full year EBITDA falls in the second and third quarters.
I guess outside of the seasonality that is that you mentioned for the mobile camps in Canada. This year is there anything else that we should be thinking about which would alter that normal seasonal pattern.
No.
Hit it but just to be abundantly clear.
Clear, yes in Canada.
The <unk>.
Second quarter, and third quarter with the turnaround activity or the two quarters with the highest.
Regional EBITDA in terms of Australia, we should see sequential improvement quarter to quarter.
Q1 to Q2 Q2 to Q3 and then <unk>.
Either flat to slightly down in Q4 in Australia and that will be dependent on holiday.
Seasonal downtime.
U S should be fairly flat.
Cautiously optimistic on the U S business from a macro perspective, but it's not material to the overall.
Silvio financials, and then lastly in total about two thirds of our EBITDA will come or is it expected to come in the second and third quarters of the year.
Year.
Great. Thank you for the color.
Yeah.
And one last thing Stephen It was a and then of course, we've got that we currently have the vast majority of the demobilization costs in the fourth quarter in Canada, which is also impacting the quarterly.
Flow if you will.
Our next question comes from the line of Sean Mitchell with Daniel Energy Partners. Please proceed with your question.
Hey, Thanks for taking the question you may have I got on the call little bit late you may have talked about it in your opening commentary, but looking at your capital spend and from 'twenty. I think you guys spent about 10 10 million Bucks in 'twenty, one it went up closer to 15.
This year growing 20% 25, what is the.
What is the kind of the maintenance cap that you. If you think about a maintenance capital level within the organization is it closer to that 10 million Bucks.
I would say, it's plus or minus 20.
In 2020, our Canadian team.
Given all the dynamics, we don't need to belabor.
But with what was happening in the second and third quarters with related to Covid.
We carved it way back and they did a great job of.
Managing to a lower capex number.
This year was somewhat some of the same I mean quite frankly.
The spending in 2021 would have been higher except for supply chain disruptions, when we couldnt get vehicles or computers et cetera.
Two that we would ordinarily we would want to purchase so our 60 are little less than $16 million of Capex in 2021, ideally it would be closer to 20.
If all of the supply chain disruptions hadn't happened.
And so we have a.
The higher expected.
Maintenance Capex number in 2022, but if youll also recall guidance for 2021 started off at 20 to 25.
So we're expecting kind of the same starting point and for this year and we will do our best to be prudent and we.
We've always tried to spend capital where we need to.
But theyre not.
Be smart about where we're spending it so I expect we'll do the same this year.
Got it thank you.
Thank you it's a good strategy.
There are no further questions in the queue I'd like to hand, the call back over to Bradley Dodson for closing remarks.
Thank you Doug and thank you everyone for joining the call today. We appreciate your interest in <unk> and we'll look forward to speaking to you on the first quarter earnings call in a few months.
Yes.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
[music].
Greetings and welcome to Silvio Corporation fourth quarter 2021 earnings call.
At this time all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded it.
It is now my pleasure to introduce your host Reagan Nielsen Senior director corporate development and Investor Relations. Thank you you may begin.
Thank you and welcome to <unk> fourth quarter 2021 earnings Conference call.
Our call will be led by Bradley Dodson, <unk>, President and Chief Executive Officer, and Carolyn Stone.
Senior Vice President 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 anything 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 in the context of the many factors that affect our business, including risks and uncertainties disclosed in our forms 10-K, 10-Q, and other SEC filings I will now turn the call over to Bradley.
Thank you Reagan and thank you all for joining us today on our fourth quarter earnings call.
I'll start with the key takeaways and then I'll provide a brief summary of our fourth quarter and full year 2021 performance.
Carolyn will then provide a financial and segment level review.
I'll conclude our prepared comments with our initial full year 2022 guidance and the regional assumptions underlying that guidance as well as some directional commentary.
And then we will open up the call for questions.
The key takeaways from our call today are the business continues to generate cash while supporting our ongoing debt reduction for the full year 2021, CBO generated $87 million and free cash flow and reduced total debt by $76 million.
And the year at $175 million of total debt.
Fourth quarter results were better than we were expecting.
In the fourth quarter severe delivered $34 5 million of adjusted EBITDA and $26 1 million of free cash flow.
We reduced our total debt by $20 million in the fourth quarter, bringing our net leverage ratio down to 149 times as of December 31, 2021.
