Civeo Corporation

Greetings and welcome to the Civio Corporation third 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, Mr. Reagan Nielsen, Vice President, Corporate Development and Investor Relations. Thank you, sir. You may begin.

Thank you, and welcome to CBO's third quarter 2024 earnings conference call. Today, our call will be led by Bradley Dobson, CBO's president and chief executive officer, and Colin Geary, CBO'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'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 third quarter earnings call. I'll start the call today with a few key takeaways for the third quarter and then give a brief summary of our third quarter 2024 performance. Then Colin will provide a financial and segment level review. And I will conclude with our prepared comments with updated fall year 2024 guidance with the underlying regional assumptions. I will also provide our preliminary outlook for 2025. And we'll then open the call for questions. The key takeaways from our call today are Australia adjusted EBITDA increased 19% from the third quarter of 2023 due to continued strong build rooms in our own villages and increased activity in our integrated services business as we expand existing customer relationships. While we anticipated the decline in our Canadian segment, the decline in LNG and mobile camp activity, the segment performance was weaker than expected in the third quarter due to lower lodge build rooms were negatively impacted by Canadian wildfires. Third key point, today we announced a 33-month contract renewal for a major Canadian oil sands producer to continue to provide accommodations and hospitality services through June 2027, which is expected to have total contracted revenues of approximately $150 million Canadian. During the third quarter, we returned $17.8 million of capital to shareholders for our quarterly dividend and sharing purchases. Last key point, we are tightening our revenue and adjusted EBITDA guidance for the full year 2024 to $675 million to $700 million of revenues and adjusted EBITDA of $83 million to $88 million. As we look forward to 2025, our preliminary expectations for adjusted EBITDA are expected to be in excess of $90 million. I'll now take a moment to provide some commentary on our business segments. Australian segment performed well during the third quarter, and the team continued to execute on our previously stated goal to grow our Australian integrated services revenues to 500 million Australian by 2027. we experienced year-over-year and sequential growth in both our owned village business and our integrated services business. Our year-over-year integrated services growth was particularly strong due to the impact of recent competitive wins, as well as the expansion of existing customer relationships. In Canada, as expected, our third quarter Canadian segment revenues and adjusted EBITDA decreased year-over-year primarily due to the expected wind down of LNG-related activity, the sale of the McClung Lake Lodge, and the previously discussed pull forward of customer turnaround and operational activities into the second quarter. This was expected but was exacerbated by the wildfire-related evacuation and associated delays. With that, I'll turn the call over to Collin, our new CFO. Collin has been with CIVIO since our spinoff in 2014, in strategic, financial, operational, and commercial roles. Welcome, Colin.

Thank you, Bradley, and very happy to be here. Today we reported total revenues in the third quarter of $176.3 million, with a net loss of $5.1 million, or $0.36 per diluted share. During the third quarter, we generated adjusted EBITDA of $18.8 million, operating cash flow of $35.7 million, and free cash flow of $28.3 million. While third quarter adjusted EBITDA was down year-over-year for all the reasons Bradley mentioned, the company's cash flow generation was quite strong as we delivered relatively consistent operating cash flows the same quarter last year. I'll discuss that in more detail a little later in the call. But first, I'd like to provide more context on our two segments. I'll begin with a review of the Australian segment performance compared to its performance a year ago, in the third quarter of 2023. Third quarter revenues from our Australian segment were $116.6 million of 33% from $87.9 million in the third quarter of 2023. Adjusted EBITDA was $22.5 million, up 19% from $18.9 million last year. The increase in revenues and adjusted EBITDA was due to increased build rooms at our own villages and increased integrated services activity related to recent competitive wins as well as the expansion of existing client activity. This shows our continued and steady growth in this segment. Australian billed rooms in the quarter were 647,000 rooms, up 4% from 623,000 in the third quarter of 2023. This is due to increased customer demand at our own villages Our daily room rate for our Australian-owned villages in the U.S. dollars was $79, which increased from $74 in the third quarter of 2023 due to CPI escalations in the recent contracts. Turning to Canada, we recorded revenues of $57.7 million as compared to revenues of $95.1 million in the third quarter of 2023. The justity bid on Canada was $3.4 million, decrease from $23.2 million in the third quarter of 2023. The year-over-year revenue and adjusted EBITDA decrease was driven by the expected wind down of LNG-related activity, including the completion of pipeline activity for our mobile clamps, the sale of our McClellan Lake Lodge, and lower build rooms as a result of the pull forward of turnaround activity into the second quarter of 2024, as well as the evacuations from Canadian wildfires. For context, the year-over-year decrease in adjusted EBITDA from our LNG-related business was approximately $12 million. During the quarter, billed rooms in our Canadian lodges totaled $484,000, which was down from $726,000 in the third quarter of 2023 due to the reasons I just mentioned. Our daily room rate for the Canadian segment in U.S. dollars was $100, which increased from $98 in the third quarter of 2023 due to the mix of occupancy between lodges. Next, I'll take a look at our capital structure. On August 13th, we announced the completion of an amendment and extension to our credit agreement. The amendment extends the maturity date to August 2028, upsizes the total revolving credit facility capacity to $245 million from $200 million, and reduces our borrowing costs. Our net debt on September 30th, 2024 was $32.2 million, a $7.9 million increase decreased, excuse me, since June 30th, 2024. Our net leverage ratio for the quarter remained flat and 0.3 times. As of September 30th, 2024, we had total liquidity of approximately $212 million, giving us the strength and flexibility to opportunistically pursue growth while maintaining prudent leverage ratios and returning capital to shareholders. Finally, I'll turn to capital allocation and cash flows. I'll start with cash flow as there's been some nuance this year that is worth pointing out. On a year-to-date basis, adjusted EBITDA of $68.5 million is down 22%. However, operating cash flows of $74 million are up 31% year-over-year. There are two primary reasons for this discrepancy. First, with the completion of several of the LNG-related mobile camp projects in Canada, we received payments which were contingent upon the demobilization of those camps. Once those projects completed, these holdbacks were released, which augmented cash flows. Secondly, working capital in Canada provided higher cash flow this quarter due to the compression of turnaround work into the second quarter and subsequent payment in third quarter. Both of these have resulted in stronger year-over-year cash flow. On the capital expenditure front, On a consolidated basis, CapEx for the third quarter of 2024 was $7.5 million, compared to $9.5 million during the same period in 2023. Capital expenditures in both periods were predominantly related to maintenance spending on our lodges and villages. Capital expenditures in the third quarter of 2023 also included $3.6 million related to customer-funded infrastructure upgrades at three Australian villages, which were reimbursed by our clients. Looking forward, fourth quarter 2024 CapEx includes maintenance CapEx and some discretionary capital related to a lodge optimization project in Canada and projects to refresh some of our Australian villager rooms in response to higher demand. In the third quarter of 2024, we repurchased approximately 515,000 shares through our share repurchase program for a total of $14.2 million. As Bradley mentioned, we returned $17.8 million of capital to shareholders through the quarterly dividend and share repurchases in the quarter, bringing our total year-to-date return of capital to shareholders to $35 million. On September 11th, we announced the renewal of our share repurchase program, authorizing the repurchase of up to 5% of total common shares outstanding over the next 12 months. We will continue to be opportunistic about repurchasing shares. This morning, we also announced that our board has declared our quarterly dividend payment. Shareholders of record as of November 25th, 2024 will receive 25 cents per share cash dividend payable on December 16th, 2024. With that, I'll turn it over to Bradley to discuss our guidance for the fall year 2024 and our thoughts moving forward.