Tidewater Inc.

Thank you for standing by. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Tidewater second quarter 2025 earnings call. All lines have been placed on mute 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. Thank you. I would now like to turn the call over to Wes Gocher, the Senior Vice President of Strategy, Corporate Development, and Investor Relations. Please go ahead.

Thank you, Jeannie. Good morning, everyone. Welcome to Tidewater's second quarter 2025 earnings conference call. I'm joined on the call this morning by our President and CEO, Quentin Mee, our Chief Financial Officer, Sam Rubio, and our Chief Operating Officer, Piers Middleton. During today's call, we'll make certain statements that are forward-looking and referring to our plans and expectations. The 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, August 5, 2025. Therefore, we advise 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 financial measures can be found on our earnings release located on our website at tdw.com. And now with that, I'll turn the call over to Quentin.

Thank you, Wes. Good morning, everyone, and welcome to the Tidewater's second quarter 2025 earnings conference call. Before beginning my prepared remarks, I'd like to first congratulate Pierce Middleton on his recent appointment as Chief Operating Officer. Pierce has over 30 years of experience in the industry and has been instrumental in the success that Tidewater has enjoyed over the past four years, and he will now be responsible for all of Tidewater's vessel operations in addition to the Chief Commercial Officer responsibilities he has held for the past four years. I'll start off today's prepared remarks by providing some highlights of the second quarter, discuss our recent balance sheet refinancing, update you on our share repurchase program and our current view on capital allocation, discuss the offshore vessel market, and lastly, provide an update on the state of vessel supply. Wes will then provide some additional detail on our financial outlook and our new capital structure and share repurchase program, Pierce will give an overview of the global market, and Sam will discuss our consolidated financial results. Second quarter revenue and gross margin nicely exceeded our expectations. Revenue came in at $341.4 million due primarily to a higher than expected average day rate and slightly better than anticipated utilization. Gross margin came in at over 50% for the third consecutive quarter. Day rates outperformed our expectations by more than $1,300 per day, setting a new quarterly day rate record at 23,166. The primary factor driving the increase in average day rate was the benefit of our fleet rolling onto higher leading-edge day rate contracts, bolstered by foreign exchange rates that largely strengthened against the dollar during the quarter. Additionally, our uptime performance continued to outperform our expectations as our vessels continued to benefit from substantial dry dock and maintenance investment we've made over the past few years. As a result of a higher than expected printed day rate for the quarter, along with improved uptime performance of our vessels, our gross margin of 50.1% came in well above our expectation of 44% provided on last quarter's call. Continued uptime outperformance in the quarter helped drive the gross margin beat because not only do we benefit from the incremental revenue associated with the vessel working, but we also avoid the expense of the repair itself, and we avoid the people expense associated with the operation of the vessel while it is on fire. During the second quarter, we generated $98 million of free cash flow, the second highest quarterly free cash flow figure since the offshore recovery began, slightly from last quarter, bringing the first half of 2025 total free cash flow to over $192 million. In early July, we closed on a $650 million U.S. unsecured bond that refinanced the vast majority of our previously outstanding debt instruments, namely our two Nordic bonds and our long-term facility, sorry, our permanent facility. We are very pleased to have consummated this refinancing, achieving our long-discussed goal of establishing a long-term unsecured debt capital structure more appropriate for the cyclical business in which we operate. Alongside the new bond, we put in place a $250 million revolving credit facility that provides us with a significant amount of financial flexibility. Importantly, given liquidity enhancement of the revolving credit facility, we are now in a position to operate the business with less cash on the balance sheet as we now have an alternative source of liquidity besides cash on hand. Wes will provide more details next, but another important feature of our new debt capital structure is that it allows for substantially increased capacity for shareholder returns. Our confidence in the long-term cash flow generation capability of the business is such that we are pleased to announce that our board of directors has approved a $500 million share repurchase program, which equates to over 20% of the company's closing market capitalization as of yesterday. I'd like to discuss our share repurchase philosophy a bit further given the new capacity we have available to us and the size of the new program. Over the past year and a half or so, under our prior debt documents, we were somewhat constrained in our capacity to repurchase shares. As such, we approached the share repurchase program on a quarter-by-quarter basis, updating our share repurchase capacity on a quarterly basis and, for the most part, rapidly executing on our available capacity each quarter to ensure we maximize the share repurchase capacity available to us, particularly during those times when we saw a more pronounced dislocation in the stock price. Because we have previously executed our program in full each quarter, I don't want to leave you with the impression that we will execute all of the $500 million this quarter. We