Q3 2025 Oceaneering International Inc Earnings Call
Speaker #1: Welcome to the Oceaneering International Inc. third quarter 2020 Earnings Conference Call. My name is Tina, and I will be your conference operator.
Speaker #1: All lines have been placed on mute to prevent any background noise. There will be a question and answer session after the speaker's remarks.
Speaker #1: With that , I will now turn the call over to Hilary Frisbie Oceaneering , Senior Director of Investor Relations .
Speaker #2: Thanks , Tina . Good morning and welcome to Oceaneering Third Quarter 2020 Earnings Conference Call . Today's call is being webcast and a replay will be available on Oceaneering website .
Speaker #2: Joining us on the call are Rob Larson , President and chief executive Officer , who will be providing our prepared comments . Alan Curtis , Senior Vice President and Chief Financial Officer .
Speaker #2: And Mike Sommerlad , senior vice president of finance . After Rod's remarks , we will open the call up for questions . Before we begin , I would like to remind participants that statements we make during this call regarding our future financial performance business strategy , plans for future operations , and industry conditions are forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 .
Speaker #2: Our comments today also include non-GAAP Financial Measures . Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter press release , which is posted on our website .
Speaker #2: I'll now turn the call over to rod .
Speaker #3: Thanks for joining the call today . In the third quarter , we surpassed the high end of our guidance range , generating consolidated adjusted EBITDA of $111 million , marking our highest quarterly performance since the fourth quarter of 2015 .
Speaker #3: These results were largely driven by the ongoing conversion of higher quality backlog in manufactured products , continued high activity levels , and a favorable product mix in our offshore Projects Group or OPG .
Speaker #3: Progression in aerospace and defense technologies , or AdTech , as they onboard personnel and subcontractors to support large scale programs and sustained remotely operated vehicle or ROV pricing and performance .
Speaker #3: Today , I'll focus my comments on our results for the third quarter of 2025 . Our outlook for the fourth quarter of 2025 , our consolidated EBITDA and free cash flow guidance for the full year of 2025 , and our initial full year 2026 guidance .
Speaker #3: Starting with our third quarter 2025 consolidated results as compared to the third quarter of 2024 , we generated revenue of $743 million , representing a 9% increase and operating income rose 21% to $86.5 million .
Speaker #3: We made meaningful progress in free cash flow , generating $77 million after utilizing $24.2 million for investments in the business . We continued to return capital to shareholders , repurchasing approximately $10 million worth of our common stock shares , resulting in an ending cash position of $506 million .
Speaker #3: Now, let's look at our results by business segment for the third quarter of 2025. Also, we will compare them to the third quarter of 2020.
Speaker #3: For subsea robotics , or SSR revenue and operating income were essentially flat , as was the EBITDA margin of 36% . ROV revenue per day utilized increased to $11,254 from $10,576 , offsetting the effects of lower but still solid ROV fleet utilization of 65% .
Speaker #3: Fleet use of 63% , and drill support and 37% in vessel based activity was similar to the same period last year . The revenue split between our ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 77 and 23% , respectively .
Speaker #3: Consistent with last year . As of September 30th , 2025 , we had 60% of the contracted floating rig market with ROV contracts on 78 of the 131 floating rigs under contract .
Speaker #3: We maintained our fleet count of 250 ROV systems during the quarter . We sold a vessel which was underutilized in the survey market .
Speaker #3: We believe this will yield positive results in our survey business by reducing costs and focusing our efforts on delivering increased efficiencies through the enhanced simultaneous operations capabilities of the ocean Intervention two .
Speaker #3: Manufactured products, operating income of $24.7 million and operating income margin of 16%, doubled on a 9% increase in revenue. These results were driven by the continued execution of higher margin backlog through our umbilical manufacturing plants, as well as pricing improvements in our Greylock and Rotator product lines.
Speaker #3: Order intake . During the quarter of $208 million was solid , and our backlog on September 30th , 2025 was $568 million . Our book to bill ratio was 0.82 .
Speaker #3: For the trailing 12 month period . OPG operating income increased 17% to $23.7 million on a 16% increase in revenue , with the operating income margin flat at 14% .
Speaker #3: These results reflect healthy vessel utilization in the US Gulf and a favorable mix of intervention and installation projects for the quarter . For integrity management and digital solutions , or Imds operating income and operating income margin improved on a slight decline in revenue .
Speaker #3: These results reflect the absence of a one . Time non-cash charge associated with the divestiture of our marine , maritime Intelligence Division in the third quarter of 2024 .
Speaker #3: AdTech operating income significantly increased by 36% to $16.6 million on a 27% increase in revenue, with operating income margin improving slightly to 13%. This growth was driven largely by increasing activity levels associated with contract wins and our defense business.
