Oceaneering International Q1 2025 Earnings Call Transcript

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April 24, 2025
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Operator

Welcome to Oceaneering's First Quarter twenty twenty five Earnings Conference Call. My name is Julianne, and I will be your conference operator. All lines have been placed on mute to prevent any background noise. There will be a question and answer period after the speakers' remarks. With that, I will now turn the call over to Hilary Frisbee, Oceaneering's Senior Director of Investor Relations.

Hilary Frisbie
Hilary Frisbie
Senior Director - Investor Relations at Oceaneering International

Thanks, Julianne. Good morning, and welcome to Oceaneering's first quarter twenty twenty five results conference call. Today's call is being webcast, and a replay will be available on Oceaneering's website. Joining us on the call are Rob Larson, President and Chief Executive Officer, who will be providing our prepared comments and Alan Curtis, Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind participants that statements we make during this call regarding our future financial performance, business strategy, plans for future operations and industry conditions are forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Hilary Frisbie
Hilary Frisbie
Senior Director - Investor Relations at Oceaneering International

Our comments today also include non GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter press release. We welcome your questions after the prepared statements. I will now turn the call over to Rod.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Good morning, and thanks for joining the call today. As we announced in our earnings release yesterday, we outperformed expectations in the first quarter with strong results across our energy services and products. In particular, Subsea Robotics or SSR demonstrated resilient utilization of remotely operated vehicles or ROVs. And Offshore Projects Group or OPG achieved robust vessel activity, particularly in the Gulf Of Mexico and West Africa. In addition, we are proud to announce that our Aerospace and Defense Technologies or AdTech segment was awarded the largest initial contract value in the company history, which is foundational to delivering significant year over year operating income growth in 2025 in this segment.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Looking ahead to the rest of the year, we remain confident in our outlook even with recent market uncertainties. Our confidence comes from our first quarter twenty twenty five order intake of approximately $1,200,000,000 our current backlog that has improved from the same time last year the diversity of the geographies and end markets we serve the optionality afforded by our strong balance sheet and the commitment of Oceaneers worldwide, including our seasoned leadership team that has led the company through previous market uncertainties. Today, I'll focus my comments on our performance for the first quarter of twenty twenty five and our consolidated and business segment outlook for the second quarter and full year of 2025. Now for the first quarter results. For the first quarter, we reported net income of $50,400,000 or $0.49 per share, a 233% year over year increase.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Consolidated revenue of $675,000,000 improved by 13% compared to our first quarter of twenty twenty four with year over year revenue increases in all of our energy businesses. Compared to the first quarter of twenty twenty four, first quarter '20 '20 '5 consolidated operating income of $73,500,000 doubled and our consolidated adjusted earnings before interest, taxes, depreciation and amortization or EBITDA of $96,700,000 improved 57%. These results were largely driven by SSR and OPG. In SSR year over year, we realized an 8% increase in average ROV revenue per day utilized, which coupled with a 4% increase in days utilized drove a 25% increase in the segment's EBITDA. In OPG, we had a favorable service mix, improved vessel activity levels and lower drydock costs, which contributed to OPG's revenue increase of 43% and operating income increased by orders of magnitude.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Now let's look at our business operations by segment for the first quarter of twenty twenty five as compared to the first quarter of twenty twenty four. SSR operating income of $59,600,000 was 35% higher on a 10% increase in revenue. EBITDA margin also improved year over year to 35% from 31%, reflecting ROV pricing progression and improved execution in our ROV and tooling businesses. Average ROV revenue per day utilized increased to $10,788 Fleet utilization improved to 67% and days utilized increased to $15,093 ROV fleet used during the quarter was 62% in drill support and 38% in vessel based activity compared to 6634% respectively in the first quarter of twenty twenty four. The revenue split between our ROE business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 7921% respectively.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

