Tidewater Inc.

results for the three months ending March 31st, 2021. My name is John Melby, operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you do have a question, touch star then 1 on your touchstone phone. Please note the conference is being recorded. And now I'll turn the call over to Jason Stanley, Vice President of ESG and Investor Relations. Jason, you may begin.

Thank you, John. Good morning, everyone, and welcome to Tidewater's earnings conference call for the three months ended March 31st, 2021. I'm joined on the call this morning by our President and CEO, Quentin Neen, our Chief Financial Officer, Sam Rubio, our General Counsel and Corporate Secretary, Daniel Hudson, and our Vice President of Sales and Marketing, Piers Middleton. During today's call, we'll make certain statements that are forward-looking, referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual future performance to be materially different from that stated or implied by any comment that we make during today's conference call. Please refer to the most recent 10Q for additional details on these factors. This document's available on the website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, May 7th, 2021. so you're advised that any time-sensitive information may no longer be accurate at the time of any replay. Also, during the call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in last evening's press release. And now, with that, I'll turn the call over to Quinton.

Thank you, Jason. Good morning, everyone, and welcome to the first quarter of 2021 Tidewater Earnings Conference Call. Joining me in presenting our prepared remarks, as usual, is Pierce Middleton, but also joining me today is Sam Rubio, our newly appointed chief financial officer. I will open the call to some general commentary on the quarter. Pierce will cover the markets and the various geographies in which we operate, and then Sam will wrap up the prepared remarks with an overview of income statement, OPEX, GMA, the balance sheet, and then, of course, we'll open it up for questions. The first quarter is often a relatively quiet quarter. This first quarter was relatively quiet. The first quarter is the softest calendar quarter of the year, but I was pleased with the cash generation in the quarter. You may recall from last quarter that the P&L performance was much stronger than we anticipated, but the cash flow generation lagged behind. As often is the case, cash flows caught up to those earnings in the first quarter. Cash flow from operations for the quarter was $5.7 million. Free cash flow was $19.2 million, bolstered by working capital inflows and proceeds from vessel sales. We laid out in the press release for you to pick the cash flow measure you like, whether it's cash flow from operations, free cash flow, levered free cash flow, whether or not you want to include asset sales. But whatever measure you pick, it's a positive cash flow measure. Pre-cash flow for the trailing 12 months was $87.1 million. That includes $39.8 million of asset sales, which we anticipate winding down over the next 12 months. Quarterly revenue was slightly higher than what we expected, but operating costs were also slightly higher. Overall margins were about 2% below where we thought they would be for the first quarter. We came in just under 26%, and we were aiming for just over 27%. For the year, we're still anticipating margins of 30%. My expectation is that we will make up a shortfall in the second and third quarters. We used the cash generated in the quarter to pay off $26.4 million in outstanding debt. Net debt is down to $23.1 million. We've made significant investments since 2018 to ensure Tidewater is the lowest-cost operator of vessels while still delivering safe, best-in-class services. We've designed a scalable infrastructure that can swiftly adjust to market changes and remain free cash flow positive, and that design was put to the ultimate test over the past 12 months. Importantly, the scalable infrastructure will allow for disproportionate profitability as the business grows. This business has a significant degree of operating leverage. Once the boats are operating, incremental day rate margins should drop 100% to operating profit. Operating leverage has cut against us the past six years, but it goes up on the same scale as it's gone down. We've designed a sustainable business that will be free cash flow positive in the worst of times and significantly cash flow positive in the best of times. We sold six vessels in the quarter for $11 million. We sold two more subsequent to the quarter, and we have 18 vessels left in the assets held for sale category. Based on the recovery in the market that we see beginning to unfold in the second half of 2021, I don't anticipate reducing the vessel fleet any further than what we currently have in assets held for sale. After this lot is sold, I anticipate everything we own should be working by the end of 2022. I am very much looking forward to getting out of the laid-up vessel business. Vessels on lay-up cost us $5.4 million in the first quarter. Annualized, that's $21.6 million of cost per year that we can add to the bottom line by getting all of these vessels out of layout. And in addition, there will be the operating profit from these currently idle vessels. Our G&A costs continue to come down. That's now nine consecutive quarters of G&A run rate cost reductions. Our annualized G&A expense for the first quarter was $64 million, down another $4 million from the last quarter. I mentioned G&A because I actually anticipate it will begin to rise a bit as we go through the remainder of 2021. I think I've said that on the last few quarterly calls, and it keeps going down. But we have begun to fill some open positions, and I anticipate travel expenses coming back as we get into the latter half of 21. Quite frankly, it's going down now just based on culture and momentum of earlier cost-saving initiatives. Our big cost focus in 2021 is optimizing the cost of dry docks and minimizing the cost of vessels and layup, the $21.6 million figure I mentioned a moment ago. I still anticipate dry docks for 2021 to be approximately $20 million. The second quarter is the heavy dry dock quarter this year. We anticipate approximately $9 million of dry dock spend in the second quarter. In our first reassessment of the recovery in the market after the pandemic broke out, it was on this call, the first quarter call last year. At that time, I indicated we thought business would be down 25% and that it would take 18 months for the industry to rebalance. Business was down 28% year over year, and I now anticipate it will be the first quarter of 2022 before we get back to where we were from a supply and demand perspective in the first quarter of 2020. essentially putting us back two years. The worst, of course, is definitely behind us. Pandemic-driven inefficiencies, which we estimate cost us 5% of revenue, are still impacting us. That's factored into our full-year margin guidance of 30%. Each wave of the pandemic has created different challenges, although they can all be generalized as increased costs associated with moving people around the world. The latest challenge results from the fact that approximately 8% of our mariners come from India, which is currently experiencing the most devastating impacts of the pandemic. Earlier in the pandemic, it was impacting the Philippines, another key source of quality mariners. About 26% of our mariners come from the Philippines. We continue to respond to the circumstances presented, but that 5% of revenue costs look to be with us for the remainder of 2021. We recently published our first sustainability report, which provides a comprehensive update on a wide range of environmental, social, and governance or ESG initiatives. It provides a look into the programs in place at Tidewater and our key sustainability challenges and opportunities. Our safety culture is one of the best in the business. Our team logged over 17 million hours in 2020 with no lost time instance, achieving a company record, a real testament to the focus and dedication of our team, despite the added challenges brought about by the pandemic. We also made significant strides in our efforts to reduce greenhouse gases and other emissions through data analysis, operational efficiencies, and leveraging technology, including hybrid and shore-based power systems. In 2020, we established a baseline for our fleet emissions, which will enable us to assess our progress as we continue to take actions to reduce our carbon footprint per vessel. We were excited to take an opportunity to provide some insight into our unique company culture and many of the actions we have been taking for years, decades in some cases, to positively contribute to the communities we live and work in all around the world. I invite you to read the report and learn more about what we're doing. That's a quick overview on the quarter. I will now hand the call over to Pew for an update on the vessel market and the various geographies in which we operate.