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spk13: Greetings and welcome to the CVO Corporation first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Reagan Nielsen, Vice President, Corporate Development and Investor Relations. Thank you, you may begin.
spk10: Thank you, and welcome to Cibio's first quarter 2024 earnings conference call.
spk08: Today, our call will be led by Bradley Dotson, Cibio's President and Chief Executive Officer, and Barclay Brewer, Cibio's Interim 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. 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. Thank you, Reagan, and thank you all for joining us today on our first quarter earnings call. I'll start with the key takeaways for the first quarter and provide a brief summary of our first quarter of 2024 performance. Then Barclay will go through the financial and segment level review, and I'll conclude with our updated comments on full year 2024 guidance and the underlying regional assumptions. We'll then open the call for questions. The three key takeaways. One, the first quarter and the full year outlook for 2024 were in line with expectations. As a result, there's no change to our full year guidance. Secondly, Australia adjusted EBITDA was up 23% compared to first quarter of 2023 due to particular strength in our build rooms in our own villages. We also benefited from recent contract wins and year-over-year improvement in Australian owned villages and integrated services business in terms of margin. Lastly, we continue to return capital to shareholders for our quarterly dividend and opportunistic sharing purchases. Let me take a moment to provide a business update across the two segments. Our Australian segment performed exceptionally well during the quarter, and our team continues to execute on our plan to grow our Australian integrated services business to $500 million of top line by 2027. We experienced year-over-year growth in both our owned villages business and our integrated services business, including the benefit of our recent contract wins that reflect improved customer spending across owned basin villages and our integrated services business. During the quarter, our Australian-owned villages continue to experience significant year-over-year growth. While metallurgical coal prices have recently declined, prices remain at very healthy levels that support these customer activity levels. Additionally, we are seeing the impact of metallurgical coal mines being sold to producers who are more focused on increasing production levels. These macro factors, coupled with the impact of our recent contract plans in the region, have driven this substantial year-over-year growth. In the first quarter, our Australian integrated services business experienced year-over-year margin improvement. Inflation mitigation plan continues to demonstrate positive results. We should continue to see this benefit from our team's efforts throughout 2024. With the improved margins, we believe the integrated service business is particularly attractive given contract terms and the outlook for additional opportunities in this area. As expected, our Canadian segment revenues and adjusted EBITDA decreased year-over-year due to the planned wind-down of LNG-related activity, particularly in our mobile camp business, including $1.8 million of mobile camp demobilization costs in the first quarter. As we touched on during our February earnings conference call, we completed the sale of our McClellan Lake Lodge in Canada earlier this year and received all proceeds. The majority of the net proceeds were recognized in the fourth quarter of 2023, with the remainder recognized in this quarter. As a reminder, the entirety of the sale proceeds and associated costs, as well as other related reimbursements, are excluded from our adjusted EBITDA calculation. As a result, the sales transaction does not impact our full year 2024 adjusted EBITDA guidance. The transportation of these assets is now complete, and we continue to pursue other business-related opportunities related to the assets. I'll now turn it over to Barclay Brewer, our interim CFO. I would like to thank him for stepping up into the interim CFO role. Barclay?
