Tidewater Inc. Q2 FY2026 earnings call

• 2025 was a strong year for Tidewater with year-over-year revenue growth, gross margin expansion, and average day rate growth. Generated EBITDA of nearly $600 million and free cash flow of nearly $430 million. - Fourth quarter revenue and gross margin came in ahead of expectations, with revenue at $336.8 million and gross margin nearly 49%. Fleet utilization benefited from better uptime and lower down for repair time and dry dock days. - Completed strategic internal restructuring of vessel ownership to consolidate a significant portion of the fleet under a single wholly owned U.S. entity. - Entered into an agreement to acquire Wilson Sons Offshore UltraTug for $500 million, planning to fund with cash on hand and assume existing debt. - Operation Epic Fury adds uncertainty in the Middle East but thus far no real changes, with largest geographic area of operation in Saudi Arabia being business as usual. - Observable offshore drilling leading indicators are materially higher, indicating operators are progressing to commence additional offshore projects. - Global fleet of vessels has been essentially unchanged or declining slightly, with limited new build orders, presenting an exciting outlook for the offshore vessel industry. - Will release sixth sustainability report in early April.

In 2025, Tidewater delivered strong performance. Fourth quarter revenue was $336.8 million due to higher average day rate and better utilization. Gross margin was nearly 49% for the quarter, an improvement from the previous quarter. By region, in the fourth quarter, consolidated average day rates were down versus the third quarter, but results varied by segment. Middle East day rates improved by 9%, while other regions declined. Total revenues were slightly lower compared to the third quarter with increases in Middle East and African regions offset by decreases in other regions. Africa's gross margin increased by 6 percentage points due to large utilization increase and slight operating cost decrease. APAC region's gross margin increased by 3 percentage points due to utilization increase and large operating cost decline. Middle East's gross margin increased by 1 percentage point due to 9% average day rate increase but higher operating costs. Europe and Mediterranean regions saw a 1 percentage point decrease in gross margin. Americas region's gross margin declined by 8 percentage points due to 9 percentage points utilization decline and 60% operating cost increase.

• Updated full year 2026 guidance to contemplate the Wilson's acquisition, with revenue guidance raised to $1.43 to $1.48 billion and gross margin range of 49 to 51%. - Firm backlog and options in January revenue for the legacy Tidewater fleet represents approximately $1.1 billion of revenue for the full year, about 80% of the midpoint of legacy Tidewater 2026 revenue guidance. - Approximately 65% of available days for 2026 are captured in firm backlog and options. Full-year revenue guidance assumes utilization of approximately 80%. - Risk to backlog revenue is unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks. - 2026 dry dock costs expected to be approximately $122 million, including $46 million of engine overhauls, and about $16 million in the second half related to Wilson's acquisition. - Expect to incur approximately $51 million in capital expenditures in 2026, with option to upgrade maintenance capex of approximately $36 million and additional $24.4 million related to vessel purchase options, and about $1 million in the second half related to Wilson's acquisition.

• Operation Epic Fury adds an aspect of uncertainty to operations in the Middle East. - Unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks could be a risk to backlog revenue. - DSO may normalize and eat up some otherwise operational cash flow in 2026 if it returns to normal levels.

Q: Jim Rolison from Raymond James asked about the day rate picture, guidance, and free cash flow generation.

A: Quinton and Sam responded, discussing day rate trajectory, guidance with expectation of market tightening in second half, and free cash flow expected to stay strong with consideration of potential DSO normalization.

Q: Keith Beckman from Pickering Energy Partners asked about best of life for PSVs and fleet rationalization.

A: Quinton and Sam answered, talking about PSV best of life and moderate new build cycle, and regular vessel sales with focus on regions like West Africa.

Q: Greg Lewis from BTIG asked about Middle East contracts and M&A in Brazil.

A: Quinton responded, stating no contract language for Saudi Aramco to cancel, and M&A in Brazil due to optimism in the country