Bristow Group, Inc.

Good day, everyone, and welcome to Bristow Group Reports' fourth quarter and full year 2024 earnings call. Today's call is being recorded. After the prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number five on your telephone keypad. At this time, I would like to turn the call over to Rud Tilchen. Senior Manager of Investor Relations and Financial Reporting.

Thank you, Angela. Good morning, everyone, and welcome to Bristow Group's fourth quarter and full year 2024 earnings call. I am joined on the call today with our President and Chief Executive Officer, Chris Bradshaw, and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I'd like to take this opportunity to remind everyone that during the course of this call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on slide three of our investor presentation. You may access our investor presentation on our website. We will also reference certain non-GAAP financial measures, such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and our investor presentation. I'll now turn the call over to our President and CEO.

Chris? Thank you, Red. I want to thank all the Bristow team members around the world for their continued focus on safety, which is Bristow's number one core value and our highest operational priority. In terms of workplace safety, the company delivered a 32% decrease in lost workdays in 2024 compared to the prior year, which represents a significant HSE performance improvement. With respect to aviation safety, as a reminder, we experienced a tragic air accident during a search and rescue training exercise offshore Norway on February 28, 2024, with six crew members on board. While five crew members were rescued, we tragically experienced one fatality as a result of the accident, and we will carry this loss with us always. The investigation process is ongoing, and we will refer you to the preliminary reports published by the authorities in Norway. We continue to fully cooperate in the investigation process. We do not have any other material updates at this time. While always a difficult transition to make, I will now turn our comments to the company's operational and financial performance. We are pleased to report very strong fourth quarter financial results. which exceeded the upwardly revised outlook range for Q4 and full year 2024. This outperformance was driven by strong growth in our offshore energy services business, where industry fundamentals remain positive, and we continue to believe that we are in the midst of a multi-year upcycle. In our government services business, we are focused on the ongoing launch of SAR services for the Irish Coast Guard, and the transition of operations to the UK SAR2G contract in the United Kingdom. Those are large and complex projects with extended transition timelines running through the second half of 2025 in Ireland and through the end of 2026 for UK SAR2G. While we are facing challenges along the way with unexpected regulatory and supply chain delays, Our commitment to delivering successful outcomes for the governments and communities we serve remains unwavering. I will now hand it over to our CFO for a more detailed discussion of financial results and guidance. Jennifer?