As of 03/31/2025, we had 60% of the contracted floating rig market with ROV contracts on 79 of the 131 floating rigs under contract. We maintained our fleet count of two fifty ROV systems. Turning to manufactured products. Our first quarter twenty twenty five revenue increased 4% year over year. Operating income of $8,700,000 declined significantly and operating income margin of 6% declined primarily due to a $10,400,000 inventory reserve related to our theme park ride business.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Excluding this reserve, the operating income margin would have been approximately 14%. Our backlog on 03/31/2025 was $543,000,000 a decrease of $54,000,000 from the first quarter of twenty twenty four. OPG achieved significant year over year improvements in revenue, operating income and operating income margin. First quarter twenty twenty five operating income of $35,700,000 and operating income margin of 22% benefited from the continuation of international projects that commenced in the fourth quarter of twenty twenty four and are expected to conclude in the second quarter of twenty twenty five, improved vessel activity in the Gulf Of Mexico and from the absence of drydock costs and the associated loss of vessel days that impacted the first quarter of twenty twenty four. For Integrity Management and Digital Solutions or IMDS, both revenue and operating income were flat compared to the same period in 2024.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

AdTech operating income and operating income margin both declined slightly as compared to the first quarter of twenty twenty four on relatively flat revenue. The declines were due to readiness costs to enable our role as a prime contractor on the recently announced large contract award. Unallocated expenses of $44,600,000 were in line with our guidance for the quarter. In the first quarter of twenty twenty five, we utilized $80,700,000 of cash in operating activities and $26,100,000 in capital expenditures resulting in negative free cash flow of $106,800,000 In addition, we repurchased approximately $10,000,000 worth of shares of our common stock. Consistent with prior years, our cash balance declined during the first quarter with an ending cash position of $382,000,000 and no borrowings under our secured revolving credit facility.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Now I'll address our outlook for the second quarter of twenty twenty five. On a consolidated basis, as compared to the second quarter of twenty twenty four, we expect our second quarter twenty twenty five revenue and EBITDA to increase with EBITDA expected to be in the range of $95,000,000 to $105,000,000 As compared to the second quarter of twenty twenty four, our expectations for the second quarter of twenty twenty five results by segment are: for SSR, we project increased revenue and operating results EBITDA margin is projected to be in the mid-thirty percent range. For manufactured products, we expect relatively flat revenue and improved operating results. For OPG, we project relatively flat revenue and significantly higher operating results. For MDS, we forecast relatively flat revenue and improved operating results.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

For AdTech, we anticipate increased revenue and significantly improved operating results. And we project unallocated expenses to be in the $45,000,000 range. Directionally, for our full year 2025 operations by segment as compared to 2024, we expect for SSR, we continue to forecast improved operating results on a high single digit increase in revenue. SSR EBITDA margins are projected to average in the mid-thirty percent range for the full year. For ROVs, we estimate that our overall ROV fleet utilization will be in the high 60% to low 70% range with a slightly higher percentage of vessel based activities than in recent years.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

We expect to sustain our ROV market share for drill support services in the 55% to 60% range. For manufactured products, we project significantly improved operating income on better operating margins and increased revenue based on our current backlog of $543,000,000 and improvements in our non energy product lines. We expect our book to bill ratio will be in the range of 0.9 to one point zero for the full year, just to point out at the midpoint of our book to bill guidance and with our guidance for revenue growth, we are predicting a year over year increase in order intake. As demonstrated by OPG's strong first quarter performance, we continue to expect year over year operating results to improve on flat to slightly increased revenue with improved vessel utilization in the Gulf Of Mexico and West Africa and increased activity in Brazil and Asia Pacific. Overall for 2025, OPG operating income margin is expected to be in the mid teens range.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

For INDS, we forecast significantly improved operating results on increased revenue with operating income margin to be in the mid to high single digit range for the full year. These improved results reflect the positive impact of our acquisition of Global Design Innovation or GDI as well as the absence of losses from the divestiture of the Maritime Intelligence division in 2024. For AdTech, operating results are expected to improve significantly on increased revenue, which is largely attributable to the previously announced Department of Defense contract award. Operating income margin is expected to be in the low teens range for the year. Returning to our 2025 market outlook.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