spk03: Thank you, Bradley, and thank you all for joining us this morning. Today, we've reported total revenues in the first quarter of $166.1 million, with a gap net loss of $5.1 million, or $0.35 per diluted share. During the first quarter, we generated adjusted EBITDA of $17.3 million. Again, this is exclusive of the financial impact of the dismantlement and sale of the McClellan Lake Lodge assets. Operating cash flow of $6 million and free cash flow of $7.2 million. First quarter adjusted EBITDA increased year-over-year due to the increased filled rooms at our Australian-owned villages and improved the margins in the Australian integrated services business, partially offset by the expected wind down of LNG-related Canadian mobile camp activities, including $1.8 million in mobile camp demobilization costs. Let's now turn to the first quarter results for our two segments. I'll begin with a review of the Australian segment performance compared to its performance a year ago in the first quarter of 2023. First quarter revenues from our Australian segment were $91.7 million, up from $77 million in the first quarter of 2023. Adjusted EBITDA was $20.3 million, up 43% from $14.2 million last year. The significant increase to adjusted EBITDA was due to increased billed rooms at our own villages, increased integrated services activity, and improved margins. Results for the quarter were strong, despite the headwind of a weakened Australian dollar relative to the US dollar, which decreased revenues and adjusted EBITDA by approximately 3.7 million and 800,000, respectively. Australian billed rooms in the quarter were a source of strength with 614,000 rooms, up 17% from 523,000 in the first quarter of 2023. This is due to increased customer demand at our own villages as demonstrated by our recent contract awards. The average daily rate in Australian dollars was up 3% year over year. Due to the weakened Australian dollar, the average daily rate for our Australian villages in US dollars $77 in the first quarter of 2024, down modestly from $78 in the first quarter of 2023. Turning to Canada, we recorded revenues of $67.2 million as compared to revenues of $89.5 million in the first quarter of 2023. Adjusted EBITDA in Canada was $5.5 million, a decrease from $12 million in the first quarter of 2023. The year-over-year revenue and adjusted EBITDA decrease was primarily driven by the sale of the Colombo Lake Lodge and the expected wind down of LNG-related mobile camp activity, including $1.8 million of mobile camp demobilization costs. During the first quarter, filled rooms in our Canadian lodges totaled 610,000, which was down from 643,000 in the first quarter of 2023. primarily due to the sale of McClellan Lake Lodge, our daily room rate for the Canadian segment in U.S. dollars was $98, which increased slightly from $96 in the first quarter of 2023. On a consolidated basis, capital expenditures for the first quarter of 2024 were $5.6 million compared to $4.8 million during the same period in 2023. Capital expenditures in both periods were predominantly related to maintenance spending on our lodges and villages, coupled with spending to activate Mossad Australian village rooms with increased customer demand. Additionally, the first quarter of 2024 included $2.4 million in capital expenditures from the Australian customer funding infrastructure upgrade that we had discussed on prior quarter conference calls. Our net debt on March 31, 2024, was $61.8 million which was down slightly since December 31st, 2023. Our net leverage ratio for the quarter remained flat at 0.6 times as of March 31st, 2024. As of March 31st, 2024, we had total liquidity of approximately $136.9 million, consisting of $120.1 million available under our revolving credit facilities and $16.8 million cash on hand giving us the strength and flexibility to opportunistically pursue growth vectors in 2024 and beyond while maintaining prudent leverage ratios. Turning to capital allocation, in the first quarter of 2024, we repurchased approximately 133,000 shares through our share repurchase program for a total of approximately $3.2 million. This morning, we announced that our Board of Directors has declared our fourth quarterly dividend payment Shareholders of record as of May 27, 2024 will receive a $0.25 per share cash dividend payable on June 17, 2024. With that, I'll turn it over to Bradley to discuss our guidance for the full year 2024.
spk10: Bradley? Thank you, Barclay.
spk08: I'd like to now turn our discussion to our full year 2024 guidance on a consolidated basis, including after which the updated outlook for each of the reasons. Despite the weakening Australian dollar versus the beginning of the year, we are maintaining our full year 2024 revenue and adjusted EBITDA guidance of $625 million to $700 million for revenues and $80 to $90 million for adjusted EBITDA. We are maintaining our full year 2024 capital expenditure guidance of $30 to $35 million. Based on this adjusted EBITDA and CapEx guidance, net cash proceeds related to the Macomb Lake Lodge dismantlement and sale of approximately $6 million, adjusted cash interest expense of $6 million, and an expected working capital inflow of $10 million, and expected Australian cash taxes of $10 million, we are maintaining our 2024 free cash flow expectation of $45 to $60 million. I will now provide the regional outlooks and corresponding underlying assumptions by region. In Canada, we are in the early stages of the turnaround season for our Canadian oil sands lodges, but early activity is shaping up as expected. We will provide further updates on the second quarter call, but build rooms across our portfolio is consistent with our previous 2024 guidance. Regarding our mobile camps, the majority of our mobile camp rental activity is complete and we are continuing the demobilization process.