Thank you, Chris. Today I will begin with a review of BRTSA's sequential quarter financial results on a consolidated basis before moving on to an introduction of our newly realigned business segment and review of the full year 2024 results on a segment basis. Adjusted EBITDA in the fourth quarter of 2024 was 57.8 million compared to 60.2 million in the third quarter. Revenues decreased 11.6 million primarily due to lower aircraft availability and unfavorable foreign exchange rate impacts across all segments, partially offset by the commencement of a new government services contract in Ireland. Operating expenses were $9.6 million lower due to lower operating personnel costs as a result of the finalization of a labor agreement in the UK in the third quarter, lower fuel costs due to fewer flight hours and decreases in global fuel prices, and lower repairs and maintenance costs primarily due to decreased power by the hour or PBH expenses. These decreases were partially offset by higher costs related to the commencement of the new government services contract. General and administrative expenses were 1.5 million higher, primarily due to higher incentive compensation costs related to the company's full year financial results. Other expenses of 6.2 million resulted from foreign exchange losses of 12.6 million which, as noted in previous earnings calls, primarily comprises non-cash foreign currency gains and losses that are excluded from our adjusted EBITDA calculations. These foreign exchange losses were partially offset by an insurance recovery of $4.5 million and a favorable interest adjustment to our company's pension liability of $1.7 million. I will now move on to an explanation of our newly realigned business segment and a brief introduction to each operating segment. Due to the recent expansion of our government services business via the addition of new contracts in multiple jurisdictions, we re-evaluated the various factors that make our existing lines of service unique, such as end customer profile, management responsibility, and contract dynamics. In the fourth quarter of 2024, we realigned our segments from a single reportable segment, aviation services, to three reportable segments. The first is offshore energy services, or OES, which provides aviation services to, from, and between offshore energy installations globally. The second is government services, which provides search and rescue, or SAR, and support government support helicopter services to government agencies globally. And lastly, other services, which primarily comprises fixed wing services, providing transportation through scheduled passenger flights and aircraft charter services, dry leasing of aircraft to third-party operators, and park sales. The realignment of our segment resulted in certain presentation changes that include a reclassification of our fixed-wing revenues supporting our energy business in Africa to our OES segment, combining our fixed-wing airline operations in Australia into the other services segment, and combining reimbursable and operating revenues as well as combining reimbursable and operating expenses. The financial years presented, including our forward-looking guidance, have been recast to conform with the revised presentation for ease of comparison. I will now cover our full year 2024 financial results by segment. Briscoe's revenues from OES were 113 million higher in 2024 compared to 2023. This increase is attributed to higher utilization and increased rates in Africa, the commencement of new contracts in Brazil, higher utilization in other parts of the Americas, and the commencement of a new contract in Norway. This increase in activity and revenues was partially offset by higher repairs and maintenance costs of 20.1 million and operating personnel costs of 8.7 million due to the increased activity. Adjusted operating income from OES was 84 million higher in 2024. Revenues from government services were $7.6 million lower than 2023, primarily due to a change in rates after transitioning to the long-term contract with the Dutch Caribbean Coast Guard, or DCCG. Adjusted operating income was $10 million lower in 2024, primarily due to aircraft availability penalties related to supply chain challenges in UK SAR, startup costs for Irish SAR, or IRCG, and the transition to the long-term DCCP contract. However, it is important to note that the duration of these contracts, generally lasting 10 or more years with additional one- to three-year extension options, provides stable long-term cash flows with high credit quality customers, strong margins, and reliable capital returns once operations are fully ramped, which I will discuss in more detail when we cover the government services outlook momentarily. Moving on to other services. Revenues from this segment were 12.6 million higher in 2024, primarily due to higher utilization and increased rates. Adjusted operating income was consistent with the prior year, as higher revenues were offset by higher operating costs in fixing services of 12.7 million. As Chris noted, we are pleased with the stronger than expected fourth quarter, which exceeded our upwardly revised outlook range for Q4 and the full year 2024. Our consolidated financial performance in 2024 culminated in revenues increasing by $118 million and adjusted EBITDA increasing by $66.3 million, which is a 39% increase compared to the prior year. Turning now to cash flows. The $145 million increase in operating cash flows is attributed to the increase in operating income and an improvement in working capital in 2024. Additionally, our adjusted free cash flows were $161 million in 2024 compared to $28 million in 2023. Bristow continues to benefit from a strong balance sheet and liquidity position. As of December 31st, our available liquidity was approximately $312 million. We have now funded 84% of the capital investments needed for our UK and IRCG contracts. The remaining capital investment is expected to largely conclude in the first half of the year. As we have noted in past earning calls and continue to reiterate now, we believe that our business model will continue to generate strong cash flows. This is becoming more evident through our new capital allocation framework. Moving on to Bristow's outlook. At this time, we are confirming our previously reported 2025 revenues guidance of 1.4 billion to 1.6 billion and adjusted EBITDA range of 230 to 260 million, as well as our 2026 target guidance of 1.5 billion to 1.8 billion total revenues and adjusted EBITDA range of $275 to $335 million. 2024 was a year of increased utilization, rate, and foliar impact of contract commencement, with Nigeria and Brazil a standout market. And while market conditions in our OES segment are expected to remain constructive in 2025, we expect headwinds from our continued supply chain shortages persist during the year. Additionally, the cadence of our contract renewal is such that more of the contracts would commence in late 2025 or 2026. So, the more meaningful increases will be visible in 2026. However, given our current utilization levels coupled with unmet lift demand and long lead times for new bills, we expect to perform well, if not better, in 2025 as reflected in our OES adjusted operating income range of $190 million to $210 million compared to the $173 million in 2024. Regarding our outlook for our government services segment, adjusted operating income for the government services segment declined by approximately $14 million from 2022 to 2024, primarily due to startup expenses of $4 million in support of our new IRCG contract, higher aircraft penalties in UK SAR of $6 million due to significant supply chain challenges, and $4 million in adverse foreign exchange impact. As the transition progresses for both IRCG and UK SAR TG contracts, we expect adjusted operating income margins to return to 2023 levels at a minimum, and for aggregate adjusted operating income generated by our government service segment to increase by approximately 25% in 2026 relative to 2022. We expect full year impacts in subsequent years will contribute meaningfully to our financial results, and the strong margins, stable long-term cash flows with high credit quality customers will provide reliable capital returns well into the middle of the next decade, as illustrated on slide 14. We continue to believe the growth in our government services segment and diversification of Briscoe's revenues will provide long-term value to our investors as evidenced by the commencement of dividend payments in Q1, 2026. At this time, I'll turn the call back to Chris for further remarks.

