Q4 2022 Civeo Corp Earnings Call
Speaker 1: I and I.
Speaker 2: If anyone wants to require operator assistance during the conference, please request
Speaker 3: Today, our call will be led by Bradley Dawson, Sivio's President and Chief Executive Officer, and Carolyn Stone, Sivio's Senior Vice President, Chief Financial Officer, and Treasurer.
Speaker 3: 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 stuff remarks should be read in the context of the manufacturers that affect our business.
Speaker 3: including risks and uncertainties disclosed in our forms 10K, 10Q and other SEC filings. I'll now turn the call over to Brad Pitt. Thank you, Reagan, and thank you all for joining us today on our fourth quarter earnings call. I'll start with a key takeaways and then give a brief summary of our fourth quarter in full year 2022 performance. Carolyn will then provide a financial and segment level review.
Speaker 3: And I'll conclude with our initial full year 2023 Consolidate Guidance and Regional Assumptions. Then we'll open up the call for questions. The key takeaways from our call today are that the business continued to generate cash, which is supporting our ongoing capital allocation priorities of...
Speaker 3: our free cash flow to repurchase the equivalent of 1.5 million common shares for $45 million.
Speaker 3: This included a reference of 40% of the then outstanding preferred shares, which coupled with the conversion of the remaining preferred shares in the common shares in December , resulted in only one class of shares outstanding at year end, just the common shares. In the fourth quarter, severe delivered 15.1 million of adjusted
Speaker 3: we are encouraged by our customers willingness to commit to a longer-term contracts and to secure their room supply with CIVIO. In both cases, CIVIO expanded its market share with the customer.
Speaker 3: The diversity in revenue drivers is a key component to Sivio's free cash flow generation strategy. We will continue to seek opportunities to expand our customer base and geographic footprint to reduce volatility in a free cash flow generation. Despite high-com money prices for natural resources extraction that we support, our customers continue to be focused on capital.
Speaker 3: inflationary pressures throughout our business were continued in the fourth quarter, as winter weather conditions in Canada increased utility costs, and the promise we made on Australia's labor issues began to reverse.
Speaker 3: Even with the severe inflationary headlands, CBO continued to journey free cash flow in the fourth quarter.
Speaker 3: which almost completely offset $31 million preferred sharey purchase made in the quarter. Let me take a moment to provide a business update across our three segments. In Canada, our fourth quarter revenues and adjusted EBITDA decreased year-to-year. Primarily related to several items that benefited the fourth quarter of 2021.
Speaker 3: coupled with cost inflation across Canada. Telling and walking through these items later in the call. As expected, our lives and experience lower build rooms sequentially related to the wind down, a seasonal turnaround activity at the end of the third quarter and typical holiday downtime in the fourth quarter. Our Australian results in the quarter were in line with expectations.
Speaker 3: and increased labor costs in our integrated services business, partially offset by increased occupancy in the Boeing Basin.
Speaker 3: In the fourth quarter, our Australian business was awarded two five-year contract annoules, one for our CIVIO own villages in the Bowen Basin and one for our integrated services business in Western Australia.
Speaker 3: In both cases these contract rules retain through those previous work with the customer and granted this additional locations and additional room commitments while taking share from competitors.
Speaker 3: Turning briefly to the US, we completed the best chair of our US offshore business in the fourth quarter. We were unfortunately unable to create scale in the business despite the sales and service efforts of our team. Our US business now consists of our children's lodge in North Dakota and the Boccan.
Speaker 3: and our CadiNaker lodge near Lake Charles, Louisiana. Turning to our balance sheet, our net leverage ratio is 1.1 times at year end, down from 1.5 times at the year end, 20.1, but increased slightly from the third quarter net leverage ratio of 0.9 times. This sequential increase was largely due to the preferred share repurchase in the quarter.
Speaker 3: as well over a year of year of decrease in our fourth quarter adjusted even though. With that, I'll turn the call over to Carolyn. Thank you, Bradley, and thank you all for joining us this morning. Today, we reported total revenues in the fourth quarter of $162.2 million, with a Gap Net Law at $13 million.
Speaker 2: or $1.31 loss per share, per deleted share. During the fourth quarter, we generated Adjusted EBITDA 15.1 million, operating cash flow of $29.4 million, and free cash flow of $25.8 million. The decrease to Adjusted EBITDA we experienced in the fourth quarter of 2022, as compared to the same period in 2021,
Speaker 4: can be categorized in four buckets. First, there was approximately 8.5 million of non-operating items such as the impact of a stronger US dollar relative to the Canadian Australian dollar, an increased stock-based compensation expense due to a higher stock price in the fourth quarter of 2022.
Speaker 4: as well as larger gains on sales of assets in the 4.25. Next, we have 3.3 million of customer and insurance settlements which positively impacted the 4.25. We also saw a further approximately 2.9 million increase in S-GNA expense, largely related to higher information technology expenses as well as professional fees.
Speaker 4: And finally, approximately 4.7 million of increased operating costs.
Speaker 4: which were largely driven by inflationary pressures for labor, food, and utilities.
Speaker 4: partially offset by increased Australia billet occupancy. For the full year 2022, we reported revenues of $6.97.1 million and a net loss of $2.2 million for 21 cents per daily share.
Speaker 4: In 2022, we generated a subsidy bidot of 112.8 million, a modest increase from our 2021 full year adjusted bidot of 109.1 million. Results from the full year of 2022 reflect the impact of a weakened Australian and Canadian dollar relative to the US dollar.