Delevering, our balance sheet remains our top financial priority.
In this quarter is the 11th straight quarter of leverage ratio a reduction.
Strategic investment in diversifying our revenue profile is pay dividends again in 2021 like it did in 2020 during the volatility experienced across all three of our segments.
While Australia activity declined in 2021 due to the China, Australia trade dispute.
And business experienced increased labor costs due to Covid, our Canadian business continued to recover from the trough of 2020 to offset the Australia decline.
If you recall the exact opposite happened in 2020, where Australia had significant growth while Canada struggled.
In the oil market struggled.
This diversity and revenue drivers as a key component of serious free cash flow generation strategies, and we will continue to seek opportunities to expand our customer base and geographic footprint.
To reduce volatility in our free cash flow generation as we continue to reduce our debt.
Despite high prices across the core commodities that we support our customers continue to be focused on capital discipline and returning capital to share it to their shareholders at the expense of spending on increased maintenance or increase increasing production.
This capital spending is ultimately what drives occupancy in our Canadian lodges in Australian villages.
Yeah.
<unk> announced a share repurchase program in the third quarter of 2021, and we began executing on that program throughout the end of the year with total 2020 on purchases under the program of approximately 217000 shares repurchased.
Return of capital to our shareholders is currently the secondary focus our capital allocation strategy alongside our first priority of debt Paydown.
Our Australian business continues to be burdened with increased labor costs related to COVID-19 travel and border restrictions, coupled with subdued activity from our customers related to that.
China, Australia trade dispute, which has led to lower billed rooms in our villages.
In total our team put together a solid fourth quarter. Despite the challenges of the pandemic trade disputes and limited capital deployment by our customers.
Let me take a moment to provide a business update across our three segments.
In Canada, our revenues and adjusted EBITDA increased sequentially and year over year, driven by our Canadian mobile camp activity as expected our largest did experienced lower billed rooms sequentially related to typical holiday downtime in the fourth quarter.
Our Australian results were above expectations, our Bowen basin occupancy was better than expected, but did reflect some typical holiday downtime sequentially.
Adjusted EBITDA in the fourth quarter was down year over year as a result of weaker customer activity in the Bowen basin and increased labor costs in our Western Australia and integrated services business.
Turning briefly to the U S conditions for our U S business continued to be challenging in the fourth quarter, but increased year over year activity in our lodges and offshore business led to higher revenues and adjusted EBITDA versus the fourth quarter of 2020.
Adjusted EBITDA was also positively impacted by a $3 8 million dollar gain on sale of assets from the opportunistic fourth quarter of 2021 sale of our West Permian launch.
Turning to our balance sheet, our net leverage ratio declined to 149 times at year end from 186 times at the end of the third quarter and 2.06 times at the end of 2020.
Proactively dedicating free free cash flow to reducing debt remains our primary financial priority.
With that I will turn the call over to Carolyn.
Thank you Bradley and thank you all for joining us this morning.
Today, we reported total revenue in the fourth quarter of $159 8 million with GAAP net income of $9 8 million or <unk> 58 per diluted share.
During the fourth quarter, we generated adjusted EBITDA of $34 5 million operating cash flow of $25 3 million and free cash flow of $26 1 million.
The increased adjusted EBITDA, we experienced in the fourth quarter of 'twenty, one as compared to the same period in 2020 was largely due to increased build brands in our Canadian oil sands lodges.
And increased Canadian mobile camp activity.
Partially offset by lower Australian village build brands and increased labor cost due to COVID-19.
For the full year 2021, we reported revenue of $5 $94 5 million and a net loss of <unk>, six <unk> 6 million or <unk> <unk> per share in.
In 2021, we generated adjusted EBITDA of $109 1 million.
Modest increase from our 2020 full year adjusted EBITDA of $108 1 million.
Results from the full year 2021 reflects the impact at a strengthened Australian and Canadian dollar relative to the U S dollar.
Which increased revenue and adjusted EBITDA by $40 6 million and $9 8 million respectively.
On a constant currency basis decreased build rents related to the China, Australia train speed and increased labor costs across the Australian segments were offset by increased level came up activity and increased billed rooms in our Canadian segment.
Let's now turn to the fourth quarter results for our three segments.
I'll begin with a review of the Canadian segment performance compared to its performance a year ago in the fourth quarter of 2020.
Revenue from our Canadian segment was $92 2 million as compared to revenue of $65 5 million in the fourth quarter of 2020.