spk10: We expect demobilizations to be completed in the second quarter of 2024, burdening our second quarter adjusted EBITDA by approximately $4 million of demobilization costs.
spk08: As a reminder, this is contemplated in our full year 2024 guidance. Turning to Australia, customer activity in our own villages remains incredibly strong, and we expect to continue to see similar levels going forward. We are currently full at three of our Bowen Basin villages, with very healthy occupancy at the rest of our own village portfolio in Australia. As it relates to our integrated services business, our improved margins are expected to continue for the remainder of the year. We are encouraged by our progress to date, and we are continuing to focus on our inflation mitigation plan. We are excited about growth potential of our Western Australian integrated service business, and now we have made strides on our inflation mitigation plan. We can shift our focus to winning work and growing the business. Again, our team has set a goal to grow our integrated services business to $500 million Australian of top line
spk10: by 2027. I will conclude by underscoring the key elements of our strategy.
spk08: We will prioritize, as always, the safety and well-being of our guests, employees, and communities. We will invest in our operational improvements and innovation to continue to enhance our best-in-class hospitality offerings. And we will allocate capital prudently to maximize free cash flow generation while we continue to return capital to shareholders and evaluate growth opportunities.
spk10: With that, we're happy to take your questions.
spk13: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. and 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. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Alex Scheibelhofer with Stifel. Please proceed with your question.
spk06: Hi, thanks, and good morning, everyone, and thanks for taking my questions. Just to kick us off here, if you're familiar, just so when we were looking at the full year guidance, can you just talk about some of the drivers between the low and the high end? And also, should we expect to see normal seasonality with roughly about 65% of full year EBIT on 2Q, 3Q?
spk10: Thank you.
spk08: The answer to the second part of the question, yes, seasonality should continue in the amount of EBITDA coming in Q2 and Q3 is largely driven by the turnaround season in Canada, and we expect that to be the case this year. The upper end and the lower end is actually linked to the same issue, which is what does the Canadian turnaround season look like? Right now, it looks as expected. We're obviously only one month into it. We'll see how it plays out. That's probably the biggest driver for us. Inflation continues to be an issue, largely across the globe, most impactful right now in Australia around food costs and, more importantly, labor. The team has done a great job in terms of trying to improve, increase our full-time labor as opposed to using temporary labor, which has a negative impact on costs and productivity. So those are primarily the largest drivers of the issue. Currency has gone against this, but we've had a few things go for us year to date. We've had better occupancy in our Kitimat, Sitka Lodge, We've seen better occupancy in the core Canadian area, coupled with really just really strong occupancy in Australian Bowen Basin villages, and clearly very good execution on the integrated services side in Australia.
spk06: Got it. Thanks. Appreciate the color. And then just as a second question, I'm just curious if you could flush out just how you think about uses of cash and what are your key criteria when you're looking at potential M&A?
spk08: Well, uses of cash, we've got the dividend, which is 25 cents a share or a dollar for the full year for shareholders. That is paramount. We've been opportunistically buying back shares as well. We need to get back to growing the business. And those returns for growth opportunities have to size up and be better than the opportunity buying back stock. So there are a handful of organic opportunities, and then we're looking at M&A. The organic opportunities are around contracted lodge and village rooms, either bringing them back online or modest increase in rooms. And the M&A side is around integrated services and expansion of geographies within Canada and Australia.
spk10: Got it. Thank you. I appreciate the color. That's all from me. I'll turn it back. Thank you.
spk13: Our next question comes from the line of Steve Ferrazani with Sidoti. Please proceed with your question.
spk05: Thanks. Good morning, Bradley, Barclay. Appreciate all the color on the call this morning. Wanted to ask about Australia, another really impressive quarter in terms of accommodations and food revenue. You announced so many new contracts or renewed contracts at better rates. Have we seen it all now? Is there more near-term growth or does this level off near-term?
spk08: No, we'll see further growth, particularly on the integrated services side. The team has a lot of lines in the water and is really building a good business there. I mean, if you recall, that business was a $70 million business back five years ago, and we did 230. I'm talking local currency. Last year, budget for this year was 250. We beat that resoundingly, and that factored into guidance. And so we're making good strides there. It's a differentiated service in terms of the competition we're winning, market share from others. So we're more than cautiously optimistic on it.