In our fourth quarter twenty twenty four earnings release, we revised the bottom end of our full year 2025 EBITDA guidance in acknowledgment that we may be impacted by different geopolitical uncertainties including tariffs and regulatory changes. Since then, further announcements related to tariffs, retaliatory tariffs and OPEC plus production have continued to generate concerns across the energy sector. We believe that our prior and affirmed guidance appropriately accounts for these risks, but we will continue to evaluate the potential impacts of these and other factors. Oceaneering remains well positioned to take advantage of market dynamics even in uncertain times. We have a strong backlog across our energy and government businesses and recognize the aforementioned $1,200,000,000 order intake in the first quarter of twenty twenty five.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

While Brent crude prices have been revised downward to the range of $60 to $70 per barrel in 2025, we believe these levels remain supportive of sustainable levels of offshore operating and capital spending. In summary, our strong first quarter twenty twenty five performance along with the strength and diversity of our backlog give us the confidence to reiterate our prior full year 2025 guidance including EBITDA in the range of $380,000,000 to $430,000,000 We appreciate everyone's continued interest in Oceaneering and we'll now be happy to take any questions you may have.

Operator

Thank you. Our first question will come from David Smith from Pickering Energy Partners. Please go ahead. Your line is open.

David Smith
Director at Pickering Energy Partners

Hey, good morning and thank you for taking my question.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Good morning, David.

David Smith
Director at Pickering Energy Partners

Wanted to ask about GDI, which I think you acquired about six months ago, but you've been working with them for longer. Can you talk about how you see the opportunities to grow that business and what kind of pull that could have on demand for your ROVs over time?

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Yeah. So great question, Dave, and thanks. I think we've been talking about this opportunity, particularly for IMDS, and it's why we put this emphasis on integrity management, also data solutions. This data driven approach has really helped us do more sort of AI machine learning assessment of offshore platforms, meaning, hey, we can go out there, we can gather data, and we can do predictive modeling to help them, number one, avoid any sort of equipment failure, but number two, also maintain a more robust inspection campaign with fewer personnel hours. So that's kind of the gist of GDI.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

And we think a lot of the customers are really excited about that opportunity to know more with fewer people on the platform. So that's a great combination. The exciting part for us and one of the reasons we really like GDI is there is also an opportunity to do the same thing underwater. It's laser scanning video approach that we can deploy on ROVs, and we can do the same sort of analysis on subsea infrastructure with ROVs. So we're in the testing phase of that, and and and we're we're confident that it will be, a robust solution and and therefore drive, you know, what what currently doesn't exist, this underwater inspection with the store technology, and that will create more dive hours for ROVs.

David Smith
Director at Pickering Energy Partners

That's great color. I appreciate that. Sorry if I missed it, but did you provide the mix of ROV support in the first quarter?

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

Yes. We were 62% drill support, 38% vessel based.

David Smith
Director at Pickering Energy Partners

Great. Thank you.

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

And just That's a slight shift there.

David Smith
Director at Pickering Energy Partners

Related to I I think I heard you say earlier, for for the full year outlook expecting a a higher mix of vessel activity, compared to to recent years. Just wanted to ask if there was anything in particular driving that if it's partnerships or just being opportunistic?

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

I think it's sort of all of the above, David. I mean, we've got of the larger construction vessels we're on are active. I mean, we see them. They've got this great opportunity. They're going back and forth right now between energy and wind, especially international wind.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

And those vessels go all over the world. So they're able to stay busy. I mean they really do go where the work is. So being on those types of vessels has been really helpful. And then of course the increase in activity for OPG drives vessel demand for us and a lot of tooling demand.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

That's the other thing. When we're operating on our vessels generally we've got greater not just the RVs, but the tooling as well.

