Q1 2025 Oceaneering International Inc Earnings Call
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Julianne: Welcome to Oceaneering's first quarter, 2025 earnings conference call. My name is Julianne and I will be your conference operator. All lines have been placed on mute to prevent any background noise. There will be a question and answer period after the speakers remarks.
Speaker Change: With that, I will now turn the call over to Hilary Frisbie, Oceaneering Senior Director of Investor Relations.
Thanks, Julien.
Speaker Change: Good morning and welcome to Oceaneering's first quarter 2025 results conference call. Today's call is being webcast and a replay will be available on Oceaneering's website.
Speaker Change: Joining us on the call are Rod Larson, president and chief executive officer who will be providing our prepared comments and Alan Curtis, senior vice president and chief financial officer.
Speaker Change: Business Strategy, Plants for Future Operations, and Industry Conditions are forward looking statements made pursuant to the safe harbor provisions of the Private Security's litigation Reform Act of 1995. Our comments today also include non-GAAP to natural measures.
Speaker Change: Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our first quarter press release. We welcome your questions after the prepared statements. I will now turn the call over to Rod.
Good morning and thanks for joining the call today.
Rod: As we announced in our earnings release yesterday, we outperformed expectations in the first quarter with strong results across our energy services and products. In particular, sub-seerobotics or SSR demonstrated resilient utilization of remotely operated vehicles or ROBs.
Rod: and Offshore Projects Group, RoboG, achieved robust vessel activity particularly in the Gulf of Mexico and West Africa
Rod: In addition, we were proud to announce that our aerospace and defense technologies or ad tech segment wasn't awarded the largest initial contract value in the company history, which is foundational to delivering significant year-over-year operating income growth in 2025 in this segment.
Rod: Looking ahead to the rest of the year, we remain confident in our outlook, even with recent market uncertainties.
Rod: Our confidence comes from our first quarter 2025 order intake of approximately $1.2 billion
Rod: Our current backlog that has improved from the same time last year, the diversity of the geographies and and markets we serve.
Rod: The optionality afforded by our strong balance sheet and the commitment of Oceaneer's worldwide, including our season leadership team that has led the company through previous market uncertainties.
Rod: Today I'll focus my comments on our performance for the first quarter of 2025 and our consolidated and business segment outlook for the second quarter and full year of 2025.
Rod: Now for the first quarter results. For the first quarter, we reported net income of $50.4 million or 49 cents per share, a 233% year-over-year increase.
Rod: Consolidated Revenue of $675 million, improved by 13%, compared to our first quarter of 2024 with the year-rearing revenue increases in all of our energy businesses.
Rod: Compared to the first quarter of 2024, first quarter of 2025 consolidated operating income of 73.5 million dollars doubled.
Rod: and are consolidated adjusted earnings before interest, taxes, depreciation, and amortization and or EBDA of $96.7 million, improved 57%.
Rod: These results were largely driven by SSR and OPG. In SSR year-over-year, we realized an 8% increase in average ROV revenue per day utilized, which coupled with a 4% increase in days utilized, drove a 25% increase in the segments EBITDA.
Rod: In OPG, we had a favorable service mix, improved vessel activity levels and lower dry dot cost which contributed to OPG's revenue increase of 43% and operating the income increase by orders of magnitude.
Rod: Now let's look at our business operations by segment for the first quarter of 2025, as compared to the first quarter of 2024.
Rod: SSR operating income of $59.6 million was 35% higher on a 10% increase in revenue.
Rod: Even a margin also improved year-over-year to 35% from 31%, reflecting R.O.V. pricing progression and improved execution in our R.O.V. and two-in-businesses.
Rod: Average RV revenue per day utilized increased to $10,788. Lead utilization improved to 67% and 10 days utilized increased to $15,093.
Rod: RB Fleet Use during the quarter was 62% in drill support and 38% in vessel based activity compared to 66 and 34% respectively in the first quarter of 2024.
Rod: The revenues split between our RV business and our combined tooling and survey businesses as a percentage of our total SSR revenue, with 79% and 21% respectively.
Rod: As of March 31st, 2025, we had 60% of the contracted floating rate market with ROV contracts on 79 of the 131 floating rates under contract.
We maintain our fleet count of 250 RV systems.
Turning to Manufactured Products
Rod: Our first quarter 2025 revenue increased 4% year-over-year. Operating income of $8.7 million declined significantly and operating income margin of 6% declined primarily due to a $10.4 million inventory reserve related to our theme park ride business.
