Q4 2024 2024 Tidewater Inc Earnings Call
Janine: Thank you for standing by. My name is Janine and I will be your conference operator for today. At this time, I would like to welcome everyone to the Tidewater, Inc., Q4, and full year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
West Gotcher, Senior Vice President of Strategy.
Corporate and Development and Investor Relations, sir, please go ahead.
Speaker Change: Thank you, Janine. Good morning, everyone, and welcome to Tidewater's fourth quarter and full year 2024 earnings conference call. I'm joined on the call this morning by our President and CEO, Quintin Kneen, our Chief Financial Officer, Sam Rubio, and our Chief Commercial Officer, Piers Middleton.
Speaker Change: During today's call, we'll make certain statements that are forward-looking and referring to our plans and expectations.
Speaker Change: There are risks and uncertainties and other factors that may cause the company's actual performance to be materially different from that stated or implied by any comment that we are making during today's conference call.
Speaker Change: Please refer to our most recent Form 10-K for additional details on these factors. These documents are available on our website at www.tdw.com or through the SEC at www.sec.gov.
Speaker Change: Information presented on this call speaks only as of today, February 28, 2025. Therefore, you are advised that any time-sensitive information may no longer be accurate at the time of any replay.
Speaker Change: Also during the call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our earnings release located on our website at www.tdw.com. And now with that, I'll turn the call over to Quintin.
Quintin Kneen: Thank you, Wes. Good morning, everyone, and welcome to the Tidewater fourth quarter and full year 2024 earnings conference call.
Quintin Kneen: In my prepared remarks this morning, I'll touch on some of the notable achievements Tidewater realized during 2024 and how the company has continued to evolve.
Quintin Kneen: I'll then spend some time looking at 2025, addressing our views on capital allocation, the state of the vessel market, and lastly, our outlook on demand for 2025 and the interplay between vessel supply and demand as we move forward.
Quintin Kneen: 2024 proved to be a year of significant financial improvements. Revenue grew 33% year over year. Average day rates increased by nearly $4,500 per day. Net income nearly doubled.
Quintin Kneen: Adjusted if the stock grew by nearly 50%. Free cash flow tripled. Net debt was lowered by $149 million and we reduced our share and share equivalents by 1.7 million shares.
Quintin Kneen: The position we hold today in the offshore market and our financial performance during 2024 is the product of a multi-year effort to dispose of older, lower spec vessels,
Quintin Kneen: Pursue a disciplined acquisition strategy to bring into the fleet younger, higher spec vessels and to leverage the investments we have made by maximizing the scalability of our global shore-based infrastructure.
Quintin Kneen: This strategy, combined with an improving offshore activity environment, drives this success.
Quintin Kneen: But the critical element is daily execution across the entire organization.
Quintin Kneen: So, as happy as I am with the financial results we posted for 2024, I am equally as grateful to the entire Tidewater team globally.
for the continuous effort to build Tidewater into the safest,
Most sustainable, most reliable, most profitable.
High Specification Offshore Energy Support Vessel Fleet in the world.
Quintin Kneen: 2024 also marked the first full year that Tidewater actively returned capital to shareholders since 2015.
Quintin Kneen: We commenced our share repurchase program in the fourth quarter of 2023 and actively repurchase shares in the open market each quarter of 2024.
Quintin Kneen: We repurchased $91 million of shares in the open market during 2024, and when combined with cash in exchange for the payment of employee taxes, used $119 million of cash to manage down the number of shares outstanding.
Quintin Kneen: In addition, we used $103 million of cash to pay down the required amortization on our debt and added $51 million of cash to the balance sheet.
Quintin Kneen: We ended the year with right at $310 million of net debt. With the cash we expect to generate in 2025, we will have more than paid down the Solstead fleet acquisition in just under 30 months.
Quintin Kneen: We have discussed our philosophy on leverage, the balance sheet, and capital allocation on prior calls, and I believe the Solstat example I just referenced is an illustration of that philosophy.
Quintin Kneen: We look for value-aggreed acquisitions with a keen eye on free cash flow generation. We will contemplate additional balance sheet leverage for the right acquisition and look to quickly de-lever afterwards to a reasonable level and, in the interim, look for additional ways to deploy free cash flow to shareholders.
Quintin Kneen: Our philosophy has not changed and we remain focused on prosecuting the strategy. We remain active in evaluating acquisition targets but have found that the recent volatility in the markets and the shifting sentiment over the past few quarters has made deal dynamics more challenging.
Quintin Kneen: During the fourth quarter, we leaned into share repurchases more than we have previously as our view on the relative value of our shares as compared to the relative value of target fleets was more compelling.
Quintin Kneen: We view the share repurchase mechanism not only as an effective way to return capital to shareholders, but also a way that allows us to capitalize on vessel value inefficiencies relative to target acquisition valuations.
Quintin Kneen: We continue to weigh the relative merits of share purchases and M&A.
Quintin Kneen: And we believe that there are a number of fleets globally that would fit well under the time of water umbrella, but we will remain disciplined on both fronts, particularly as we weigh the timing of establishing a long-term capital structure more appropriate for a cyclical business such as ours.
Speaker Change: As West, Sam, and Piers will discuss, the business continues to do well and is expected to do slightly better in 2025. In Q4, we saw significant improvements in West Africa and the Middle East, offset by a pullback in Asia Pacific and the Americas, although on a consolidated basis, revenue, gross margin, and utilization were all up.
Speaker Change: The mix of performance in our various regions is emblematic of a tight vessel market reshuffling due to differences in regional demand, and it's why we continue to develop and pursue geographic diversification.
Speaker Change: I'd now like to take some time to discuss our outlook and the state of the vessel market. We held off on providing guidance on our Q3 call, given some of the uncertainty and lack of visibility on the growth of offshore activity for 2025. Since then, we have spent a considerable amount of time constructing our internal view on 2025 through our budget and weekly forecasting processes.
Speaker Change: The growth in offshore drilling activity appears to be more muted throughout 2025 as compared to what was anticipated earlier in 2024. We anticipate fewer offshore rigs working in 2025 as compared to 2024, which will have an impact on demand for offshore vessels.
