Q2 2025 Civeo Corp Earnings Call
Operator: I will now turn the conference over to your host, Regan Nielsen. Please go ahead.
Session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Ragen Nielsen. Please go ahead. Thank you and welcome to <unk> second quarter 2025 earnings conference call today.
Regan Nielsen: Thank you. Welcome to Civeo's Q2 2025 Earnings Conference Call. Today, our call will be led by Bradley Dodson, Civeo's President and Chief Executive Officer, and Collin Gerry, Civeo's 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 are relying on the safe harbor protections afforded by federal law. These forward-looking remarks speak only as of the date of our earnings release and this conference call. We undertake no obligation to update or revise these forward-looking statements, except as required by law. Any such remarks should be read in the context of the many factors that affect our business, including risks and uncertainties disclosed in our Forms 10-K, 10-Q, and other SEC filings. I'll now turn the call over to Bradley.
Our call will be led by Bradley Dodson, <unk>, President and Chief Executive Officer, and Colm and Gary <unk>, 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.
These forward looking remarks speak only as of the date of our earnings release and this conference call. We undertake no obligation to update or revise these forward looking statements except as required by law.
Any such remarks should be read in the context of the many factors that affect our business, including risks and uncertainties disclosed in our forms 10-K, 10-Q, and other SEC filings I will now turn the call over to Barry.
Thank you Regina and thank you all for joining us today for our second quarter 2025 earnings call.
Bradley Dodson: Thank you, Regan, and thank you all for joining us today on our Q2 2025 earnings call. I will start by highlighting some of the key takeaways before walking through a brief summary of our Q2 2025 financial results. Collin will provide financial and segment level review. I will conclude with our 2025 guidance and the underlying regional assumptions, we will open the call up for questions. Turning to our key takeaways, I will start with significant progress that we have made towards completing our expanded share repurchase authorization. We capitalized on equity market softness earlier in the Q2 to repurchase 883,000 common shares, which is approximately 7% of Civeo's common shares outstanding. These repurchases made since the announcement of our new capital allocation plan equate to 30% of that new buyback authorization as of 30 June 2025.
I'll start by highlighting some of the key takeaways before walking through a brief summary of our second quarter of 2025 financial results, then Collin, who will provide financial and segment level review.
I'll conclude with our 2025 guidance and the underlying regional assumptions and then we will open the call up for questions.
Turning to our key takeaways I'll start with significant progress that we've made towards completing our expanded share repurchase authorization.
We capitalized on the equity market softness earlier in the second quarter.
Repurchase 883000 common shares which is approximately 7% of <unk> common shares outstanding.
These repurchases made since the announcement of our new capital allocation plan.
Wait to 30% of that new buyback authorization as of June 32025.
<unk> has now repurchased approximately 27% of its common shares outstanding since we began our share repurchase program. That's August of 2021.
Bradley Dodson: Civeo has now repurchased approximately 27% of its common shares outstanding since we began our share repurchase program in August 2021. We believe that share repurchases represent a compelling use of capital, especially during broad equity market volatility. Given the accelerated buybacks and the recently completed acquisition, we have now reached the upper end of our target net leverage ratio of 2x. We are comfortable with that ratio as we continue to execute under our share repurchase program. We remain committed to completing the 20% share repurchase authorization as soon as practicable and intend to use no less than 100% of the annual free cash flow to achieve that goal. I'll now move to some comments on the regional results. In Australia, we remain focused on growing our integrated services business and integrating the recent acquisition.
We believe that share repurchases represent a compelling use of capital, especially during the broad market equity market volatility.
Given the accelerated buybacks in the recently completed acquisition.
We have now reached the upper end of our target net leverage ratio of two times, we're comfortable with that ratio as we continue to execute under our share repurchase program.
We remain committed to completing the 20% share repurchase authorization as soon as practicable and intend to use no less than 100% of the annual free cash flow to achieve that goal.
I'll now move to some comments on the regional results.
In Australia, we remain focused on growing our integrated services business and integrating the recent acquisition Reg.
Revenue in the region increased 4% year over year or 7% on a constant currency basis, and adjusted EBITDA grew by 10%.
Bradley Dodson: Revenue in the region increased 4% year over year or 7% on a constant currency basis. Adjusted EBITDA grew by 10% or 12% on a constant currency basis. Contributions from the newly acquired Bowen Basin villages and growth in our integrated services business are driving the strong margins that we experienced in the Q2. Based on current customer discussions and our base of contracted room nights, we expect our current Australian occupancy levels to continue through the rest of the year, despite weakening in coal prices experienced recently. We completed the acquisition of 4 villages in May and began integrating them into our operations. Approximately 2 months of those results were included in our Q2 2025 results. We are pleased with their early contributions. We look to realize further margin leverage going forward. Additionally, we recently announced 2 contracts in Australia in the Bowen Basin.
Or 12% on a constant currency basis cant.
Contributions from the newly acquired Bowen basin villages and grids in our integrated services business.
Are driving the strong margins that we experienced in the second quarter.