spk05: Great. What are the risks there, given the number of contracts you have renewed already? Anything near term we should be concerned about? And what kind of term do you have to de-risk sort of what's in place right now?
spk08: There are no, on the questions about Australian integrated services, there are no material renewals until 2027. That being said, in the integrated services business, as you know, all the contracts can be canceled. So every day we have to show up and deliver service and the team is there. We've got a good relationship with the major customers there where there's transparency and good conversation where inevitably when you're trying to serve 8,000, 9,000 people a day, there are going to be mistakes. But with the transparency, the conversation, The willingness to and the effort to deliver excellent service every day, that carries the day.
spk05: Fair enough. Turning to the other side, on food and service in Canada, two straight quarters where your year-over-year top line was up more than 20%. Can you give a little sense of what's driving that? I know the margins are fairly thin there.
spk10: But it's pretty significant revenue growth given everything else that's going on in Canada. Well, the major drivers for Canada are as discussed.
spk08: I mean, one, we sold the McClellan asset. So year over year, we're losing those build rooms. We got a good value for the assets that we sold. And the second is the wind down in the...
spk10: LNG Canada activity, right? Those are the major drivers for Canada, both top line and EBITDA.
spk08: Now, the focus is for us and for our team is to find additional projects to build back up the profitability of Canada. I think through the process of selling McClellan, we recognize that are modular assets, both permanent and mobile. There are a lot of industrial and mining projects that need assets that are remote. A lot of them are driven by power transmission and effectively resources that are used in EV batteries. So we're working very diligently to expand the Canadian business into
spk10: and down into the U.S.
spk05: And any update on McClellan Lake? Was that transportation contract completed within Q1, and are you on any follow-up?
spk10: Right. The transportation contract is complete.
spk08: It was all recognized in the first quarter. And we are continuing to pursue the reinstallation of those assets at the new location in western U.S. and the potential to operate those assets long-term for the new client.
spk05: Thanks, Bradley.
spk10: Thank you.
spk13: Our next question comes from the line of Dave Storms with StoneGate. Please proceed with your question.
spk17: Good morning. Hi, Dave. Good morning. Just hoping we can kind of start with the dividend. I know you've been paying it for a couple of quarters now. Your stock has gone up since you started paying it. Could you give us a sense of what your process is like? How often do you revisit that to make sure it remains competitive? Anything on that front would be very helpful.
spk08: Sure. Well, we'd like to get a year underneath our belt. This would be the fourth payment, so we'll readdress it in the fall. And again, it's a key component to our capital allocation framework. And so, you know, as you know, cash flow for us is also seasonal. We covered that in the first question. But cash flow is better in the back half of the year. So we'd like to see how things play out. Certainly, dividend growth is a possibility. but one that we'll address in the back half of this year.
spk17: Understood. Very helpful. Thank you. And then just touching back on kind of some of your levers that you have to kind of recoup some of those mobile camp losses, you mentioned maybe expanding to Alberta, maybe into the U.S. a little bit. What would that look like logistically, and what would be some of the hurdles to get over that?
spk10: Well, right now, the hurdles are twofold.
spk08: They're not surprising. One, we need the client project to move forward, so we need green line on projects, and then we need to win the work. We've got a handful of projects we're actively pursuing, but that's simply what needs to happen. We've got a team in Eastern Canada. on the business development side that are pursuing opportunities, and they're largely mining and transmission related. The U.S.
spk10: is initially going to be dependent on can we get more work ultimately related to the Macaulay assets. Understood. Thank you. Appreciate the call.
spk14: Thank you.
spk13: We have reached the end of our question and answer session, and with that, I would like to turn the floor back over to Bradley Dodson for any closing comments.
spk10: Thank you so much, and thank you everyone for joining the call today. We appreciate your interest in Cibio, and we look forward to speaking to you on our second quarter earnings call planned for July.
spk13: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you.
spk12: © transcript Emily Beynon © transcript Emily Beynon you Thank you. you Thank you.