Speaker Change: And more firm deliveries in the pipeline and many more discussions for delivery in future periods.
Speaker Change: We anticipate that the combination of a reacceleration in drilling activity as we progressed beyond 2025, coupled with a growing subsea demand in material F. PSL deliveries will generate a material increase in demand for offshore supply vessels, such that it will allow us again to push day rates upwards at the pace we saw in 2020.
Speaker Change: Three in 2024 as such we remain confident in the long term fundamentals of our business.
Speaker Change: We remain confident that vessel supply will be unable to keep up with demand. There has been some newbuild vessel announcements over the past few quarters, while we still believe that current day rates and contract terms don't justify newbuild ordering we have seen orders from a few vessel owners newbuild PSB represent roughly 3% of.
Speaker Change: <unk> PSV supply and we believe that natural vessel attrition over the coming years will likely offset the expected additions to the global fleets.
Speaker Change: It's worth noting that for vessels that were ordered in conjunction with a tender and contract award in Brazil, Dayrates approached $60000 per day for long term contracts with equivalent vessels currently in Brazil at day rates of approximately 40 to $45000 per day.
Speaker Change: These new rates are an indication to us that when appropriate commercial relationship and indicative of the percentage increase in day rates, we see as possible.
Speaker Change: The offshore absorb coal continues.
Speaker Change: Continues.
Speaker Change: Okay.
Speaker Change: We watch Newbuild activity very closely and we will continue to do so but remain of the view that current shipyard capacity prevailing global day rates and contract terms the state of the financing markets and vessel technology considerations make large scale new building programs unlikely.
Speaker Change: Before I turn the call over to Wes I want to reiterate that 2024 marked one of the best years in Tidewater history, and we are excited for another year of substantial free cash flow generation through which we continue to pursue value accretive actions to enhance shareholder value.
Speaker Change: And with that let me turn the call back over to west for additional commentary and our financial outlook. Thank you Quentin during 2020 for Tidewater generated $331 million of free cash flow over the same timeframe, we used $119 million of cash to reduce our share count there are open market repurchase program and our intern.
Speaker Change: Program to allow the forfeiting of employee shares to pay their cash tax liability or investing.
Speaker Change: In addition, we used $103 million of cash on the required amortization of our outstanding debt for a <unk> for a total of $222 million or <unk>, 67% of free cash flow allocated directly to equity enhancing users.
Speaker Change: We have repurchased the maximum allowance of shares in the open market since the inception of the buyback program in Q4 of 2023 totaling $126 million.
Speaker Change: We are pleased to announce that our board of directors has authorized an additional $93 million of share repurchase capacity.
Speaker Change: Based on the language in our outstanding debt the governs our share repurchase allowance, we have full access to the $93 million of capacity as of today.
The new authorization represents the maximum amount permissible under our existing debt agreements.
Speaker Change: The required amortization on our outstanding debt steps down to $65 million in 2025 versus the $103 million in 2024, allowing for additional cash flow after debt service for us to evaluate capital allocation opportunities, we remain committed to allocating our free cash flow to enhance shareholder value.
Speaker Change: We're also continuing to evaluate the best path to achieve our goal of establishing a long term unsecured debt capital structure, along with the sizable revolving credit facility.
Speaker Change: We remain opportunistic on pursuing a potential refinancing so we have no near term maturities and no immediate need to access the debt capital markets.
Speaker Change: One of the primary considerations of the timing of our refinancing of our outstanding debt is the call premium associated with calling that early particularly on our 2028 unsecured Nordic bonds issued in connection with the acquisition of Psb's themselves to add in 2023.
Speaker Change: The make whole associated with these bonds lapses in July of 2025.
Speaker Change: The make whole premium decreases with time, therefore, as we approach July the frictional cost to refinance these bonds dissipates to the extent market conditions appear favorable and the debt capital markets, along with the bank market to support our desired revolving credit facility, we will opportunistically, where the relative cost benefit of pursuing a refinancing ahead of the make whole.
Speaker Change: <unk>.
Speaker Change: Turning to our leading edge day rates by vessel class, which were posted in our investor materials yesterday, we did see some pressure on leading edge day rates across our best vessel classes during the fourth quarter as seasonal factors along with some regional specific factors contributed to the pressure.
Speaker Change: During last quarters call, we discussed the adjustments of the regulatory and tax structure in the U K and our subsequent impacted demand in this region likely leading to pressure on day rates.
Speaker Change: A combination of lower demand along with the fourth and first quarters typically representing the least favorable seasonal periods of the calendar year impact.
Speaker Change: Impacted day rates materially in this region and our and on our reported leading edge day rates.
Speaker Change: Outside of the U K during the fourth quarter, we entered into term contracts for our largest P. S fees and various other regions with a contract contracted day rates showing resilience and prior period, leading edge day rates.
Speaker Change: We experienced very similar regional bifurcation in our midsized psus as well with the rates under pressure in the U K the Brazilian across most other markets.
Speaker Change: To this point, we've generally seen disciplined behavior from our competitors recognizing that a mid cycle pause in drilling activity does not justify seriously competing on price given the constructive intermediate to long term outlook for demand.
Speaker Change: Having said that depending on the duration of offshore driller activity deceleration, we could see modest pockets of price pressure.
Speaker Change: Importantly, although leading edge day rates have come under pressure in the U K and we could potentially experienced pockets of pricing pressure in the earlier parts of 25%. There is still a meaningful amount of room between our printed day rates and prevailing leading edge day rates, allowing for the continued uplift in rates as we roll older contracts to new contracts.
Speaker Change: Enabling us to continue to benefit from a healthy day rate environment.
Speaker Change: Looking to 2025.
Speaker Change: We are initiating our full year revenue guidance of $1 three two to 138 billion.
Speaker Change: And our full year gross margin range of 48% to 50% with our average printed day rates up approximately $850 year over year.
Speaker Change: We expect first quarter revenue declined by approximately 6% as compared to the fourth quarter with day rates contributing about two percentage points of the decline due to seasonal weakness in certain of our markets in a relatively slow start to the year globally with.