Based on current customer discussions and our base of contracted room nights, we expect our current Australian occupancy levels to continue through the rest of the year. Despite weakening in met coal prices.
Experienced reasonable.
We completed the acquisition of four villages in May.
And began integrating them into our operations approximately approximately two months of those results were included in our second quarter 2025 results.
We are pleased with their early contributions and we look to realize further margin leverage going forward.
Additionally, we recently announced two contracts in Australia in the Bowen basin.
Our renewal of a contract with an existing customer renewal is a four year take or pay agreement at our own villages with expected revenues over the contract term of $250 million Australia.
Bradley Dodson: A renewal of a contract with an existing customer. The renewal is a a 4-year take-or-pay agreement at our owned villages, with expected revenues over the contract term of AUD 250 million. The second contract previously announced is a 3-year integrated services contract worth approximately $64 million in revenue. These awards validate our winning strategy and position us for continued momentum and growth in Australia. In Canada, Q2 saw the typical seasonal increase in occupancy relative to Q1, driven by turnaround activity in the core oil sands region. However, on a year-over-year basis, turnaround occupancy remains subdued. Conditions in Canada remain challenging given the macroeconomic headwinds, which include low and uncertain oil prices and our customers' fiscal conservatism. Customers remain steadfast in their singular focus on cost reductions in response to oil price and political uncertainty and investor pressure to return capital to shareholders.
The second contract.
As previously announced as the three year integrated services contract worth approximately $64 million in revenue.
These awards validate our winning strategy and position us for continued momentum and growth in Australia.
In Canada, the second quarter saw the typical seasonal increase in occupancy relative to the first quarter driven by turnaround activity in the core region of the core Oilsands region.
However, on a year over year basis turnaround occupancy remains subdued.
Conditions in Canada remains challenging given the macroeconomic headwinds, which include low and uncertain oil prices and our customers' fiscal conservatism.
Customers remain steadfast in our singular focus on cost reductions in response to oil price and political uncertainty and investor pressure to return capital to shareholders.
We remain focused on controlling what we can control.
Bradley Dodson: We remain focused on controlling what we can control. We continue to take steps to optimize our cost structure in Canada and align our business with the realities of the current environment without sacrificing our ability to capitalize on opportunities to diversify our business away from the oil sands region. Overall, we are executing on our strategic priorities in each region. In Australia, our Australian business is hitting on all cylinders. While the Canadian headwinds remain, we know this market well and are working with our strategic partners to understand how we can continue to support them as we capitalize on evolving opportunities in the region. We are taking decisive action to apply our resources to position Civeo for long-term resilience and cash generation. With that, I'll turn it over to Collin.
We continued to take steps to optimize our cost structure in Canada and align our business with the realities of the current environment without sacrificing our ability to capitalize on opportunities to diversify our business away from the oil sands.
Overall, we are executing on our strategic priorities in each region.
In Australia, our Australian business is hitting on all cylinders and while the Canadian headwinds remain we know this market well and we're working with our strategic partners to understand how we can continue to support them as we capitalize on volume opportunities in the region.
We are taking decisive action to apply our resources to position <unk> for long term resilience and cash generation.
With that I'll turn it over to Colin.
Thank you Bradley. Thank you all for joining us this morning.
Collin Gerry: Thank you, Bradley. Thank you all for joining us this morning. Typically, I would first focus on expanding more on the underlying drivers of the results in the income statement. However, the real story for this Q2 relates to the balance sheet and the impact of our recent capital allocation. As Bradley mentioned, we made significant progress on our buyback authorization, completing 30% of the program in Q2. In addition, we executed on accretive growth through our acquisition in Australia. As a result, our net debt increased by $95 million in Q2, primarily driven by $65 million deployed for our recent Australian acquisition and $19 million deployed for share buybacks. Consequently, our net debt was $154 million as of 30 June 2025, resulting in a net leverage ratio of 2 times.
Typically I would first focus on expanding more on the underlying drivers of the result in the income statement. However, the real story for this quarter relates to the balance sheet.
The impact of our recent capital allocation.
Rafi mentioned, we made significant progress on our buyback authorization completing 30% of the program in the second quarter and.
In addition, we executed on accretive growth through our acquisition in Australia. As a result, our net debt increased by $95 million in the second quarter, primarily driven by $65 million deployed for our recent Australian acquisition and $19 million deployed for share buybacks.
Consequently, our net debt was $154 million as of June 32025, resulting in a net leverage ratio of two times.
Turning to the income statement today, we reported total revenues in the second quarter of $162 7 million with a net loss of $3 3 million or <unk> 25 per diluted share.
Collin Gerry: Turning to the income statement, today we report total revenues in Q2 of $162.7 million, with a net loss of $3.3 million or $0.25 per diluted share. During Q2, we generated adjusted EBITDA of $25 million and negative operating cash flow of $2.3 million. Our free cash flow was burdened by a working capital build in the quarter and the expected payment of Australian income taxes, which included a large payment related to the prior year. The decrease in adjusted EBITDA in Q2 of 2025 compared to the year ago period was primarily due to the decreased billed rooms at the Canadian lodges. We expect this lower level of customer spending to continue as producers in the region remain keenly focused on reducing costs.