Rod: Excluding this Reserve, the operating income margin would have been approximately 14%. Our backlog on March 31st, 2025 was $543 million, a decrease of $54 million from the first quarter of 2024.
Rod: OPG achieves significant year-over-year improvements in revenue, operating income and operating income margin.
Rod: First quarter, 2025 operating income of $35.7 million in operating income margin of 22% benefited from the continuation of international projects that commenced in the fourth quarter of 2024 and are expected to conclude in the second quarter of 2025.
Rod: Improved vessel activity in the Gulf of Mexico and from the absence of dry dot costs and the associated loss of vessel days that impacted the first quarter of 2024.
Rod: Frintegrity Management and Digital Solutions, or IMDS, both revenue and operating income were flat compared to the same period in 2024.
Rod: At Tech operating income and operating income margin both declined slightly as compared to the first quarter of 2024 on relatively flat revenue.
Rod: The declines were due to rent readiness costs to enable our role as a prime contractor on the recently announced large contract award.
Rod: Unallocated Expenses of $44.6 million were in line with our guidance for the corner.
Thank you.
Rod: In the first quarter of 2025, we utilized $80.7 million of cash in operating activities, and $26.1 million in capital expenditures, resulting in negative free cash flow of $106.8 million.
Rod: In addition, we repurchased approximately $10 million worth of shares of our common stock.
Rod: Consistent with prior years, our cash balance declined during the first quarter, with an ending cash position of $382 million, and no borrowings under our secured revolving credit facility.
Rod: Now, I'll address our outlook for the second quarter of 2025.
Thank you. Thank you.
Rod: On a consolidated basis as compared to the second quarter of 2024, we expect our second quarter 2025 revenue and EBITDA to increase with EBITDA expected to be in the range of $95 to $105 million.
Rod: As compared to the SEC quarter of 2024, our expectations for the SEC quarter of 2025 results by segment are, for SSR, we project increased revenue and operating results. Even a margin is projected to be in the mid 30% range.
Rod: For manufactured products, we expect relatively flat revenue and improved operating results. For OPG, we project relatively flat revenue and significantly higher operating results.
Rod: Prime DS, we forecast relatively flat revenue and improved operating results. For ad tech, we anticipate increased revenue and significantly improved operating results. And we project an allocated expenses to be in the $45 million range.
Rod: Directionally, for our full year 2025 operations by segment as compared to 2024, we expect for SSR, we continue to forecast improved operating results on a high single-digit increase in revenue. SSR even margins are projected to average in the mid 30% range for the full year.
Rod: For ROVs, we estimate that our overall ROV fluidization will be in the high 60 to low 70% range with a slightly higher percentage of vessel-based activities than in recent years. We expect to sustain our ROV market share for drill support services in the 55 to 60% range.
Rod: For Manufactured Products, we project significantly improved operating income on better operating margins and increased revenue based on our current backlog of $543 million and improvements in our non-energy product lines.
Rod: We expect our book to bill ratio will be in the range of 0.9 to 1.0 for the full year, just to point out. At the midpoint of our book to bill guidance, and with our guidance for revenue growth, we are predicting a year-to-year increase in order intake.
Rod: As demonstrated by OPG's strong first quarter performance, we continue to expect year-over-year operating results to improve on flat to slightly increased revenue with improved vessel utilization in the Gulf of Mexico and West Africa and increased activity in Brazil and Asia-Pacific
Rod: Overall, for 2025, OPG operating income margin is expected to be in the mid-teens range.
Rod: These improved results reflect the positive impact of our acquisition of global design innovation or GDI, as well as the absence of losses from the legislature of the Maritime Intelligence Division in 2024.
Rod: For AdTech, operating results are expected to improve significantly on Creece Revenue, which is largely attributable to the previously announced Department of Defense contract award. Operating income margin is expected to be in the low teens range for the year.
Returning to our 2025 Market Outlook
Rod: In our fourth quarter, 2024 earnings release, we revised the bottom end of our full year 2025 EBA guidance in acknowledgment that we may be impacted by different geopolitical uncertainties including tariffs and regulatory changes.
Rod: Since then, further announcements related to Terrace, Pratatliatory Terrace, and OPEC Plus production have continued to generate concerns across the energy sector. We believe that our prior and affirmed guidance appropriately accounts for these risks, but we will continue to evaluate the potential impacts of these and other factors.
Rod: Oceaneering remains well positioned to take advantage of market dynamics even in uncertain times.
Rod: with a strong backlog across her energy and government businesses and recognize the aforementioned $1.2 billion order intake in the first quarter of 2025.