Speaker 4: which decreased revenues and adjusted EBITDA by $38.2 million and 8.1 million respectively. On a constant currency basis, increased build rooms in Canada and Australia, and stronger Canadian mobile camp activities were partially offset by continued cost inflation across the business. The divestitures in the US business.
Speaker 4: an increased stock-based compensation expense related to the increase in our share price. 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 2021. Revenue for the Canadian segment was $88 million, as compared to revenue of $92.2 million in the fourth quarter of 2021.
Speaker 4: Adjusted EBITDA on Canada with $11.8 million compared to adjusted EBITDA of $23.1 million in the fourth quarter of 2021.
Speaker 4: Results from the fourth quarter of 2022 reflect the impact of a weakened Canadian dollar relative to the US dollar Which decreased revenues and adjusted EBITDA by 6.9 million and 1.0 million respectably
Speaker 4: The decrease in the density of the DAW was driven by the weekend Canadian dollar as well as certain aforementioned customer and insurance settlements that benefited the fourth quarter of 2021.
Speaker 4: and cost inflation affecting food, labor, and utilities in the fourth quarter of 2022. During the fourth quarter, build rooms in our Canadian lodges totaled 622,000, which were at 6% year-ever-year from 588,000 in the fourth quarter of 2021. Our daily room rate for the Canadian segment, US dollars, was $93.
Speaker 4: which is down from 106 year over year due to a weakened Canadian dollar relative to the US dollar and the impact of a lower rate in our 12 year walk-as-toe contract renewal.
Speaker 4: Turning to Australia. During the fourth quarter we recorded revenues of $73.1 million, up from $62.3 million in the fourth quarter of 2021.
Speaker 4: Adjusted EBITDA with 13.1 million down from 13.6 million during the same period of 2021. Results from the fourth quarter of 2022 reflect the impact of a weakened Australian dollar.
Speaker 4: Related to the US dollar and the impact of a lower rate in our 12 which decreased revenues and adjusted a bit though by 8 million and 1.5 million respectively. In addition to the weakened Australian dollar, the decreased in adjusted a bit though was driven by an increased in labor cost, especially in our Western Australia integrated services business.
Speaker 4: This was partially offset by an increase in build rooms in the Belgrade. Australian build rooms in the quarter were 519,000, up from 465,000 in the fourth quarter of 2021. That was daily rate for Australian villages in US dollars with 73 in the fourth quarter, down from 77 in the fourth quarter of 2021.
Speaker 4: which was entirely due to the which industrialized dollar compared to the US dollar. On a consolidated basis, capital expenditures for the full year 2022 were 25.49 million up from 15.6 million during 2021.
Speaker 4: This increase was primarily due to increased large and village maintenance, coupled with a more full-fledged and more refurbishment program in our Australia villages, in preparation for increased contracted renovations and certain villages.
Speaker 4: Our total debt outstanding on December 31, 2022 was $132 million. A 6 million increase in September 30, 2022 and a $43 million decrease from year 2021. Our net leverage ratio for the quarter increased to 1.1 times as of December 31 from 0.9 times as of September 30.
Speaker 4: As Bradley mentioned, the increase is due to a combination of lower fourth quarter adjustity bit-daw compared to the fourth quarter of 2021, as well as debt and current finance. The 31 million preferred share repurchase in the fourth quarter of 2022. As of December 31, 2022, we had total liquidity of approximately 104.1 million, consisting of 96.1 million available under our revolving credit facilities and 8 million of cash on hand. Bradley will now discuss our outlook for the full year 2023.
Speaker 3: Thank you, Carolyn. We will now discuss our full year 2023 guidance on consolidated basis, including the underlying regional assumptions. We are initiating our full year 2023 guidance of revenues between $630 million, $650 million, and Ein.
Speaker 3: of 85 million to 95 million. Our full year 2023 capitol expenditure guidance.
Speaker 3: is 25 million to 30 million. Cabal expenditures are expected to be relatively flat with 2022, as we continue to normalize our maintenance capillabins spending for our lodges and villages across the business after several years of prioritizing free cash flow.
Speaker 3: As an example, we are in the process of refurbishing rooms in the bone basin based on our current occupancy outlook to bring rooms back online where we have seen increased contracted room demand in the coming years.
Speaker 3: That being said, our primary financial objective can choose to be maximizing pre-cash flow.
Speaker 3: based on the evidon Capet's guidance just outlined. Expected interest expense for 2022 of $12 million are 2023, excuse me, and minimal expected cash taxes and working capital investment. We expect 2023 free cash flow to range between 43 million and 58 million.
Speaker 3: As we have discussed on previous earnings calls, the significant year-year decline in 2023 adjusted to David DAugt.
Speaker 3: comes from our Canadian mobile camp business, resulting from the line down of construction activity for the Coastal Gasoline Pipeline project in British Columbia and the TMX Pipeline expansion.
Speaker 3: Canadian contract camps contributed approximately $36 million in 2022.
Speaker 3: We are currently expecting to have three mobile camps remaining on the coastal gasoline project as well as one camp supporting the TMX pipeline expansion projects.
Speaker 3: and are expecting all of them to be completed in 2023. Our 2023 guidance currently includes...
Speaker 3: $13 million Canadian in mobile camp fee mobilization expenses.
Speaker 3: I will now provide the regional outlets and corresponding underlying assumptions by region.
Speaker 3: In Canada, as we looked into 2023, we know that our customers are continuing to prioritize return to capital to their shareholders.