Speaker Change: With a gross margin of about 46% due to the expected reduction in revenue.
Speaker Change: As we progress through 2025, we anticipate for the second quarter will look similar to the first quarter with a material uplift in utilization in the third quarter and sustaining into the fourth quarter delivering similar revenue levels as expected subsea and production vessel support activity increases and we experienced a reduction in dry dock days driving both <unk>.
Avenue uplift in margin expansion from first half levels.
Speaker Change: The midpoint of our revenue guidance range is approximately 81% supported by January revenue plus firm backlog and options for the remainder of the year.
Speaker Change: Our firm backlog and options represents $973 million of revenue for the remainder of 2025.
Speaker Change: Proximately, 68% of available days are captured in firm backlog and options.
Speaker Change: The bigger risks to our backlog revenue as unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks.
Speaker Change: With that I'll turn the call over to peers for an overview of the commercial landscape.
Speaker Change: Thank you Wes and good morning, everyone before I talk about the market and put some a clinton and west comments into a wider global context.
Speaker Change: Wanted to mention that we will be releasing a fifth sustainability report next week. This reported global team effort and I'd like to take this opportunity to thank everyone within the Tidewater team for their hard work and commitment helping to put this report together as we continued to showcase to all our stakeholders.
Speaker Change: <unk> is a huge commitment to sustainability. Please look at the report.
Speaker Change: Turning back to the offshore space. The overall long term outlook remains strong as does the fundamentals for the OSV market sector remains supply side favorable with little prospect of capacity expansion from the stack fleet or from the order book, which is still quite modest.
Quintin Kneen: As Quintin mentioned, we did see a small number of Newbuild orders in 2020 full but the order book still remains under 3% of the OSV fleet against an existing total fleet average age close to 20 years old which compares very favorable favorably to our fleet average age of 12 six years, which is a particular portions when we see some softening in <unk>.
Quintin Kneen: Bond is chartered always lean towards working with the youngest safest and most reliable fleets when looking to support that projects of which Tidewater takes all three boxes.
Quintin Kneen: While there is still demand these back slightly in the latter half of 'twenty. Four we did we still feel that with the favorable supply story and one of the youngest fleets in the industry. We are well placed to weather any short term headwinds in 2025 and make further progress in 2026 and 2027 is expected to bond growth comes back online for exploration.
Quintin Kneen: In subsea construction project backlog continues to unfold.
Quintin Kneen: Turning to our regions and starting with Europe on SaaS in the UK remains and as Wes mentioned this area has seen the most pressure on rates, but to put that into context PSC term rates still remain healthy for the north sea and is still above where rates were in the last up cycle of 2010 to 2014.
Quintin Kneen: Beyond 2025, we expect rates to pick up again in 2026 as additional decommissioning projects come online in the U K North Sea PSV supply shrinks as vessels move to other markets.
Quintin Kneen: No way expectations are still for a robust 2025, the PSV market with ethanol rumored to be shortly releasing a tender for additional long term PSC to support drilling activity through the summer and into 2026.
Quintin Kneen: In Africa, we had a strong Q4 as a number of delayed exploration project started up in Namibia with most of these expected to continue through Q1, and Q2 of 2025 before drilling activity pauses in the second half of the year.
Quintin Kneen: As mentioned on the last call 2025 visibility in the region related to additional drilling activity still remains opaque.
Quintin Kneen: However, the majority of our fleet up and down the coast, mainly committed to supporting production work.
Quintin Kneen: In the last few weeks, we've also see some new tenders related to <unk>.
Quintin Kneen: Which while shorter term lengths, we will focus on gilenya availability gaps that may come off in the latter half of 2025.
Quintin Kneen: The longer term outlook for new drilling activity still remains bullish commencing in the second half of 2026.
Quintin Kneen: In the Middle East the market remains very tight with very limited availability of tonnage in the region. Even office 70 vessels and rigs were released through 2024 from work in the Kingdom.
Quintin Kneen: This vessels find other work in the region with other Noc's, while supporting epi contracts in the Kingdom.
Quintin Kneen: We expect the region to remain supply constrained in the short to medium term and the opportunity will be that push rates as additional demand comes online in 2025.
Quintin Kneen: However, as we have mentioned on previous calls this is a highly fragmented market and us as such rate increases tend to take longer to push through that and other areas of the world, but we do believe that we will start to see some acceleration in rates in the second half of the year.
Quintin Kneen: In Brazil demand appear set to remain positive for 25 and as Quintin mentioned the latest newbuild tender from Petrobras would indicate that rates can be further improved but also show that there is a long term demand story in the country beyond just the next few years.
Quintin Kneen: As mentioned on the last call Mexico long term outlook still remains uncertain, but indications are that the government will be providing clarity around the production growth plans for <unk> in Q2, and until then we see Mexico as being steady state for the remainder of the year.
Quintin Kneen: The U S and Caribbean had a soft Q4, and we expect that to continue into the first half of 2025, but we are seeing seeing some positive momentum for long term future work in the Caribbean from the second half of 2025, both the drilling and supporting subsea construction activity in the region.
Quintin Kneen: Lastly in Asia Pacific.
Quintin Kneen: In Asia, and Petronas, specifically have now resolved the issues and sovereign satellite and tendering activity is expected to start again after the holidays, which should mean that the backlog of Malaysian overseas that would be pressuring rates in the region over the last few quarters will subside as they go back to work in Q3 and Q4 of 2025.
Quintin Kneen: This in turn should mean that the supply demand balance in the region return to some level of parity in the second half of 'twenty five.
Quintin Kneen: For 2025 and beyond we will of course remain focused and disciplined on continuing to maintain and improve current day rate levels when possible keep improving contract terms to be more actual and as we believe in the long term fundamentals of our business. We will continue with our short term chartering strategy and expectation of an improving market again in 2026.
Quintin Kneen: Overall as mentioned my question, we're very pleased with how our global team both on and offshore performed through 2024, and while we saw some softening in the offshore space in the latter half of 2024, the market still continue to move in the right direction through the year and we remain positive about how the market develops in 2025 and interest.
