TIDEWATER INC Q3 FY2024 earnings call

• Free cash flow generation: Substantial improvement with $67 million generated in Q3 and nearly $224 million year-to-date, driven by fleet high grading and contracting strategy to push day rates.
• Fleet and strategy: Focus on newer, higher specification vessels; contracting strategy with short-term contracts to push day rates; plan to invest more in fleet in Q4.
• Share repurchases: Repurchased about $15 million of shares in Q3, with year-to-date repurchases at $48 million and nearly $83 million since the buyback program inception. Authorized an additional $10.1 million of share repurchase capacity.
• Regional market insights: Piers discussed regional market dynamics including Europe, Africa, Middle East, Americas, and Asia-Pacific, highlighting both challenges and opportunities in each region.

Third quarter revenue was $340.4 million, up slightly from $339.2 million in the second quarter. Average day rates increased by 5.4% from $21,130 per day in Q2 to $22,275 per day in Q3. Gross margin in Q3 was $160.8 million, down slightly from $161.9 million in Q2. Year-to-date, Tidewater has generated nearly $224 million of free cash flow. Regionally, day rates improved by 5.4% during the quarter, led by the Asia-Pacific region (up 23%) and West Africa region (up 10%). Revenues were higher in all regions except Americas, which declined by 12% primarily due to lower utilization. Gross margins varied by region, with the Americas region experiencing a decline of about five percentage points and APAC, Europe, and Mediterranean regions also seeing declines, while West Africa and Middle East regions saw improvements.

• 2024 revenue guidance updated to $1.33 billion to $1.35 billion with a 48% gross margin. Q4 revenue expected to be essentially flat with Q3, and gross margins to improve 1 percentage point sequentially. Drydock days expected to decline by about half in Q4 versus Q3.
• 2025 guidance to be updated next quarter as visibility improves for offshore activity pace and timing. Current contracted backlog at about $332 million of revenue for Q4 with 79% of available days contracted.

• Unanticipated downtime due to unplanned maintenance and drydock days. Market uncertainties affecting activity levels, including project delays, regulatory impacts, and subdued near-term activity growth in offshore vessel activity.

Q: Jim Rollyson asked about M&A potential and guidance for 2025.

A: Quintin Kneen said M&A is too early yet, and West Gotcher noted day rates should increase in 2025 but visibility is low.

Q: David Smith inquired about Q4 guidance and pricing in different regions.

A: West Gotcher explained Q4 revenue is expected flat due to various regional pressures, and Piers Middleton discussed factors affecting pricing in regions like the North Sea and Mediterranean.

Q: Greg Lewis asked about drydocking and pricing in certain markets.

A: Samuel Rubio discussed drydock day breakdown, and Piers Middleton provided insights on pricing resets and market visibility for 2025.

Q: Don Crist asked about FPSO work and utilization.

A: Piers Middleton talked about FPSO work composition and West Gotcher mentioned utilization expected to tick up in 2025 with lower drydock days.

Q: James West inquired about utilization and day rates.

A: Samuel Rubio broke down utilization factors, and Quintin Kneen discussed product mix impact on day rates.

Q: Fredrik Stene asked about capital allocation and M&A.

A: Quintin Kneen discussed M&A complexities due to market volatility, and West Gotcher provided 2025 backlog information.

Q: Don Crist asked about debt covenant and cash allocation.

A: Quintin Kneen stated preference for share repurchases over deleveraging at present