During the second quarter, we generated adjusted EBITDA of $25 million and negative operating cash flow of $2 $3 million.
Our free cash flow was burdened by a working capital build in the quarter and the expected payment of Australia and income taxes, which included a large payment related to the prior year.
The decrease in adjusted EBITDA in the second quarter of 2025 compared to the year ago period was primarily due to the decreased billed rooms at the Canadian lodges.
This lower level of customer spending to continue as producers in the region remain keenly focused on reducing costs.
As we mentioned we are taking action to cut costs and streamline the business and identifying additional opportunities across the region.
Collin Gerry: As we mentioned, we are taking action to cut costs and streamline the business and identifying additional opportunities across the region. Q2 revenues from our Australian segment were $112.7 million, up 4% from $108.6 million in Q2 2024. Adjusted EBITDA was $23.7 million, up 10% from $21.6 million in Q2 2024. The increase in revenues and adjusted EBITDA was primarily driven by the recently completed acquisition of four owned villages, as well as margin improvement in the integrated services business. The year-over-year increase was offset by the impact of a weakened Australian dollar relative to the US dollar, which decreased revenues and EBITDA by $3.2 million and $0.7 million respectively. Australian owned village billed rooms in the quarter were 690,000 rooms, up 10% from Q2 2024, primarily due to our recently completed acquisition.
Second quarter revenues from our Australia segment were $112 $7 million.
Up 4% from $108 6 million in the second quarter of 2024, adjusted EBITDA was $23 7 million up 10% and $21 6 million in the second quarter of 2020.
The increase in revenues and adjusted EBITDA was primarily driven by the recently completed acquisition of $4 villages as well as margin improvement in the integrated services business.
Year over year increase was offset by the impact of a weakened Australian dollar relative to the U S dollar, which decreased revenues and EBITDA by $3 2 million and <unk> 7 million respectively.
China and diligence village billed rooms in the quarter was 690000 rooms.
Up 10% from the second quarter of 2024.
Primarily due to recently to our recently completed acquisition, our daily room rate for Australian villages in U S dollars was $76, which decreased from $78.
Collin Gerry: Our daily room rate for Australian owned villages in US dollars was $76, which decreased from $78 in Q2 2024, primarily due to the weakening of the Australian dollar. Turning to Canada, we reported revenues of CAD 50 million compared to revenues of CAD 79.5 million in Q2 2024. Adjusted EBITDA for the segment was CAD 7.5 million, a decrease from CAD 17.3 million in Q2 2024. As noted, the year-over-year revenue and adjusted EBITDA decreases were driven by lower billed rooms as our customers focus on cost and headcount reductions, as well as the loss of Fort Hills related occupancy from the sale of our McClellan Lake Lodge. During Q2, billed rooms in our Canadian lodges totaled 450,000, which was down from 752,000 in Q2 2024.
In the second quarter of 2024, primarily due to the weakening of the Australian dollar.
Turning to Canada.
We reported revenues of $50 million compared to revenues of $79 5 million in the second quarter of 2015 adjusted.
Adjusted EBITDA for the segment was $7 5 million a decrease from $17 3 million in the second quarter of 2024.
As noted the year over year revenue and adjusted EBITDA decreases were driven by lower billed rooms, as our customers focus on cost and head count reductions as well as the loss of Fort Hills related occupancy from the sale of our Mcclelland Lake Lodge.
During the second quarter billed rooms in our Canadian lodges totaled $450000, which was down from 752000 in the second quarter of 2024, our daily room nights for the Canadian segment in U S dollars was $94, which decreased from 96 in the second quarter of 2020, primarily due to the weakening of the Canadian dollar.
Collin Gerry: Our daily room rates in the Canadian segment in US dollars was $94, which decreased from $96 in Q2 2024, primarily due to the weakening of the Canadian dollar. Looking at our capital structure, as mentioned earlier, Civeo's net debt as of 30 June was $154 million, a $95 million increase since 31 March 2025, attributable to our recent acquisition as well as the significant progress made on our share repurchase authorization in the quarter. Our net leverage ratio for the quarter was 2 times, with total liquidity of approximately $73 million. Given the accelerated buybacks and recently completed acquisitions, as mentioned, we have now reached the high end of our target net leverage ratio at 2 times.
Looking at our capital structure as mentioned earlier <unk> net debt as of June 30 was.
$154 million and $95 million increase since March 31, 2025 attributable attributed attributable to our recent acquisition as well as the significant progress made on our share repurchase authorization in the quarter.
Our net leverage ratio for the quarter was two times with total liquidity of approximately $73 million.
Given the accelerated buybacks and recently completed acquisitions as mentioned we have now reached the high end of our target net leverage ratio of two times.