Chris? Thank you. As summarized in our press release and slide 19 of the earnings presentation, We are pleased to announce Bristow's new capital allocation framework with strategic priorities that include protect and maintain a strong balance sheet and liquidity position, pursue high impact, high return growth opportunities, and return capital to shareholders via opportunistic share buybacks and quarterly dividend payments. Understanding that offshore energy services, our largest business segment, is inherently volatile we must sustain a robust balance sheet that can withstand all market cycles. As such, the company intends to pay down debt to a balance of approximately $500 million of gross debt by the end of 2026. At the same time, we will continue to execute on compelling growth opportunities, such as the long-term government SAR contracts, as well as the attractive opportunities we have to introduce new AW189 helicopters meet customer demand and boost profitability in our offshore energy services segment furthermore bristow is committed to return capital to shareholders via a new quarterly dividend program intended to commence in q1 2026 with an initial dividend payment of 12.5 cents per share or 50 cents per share annualized as well as opportunistic share buybacks under the company's new $125 million share repurchase program. We believe this disciplined and focused capital allocation approach provides multiple avenues to create additional value for Bristow stakeholders. With that, let's open the line for questions. Angela?

At this time, I would like to remind everyone that in order to ask a question, press star and then the number five on your telephone keypad. If you would like to withdraw your question, press star, and the number five once again. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Jason Vandal with Evercore. Jason, please go ahead.

Thanks. Good morning, Chris, Jennifer, and Red. Good morning. Good morning. My first question, let's start with offshore energy services. The business seems to be doing quite well. Yeah, it sounds constructive. You know, we're kind of used to hearing about white space headwinds and commodity macro headwinds and so forth. So can you guys, I guess, start by highlighting some of the dynamics that are going on in OES and expand a little bit on how you're keeping utilization levels so high currently? Okay.

Yes, happy to do so, Jason, and thanks again for joining the call. So I think as we look at our sector, obviously we are impacted by a lot of the same market drivers that impact other offshore services spaces, like the drillers, for example. And we certainly do follow those indicators, especially the floating offshore rig count, as that's mostly the water depth and market that we serve. Our equipment sector is really different from that. We have our own supply-demand dynamics. And so what's keeping utilization levels so high, and, again, today they really are at or near 100% effective utilization for the relevant heavy, super-medium, and medium helicopter models, is the fact that we had about a decade's period where there were very few, if any, new deliveries coming into the market. Over that period of time, you had a number of helicopters that were sold into other end markets or were aged out or otherwise disposed out of the available fleet. So there's been a significant tightening of the supply. So as demand has picked up over the last several years, we've resulted in this very tight supply-demand dynamic that's informing those at or near 100% effective legalization levels. And importantly, with a very finite supply number of OEMs who manufacture helicopters, the lead times today are really two-plus years if you're looking for a new aircraft to be delivered. So that's part of what informs our visibility on the supply-demand dynamic for our space over the next couple of years.

Great. And if you dig in a little bit deeper, Chris, just on, I guess, the 2025 outlook here, just some of the key drivers to your growth and maintain that utilization, kind of go around the globe here and kind of note one or two or three pockets of strength that you're seeing.

Sure. Happy to do that. So for the purposes of this, I'll focus on the OES portion of our business. The markets where we're seeing more growth continue to be in West Africa and Nigeria has been a very strong, positive contributor to our business. We expect that to continue in 2025, 26, and really beyond. Also, Brazil. Brazil is an area where we've put more helicopters on contract, both with Petrobras as well as independent producers there. So Brazil is an area that has driven growth so far. We expect that to continue, particularly in the latter half of 2025 and into 2026. And then the Caribbean Triangle, namely thinking about right now, for the purposes of these comments, Suriname, is an area where we're seeing additional projects come up, additional demand for our offshore helicopter services there. So from a growth rate standpoint, those are the markets that I would highlight. But we also have strength in some of our more mature markets, like the Gulf of Mexico, for example. Not the same growth rates given the size, but there is incremental demand here in the U.S. We just started a new S92 contract for a customer here in the U.S. at the beginning of this year, and we see incremental demand over the course of 25 and 26 as well.