Speaker 3: and need to be convinced of longer-term stability across commodity prices and the broader economy before materially increasing investments in Canada.
Speaker 3: While activity and lodges should remain steady, the 2023 mobile camp activity will be significantly impacted negatively impacted by the completion of the pipeline construction projects throughout the year, including the incurrence of some of the related demobilization costs.
Speaker 3: We are currently expecting relatively consistent year-over year turn-out that turn-around activity in Canada in the second and third quarters of 2023. But as we have discussed in prior years, we don't get an accurate view until customers look to secure turn-around rooms.
Speaker 3: We are currently expecting relatively consistent year-over-year turnaround activity in Canada in the second and third quarters of 2023. But as we have discussed in prior years, we don't get an accurate view until customers look to secure turnaround rooms in the second quarter.
Speaker 3: Canadian mobile camp activity related to coastal gasoline pipeline will significantly decline throughout the year. As our three mobile camps are currently expected to wind down during the middle part of 2023.
Speaker 3: Additionally, our mobile camp supporting TMX expansion is expected to also continue through the third quarter of 2023. When these pipeline-related mobile camp projects roll off, we'll encourage a cost associated with the demobilization of these camps.
Speaker 3: We currently have two of the four DMobilizations in our 2023 guidance, as I mentioned, approximately $13 million Canadian of DMobilization costs.
Speaker 3: As we saw last year, however, uncertainty remains around the timing of these projects. To the extent that projects are extended, our 2023 guidance will be positively impacted, both by the deferral demobilization costs as well as the incremental revenue on the camps.
Speaker 3: Our 223 guidance could also be impacted by further clarity from a customer around the room demand for severe lodges in the back half of the year. As we disclose last quarter, we have agreed not to remove renew.
Speaker 3: and expiring land lease associated with Armaclo and Lake Lodge, which this land lease currently expires in June 2023. In order to support the customers intent, to mine that land where it currently is located, in addition, our hospitality services contract expires in June of 2023.
Speaker 3: Our 2023 guidance includes customer room demand at other city lodges in the second half of 2023 as a customer transitions to its new solution. If there are to find an alternate solution for room supply, this would negatively impact our guidance.
Speaker 3: We are marketing the McCollum Lake Lodge assets for new opportunities in the Canada and the US.
Speaker 3: Based on our current knowledge and understanding of the marketplace, we believe there is demand for these assets for sale or redeployment. In our 2022 revenues, the McCone Lake Lodge generated 2022 revenues of approximately $60 million Canadian.
Speaker 3: We expect to have further clarity on the customer's 2023 room demand and digital sales, the real deployment opportunities of these assets later on in 2023. Turning to Australia, sustained healthy medical electrical coal prices in 2022 and early 2023.
Speaker 3: have gradually improved customer activity in our bow and base in villages. We expect a modest increase in our village occupancy in 2023.
Speaker 3: However, our customers continue to focus on capital discipline or hesitant to commit capital to large, expansionary projects.
Speaker 3: Our current guidance reflects continued capital discipline more than reflects the current price for Met coal.
Speaker 3: That being said, in early 2023, we have experienced the noticeable uptick and customer activity versus our initial expectations. And there could be upside to our guidance that this trend continues further into 2023.
Speaker 3: Well, I don't know if prices were treated modestly in 2022. There are many at healthy levels and customer activity and western Australia remains strong.
Speaker 3: Although our integrate services business in Western Australia as evidenced by our recent five year contract award.
Speaker 3: We continue to be burdened by inflationary pressures, particularly labor costs.
Speaker 3: We are expecting the labor costs to slowly subside throughout 2023, real resulting in an uplift in our integrated services margin in the back half of the year.
Speaker 3: However, if these laborations do not subside, results with that cap of the year could be negatively reempowered.
Speaker 3: I will conclude by underscoring the key elements of our strategy as we navigate the current marketing climate.
Speaker 3: Our mandate, as far as follows, we prioritize the safety and well-being of our guests, employees, and the communities we work in. We will continue to manage our cost structure and accordance with the occupancy outlook across Canada and Australia.
Speaker 3: We will continue to enhance our best in class hospitality offerings.
Speaker 3: We will continue to prudently allocate capital prudently to maximize free cash of generation while we continue to return capital to shareholders and reduce debt.
Speaker 2: And lastly, we will seek opportunities to further our revenue diversification through organic and M&A opportunities. With that, we're happy to take the questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tool will indicate your line is in the question queue. You may press star two. If you would like to remove your question from the queue.
Speaker 2: and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker 2: participate using speaker equipment and maybe necessary to pick up your hands that before pressing the star keys. Our first question is from Stephen.
Speaker 2: Jen Jaro with Steve Fell, please proceed. Thanks and good morning, everybody.
Speaker 2: with Steve Falle, please proceed. Thanks and good morning everybody. Good morning.
Speaker 5: So, Bro, you did a thorough job with the guidance for 2023, just one quick question. As we put it all together, does the wind down effect the normal seasonal pattern of even die? I think the second, third, quarter is usually capture 60 or 65 percent of fully-revid die. Is that?
Speaker 5: So we should expect that the shift based on the current expectation for for demo costs.
Speaker 3: No, I think we still have that same kind of 65% of the guidance, give it dots in the second and third quarters. And then as we typically do it right now, guidance is softer in the fourth quarter. And that's just.
