Oceaneering International, Inc.

Q2 2022 Earnings Conference Call


spk_0: the morning ladies and gentlemen and welcome to the oceaneering international inc twenty twenty two second quarter earnings at the time all like or in a listen only mode while he presentation we will conduct the question and answer session if at any time during the you need assistance prefer story and for the operator the call is being recorded on thursday july twenty eighth two twenty two oh knowledge teleconference over to mock peterson please go ahead
spk_1: thank you are good morning and lot of oceaneering second quarter twenty twenty two result conference call to those goals ring webcast and a replay will be available on ios news website joining us on the cold today are a lot worse when president and chief executive officer who won't be providing well prepared remarks and allen curtis senior vice president and chief financial officer before we begin or would just like to remind participants that statements we make during the course of this call regarding our future financial book months business strategy plans for future operations in industry conditions are forward looking statements made pursuant to the safe harbor provisions of the private securities litigation reform act of nineteen ninety five of comedy today also include non gap financial measures additional do tales and reconciliations to the most directly comparable to gap financial measures can be found in our second quarter press release we welcome your questions after the prepared statements i will now turn to call overdrive
spk_2: good morning everyone eroded thanks for joining the call today and case to the earlier resurgence of outdoor activity that we anticipated to start a second quarter twenty eight way to his materializing and beginning to be reflected in our results specifically are such a robotics or ssr and option project group or rpg segments generated some of the highest level revenue and the eyes operating income seen since the beginning of twenty eight team which is the earliest period respect reflector twenty twenty segment realignment or first half twenty twenty two financial performance unfolded slightly lower expectations due to challenges of hiring off for personnel primarily in the gulf of mexico resulting in some delay projects and missed opportunities in addition to continue your ever resolution and earlier in the year continues to negatively impact revenue makes and timing in our era space and defense technologies are that segment we see strong market dynamics supporting robust activity and offshore markets for a second half of twenty twenty two to be partially needed by timing uncertainties within our ad tech segment given our first our forty twenty two performance and our expectations for the second half of twenty twenty two their updating our just that even a guy is range to two hundred and ten to two hundred forty million dollars for the four year we believe carpet into the offer industry is returning is the world is gaining a greater appreciation for energy security and the need for dependable forms of energy during the like the energy transition prospects this combined a good growth opportunities in or ethic that was a mobility solutions businesses underpin or general expectation for increase activity levels over the next several years now folks my comments on our performance for the second quarter twenty twenty two our current market outlook oceanarium consolidated and business segment outlook for the third quarter twenty twenty two and oceanarium by consolidated twenty twenty two outlook including lower just either that and precast flow guidance ranges after these comments i will then make some closing remarks he probably call your questions now for a second quarter similar results or second quarter twenty twenty three results increase significantly as compared to the first quarter twenty twenty two as we produced a just leave it out fifty three point five million dollars which was within the guidance range provided beginning of a quarter as noted above the level of activity and earnings in our energy driven businesses were significantly improved order a large project product sale in our entertainment business did not complete in the quarter and the mixing timing of projects in our ethic businesses contributed to the lower quarterly results and margins and are manufactured products and ad tech segments during the quarter our cash balance declined by seventy million dollars to three hundred and sixty eight million dollars largely due to an increase in receivables were concerned the see or customers extending payment terms and are actively working with them to improve the situation despite the consumption of casting the first step and twenty twenty two we continue to expect positive free cash flow generation for twenty twenty two but are revising archivist range to twenty five seventy five million dollars for the full year operating results benefited from seasonal in marketing floaters the resulted in a seventeen percent sequential growth in revenue as expected compared to the first quarter twenty twenty two or energy segment segments in aggregate led biases are no good you posted a twenty percent revenue increased and significantly improved operating results in the second quarter energy segment results were slightly offset by sequential decline in operating results by red deck segment and solid eight of operating results increased by twenty three point nine million dollars in the second quarter twenty twenty two as compared to earth quarter twenty twenty two with all are operating segments generating positive either i'm now let's look at our business segments operations by simon for the second quarter twenty twenty two as is our revenue and operating income both increase significantly as expected with healthy levels of seasonal activity garvey survey and tooling services at this are even a margin point eight percent and group sequentially with the increased activity better aligning with the additional costs incurred during the first quarter we also started to realize recent price improvements the this is our revenues went with seventy seven