Oceaneering International, Inc.

Q1 2022 Earnings Conference Call

4/28/2022

spk_0: my name is greener and i will be a conference operator i would like to welcome everyone to oceaneering international incorporated twenty twenty two first quarter earnings conference call alliance have been placed on you to prevent any background noise after his biggest remarks there will be a question and answer session with that i had no turn to call over to mark peterson ocean innings vice president of corporate development and investor relations go ahead sir
spk_1: were you born up or good morning everyone and welcome to ocean or his first quarter twenty twenty two or results conference call today's called being webcast and a replay will be available on ocean or his website joining us on the call today are road larson president and chief executive officer who will be providing are prepared comments and allen curtis senior vice president and chief financial officer before we begin our with just like to remind participants that statements we make during the course of this calls regarding or future finance for 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 ninety ninety five or promise to they are also non gap also include non gap financial measures additional details and reconciliations to the most directly comparable gap financial measures can be found in our first quarter press release we welcome your questions after the prepared statements i will now turn the call to rob a good morning and thanks for joining the call that it or first quarter
spk_2: operating results reflect our continued expectation am significant preparation for increasing activity throughout the remainder of twenty twenty two as a result or first quarter twenty twenty two financial results were impacted by increased costs the macro driver supporting this expected increase in activity remain in place and continue to be supportive of her of boss ramp up and activity and pricing improvements beginning in the second quarter and continuing to the remainder of the year this outlook coupled with increase vessel capacity secure to the remainder of the year gives us confidence to maintain our original even a guidance of two hundred and twenty five to two hundred and seventy five million dollars for the full year of twenty twenty two today i'll focus my comments on our performance for the first quarter twenty twenty two are consolidated and business segment outlook for the second quarter and boy year of twenty twenty two or balance sheet and liquidity situation and the positive macro data points driving our markets now for a result for the first quarter we reported the net loss of nineteen point two million dollars or nineteen cents per share on revenue a four hundred and forty six million dollars these results included the impact of point four million dollars a pretax adjustments associated with foreign exchange games and thirteen point one million dollars of discreet tax adjustments primarily due to changes in valuation allowances adjusted net loss was six point four million dollars or six cents per share
spk_1: are consolidated first quarter twenty twenty two unfolded largely as expected as we experienced higher costs in hiring and training of personnel and mobilization of equipment in preparation for a significant activity increase anticipated for the remainder of twenty twenty two these costs mostly impact our energy segments nonetheless each of our operating segment
spk_2: generated positive operating income and other be better in the quarter or off your products group segment experienced cost overruns on a project and schedule changes that affected the timing of project work however these impacts were largely offset by lower unallocated expenses and slightly improved results from my aerospace and defense segment consist come with our guidance these factors resulted in consolidated adjusted ebitda of thirty one point five million dollars for the first quarter twenty twenty two a significant decrease from the prior quarter now let's look at our business operations by segment for the first quarter of two thousand and twenty two some see robotics or ssr operating income was significantly lower on a modest decrease in revenue as compared to the fourth quarter twenty twenty one operations were impacted by seasonal factors resulting and reduced our of the activity and increased costs associated with hiring and training and asset proper preparedness for anticipated twenty twenty two words these factors resulted in a reduced even a margin of twenty four percent for the first quarter we anticipate the work associated with these cards to materialize over the remainder of twenty twenty two with even a margins recovering as well the revenue split between are remotely operated vehicle or rb business and are combined tooling and survey businesses as a percentage of our total assets are revenue was seventy six and twenty four percent respectively compared to the seventy seven twenty three percent split in immediate prior quarter first quarter twenty twenty two rv days on higher were sequentially lower do to typically lower seasonal activity days on higher were eleven thousand eight hundred and forty two as compared to twelve thousand seven hundred and forty seven during the fourth quarter of twenty twenty one with decreases in both drill support and vessel base days on higher or fleet use was sick thirty three percent and drill support and thirty seven percent and vessel based services vs fourth quarter twenty twenty one fleet use of sixty two and thirty eight percent respectively for the first quarter we maintain our fleet count at two hundred and fifty rp systems and our fleet ills eight and was fifty three percent down slightly from fifty five percent in the fourth quarter twenty twenty one average rv revenue per day on higher was a thousand one hundred ninety six dollars was essentially flat with that achieved during the fourth quarter of twenty twenty one at the end of march we had rv contracts on seventy two of the one hundred and thirty one floating rigs under contract or fifty five percent this was flat with the prior quarter when we had rb contracts i'm seventy five of the one hundred and thirty seven floating rigs under contract subject to quarterly variances we continue expect our girl sport marketshare to generally remain in the range of fifty five to sixty percent turning the manufactured products or first quarter twenty twenty two operating income declined as compared to the fourth quarter of twenty twenty one adjusted results on a twenty percent decrease in segment revenue operating income margin decrease the three percent in the first quarter twenty twenty two from an adjusted nine percent margin in the fourth quarter twenty twenty one primarily dude the inability to fully absorbed fix cost of the segment over reduced revenue base for energy products businesses experience good order and taken the first quarter while bookings and or mobility solutions businesses continued to lag are manufactured products backlog on march thirty first twenty twenty two was three hundred and thirty four million dollars compared to our december thirty first twenty twenty one backlog of three hundred and eighty million dollars or book to go ratio was one point two for the drilling twelve months as compared with a booked will ratio of one point one for the year ended december thirty first