Speaker 3: to do customer visibility. So we'll have to see how that plays out. A big factor of that is the demo of the contract camps in the back half of the year. And then two other things for me. The first is.
Speaker 5: When you think about the free cash generation, I'm obviously you've been buying back stock. I think people have reacted well to that, but what types of M&A would you be looking at? And how do you evaluate potential M&A opportunities?
Speaker 5: about the free cash generation. I'm obviously you've been buying back stock. I think people have reacted well to that but what types of M&A would you be looking at? And how do you evaluate potential M&A opportunity?
Speaker 3: We have certain properties that we would look at that would be one-off properties but in Canada and Australia that would be added to the Portfolio as a whole.
Speaker 3: And as I mentioned, we'll look to continue to diversify building off of our hospitality services into other geographies and other end markets.
Speaker 3: based on what we see is our cost to capital. Those would have to have strong returns in the upper teens on an unleivered app-protect basis.
Speaker 5: Okay, great. And any, any, what would it, it would like maybe hospitality services as opposed to hard access? Is that fair?
Speaker 3: Well, the adding locations portfolio would be our assets, but it also could be adding service companies in an M&A fashion.
Speaker 5: Okay, thanks. And I just want to find one that the second half sale of US assets.
Speaker 5: the US business close to zero now. I'm trying to give up what exactly you did last.
Speaker 3: We've divested everything but chill deer and a Katie and acres and actively looking to divest those.
Speaker 5: Thanks. And then maybe just actually one final one. What your debt levels have come down significantly. I think they tweaked up a little bit in the quarter. It may have been that facts, but where at what leverage ratio do you. Is there a leverage ratio where you. You scum.
Speaker 5: Any doubt that just return all the cash.
Speaker 3: Well, I think we're in that range and I think kind of one to one and a quarter times is a good base and what that does is that gives us the flexibility that if we want to either invest in or on stock or invest in growing the business and we have an adverse macro.
Speaker 3: unforeseen adverse macro curve after we've made that investment. We won't end up in a higher leverage ratio. So I feel like we're in a good spot. It should, I would expect it over the next few years to vary around where it is from a net leverage standpoint, potentially dip lower when there are fewer opportunities. And what you may decide to move it slightly higher.
Speaker 3: for the right investment opportunity, which can be both returning capital share holders and growing the business.
Speaker 5: Got it. Great. Thank you for the color. Yeah. Thank you for the question.
Speaker 2: As a reminder to star one on your telephone keypad if you would like to ask a question, our next question is from Steve for Zannie with Cicode Stodie and Cupdede, please proceed.
Speaker 6: Good morning, Bradley, Carolyn. I appreciate all the detail on the call. I do want to check on some of these numbers just to make sure I got them clear because a lot of moving parts here. Some of the Collellen Lake.
Speaker 6: So that's now June , so that was 60 million in annual revenue that comes out after the first half.
Speaker 7: Okay.
Speaker 3: Okay. And then you're timing now. Hold on one second, but for 2023 as of right now, it's partially offset by moving that occupancy into other civil locations. So much civil clothe issue is much more of a 2024 issue than it is in 2020.
Speaker 6: the mobile camps now. And as we know, some of these projects are clearly have consistently been extended. What's your current timing thoughts on this? Because both are going to be completed probably very end of 23, right? But I know that doesn't mean your mobile camps extend the full time. So we're expecting the camps roll.
Speaker 3: million or so Canadian in 2024.
Speaker 6: Did that go off of your original estimates last year or over a year ago with inflation, the demob costs? Am I right on that?
Speaker 3: No, they've been fairly consistent at a range. Okay.
Speaker 3: Okay. 20 million Canadian and total and 15 depending on exchange rate, it's about 15 million US.
Speaker 6: Okay, then a couple of numbers on the quarter. I just wanted to check on the Canadian daily rates. Was there anything to mix there? I'm guessing there was something beyond F-Facts because it looked like...
Speaker 4: The rooms were pretty booked, apparently for this time of year, but the ADRs didn't kind of came down. It was our largely our walk-through lodge. We entered into new contract in July , and as we noted in our release of that, we had
Speaker 6: have lower rates on that going forward this offset by some cost and scope adjustments. Okay, perfect, thanks. And then on the, and you did talk about this, but the margin with food and service in Australia was very, very low. You talked about the higher labor cost, higher food costs. How do you offset that?
Speaker 6: what's your intention and I know this is a seasonally slower quarter anyway.
Speaker 3: Well, this flight chain team is fighting the food cost piece and the freight costs. And the HR team is working on trying to increase as we've talked about in the past, the principal issue in Australia is how much temporary labor we're using is posed to full-time employees. The temporary labor is in the set to do you if we can't have full-time employees.
Speaker 3: H.R. and scope adjustments.
Speaker 7: Okay.
Speaker 6: Perfect. Thanks, Bradley. Thanks, Carolyn. Appreciate it. Thank you, Steve. Appreciate it.
Speaker 2: Our next question is from John Daniela Energy Partners. Please proceed.
Speaker 8: Hey Bradley, thanks for taking the call. I just want to follow up on the M&A stuff. When you talk to a lot of people and say traditional OFS, they will speak to the volume of deals that they're looking at, pitch books, etc. Can you just provide some color on?
Speaker 8: how many opportunities are out there for your business and when you're not doing deals, is it valuation-related, is it quality of property, just any color on M&A would be helpful.