Adjusted EBITDA in Canada was $23 1 million, an increase from $13 8 million in the fourth quarter of 2020.
The increase in revenue and adjusted EBITDA was largely caused by a meaningful increase in <unk> in 2021 related to the recovery in oil prices and the reduced effects of the COVID-19 pandemic, especially in our oil sands lodges.
This was coupled with increased level camp activity.
Our U S. Dollar results further reflects the impact of a strengthened Canadian dollar relative to the U S dollar.
During the fourth quarter billed rooms in our Canadian lodges totaled 588000, which was at 25% year over year from 469000 in the fourth quarter of 2020 due to the factors we just discussed.
Our daily room rate for the Canadian segment in U S. Dollars was 106, which represents an 8% year over year increase.
Turning to Australia during the fourth quarter, we recorded revenue of $62 3 million down from $63 7 million in the fourth quarter of 2020.
Adjusted EBITDA was $13 6 million down from $17 2 million during the same period of 2020.
These results, which represent a cheap percent period over period topline decrease on a constant currency basis.
Well driven by decreased activity in villages as.
As well as increased labor costs, which were largely the result of COVID-19 related travel and border restrictions.
Australian billed rooms in the quarter were 465000 down from 480000 in the fourth quarter of 2020.
Could you again to the continued uncertainty related to the ongoing China, Australia trade dispute.
The average daily rate for Australian villages in U S dollars was $77 in the fourth quarter, which is consistent with the fourth quarter of 2020.
Moving to the U S revenue for the fourth quarter was $5 3 million as compared to $4 2 million in the fourth quarter of 2020.
<unk> segment, adjusted EBITDA was $3 3 million in the fourth quarter, which was an increase from a negative adjusted EBITDA of $1 4 million during the same period last year.
These year over year increases were related to increased activity in our lodges and our offshore business as well as the gain on sale of our West Permian launch.
On a consolidated basis capital expenditures for the full year 2021 was $15 6 million, which was up from $10 1 million during 2020.
This increase was primarily due to increased Canadian lodge maintenance, coupled with increased Canadian mobile camp capital expenditures related to the awarded pipeline contracts.
Our total debt outstanding on December 31, 21 was $175 million to $175 1 million, which represents a $21 million decrease since September 30th and.
And a $76 million decrease from year end 2020.
Our net leverage ratio for the quarter decreased to 149 times from 186 times as of September 30th.
And as of December 31, 2021, we had total liquidity of approximately $92 8 million, which consists of $86 5 million available under our revolving credit facilities as well as $6 3 million of cash on hand.
Bradley will now discuss our outlook for the full year 2020 to Bradley.
Thank you Carolyn.
Like to discuss our full year 2022 guidance on a consolidated basis, including the underlying outlook for each of the regions as well as the underlying assumptions related to our guidance.
We are we are initiating full year 2022 guidance of revenues between 600 $615 million.
EBITDA between 90 and $95 million.
Our full year 2022 capital expenditures.
Forecast is a range of $20 to $25 million.
Capital expenditures are expected to be higher year over year in 2022, as we normalize our maintenance capital spending for our Canadian lodges and Australian villages. After several years of prioritizing free cash flow.
That being said our primary financial objective continues to be maximizing free cash flow generation.
Based on the EBITDA and Capex guidance, just outlined an expected interest expense of $10 million for 2022, and minimal expected cash taxes and working capital investments, we expect 2022 free cash flow to range between $55 million and $65 million.
To bridge, our 2022 guidance from the 2021 actuals and our 2021 adjusted EBITDA included approximately $13 million of nonoperating items comprised of $3 5 million.
Canadian emergency wage subsidy proceeds six.
$2 million in gains on sale of those assets and $3 4 million from other miscellaneous items, such as insurance proceeds and contract settlement.
Excluding those items from the 2021 results or 2021, adjusted EBITDA would've been approximately $95 million in line with our 2020 due guidance EBITDA guidance of $90 million to $95 million.
We've not included any nonoperating items in our 2022 guidance figures and are not aware of any such items at this time.
The single largest uncertainty and our 2022 guidance as the timing and duration of the pipeline.
<unk> in British Columbia that we are currently supporting with our mobile camp assets.
Should these projects extend further into 2022 or even into 2023, we could see adjusted EBITDA in 2020 to improve by up to approximately $7 million to $10 million.