David Smith
Director at Pickering Energy Partners

That's great color. I appreciate it. Turn it

David Smith
Director at Pickering Energy Partners

back.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Thanks.

Operator

Our next question will come from Eddie Kim from Barclays. Please go ahead. Your line is open.

Eddie Kim
Eddie Kim
Vice President - Equity Research at Barclays

Hi, good morning. So you reiterated the full year EBITDA guidance despite the volatility in commodity prices over the past month. Sounds like you're fairly confident in activity levels in the second half of the year. Could you just talk about your confidence level on kind of second half activity holding up just based on customer conversations you've been having it? And separately, I mean to the extent that customers were to pull back on spending if oil prices declined below $60 which segments would we see that impact first in your financials?

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

I think well, first of all, let me address the confidence. I mean, we see the orders come in and the backlog build. Remember, backlog build, obviously, we had a great component from AdTech. But we also see it in all the business. We see adding days for OPG.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

We see shoring up some of the spec work for in the SSR business and IMDS as well. So it's that build in pipeline actually. Our pipeline looks strong. We see an increased pipeline year over year. And that pipeline, I would call out that not only is it growing, but there's also some great diversification in there.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

And there's some OpEx related work in there. So those are the things that kind of to me, that OpEx related work is the stuff that happens through cycle more often than not. I mean, it's the things that to keep up production they have to keep doing and to also deal with anything that comes up. So I think those are the things. I spent some time with customers.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

We've been going to all the conferences where we get to sit with our peers and our customers. I think that as of right now, they're not worried about long term effects so much. So they're keeping work going. They're talking not just about their forecast, but, I mean, I've got a lot of great feedback on our execution. So I feel like our customer relationships are strong, and and so that we'll be able to stay, you know, stay active through this year.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

I think we start to see a longer cycle, something that looks, we'll hear more about that. But it doesn't seem like that's going to affect anything outside of our guidance for 2025. The other thing you asked what happens first, I think you look at previous cycles, we see things like high cost, like drilling rigs or the SSR stuff might come off first. OPG sometimes comes off. But on the other hand, and I've said this probably enough times to be annoying, the cheapest barrels are behind pipe.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

And so when we think about light well intervention, some of the IMR work we do, I mean, that work is high return. Generally, customers get good payback on a lot of the work we do with OBG. So if you're going to start cutting your budget, it's probably not the easiest thing to cut. I think you want to maintain those current assets. So I'd say that while they do see some of that volatility for call out work, generally the market doesn't drop off early.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

And then of course, pipeline on some of the other work. The INBS contracts are longer. The backlog in the manufactured products is longer and AdTech doesn't apply here. So I think that's kind of the order of kind of time dependency on decisions.

Operator

Our next question comes from Colby Sasso.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Eddie, did we lose you or do you have another question?

Eddie Kim
Eddie Kim
Vice President - Equity Research at Barclays

Sorry about that. I my phone was put on mute for some reason. Yeah. Just my follow-up actually is on ROVs average revenue per day, which looked like it held flat sequentially for the first time in about six quarters. Just given market conditions, mean, should we expect ROV's day rate to remain kind of fairly steady through the end of the year?

Eddie Kim
Eddie Kim
Vice President - Equity Research at Barclays

Or would you expect it to exceed 11,000 at some point this year?

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

Yes, Eddie. This is Alan. We're still projecting that we'll be able to get some level of pricing. Our guidance last time was it would be a little bit more muted than what we saw our ability to move price in 2024. The team is projecting probably in that 5% to 10% exit rate increase.

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

So we do expect to touch on 11,000 per day though.

Eddie Kim
Eddie Kim
Vice President - Equity Research at Barclays

Okay. Great. Thanks for that. I'll turn it back.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Thanks,

Operator

Eddie. Sasso from Daniel Energy Partners. Please go ahead. Your line is open.