Speaker 3: We have a, we've had a wish list that varies between six and ten items and you, as you can imagine, and in, in an M&A context, some of those, it's a wish list, but the target is not interested at the time. It's not the right time for them. To your point, sometimes it's valuation. I would say that...
Speaker 3: Here sometimes it's what you find in due diligence.
Speaker 3: So right now I would say we've been fortunate in the sense that while we've been focused on paying down debt, the things are a wishless haven't been acquired or gone in another direction that we then have to take them off the list.
Speaker 3: So, what we've been focused internally, at least the wish list hasn't gone someplace else. But I would say we're in the early innings of being able to pivot there, certainly cognizant of capital allocation decisions. So, we just...
Speaker 8: Would you say that the majority of options that you all would go look at are if you will self-sourced or versus you know a bunch of bankers pitching it to you I'm just trying to forgive me for a lack of knowledge here on the accommodations. I've just curious to like how that
Speaker 3: How do you actually speaking we are these are internally sourced we know which pieces which assets which service companies were interested in of course occasionally we'll see an idea that's pitched pitch to us but for the most part in in the fairway of our existing business.
Speaker 3: We have reached the end of our question and answer session. I would like to turn the conference back over to Bradley for closing comments. Thank you all for your interest in Sivio. Thank you for joining the call today. We look forward to speaking with you on our first quarter of 2023 hearings call, planned for it at the end of April .
Speaker 2: So, thank you all. Take care. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Speaker 1: I.
Speaker 1: I that.
I have you.
All participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please request star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Megan Nielsen, Senior Director.
corporate development and investor relations. Thank you, you may begin. Thank you and welcome to the Civilian's fourth quarter 2022 earnings conference call.
Today, our call will be led by Bradley Dawson, Sivio's President and Chief Executive Officer, and Carolyn Stone, Sivio's 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 10K, 10Q and other SEC filings. I'll now turn the call over to Bradlett. 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 give a brief summary of our fourth quarter and full year 2022 performance. Carolyn will then provide a financial and segment level review and I'll conclude with our initial full year 2023 Consolidate Guidance and Regional Assumptions.
Then we'll open up the call for questions. The key takeaways from our call today are that the business continued to generate cash, which is supporting our ongoing capital allocation priorities of reducing debt and returning capital to shareholders.
For the full year 2022, City of Generated $83 million in free cash flow and made debt repayments of $34 million. During 2022, we also used over 50% of our free cash flow to repurchase the equivalent of $1.5 million common shares for $45 million. This included a repurchase of 40% of the then outstanding preferred shares.
We recently announced two significant five-year contracts with existing customers in Australia.
This is a signal of our strong customer relationships and operational execution. We are encouraged by our customers willingness to commit to longer-term contracts and to secure their room supply with SIVIO. In both cases, SIVIO expanded its market share with the customer. The diversity in revenue drivers is a key component to SIVIO.
and returning capital to their shareholders at the expense of increased maintenance and reduction spending. This capital spending is ultimately with drive occupancy at Sivia's Canadian waters and Australian villages.
As we've mentioned in on past earnings calls, inflationary pressures throughout our business work continued in the fourth quarter. As we're weather conditions in Canada increased utility costs and the promise we've made on Australian labour issues began to reverse.
Even with the severe inflationary headlands, City of Continuity during free cash flow in fourth quarter, which almost completely offset $31 million preferred sharey purchase made in the quarter. Let me take a moment to provide a business update across our three segments. In Canada, our fourth quarter revenues and adjusted even thought. Just to be with God.
decreased year-to-year, primarily related to several items that benefited the fourth quarter of 2021 coupled with cost inflation across Canada.
Killing walking through these items later in the call. As expected, our lives and experience lower build rooms sequentially related to the wind down, a seasonal turnaround activity at the end of the third quarter in typical holiday downtime in the fourth quarter.
Our Australian results in the quarter were in line with expectations, despite higher than expected labor costs in our integrated services business.
Our bone-based occupancy was better than expected, but did reflect some typical holiday-down times quickly?
Adjusted even down in the fourth quarter, modestly de-increased year-to-year, as a result of the weakness of the Australian dollar, and increased labor costs in our integrated services business, partially offset by increased occupancy in the Bowen Basin. In the fourth quarter, our Australian business was awarded two five-year contract annoules, one for our city-owned villages in the Bowen Basin, and one for our integrated service.
quarter. We were unfortunately unable to create scale in the business despite the sales and service efforts of our team.
Our US business now consists of our Kildir Lodge in North Dakota and the Boccan and our Katie and Acre Lodge near Lake Charles, Louisiana. Turning to our balance sheet, our net leverage ratio is 1.1 times at year end, down from 1.1.
five times at the year end 2021, but increased slightly from the third quarter net leverage ratio of 0.9 times.
The sequential increase was largely due to the preferred share repurchasing of the quarter, as well over a year of year of decrease in our fourth quarter adjusted even.
With that, I'll turn the call over to Carolyn. Thank you, Bradley, and thank you all for joining us this morning. Today, we reported total revenues in the fourth quarter of $162.2 million. With a Gap Net Law at $13 million, or $1.31 loss per share.
With that, I'll turn the call over to Carolyn. Thank you, Bradley, and thank you all for joining us this morning. Today we reported total revenues in the fourth quarter of $162.2 million. With a Gap Net Law at $13 million, or $1.31 per share, per deleted share.