spk13: Greetings and welcome to the CVO Corporation first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Reagan Nielsen, Vice President, Corporate Development and Investor Relations. Thank you, you may begin.
spk08: Thank you, and welcome to Cibio's first quarter 2024 earnings conference call. Today, our call will be led by Bradley Dotson, Cibio's President and Chief Executive Officer, and Barclay Brewer, Cibio's Interim 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. 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. Thank you, Reagan, and thank you all for joining us today on our first quarter earnings call. I'll start with the key takeaways for the first quarter and provide a brief summary of our first quarter of 2024 performance. Then Barclay will go through the financial and segment level review, and I'll conclude with our updated comments on full year 2024 guidance and the underlying regional assumptions. We'll then open the call for questions. There are three key takeaways. One, the first quarter and the full year outlook for 2024 were in line with expectations. As a result, there's no change to our full-year guidance. Secondly, Australia adjusted EBITDA was up 23% compared to first quarter of 2023 due to particular strength in our build rooms in our own villages. We also benefited from recent contract wins and year-over-year improvement in Australian owned villages and integrated services business in terms of margin. Lastly, we continue to return capital to shareholders for our quarterly dividend and opportunistic sharing purchases. Let me take a moment to provide a business update across the two segments. Our Australian segment performed exceptionally well during the quarter, and our team continues to execute on our plan to grow our Australian integrated services business to $500 million of top line by 2027. We experienced year-over-year growth in both our owned villages business and our integrated services business, including the benefit of our recent contract wins that reflect improved customer spending across owned basin villages and our integrated services business. During the quarter, our Australian-owned villages continue to experience significant year-over-year growth. While metallurgical coal prices have recently declined, prices remain at very healthy levels that support these customer activity levels. Additionally, we are seeing the impact of metallurgical coal mines being sold to producers who are more focused on increasing production levels. These macro factors, coupled with the impact of our recent contract wins in the region, have driven this substantial year-over-year growth. In the first quarter, our Australian integrated services business experienced year-over-year margin improvement. Inflation mitigation plan continues to demonstrate positive results. We should continue to see this benefit from our team's efforts throughout 2024. With the improved margins, we believe the integrated service business is particularly attractive given contract terms and the outlook for additional opportunities in this area. As expected, our Canadian segment revenues and adjusted EBITDA decreased year-over-year due to the planned wind-down of LNG-related activity, particularly in our mobile camp business, including $1.8 million of mobile camp demobilization costs in the first quarter. As we touched on during our February earnings conference call, we completed the sale of our McClellan Lake Lodge in Canada earlier this year and received all proceeds. The majority of the net proceeds were recognized in the fourth quarter of 2023, with the remainder recognized in this quarter. As a reminder, the entirety of the sale proceeds and associated costs, as well as other related reimbursements, are excluded from our adjusted EBITDA calculation. As a result, the sales transaction does not impact our full year 2024 adjusted EBITDA guidance. The transportation of these assets is now complete, and we continue to pursue other business-related opportunities related to the assets. I'll now turn it over to Bartlett Brewer, our NMCFO. I would like to thank him for stepping up into the NMCFO role. Bartlett?
