Tidewater Inc. Q2 FY2025 earnings call

Key Highlights - Second quarter revenue and gross margin nicely exceeded expectations. Revenue was $341.4 million due to higher day rates and better utilization. Gross margin was over 50% for the third consecutive quarter. Day rates set a new quarterly record at $23,166. - Generated $98 million of free cash flow in the second quarter, with first half of 2025 total free cash flow over $192 million. - In early July, closed on a $650 million U.S. unsecured bond to refinance debt and set up a $250 million revolving credit facility, enhancing financial flexibility. - Board of Directors approved a $500 million share repurchase program, viewing it as a long-term program while prioritizing acquisitions for value accretion. - On offshore vessel market, near term slightly softer than expected but subsea and production-related activity robust. Vessel supply outlook unchanged with limited new build activity.

Second quarter revenue was $341.4 million. Gross margin was over 50% for the third consecutive quarter. Regionally, in the Americas, the region had a solid quarter with new contracts won in the Caribbean. Europe and Mediterranean had a strong Q2 driven by North Sea spot markets and Med utilization, with day rates improving 14% and utilization up 8 percentage points. APAC region had a marginal decrease in gross margin due to slight decrease in utilization partially offset by higher day rates. Middle East region saw a gross margin decrease of about 8 percentage points due to decline in utilization and increase in operating expenses. Africa region had a 12 percentage point decrease in gross margin mainly due to lower day rates, lower utilization and higher R&M and fuel costs resulting from higher dry dock repair and idle days. Revenue contribution by region varied, with Americas and Europe and Mediterranean seeing increases, while Africa saw a significant decrease.

Guidance - Full year 2025 revenue guidance: $1.32 billion to $1.38 billion, gross margin range: 48% to 50%. - Q3 revenue expected to decline by about 4% sequentially. Q3 gross margin anticipated to be 45%. - Expect utilization to improve sequentially from Q3 to Q4 due to dry dock days declining by about half, leading to margin improvement in Q4. - Midpoint of revenue guidance range is approximately 93% supported by first half revenue plus firm backlog and options for the remainder of the year, with firm backlog and options representing $585 million of revenue for the remainder of 2025.

Risks - Uncertainty around project cancellations. - Impact of geopolitical and macroeconomic events on offshore activity. - Limited new build activity with new builds on order representing less than 3% of the global fleet expected to deliver in late 2026 or later, which may not sufficiently replace vessels expected to attrite from the global fleet.

Q: Jim Rollyson asked about M&A progress and outlook for demand post-2026.

A: Quintin said discussions are more constructive now as people are comfortable with uncertainty levels. Piers mentioned seeing uptick in tendering activity for 2026 and positive outlook for subsea construction and drilling in the second half of 2026.

Q: Fredrik Stene inquired if more optimistic about M&A now.

A: Quintin said people are getting comfortable with uncertainty, making M&A discussions more constructive.

Q: David Smith asked about Q3 utilization improvement range and lower rate outlook.

A: West said Q3 utilization has a few percentage points improvement, lower rates due to softness in North Sea and West Africa day rates and FX factors.

Q: Joshua Jayne asked about West Africa multiyear outlook and basis for $500 million share repurchase program.

A: Piers said West Africa has positive long-term outlook with demand picking up in 2026 and beyond. Quintin said $500 million repurchase program set based on cash on hand, free cash flow, and financial flexibility.