Q4 2023 Civeo Corp Earnings Call
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Operator: Please note, this conference is being recorded. Next time, I'll turn the conference over to Regan Nielsen, Vice President of Corporate Development and Investor Relations. Regan, you may now begin.
Please note this conference is being recorded.
At this time I'll turn the conference over to Reagan Nielsen, Vice President corporate development and Investor Relations.
You may now begin.
Regan Nielsen: Thank you, and welcome to Civeo's fourth quarter and full year 2023 earnings conference call. Today our call will be led by Bradley Dodson, Civeo's President and Chief Executive Officer, and Carolyn Stones, Civeo'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 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. I'll now turn the call over to Bradley. Thank you, Regan.
Thank you and welcome to <unk> fourth quarter and full year 2023 earnings conference call.
Today, our call will be led by Bradley Dodson, Senior Vice President and Chief Executive Officer.
Carolyn stone.
He was 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.
And he said his remarks should be read in the context of the many factors that affect our business.
Risks and uncertainties disclosed in our forms 10-K, 10-Q, and other SEC filings I will now turn the call over to Brian.
Thank you Reagan.
Bradley J. Dodson: And thank you all for joining us today on our fourth quarter and full year earnings call. We had a solid end to the year, having reached and exceeded our target leverage ratio. We are entering into 2024 with financial strength and flexibility to execute on our capital allocation strategy, including looking to identify and execute on growth opportunities. This morning, I'll review our fourth quarter 2023 performance, then Carolyn will provide a financial and segment level review, and I'll conclude with our initial full year 2024 guidance and the underlying regional assumption. Lastly, we'll open up the call for questions. I'll begin with a few important highlights.
And thank you all for joining us today on our fourth quarter and full year earnings call.
We had a solid ended the year, having reached and exceeded our target leverage ratio.
We are entering into 2024 with financial strength and flexibility execute on our capital allocation strategy, including looking to identify and execute on growth opportunities.
This morning, I'll review, our fourth quarter, 2023 performance and Carolyn will provide a financial and segment level review and.
And I'll conclude with our initial full year 2020 for guidance and the underlying read regional assumptions Lastly, we'll open up the call for questions.
I'll begin with a few important highlights.
Bradley J. Dodson: Our fourth quarter 2023 revenues, adjusted EBITDA, and free cash flow exceeded our expectations. Australian adjusted EBITDA increased 64% compared to the fourth quarter of 2022 due to particular strength in our build rooms at our own villages, where we posted our third consecutive quarter of record performance. We also saw a margin improvement in our Australian integrated services business as a result of our inflation mitigation efforts, and both our own villages and our integrated services benefited from recent contracts, moving to Canada subsequent to the end of the quarter. We closed the previously announced sale of McClellan Lake Lodge, and we are currently performing the associated transportation services contract for those assets.
Our fourth quarter 2023 revenues, adjusted EBITDA and free cash flow exceeded our expectations.
Australia, and adjusted EBITDA increased 64% compared to the fourth quarter of 2022 did.
Q2 particular strengths in our bill grams at our own villages, where we posted our third consecutive quarter of record performance.
We also saw margin improvement in our Australia and integrated services business as a result of our inflation mitigation efforts.
And both our own villages N I N grades versus and exited from recent contract wins.
Moving to Canada subsequent to the end of the quarter, we completed the previously announced sale of the Mcclelland Lake Lodge.
We're currently performing the associated transportation services contract for those assets.
Bradley J. Dodson: During 2023, we returned 23% of our free cash flow to shareholders through both our recently-initiated dividend and continued opportunistic sharing program. I'll now make a few comments on the business today. The Australian segment performed exceptionally well during the quarter as we experienced sequential and year-over-year growth in both our own village business and our integrated services.
During 2023, we returned 23% of our free cash flow to shareholders through both our REIT.
We initiated dividend and continued opportunistic share repurchase.
I'll now make a few comments on the business segments.
Australia segment performed exceptionally well during the quarter as we experienced sequential and year over year growth in both our own village business and our integrated services business.
Bradley J. Dodson: During the quarter, we experienced a sequential increase in Australian-owned village occupancy, setting, again, a third consecutive quarterly record for that five-year period, and the fourth quarter Australian integrated services business experienced significantly improved margins, as our inflation mitigation efforts started to demonstrate positive results. We should continue to see this benefit from our team's efforts as we move into 2020. Our team continues to execute on our growth plans for our integrated services business, a goal to reach $500 million in top line revenues from integrated services in Australia by 2027. With improved margins, we believe the integrated service business is particularly attractive given contract terms and the outlook for additional opportunities in the future.
During the quarter, we experienced a sequential increase in Australian village occupancy.