Speaker #3: Unallocated expenses of $46.3 million were in line with our guidance for the quarter . Turning to our outlook for the fourth quarter of 2025 .
Speaker #3: As compared to the fourth quarter of 2024 , we expect revenue to be lower as improvements in adtech and SSR will only partially offset the reduction in international OPG projects .
Speaker #3: Consolidated EBITDA is projected to be in the range of 80 to $90 million by segment for SSR . We anticipate increased revenue and operating income with EBITDA margin expected to be in the mid to upper 30% range .
Speaker #3: Our expectation for improved results is based on continued progression of ROV revenue per day utilized and improved utilization in our survey group , with projects starting in the fourth quarter in the US , Gulf , Europe and West Africa .
Speaker #3: For manufactured products , we expect significantly improved operating income on lower revenue with continued conversion of higher margin backlog and cost reductions associated with our Non-energy products .
Speaker #3: For OPG, we project revenue and operating income to decrease significantly due to the absence of large-scale international intervention and installation projects that favorably impacted the fourth quarter of 2020.
Speaker #3: For lower vessel activity levels in the US Gulf and project timing with respect to our leased vessel fleet , we have one charter in the international market that is expiring during the quarter that we do not intend to renew due to our expectation for seasonally lower activity and allowing us to better manage , lease costs to future projects .
Speaker #3: For Imds , we forecast revenue to decrease in operating income to decrease significantly due to lower activity . For adtech , we anticipate significant increases in both revenue and operating income on higher activity levels in our defense business , we project unallocated expenses to be in the $45 million range for the full year of 2025 , based on our fourth quarter EBITDA guidance , combined with our year to date EBITDA results , we expect to generate adjusted EBITDA in the range of 391 to $401 million .
Speaker #3: Our strong free cash flow generation in the third quarter gives us confidence to maintain our full-year guidance range of $110 to $130 million.
Speaker #3: Now , looking forward , I'd like to provide you with our initial outlook for 2026 . As we announced yesterday , we are initiating consolidated EBITDA guidance in the range of 390 to $440 million , driving similar levels of free cash flow .
Speaker #3: As we expect to generate in 2025 . This is based on our expectations for significant growth in adtech and stable activity levels across our energy focused businesses , in particular for SSR , we forecast similar ROV utilization levels as 2025 at improved pricing levels , together with increased volume from survey will generate slight increases in revenue and operating income and stable EBITDA margins for manufactured products .
Speaker #3: We project significantly improved operating income and improved operating margins on decreased revenue due to the continued conversion of higher margin backlog , as well as improved performance and cost reductions from our Non-energy product lines for OPG , we expect revenue and operating income to decrease on changes in product mix , while significant opportunities exist , customer schedules have not yet finalized for Imds .
Speaker #3: We forecast increased revenue and operating income , and for adtech revenue and operating income are expected to increase significantly , and operating income margins are expected to be similar to 2025 levels .
Speaker #3: As we execute large scale projects that have been ramping up throughout the year . Our 2026 forecast is based on the expectation that the government shutdown will be resolved in 2025 .
Speaker #3: We plan to continue share repurchases in 2026 with approximately 5.8 million shares remaining under our existing repurchase authorization , we will provide more detailed guidance for 2026 during the year end reporting process .
Speaker #3: In summary , we continue to see growth opportunities in each of the markets we serve beyond 2025 , driven by supportive long term commodity prices , improving visibility into an increasing number of contracted floating rates .
Speaker #3: In the second half of 2026 and beyond, stability in ROV revenue per day utilized our ability to optimize our revenue mix between our customers.
Speaker #3: CapEx and OpEx spend growth in global defense spending and increased market demand for our mobile robotics technologies . Now , before we take questions , I want to take a moment to acknowledge an important milestone .
Speaker #3: As we previously announced , plans to retire from his role as CFO on January 1st . During his 30 years with Oceaneering and ten years as CFO , Allen has been more than a financial steward .
Speaker #3: He's been a trusted advisor , a steady hand , and a thoughtful leader . Visibility to challenge assumptions while remaining open to the perspectives of our employees , customers , investors and other stakeholders has helped us to shape our strategy in meaningful ways .
Speaker #3: More than that , Alan is a true oceaneering embodying our culture of innovation , collaboration , and a relentless commitment to excellence . His steady presence has shaped not only our financial direction , but also the way we lead and work together .
Speaker #3: Alan, on behalf of all of us and our Board of Directors, thank you for all you've done for our team and for Oceaneering.
Speaker #3: We look forward to your continued contributions as you transition to an advisory role. I'm also happy to introduce Mike Summerall, our Senior Vice President of Finance, who joined the call today.