Great. That's helpful, Chris. And let me get one last question in here. In your appendix, you have a slide in the presentation on net asset value. We'd love to kind of hear your thoughts on the importance of that slide and also hear your thoughts about why you think your stock continues to kind of trade at a discount to the NAV calculation you show on that slide. Thanks.

Thank you for the question, Jason. Once a year, we do have a third-party firm that does an appraisal of all of the owned aircraft in Bristow's fleet. So this does not include any attributed value to the leased helicopters. This is really just focused on all the aircraft that we own in the fleet. So this third-party appraisal is done on an individual aircraft basis. We roll that up into their estimation of the fair market value of the overall owned aircraft fleet, which is a little over $1.5 billion. To that, we add the net book value of other tangible assets, subtract total debt, as well as other liabilities, such as deferred taxes. And this year, that resulted in an aggregate net asset value of about $1.7 billion, which on a per-share basis is roughly $57 per share of NAV. which is a significant premium to where the stock price is trading today. In terms of why there is such a discount to that NAV, I'll probably leave that for other market participants to speculate. Obviously, as a management team, we always think our stock price could be higher. That's a given. But we are pleased to release this year's version of the NAV, which, again, we disclose once a year.

Great. Thanks so much for the time. I'll turn it back. All right. Thank you.

Thank you. Our next question will come from Josh Sullivan at the Benchmark Company.

Can you hear me? Yeah. Hi, Josh. Good morning. How are you? Hey, good morning. Sorry, just wanted to make sure. So you just mentioned surname there as, you know, an opportunity for growth. You know, is pricing coming back in that market? You know, at one point there seemed to be a dislocation. You know, are customers, you know, changing their perspective there?

Good morning, Josh, and thanks again for the question. So, we continue to see really positive, strong, stable pricing across our offshore energy services business. I think that is informed by the tight utilization or the high utilization levels, the tight supply and demand dynamic. So, when we're looking to bid on new projects or renew contracts, that's That's the type of consistency and sustainability that we're seeing in the pricing in the market right now, and that includes CERNOM. Really, the growth in CERNOM I would attribute more to incremental project demand, as you've had some very successful projects which is prompting the initiation beginning later this year of more development and production work, as well as it's promoting additional exploration work by other operators who are looking to potentially hit promising reserves like those that have been discovered there already. Okay, got it.

And then I guess just looking at the 24 results, you know, you beat your own guidance. What was the outsized driver compared to maybe what you saw at the end of Q3?

Thank you, Josh. Good morning. So we were pleased to deliver better than expected results for the quarter. There were several items. Africa has continued to be a driver. Our OES business is a driver in Africa particularly, but also in Q4 you had both in the Brazil and the UK some attractive ad hoc opportunities as well to help drive that.

Got it. And then I guess just, excuse me, relatedly, as we look at 25, you know, why keep the current guide done? You know, what are the major puts and takes to 25, I guess?

Sure. We always knew that 2025 was going to be a transition year with both the UK SAR 2G and the Irish Coast Guard contracts ramping up. Our OES business continues to do well. However, as I noted in my prepared remarks, We do expect supply chain shortages to persist. In addition, many of our contract renewals commenced in late 25 or 26, so the impact of those really get reflected in 2026 and beyond. And for those reasons, we affirmed the guidance as we had put it out previously.

Which I think, just if I could add there, I think is a positive statement to make in light of what's going on elsewhere and in this climate for the offshore services space. Hopefully it's sending a positive message that we can affirm our outlook for both 25 and 26, given the strength that we see for Bristow's business.

Got it. Got it. And then I guess just one or actually a couple on that. the new capital allocation framework. Congratulations on that. But if we take the priorities, as you mentioned, just one by one, maybe first in the debt, how quickly should we expect you to start paying that down?