spk03: Thank you, Bradley, and thank you all for joining us this morning. Today, we reported total revenues in the first quarter of $166.1 million. with a gap net loss of $5.1 million, or $0.35 per diluted share. During the first quarter, we generated adjusted EBITDA of $17.3 million. Again, this is exclusive of the financial impact of the dismantlement and sale of the McClellan Lake Lodge assets. Operating cash flows of $6 million and free cash flows of $7.2 million. First quarter adjusted EBITDA increased year-over-year due to the increased filled rooms at our Australian-owned villages and improved the margins in the Australian integrated services business, partially offset by the expected wind down of LNG-related Canadian mobile camp activities, including $1.8 million in mobile camp demobilization costs. Let's now turn to the first quarter results for our two segments. I'll begin with a review of the Australian segment performance compared to its performance a year ago in the first quarter of 2023. First quarter revenues from our Australian segment were $91.7 million, up from $77 million in the first quarter of 2023. Adjusted EBITDA was $20.3 million, up 43% from $14.2 million last year. The significant increase to adjusted EBITDA was due to increased billed rooms at our own villages, increased integrated services activity, and improved margins. Results for the quarter were strong despite the headwind of a weakened Australian dollar relative to the US dollar, which decreased revenues and adjusted EBITDA by approximately 3.7 million and 800,000 respectively. Australian billed rooms in the quarter were a source of strength with 614,000 rooms, up 17% from 523,000 in the first quarter of 2023. This is due to increased customer demand at our own villages as demonstrated by our recent contract awards. The average daily rate in Australian dollars was up 3% year over year. Due to the weakened Australian dollar, the average daily rate for our Australian villages in US dollars $77 in the first quarter of 2024, down modestly from $78 in the first quarter of 2023. Turning to Canada, we recorded revenues of $67.2 million as compared to revenues of $89.5 million in the first quarter of 2023. Adjusted EBITDA in Canada was $5.5 million, a decrease from $12 million in the first quarter of 2023. The year-over-year revenue and adjusted EBITDA decrease was primarily driven by the sale of the Colombo Lake Lodge and the expected wind-down of LNG-related mobile camp activity, including $1.8 million of mobile camp demobilization costs. During the first quarter, filled rooms in our Canadian lodges totaled 610,000, which was down from 643,000 in the first quarter of 2023. primarily due to the sale of Colvin Lake Lodge, our daily room rate for the Canadian segment in U.S. dollars was $98, which increased slightly from $96 in the first quarter of 2023. On a consolidated basis, capital expenditures for the first quarter of 2024 were $5.6 million compared to $4.8 million during the same period in 2023. Capital expenditures in both periods were predominantly related to maintenance spending on our lodges and villages, coupled with spending to activate Mossad Australian village rooms with increased customer demand. Additionally, the first quarter of 2024 included $2.4 million in capital expenditures from the Australian customer-funded infrastructure upgrade that we had discussed on prior quarter conference calls. Our net debt on March 31, 2024, was $61.8 million, which was down slightly since December 31st, 2023. Our net leverage ratio for the quarter remained flat at 0.6 times as of March 31st, 2024. As of March 31st, 2024, we had total liquidity of approximately $136.9 million, consisting of $120.1 million available under our revolving credit facilities and $16.8 million cash on hand giving us the strength and flexibility to opportunistically pursue growth vectors in 2024 and beyond while maintaining prudent leverage ratios. Turning to capital allocation, in the first quarter of 2024, we repurchased approximately 133,000 shares through our share repurchase program for a total of approximately $3.2 million. This morning, we announced that our Board of Directors has declared our fourth quarterly dividend payment. Shareholders of record as of May 27, 2024 will receive a $0.25 per share cash dividend payable on June 17, 2024. With that, I'll turn it over to Bradley to discuss our guidance for the full year 2024.
spk10: Bradley? Thank you, Barclay.
spk08: I'd like to now turn our discussion to our full year 2024 guidance on a consolidated basis, including after which the updated outlook for each of the reasons. Despite the weakening Australian dollar versus the beginning of the year, we are maintaining our full year 2024 revenue and adjusted EBITDA guidance of $625 million to $700 million for revenues and $80 to $90 million for adjusted EBITDA. We are maintaining our full year 2024 capital expenditure guidance of $30 to $35 million. Based on this adjusted EBITDA and CapEx guidance, net cash proceeds related to the Macomb Lake Lodge dismantlement and sale of approximately $6 million, adjusted cash interest expense of $6 million, and an expected working capital inflow of $10 million, and expected Australian cash taxes of $10 million, we are maintaining our 2024 free cash flow expectation of $45 to $60 million. I will now provide the regional outlooks and corresponding underlying assumptions by region. In Canada, we are in the early stages of the turnaround season for our Canadian oil sands lodges, but early activity is shaping up as expected. We will provide further updates on the second quarter call, but build rooms across our portfolio is consistent with our previous 2024 guidance. Regarding our mobile camps, the majority of our mobile camp rental activity is complete and we are continuing the demobilization process.