A third consecutive quarterly record for that that's that side of our business.
In the fourth quarter, Australia, and integrated services business experienced significantly improved margins.
As our inflation rate mitigation efforts starting to demonstrate positive results.
To date, we should continue to see this benefit from our team's efforts.
In 2020.
Okay.
Our team continues to execute on our growth plans for our integrated services business.
Goal to reach 500 million Australian topline revenues out of integrated service in Australia by 2027.
With improved margins, we believe the integrated service business is particularly attractive given contract terms and the outlook for additional opportunities in this business.
Yeah.
Bradley J. Dodson: As expected, our Canadian segment revenues in adjusted EBITDA decreased year-over-year due to the wind-down of LNG-related mobile campaigns, including $5.6 million U.S. in mobile camp demobilization costs in the fourth quarter. Regarding the sale of our McLellan Lake Lodge in Canada, we completed the sale in January of 2024 and have received all proceeds. The majority of the net proceeds were recognized in the fourth quarter, with the remainder here in January 2020. As a reminder, the entirety of the sale proceeds and associated costs, as well as other related reimbursements, are excluded from our adjusted EDADOC help. As a result, the failed transaction does not impact our full year 2024 adjusted EBIT.ca. The transportation of these assets is progressing well, and we continue to pursue other related business opportunities. And with that, I'll turn the call over to Carolyn. Thanks, Bradley. And thank you all for joining us this morning.
As expected our Canadian segment revenues and adjusted EBITDA decreased year over year due to the wind down of allergy related mobile camp activity, including $5 6 million U S mobile camp demobilization costs in the fourth quarter.
Regarding the sale of our Mcclelland Lake Lodge in Canada, We completed the sale in January of 2024 and have received all proceeds.
The majority of the net proceeds were recognized in the fourth quarter with the remainder here in January 2024.
As a reminder, the entirety of the sale proceeds and associated costs as well as other related reimbursements.
<unk> are excluded from our adjusted EBITDA calculation.
As a result of sales transaction does not impact full year 2024 adjusted EBITDA.
The transportation of these assets is progressing well and we continue to pursue other related business opportunities.
And with that I'll turn the call over to Kevin. Thanks.
Thanks, Bradley and thank you all for joining us this morning.
Carolyn J. Stone: Today, as Bradley noted, we reported financial results that exceeded our guidance. Total revenues in the fourth quarter were $170.8 million, with gas net income of $23 million, or $1.55 per diluted share. During the fourth quarter, we generated an adjusted EBIT doc of $17.4 million. Again, this is exclusive of the financial impact of the dismantlement and sale of the McClellan Lake Lodge assets, operating cash flow of $40 million, and free cash flow of $39.2 million. Fourth quarter adjusted EBITDA increased year over year due to increased billed rooms at our Australian-owned villages and improved margins in the Australian Integrated Services, partially offset by the expected wind-down of LNG-related Canadian mobile camp activity, including $5.6 million in mobile camp demobilization costs. For the full year 2023, we reported revenues of $700.8 million and net income of $30.2 million, or $2.01 per delayed share.
Today, It's broadly noted we reported financial results that exceeded our guidance.
Total revenues in the fourth quarter were $178 million with GAAP net income of 23 million or $1.55 principally this year.
During the fourth quarter, we generated adjusted EBITDA of $17 $4 million again. This is exclusive of the financials.
Pat at the Dismantlement and say Oh My God.
Gotcha.
Operating cash flow of 40 million and free cash flow of $79.
Fourth quarter, adjusted EBITDA increased year over year due to increased build brands at our Australian villages and increased margins in the Australian integrated service.
Partially offset by the expected wind down and LNG related Canadian mobile camp activity.
<unk> $5.6 million and applecare demobilization costs.
For the full year 2023, we reported revenues of $728 million and net income I'm sorry, Sheila.
Our $2 one per diluted share.
Carolyn J. Stone: In 2023, we generated adjusted EBITDA of $102 million, a decrease from our 2022 adjusted EBITDA of $112.8 million. Results for the full year of 2023 reflect the impact of a stronger U.S. dollar, which decreased both revenues and adjusted EBITDA by $28.8 million and $5.7 million, respectively. The decrease in adjusted EBITDA was largely driven by the wind-down of LNG-related activity in Canada and the impact of weakened Canadian and Australian dollars, but partially offset by significant improvement across our Australian economy. Now, we turn to the fourth quarter results for our two-second break.
In 2023, we generated adjusted EBITDA of $102 million, a decrease from our 2022 and adjusted EBITDA of $112 8 million.
Results for the full year of 2023 reflects the impact of a stronger U S dollar.
Each decreased both revenues and adjusted EBITDA.
$8 8 million and $5 7 million.