I will now provide the regional outlooks in corresponding underlying assumptions by region.
In Canada as we look into 2022, we are encouraged by the recent uplift in oil prices. We know that our customers are currently prioritizing the return of capital to shareholders and need to be convinced of the longer term stability across commodity prices and the broader economy as well as improving COVID-19 dynamics before materially increase.
Capital investment in Canada.
While activity in our largest should remain steady 2022 mobile camp activity will be negatively impacted by the completion of pipeline construction projects throughout the year, including the incurrence of the related to demobilization costs.
Yeah.
We currently expect relatively consistent year over year turnaround activity in the second and third quarters of 2022, but as discussed in prior years, we won't get a more accurate view on this until at least March when customers look to secure turnaround rooms.
[noise] Canadian mobile camp activity related to the coastal gasoline pipeline will remain relatively strong throughout the first nine months of the year after which.
The three mobile camps are currently expected to wind down by the end of 2022.
However, our mobile camp supporting the <unk> pipeline expansion is expected to continue into 2023.
When these pipeline related mobile camps projects roll off we incur the costs associated with the demobilization of these assets.
Currently we have currently included all three demobilization and our current 2022 guidance.
With costs of approximately $7 million to $10 million in total or approximately $2 million to $4 million of demobilization costs per count.
If one of the fourth quarter demobilization slips into 2023, we expect the demobilization costs of approximately $2 million to $4 million to also slip into 2023.
Yes.
Our Canadian guidance, primarily depends on the following three assumptions.
Decreasing COVID-19 infections and hospitalizations from current levels.
And that do not impact industrial activity.
Customers are currently prioritizing return of capital to shareholders versus deploying capital into their operations and this is reflected in our guidance.
With that being said customer 2022, capex budgets are marginally higher than 2021.
W. Gi oil trading over $90, a barrel where economy, just really optimistic that customers will could increase capital expenditures further later in 2022.
Lastly, availability of skilled labor continues to be an issue limiting our customers' ability to increase staffing levels, particularly for turnarounds or construction projects as well as impacting our ability to.
To increase our head count.
Turning to Australia, we are encouraged by the significant increase in metallurgical coal prices in the back half of 2021 and into early 2022.
However, customers are still focusing on capital discipline them through the volatility in met coal prices linear weather and the lingering China, Australia trade dispute.
Our current guidance reflects continued capital discipline.
Rather than the current price for met coal.
Iron ore prices remain at extremely healthy levels and customer activity in Western Australia remains strong.
Covid related travel and border restrictions continue to significantly increase.
The labor costs for our integrated services business.
We are beginning to see signs of.
Prescription relief throughout Australia, but we believe labels labor shortages will remain throughout the year 2022.
For our U S business, the oil and gas price environment has improved significantly in recent months, but similar to our Canadian Australian customers. There has been an emphasis on living within cash flow versus growth, we expect our well site and offshore businesses to improve throughout the year, but this was offset by lower contributions from our U S lodges.
Due to the sale of the West Permian launch in October 2021.
I will conclude our prepared comments by understanding the key elements of our strategy as we navigate this extraordinary market climate.
Our mandate is as follows we.
We will prioritize the safety and wellbeing of our guests employees and the communities we work in.
We will manage our cost structure in accordance with the occupancy outlook across our three regions.
We will continue to enhance our best in class hospitality offerings.
We will allocate capital prudently to maximize free cash flow generation, while we continue to reduce debt and begin to return capital to shareholders through our share repurchase program.
As we continue to reduce debt, we will seek opportunities to further.
Diversify our revenue and free cash flow generation through organic opportunities.
With that we're happy to take any questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It.
May be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Stephen <unk> with Stifel.
Please proceed with your question.
Thanks, and good morning, everybody.
Good morning, Steven.
I think I think the first question is.
It was just kind of use of use of cash I mean, you have the share repurchase program in place.
Look at what.
What <unk> done I mean, you've done a great job paying down debt youre going to generate apparel, we think pretty good free cash flow next year.
What will it take and why not just get ultra aggressive on the on the buyback.
Well as we've talked about in the past we put the program in place in September .
Give us a very large open window before.
Third quarter blackout period, but if you look at the disclosure in the 10-K, which we'll file later today or early tomorrow you'll.
You'll see that the pace of us buying back stock throughout the last four months of the year picked up each month.
And so as we stand here today with about four months underneath our belt, where about a third 30% a third.
Complete under the authorization of 700.