percent from are remotely operated vehicle or rb business and twenty three percent from our combined to lying and survey businesses compared to seventy six and twenty four percent split respectably and immediate prior quarter as we forecast to quite barbie date on higher increase on standard seasonality and recovering after activity with an increase in days for both throw support and vessel based services based on higher were fourteen thousand six hundred and thirty one as compared to eleven thousand eight hundred forty two during the first quarter or fleet use was fifty seven percent drop support and forty three percent invested a services first sixty three and thirty seven percent respectively and the first quarter we maintained our fleet count at two hundred and fifty rv systems and our second quarter fleet utilization was sixty four percent up significantly from fifty three percent and the first quarter during the second quarter we're tired bremer conventional work last rv systems and replace them with to upgraded conventional work or systems and one high speed estrus work last rb system it is currently engaged in are nobles work average are the revenue per day on higher of eight thousand two hundred and seventy eight dollars was one percent higher than average rv revenue per day and hired a thousand one hundred ninety six dollars achieved or the first quarter at the end of june we had already contract on eighty of the one hundred and thirty seven floating rigs under contract or fifty eight percent market share an improvement over the fifty five percent recorded for the quarter ending march thirty first twenty twenty two when we had already contract on seventy two and one hundred and thirty one floating rates under contract turning to manufacture products this segment producer and operating loss at one point four million dollars for the second quarter twenty twenty two on revenue twenty eight percent higher than the first quarter revenue revenue increased primarily due to the receipt of certain umbilical materials the did not contribute the current quarter manufacturing activity sequentially operating results declined due primarily to less profitable working being executed in our mobility solutions businesses are manufactured product backlog on june thirtieth two thousand and twenty two remained flat at three hundred and thirty five million dollars compared to or march thirty first twenty twenty two backlog a three hundred and thirty four million dollars or booked the ratio at one point one for the six months ended june thirty and twenty twenty two and was one point two five for the trailing twelve months appropriately a second quarter twenty twenty two revenue and operating income increased significantly compared to the first quarter twenty twenty two primarily as a result of increased inspection maintenance and repair or i am are and installation work in the gulf of mexico the sequential operating income martin increased from one percent in the first quarter to fifteen percent in the second quarter twenty twenty two reflected increase demand and significantly improved pricing for vessel based services in the gulf of mexico although was a very good quarter it could have been better as we were negatively impacted by customer driven project plays an ongoing industrywide iron challenges particularly in the gulf of mexico which resulted in missed opportunities integrity management and digital solutions are i'm the as sequential operating income was essentially flat on five percent increase in revenue are seasonal activity contributed to that revenue increased operating income margin of six percent with the same as recorded for the first quarter of twenty twenty two or ad tech second quarter twenty twenty two operating income declined from the first quarter twenty twenty two and a five percent increase in revenue operating income margin of ten percent decline more than expected from the fifteen percent margin achieved in the first quarter twenty twenty two two detainees in revenue max and delays and certain projects where we incurred pre contract costs unallocated expenses of thirty one point seven million dollars relatively flat out of the first quarter of twenty twenty two now i'll address i'll look for the third quarter of twenty twenty two we are projecting a sequential increase in third quarter twenty twenty two consolidated results on increased revenue with address leave it out in the range of sixty to seventy million dollars for a third quarter twenty twenty two operations by segment compared to the second quarter twenty twenty two are we are projecting hi revenue and operating profitability an rb survey and to businesses with rv utilization increasing to the high sixty below seventy percent range as this or even a margin is anticipated to improve better remain in the high twenty percent range as the benefit of recent pricing improvements is increasingly reflected in our results manufactured products we it is a higher operating income on a modest increase in revenue which back operating income margin to improved that low to mid single digit range quotation activities robust within our energy businesses and interested increasing in our mobility solutions businesses probably do you expect a significant increase in revenue and higher operating results with operating margins remaining in the mid teens range global after i can be is expected to remain high with the gulf of mexico in particular experiencing hi seasonal i am are and installation activity through the third quarter for i am the as we expect revenue to increase modestly with a slight improvement in operating income margin for ad tech we forecast relatively flat operating income on a slight increase in revenue we expect continuing project delays and higher be pre contract caused through the third quarter unallocated expenses are expected to be in a low to mid thirty million dollar range directional a for holier twenty twenty two operations by segment as compared to twenty twenty one presses are we expect operating results to improve on higher revenues are we date on higher are projected to increase year over year with minor ships in geographic