Allocated $22 $5 million to share repurchases in the first half of 2025 and assuming current valuations, we expect to utilize free cash flow to remain active repurchasing shares in the back half of the year, we will target a year ending leverage ratio of approximately two times.
Collin Gerry: We have allocated $22.5 million to share repurchases in H1 2025. Assuming current valuations, we expect to utilize free cash flow to remain active repurchasing shares in the back half of the year. We will target a year-ending leverage ratio of approximately 2 times. Turning to capital allocation, I'll start with CapEx. On a consolidated basis, capital expenditures for Q2 2025 were $4.5 million, down from $5.3 million during Q2 2024. Capital expenditures in both periods were predominantly related to maintenance spending on our lodges and villages. As noted during Q2 2025, we repurchased approximately 883,000 shares through our share repurchase program for a total cost of approximately $19.1 million.
Turning to capital allocation.
I'll start with Capex on a consolidated basis capital expenditures for the second quarter of 2025 or $4 $5 million down from $5 3 million during the second quarter of 2020.
Capital expenditures in both periods were predominantly related to maintenance spending.
On our lodges and villages as.
As noted during the second quarter of 2025, we've repurchased approximately 883000 shares through our share repurchase program for a total cost of approximately $19 $1 million.
With our recently increased share repurchase authorization and commitment to accelerating our return of capital to shareholders. We continue to believe that repurchasing shares <unk> shares presents a value enhancing opportunity.
Collin Gerry: With our recently increased share repurchase authorization and commitment to accelerating the return of capital to shareholders, we continue to believe that repurchasing Civeo shares presents a value enhancing opportunity. Q2 market softness gave us an excellent buyback opportunity. We've made great progress on our current share repurchase authorization, and we will continue to opportunistically execute on our plan moving forward. With that, I'll turn it back over to Bradley.
Second quarter market softness gave us an excellent buyback opportunity we've made great progress on our current share repurchase authorization and we will continue to opportunistically execute on our plan moving forward with that I'll turn it back over to Brad.
Thank you Colin.
I would now like to turn.
Bradley Dodson: Thank you, Collin. I would now like to turn our discussion over to the full year 2025 guidance on a consolidated basis, including our underlying macroeconomic and regional assumptions. We are maintaining our full year 2025 revenue and adjusted EBITDA guidance. We continue to look for revenue this year to be in a range of $640 to 670 million, and adjusted EBITDA to be in the range of $86 to 96 million. We are also maintaining our full-year capital expenditure guidance, which was a range of $20 to 25 million. I'll now provide the regional outlooks and corresponding underlying assumptions. In Australia, customer activity in our own villages remains very strong. Bowen Basin villages continue to operate effectively at full capacity, and we are seeing strong occupancy across the remainder of our own village portfolio.
Our discussion over to the full year 2025 guidance on a consolidated basis, including our underlying macroeconomic and reasonable assumption.
We are maintaining our full year 2025 revenue and adjusted EBITDA guidance. We continue to look for revenue this year to be in a range of $640 million to $670 million.
And adjusted EBITDA to be in the range of $86 million 96 billion.
We're also maintaining our full year capital expenditure guidance, which was a range of 20 million to $25 million.
I will now provide the regional outlooks in coiled corresponding underlying assumptions.
In Australia customer activity in our own villages remains very strong.
We have our Bowen basin villages continue to be effectively.
Continue to operate effectively at full capacity and we are seeing strong occupancy across the remainder of our own village portfolio.
Despite weakening met coal prices in the first half of the year. We continue we expect continued strength in our own villages throughout the balance of the year.
Bradley Dodson: Despite weakening met coal prices in H1 of the year, we expect continued strength in our own villages throughout the balance of the year. As it relates to our integrated services business, we are encouraged by the top-line growth as well as the year-over-year margin improvement experienced in H1 of the year. We'll continue to focus on executing cost effectively on our recent contract awards. We expect to build on this through the remainder of 2025 and beyond as we work towards our goal of achieving AUD 500 million of Australian integrated services revenues by 2027. In Canada, we continue to navigate the difficult operating environment in the oil sands and lower demand for temporary turnaround activity, which has been exacerbated by broader macroeconomic uncertainty.
As it relates to our integrated services business. We are encouraged by the top line growth as well as the year over year margin improvement experienced in the first half of the year.
And we will continue to focus on executing our cost executing cost effectively as we.
On our recent contract awards.
We expect to build on this through the remainder of 2025 and beyond as we work towards our goal of achieving.
$500 million Australian Australian integrated services revenues by 2027.
In Canada, we continue to navigate the difficult operating environment in the oil sands.
And lower demand for temporary turnaround activity, which is exacerbated has been exacerbated by broader macroeconomic uncertainty.
We expect billed rooms in the second half of the year to be more in line with the second half of 2024.
Bradley Dodson: We expect billed rooms in H2 of the year to be more in line with H2 2024, though more balanced between Q3 and Q4. Lastly, we do not currently foresee any meaningful near-term rebound in upstream oil sands spending. As a result, our focus remains squarely on managing what we can control, executing on our cost reduction initiatives, enhancing operational efficiency, and aligning our resource base with demand realities. During Q2, we took steps to streamline our lodge footprint, including cold closure of 2 lodges. We are actively working with a third-party consulting partner to identify additional opportunities to lower our cost structure in Canada.