Speaker #3: Mike brings deep industry experience, and we look forward to his contributions to Oceaneering. His continued growth, and I will now be happy to take any questions you may have.
Speaker #1: To ask a question at this time , simply press star , followed by the number one on your telephone keypad . Again , that is star one .
Speaker #1: To ask a question . And our first question comes from the line of Josh Jain with Daniel Energy Partners . Please go ahead .
Speaker #4: Thanks . Good morning . First one for me . Just when I think about the business moving forward toward the ocean intervention two I think it was in August and it was helpful to see the scale and capabilities of the vessel .
Speaker #4: One of my takeaways from the upgrades was how you'll ultimately be able to perform simultaneous autonomous survey operations. Maybe you could speak to that a little bit more.
Speaker #4: The advantages that this is going to provide and how we should think about that—those capabilities and the business moving forward.
Speaker #3: Sure . I think , Josh , I mean , you saw some of that in the in the tour , but the main takeaway is being able to do more with less .
Speaker #3: So you , you decrease the surface expression , you decrease fuel usage , you decrease personnel on board . So much more efficient .
Speaker #3: Not not just from a from a cost standpoint , but also from a time standpoint . Being able to do more . The other thing that isn't necessarily intuitively obvious , because we're doing these things simultaneously and we're we're gathering this data .
Speaker #3: You're actually cross-checking data . So you're getting data from two different sources at the same time . You get up , you get a better idea early about your data quality .
Speaker #3: So I think all in all , it just it just provides the customer more robust solution . And getting that data into their hands sooner .
Speaker #4: Okay . Thanks . And then also this you announced a . Significant subsea robotics contract with Petrobras . I think it was $180 million .
Speaker #4: Could you speak to that market in 2026 ? How you expect it to hold up versus other geographies ? And do you expect your market share in Brazil to increase moving forward for your other energy business lines ?
Speaker #3: Sure . I would just say , first of all , I was down there just about a month ago and got to meet with customers , including Petrobras and , you know , the market's really robust .
Speaker #3: I mean , they've got some pretty significant plans . They've got they've got Pelotas , which is coming up . They've got the the we just got an approval .
Speaker #3: I think some of you might have seen in the news , they just got approval to drill up north near the mouth of the Amazon , which kind of puts them in that , that Atlantic margin along with , with Suriname and Guyana .
Speaker #3: So I very exciting stuff up there . So it is it is ever forward in Brazil . They're looking really hard at at what they have ahead of them .
Speaker #3: And and these are as big opportunities as we probably ever seen in Brazil . I think market share continues to increase . My , my conversations certainly led me to believe like like I would say , even more in the past , but but coming back recently , their interest in technology is really big .
Speaker #3: I mean , they are they are first adopters . A lot of the most interesting things we do , we've got things like we've got a riser inspection that that will actually fly and do riser inspections and , and we've done mooring line inspections in some of the things .
Speaker #3: So both I think both those things that drive them to exploration places . But also with an aging infrastructure , the ability to continue to work in places and exploit those , those investments , they've already made in the existing field .
Speaker #3: So I just think Brazil's a very exciting market and we're well positioned there .
Speaker #4: Okay , thanks . And then maybe just one more quick one just on the ad tech business , which continues to grow from a number of the awards you announced and you highlighted in your 26 guidance .
Speaker #4: Sounds like there's confidence it'll be an increasing portion of your business going forward. Could you just speak to how that business is expected to compete for capital moving forward, and where you ultimately see it as a percentage of your business over the next 3 to 5 years?
Speaker #4: And then I'll turn it back . Thanks .
Speaker #3: Sure . I think the nicest thing about it is that business grows . It's really low capital intensity . And so that's that's one of the most exciting things about scaling up that business .
Speaker #3: It's a lot of engineering know how . It's a lot of products we build . It actually allows us to sweat the footprint .
Speaker #3: We already have currently . I've talked a lot about this . You know that people ask about , we've got this defense business and we've got this , this energy business .
Speaker #3: They're really hard to separate . We do a lot of robotics . We do a lot of vehicle work and all of those things happen .
Speaker #3: In throughout Oceaneering . Right . So some of the things those customers want are , are really well aligned with our imds business , for example , some of them are really well aligned with the SSR business , obviously with vehicles , but I think that's that's the exciting part is we are able to to scale that up significantly without a lot of capital .
Speaker #3: The other thing that we're starting to see more and more , as you see NATO spending increase , you see some of the other areas of the world bearing more of the cost and more of the responsibility for for defense .
Speaker #3: We're seeing more international opportunities come up as well . And that's everything from , you know , things we've seen in Taiwan , things that we've seen in with Aukus , the the Australian , UK and US submarine build .