Quintin Kneen: Staying period growth for the OSV space into the foreseeable future.
Sam Rubio: And with that I'll hand, it over to Sam Thank you.
Sam Rubio: Thank you Paris and good morning, everyone. At this time I would like to take you through our financial results. My discussion will focus first on our full year 2024, compared to 2023, followed by the quarter to quarter results from the fourth quarter of 2024 compared to the third quarter.
Sam Rubio: 2024.
Sam Rubio: As noted in our press release filed yesterday for the year, we generated revenue of $1 35 billion compared to $1 billion in 2023.
Sam Rubio: An increase of 33%.
Speaker Change: Kris and average day rates and a full year effect of the acquired.
Speaker Change: Acquired sole stacked vessels were the main drivers for the revenue increase.
Speaker Change: As previously mentioned on the call. We expect 2025 revenue to be between $1 32 billion to $1 three 8 billion for the full year.
Speaker Change: Gross margin for the year was $649 2 million compared to $449 1 million in 2023.
Speaker Change: And net income in 2024, our net income was $187 million.
Speaker Change: Compared to $97 2 million in 2023.
Speaker Change: Operationally average day rates improved almost $4500 per day for the full year of 2000 for the full year to 21273.
Speaker Change: And active utilization decrease by approximately two percentage points to 79, 2% due to the higher drydock in idle days.
Speaker Change: However, the strength and the day rates boosted our gross margin by almost four percentage points year over year to 48, 2%.
Speaker Change: For 2025, we expect consolidated gross margin to be between 48% and 50% we expect our quarterly operating costs for 2025 to increase slightly from Q4.
Speaker Change: In the first half of the year and to decrease somewhat in the second half of the year as we expect a lower number of Drydocks and a lower number of vessel operating in Australia.
Speaker Change: 72% of our dry dock days are expected to be in the first half of the year.
Speaker Change: Active utilization for 2025, which includes <unk>, which excludes stacked vessels should be lower in Q1 and Q2, an increase during the second half of the year as Drydock days.
Speaker Change: Decrease adjusted EBITDA was $559 6 million for 2024 compared to $386 7 million in 2023.
Speaker Change: We also generated $331 million of free cash flow, an increase of $219 6 million from 2023.
Speaker Change: Overall 2024 was a good year with strong free cash flow delivery and solid operational execution and we are pleased to report on the success we achieved.
Speaker Change: I would now like to turn our attention to the fourth quarter. We reported net income in the fourth quarter of $36 9 million or <unk> 70 per share in.
Speaker Change: In the quarter, we generated $345 1 million compared to 340.
Speaker Change: $4 4 million in the third quarter.
Speaker Change: Average day rates were essentially flat versus the third quarter. Despite the strengthening of the U S dollar, which negatively impacted our day rate by $243 per day, but also positively impacted our operating costs by $160 per day.
Speaker Change: We did see a nice increase in active utilization from 76, 2% in the third quarter to 77, 7% in the fourth quarter, which was the main reason for the increase in revenue.
Speaker Change: The utilization increase resulted mainly from a decrease in drydock and mobilization days in the quarter, which was stacked in over 20 year old vessel due to declining marketability of the vessels.
Yeah.
Speaker Change: The gross margin in the fourth quarter was $174 million compared to $160 8 million in the third quarter. Adjusted EBITDA was $138 4 million in the quarter compared to $142 6 million in the third quarter.
Speaker Change: In Q4, we recorded a $14 3 million FX loss that negatively impacted our adjusted EBITDA of which $12 1 million was noncash.
Speaker Change: Vessel operating cost for the fourth quarter were $170 4 million compared to $178 7 million in Q3.
Speaker Change: In the period, we did have a few idle vessels. So we were able to reduce the crude a minimum manning levels. Additionally, we had a couple of vessels operating in southeast Asia instead of Australia.
Speaker Change: And our cost is lower the combination of the two factors contributed to a significant decrease in crew salaries and travel costs.
Speaker Change: Also we had 384 fewer dry dock and 108 fewer mobilization days, which also reduce our supplies and consumable expense for the quarter.
Speaker Change: For the year, our total G&A costs was $110 8 million, which is $15 5 million higher than 2023, primarily due to an increase in personnel costs and benefits stock based compensation higher professional fees and <unk> and includes the full year impact of the Sol staff acquisition.
Speaker Change: G&A costs for the quarter was $30 7 million $2 2 million higher in the third quarter due primarily to an increase in professional fees and personnel cost.
Speaker Change: For 2025, we expect our G&A costs to be about $119 million, which includes approximately $15 million and noncash stock compensation.
Speaker Change: Dry dock costs for the full year 2024 was $133 3 million, which includes $10 2 million of engine overhauls.
Full year 2020 for Drydock days effective utilization by about six percentage points in the fourth quarter, we incurred $17 7 million in deferred drydock costs compared to $35 5 million in the third quarter.
Speaker Change: By dark days effect that utilization by about five percentage points during the fourth quarter right. Our costs for 2025 is expected to be approximately $113 million, which includes $21 million of engine overhauls and we are expecting dry dock days affect utilization by approximately five percentage points.
Speaker Change: Okay.
Speaker Change: Full year 2024 capital expenditures totaled $27 6 million.
Speaker Change: In Q4, we incurred $4 5 million in capital expenditures related to vessel modifications ballast water treatment installations and DP system upgrades for the full year 2025, we expect to incur approximately $37 million in capital expenditures the.
Speaker Change: The increase year over year is due to an increase in both DP system upgrades ballast water treatment installations.
Speaker Change: Also contributing to the increase will be the cost for vessel it infrastructure upgrades vessel fuel monitoring systems, and our ERP software upgrade.
Speaker Change: We generated $107 million of free cash flow in Q4 compared to $67 million in Q3, the free cash flow increase quarter over quarter was attributable to improved gross margin.
Speaker Change: And with lower dry dock and higher proceeds from asset sales in the quarter. We sold two vessels for proceeds of $4 5 million.
Speaker Change: For the full year 2024, we made $100 million in principal payments on our seniors.
Speaker Change: Loan and $3 million on our vessel facility agreement.