During the fourth quarter, we generated a just a debit dot of 15.1 million operating cashflow of 29.4 million and free cashflow of 25.8 million. The decrease the just a debit dot we experienced in the fourth quarter of 2022 as compared to the same period in 2021 can be categorized in four buckets. First, there was approximately 8.5 million of non-operating items.
such as the impact of a stronger US dollar relative to the Canadian Australian dollars and increased stock-based compensation expense due to a higher stock price in the fourth quarter of 22 as well as larger gains on sales and assets in the fourth quarter of 2021
Next, we have 3.3 million of customer and insurance settlements which positively impacted the Ford quarter of 2021.
We also saw a further approximately 2.9 million increase in S-GNA expense, largely related to higher information technology expenses as well as professional fees.
And finally, approximately 4.7 million of increased operating costs.
which were largely driven by inflationary pressures for labor, food, and utilities, partially offset by increased Australia bill of occupancy. For the full year 2022, we reported revenues of $6.97.1 million and a net loss of $2.2 million for 21 cents per glee to share.
In 2022, we generated a subsidy of 112.8 million, a modest increase from our 2021 full-year adjusted EBITDA of 109.1 million.
Results from the full year of 2022 reflect the impact of a weakened Australian and Canadian dollar relative to the US dollar, which decreased revenues and adjusted EBITDA by $38.2 million and $8.1 million respectively.
On a constant currency basis, increased build rooms in Canada and Australia, and stronger Canadian mobile camp activity were partially offset by continued cost inflation across the
the divestitures in the US business, an increased stock-based compensation expense related to the increase in our share price.
Let's now turn to the fourth quarter results bar 3 segments. I'll begin with a review of the Canadian segment performance compared to its performance a year ago in the fourth quarter of 2021.
Revenue for Latin-Aidian segment was $88 million as compared to revenue of $92.2 million in the fourth quarter of 2021.
Adjusted EBITDA on Canada with $11.8 million compared to adjusted EBITDA of $23.1 million in the fourth quarter of 2021. Results from the fourth quarter of 2022 reflect the impact of a weakened Canadian dollar relative to the US dollar.
which decreased revenues and adjusted EBITDA by $6.9 million and 1.0 million respectively. The decrease in the adjusted EBITDA was driven by the week in Canadian Dollar as well as certain aforementioned customer and insurance settlements that benefited the fourth quarter of 2021. The increase in the increase in the adjusted EBITDA was driven by $6.9 million and 1.0 million respectively.
and cost inflation affecting food, labor, and utilities in the fourth quarter of 2022.
During the fourth quarter, build rooms in our Canadian lodges totaled 622,000, which were at 6% year-ever year from 588,000 in the fourth quarter of 2021.
Our daily room rate for the Canadian segment US dollars was $93, which is down from 106 years. Due to a weakened Canadian dollar relative to the US dollar and the impact of a lower rate in our 12 year walk-as-to contract renewal.
Turning to Australia. During the fourth quarter we recorded revenues of 73.1 million, up from 62.3 million in the fourth quarter of 2021. Adjusted EBITDA with 13.1 million, down from 13.6 million during the same period of 2021.
Results from the fourth quarter of 2020 reflect the impact of a weakened Australian dollar relative to the US dollar and the impact of a lower rate in R12 which decreased revenues and adjusted a bit of by 8 million and 1.5 million respectively. In addition to the weakened Australian dollar, the decreased in adjusted a bit of was driven by an increase in labor costs.
Australian villages in US dollars was 73 in the fourth quarter down from 77 in the fourth quarter of 2021, which was entirely due to the weakened Australian dollars compared to the US dollar.
On a consolidated basis, capital expenditures for the full year 2022 were 25.4 million. Up from 15.6 million during 2021. This increase was primarily due to increased large and village maintenance, coupled with a more full-fledged and re-verbishment program in our Australia villages, in preparation for increased contracted renovations and certain villages.
Our total debt outstanding on December 31, 2022 was $132 million. A 6 million increase in September 30, 2022 and a $43 million decrease from year 2021.
Our net leverage ratio for the quarter increased to 1.1 times as of December 31st from 0.9 times as of September 30th. As Bradley mentioned, the increase was due to a combination of lower fourth quarter of just city bit.com compared to the fourth quarter of 2021.
As well as debt and current finance, the 31 million preferred share repurchase in the fourth quarter of 2022. As of December 31, 2022, we had total liquidity of approximately 104.1 million, consisting of 96.1 million available under our revolving credit facilities and 8 million of cash on earth.
Bradley will now discuss our outlook for the full year 2023. Bradley? Thank you, Carolyn. We will now discuss our full year 2020-23 guidance on consolidated basis, including the underlying regional assumptions. We are initiating our full year 2023 guidance of revenues between $630 million and $650 million and EBITDA.
of 85 million to 95 million. Our full year 2023 capitol expenditure guidance.
is 25 million to 30 million. Cabal expenditures are expected to be relatively flat with 2022. As we continue to normalize our maintenance, cabal spending for our lodges and villages across the business after several years of prioritizing free cash flow.
where we have seen increased contracted room demand in the coming years.
That being said, our primary financial objective can choose to be maximized in free cash flow. Based on the EVA Dawn Capac's guidance just outlined. Expected interest expense for 2022 of $12 million, or 2023, excuse me.
and minimal expected cash taxes and working capital investment. We expect 2023 cash flow to range between 43 million and 58 million. As we have discussed on previous earnings calls, the significant year-year decline in 2023 adjusted EBITDA.
comes from our Canadian mobile camp business, resulting from the line down of construction activity for the Coastal Gasoline Pipeline project in British Columbia and the TMX Pipeline expansion. Canadian contract camps contributed approximately $36 million in 2022. We are currently expecting to have three mobile camps remaining on the...
localization expenses. I will now provide the regional outlooks and corresponding underlying assumptions by region. In Canada, as we looked into 2023, we know that our customers are continuing to prioritize a return of capital to their shareholders.
and need to be convinced of longer-term stability across commodity prices and the broader economy before materially increasing investments in Canada.