spk10: We expect demobilizations to be completed in the second quarter of 2024, burdening our second quarter adjusted EBITDA by approximately $4 million of demobilization costs.
spk08: As a reminder, this is contemplated in our full year 2024 guidance. Turning to Australia, customer activity in our own villages remains incredibly strong, and we expect to continue to see similar levels going forward. We are currently full at three of our Bowen Basin villages, with very healthy occupancy at the rest of our own village portfolio in Australia. As it relates to our integrated services business, our improved margins are expected to continue for the remainder of the year. We are encouraged by our progress to date, and we are continuing to focus on our inflation mitigation plan. We are excited about growth potential of our Western Australian integrated service business, and now we have made strides on our inflation mitigation plan. We can shift our focus to winning work and growing the business. Again, our team has set a goal to grow our integrated services business to $500 million Australian of top line
spk10: by 2027. I will conclude by underscoring the key elements of our strategy.
spk08: We will prioritize, as always, the safety and well-being of our guests, employees, and communities. We will invest in our operational improvements and innovation to continue to enhance our best-in-class hospitality offerings. And we will allocate capital prudently to maximize free cash flow generation while we continue to return capital to shareholders and evaluate growth opportunities.
spk10: With that, we're happy to take your questions.
spk13: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. and 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. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Alex Scheibelhofer with Stifel. Please proceed with your question.
spk06: Hi, thanks, and good morning, everyone, and thanks for taking my questions. Just to kick us off here, if you're familiar, just so when we were looking at the full year guidance, can you just talk about some of the drivers between the low and the high end? And also, should we expect to see normal seasonality with roughly about 65% of full year EBIT on 2Q, 3Q?
spk10: Thank you.
spk08: The answer to the second part of the question, yes, seasonality should continue in the amount of EBITDA coming in Q2 and Q3 is largely driven by the turnaround season in Canada, and we expect that to be the case this year. The upper end and the lower end is actually linked to the same issue, which is what does the Canadian turnaround season look like? Right now, it looks as expected. We're obviously only one month into it. We'll see how it plays out. That's probably the biggest driver for us. Inflation continues to be an issue, largely across the globe, most impactful right now in Australia around food costs and, more importantly, labor. The team has done a great job in terms of trying to improve, increase our full-time labor as opposed to using temporary labor, which has a negative impact on costs and productivity. So those are primarily the largest drivers of the issue. Currency has gone against this, but we've had a few things go for us year to date. We've had better occupancy in our Kitimat Sitka Lodge, We've seen better occupancy in the core Canadian area, coupled with really just really strong occupancy in Australian Bowen Basin villages, and clearly very good execution on the integrated services side in Australia.
spk06: Got it. Thanks. Appreciate the color. And then just as a second question, I'm just curious if you could flush out just how you think about uses of cash and what are your key criteria when you're looking at potential M&A?
spk08: Well, uses of cash, we've got the dividend, which is 25 cents a share or a dollar for the full year for shareholders. That is paramount. We've been opportunistically buying back shares as well. We need to get back to growing the business. And those returns for growth opportunities have to size up and be better than the opportunity buying back stock. So there are a handful of organic opportunities, and then we're looking at M&A. The organic opportunities are around contracted lodge and village rooms, either bringing them back online or modest increase in rooms. And the M&A side is around integrated services and expansion of geographies within Canada and Australia.
spk10: Got it. Thank you. I appreciate the color. That's all from me. I'll turn it back.
spk06: Thank you.
spk13: Our next question comes from the line of Steve Ferrazani with Sidoti. Please proceed with your question.
spk05: Thanks. Good morning, Bradley, Barclay. Appreciate all the color on the call this morning. I wanted to ask about Australia, another really impressive quarter in terms of accommodations and food revenue. You announced so many new contracts or renewed contracts at better rates. Have we seen it all now? Is there more near-term growth, or does this level off near-term?