Thank you for the comments on that, Josh. We are pleased to roll that out and introduce and start implementing that. On the debt, we are looking to pay down debt to gross debt balance of approximately $500 million by the end of next year. And we expect to initiate those advanced payments beginning in Q2 of this year. So just over the next couple of months, we should initiate those advanced debt payments.

And then on the second priority, just on growth outlets, with the Irish SAR and UK contract being the helicopters associated with that coming to the end at some point, what are the other growth outlets that might require some capital over the next two years?

Nothing immediately identified. Although we do think there will be some additional opportunities that may come to market. Those include Australia, where we expect that the existing SAR support services there for the government in Australia will come to tender over the next couple of years. There might be some opportunities in the Middle East where we're seeing some potential interest to launch search and rescue services to privatize those services for those communities, as well as in Europe, probably more around training opportunities that could exist. There's obviously a high focus on military and security in Europe. Right now, and I think there's an interest in looking to the private sector to help support some of the training necessary to keep pace with that increased defense activity. So those would be a few areas that we would highlight. But again, nothing identified at this time that would impact CapEx over the timeframe you referenced.

Got it. And then I just go on the buybacks. When should we expect those to begin? And on the new dividend policy, what is the strategy there? Is there a ratio or metric that you're following?

Thanks for that question as well. On the buybacks, we are planning to take an opportunistic approach to deployment of capital to repurchase shares. So there's nothing programmatic about the timing or cadence for those. It'll depend on the situation and prevailing market conditions. On the dividends, our intention is to initiate that quarterly dividend payment beginning in Q1 of 2026. We're initiating that at 12 and a half cents per share quarterly or 50 cents per share annualized initially. That's informed really by the size and stability of the government services cash flows that the company is expected to generate. So the sizing really I would think about as being a function of our government services business. We do have a long-term ambition on being able to grow that dividend payout over time, but again, That's the amount that we intend to initiate in Q1 of 26.

And then just one last one. On the advanced mobility market, you've got some of the EVTOL players talking about international markets being some of the first areas for operations. Obviously, you guys have some very good operating certificates globally. What's your perspective on the market right now and how it might develop over the next year or so?

Yeah, as you're aware, Josh, but just for the benefit of the broader audience, we have spent some time and resources over the last several years now really analyzing that space, advanced air mobility, studying and understanding the technology, understanding the variances between the different products that are being developed and may come to market, the teams that are behind them. We've been in a lot of discussions with those. We have announced some partnerships with some of those. We are interested in how the new technology can be deployed to meet demand from our existing customer base as well as a potential new set of customers. In terms of timing, really those aircraft are still in the certification stage. It's uncertain exactly what those timelines will be. I think there's a lot of optimism that the first Western aircraft advanced air mobility products will be certified later this year. Obviously, there's some uncertainty around that, particularly with what's going on with the regulatory authorities that are relevant here. But we'll be optimistic that those timelines will advance. We were pleased to publicly announce that Bristow will be participating in really a first-of-its-kind exercise later this year in a regulatory sandbox in Norway. where we will be operating one of those products, namely Beta's e-CTOL, or conventional takeoff and landing aircraft, in Norway on a real-world, real-life basis, testing that technology in partnership with not just Beta, but also the government there. So that's an exciting opportunity to demonstrate some real-world data, help prove out some of the assumptions and use cases, and I think hopefully clarify, you know, a visible path to more commercial operations for these technologies moving forward. Great.

Thank you for your time. Thanks, Josh.

Thank you. Our next question will come from Savi Siss with Raymond James.

Hey, good morning, everyone. I just had actually a couple of follow-up questions. Just on the government services side, I recognize those are kind of longer-term contracts, and you mentioned this a little bit in terms of Europe, but clearly there's a lot of noise around government spending in the U.S., and I was just kind of wondering if you're seeing anything today that gives you a reason to be more optimistic or have concerns on the U.S. side of things.

Obviously, thank you for the question. There's a lot to follow there. Heavy news flow in the U.S., certainly. I think our view right now is we expect continuation of the same with some optimism for potential incremental opportunities or growth over time, particularly if the government is focused on being more efficient and thinking about how they can adopt and work with more of a private sector model to capture some of those efficiencies, that could be an incremental opportunity. But we will continue to actively monitor the news flow and look to see where we can potentially glean some of those opportunities for Bristow.