So more balanced between the third and fourth quarters.
Lastly, we do not currently foresee any meaningful near term rebound in the upstream oil sands spending.
As a result, our focus remains squarely on managing what we can control.
Executing on our cost reduction initiatives enhancing operational efficiency and aligning our resource base with demand realities.
During the second quarter, we took steps to streamline our large footprint, including pulled closure of two lodges.
Actively working with a third party consulting partner to identify additional opportunities to lower our cost structure in Canada.
While 25 is clearly a transitional year for our Canadian segment. We believe we are executing the decisive actions that were oriented business to capitalize on growth opportunities and position it for long term growth and improved cash flow generation.
Bradley Dodson: While 2025 is clearly a transitional year for our Canadian segment, we believe we are executing the decisive actions that will orient the business to capitalize on growth opportunities and position it for long-term growth and improved cash flow generation. I want to take a moment to thank the hardworking Civeo team for their continued focus on operational excellence. That, together with disciplined capital deployment, is what's driving long-term shareholder value creation. With that, we are happy to take your questions.
I'll take a moment to thank our hardworking Silvio team for their continued focus on operational excellence excellence.
That together with disciplined capital deployment is what's driving long term shareholder value creation.
With that we're happy to take your questions.
Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from David Storms with Stonegate.
A confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
And our first question will come from Dave storms with Stonegate.
Good morning.
Just wanted to start with maybe some of the puts and takes on your guidance on a macro level. We've seen a couple of trade deals get announced in the U S over the.
David Storms: Morning. Just wanted to start with maybe some of the puts and takes on your guidance at a macro level. We've seen a couple of trade deals get announced in the US over the last couple of weeks. Do any of those deals give you confidence to maybe relook at that guidance? Is there a chance that it could be biased towards the upside or the downside? Just curious as to what your thoughts are relative to that.
Last couple of weeks.
Do any of those deals.
Gives you confidence to maybe.
When you look at that guidance is there a chance that it could be bias towards the upside or downside just curious as to what your thoughts are relative to that.
We have been watching the trades the international trade situation very closely.
Bradley Dodson: We have been watching the international trade situation very closely. Obviously, thus far to date, the impact of the trade uncertainty has not impacted our business either in Canada or Australia significantly, although we watch it very closely, where the impact primarily to food costs has been felt in a very minor fashion in Canada. We're keeping an eye on it to make sure that doesn't accelerate. Most of our focus has been on whether trade uncertainty or disruption will impact our customers and how that might influence their need for rooms or their spending. Thus far, we've not seen any material impact either previously or with recent announcements.
Obviously.
Thus far to date the impact of the trade uncertainty has not impacted our business either in Canada, or Australia significantly, although we watch it very closely.
The impact primarily to food costs has been felt.
In a very minor fashion in Canada.
We're keeping an eye on it to make sure that doesn't accelerate most of our focus has been on whether the trade uncertainty or disruption will impact our customers and how that might influence their need for rooms are theyre spending, but thus far we've not seen any material impact.
Either previously or with recent announcements.
Understood. That's very helpful. Thank you and then just wanted to turn to the acquisition that you completed in the quarter.
David Storms: Understood. That's very helpful. Thank you. Just want to turn to the acquisition that you completed in the quarter. I know you mentioned that you're expecting maybe a little bit of additional margin increase as you continue to integrate that. I did want to double-check, though, about the $4.9 million in roughly 2 months. Does a $30 million run rate sound fair for that property on the full year? Are there other maybe synergies that could be squeezed out of that?
You mentioned that you're expecting maybe a little bit of additional margin increase as you are.
Can you to integrate that.
I did wanted double check, though about the $4 9 million and roughly two months does that $30 million run rate sound fair for that property on the full year or are there other maybe synergies that can be squeezed out of that.
On the run rate.
Bradley Dodson: On the run rate. I mean, originally, we had talked about $11 million in impact in 2025 in terms of EBITDA. That was assuming we were going to close at the beginning of April. We had closed at the beginning of May. The fundamentals of that are intact. Right now, we're not expecting. No change to our outlook at this point. Operationally, our team is doing a good job of folding that into our operations. With met coal prices being a little shaky here recently, I think it is too early to make a call for improvement.
Okay.
I mean.
Originally we had talked about $11 million and impact in two.
2025 in terms of EBITDA.
We that was assuming we were going to close at the beginning of April we had closed at the beginning of May.
So, but the fundamentals of that are intact.
Right now, we're not expecting so no change to our outlook at this point.
<unk>.
Operationally things are the team is doing a job of folding that into our operations with met coal prices.
Being a little shaky here recently I think it's too early to make a call for improvement.
Understood. Thank you for taking my questions I'll get back in line.
David Storms: Understood. Thank you for taking my questions. I will get back in line.
