Oceaneering International, Inc.

who will be available on Oceaneering's website. Joining us on the call are Rob Larson, President and Chief Executive Officer, who will be providing our prepared comments, and Alan Curtis, Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind participants that statements we make during this call regarding our future financial performance, business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act 1995. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter press release. We welcome your questions after the prepared statements. I will now turn the call over to Rod.

Good morning, and thanks for joining the call today. As we announced in our earnings release yesterday, we outperformed expectations in the first quarter, with strong results across our energy services and products. In particular, Subsea Robotics, or SSR, demonstrated resilient utilization of remotely operated vehicles, or ROVs, and Offshore Projects Group, or OPG, achieved robust vessel activity, particularly in the Gulf of Mexico and West Africa. In addition, we were proud to announce that our Aerospace and Defense Technologies, or ADTEC segment, was awarded the largest initial contract value in the company history, which is foundational to delivering significant year-over-year operating income growth in 2025 in this segment. Looking ahead to the rest of the year, we remain confident in our outlook, even with recent market uncertainties. Our confidence comes from our first quarter 2025 order intake of approximately $1.2 billion. our current backlog that has improved from the same time last year, the diversity of the geographies and end markets we serve, the optionality afforded by our strong balance sheet, and the commitment of Oceaneers worldwide, including our seasoned leadership team that has led the company through previous market uncertainties. Today I'll focus my comments on our performance for the first quarter of 2025, and our consolidated and business segment outlook for the second quarter and full year of 2025. Now for the first quarter results. For the first quarter, we reported net income of $50.4 million, or 49 cents per share, a 233% year-over-year increase. Consolidated revenue of $675 million improved by 13% compared to our first quarter of 2024, with year-over-year revenue increases in all of our energy businesses. Compared to the first quarter of 2024, first quarter 2025 consolidated operating income of $73.5 million doubled, and our consolidated adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, of $96.7 million improved 57%. These results were largely driven by SSR and OPG. In SSR year-over-year, we realized an 8% increase in average ROV revenue per day utilized, which, coupled with a 4% increase in days utilized, drove a 25% increase in the segment's EBITDA. In OPG, we had a favorable service mix, improved vessel activity levels, and lower dry dock costs, which contributed to OPG's revenue increase of 43% and operating income increase by orders of magnitude. Now let's look at our business operations by segment for the first quarter of 2025 as compared to the first quarter of 2024. SSR operating income of $59.6 million was 35% higher on a 10% increase in revenue. EBITDA margin also improved year over year to 35% from 31%, reflecting ROV pricing progression and improved execution in our ROV and tooling businesses. Average ROV revenue per day utilized increased to $10,788. Fleet utilization improved to 67%, and days utilized increased to 15,093. ROV fleet use during the quarter was 62% in drill support and 38% in vessel-based activity, compared to 66% and 34% respectively in the first quarter of 2024. The revenue split between our ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 79% and 21% respectively. As of March 31st, 2025, we had 60% of the contracted floating rig market with ROV contracts on 79 of the 131 floating rigs under contract. We maintained our fleet count of 250 ROV systems. Turning to manufactured products, Our first quarter 2025 revenue increased 4% year over year. Operating income of $8.7 million declined significantly and operating income margin of 6% declined primarily due to a $10.4 million inventory reserve related to our theme park ride business. Excluding this reserve, the operating income margin would have been approximately 14%. Our backlog on March 31st, 2025 was $543 million, a decrease of $54 million from the first quarter of 2024. OPG achieved significant year-over-year improvements in revenue, operating income, and operating income margin. First quarter 2025 operating income of $35.7 million and operating income margin of 22% benefited from the continuation of international projects that commenced in the fourth quarter of 2024 and are expected to conclude in the second quarter of 2025 improved vessel activity in the Gulf of Mexico, and from the absence of dry dock costs and the associated loss of vessel days that impacted the first quarter of 2024. For integrity management and digital solutions, or IMDS, both revenue and operating income were flat compared to the same period in 2024. Ad tech operating income and operating income margin both declined slightly as compared to the first quarter of 2024 on relatively flat revenues. The