The decrease in adjusted EBITDA was largely driven by the wind down of LNG related activity in Canada, and the impact of weakened Canadian and Australian dollars.
We offset by significant improvements across all studies.
Yeah.
Let's now turn to the fourth quarter results for Oxy.
Carolyn J. Stone: I'll begin with a review of the Canadian segment performance compared to its performance a year ago in the fourth quarter of 2022. Revenues from our Canadian segment were $72.7 million, as compared to revenues of $88 million in the fourth quarter of 2020. Adjusted EBITDA in Canada was $3.4 million, a decrease from $11.8 million in the fourth quarter of last year. Revenues and adjusted EBITDA decreased 17% and 72%, respectively, primarily driven by the wind-down of LNG-related mobile camp activities, including $5.6 million of mobile camp demobilization costs.
I'll begin with a review of the Canadian segment performance compared to its performance a year ago in the fourth quarter of 2022.
Revenues from our Canadian segment were $72 $7 million as compared to revenues of $88 million in the fourth quarter of 2022.
Adjusted EBITDA in Canada was $3 $4 million, a decrease from $11 8 million in the fourth quarter of last year.
Revenues and adjusted EBITDA decreased 17% from 72%, respectively, primarily driven by the wind down of LNG related mobile camp activity, including $5 6 million of mobile camp demobilization costs.
Carolyn J. Stone: During the fourth quarter, billed rents in our Canadian lodges totaled $617,000, which was modestly down from 622,000 in the fourth quarter of 2022. Our daily room rate for the Canadian segment in U.S. dollars was $95, which increased slightly from $93 in the fourth quarter of last year. Turning to Australia, during the fourth quarter, we recorded revenues of $89.3 million, up from $73.1 million in the fourth quarter of 2022. Adjusted EBITDA was $21.5 million, up 64% from $13.1 million last year. A significant increase to adjusted EBITDA was due to increased billed rooms at our owned villages, increased integrated services activity, and improved margins due to our inflation mitigation. Australian built rooms in the quarter were a source of strength with 638,000 rooms, up 23% from 519,000 in the fourth quarter of 2022. This is due to increased demand at our own villages, as demonstrated by our recent contract award. The average daily rate for our Australian villages in U.S. dollars was $74 in the fourth quarter, up modestly from $73 in the fourth quarter of 2020.
During the fourth quarter billed rooms in our Canadian lodges totaled 617000, which was modestly down from 622000 in the fourth quarter of 2022.
Our daily room rate for the Canadian segment in U S dollars was $95, which increased slightly from $93 in the fourth quarter of last year.
Turning to Australia during the fourth quarter, we recorded revenues of $89 3 million up from $73 $1 million in the fourth quarter of 2020.
Adjusted EBITDA was $29 $5 million up 64% and $13 1 million last year.
I think an increase to adjusted EBITDA was due to increased build brands and our own sandwiches.
Increased integrated services activity.
And appraise margins do you see more inflation mitigation efforts.
Yeah.
Australian billed rooms in the quarter were a source of strength with 638000 up 23% from 519000 in the fourth quarter of 2020.
This is due to increased demand as demonstrated by our recent contract awards.
The average daily rate for Australian villages in U S dollars was $74 in the fourth quarter up modestly from $73 in the fourth quarter I'm trying to be true.
Carolyn J. Stone: On a consolidated basis, capital expenditures for the full year 2023 were $31.6 million, compared to $25.4 million during the full year 2022. Capital expenditures in both periods were related to maintenance spending on our lodges and villages. Additionally, the full year 2023 also included $10 million in expenditures for the Australian Customer Funded Infrastructure Upgrades that we have discussed at prior quarter conferences. Our total debt outstanding on December 31, 2023 was $65.6 million. A $37.7 million decrease since September 30, 2020. We were pleased to reach and exceed our net leverage ratio target in 2023. We ended the year at 0.6 times, down from 0.9 times as of the September quarter end.
On a consolidated basis capital expenditures for the full year, 2023, or 31 $6 million compared to $25 $4 million during the full year 2022.
Capital expenditures in both periods were related to maintenance spending on our lodges and villages.
Additionally, the full year 2023 also included $10 million in expenditures for the Australian customer funded infrastructure upgrades that we have discussed on prior quarter conference call.
Our total debt outstanding at December 31, 2023 was $65 6 million.
$37 7 million decrease since September 30.
Great.
We were pleased to reach and exceed our net leverage ratio target in 2020. Three we ended the year at 0.6 times down from 0.9 times as of September quarter end.