max results retooling based services are expected to increase with activity levels generally following or early days on higher survey results are are expected to improve on growing your physical activity as is our for cassidy but a margin is expected to show and increasing trend through the second half of beer as an increasing percentage of work reflect recent pricing improvements in addition to the increased levels of personal legalization even a margin is expected average in the high to ninety percent range for the failure of twenty twenty two for are these weeks expect twenty twenty two service mixed remain about the same as twenty twenty one mix of sixty percent girl support and forty percent vessel based services with higher vessel base percentages during the seasonally higher second and third quarters we asked me overall already with utilization to be in the mid sixty percent range for the year again with higher seasonal activity during second third quarters subject quarterly variances we can cater gas or market share the girl support market will remain in the fifty five to sixty percent rate for the foreseeable future as of june thirtieth twenty twenty two there were approximately thirty opening our views on board twenty five of thirty five floating drilling rigs with contract terms expiring by your end during the second half of twenty twenty two expect forty six of are obese on forty to sixty one floating rate to began to contract
spk_1: her manufactured products before catch fire operating results on a significant increase in revenue as compared to twenty twenty one we expect the current hypotension activity and our energy businesses to result in solid looking for twenty twenty two and the increasing interest in our mobility solutions businesses to result in a good pipeline of opportunities
spk_2: for twenty twenty three
spk_1: the anticipating entertainment related products you mentioned in connection with our second quarter twenty twenty two even a guidance range is now projected to conclude and the second half twenty twenty two
spk_2: we forecast that are operating income margins will be in the low to mid single digit range for the year and segment book to bill ratio will be in the range and one point one to one point three or four year probably a we forecast a significant annual improvement in both revenue and operating results good definitely utilization is expected to continue into the fourth quarter with operators remaining active with shorter cycle am are and installation work in the gulf of mexico we feel well positioned to capitalize on these opportunities with the additional vessel charters and run into earlier this year although he expected typical seasonal declined or in the fourth quarter current projections show activity remain significantly above the level of achieved in the fourth quarter of twenty twenty one we expect the higher demand at work pricing and operating income margins to remain and a lot of maintained for the fourth quarter of twenty twenty two prime be as we forecast lower operating results on high revenue with operating income margins averaging in the mid single digit range for the year as this is a people intensive business we are experiencing inflationary pressures on our direct cost which are resulting in lower margin expectations for twenty twenty two we're working to mitigate this margin deterioration by introducing for the cost of ruins internally and implementing contractual increases to be passed on to our customers we currently project improved operating income margins for the second half and twenty twenty two as compared to the first half of two thousand brad pitt with people are operating results on relatively flat revenue we're anticipating a group project activity during the fourth quarter with operating income margins recovery to load midpines range for the foyer twenty twenty two expect operating income margin average in the lower double digit range
spk_1: we remain encourage about or ethic businesses and see good growth potential for this segment and twenty twenty three and and beyond
spk_2: we are reducing our estimates for twenty twenty two organic capital expenditures to range of seventy to eighty million dollars to better line with our free cash flow expectations isn't good approximately forty to forty five million dollars mean it's capital expenditures and thirty to thirty five million dollars of growth capital expenditures before caster twenty twenty two income tax payments memory and you're forty to forty five million dollars and allocated fences are expected average in the low to mid thirty million dollar range for the quarter but the second half of twenty twenty two
spk_3: now turning car balance sheet and liquidity as previously announced we entered into a new revolving credit facility in the second quarter twenty twenty two which provides access to substantial with when me through april twenty twenty six this new facility when combined with our cash balance gives us good flexibility to both grow our businesses and to address the maturity of our twenty two
spk_2: my poor notes expect a meaningful reversal from cash consumption during the first half and twenty twenty two to significant cash generation during the second half a beer and out back to generate between twenty five knit and seventy five million dollars a free cash flow control year liquidity remain strong with no borrowings under our new two hundred fifty million dollars to cured revolving credit for silly with no loan maturities until november twenty twenty four in summary based on our expectations for the second half and twenty twenty two we're appealing are just even guidance to arrange of two hundred ten to two hundred forty million dollars for the four year the on twenty twenty two we believe that the macro indicators associated with her energy businesses will continue to be strong and we anticipate high levels smarter energy activity or the next three five years this combined with good growth opportunities and our aerospace and fence businesses and mobility solutions businesses underpin our general expectation for increased activity or the next several years we remain focused on energy transition and the need to transform our businesses to thrive as the world evolves without with lp levels of free cash flow projected over the next several years expect have the flexibility to make investments to transform our businesses and deal with or twenty twenty four debt maturity our key focus areas are retaining and a tracking top talent to maximize access the near term opportunities ensuring that our pricing is appropriate for the current market generating significant levels of recast phone the second half of twenty twenty two and most importantly delivering value added solutions utilizing our services and products but
