TIDEWATER INC Q1 FY2025 earnings call

• First quarter revenue and gross margin exceeded expectations: Revenue was $333.4 million, gross margin over 50% for the second consecutive quarter, with day rates setting a new quarterly record at $22,303.
• Share repurchase activity: Deployed ~$97 million to repurchase ~2.5 million shares at an average price of $39.47, fully utilizing the $90 million share repurchase authorization under existing debt agreements.
• M&A strategy: M&A remains a growth cornerstone, but broader market volatility challenges deal dynamics; will evaluate deals using stock, cash, or a combination, considering intrinsic value of shares.
• Macroeconomic impacts: U.S.-led tariff regime and global growth uncertainty influence business; company is familiar with navigating such situations with low leverage and global operating footprint.
• Offshore vessel market: Pipeline of subsea projects and FPSO deliveries remains robust; vessel supply outlook unchanged, with newbuild discussions largely ceased, supporting demand outpacing supply in the intermediate term.

In the first quarter, consolidated average day rates were slightly up versus the fourth quarter. Results varied by segment: Americas day rates improved by 8%, Middle East by almost 5%, Africa and APAC had marginal increases, while Europe and Mediterranean decreased by about 4%. Total revenues were down compared to Q4, with revenues up 6% in the Middle East region and down in other regions. Regionally, gross margin increased in APAC and Middle East regions but decreased in the other three regions. For example, the increase in the Middle East region was due to higher average day rates, utilization, and minor decrease in operating expenses, while the APAC region's increase was primarily due to a 14% decrease in operating expenses.

• Reiterated full-year revenue guidance: $1.32 billion to $1.38 billion, and full-year gross margin range of 48% to 50%.
• Q2 outlook: Anticipates revenue to decline about 5% sequentially with a Q2 gross margin of 44%.
• Backlog: Firm backlog and options represent $848 million of revenue for the remainder of 2025; ~88% of backlog covered by contracts, but bigger risk is unanticipated downtime affecting backlog revenue.

• Macroeconomic uncertainty: Uncertainty about magnitude and direction of global growth, influenced by U.S.-led tariff regime and energy needs impacts on customers' investment plans.
• Vessel downtime risk: Unanticipated downtime due to unplanned maintenance and incremental time spent on drydocks poses a risk to backlog revenue.

Q: Jim Rollyson asked about conversations on activity pickup translating into business and Piers Middleton responded that they haven't seen customers change plans, with pre-tender discussions positive and no slowdown in conversations yet.

Q: Greg Lewis inquired about stacking costs and Brazil tender; West Gotcher said six vessels were stacked, mostly alley cats with negligible stacking costs, and Piers Middleton mentioned Brazil tender with incremental vessels and rates pushing towards high '50s range.

Q: Fredrik Stene asked about guidance changes and backlog progression; West Gotcher said 88% of backlog covered, and Quintin Kneen noted DFR outperformance in Q1 may roll into other quarters, while West Gotcher mentioned backlog for 2026 continues to improve with positive pre-tendering discussions.

Q: David Smith asked about vessel stacking decision-making; Quintin Kneen said it involves rate thresholds, visibility metrics, and region-specific factors, with higher maintenance vessels like alley cats being stacked due to economic considerations.

Q: Don Crist asked about tender timeline and capital allocation; Piers Middleton said tender timelines vary by customer, and West Gotcher stated debt refinancing is an economic and opportunistic consideration, with preference for value-accretive acquisitions over newbuilds or other uses of proceeds.