Speaker Change: Previous calls we have mentioned that we have no immediate need to refinance our debt as we have no near term maturities and that is still the case. However, as noted earlier.
Speaker Change: As we get closer to the expiration of call premiums and market conditions are favorable and the debt capital markets. We will remain optimistic and weigh the cost benefit of pursuing a potential refinance afford that make whole premium expires.
Speaker Change: During the year, we used $91 million in cash to reduce the number of our shares in the market $44 million of which will be used in the fourth quarter.
Speaker Change: <unk>.
Speaker Change: We conduct our business in five segments I'll refer to the tables in the press release and the segment footnote in our results of operation discussions in the 10-K for more details of our regional results.
Speaker Change: In the fourth quarter consolidated average day rates essentially we're.
Speaker Change: Were flat versus the third quarter. However results varied by region with the West Africa day rates, improving 9% and our middle East day rates improving by almost 5%.
Speaker Change: Revenues increased 13% in West Africa, and 10% in the Middle East while revenues were down in each of our other three regions.
Speaker Change: Gross margin increased by more than three percentage points from the third quarter increasing from $47.
Speaker Change: 2% to 54% in the fourth quarter, which.
Speaker Change: Which is our highest gross margin dating back to 2009.
Speaker Change: All regions, except our APAC region experienced an increase in gross margin percentage led by the middle East, which increased by over 10 percentage points.
Speaker Change: Due to higher day rates and higher utilization, resulting from lower dry dock repair days.
Speaker Change: In West Africa, we achieved an increase of almost five percentage points to 67% due to an increase in day rates combined with a slight increase in utilization.
Speaker Change: Primarily due to fewer mobilization days.
Speaker Change: Our Europe and Mediterranean region saw a gross margin increase of almost one percentage point due to the higher utilization, resulting from lower dry dock days and lower operating costs, partially offset by slightly lower day rates.
Speaker Change: In our Americas region, we saw.
Speaker Change: We saw a slight increase in gross margin due primarily to lower operating costs.
Speaker Change: Despite seeing a small decline in average day rates and utilization.
Speaker Change: Alright, APAC region saw an increase in utilization as well as a decrease in operating costs. However, a decrease in day rates due to higher mix of operating days in southeast Asia versus Australia.
Speaker Change: Offsetting these positive variances and led to a small decrease in overall gross margin.
Speaker Change: In summary, we see 2025, improving slightly from 2024, and we expect to continue to generate strong free cash flows and profitability.
Speaker Change: And in the near term, we will continue to invest in our fleet pursue attractive M&A opportunities and.
Speaker Change: Execute operationally at a high level.
Speaker Change: We will also continue to pursue share repurchases as an attractive investment and return of capital option for our shareholders.
Speaker Change: We remain optimistic about the fundamentals of the industry and the opportunities. This will provide tidewater and both short and long term.
Speaker Change: With that I'll turn it back over to questions all right.
Sam Rubio: Sam Thank you very much let's go ahead and open it up for questions.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star one on your Touchtone phone and you'll hear a prompt FTR has been rates.
Speaker Change: Should you wish to withdraw please press star one.
Speaker Change: If you are using a speakerphone, please pick up the handset before pressing entities.
Speaker Change: Our first question comes from the line of Jim Rollyson from Raymond James Sir. Please go ahead.
Jim Rollyson: Hey, good morning, guys.
Speaker Change: Clinton.
Speaker Change: Taking a step back from some of the near term noise and just I think in a bigger longer term question for you.
Speaker Change: If you look at the way the market has kind of been playing out when we started out last year talking about rate increases in <unk>.
Speaker Change: This all leads to the potential long term need for new builds and it obviously what rates are required there and then as we went through the year you kind of ran into a bit of a bunch of style with the white space picking up and at.
Speaker Change: And obviously that drove kind of flattish year over year guidance as you think out based on what customers are saying today and over the next 234 years has your view of where the market ends up going changed because of this pause or is this just kind of.
Speaker Change: Become a timing question and just kind of curious how your big picture thinking has has changed over the past few months.
Jim Rollyson: Hey, Jim.
Speaker Change: It Hasnt changed.
Isn't anticipating this pullback I thought we were going to drill through.
Speaker Change: The rest of 2014 to 25.
Speaker Change: On reflection has seen some of the things that were happening in West Africa from a supply chain perspective, as well as the regulatory issues in the U K. It doesn't surprise me, but the fact is that the demand for hydrocarbons as we talk to our customers are in Ocs and are supermajors and so forth is very strong as we look out through 2000.
Speaker Change: In 2007, the amount of vessels that are out there as there is limited and it's going to be decreasing as we go through the next two or three years just from attrition. So so I'm very confident in the business over the next couple of years I just see this as a sideways movement in 'twenty five versus another leg up.
Speaker Change: Got you and maybe if I zoom back into kind of 'twenty five.
Speaker Change: When you look at your start to last year with guidance, which I think we all thought work are hoping where it was conservative and it proved out to be the opposite a little bit as things developed in the second half of the year.
Speaker Change: Comfortable or confident are you in guidance this year, given kind of your commentary around a little bit softer start to the year.
Speaker Change: Normally when you get farther out in the year, you have less visibility, but some of your comments seem to indicate maybe you have a decent amount of visibility in the back half of the year, but just trying to understand kind of your confidence level in guidance for 2005 based on where you sit today.
Speaker Change: Yes, Great question, you know when we initiated guidance for 'twenty four we came out at one four to 145 billion in the year came in at $135 billion. Okay.
Speaker Change: And Thats I think about 6% down from where we were hoping to be.
Speaker Change: And you take lessons from that.
Speaker Change: One of the reasons that we didn't provide guidance on the Q3 call was that we wanted to double up.
Speaker Change: Our efforts on looking at 25, we wanted to get another three months into the forecast horizon. We wanted to have at least one five months under our belt before we gave the guidance. So I do feel feel good about the guidance. Obviously, we've got about 81% covered from backlog a lot of the open.
Speaker Change: <unk>.
Speaker Change: Contracting to do is in the latter part of grew 25, but those conversations have already begun.
