Bristow Group Q1 2025 Earnings Call Transcript

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May 7, 2025

There are 8 speakers on the call.

Operator

Good day, everyone, and welcome to Bristol Group Reports First Quarter twenty twenty five Earnings Call. Today's call is being recorded. After the speakers' remarks, there will be a question and answer session. At this time, I'd like to turn over the call to Rhett Tillahunt, Senior Manager of Investor Relations and Financial Reporting.

Speaker 1

Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's first quarter twenty twenty five earnings call. I am joined on the call today with our President and Chief Executive Officer, Chris Bradshaw and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I'd like to take this opportunity to remind everyone that during the course of this call, management may make forward looking statements that are subject to risks and uncertainties that are described in more detail on Slide three of our investor presentation. You may access the investor presentation on our website.

Speaker 1

We will also reference certain non GAAP financial measures such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and the investor presentation. I'll now turn the call over to our President and CEO.

Speaker 2

Chris? Thank you, Rhett. I will begin with a note on safety, which is Bristow's number one core value and our highest operational priority. The company achieved our target of zero air accidents in Q1 twenty twenty five. In terms of workplace safety, we experienced fewer recordable injuries and fewer lost workdays than the first quarter of twenty twenty four, and we are currently on track to achieve the company's workplace safety targets for 2025.

Speaker 2

I want to thank all the Bristow team members around the world for their continued focus on placing safety first every day. Turning to financial performance and outlook for the company. We are pleased to report very strong first quarter financial results and to affirm Bristow's financial guidance for both 2025 and 2026. We recognize that macroeconomic risks and uncertainty have increased significantly since the beginning of the year. And I want to briefly address the potential impacts on Bristow's business.

Speaker 2

Recently implemented U. S. Tariffs on steel and aluminum imports, including some aircraft parts, introduce incremental costs and additional complexities into the industry's already complex supply chain. The new tariff regime has negative implications for repairs and maintenance costs on our U. S.-based aircraft fleet and introduces additional uncertainty for a component delivery time line.

Speaker 2

Having said that, in the scope of our overall financial guidance, we do not expect the direct impact of these costs to have a material impact on the company's financial performance. The greater risks relate to concerns about slowing economic activity, which could result in decreased demand for crude oil and natural gas. These demand concerns, combined with an increased supply of crude oil, as OPEC plus has announced additional supply increases sooner than previously contemplated, have resulted in a significant reduction in the price of oil, which has adverse implications for our customers' spending plans. Despite these adverse developments, we continue to have a positive outlook for Bristow's offshore Energy Services business. Deepwater projects remain favorably positioned within oil and gas company portfolios, and the attractive full cycle economic returns from these projects are likely to drive continued investment in offshore activity for the foreseeable future.

Speaker 2

In summary, we are confident in affirming the company's financial guidance. This belief is further supported by the stability of our Government Services business, the heavy weighting of our Offshore Energy Services business to production support activities and the breadth and diversity of the geographic markets we serve. I will now hand it over to our CFO for a more detailed discussion of Q1 financial results and our financial outlook. Jennifer?

Speaker 3

Thank you, Chris. Good morning, everyone. I will begin with a review of Briska's sequential quarter financial results on a consolidated basis before covering the financial results of each of our segments in more detail. Revenues decreased $3,000,000 primarily due to lower utilization resulting from seasonality in our Other Services segment, namely our fixed wing operations in Australia, partially offset by higher revenues from new contracts services. Revenues from offshore energy services, or OES, remained consistent with last quarter.

Speaker 3

Adjusted EBITDA was $58,000,000 this quarter, consistent with last quarter. While Q1 is generally our seasonally lowest revenue period, our costs were lower, primarily driven by lower operating and administrative expenses, offsetting the lower revenues. Focusing on our OES segment, revenues in Europe decreased $4,500,000 due to lower utilization in The U. K. Revenues in Africa increased $2,200,000 due to additional aircraft capacity and higher utilization, and revenues in The Americas increased $1,900,000 due to increased utilization of heavy helicopters in The U.