While activity and lodges should remain steady, the 2023 mobile camp activity will be significantly impacted negatively impacted by the completion of the pipeline construction projects throughout the year, including the incurrence of some of the related demobilization costs.
We are currently expecting relatively consistent year-over year turn-out that turn-around activity in Canada in the second and third quarters of 2023. But as we have discussed in prior years, we don't get an accurate view until customers look to secure turn-around rooms.
We are currently expecting relatively consistent year-over-year turnaround activity in Canada in the second and third quarters of 2023. But as we have discussed in prior years, we don't get an accurate view until customers look to secure turnaround rooms in the second quarter.
Canadian mobile camp activity related to coastal gasoline pipeline will significantly decline throughout the year. As our three mobile camps are currently expected to wind down during the middle part of 2023. Additionally, our mobile camp supporting TMX expansion is expected to also continue through the third quarter of 2023. When these pipeline-related mobile camp projects roll off,
by the deferral demobilization costs as well as the incremental revenue on the camps.
Our 223 guidance could also be impacted by further clarity from a customer around the room demand for severe lodges in the back half of the year. As we disclose last quarter, we have agreed not to remove renew and expiring land lease associated with Armaclo and Lake Lodge, which this land lease currently expires in June of 2019 and the following year. We have agreed to ?ummably approach back into Ontario called Summit State säga.
in order to support the customers intent to mine that land where it currently is located. In addition, our hospitality services contract expires in June of 2023. Our 2023 guidance includes customer room demand at other civil lodges in the second half of 2023 as a customer transitions to its new solution.
If there are to find an alternate solution for room supply, this would negatively impact our guidance. We are marketing the McCone Lake Lodge assets for new opportunities in the Kent, the Canada and the US.
Based on our current knowledge and understanding of the marketplace, we believe there is demand for these assets for sale or redeployment. In our 2022 revenues, the McCone Lake Lodge generated 2022 revenues of approximately $60 million Canadian.
We expect to have further clarity on the customer's 2023 room demand and potential sales, or really with redeployment opportunities of these assets later on in 2023.
Turning to Australia, sustained healthy medical electrical cold prices in 2022 and early 2023 have gradually improved customer activity in our bow and base in villages.
We expect a modest increase in our village occupancy in 2023. However, our customers continue to focus on capital discipline or are hesitant to commit capital to large expansionary projects. Our current guidance reflects continued capital discipline more than it reflects the current price for Metcoal. That being said, in early 2023, we have experienced a noticeable uptick in customer activity versus when we were in our earlier years. Pricing increases since we dropped were hiring people was tilling cause inflation. We are congested by the SCPMD and in our earlier years it was the great debt. It is a further shedding of our debt with Lazars and Farnsworth and Sharks Cities and North Tahoe. Our business rates have they also increased greatly since we had laws and changes in our dealing with these bigger constraints than they did before. Previously, workers and traders updated their own open won't, including increased
We continue to be burdened by inflationary pressures, particularly labor costs.
We are expecting the labor costs to slowly subside throughout 2023, real resulting in an uplift in our integrated services margin in the back half of the year.
However, if these labor issues do not subside, results with that capital year could be negatively impact. I will conclude by underscoring the key elements of our strategy as we navigate the current market in climate.
Our mandate, as far as follows, we prioritize the safety and well-being of our guests, employees, and the communities we work in. We will continue to manage our cost structure and accordance with the occupancy outlook across Canada and Australia. We will continue to enhance our best-in-class hospitality offerings.
We will continue to prudently, to allocate capital prudently, to maximize free cash of generation while we continue to return capital to shareholders and reduce debt.
And lastly, we will seek opportunities to further our revenue diversification through organic and M&A opportunities.
And lastly, we will seek opportunities to further our revenue diversification through organic and M&A opportunities. With that, we're happy to take your questions.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tool will indicate your line is in the question queue. You may press star two.
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Our first question is from Stephen Genjaro with Steve Falle, please proceed. Thanks and good morning everybody.
So, Bro, you did a thorough job with the guidance for 2023, just one quick question. As we put it all together, does the wind down effect the normal seasonal pattern of the day? I think the second, third, quarters usually capture 60 or 65 percent of fully repetometry dumbads at.
Should we expect that to shift based on the current expectation for for demo costs? No, I think we'll still have that same kind of 65% of the guidance, given dies in a second and third quarters.
And then as we typically do it right now, guidance is softer in the fourth quarter. And that's just to do customer visibility. So we'll have to see how that plays out. A big factor of that is the demo of the contract camps in the back half of the year.
Okay, thanks. And then two other things for me, the first is when you think about the free cash generation, obviously you've been buying back stock. I think people have reacted well to that, but what types of M&A would you be looking at? And how do you evaluate?
for potential M&A opportunity. Sure.
Well, there are certain properties that we would look at that would be one-off properties but in Canada and Australia that would be added to the portfolio as a whole.