Speaker #3: So it's it's growing on all fronts . The big beautiful bill really put a lot of a lot of money back in the coffers for this work to go forward .
Speaker #3: Yeah . I'll just add one quick comment . It was we had management meetings last week and just to see the whole team rallying around , you know , this growth aspect of ad tech and all of the people from the energy side of the business , it was just nice to see , you know , 80 people sit there and rally around .
Speaker #3: How can we get there faster ? Yeah .
Speaker #4: Thanks . I'll turn it back .
Speaker #1: On our next question comes from the line of Scott Gerber with Citigroup . Please go ahead .
Speaker #5: Yes . Good morning .
Speaker #3: Good morning Scott .
Speaker #5: Good .
Speaker #6: Why don't you just get some more color on one of the segments in for Q or manufactured products ? It's been a big source of growth this year .
Speaker #6: You mentioned the continued strength on a year over year basis in four Q on operating income , but but on lower revenues , it looks like it's implying maybe double digit decline on revenues .
Speaker #6: What do you think that means for margins, and kind of what's driving that revenue decline? Maybe I'll pack my lunch for us a bit more.
Speaker #6: Yeah . Give me one second here , Scott . I'm looking at I don't know if we're implying double digit decline .
Speaker #3: In revenue .
Speaker #6: And I think it's really the quality .
Speaker #3: Of .
Speaker #6: Earnings is where we see the increase in the operating income . And EBITDA for the segment . So a lot of the backlog we've been talking about for the last two years where we've received the improved pricing , a lot of that starting to flow through as you witness this year , there's , you know , a good part of that still in backlog that we expect to execute in 26 .
Speaker #6: And at the same time , we've taken , you know , some I'll say , operational excellence focus in this area as well .
Speaker #6: And continue to look at how we can improve our cost structure across the board . And I think we're expecting to realize some additional benefit in 26 .
Speaker #6: There .
Speaker #3: Yeah , Scott , maybe , maybe just while they're doing the calculations , I mean , we're running the plants . The plants are booked .
Speaker #3: We've I mean , we've got a great we've got a great runway for both . What what we did in 25 . But but through 26 as well is like Allen's mentioned before , having , having good backlog in all three of the umbilical plants .
Speaker #3: We've got good throughput at Greylock and rotator rotators having some of their best quarters ever . So I don't think there's a the revenue thing is not to imply that we're not going to have a large book of work .
Speaker #3: I think it's really just a matter of of , you know , how that timing happens . I would say the sales funnel looks good .
Speaker #3: So we , you know , we're booking into 27 . So it's just a matter of when those larger projects hit . But I'm not I'm really I mean manufactured products is a is a good story for next year .
Speaker #6: Yeah . Oh yeah . Yeah . Just a bit surprised that the revenue would be declining sequentially here in the fourth quarter . Relative to last year .
Speaker #6: But moving on to to ad tech , you obviously another great source of of growth for you guys . Can you just give us some additional color on the kind of cadence of ad tech growth that's embedded in the 26 EBITDA guide ?
Speaker #6: Yeah , I , I would I , I would kind of start with , you know , we've been talking through we're adding additional contractor subcontractors and personnel for the large scale project that we announced in Q1 .
Speaker #6: The team continues to on board those subcontractors and looking at how we exit 25 , I think is a good beginning to how we think we'll start 26 .
Speaker #6: But we expect to still continue to ramp up some of the revenue throughout the remainder of 26 as well . So we expect good progression year over year really with the new program that we have been awarded .
Speaker #3: And that's just that program because it ramps through 27 . But but we've got some other things coming on as well . New opportunities you know , yet to be determined .
Speaker #3: So there's just there's just a lot a lot of excitement at ad tech . I think , you know , we talked on the previous to to Josh as well .
Speaker #3: There's it's it's firing on on all three cylinders actually in that business . So it's it's hard to it's hard to really quantify until we get those other those other pieces booked .
Speaker #3: But we just talk about that one big project . Alan Allen hit it . Well it'll ramp through 26 and into 27 .
Speaker #6: Got it . I appreciate all the color . I'll turn it back . Thank you . Thanks , Scott .
Speaker #1: And with no further questions in queue , I will now turn the call back to Rod Larson for closing remarks .
Speaker #3: Well , since there are no more questions , I'd like to wrap up by thanking everyone for joining the call . This concludes our third quarter 2025 conference call .
Speaker #3: Have a great day .
Speaker #1: Thank you again for joining us today . This does conclude today's conference call . You may now disconnect . Welcome to Oceaneering . S third quarter 2020 earnings Conference call .
Speaker #1: My name is Tina and I will be your conference operator . All lines have been placed on mute to prevent any background noise .