Rod: While Brent Crude Price has had been revised downward to the range of $60 to $70 per barrel in 2025, we believe these levels remain supportive of sustainable levels of offshore operating and capital spending.
Rod: In summary, our strong first quarter 2025 performance along with the strength and diversity of our backlog give us the confidence to reiterate our prior full year 2025 guidance, including EBITDA in the range of $380 to $430 million.
Rod: We appreciate everyone's continued interest in Oceaneering and will now be happy to take any questions you may have.
Thank you.
Rod: Thank you. If you would like to ask a question, please press star, followed by the number one on your telephone key pass. We'll pause for just a moment to compile the Q&A roster.
Speaker Change: Our first question will come from David Smith from Pickering Energy Partners. Please go ahead your line is open.
David Smith: Take it morning, and thank you for taking my question. Order, David.
David Smith: I wanted to ask about GDI, which I think you acquired about six months ago, but you've been working with them for longer. Can you talk about how you see the opportunities to grow that business and what kind of poll that could have on demand for your ROVs over time?
David Smith: Yeah, so great question, David, and thanks. I think we've been talking about this opportunity.
David Smith: particular for IMDS, and it's why we put this emphasis on integrity managed but also data solutions.
David Smith: This data-driven approach has really helped us do more sort of AI machine learning.
David Smith: assessment of offshore platforms, meaning we can go out there, we can gather data, and we can do predictive modeling to help them, number one, avoid any sort of equipment failure, but number two also maintain a more robust inspection campaign with fewer personnel hours. So that's kind of the gist of GDI, and we think a lot of the customers are really excited about that opportunity to know more with fewer people on the platform. So that's a great combination.
David Smith: The exciting part for us, and one of the reasons we really like GDI, is that it's also an opportunity to do the same thing underwater.
David Smith: It's a laser scanning video approach that we can deploy on ROVs and we can do the same sort of analysis on subsea infrastructure with with ROVs so we're in the testing phase of that
David Smith: and we're confident that it will be a robust solution and therefore drive what currently doesn't exist, this underwater inspection with this sort of technology and that'll create more dive hours for our rupees.
Speaker Change: I appreciate that. Sorry for missed it, but did you provide the mix of R of E support and the first quarter?
Thank you.
Yes, we were 62% drill support 38% vessel based.
Thank you.
Great, thank you.
Speaker Change: Related to, I think I heard you say earlier, for the full year outlook expecting a higher mix of vessel activity compared to recent years, just wanted to ask if there was anything in particular driving that, if it's...
Partnerships, or just being opportunistic.
Speaker Change: They've got this great opportunity. They're going back and forth right now between energy and wind.
Speaker Change: International Wind, and those vessels go all over the world, so they're able to stay busy. I mean, they really do go where the work is. So being on those types of vessels has been really helpful. And then, of course, the increase in activity for OPG drives vessel demand for us.
Speaker Change: and a lot of tooling demand. That's the other thing. When we're operating in our vessels, generally, we've got greater, not just the RVs, but the tooling as well.
Speaker Change: That's a great call. I appreciate it. I'll turn it back.
Thanks.
Speaker Change: Hi, good morning. It's a re-iterated full-year EBITDA guidance despite the volatility in commodity process over the past month.
Speaker Change: Sounds like you're fairly confident in activity levels in the second half of the year. Could you just talk about your confidence level on kind of second half activity holding up.
Speaker Change: which segments would we see that impact first in your financials?
Speaker Change: I think, well, first of all, let me address the confidence. I mean...
Speaker Change: We see the orders come in in the Backlog Build, remember the Backlog Build? Obviously we had a great component from AdTech.
Speaker Change: But we also see it in all the business. We see adding days for OPG, we see, you know, showing up some of the specwork for in the SSR business.
Speaker Change: and IMDS as well. So it's that build and that pipeline actually. Our pipeline looks strong. We see an increase pipeline year over year, and that pipeline, I would call out that not only is it growing, but there's also some great diversification in there.
Speaker Change: and there's some op-ex related work in there. So those are the things that kind of
Speaker Change: to me, you know, that obeculated work is the stuff that...
Speaker Change: that happens through cycle more often than not. I mean, it's the things to keep up production that you have to keep doing.
Speaker Change: and to also deal with anything that comes up. So I think those are the things. I spent some time with customers. We've been going to all the conferences where we get to sit with our peers and our customers.