spk_3: twenty twenty one
spk_2: ah sure products group or opie first quarter twenty twenty two operating income decline sequentially despite higher revenue operating income march and declined to one percent in the first quarter from eight percent and fourth quarter twenty twenty one due to cost overruns experienced on a project and lower than expected vessel utilization resulting from sky i do changes that affect the timing a project work as as there are other off businesses we experienced higher costs in the first quarter of twenty twenty two in connection with hiring and equipment readiness to prepare for expected higher activity during the remainder of twenty twenty two for integrity management and digital solutions are i am the s first quarter twenty twenty two operating income was lower than the fourth quarter twenty twenty one on a six percent seasonal decrease in revenue operating income margin declined to six percent in the first quarter twenty twenty two from ten percent in the fourth quarter of twenty twenty one primarily due to less efficient absorption of fixed costs or aerospace and defense technologies are ad tech first quarter twenty twenty two operating income improved sequentially on slightly lower revenue operating income margin of fifteen percent improved over the thirteen percent achieved for the fourth quarter twenty twenty one did a favorable project mix unallocated expenses of thirty one point three million dollars were lower than expected as reduce spending to better align with our revenue streams during the first quarter we reported a caf reduction of one hundred million dollars we utilized eighty point five million dollars of cash and operating activities primarily due to an increase in working capital associated with accounts receivable and the payment of accrued employ incentive compensation in addition nineteen point three million dollars cash was used for maintenance and growth capital expenditures at the end of the quarter we had four hundred and thirty eight million dollars of cash and cash equivalents know borrowings under a revolving credit facility and alone maturities until november of twenty twenty four now address or i'll look for the second quarter of twenty twenty two on a consolidated basis we expect our second quarter twenty twenty two results to improve significantly with adjusted he bit on the range of fifty to seventy million dollars on sequentially i revenue this wider than usual range and quarterly adjusted even a guy in this reflects uncertainty in the timing of certain anticipated product sales and project work as well as detained levels of after utilization and pricing for a second quarter twenty twenty two operations by segment as compared to the first quarter of twenty twenty two for ssr we are projecting so inefficiently higher seasonal activity and operating profitability in our are obese survey into and businesses are be date on higher are expected to increase in both your support and vessel based activities achieving utilization in the mid sixty percent range as his are adjusted even a margin is forecast to rebound to the high twenty percent to low thirty percent ray reflecting a more normal run rate and lower preparatory costs for manufactured products we anticipate hi revenue operating profitability and the second quarter twenty twenty two will be highly influenced by the timing of anticipated product sales which could lead to either higher or lower operating income in the second quarter of twenty twenty two as compared to the first quarter of funny twenty two we continue to see active bidding in our energy products businesses and are becoming more optimistic for increased bidding activity and or mobility solutions businesses pero pg we anticipate significantly higher revenue and operating results we expect a robust seasonal pick up in intervention maintenance and repair or i am more activity primarily in the gulf of mexico operating income margins are expected to increase to the load double digit range in the second quarter of twenty twenty two as mentioned my opening comments we have secured increase vessel capacity which is expected to benefit results through the remainder of twenty twenty two bryan vs we expect higher revenue and operating results with operating margins improving modestly over the first quarter twenty twenty two for ad tech we expect higher revenue and operating result we expect a slight revenue makeshift to result in slight sequential decline and operating income margins unallocated expenses are expected to be in the mid thirty milk dollar range in the second quarter of twenty twenty two directional a for a four year twenty twenty two operations by segment as compared to twenty twenty one we expect for are we forecast improved operating results from higher revenues are have a date on higher projected to increase year over year by double digit percentage retooling based services results generally following or of the days on higher survey results are expected to improve on higher levels of activities as well as is our forecasted adjusted even a margins are expected to average in the low thirty percent range for the full year for are obese we expect our twenty twenty one service mix of sixty percent will support and forty percent vessel based services to generally remain the same for twenty twenty two with higher vessel base percentages during the seasonally higher second and third quarters we estimate overall rv fleet use asian to be in the mix sixty percent range again with higher seasonal activity during second and third quarters pricing for rv services continues to increase allowing us to offset increasing costs for acids and labour we continue to forecast that are marketshare for the drill support market will remain in the fifty five to sixty percent range for the near term as of march thirty first twenty twenty two there were approximately five are oceaneering are obese onboard a polluting