Our next caller comes question comes from Steve <unk> with Sidoti and company.
Operator: Our next question comes from Steve Ferazani with Sidoti & Company.
Good morning, everyone.
Bradley Your guide would seem to imply even if we add in the full six months of the fourth villages.
Steve Ferazani: Morning, everyone. Bradley, your guide would seem to imply, even if we add in the full 6 months of the 4 villages, that the H2 does look, from a profit standpoint, to be better than the H1. Can you walk through, is that better turnaround activity in Q3? Is that more impact from the cost cuts? Can you get us to what gets the H2 to at least be moderately better than your H1?
The second half does luck from a profit standpoint to be better than the first half can you walk through is that.
Better turnaround activity in <unk> is that more impact from the cost cuts can you get get us to what what gets the second half to at least be moderately better than your first half.
Yes, I would say that.
Bradley Dodson: Yeah, I would say that Canada Q2, Q3 looks fairly stable overall, both on the top line and on the adjusted EBITDA line. We'll expect in Canada in Q4 to have normal seasonal downtime for the holiday season. In Australia, Q3 will be an improvement over Q2. One, because of the full quarter of the 4 acquired villages. Two, because of the integrated services business that we won in the Bowen Basin that we announced, and then continued strength in the base business, primarily the owned villages and the base level of integrated services.
<unk>.
Canada second quarter third quarter looks fairly stable overall, both on the top line and on.
EBIT adjusted EBITDA line.
We will expect in Canada in the fourth quarter to abnormal seasonal.
Downtime for the holiday season.
In Australia.
The third quarter will be an improvement over.
The second quarter.
One because of the.
The full quarter.
Before acquired villages.
Two because of the integrated services business that we won in the Bowen basin that we announced.
And then continued strength in the base business.
Primarily.
The owned villages and the base level of integrated services.
Great that's helpful.
Steve Ferazani: Great. That's helpful. Obviously, we're all looking at the met coal prices and thinking that would be a concern. Then you announce a very large contract renewal for 4 years. I don't want to ask you if you were surprised by that. What's your gauge on your customers in Australia, given what we're seeing, the extreme volatility in prices and recent weakness that you're getting those lengthy extensions, particularly with larger customers?
Obviously, we're all looking at the met coal prices and thinking that would be a concern, but then you announced a very large contract renewal for four years.
We used I'm not I wanted to ask if you were surprised by that but what's what's your gauge on your customers in Australia, given what we've seen.
The extreme volatility in prices and recent weakness that you're getting those.
Lengthy extensions, particularly with larger customers.
Well I think it speaks to the service level, which is a combination of.
Bradley Dodson: Well, I think it speaks to the service level, which is a combination of the field team doing a good job on boot service and housekeeping, coupled with an exceedingly strong safety record. That coupled with a portfolio that can meet the customer's needs across several of their projects, across several of our villages. I think it's being close to the customer, and as they've grown over the last 5 years, we've been able to serve that group consistently, effectively, at an economic price for them. I would say that your point is that, or your question implies something that's very valid, which is, there is uncertainty in the market. While that is a great win, I would say that it's relatively shaky. With our contracted rooms base in Australia, we feel pretty good about H2 2025 going into 2026.
The field team doing a good job on food service and housekeeping, coupled with exceedingly strong safety record.
That coupled with the portfolio.
Does that can meet the customers' needs across several several of their projects across several of our villages.
And I think it's being close to the customer and as they've grown over the last five years, we've we've been able to serve that growth consistently effectively.
And at an economic price after them.
But I would say that your point is that our your question implies something that's very valid which is.
There is uncertainty in the market.
While that was a great win I would say that.
Yes.
It's relatively shaky so with our contracted rooms.
Based in Australia, we feel pretty good about second half of 2025 going into 2026.
But as it relates to customers if they have us as a hypothetical.
Bradley Dodson: As it relates to customers, as a hypothetical, they have a contracted minimum of 500 rooms. We have a handful of customers, several customers that are using more than their contracted minimums. What starts to get called into question is how much of that above the contracted minimum are they going to use? Are they going to start deferring maintenance projects? Are they starting to push things to the right? I think that in the met coal, the current met coal commodity price environment, that becomes a little bit more uncertain. As we sit here today, we feel good about things, but the met coal price puts our antennae up and we got to pay attention.
Our contracted minimum of 500 rooms.
A handful of customers several customers that are using more than their contracted minimums what starts to get called into question is how much of that.
Above the contracted minimums are they going to use are they going to start deferring.
Maintenance projects that are starting to push things to the right in this in the met coal the current met coal commodity price environment that becomes a little bit more uncertain.
So as.
As we sit here today, we feel good about things, but met coal price.
NII up and we got to pay attention.
Got it that's fair.
If I can get one more in just about free cash flow. Obviously, the first half you've seen an outflow you talked about using 100% or more of free cash flow for the share buyback can you put can you talk a little bit about.