<unk> thousand shares and so I think we've made a good good pace and we will certainly look to be opportunistic.
Around buying back stock here as we move forward into 2022.
Okay. Thanks has there been any thought to.
I think you'd have to do a more complete filing in Canada to expand it to a larger buyback has there been any thought to that.
We're continuing to evaluate that certainly.
We've made some progress.
We need to continue to evaluate that.
Should become an option that we wanted to take advantage of we can certainly look at that.
Great. Thanks, two other things one is on the on the Canadian front, just listening to your commentary and you have quite a lot of color.
The mobile camp side.
You talked about the <unk> and I think that.
That kind of leads to a pretty sharp drop off in <unk> EBITDA in Canada, just because of the depot of course.
Could you give us any sense for the revenue.
Of the two major pipeline projects.
It is it half the mobile.
Revenue in Canada or is how should we think about that.
Well in terms of the campus, we have supporting coastal gas link and <unk> that is the totality of our mobile camp revenue.
None.
19, 95% to 100% of it.
It relates to those two projects.
Okay. Okay.
That makes sense and then just the final one can you give us.
So the U S market has been has been interesting when you when you think about activity growth.
You sold.
The West Permian facility.
How much revenue does.
Does that.
No.
It's not a huge piece, but is that is.
How should we think about the revenue contribution that that facility had and then when we think about EBITDA in that business kind of run EBITDA breakeven give or take for most of the 22 is that how we should be thinking about it.
So the revenue from the West Permian Lodge as you as you may recall, we leased out the facility in totality I believe it was in April of 2021 to.
To a third party, who then operated that asset.
We did have a little less than $2 million in revenues from the terms of the west Permian launch lashed in 2021 before we.
Sold the asset.
And in total for 2022.
If you'll allow me a range I would expect will be breakeven to maybe a $2 million EBITDA loss in the U S.
Okay great.
Great. Thank you.
Okay.
Our next question comes from the line of Steve <unk> with Sidoti. Please proceed with your question.
Hi, good morning, everyone. Thanks for all the detail on the call.
When you think about.
If not expanding on the share buyback and your net leverage is probably to a point that you're comfortable with or maybe that's not or maybe you have changed the sort of targets there.
Are you thinking about capital allocation because your capex is going up huge.
So we have about.
$30 million and $32 million worth of amortization annually on the term loan.
So that will be the use.
Of the free cash flow and then would look to continue to reduce leverage on the revolver as well.
And then we will Opportunistically look to buy back stock as a secondary priority.
Okay.
Then.
The West Permian sale, which you mentioned was opportunistic and I know you had that relationship there beforehand, but are.
Are there any other assets you might consider divesting as you sort of reshape the portfolio.
Across all three regions, if we have assets that we can monetize.
At at valuations that effectively bring forward the cash flow generating capability of that asset.
To the to the current date, we'll certainly continue to look at that absolutely.
Okay.
What will bring down Australia, and labor costs, and how are you thinking about that when you when you provided the guidance.
Yeah.
They need to open the international borders, which they have we need to see the <unk> border.
Open the internally the state border open.
And consistently be opened and it has been opened from time to time over the last 12 or 15 months.
But then it will close again with very short notice, which makes it very difficult to source labor from Eastern Australia NCWA.
I think.
Businesses across the world are dealing with limited availability of labor as well as higher labor costs for us it's a double whammy if.
If we can't get full time hires and we get temporary hires.
That are both more expensive on an hourly basis and then less efficient.
So our team has been working diligently to.
Recruit folks to bring in foreign workers as well.
But I do think that that process to kind of unwind whats already happened will likely take the balance of the full balance of 2022.
So our guidance effectively looks at looked at is based off of the cost structure that was present in the second half of 2021.
So it assumes that it doesn't get better but it assumes it doesn't get worse as well.
Okay Fair enough. Thanks, and just last one for me is what would get you more positive on expectations for Canadian turnaround activity. It doesn't sound like you're super optimistic on a huge jump this year, even though we've seen you know the capex budgets the initial ones at least be higher.
And we all see oil prices whats your thoughts there and what would get you more optimistic.
Okay.
Well it's.
It's one of those times are topics, where some of the public statements made by our customers don't.
<unk> lineup with what they are telling us on the detailed level on a side by side basis. So.
Right now our I would say underlying your question.
Probably fairly conservative on our our overall occupancy in Canada for 2022, but it's based on the best information we have from our clients.