spk_1: drilling rigs with contract terms expiring before third quarter during the same period we expect thirty of are are obese on twenty six voting rigs to begin new contract
spk_2: for manufactured products we expect segment revenue to be up significantly and operating performance to improve year over year primarily as a result of increased order intake and our energy businesses during twenty twenty one disorder intake is expected to drive increased activity in the second half of twenty twenty two be forecast that are operating income are judges will be in the low to mid single digit range for the year additionally we continue to see good bit activity in our energy products businesses and are beginning to see some positive market signs in our mobility solutions businesses pointing to an increase in bidding activity the supports or expectation that segment book to bill ratio will be in the range of one point zero to one point two for the full year bro pg we expect an increase in revenue and operating results opie these businesses primarily tied a short cycle fundamentals and the current support commodity price environment is driving a noticeable increase in demand for services particularly in the gulf of mexico based on this demand signal we recently added vessel capacity to meet the forecasted increase in i am or activity throughout the remainder of twenty twenty two we expect increase vessel legalization and pricing to improve over geez operating margins into the low to mid teens range for the remainder of twenty twenty two for i am yes we project an increase in revenue and operating income as noted in our first quarter twenty twenty two press release i am the us continues to be successful and expanding into new geography and adding new customers the success is expected result in higher avenue over the three remaining quarters of twenty twenty two before cast year over year operator income margin to be essentially flat frantic we project higher revenue and lower operating results than achieved and twenty twenty one operating income marches projected decline as compared to twenty twenty one duty shipped in revenue mix but is expected to remain in the mid teens range for twenty twenty two we continue to see good growth opportunities across all our businesses and ad tech are estimated organic capital expenditure total for twenty twenty two remains between seventy and ninety million dollars this includes approximately forty to forty five million dollars maintenance capital expenditures and thirty to forty five million dollars of growth capital expenditures we forecaster twenty twenty two cash income tax payments to be in the range of forty to forty five million dollar there's unallocated expenses are expected to average in the mid thirty million dollar range for quarter for the remainder of twenty twenty two now turning to our balance sheet and liquidity with four hundred thirty million dollars of cash at the in a march and the expectation of generating twenty twenty two free cash flow in the range of seventy five to one hundred and twenty five million dollars we continue to be well positioned to address or twenty twenty four debt maturity after repurchasing one hundred million of our twenty two twenty four dead in twenty twenty one we're looking at additional options that will allow us to further mitigate the twenty twenty four debt balance subsequent a quarter and we replaced or credit facility with a new two hundred and fifty million dollar senior secured revolving credit facility that gives us financial flexibility over the next four years on a macro base as we continue to see positive signs in our off your energy markets and feel the commodity prices will remain supportive of higher activity levels over the next several years as evidenced by the current projection by the energy information administration for brent crude oil price to average one hundred three days hours per barrel in twenty twenty two and more than ninety two dollars per barrel and twenty twenty three our internal estimates of continued gradual growth in rb activity rice that energies expectation for increased after if i d's and both twenty twenty two and twenty twenty three as compared to twenty twenty one rice said energy also projecting tree installations to be up by approximately nine percent and twenty twenty two and new tree orders to be up over ninety percent as compared to twenty twenty one and the increasing importance of energy security on the geopolitical front in summary or first quarter performance and or first a refreshed outlook for the year give us confidence to maintain our twenty twenty two adjusted even a guidance range of two hundred and twenty five to two hundred and seventy five million dollars we believe that support of energy markets will drive healthy levels of free cash flow and investment opportunities in our traditional businesses over the next several years at the same time we continue to pursue opportunities in the energy transition and on energy markets as we focus on growing our businesses in these areas to underpin a more sustainable future for the company while we continue to face the issues inflation hiring entertaining personnel supply chain obstacles and shifting call the guidelines are management and employees have been effectively managing these challenges we continue to strengthen our service and product offerings and or balance sheet in order to best position the company for success in these evolving market environments we remain focused on generating substantial positive free cash flow and twenty twenty two operational excellent quality and safety and enhancing customer engagement allowing us to win more of the most desirable opportunities all of which result in improving our returns we appreciate everyone's continued interest in oceaneering and will now be happy the to take any questions you might have
spk_0: as a reminder to ask questions please press the star one on your telephone see what i question tested that he and please stand by while the compiled with you any less than once again as constantly please the sky and the number one on your telephone
spk_2: thanks where if there are no questions at this time i just like to thank everybody for for joining the call today and this concludes our first quarter twenty twenty two conference call thank you everyone
spk_0: and discuss this at this conference call thank you for participating him in our disconnect
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This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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