spk_0: high levels of quality and safety we appreciate everyone's contain interest in oceaneering and will now be happy to take any questions you may ladies and gentlemen we will not become a question about assassin cydia
spk_4: press star followed by the one on a test on phone you well here in tampa had even across if you had to try request press talk about him and a few items because i'm happy for passing personalities
spk_0: when moment please my son's question
spk_5: that's question comes june some some italian please go ahead hagan my nice point yeah ah a so that the sub sea robotic march and guidance for the year was revised lower i'm assuming some wage increases are pressuring your martin's there
spk_2: what what's the opportunity to raise prices in the segment to offset any cost increases so i guess if you know we're still we're stopped rejecting you know that that high twenty average for the year which you know when we an interest paid an exit rate of around thirty or buzzer minus out it's not it's gotta be written down or anything sites montclair that up but pay for pricing i me that i did too great question i'm glad you out because one of the things i think we need to point out is in lpg weakening price almost immediately to call a business in a wee bit that we did that work real time so as soon as we started see the market change weekend we can appreciate that on most all of our jobs in the gulf of mexico immediately after much international but certainly for the gulf of mexico so that that moves really quickly for rv pricing you know were tied to take to six months in be on pricing after several years so so that's all built in a contract doesn't mean we don't go look for it as mean we don't ask for personal surcharges and other things like that but it's harder to move in it takes longer for us to build that up we're starting to see it now we think it continues as i mentioned in the in the notes throughout the year but it it's just a little bit slower walk to get it to get up there and good side that is analysis kind of point out when we you know in the market was in decline we we were able to hold onto those murders for a long time because of the same phenomenon around that sort of their contracting lengths
spk_6: it's just he just moved and a difference between some of the other businesses
spk_5: i understood thanks for that and then just looks like the be math on the implied fourth quarter he beat the calls for seventy five million at the midpoint booth the the third quarter guides midpoint a sixty five and typically the fourth quarter is a weaker quarter for you
spk_2: so why is the fourth quarter significantly stronger this year and how achievable sir wired for football we've got we've got that the the an attack and we do we measure that that you know theocratic improvement in the fourth quarter on we do think that we're going out a longer season in a biggie
spk_7: we see that we do see that walk up or rv out what else momentum and the other one really alerted to here in the called notice the related to the of products sell in manufacture products it it was originally we're looking to conclude as your and cute to
spk_2: when you're when you look at it pray and of materialize you're in the back after year and i would say it's prey to be due for at that point so that i would be one element that could drive you for higher and at the same time as rudd said you are starting to if you look at the map on oh the pricing and when that
spk_8: start to materialize and we start to get our gender ah appreciation yeah we get something cute three and then we're looking for a further leg up a queue for as well
spk_0: gotcha okay thank you very much hm
spk_9: thank you i think i definitely have any questions please pass time for penguin
spk_5: no further questions at this time
spk_2: i power i mean if i'm sorry kid we do to follow up that he meant phantom some people get the track it
spk_10: hey so at the last one for me i had just given your concerns regarding receivables just what's the risk of or right down here are how confident are now getting paid yet so so damned dishes more about i think it's activity based where our customers or are are working ah ill and having issues with trying to trying to find personnel just the same as we've been sourcing and i think so many their bills that are being sat and sit as their personal computer job the going to another one and sometimes i think these build aren't getting approved this timeline or just because of their activity level so ah in our customers that we're looking at have cash and in our eyes adult tickets a collection
spk_6: credit issue i think it's more of a time a matter of their ability to process some of the he's ah the bills and as time as we would like so i think that's more the issue then their ability to pay so i don't think it's the collection initiated would necessitate right off
spk_2: right i i wouldn't think at this point there be credit worthy issues but i just wanted to work it came out on her thank you my great great question i appreciate john
spk_5: it's a very generalized phenomenon across some of the some the big guys and and and even even some more nine oil
spk_2: customers as well so it is a very broad base that doesn't necessarily spike out any any favors
spk_0: right i don't think you're alone necessarily for for a field services but the just as wanted to clarify thank you
spk_2: request infection
spk_0: tanaka the questions you may proceed

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.