Carolyn J. Stone: As of December 31, 2023, we had total liquidity of approximately $136.4 million, consisting of $133.1 million available under our revolving credit facilities and $3.3 million of cash on hand, giving us the strength and flexibility to opportunistically pursue growth factors in 2024 and beyond while maintaining prudent leverage ratios. And turning to capital allocation, as you are aware, we updated our capital allocation priorities. Our new Capital Allocation Framework is designed to allow our strong cash flow generation to support our existing operations, return capital to shareholders through a consistent dividend and opportunistic share repurchase, and use excess cash to fund growth opportunities, all while maintaining our target leverage ratio in the range of 1.0 times to 1.25 times through the cycle. However, we are open to increasing our leverage ratio up to 2.0 times to pursue accretive growth opportunities where appropriate.
And as of December 31, 2023, we had total liquidity of approximately $136 4 million consisting of $133 1 million available under our revolving credit facilities and $3 3 million of cash on hand.
Giving us the strength and flexibility to opportunistically pursue growth factors for 2024 and beyond while maintaining prudent leverage ratios.
Okay.
And turning to capital allocation as you are aware, we updated our capital allocation priorities in September.
Our new capital allocation framework.
Until our strong cash flow generation to support our existing operations.
Return capital to shareholders through a consistent dividend and opportunistic share repurchases.
And use excess cash to find great growth opportunity.
All while maintaining our target leverage ratio in the range of 1.0 times to 125 times through the cycle.
However, we are open to increasing our leverage ratio up to chipotle neuroscience to pursue accretive growth opportunities where appropriate and we may also occasionally dropped below one point at a time as we Havent December 31st as we carefully assess great opportunity.
Carolyn J. Stone: And we may also occasionally drop below 1.0 times, as we did on December 31st, as we carefully assess growth opportunities. During the fourth quarter of 2023, we repurchased approximately 121,000 shares through our Share Repurchase Program for a total of $2.4 million. And earlier this month, we announced that our Board of Directors had declared our third quarterly dividend payment. Shareholders of record as of February 26th will receive a $0.25 per share cash dividend payable on March 8th. With that, I'll turn it over to Bradley to discuss our initial guidance for the full year.
During the fourth quarter of 2023, we repurchased approximately 121000 shares through our share repurchase program for a total of $2 4 million.
And earlier this month, we announced that our board of directors has declared our third quarterly dividend shareholders.
Shareholders of record as of February 26, we'll receive a 25 cent per share cash dividend payable on March eight T.
With that I'll turn it over to probably to discuss our initial guidance for the full year 2024.
Bradley J. Dodson: Thank you, Carolyn. Now I'd like to turn the discussion to our initial full year 2024 guidance on a consolidated basis, and I'll include an outlook for each of the reasons. We are initiating full year 2024 guidance of revenues of $625 million to $700 million and adjusted even down of $80 million to $90 million. Our initial full year 2024 capital expenditure guidance is $30 million to $35 million, based on the Suggested E-Design CapEx Guide. Estimated net cash proceeds related to McConn Lake's dismantlement and sale are approximately $6 million.
Thank you Carolyn.
Now like to turn the discussion to our initial full year 2024 guidance on a consolidated basis.
<unk> outlook for each of the regions.
We are initiating full year 2024 guidance of revenues.
625 million to $700 million and adjusted EBITDA of 80 million to $90 million.
Our initial full year 2024 capital expenditure guidance is 30 million $35 million.
Based on this adjusted EBITDA and Capex guidance.
The net cash proceeds related to mcallen late dismantlement and sale of approximately 6 million expected cash interest expense also approximately $6 million.
Bradley J. Dodson: Also, expected cash interest expense of approximately $6 million, expected working capital inflow of $10 million, and expected Australian cash taxes of $10 million. We are expecting our 2024 free cash flow to be in the range of $45 to $60 million. I will now provide the regional outlooks and the corresponding underlying assumptions. As we mentioned on our last conference call, the primary reason for the year-over-year EBITDA decline in 2024 is the wind-down of Canadian mobile camp activity and the loss of the Mufalon Lake earnings, which account for approximately $27 million of the year-over-year change between 2023 Adjusted EBITDA and 2024 EBITDA Guidance. These are popularly upset by year-over-year increases in revenues in March and our Australian Integrated Services and modestly improved performance in the Australian villages and Canadian lodges.
Expected working capital inflow of $10 million and expected, Australia and cash taxes of $10 million, we are expecting our 2020 for free cash flow to be in the range of $45 million to $60 million.
I will now provide the regional outlooks in a corresponding underlying assumptions.
As we mentioned on our last conference call. The primary reason for the year over year EBITDA decline in 'twenty 'twenty four is the wind down.
And mobile camp activity.
The loss at the Salt Lake earnings, which account for approximately 27 million euro or euro change between 2023 adjusted EBITDA in 2020 for EBITDA guidance.