Steve Ferazani: Got it. That's fair. If I can get one more in just about free cash flow. Obviously, H1 you've seen an outflow. You talked about using 100% or more of free cash flow for the share buyback. Can you talk a little bit about how this trends over the next couple of quarters, given the outflows from H1? I didn't hear you update the free cash flow guide.
Oh this trends over the next couple of quarters, given the outflows from the first because I didn't hear you update the free cash flow guide.
Yes, so as it relates I guess, if the underlying question is related to that.
Bradley Dodson: Yeah. Is the question related to the repurchase program or just free cash flow in general?
Just a question related to <unk>.
Repurchase program or just free cash flow in general.
Well I mean, if you don't generate free cash flow, it's going to affect the buyback. So I guess at the core of the question is is this free cash flow going to be much stronger in the second half or how are you thinking about it.
Steve Ferazani: Well, I mean, if you don't generate free cash flow, it's going to affect the buyback. I guess at the core of the question is free cash flow going to be much stronger in H2, or how are you thinking about it?
Our free cash flow will be stronger in the second half yes.
Bradley Dodson: Free cash flow will be stronger in H2, yes. As you know, having followed us for as long as you have, seasonally or just through history, H1 free cash flow is always weaker.
We had.
As you as you know, having followed us for as long as you have.
Seasonally or just through history. The first half free cash flow is always weaker.
Yes, I have a ramp up in receivables as we come out of the holiday.
Steve Ferazani: Yep.
Bradley Dodson: We have a ramp-up in receivables as we come out of the holiday slow period. We have some structural things, including insurance and property taxes would typically hit in the H1 of the year. Then you throw on top of that, we're now a cash taxpayer in Australia. That started in earnest with the 2024 fiscal year. Those payments, as Collin noted, there was a big one this quarter that was related to 2024. Free cash flow would be better in the H2. Just to remind everyone, our capital allocation plan is to spend no less than 100% of free cash flow on the buyback until we get our 20% buyback authorization. We will continue to be active in the H2 of the year on the buyback program. That's expected to.
Slow period.
We have some structural things, including insurance and property taxes, which typically hit in the first half of the year.
You throw on top of that.
We're now a cash taxpayer in Australia.
That started in earnest with the 2024.
Fiscal year.
Those payments.
As Colin noted there was a big one this quarter that was related to 2024.
So free cash flow would be better in the second half.
Just to remind everyone our paddle outpatient planning to spend no less than 100% of free cash flow on the buyback until we get our 20%.
Buyback authorization. So we will continue to be active in the second half of the year on the buyback program.
So that that's expected to.
Okay.
Okay fair enough. Thanks PRASM.
Steve Ferazani: Okay. Fair enough. Thanks, Bradley.
Okay.
Bradley Dodson: Thank you.
And again that is star one if he would like to ask a question and we'll go next to Jawad Bouillon with Stifel.
Operator: Again, that is star one if you would like to ask a question. We'll go next to Jawad Bhuiyan with Stifel.
Hi, everyone. This is gerard on for Stephen Giga.
Jawad Bhuiyan: Hi, everyone, this is Jawad on for Stephen Gengaro. I just had a quick question on the Canadian occupancy, I guess. Given the continued weakness in billed rooms and then also coupled with the turnaround activity that you've seen, I guess could you speak a little bit on what you're seeing so far in Q3 and then maybe whether there's any signs of stabilization or improvements as we go into H2? Thanks.
I just had a quick question on the Canadian occupancy I guess give.
Given the continued weakness in <unk>.
Billed rooms, and then also coupled with the turnaround activity that you've seen I guess could you speak a little bit on what youre seeing so far in <unk> and then <unk>.
Maybe whether there's any signs of stabilization or improvement as we go into the second half of the year.
Thanks.
Yeah.
Sure as it relates to Canadian occupancy.
Bradley Dodson: Sure. As it relates to Canadian occupancy, in the Q2 and Q3, it always depends on turnaround activity. As we sit here today, the Q3 has been a continuation of the Q2. In order to hit what's implied in guidance, we will need to see some expected turnaround activity come to fruition in Canada, particularly in the next couple of months. If that does not come to fruition, we'll miss that part of guidance. As of right now, it looks like we should see a pickup here July to August and August to September as it relates to Canadian occupancy. As always, turnaround activity is uncertain and could run longer into the Q4. That's not currently contemplated in guidance. I would say that generally speaking, there is some stabilization in the Canadian occupancy.
Second quarter and third quarter, it always depends on turnaround activity.
As we sit here today.
Third quarter has been a continuation of the second quarter.
In order to hit what's implied in guidance, we will need to see some turnaround expected turnaround activity come to fruition.
Canada, particularly in the next couple of months.
So if that does not come to fruition.
We will miss that part of the guidance as of right now.
It looks like we should see a pickup here July to August.
In August to September as it relates to Canadian occupancy.
As always turnaround activity.
It.
Is uncertain.
And could run longer into the fourth quarter, that's not currently contemplated in guidance.
But I would say that generally speaking.
There is some stabilization in the Canadian op.