declines were due to readiness costs to enable our role as a prime contractor on the recently announced large contract award. Unallocated expenses of $44.6 million were in line with our guidance for the quarter. In the first quarter of 2025, we utilized $80.7 million of cash in operating activities and $26.1 million in capital expenditures. resulting in negative free cash flow of $106.8 million. In addition, we repurchased approximately $10 million worth of shares of our common stock. Consistent with prior years, our cash balance declined during the first quarter with an ending cash position of $382 million and no borrowings under our secured revolving credit facility. Now I'll address our outlook for the second quarter of 2025. On a consolidated basis, as compared to the second quarter of 2024, we expect our second quarter 2025 revenue and EBITDA to increase, with EBITDA expected to be in the range of $95 to $105 million. As compared to the second quarter of 2024, our expectations for the second quarter of 2025 results by segment are, for SSR, we project increased revenue and operating results. EBITDA margin is projected to be in the mid-30% range. For manufactured products, we expect relatively flat revenue and improved operating results. For OPG, we project relatively flat revenue and significantly higher operating results. For IMBS, we forecast relatively flat revenue and improved operating results. For ad tech, we anticipate increased revenue and significantly improved operating results. And we project unallocated expenses to be in the $45 million range. Directionally, For our full year 2025 operations by segment as compared to 2024, we expect for SSR, we continue to forecast improved operating results on a high single digit increase in revenue. SSR EBITDA margins are projected to average in the mid 30% range for the full year. For ROVs, we estimate that our overall ROV fleet utilization will be in the high 60 to low 70% range with a slightly higher percentage of vessel based activities than in recent years. We expect to sustain our ROV market share for drill support services in the 55% to 60% range. For manufactured products, we project significantly improved operating income on better operating margins and increased revenue based on our current backlog of $543 million and improvements in our non-energy product lines. We expect our book-to-bill ratio will be in the range of 0.9 to 1.0 for the full year, just to point out, At the midpoint of our book-to-bill guidance and with our guidance for revenue growth, we are predicting a year-over-year increase in order intake. As demonstrated by OPG's strong first quarter performance, we continue to expect year-over-year operating results to improve on flat to slightly increased revenue with improved vessel utilization in the Gulf of Mexico and West Africa and increased activity in Brazil and Asia-Pacific. Overall, for 2025, OPG operating income margin is expected to be in the mid-teens range. For IMDS, we forecast significantly improved operating results on increased revenue with operating income margin to be in the mid to high single-digit range for the full year. These improved results reflect the positive impact of our acquisition of Global Design Innovation, or GDI, as well as the absence of losses from the divestiture of the Maritime Intelligence Division in 2024. For ad tech, operating results are expected to improve significantly on increased revenue, which is largely attributable to the previously announced Department of Defense contract award. Operating income margin is expected to be in the low teens range for the year. Returning to our 2025 market outlook. In our fourth quarter 2024 earnings release, we revised the bottom end of our full year 2025 EVA guidance in acknowledgement that we may be impacted by different geopolitical uncertainties, including tariffs and regulatory changes. Since then, further announcements related to tariffs, retaliatory tariffs, and OPEC Plus production have continued to generate concerns across the energy sector. We believe that our prior and affirmed guidance appropriately accounts for these risks, but we will continue to evaluate the potential impacts of these and other factors. Oceaneering remains well-positioned to take advantage of market dynamics, even in uncertain times. We have a strong backlog across our energy and government businesses and recognize the aforementioned $1.2 billion order intake in the first quarter of 2025. While Brent crude prices have been revised downward to the range of $60 to $70 per barrel in 2025, we believe these levels remain supportive of sustainable levels of offshore operating and capital spending. In summary, our strong first quarter 2025 performance, along with the strength and diversity of our backlog, give us the confidence to reiterate our prior full-year 2025 guidance, including EBITDA, in the range of $380 to $430 million. We appreciate everyone's continued interest in Oceaneering and will now be happy to take any questions you may have.

Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. We'll pause for just a moment and file the Q&A roster. Our first question will come from David Smith from Pickering Energy Partners. Please go ahead. Your line is open.