These were partially offset by year over year increases in revenues and margins in Australia and integrated services business.
And modestly improved performance in the Australian villages and Canadian lodges.
Bradley J. Dodson: We are acutely focused on replacing these earnings and growing the company, but 2024 will be a transition year for our Canadian business, and Canada. As you look into 2024, the macroeconomic environment for oil sands is improving with increased customer capital spending and the Trans Mountain Pipeline expansion coming online this year. With the exception of the loss of occupancy at Milquant Lake Lodge, we should experience steady to modestly increasing build rooms across the rest of our lodge portfolio. Regarding our mobile camps, the majority of our mobile camp rental activity is, and we are continuing the demobilization process in 2020. We expect approximately $6 million in demobilization costs in the first half of this year, which is contemplated in our full year 2024 guidance. Yiang
We are acutely focused on replacing these earnings and growing the company.
But 'twenty 'twenty four will be a transition year for our Canadian business.
In Canada as we look into 2020 for the macroeconomic environment for oil sands is improving with increased customer capital spending.
And the Trans mountain pipeline expansion coming online this year.
With the exception of the loss of occupancy at Mcclelland Lake Lodge, we should experience steady to modestly increasing build rooms across the rest of our large portfolio.
Regarding our mobile camps majority of our mobile camp rental activity is complete.
We're continuing to deem a law continuing the demobilization process in 2024.
We expect approximately $6 million of demobilization costs in the first half of this year.
Which is contemplated in our full year 2020 for guidance.
Again.
Bradley J. Dodson: This will be a transition year for our Canadian business. Moving forward, we have identified promising opportunities and expect to leverage our brand and scale to expand in additional Canadian geographies and end markets. Turning to Australia, customer activity in our own villages improved throughout 2020, and we expect that to continue into 2024 at similar levels to the end of the year. We are currently full at three of our Bowen Basin villages with very healthy occupancy at the rest of our own villages in the portfolio in Australia.
This will be a transition year for our Canadian business moving forward, we have identified promising opportunities and expect to leverage our brand and scale to expand an additional Canadian geographies and end markets.
Turning to Australia customer activity in our own villages improved throughout 2023, and we expect that to continue into 2024 at similar levels to the end of the year.
We are currently.
We are currently full at three of our Bowen Basin villages was had very healthy occupancy at the rest of our own villages in the portfolio in Australia.
Bradley J. Dodson: As it relates to our integrated services business, the story of 2023 was our inflation mitigation plan that we executed throughout the year. Our significantly improved margins in the fourth quarter demonstrate the progress that has been achieved. And we should continue to see the benefit of our efforts through 2024, resulting in increased EBITDA year over year. We are excited about the growth potential of our Western Australian Integrated Services business. And now that we have executed on our Inflation Mitigation Plan, we can shift our focus back to winning work and growing the business. Our team has set a goal to grow our Australian integrated services business to $500 million in revenues in Australia. 2027
As it relates to our integrated services business. The story of 2023 was our <unk>.
She mitigation plan that we executed throughout the year.
Our significantly improved margins in the fourth quarter demonstrates the progress that has been achieved and we should continue to see the benefit of our efforts through 2024, resulting in increased EBITDA year over year.
We are excited about the growth potential of our Western Australia integrated services business.
And now that we have executed on our inflation mitigation plan, we can shift our focus back to winning work in growing the business.
Our team has set a goal to grow our Australia and integrated services business to $500 million of revenues, Australia by 2027.
Bradley J. Dodson: I will conclude by underscoring the key elements of our strategy. We will prioritize the safety and well-being of our guests, employees, and community. We will invest in operational improvements and innovation to continue to enhance our best-in-class hospitality offering. We will allocate capital prudently to maximize free cash flow generation while we continue to return capital to shareholders and evaluate growth. With that, we're happy to take, Thank you. We'll now be conducting a question and answer session. If you would like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line from the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
I will conclude by underscoring the key elements of our strategy.
We will prioritize the safety and wellbeing of our guests employees and communities.
We will invest in operational improvements and innovation to continue to enhance our best in class hospitality offerings.
We will allocate capital prudently to maximize free cash flow generation, while we continue to return capital to shareholders and evaluate growth opportunities.
With that we're happy to take your questions.
Thank you well now be conducting a question and answer session.
If you'd like to ask a question at this time. Please press star one from your telephone keypad.
And telling them indicate your lines in the question queue do.
You May press Star two if you like to withdraw your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions and once again that starwood. Thank you.
Operator: One moment, please, while we poll for questions, and once again, that's star number one. Thank you. And our first question comes from the line of Stephen Gengaro with Stiefel. Please proceed with your question. Thanks. Good morning, everybody. Good morning.