Should that should their actual activity lineup more with what they've said about their capex than we could have some upside for sure.
Great. Thanks, so much everyone.
Thank you.
Okay.
We have a follow up question from the line of Steven <unk> with Stifel. Please proceed with your question.
Thanks.
Robert I was curious.
Talked about uses of cash has there been any thought of additional M&A, whether it's like the action deal you were successful at that in Australia or or or other.
Potential deals and then maybe beyond that has there been any thought to other end markets as it pertains to M&A.
Sure.
Well the action transaction, we did in July of 2019 gave us our foothold in Western Australia gave us critical mass in that region expanded our.
Service only business model significantly.
And we're very pleased to do that it also gave us exposure to iron ore, which we did not have a significant exposure to that commodity prior to the transaction.
In terms of priority M&A would be last.
So in our in our view of capital allocation.
Debt pay down one by that too.
Look for organic.
Capital growth organic.
Expansionary opportunities and then M&A would be last when we think about the value that our stock is trading at right. Now we believe that the buyback program presents better returns and typically you can receive at least at this point and M&A.
Ideally longer term.
We would like to expand the business by.
Kind of expanding within our fairway.
But looking for ways that give us greater customer.
And larger customer base or expand our geographies.
But keeping to our knitting in terms of the services that were provided.
And so we have looked at other geographies and in other regions, but typically closer to home than really going out.
Two.
A completely different.
No.
Geography in the world.
Thank you and just one final when you.
I think traditionally they have to go back and look the exact numbers, but I think about 60% of your full year EBITDA falls in the second and third quarters.
Outside of the seasonality that you is that you mentioned for the mobile camps in Canada. This year is there anything else that we should be thinking about which would alter that normal seasonal pattern.
No.
You've hit it but just to be abundantly.
Clear, yes in Canada.
The.
Second quarter, and third quarter with the turnaround activity or the two quarters with the highest.
Regional EBITDA in terms of Australia, we should see sequential improvement quarter to quarter.
Q1 to Q2 Q2 to Q3 and then.
Either flat to slightly down in Q4 in Australia and that will be dependent on holidays.
Seasonal downtime.
U S should be fairly flat.
Im cautiously optimistic on the U S business from a macro perspective, but it's not material to the overall.
Silvio financials, and then lastly in total about two thirds of our EBITDA will come or is it expected to come in the second and third quarters of the year.
Great. Thank you for the color.
Yes.
And one last thing Stephen It was and then of course, we've got that we currently have the vast majority of the demobilization costs in the fourth quarter in Canada, which is also impacting the quarterly.
Flow if you will.
Our next question comes from the line of Sean Mitchell with Daniel Energy Partners. Please proceed with your question.
Hey, Thanks for taking the question.
I got on the call little bit late you may have talked about it in your opening commentary, but looking at your capital spend and from 'twenty. I think you guys spent about 10 10 million Bucks in 'twenty. One it went up closer to 15. This.
This year growing 20% to 25 what is the.
What is the kind of the maintenance cap that you if.
If you think about a maintenance capital level within the organization is it closer to that 10 million Bucks.
Yes.
I would say, it's plus or minus <unk> 20.
In 2020, our Canadian team.
Given all the dynamics, we don't need to belabor.
But with what was happening in the second and third quarters with related to Covid.
We carved it way back and they did a great job of.
Managing to a lower capex number.
This year was somewhat some of the same I mean quite frankly.
The spending in 2021 would have been higher except for supply chain disruptions, when we couldnt get vehicles or computers et cetera.
Two that we ordinarily would want to purchase so our 60 are little less than $60 million of Capex in 2021, ideally it would be closer to 20.
If all of the supply chain disruptions hadn't happened.
And so we have.
The higher expected.
Maintenance Capex number in 2022, but if youll also recall guidance for 2021 started off at 20 to 25.
So we're expecting kind of the same starting point and for this year and we will do our best to be prudent and we.
We've always tried to spend capital where we need to.
But theyre not.
Be smart about where we're spending so I expect we'll do the same this year.
Got it thank you.
Thank you it's a good strategy.
There are no further questions in the queue I'd like to hand, the call back over to Bradley Dodson for closing remarks.
Thank you Doug and thank you everyone for joining the call today. We appreciate your interest in <unk> and we'll look forward to speaking to you on the first quarter earnings call in a few months.
Yes.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.