see this new program as a long-term repurchase program. Given our current cash on hand and our future quarterly cash flow generation, we can easily execute on this program over the next year or so and maintain a net debt to EBITDA ratio well below one times. We won't be utilizing our revolving credit facility to repurchase shares, and our capital allocation philosophy still prioritizes acquisitions over repurchases when such acquisitions add more value to our equity holders. Just to wrap up on the prior repurchase program, as previously announced, during the second quarter, we fully utilized the remaining capacity under our prior share repurchase program, repurchasing 1.4 million shares at an average price of $36.80 per share, totaling $50.8 million of shares repurchased in the second quarter. As it relates to capital allocation priorities, we remain committed to pursuing M&A opportunities, and this is still the preferred direction for us to allocate capital. As excited as we are to announce a new share repurchase program, we are optimistic that we can consummate more M&A transactions. Fortunately, the longer-term cash flow output for the business is such that we can likely execute on both acquisitions and share repurchases, but the right value for your acquisitions can provide benefits in excess of what a share repurchase alone can achieve, and we believe there are such opportunities in the market today. We remain open to a transaction using stock, cash, or a combination of both. although our view of the intrinsic value of our shares will influence how we employ stock as consideration. We will contemplate additional balance sheet leverage for the right acquisition, provided that we have confidence that the near-term cash flows provide the ability to quickly deliver back to below one times net debt to EBITDA, very similar and consistent with what we have done in our prior acquisitions. Shifting gears a bit, I'd like to discuss our view on the current offshore vessel market and how we see the market evolving over the coming months and quarters. Weston Pierce will provide more commentary shortly, but I think it's worth providing some context on our view of the market output today. Coming into 2025, uncertainty around offshore activity, particularly in the first half of the year, was the prevailing theme, with drilling activity poised to rebound in the back half of the year. Recent macroeconomic and geopolitical events seem to be extending that period of uncertainty, including for offshore vessels. We are in the fortunate position of benefiting from operations in almost every geographical location around the world and from a wide variety of offshore end markets, including production, subsea, offshore construction, and drilling, and we remain confident in the fundamentals across each of these service lines. That said, in the near term, specifically in the next quarter or two, appeared to be a bit softer than we originally expected, offsetting the fact that the last two quarters were much stronger than we originally expected. We remain unaware of any project cancellations and customer conversations remain constructive, but nonetheless we seem to be in a period that can be characterized as lacking any sense of urgency related to commencing committed capital expenditures. Fortunately, subsea and production-related activity remains robust and is helping to mitigate the near-term activity softness in the drilling market, When vessel supply is as tight as it is, marginal improvements in drilling have an outsized impact on our ability to push up day rates across all of our service lines. The current level of subsea and production activity is strong, but it isn't quite sufficient to put the same strain on existing vessel supply that is needed to meaningfully push up day rates. But it has been enough to hold leading-edge day rates at their current levels. The continued expansion of subsea and production-related work provides a higher baseline demand, which reduces the number of vessels available to satisfy the increase in drilling activity we see shaking up nicely in 2026, which would then provide that much more of a strain on vessel supply as drilling activity picks up, and therefore increase our ability to once again aggressively push day rates higher. The vessel supply outlook remains essentially unchanged from the prior quarters, and really over the past year, nothing has changed. And our understanding of new-build conversations globally points to very limited activity. We're not aware of any new-build announcements during 2025. The number of new-builds on order, representing less than 3% of the global fleet, are expected to deliver in late 2026 at the earliest, likely into 2027, into 2028. We remain of the view that new-build capacity won't sufficiently replace vessels expected to attrition from the global fleet during the same timeframe. As such, we still view vessel supply limitations as a tailwind over the coming years as subsea and production markets structurally grow and as drilling activity increases. We watch new-build activity very closely, and we will continue to do so, but believe that current shipyard capacity, prevailing global day rates and contractual terms, The state of the vessel financing markets, as well as vessel technological obsolescence considerations, make any large-scale new building programs unlikely. In summary, we are pleased with the strong first half of the year and remain confident in our full year expectations. We are now better positioned than we ever have been since the offshore recovery began with our new debt capital structure and its added flexibility to capitalize on value-accretive acquisitions and share repurchases. We remain confident in a robust free cash flow outlook, and we look forward to deploying this cash in the most value-accretive manner for our shareholders. And with that, let me turn the call back over to Wes for additional commentary and our financial outlook. Thank you, Quentin.