Okay.
Thank you and our first question comes from the line of Stephen <unk> with Stifel. Please proceed with your question.
Hi, Thanks, good morning, everybody.
Good morning.
I think the the first for me is you.
Stephen David Gengaro: I think the first for me is, When we think about the strength in Australia that you saw in the fourth quarter was very strong and you think about the outlook for Australia, I mean one of the things that we keep hearing about is kind of concerns about economic growth in China and I'm just curious sort of what your outlook and guidance sort of suggests for Australia and how we should think about sort of the potential gives and takes with the economic conditions right now, all the indications from our customer base down there on the Own Villages side, is one of, for the, For the new customers about burrowing production, certainly some of the majors are looking at cost containment, but our outlook for occupancy in young villages is nicely up year over year, 24 from 23. We're seeing a big uplift and, our integrated services business, some of its top line where we're expecting to hit, over $250 million in revenues in 2024. That's up from about, 240, and 2023, but the big story is the March.
You know when we think about the strength in Australia that you saw.
Fourth quarter was very strong and you think about the outlook for Australia, I mean, one of the things that we keep hearing about is kind of concerns about economic growth in China and I'm, just curious sort of what your what your outlook and guidance sort of.
I suggest for Australia, and how we should think about sort of the potential gives and takes are with the economic conditions right now.
Well all the indications from our customer base down there on the diligence side is it's one of our.
For the well for the.
For the new customers and about burrowing production certainly some of the majors are looking at cost containment, but our outlook for occupancy and young villages is nicely up year over year 24, it from 23.
We're seeing a big uplift in our integrated services business.
Some of its top line, where we're expecting to hit.
Over $250 million in revenues in 2024, that's up from about.
Uh huh.
240.
2023, but the big story is the margin improvement.
Bradley J. Dodson: And the vast majority of that integrated services business is iron ore related. So we're quite constructive on the Australian business, certainly always cognizant of macroeconomic forces. As of right now, we feel very good about it. Thanks.
They're in the vast majority of that integrated service business as iron ore related.
So we're quite constructive on the Australia business, certainly always cognizant of macroeconomic forces as of right now we feel very good about.
Great. Thanks, and then when you think about our use of cash and you've.
Bradley J. Dodson: And when you think about the use of cash, and you've obviously done a tremendous job over the last several years, right, deleveraging and returning capital, what types of acquisitions, if you were thinking about acquisitions, should we think you would be pursuing? Would it be geographic expansion, or would it be things like the sort of on the logistics and catering side that would be more likely in the current geography? Well, we will focus on current geographies, which would be Australia and North America. I'll start with Australia.
Obviously, you've done a tremendous job over the last several years right deleveraging and returning capital what types of acquisitions. If you were thinking about acquisitions should we think you would be pursuing whether it be geographic expansion or would it be things like the <unk>.
Sort of on the on the logistics and catering side that would be more likely in current geographies.
Well, we will focus on current geographies, which would be Australia and North America.
Start with Australia, there are a handful of one off properties that would be nice additions to the portfolio primarily in the Bowen basin. So we're pursuing that.
Bradley J. Dodson: There are a handful of one-off properties that would be nice additions to the portfolio, primarily in the Bowen Basin, so we're pursuing them. The integrated services, there are opportunities to expand that business through acquisition, and we're looking to do that. And that would be, again, in the Australian geography, in Canada. I think one of the big takeaways from the saga that was McClellan Lake is that existing infrastructure has value because the replacement costs are significantly higher today than they have been historically. So reaching a complete new-build lodge in North America economically is very difficult, in my opinion. So how can we leverage existing underutilized assets, primarily in Alberta, to expand into other geographies?
The integrated services, there are opportunities to expand that business through acquisition.
And we're looking to do so.
And that would be again in the Australia and geography.
In Canada, I think one of the big takeaways from the saga that was Mcclelland Lake is that existing infrastructure has value.
So replacement costs are significantly higher today than they have been historically.
So reaching.
<unk> Newbuild large north America economically is very difficult in my opinion, so how can we leverage existing underutilized assets, primarily in Alberta expand into other geographies specifically.
Specifically.
Stephen Michael Ferazani: Eastern Canada, looking perhaps as McClellan Lake assets moving into the Western US as an opportunity to expand into the U.S. in a fashion that more..., reflects or resembles, mirrors what our Canadian operations are. Certainly also looking in Canada to find an entry point into the Montanans. We see long-term activity there, but that has been more difficult to determine the entry point. Great. Good Now, thank you for the call. Our next question is from the line of Steve Ferazani with Sidonian Company to see if there are any questions. Morning, Bradley and Carolyn.