Speaker Change: I think that as of right now, they're not worried about long-term effects so much, so they're keeping work going. They're talking not just about their forecast, but I mean I've got a lot of great feedback on our execution, so I feel like our customer relationships are strong and until it will be able to stay active through this year.
Speaker Change: I think that we start to see a longer cycle, something that looks, you know, we'll hear more about that but it doesn't seem like that's going to affect, you know, the anything outside of our guidance for 2025.
Speaker Change: You know, and I've said this probably enough times to be annoying, but the cheapest barrels are behind pipe [inaudible]
Speaker Change: and so when we think about light well intervention, some of the IMR work we do, I mean that work is high return. Generally the customers get good pay back on a lot of the work we do with OBG so if you're going to start cutting your budget, it's probably not.
Speaker Change: It's probably not the easiest thing to cut. I think you want to maintain those current assets. So I'd say that while they do see some of that volatility for callout work, generally the markets doesn't drop off early.
Speaker Change: And then, of course, Long Pipeline on some of the other work. The INBS contracts are longer. The backlog in the manufactured products is longer and that I doesn't apply here. So, I think that's kind of the order of...
kind of time, time dependency on our decisions.
Speaker Change: For any additional questions, please press star followed by one on your telephone key pass.
Eddie: Eddie, did we lose here? Or do you have another question?
So I bet that I am...
Eddie: My phone was put on mute for some reason. Yeah, just my follow-up actually is on ROV's average revenue per day, which looked like, you know, it helped flap sequentially for the first
Eddie: six quarters. Just given market conditions, should we expect this all of these day rates to remain fairly steady through the end of the year, or would you expect it to exceed 11,000 at some point this year?
Yeah, Eddie, this Alan.
Eddie: We're still projecting that we would be able to get some level of pricing our guidance last time was it would be a little bit more muted than what we saw.
Our Billed to Move Price in 2024.
The team is-
Okay.
Great. Thanks for that. I'll turn it back. Thanks too.
Speaker Change: Hi, next question comes from Colby Saso from Daniel Energy Partners. Please go ahead. Your line is open.
David Smith, Roderick Larson, Sungeun,
Hi. Thanks for having me on.
Speaker Change: We continue to see a lack of intermittent incremental contracts on the rig side, yet utilization of your asset control support continues to be strong.
Speaker Change: Even if the red count falls throughout 25, how are you looking at the opportunities to grow the ROV business and 26 and beyond?
Speaker Change: Yeah, hopefully I think it really depends on, you know, we see the shift in vessel activity and so as the vessel activity remains strong or even increases in some case in intensity, that would be the biggest offset.
Speaker Change: But again, I think unfortunately those things don't operate independently. So if you see a protracted
Speaker Change: Negative sentiment and everybody pull back. I think if they start dropping rigs, and wind absorbs as much, and I'm talking about international and obviously the US wind is challenged.
Speaker Change: But if they absorb what they can on the vessel side, beyond that, I think it's a challenging market. We don't see that happening in 25.
Speaker Change: I don't, you know, as I mentioned before, our customer conversations, you know, we talk to customers who say, you know, one person throws out that it has to be sub 50 before they reduce their active rig count.
Speaker Change: I mean, anecdotally, it just doesn't look like, especially thinking about, remember, we operate for the big operators. They got long-term plans in deep water, so unless this looks like a protracted downturn, generally these 10-year projects, 20-year projects, would longer life cycles than that.
Speaker Change: They don't bend easily for what looks like a short-term drop in commodity price. So I think overall we're starting to see more of that.
Speaker Change: Yeah, I might add one additional thing here, Kobe, is, you know, we had the question earlier from David Smith about GDI and I think it's also one of those of how do we start to feed more days into ROV and GDI is an excellent example of why we invest in that business.
Speaker Change: So, being able to go out in and do more work with ROVs.
Speaker Change: Not only just getting the pictures and the data set, but also if you see anomalies, then you need to take your vessel with OPG back out and go for more, which...
Speaker Change: You know, we always say we are a solution provider here at Oceaneering and, you know, so we provide tooling as well, so it's not just about the ROV, but it's also what we do with the ROV and how we operated with the vessels with the tooling's suites that we offer as well.
Speaker Change: So I think we offer a more holistic solution to many of our customers.
Speaker Change: Thank you so much for the color. I'll turn it back.
Thank you all.
Speaker Change: We have no further questions in queue. I'd like to turn the call over to Rod Larson for any closing remarks. Awesome. Well, thank you. Since there are no more questions, I'll just wrap up by thanking everyone for joining the call. This concludes our first quarter 2025 conference call. Thanks, everybody.
Thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.