spk08: No, we'll see further growth, particularly on the integrated services side. The team has a lot of lines in the water and is really building a good business there. I mean, if you'll recall, that business was a $70 million business back five years ago, and we did 230. I'm talking local currency. Last year, budget for this year was 250. We beat that resoundingly, and that factored into guidance. And so we're making good strides there. It's a differentiated service in terms of the competition we're winning, market share from others. So we're more than cautiously optimistic on it.
spk05: Great. What are the risks there, given the number of contracts you have renewed already? Anything near term we should be concerned about? And what kind of term do you have that de-risks sort of what's in place right now?
spk08: The questions about Australian integrated services, there are no material renewals until 2027. That being said, in the integrated services business, as you know, all the contracts can be canceled. So every day we have to show up and deliver service, and the team is there. We've got a good relationship with the major customers there where there's transparency and good conversation where inevitably when you're trying to serve 8,000, 9,000 people a day, there are going to be mistakes. But with the transparency, the conversation, The willingness to and the effort to deliver excellent service every day, that carries the day.
spk05: Fair enough. Turning to the other side, on food and service in Canada, two straight quarters where your year-over-year top line was up more than 20%. Can you give a little sense of what's driving that? I know the margins are fairly thin there. But it's pretty significant revenue growth given everything else that's going on in Canada.
spk10: Well, the major drivers for Canada are as discussed.
spk08: I mean, one, we sold the McClellan asset. So year over year, we're losing those build rooms. We got a good value for the assets that we sold. And the second is the wind down in the...
spk10: LNG Canada activity, right? Those are the major drivers for Canada, both top line and EBITDA.
spk08: Now, the focus is for us and for our team is to find additional projects to build back up the profitability of Canada. I think through the process of selling McClellan, we recognize that are modular assets, both permanent and mobile. There are a lot of industrial and mining projects that need assets that are remote. A lot of them are driven by power transmission and effectively resources that are used in EV batteries. So we're working very diligently to expand the Canadian business into
spk10: Alberta and down into the U.S.
spk05: And any update on McClellan Lake? Was that transportation contract completed within Q1, and are you on any follow-up?
spk10: Right. The transportation contract is complete.
spk08: It was all recognized in the first quarter. And we're continuing to pursue the reinstallation of those assets at the new location in Western U.S. and the potential to operate those assets long-term for the new client.
spk10: Thanks, Bradley. Thank you.
spk13: Our next question comes from the line of Dave Storms with StoneGate. Please proceed with your question.
spk17: Good morning. Hi, Dave. Good morning. Just hoping we can kind of start with the dividend. I know you've been paying it for a couple of quarters now. Your stock has gone up since you started paying it. Could you give us a sense of what your process is like? How often do you revisit that to make sure it remains competitive? Anything on that front would be very helpful.
spk08: Sure. Well, we'd like to get a year underneath our belt. This would be the fourth payment, so we'll re-address it in the fall. And again, it's a key component to our capital allocation framework. And so, you know, as you know, cash flow for us is also seasonal. We covered that in the first question. But cash flow is better in the back half of the year. So we'd like to see how things play out. Certainly, dividend growth is a possibility. but one that we'll address in the back half of this year.
spk17: Understood. Very helpful. Thank you. And then just touching back on kind of some of your levers that you have to kind of recoup some of those mobile camp losses, you mentioned maybe expanding to Alberta, maybe into the U.S. a little bit. What would that look like logistically, and what would be some of the hurdles to get over that?
spk10: Well, right now, the hurdles are twofold.
spk08: They're not surprising. One, we need the client project to move forward, so we need green line on projects, and then we need to win the work. We've got a handful of projects we're actively pursuing, but that's simply what needs to happen. We've got a team in Eastern Canada. on the business development side that are pursuing opportunities, and they're largely mining and transmission related. The U.S.
spk10: is initially going to be dependent on can we get more work ultimately related to the Macaulay assets. Understood. Thank you.
spk14: Appreciate the call.
spk13: Thank you. We have reached the end of our question and answer session, and with that, I would like to turn the floor back over to Bradley Dodson for any closing comments.
spk10: Thank you so much, and thank you everyone for joining the call today. We appreciate your interest in CIVIO, and we look forward to speaking to you on our second quarter earnings call planned for July.
spk13: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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