Eastern Canada.
Looking perhaps as the.
The Mcclelland Lake assets moving into Western U S.
As an opportunity to expand into the U S.
In a fashion that more reflects a resembles mirrors, what our Canadian operations are today.
So certainly also looking at Canada to find an entry point into the Montney was we see long term activity there.
But that has been more difficult to determine the entry.
Yes.
Great.
No. Thank you for the color.
Yes.
Our next question is from the line of Steve <unk> with Sidoti and company. Please proceed with your questions.
Good morning, proudly and Carolyn obviously finished up a very busy year.
Bradley J. Dodson: Obviously, you've finished up a very busy year. When I think about 2024 and the margin improvement you've already seen in Australia, and I'm assuming you may be proud of the color, I'm assuming it's a mix of the new contracts and some easing of inflationary pressures. Also wanted to ask about if labor constraints are easing and how much more room you've got into 2024 on all those points. Some of it is gaining scale, although I don't think we've seen the improvement on getting scale in the integrated services business quite yet. That will be part of what we pivot to focus on, to have more, and improve our processes to really bring more of it to the bottom line. I think as you look at gross margins in integrated services, the fourth quarter was a really nice quarter. We can maintain that kind of nine to 10% gross margin in integrated services; that's pretty solid. Now we're going to work on being more efficient on the operational side. Inflation is still an issue.
When I think about 'twenty 'twenty, four and the margin improvement you've already seen in Australia, and I'm, assuming maybe you could provide a little color I'm, assuming it's a mix of the new contracts. Some easing inflationary pressures also wanted to ask about if labor constraints are easing and how much more room, you've got into 2024 on all those on all of those.
Points.
Some of it is gaining scale, although I don't think we've seen the improvement on getting scale on the integrated services business quite yet that will be part of what we pivoted to focus on is to have more improve our processes.
Do you.
Really free more of it to the bottom line I think as you look at kind of gross margins and a great service as the fourth quarter was a really nice quarter.
We can maintain that.
At 9% to 10% gross margin integrated services, that's pretty solid.
Now we've got to work on being more efficient on the operational side.
Inflation is still an issue.
Stephen Michael Ferazani: So I don't want to discount it. What I think the team has done by focusing, as we mentioned in our Fletcher Mitigation Plan, on human capital and how we can be more efficient there. I think we've seen improvement, location by location, in terms of reducing turnover and reducing the reliance on temporary employees, and Sarah White, early stages in that, but the progress has been good. Okay, and then turning to the U.S. market, you noted it looks like another year of rising CapEx, and we have Trans Mountain coming. How are you thinking about that translating into turnaround activity, and is it too early to get a sense? Are you hearing much right now from customers about occupancy this summer? Spring, I guess, starting in spring.
So I don't want to discount it what I well I think the team has done by focusing and as we mentioned in our.
Inflation mitigation plans was work on human capital and how can we be more efficient there.
I think we've seen improvements.
Location by location in terms of reducing turnover and reducing the reliance on temporary employees.
So.
We're early stages on that.
The progress has been good.
Okay, and then turning to the U S market I, you know what it looks like another year of rising Capex, we have a trans mountain coming how is that going to how are you thinking about that translating into turnaround activity in hip is it too early to get a sense are you hearing much right now from customers.
Oh, Yeah occupancy this this summer.
Spring I guess, starting with spring yeah.
Bradley J. Dodson: Yeah. Still a little early to really call the Canadian turnaround activity for 2024. Guidance assumes a slightly softer turnaround. Period. and Q2-Q3 this year. So we'll have to see how it plays out. But right now, guidance is a little bit softer on turnaround activity. We'll see.
Still a little early.
So it really call the Canadian turnaround activity for 2024 guidance assumes a slightly softer in turnaround.
Period in Q2 Q3 of this year.
And so we'll have to see how it plays out.
Right now guidance is a little bit softer on turnaround activities, but we'll see we've seen some improved margin some locations in Canada, because the box over.
Stephen Michael Ferazani: We've seen some improved margins in some locations in Canada because of some of our inflation mitigation efforts, and we expect that to continue into 2020. You covered a lot of territory in the call. I didn't hear, did you provide guidance on free cash flow? $45 to $60 million. Any changes to your target range or other uses of capital beyond acquisitions or on net leverage? Right now?
Place your mitigation efforts, we expect that to continue into 2024.
Great you covered a lot of territory on the call I didn't hear did you provide guidance on free cash flow.
$45 million to $60 million.
Any changes to your your target range or other uses of capital beyond acquisitions.
On the net leverage right now.
Bradley J. Dodson: Right. I mean, we kind of flew through our target with the strong free cash flow and the quarter. But it's really kind of a timing issue.