Speaker Change: Got it that's helpful I'll turn it back and maybe get back in the queue. Thanks.
Jim Rollyson: Thanks, Jim.
Thank you. Our next question comes from the line of Greg Lewis from <unk>. Sir. Please go ahead.
Speaker Change: Yes, Thank you and good morning, and thank you for <unk>.
Jim Rollyson: My questions I.
Jim Rollyson: Did want to follow up a little bit on the on the last question.
Jim Rollyson: More around utilization West I can appreciate I think you kind of said roughly 68% of revenue is related or as in backlogs for for this year. My kind of question is there any way to kind of.
Jim Rollyson: Think about how that.
Jim Rollyson: Those throughout the year and I guess, it's a two part question. So I apologize at how it flows throughout the year, where I imagine like Q4 is maybe <unk>.
Jim Rollyson: 50%.
Jim Rollyson: With that covered through backlog and really what I'm trying it and so that's the first part of the question and then the second part of the question.
Jim Rollyson: Are there any basins that are that are more exposed I E. As a base and like West Africa have more renewals this year than maybe say Asia. Just so we can kind of think about how we want to model utilization.
Jim Rollyson: By region.
That would be helpful. Thanks.
Jim Rollyson: Hey, Greg it's Wes good morning.
To be clear on.
Jim Rollyson: The coverage so about.
Jim Rollyson: 81% of our revenues covered the 68% was the amount of days available days that we have.
Jim Rollyson: Contracted within that backlog, so we actually have some more capacity if you will.
Jim Rollyson: On the available days side to go secure more revenue. So just just to be clear as to what we were.
Jim Rollyson: We're characterizing there.
Jim Rollyson: The second part of your question I think in terms of I guess.
Speaker Change: <unk>, if you will to the backlog coverage certainly in the near term we have more coverage.
Speaker Change: Don't think that should be surprising given the shorter term focus on contracting that we've done over the past few years. So the near term is going to have more.
Speaker Change: Backlog coverage than call it Q3, or Q4 of this year and then.
Speaker Change: Lastly from a regional perspective, I would say, there's a reasonably tight range. If you will around the amount of coverage we have by region I would say, where we probably are.
Speaker Change: Or on the lighter end would be in the Americas.
Speaker Change: And then Oh.
Speaker Change: On the higher end, probably Africa and Asia.
Speaker Change: Okay Super helpful. And then and then just because it's.
Speaker Change: It is.
Speaker Change: Yes.
Speaker Change: I'll add a balance sheet question. It looked like receivables kind of ticked up in Q4, and I'm just kind of I guess.
Speaker Change: Not a big working capital person, but I guess dsos were up a couple of days.
Speaker Change: Yes, I guess as we think about.
Speaker Change: What is driving that is that kind of a year end timing issue I know theres been some conversations we know you have work in Mexico.
Speaker Change: Just kind of any kind of color around that that uptick in the receivables and maybe when that could reverse snacks.
Sam Rubio: Hey, Greg This is Sam yes receivables did go up in Q4, and Thats, mainly driven by Mexico as you can imagine tonight's kind of drove that.
Speaker Change: I haven't we haven't been paying a lot for Pemex.
Speaker Change: But hopefully we get paid here soon and Youll start seeing the days come down Dsos did go up I think like two or three days quarter over quarter. So yes, Alex was kind of the main driver we do have some other areas in Africa.
Speaker Change: Some of our other customers went a little bit long in Q4, but have since kind of caught up over the last couple.
Speaker Change: A couple of months.
Okay Super helpful. Thank you very much.
Speaker Change: Our next question comes from the line of David Smith from Teekay LNG partners. Sir. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hey, good morning, Thanks for taking my question.
Speaker Change: Good morning.
Speaker Change: Wanted to circle back to <unk> prepared remarks.
Speaker Change: The 2025, Drydock schedule, representing 5% of vessel days, So I had thought that 23% and 24 were pretty big concentration for the five year survey schedules. So wanted to ask if there were any delays.
Speaker Change: 2020 for our project plans that were question and to 'twenty five.
Speaker Change: If there is something in a disproportionately impacting the dry dock days beyond regulatory work or maybe I was just mistaken on that survey concentration for 'twenty three 'twenty four.
David Smith: Yes, David good morning.
David Smith: 'twenty three.
David Smith:
David Smith: It didn't have a lot of push into 'twenty four but we did have some.
David Smith: So we do have a few.
David Smith: Carry overs from 24 going into 'twenty five.
David Smith: I think 24 overall days impacted utilization by 6% or so.
David Smith: And we're seeing 25 come down a little bit I mean, what is what does impact us a little bit also.
His amount.
David Smith: Engine overhaul center that are happening.
David Smith: Which is which is a little bit higher in 'twenty five than we had in 2000.
Speaker Change: Okay I appreciate that color and if I could ask one more just regarding the <unk> contract slide from the Investor presentation.
Speaker Change: Can you give us any color about the average duration for the new PSV term contracts in Q4 or at least.
Speaker Change: Extending versus earlier quarters.
Speaker Change: Because I was just curious with demand growth on on pause at least in the first half.
Speaker Change: Youre thinking about the tradeoff of seeking longer term.
Speaker Change: Duration with it looks like lower leading edge rates.
West: Hey, Dave It's West I'll answer the first part of your question and then I'll, let maybe peers speak to the.
West: Contracting philosophy that were.
West: Contemplating these days.
West: What I can tell you is for the quarter across all the fleet, we entered into 31, new term contracts and the average duration of those contracts is about 12 months.
West: Okay.
Dave West: Yes, Dave I'll just add.
Speaker Change: A few thoughts around that I mean, obviously there are some longer term contracts that we put in place to fulfill some of that.
Speaker Change: That softness, but I think as I said in my comments and contracting strategy, we still believe in this market. So.
Yes.
Speaker Change: Joe.
Speaker Change: Sure.
Speaker Change: <unk>.
Speaker Change: Democracy interested in 'twenty six 'twenty seven going forward, so we didn't lock everything.
Speaker Change: Yes, Q4, we did take a few longer term.
