Tidewater Inc.

to the Tidewater Q3 2024 Earnings Conference Call. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We also ask that you please limit your questions to one question, one follow-up. Thank you. I would now like to turn the call over to Wes Gocher, Senior Vice President of Strategy, Corporate Development, and Investor Relations.

Thank you, Novi. Good morning, everyone, and welcome to Tidewater's third quarter 2024 earnings conference call. I'm joined on the call this morning by our President and CEO, Quentin Neen, our Chief Financial Officer, Sam Rubio, and our Chief Commercial Officer, Piers Middleton. During today's call, we'll make certain statements that are forward-looking and referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual performance to be materially different from that stated or implied by any comment that we're making during today's conference call. Please refer to our most recent Form 10-K and Form 10-Q for additional details on these factors. These documents are available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, November 8, 2024. Therefore, 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's non-GAAP financial measures can be found in our earnings release located on our website at tdw.com. And now with that, I'll turn the call over to Clinton.

Thank you, Wes. Good morning, everyone, and welcome to the third quarter 2024 Tidewater Earnings Conference Call. Third quarter revenue came in as expected as day rates continued to improve nicely, exceeding our expectations by over $600 per day. Gross margin came in at 47.2%, and we generated pre-cash flow of $67 million. Year-to-date, we have generated nearly $224 million of pre-cash flow, $174 million more than the same period last year. A substantial improvement in free cash flow generation is the result of high grading our fleet through focusing on newer, higher specification vessels and our contracting strategy to relentlessly drive global day rates higher. We believe that long-term fundamentals support continued free cash flow progression, and we expect our free cash flow generation to improve over the coming quarters. The third quarter is typically characterized as the most active quarter of the year, as customers take advantage of favorable weather conditions to execute their plans ahead of the seasonally less favorable fourth and first quarters. We saw this dynamic play out this year, with average day rates improving over 5% and leading edge day rates moving up nicely, particularly in our high specification PSVs and smaller anchor handlers. Utilization came down slightly as additional time between jobs, principally in our West Africa and Europe and Mediterranean segments, along with higher-than-anticipated dry dock days globally, both increased from the second quarter. On last quarter's call, we discussed our weekly re-forecasting process in the context of the rapid pace at which the industry outlook can change and the need to frequently evaluate our outlook as the factors driving our business evolve. We've seen that play out in the past three months as activity in certain of our regions softened unexpectedly due to a lack of incremental projects, projects ending early, and regulatory delays causing more idle time for some of our vessels, principally in the Americas and Asia Pacific. The North Sea, particularly in the UK sector, is anticipated to be weaker due to a combination of typical winter seasonality and adjustments to their regulatory and tax programs both of which are putting pressure on day rates and utilization. We're also planning on making more investments during the fourth quarter in our fleet than we had originally planned to prepare for what is expected to be a better market as we progress into the second half of 2025. And these incremental investments will result in incremental dry dock days as compared to our previous expectations. More broadly, as we evaluate the landscape for 2025, the outlook on the timing and pace of growth in offshore vessel activity is less clear than it's been in a few years. We continue to see conviction in long cycle projects by our customers. However, continued near-term activity growth appears to be somewhat subdued. We've seen our customers take a measured approach to executing incremental growth projects. Importantly, projects aren't being canceled but the decision to procure vessels and other assets has been stalled as operators evaluate the outcome of recent successes and contend with lead time issues for critical offshore infrastructure and equipment. We've not seen a pullback in day rates, as evidenced by both the increase in average day rates for the quarter, along with the increase in the quarter's leading edge day rates. However, lower activity levels adversely impact our ability to continue to push day rates as aggressively as we have over the past two years. Over the last two years, we've been able to push day rates up over $4,000 per day each year, which incidentally is fantastic. And those increases have had a big impact on earnings. I'm confident we can still push day rates up, but whether it's $1,500 per day, which historically has been the benchmark during industry upturns, or the $4,000 a day we've seen recently is what we are grappling with. So we're holding off on guidance for 2025 until we get some better visibility which we anticipate we will have for you on next quarter's call. We've talked at length about our contracting strategy over the past few years, the merits of taking a short approach to contract duration in order to push day rates and contractual terms. We've seen the benefit of this strategy with realized average day rates now almost double what they were at the beginning of 2022, which has had a substantial impact on the earnings and cash flow of the business. This strategy trades contract coverage and higher utilization for the opportunity to push rates. Although the near-term expectation and the growth of offshore activity is less certain, we still believe that going short is the right strategy, though it may cause some lower utilization in the near term. In our view, market day rates still do not justify the economics required for new-build vessels and that the day rates will ultimately need to move to a point where new-build vessels are economically viable. We see vessel attrition continuing to further constrain vessel supply over the coming years. And given the very low number of new vessels on order, we expect that the balance of supply and demand will remain firmly in our favor for at least the next three years. As such, we anticipate that as we move through 2025 and into 26, leading-edge day rates will continue to increase from where we are today, and we will be well-positioned to take advantage of the imbalance of that imbalance as the growth in activity level accelerates. Subsequent to last quarter's earnings release, we repurchased about 15 million of shares in the open market. That brings our year-to-date share repurchases to about $48 million. And since the inception of the buyback program in the fourth quarter of 2023, we have repurchased nearly $83 million of shares in the open market. In addition to the open market repurchases, we used $28.5 million of cash in the first quarter to buy shares from employees so that they could pay their tax obligation on the equity compensation in lieu of those employees issuing shares into the open market, which incidentally we will do again in the first quarter of 2025. So over the past four quarters, we've used $111 million of cash to reduce the share count by over 1.4 million shares. We still believe that acquisitions done at a price that reflects a sharing of the cyclical and market risk is a solid way to make significant investments to the long-term value of the shares. And we're still generally focused on acquisition opportunities in North and South America. But the aforementioned lack of near-term visibility has increased the bid-ask spread, at least for now. So for now, we'll remain focused on repurchasing our own shares. Because our confidence in cash flows over the next two quarters remain strong, we are inclined to increase the rate of shareable purchases. In summary, we are confident that the long-term fundamentals for this business remain favorable and that our ability to capture the benefits of the imbalance of vessel supply and demand is intact. We are confident that the business will continue to generate substantial pre-cash flow that will allow us to take advantage of these near-term uncertainties and provide opportunities to continue our past successes in enhancing shareholder value. And with that, let me turn the call back over to Wes for additional commentary and our financial outlook.