Appreciate that. And just to follow up on that, can I advance mobility side of the world? I realize it's still very early days across, but if you look at, you know, your operations globally, where do you think it will be easier to initiate or where there might be more demand to initiate some of these operations?

Our view is that it could be outside of some of the major countries and regulatory bodies. Maybe not the U.S. or Europe, but maybe some of the first places where you can actually put these to work at scale would be in places like the Middle East, where you have a lot of interest, very heavy state sponsorship that can make things like that happen quickly, or in Africa, where, again, there's perhaps fewer hurdles there to launching operations of this technology. So in things that we're looking to do either directly with the aircraft manufacturers or in partnership with other players in the space, those are some of the areas that could move more quickly than others in our view.

I hope so. Appreciate it. Thank you.

Thank you.

Thank you. Our next question will come from Nikolai Tomfield with Friendly Securities.

Hi there, good morning. So I believe most of my questions already have been covered, but just one final question from my side. With the Irish Coast Guard and the UK SAR 2G contract being in sort of the transition phase, when do you sort of believe that we, when do you anticipate that we will see the full ramp up and the full earnings potential with these contracts?

You'll start to see a cleaner picture in 2026. That won't be a perfectly clean one, really. That'll be 2027 and beyond. But we've always known that both 2024 and 2025, this year, we're going to be transition years. As we're launching those services, we do have a pretty extended period of time of startup costs. given the scale and complexity of these operations. So certainly a bit of a drag from some of the startup costs impacting both 24 and 25 profitability margins. But 26, again, should be a cleaner picture of the earnings potential, particularly from Ireland. And then 27 and beyond should be, we think, an even cleaner view on the earnings potential and profitability margins. from that part of our business, which we expect to carry on well into the middle of the next decade.

All right. That's good. Thank you. Thank you.

Thank you. Our final question will come from Colby Tasso.

Hi. Thanks for having me on the call. Multiples in the offshore – multiples have compressed their offshore energy levered equities in the last 12 months. When you think about opportunities for growth for your business, have you seen any more opportunities become available given the multiple compression in the energy space?

Yeah, good morning, and thank you for the question. In our sector, since Bristow is really the only public company today, there are not directly some – other public multiples to reference for the – what could be potential M&A opportunities since they're private. Nevertheless, similar dynamics prevail, right? So I think the – certainly understand the nature of the question. We'll continue to look at those opportunities, and they're relatively finite in number in our space. There's only really a few players out there. For ones that meet our parameters and become actionable, we will spend the time to analyze them and see if there's a way to implement M&A that could be value-added for shareholders. Certainly, we did that with the ERA Bristow merger in 2020. We were able to also add, via direct acquisition, a business to our government services, which expanded us into the Falklands and UK MOD business. So, you know, we do have, I believe, a track record of being able to execute when the opportunities are there, and we'll continue to monitor them and see if any of them become actionable over the near to medium term.

Perfect. And as a quick follow-up, I know you've already touched on the U.S. government a little bit, but tariffs are on again, off again, and there seems to be no concrete answer. But I wanted to ask how you're thinking about the potential impact to your company, given you have some new-built aircraft coming over the next few years. And if you're planning for this impact at all?

Yes, that's an important question. Definitely something that we're actively monitoring. As an aviation operator, we do have a a large and very international complex supply chain. So tariffs or really anything that introduces uncertainty to that supply chain would be a potential issue for our business. We do have a portion of our supply chain that comes through Canada, engines and other components, and we have a heavy portion of our supply chain that's coming out of Europe. So this is This is definitely an important issue that we monitor. As it relates to the new deliveries that we're bringing in to the fleet, whether it's the H135 Light Twins that we're taking delivery of right now or the AW189 orders that we have in place, those are fixed and firm prices, so we'll not be impacted by tariffs.

Thank you. That's all I have.

Thank you. We have no raised hands at this time. I will now turn it back over for closing remarks.

Thank you, Angela, and thanks, everyone, for joining the call. I appreciate the time and look forward to speaking again next quarter. Stay safe and well.

Thank you. The call has now concluded. Please feel free to disconnect.