Speaker Change: A few longer term contracts to get us through 'twenty five.
Speaker Change: That is helpful context, thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Sanjay <unk> from Clarksons Securities. Sir. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hey, Greg and team hope, you're all well and thank you for.
Speaker Change: I hope I get the commentary.
Speaker Change: As always I wanted to.
Speaker Change: So it doesn't require I think it's been kind of well covered here already.
Speaker Change: As we think about 'twenty 'twenty six in 2027.
Speaker Change: I think I share your for market data about drilling activity recovering at some point the interim attempt to fix et cetera, but are you able to share some color in terms of.
Speaker Change: Contract cover.
Speaker Change: Coverage for 2026 already or are you.
Speaker Change: With the new contracts that you are.
Speaker Change: Going into right now are there any of those have actually stocked up as far out the 20th synthetics.
Speaker Change: <unk>.
Speaker Change: How confident can we be at this stage.
Speaker Change: That we could potentially see another leg up in 2026 versus 2000 Twenty's alright.
Speaker Change: On financial performance.
Speaker Change: Hey, Frederic it's it's west I'll answer the first part I think we're comfortable to give the 2025 backlog coverage for now as we've done in prior calls kind of the current year.
Speaker Change: Backlog and we'll hold off on providing the outer year backlog and then as it relates to the timing of contracts, perhaps out ended 26 again I'll, let Pierre speak to the current contracting activity.
Speaker Change: Thank you Pi.
Speaker Change: We are.
Speaker Change: And just see.
Speaker Change: It.
Speaker Change: A discussion starting with some <unk>.
Speaker Change: Oil and gas companies about 2026 in various regions. So it does give us confidence.
Speaker Change: There is.
Speaker Change: Good demand.
Speaker Change: Spike.
Speaker Change: Coming in 2006, and 27 and that's across all regions.
Speaker Change: Even in the U K as well.
<unk>.
Speaker Change: Discussions, we're having around decommissioning projects as well so.
I think it's.
Speaker Change: Okay.
Speaker Change: Our confidence level and certainly that we're going to start seeing a real uptick in 'twenty six and we started some of those pre.
Speaker Change: Pre discussions with.
Speaker Change: With customers about availability of vessels and stuff like that to 'twenty six 'twenty seven as well so they haven't turned into firm tenders, yet, but there's definitely a lot of inquiry coming from that.
Speaker Change: All companies, making sure we have available in the market, which is pretty common so more than we sold perhaps.
Speaker Change: The last half last year.
Speaker Change: It gives us a lot of confidence about the future.
Speaker Change: Yes. Thank you.
And then second question.
Speaker Change: I don't want to turn it to them.
Debbie: Hi, Debbie.
Speaker Change: Quentin I think you mentioned some.
Speaker Change: But youre always looking for for accretive M&A transactions.
Speaker Change: That such transaction box necessarily.
Now easily to get through from time to time in market and I think bump in markets with high volatility.
Speaker Change: If we could M&A aside.
Speaker Change: Of course, I can't when we look at the our own.
Speaker Change: Currently.
Speaker Change: <unk> count at least among the older vessels in cabin.
Speaker Change: Sliding.
Speaker Change: We've just had a couple of vessels.
Speaker Change: Every quarter and I am sure sure these kind of relates to.
Speaker Change: Maybe selling off some noncore assets et cetera.
Speaker Change: Our assets now are effectively active that we wanted to see if you have any comments around further caused organic.
Speaker Change: Fleet type adjustments and in general both for your own fleet.
Speaker Change: The market as a whole do you think there are any regions that are more prone to such supply adjustments.
Speaker Change: Thanks.
Yes, sure sure Hirsch, Kate so almost supply saga clearly.
Speaker Change: Buying in bulk is easier for us. So if we can pick up fleets of 20 or 30 vessels.
Speaker Change: Normally we can get a better price on average as opposed to going to the secondary market and picking up vessels here and there.
Speaker Change: Because generally when you are acquiring a company there is some lifting that you've got to do.
Speaker Change: You get some cats and dogs, along with it and you saw somebody else's problem, whether its capital structure problem work, where somebody is just looking to get out and so we lose and a lot easier for us to move the needle when we're doing fleet acquisitions.
Speaker Change: And so we look.
Speaker Change: To that route more than just one off vessel acquisitions, but we're not against one off vessel acquisitions at all as well on the attrition side. We've got a fleet of 200 boats like everybody in the world and similar to the attrition comments that we had on the in the entire fleet.
Speaker Change: <unk> got fleet, you've got boats that are approaching 25 years old and they just not economical to work anymore. So we will end up scrapping them or selling them into an obscure market, where they won't be competing with us going forward.
Speaker Change: And then on the.
Speaker Change: Just the Newbuild acquisition.
Speaker Change: I am certainly very confident in where this market is going to be in 2007 and 28, but.
Speaker Change: I believe the world has got enough vessels and I still think that there is opportunities to pick up fleets at a discount and so I'll be looking to invest a little bit more on older vessels.
Speaker Change: Any new vessels at this point.
Speaker Change: Super Thats very helpful. As always thank you so much.
Speaker Change: For me I have a good day.
Roger: Thanks Roger.
Speaker Change: Thank you again should you have a question. Please press star followed by the number one.
Speaker Change: Our next question comes from the line of Jeff Shane from Danielle Energy Partners Ma'am. Please go ahead.
Jeff Shane: Thanks, Good morning.
Good morning.
Speaker Change: First question I had is just could you speak a little bit more on the debt markets.
Speaker Change: Just as it relates to tidewater, but what youre seeing out there and the reason I ask is why you've talked about finding an acceptable solution long term for your capital structure I would think.
Speaker Change: Tidewater Hasnt found something optimal might cause some challenges for others to do things like build new assets at a fast clip. So to the extent you can could you speak to what youre seeing out there.
Speaker Change: With respect to capital available to those in the OSV space today.
Dave West: Hey, Josh it's west.
Dave West: Absolutely. It's a good question and I think there's maybe a couple of different ways you can look at it so.