Right, I mean, where where we kind of blew through our target with the strong free cash flow in the fourth quarter.
But it's really kind of a timing issue.
Bradley J. Dodson: Certainly, we expect to be returning the same kind of capital to our shareholders in 2024, but we do need to pivot and allocate more to growth than we have. Well, quite frankly, I've been able to, but now building that pipeline or that funnel of growth opportunities that I just highlighted in the past question. And so, you know, I'm cautiously optimistic. We'll be able to show some growth and put capital to work in a growth fashion in twenty, twenty four. Thanks, Fred.
Certainly expect to be returning the same cause capital to our shareholders in 2024, but we do need to have it and allocate more to growth than we have.
Well quite frankly been able to but now bill.
Building that pipeline of that funnel of growth opportunities that I just highlighted on the past question and so I'm cautiously optimistic we're really shows some growth.
And putting capital to work in a gross fashion in 2024.
Great. Thanks, Brian.
David Joseph Storms: Thank you. Thank you. Our next question is from the line of Dave Storms with Stonegate. Good morning.
Thank you.
Thank you. Our next question is from the line of Dave storms with Stonegate. Please proceed with your questions.
Good morning.
Good morning.
Bradley J. Dodson: You could start with kind of a cadence of the guidance, should we expect it to follow, patterns, or is there anything else you'd like to add? Right now, for 2024, we expect it to be fairly typical, where historically 65% of the annual EBITDA comes in the combined Q2-Q3, and that's largely driven by a couple factors that we've highlighted previously. One, certainly turnaround activity in Canada. Q4 and Q1 are usually softer because of the holidays, either at the beginning of the year or at the end of the year.
Hoping we could start with a kind of a cadence of the guidance should we expect it to follow pretty typical seasonal patterns or is there anything else that.
Do you think might throw a wrench in that.
Yeah.
Right now for 'twenty 'twenty, four we expect it to be fairly typical.
Where historically, 65% of the annual EBITDA comes in Q1, Q2, Q3, and that's largely driven by.
A couple of factors that we've highlighted previously one certainly turnaround activity in Canada.
Q4, and Q1 are usually softer.
Because of the holidays, either getting a year or any of the year. So I think it'll be a fairly typical in terms of cadence.
Carolyn J. Stone: So, I think it will be fairly typical in terms of cadence. We expect to see the same cadence on cash, or not the same cadence on cash flow, the same historical cadence on cash flow, where the first quarter is our lowest cash flow, various timing and build-up of remedies and such, and then that'll come, and we'll get more cash in as the year progresses. And then you mentioned the goal of getting integrated services. Australia, what does the logistics look like for that, and what is short-term success? fairly well.
What do you expect to see the same thing on cash not thinking on cash flow. The same historical cadence on cash by where first quarter is our.
The lowest cash flow, because there's various timing and build up on revenues and such.
Okay.
We'll get more caching.
Progressive.
Understood. Thank you and then you mentioned the golf Guy and integrated services up to $500 million in Australia. What are the logistics look like for that and what is short term success look like a concern its a fairly long term goal.
Bradley J. Dodson: Well, our team has identified tangible contract wins over the next three years that should be able to get us to that $500 million mark. As many of you may recall, we entered into integrated services in Western Australia in 2019. Action Industrial Catering, which at the time we bought it, was doing about 40 million Australian dollars in revenue, and last year it did 239. So we've made significant progress, and we see a very tangible pathway to get to 500. It's not without a lot of work by the team and continuing to demonstrate the value proposition to the customer base to achieve new contracts. Thank you for taking my question.
Well our team has identified.
Tangible.
Contract wins over the next three years that they should be able to get us to that $500 million Mark.
As many of you may recall, we entered into an integrated services in Western Australia in 2019.
Action industrial catering acquisition, which at the time, we bought it.
It was doing about $40 million Australia in its.
Revenues in last year's $2 39.
We've made significant progress and we see a very tangible pathway to get to 500, it's not without.
A lot of work by the team and continuing to demonstrate the value proposition to the customer base too to achieve new contract wins.
Understood. Thank you for taking my questions.
Operator: Absolutely, thank you. Thank you. At this time, we have no additional questions. I'd like to hand the floor to Bradley Dodson for any closing remarks. Thank you, Rob, and thank you, everyone, for joining the call today. We appreciate your interest in Civeo and look forward to speaking with you on the first quarter earnings call, expected in April. Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Absolutely. Thank you.
Thank you.
At this time, we have no additional questions I'd like to turn the floor to Bradley Dodson for any closing remarks.
Thank you Rob and thank you everyone for joining the call today. We appreciate your interest in <unk> and forward to speaking with you on our first quarter earnings call expected in April.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.