And as I mentioned, we'll look to continue to diversify building off of our hospitality services into other geographies and other end markets.
based on what we see is our cost to capital. Those would have to have strong returns in the upper teens on an unlearned aftertaste basis.
Okay, great. And any, any, what would it, it would like maybe cost to felony services as opposed to hard access? Is that fair?
Well, the adding locations portfolio would be our assets, but it also could be adding service companies in an M&A fashion.
Okay, thanks. And I just want to find one that the second half sale of US assets. The US business close to zero now. I'm trying to get about what exactly you did last.
We've divested everything but chill deer and a Katie and acres and actively looking to divest those.
Thanks. And then maybe just actually one final one, what your debt levels have come down significantly. I think they tweaked up a little bit in the quarter. It may have been that fact. But where at what leverage ratio do you, is there a leverage ratio where you just stop paying down that just return all the cash?
Well, I think we're in that range and I think kind of one to one and a quarter times is a good base and what that does is that gives us the flexibility that if we want to either invest in or on stock or invest in growing the business.
and we have an adverse macro, unforeseen adverse macro curve after we've made that investment. We won't end up in a higher leverage ratio. So I feel like we're in a good spot. I would expect it over the next few years to vary around where it is from a net leverage standpoint, potentially dip lower when there are fewer opportunities. And
but you may decide to move it slightly higher for the right investment opportunity, which can be both returning capital shareholders and growing the business.
Thank you for the call. Thank you for the question. As a reminder to star one on your telephone keypad, if you would like to ask a question, our next question is from Steve for Zannie with the Stodi and company, please proceed. Thank you.
Good morning, Bradley, Carolyn. I appreciate all the detail on the call. I do want to check on some of these numbers just to make sure I got them clear because a lot of moving parts here. Some of the McClellan Lake shutdowns. So that's now June . So that was...
60 million in annual revenue that comes out after the first half. Did I hear that right? Correct. Okay. And then you're timing now. Hold on one second. That's at least for 20. Hold on one second. But for 2023 as of right now, it's partially offset by...
moving that occupancy into other civil locations. So much civil clothes issue is much more of a 2024 issue than it is a 2023. As we tried to caution people though, we have indications but not commitments for back-up occupancy. And then you're, how are you currently based on this guidance? How are you thinking about the timing of the mobile camps now?
And as we know, some of these projects are clearly have consistently been extended. What's your current timing thoughts on this? Because both are going to be completed probably very end of 23, right? But I know that doesn't mean your mobile camps extend the full time.
So we're expecting that the cancel roll off between Q2, Q3 and Q4 potentially one. And so that's when the rent will end and the service revenue end, not all the demob cost will occur in 2023. We've got 13 million Canadian of demob costs in 2023.
with another approximately 7 million or so Canadian in 2024. Did that go off of your original estimates last year or over a year ago with inflation, the demob cost? Am I right on that? No, they've been fairly consistent in that range. Okay.
okay twenty million canadian and total and fifteen you know depending on exchange rate of about fifteen million u.s. Okay a couple of numbers on the quarter i just wanted to check on that the canadian daily rates was there anything to mix their bim I'm guessing there was something beyond affects because it looked like the rooms were pretty booked terribly for this time of year
going forward this offset by some cost and scope adjustments. Okay, perfect, thanks. And then on the, and you did talk about this, but the margin with food and service in Australia was very, very low. You talked about the higher labor, cost higher food costs. How do you offset that? What's your, what's your intention? And I know this is a seasonally slower quarter anyway.
Well, the supply chain team is fighting the food cost piece and the freight costs. And the HR team is working on trying to increase as we've talked about in the past. The principal issue in Australia is how much temporary labor we're using is posed to full time employees. The temporary labor is a necessity. If we can't have full time employees.
HR and scope adjustment.
Thank you, Steve. Appreciate it. Our next question is from John Daniela Energy Partners. Hey Bradley, thanks for taking the call. Just one follow up on the M&O stuff. Now when you talk to a lot of people and say traditional LFS space they will speak to the volume.
We have a we've had a wish list that varies between six and ten items and you as you can imagine and in an M&A context some of those it's a wish list but the target is not interested at the time that's not the right time for them. At your point sometimes it's valuation. I would say that...
We've had a wish list that varies between six and ten items, and as you can imagine, in an M&A context, some of those, it's a wish list, but the target is not interested at the time. It's not the right time for them. To your point, sometimes it's valuation. I would say that sometimes it's what you find in due diligence.
So right now I would say we've been fortunate in the sense that while we've been focused on paying down debt, the things are a wish list haven't been acquired or gone in another direction that we then have to take them off the list. So while we've been focused internally, at least the wish list hasn't gone someplace else. But I would say we're in the early innings of being able to pivot there, certainly cognizant of capital allocation decisions. So would you say that the majority of opportunities that you all would go look at are?
If you will self-sourced or versus a bunch of bankers pitching it to the industry. Forgive me for a lack of knowledge here on the accommodations I've just curious to how the opportunities come to you. Generally speaking, we are, these are internally sourced. We know which pieces, which assets, which service companies were interested in. Of course, occasionally we'll see an idea that's pitched to us. But for the most part, in the fairway of our existing business, these are all assets, properties, companies that we know well.
Okay. Thank you for the little tutorial on education. I appreciate the help. Thanks for the call. Thanks for the question. We have reached the end of our question and answer session. I would like to turn that conference back over to Bradley for closing comments. Thank you all for your interest in CIVIO. Thank you for joining the call today. We look forward to speaking with you on our first quarter of 2023.