Dave West: For Tidewater, we're in a fortunate position that we have critical mass more publicly traded and we have a very strong balance sheet and the type of financing. We're looking at is really kind of corporate debt alright, and as we've said, we're not really pushed to do anything on the on the debt capital structure, we'd like to.
Dave West: We're opportunistic there is a point in time, where that makes sense.
Dave West: And as we evaluate the debt capital markets and the bank markets they appear to be constructive, but again in our particular position with the make whole and some of the frictional costs that I described earlier in my comments, we want to be judicious about how we approach that.
Dave West: And way that relative cost benefit now there's a difference between.
Dave West: Corporate level debt debt capital markets Bank markets for a decent sized U S pellet company as compared to perhaps what the <unk>.
Dave West: Project finance market or an equivalent.
Market may look like for Newbuild financing.
Dave West: And.
Dave West: Over the past few years I should say based on our understanding and conversations within the market landscape to understand what the appetite is that appetite still seems to be relatively limited.
Dave West: There have been a number of banks or private financing vehicles or different silos of capital.
Dave West: <unk> had a very unpleasant experience in the last down cycle and.
Dave West: I think theres still some scar tissue there.
Dave West: As it relates to contemplating newbuild financing, so I think for the marginal.
Dave West:
Yeah.
Dave West: Prospective vessel builder the appetite in those financing market is still fairly limited in what else I would say peers has talked about this a lot over time, we collectively have talked about this a lot over time that the day rates and the contract terms still don't really support the newbuild concept and that the raw economics in our.
Dave West: Belief don't supported and contract terms don't really support it so in order for financing party to get comfortable with that.
Dave West: Arrangement, the commercial terms would have to be appropriate to protect them from a downside perspective. So there are some differences I think in terms of what we're looking at as it relates to that capital and again, what perhaps the marginal vessel builder may be looking at.
Dave West: And we're fortunate that that situation is more palatable.
Dave West: And then for others, but we do think there are still some challenges out there as it relates to newbuild financing.
Speaker Change: Okay. Thanks, and then just as my follow up return on capital is something that.
Speaker Change: Tidewater has been pretty aggressive on over the last 24 months essentially maxing out the buyback allowed under your car.
Speaker Change: Current capital structure that we've referenced.
Speaker Change: Longer term could you speak to how you plan on handling this is their long term percentage of free cash flow you're thinking about from a return to shareholder perspective, we're just I'm just curious how you're thinking about it over the intermediate to long term.
Speaker Change: So under the intermediate term at what I wanted to do first is just get a better long term capital structure in place and know what's possible in the with the revolver capacity as ours. So that we can figure out how low we can bring our cash balances down.
Speaker Change: And then of course, just get better assessment of the cycle. So I don't have any percentages for you today, but the indications of what we did in 2004 should be a good guide as well.
Speaker Change: What were comfortable doing as we move forward.
Speaker Change: Only thing that I don't want to do is put.
Speaker Change: Any sort of financial distress or concern on the company.
Speaker Change: Understood. Thanks, I'll turn it back.
Speaker Change: Thanks, Josh.
Speaker Change: Our last question comes from the line of Don Crist from Johnson Rice. Please go ahead.
Don Crist: Good morning General Hope you all are doing well I wanted to ask about Asia Pacific and <unk>.
Don Crist: And specificity, Malaysia, if I remember correctly back late last year.
Don Crist: The tax disagreement was that a framework in place.
Don Crist: And we're moving forward to resolve that tax dispute amongst states.
Don Crist: Just didn't know if there was any any.
Don Crist: The update to that and if I remember correctly, you had six vessels that were on pretty high day rates in the area any.
Don Crist: Visibility onto when those could go back to work.
Donald: Yes, Hi, Donald.
Don Crist: I should mention also.
Don Crist: Malaysia has resolved or Petronas is resolved.
Speaker Change: We'll come to an agreement with Sarah Aitken saddle now so.
Speaker Change: In the what we expect to happen is the offset.
Speaker Change: E holidays, I'll start putting vessels back on it tends to take a little bit longer.
Speaker Change: Asia Pacific to get things done, but I think Joe in Q3, and Q4, we expect the vessels to be sort of sitting around not doing much.
Speaker Change: Coming back on stream as Petrobras comes back and re tenders from that side.
Speaker Change: And in time that will allow us to tighten up our own vessels we have.
Speaker Change: Fleet, we have that is focused on the larger sized PSC. So again supporting the drilling there. So yes, we would expect in the second half of the shale Lasalle.
Speaker Change: Yes, they are available some vessels back into Malaysia as well.
Speaker Change: Yes.
Speaker Change: As opposed to best being resolved.
Speaker Change: I appreciate that and just one question on kind of the current administration that that just took over in their energy policies kind of in the Gulf of America.
Speaker Change: Any.
Speaker Change: Obviously this year is going to be a little bit weak with with Mexico etcetera in that region, but as you look out to 'twenty six are you getting.
Speaker Change: Yes.
Speaker Change: Increased calls for vessels to go back to work in the Gulf of America, as we look to 2006 and seven.
Speaker Change: Yes, we've seen actually couple of.
Speaker Change: And just in the last few weeks for some additional vessels on top of what is already here.
Speaker Change: Expectation of some maybe one or two extra rigs coming in but that was also.
Speaker Change: Talked about last year as well so it's difficult to tell how much is down to the new administration.
Speaker Change: What was already planned by.
Speaker Change: But now we're certainly.
Speaker Change: How much of a tangent to the vessels, we expect some uplift.
Speaker Change: And.
Speaker Change: And the Gulf of America.
Speaker Change: Into 2026, but yes, that's what.
Speaker Change: We're saying that the changes to the earliest one I think to really get a full read as to how to really affect the region.
Speaker Change: I appreciate the color I'll turn it back thanks, guys.
Speaker Change: Thank you that concludes our Q&A session I will now turn the call back to Ken Kenny.
Speaker Change: <unk>.
Ken Kenny: For closing remarks.
Ken Kenny: Alright, well. Thank you everyone and we will update you again in May Goodbye.
Ken Kenny: Okay.
Ken Kenny: That concludes our conference call for today. Thank you for joining and you may now disconnect.