Colby Sasso
Analyst at Daniel Energy Partners

Hi. Thanks for having me on. We continue to see a lack of incremental contracts on the rig side, yet utilization of your assets and drill support continues to be strong. Even if the rig count falls throughout '25, how are you looking at the opportunities to grow the ROV business in '26 and beyond?

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Yeah. Colby, I think it really depends on we see the shift in vessel activity. And so as the vessel activity remains strong or even increases in some case in intensity, that would be the biggest offset. But again, I think unfortunately those things don't operate independently. So if you see a protracted negative sentiment and everybody pull back, I think if they start dropping rigs and wind absorbs as much and I'm talking about international wind, obviously The U.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

S. Wind is challenged. If they absorb what they can on the vessel side beyond that, I think it's a challenging market. We don't see that happening in 2025. I don't as I mentioned before, our customer conversations, we talk to customers who say one person throws out that it has to be sub-fifty before they reduce their active rig count.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

I mean, anecdotally, it just doesn't look like especially thinking about remember, we operate for the big operators. They got long term plans in deepwater. So unless this looks like a protracted downturn, generally these ten year projects, twenty year projects with longer life cycles than that, they bend easily for what looks like a short term drop in commodity price. So I think overall, we're starting to we're starting to see more of that. Yeah.

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

I I might add one one additional thing here, Colby, is, you know, we had the question earlier from David Smith about GDI, and I think it's also one of those of how do we start to feed more days into ROV, and and GDI is an excellent example of why we invest in that business. So being able to go out and do more, work with ROVs, not only just getting the pictures and the dataset, but also if you see anomalies, then you need to take your vessel with OPG back out and go for from work, which, you know, we always say we're a solution provider here at Oceaneering. And, you know, so we provide tooling as well. So it's not just about ROV, but it's also what we do with the ROV and how we operate it with the vessels,

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

with the

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

toolings, suites that we offer as well. So I think we we offer a more holistic solution to many of our customers.

Colby Sasso
Analyst at Daniel Energy Partners

Thank you so much for the color. I'll turn it back.

Alan Curtis
Senior Vice President and Chief Financial Officer at Oceaneering International

Thanks, Colby.

Operator

We have no further questions in queue. I'd like to turn the call over to Rod Larson for any closing remarks.

Roderick Larson
Roderick Larson
President, Chief Executive Officer & Director at Oceaneering International

Awesome. Well, thank you. Since there are no more questions, I'll just wrap up by thanking everyone for joining the call. This concludes our first quarter twenty twenty five conference call. Thanks, everybody.

Operator

Ladies and gentlemen, this concludes today's conference call. You for your participation. You may now disconnect.

Executives
    • Hilary Frisbie
      Hilary Frisbie
      Senior Director - Investor Relations
    • Roderick Larson
      Roderick Larson
      President, Chief Executive Officer & Director
Analysts
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Key Takeaways

  • Q1 net income of $50.4 million and EPS of $0.49, a 233% increase year over year, on revenue of $675 million (+13%) and adjusted EBITDA of $96.7 million (+57%).
  • In Subsea Robotics, ROV utilization rose to 67% with an 8% increase in day rates, driving a 25% EBITDA gain, while Offshore Projects Group delivered a 43% revenue jump and significantly higher operating income.
  • The Aerospace & Defense Technologies segment secured the largest initial contract in company history, laying the foundation for substantial year-over-year income growth in 2025.
  • With Q1 order intake of approximately $1.2 billion and an improved backlog, Oceaneering reaffirmed full-year 2025 EBITDA guidance of $380 million–$430 million, expecting high-60s % ROV utilization and mid-30s % SSR margins.
  • Despite geopolitical and commodity price uncertainties (tariffs, OPEC+ cuts), Oceaneering highlights its strong balance sheet, diversified end markets and seasoned leadership as support for its outlook.
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Earnings Conference Call
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