Got it thank you I'll pass it on.
Jawad Bhuiyan: Got it. Thank you. I'll pass it on.
Okay.
Moving on to John Daniel with Daniel Energy Partners.
Operator: Moving on to John Daniel with Daniel Energy Partners.
Hey, broadly, thanks, and Colin Thanks for including me.
John Daniel: Hey, Bradley, thanks. Collin, thanks for including me. Bradley, I've got perhaps a basic question, so apologies for the ignorance. As you look at Australia, today you've got multiple US service companies there, Halliburton, Liberty, HP. Can you walk me through just the longer-term opportunity set? I'm not looking for specific guidance per se, but just what the opportunity exists with supporting that segment of companies coming over there. Just give me that market update, if you don't mind.
Grab that got perhaps a basic question so apologies for the ignorance, but as you look at Australia today, you've got multiple U S service companies, they're Halliburton Liberty H P.
Can you walk me through the just the longer term opportunity set and I'm not looking for specific guidance per se, but just.
What the opportunity exists with supporting that that segment of companies coming over there.
Okay give me that market update if you don't mind.
Okay.
Yes.
Today.
Bradley Dodson: Yeah. Well, today and historically, our oil and gas exposure in Australia has been, I would, minimal to de minimis. For us, our exposure has been at our Wrathell location, which from time to time has supported onshore and offshore LNG activity.
Our Australian operations with the exception of it well today.
Today than historically.
Our oil and gas exposure in Australia has been minimal.
Minimal to de Minimis.
And.
For us our exposure has been at or wrath of location.
I wish it from time to time is supported.
Onshore and offshore.
LNG activity.
As it relates to onshore land oil and gas development.
John Daniel: Okay.
Bradley Dodson: As it relates to onshore land oil and gas development, this goes back over 10 years. We did a little bit of work as it related to the Curtis Island LNG work in Queensland, but that's long gone in terms of the opportunity for accommodations work. On a go-forward basis, as it relates to oil and gas opportunities in Australia, it would likely be a natural gas drilling project, something similar to the Santos project in New South Wales. Our Boggabri and Narrabri locations are well suited to support that, should that move forward. There seems to be political momentum to support further natural gas drilling in that they're facing higher power prices and are starting to get more comfortable with natural gas being an answer to what will be a electricity availability and cost issue.
This goes back over 10 years, we get a little bit of work as it related to the Curtis Island, LNG work and Queensland, but that's.
On in terms of the opportunity for accommodations work.
On a go forward basis as it relates to oil and gas opportunities in Australia.
Would likely be.
Natural gas drilling project something similar to the Santos project in New South Wales.
Our Bob O'brien narrow Brian locations are well suited to support that should that move forward.
There seems to be.
Political.
Momentum.
To support further natural gas drilling and that they are facing higher power.
We're facing all countries facing higher power prices are starting to get more comfortable with natural gas being an answer to what will be.
Electric electricity availability and cost issue.
Okay.
So nothing now.
John Daniel: Okay. Nothing now, but I guess, what do you think these companies are doing for accommodations for their workers? Because it is remote, isn't it?
Do you see I guess.
What do you think these companies are doing it for a combinations for their workers.
It is remote isn't it.
It is.
A lot of it is in a space that we don't currently play in which is we do not have mobile camps.
Bradley Dodson: It is. A lot of it is in a space that we don't currently play in, which is we do not have mobile camps in Australia. It's something we've looked at in the past, and we'll continue to look at in the future. I don't see it as being a major driver for us.
In Australia, it's something we've looked at in the past.
And in May and will continue to look at it in the future.
I don't see it as being a major driver for us.
I think the Australia business can grow if they're there.
John Daniel: Sure.
Bradley Dodson: Where I think the Australian business can grow is there are specific properties in our core business that would be additive if we were to acquire them, and then organic growth and potentially acquisition growth in the integrated services business. Again, we're very conscious of the fact that any capital project has to stack up against our cost of capital and the anticipated return from the buyback program.
Are there specific properties in our core business.
That would be additive if we were to acquire them.
And then organic growth and potentially acquisition growth in the integrated services business.
But again, we're very conscious of the fact that any capital project task stack up against.
Our cost of capital and anticipate a return from a buyback program.
Got it okay.
That's all I had thanks for entertaining that question.
John Daniel: Got it. Okay. That's all I had. Thanks for entertaining that question.
Thank you John.
Bradley Dodson: Thank you, John.
This now concludes our question and answer session I would like to turn the floor back over to Bradley Dodson for closing comments.
Operator: This now concludes our question and answer session. I would like to turn the floor back over to Bradley Dodson for closing comments.
Thank you Gary and thank you everyone for joining the call today. We appreciate your interest in severe we look forward to speaking with you on the third quarter earnings call, which we anticipate will be at the end of October.
Bradley Dodson: Thank you, Carrie, and thank you, everyone, for joining the call today. We appreciate your interest in Civeo, and we look forward to speaking with you on the Q3 earnings call, which we anticipate will be at the end of October.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.