Speaker 3

S. The $3,100,000 increase in adjusted operating income from OES was primarily due to lower repairs and maintenance expenses of $7,100,000 partially offset by $3,200,000 of increased expenses due to higher training costs in the current quarter and the absence of a property tax benefit recognized in the preceding quarter. Moving on to Government Services. Revenues were $3,400,000 higher, primarily due to the Irish Coast Guard contract, which began its transition in late twenty twenty four. Adjusted operating income for this segment was $3,900,000 higher

Speaker 3

Finally, revenues from other services were $6,000,000 lower as a result of lower seasonal activity in Australia, unfavorable foreign exchange rate impacts and lower dry leasing revenue. Adjusted operating income was $4,500,000 lower this quarter due to these lower seasonal revenues, which were partially offset by a decrease in operating expenses also related to activity. Turning now to cash flows. Working capital uses of $56,400,000 this quarter primarily resulted from an increase in accounts receivables due to the timing of customer payments, an increase in costs related to the start up of new government services contracts and increases in inventory to support new contracts and to mitigate risks related to supply chain challenges. As a result of these working capital changes, cash used in operating activities was $600,000 this quarter.

Speaker 3

Bristow continues to benefit from a strong balance sheet and liquidity position. As of March 31, our available liquidity was approximately $254,000,000 and we have now funded 86% of the capital investments needed for our new government services contract, with the remaining capital investment expected to conclude in the coming months. As we continue to transition on our two new government services contracts and begin to execute on our capital allocation targets, we remain mission focused on maintaining a strong balance sheet and believe that our business model will continue to generate healthy cash flows. Moving on to Bristow's financial outlook. Though additional uncertainty has been introduced to the global economy and to the oil and gas industry in recent months for the reasons Chris noted, we are affirming our previously reported 2025 revenues guidance of $1,400,000,000 to $1,600,000,000 and adjusted EBITDA range of $230,000,000 to $260,000,000 as well as our 2026 guidance of $1,500,000,000 to $1,800,000,000 of total revenues and adjusted EBITDA range of $275,000,000 to $335,000,000 Supply chain dynamics that impact aircraft availability, customer activity levels influenced by global energy demand and the exchange rates of foreign currencies relative to the U.

Speaker 3

S. Dollar, namely the British pound sterling and the euro, are among the primary factors that could bias results to either end of our guidance range. In our OAS segment, we expect market conditions to remain supportive in 2025 and to generate adjusted operating income of approximately 190,000,000 to $210,000,000 on revenues of $950,000,000 to $1,000,000,000 a significant improvement in profitability compared to 2024. In Europe, we expect activity levels to remain mostly stable in 2025. So in general, the North Sea is a mature market with limited growth opportunities.

Speaker 3

We believe the Americas and Africa markets will continue to contribute positively to growth in our 2025 results. In our Government Services segment, 2025 remains a transition year as we incur start up costs related to the new contracts, while the cadence of revenues is tied to a schedule that commences as each base becomes fully operational. The strong margins and earning potential of this business will not become fully evident until the operations and revenues for these contracts have fully ramped. We expect this segment to contribute meaningfully to our financial results and the stable long term cash flows with high credit quality customers will provide valuable diversification and reliable capital returns to our investors well into the middle of the next decade. At this time, I'll turn the call back to Chris for further remarks.

Speaker 3

Chris?

Speaker 2

Thank you. We continue to believe that Bristow is well positioned as the global leader in vertical flight solutions. The company's current fleet includes two eleven aircraft located across six continents and 18 different countries. Bristow is the world's largest operator of each of the S-ninety two, AW189 and AW139 helicopter models, which remain the most in demand models for both offshore crew transportation and SAR mission. In our Offshore Energy Services business, we continue to have an optimistic outlook for a long duration up cycle.

Speaker 2

The fleet status for offshore configured heavy and super medium helicopters remains at or near full effective utilization levels. With current manufacturing lead times at approximately twenty four months, the ability to bring in new capacity is constrained. In our Government Services business, we are focused on the ongoing launch of SAR services for the Irish Coast Guard and the transition of operations to The U. K. SAR two gs contract in United Kingdom.

Speaker 2

Those are large and complex projects with extended transition time lines running through the beginning of twenty twenty six in Ireland and through the end of twenty twenty six for U. K. SAR two gs. While we are facing challenges along the way with unexpected regulatory and supply chain delays, our commitment to delivering successful outcomes for the governments and communities we serve remains unwavering. Vision is to lead the world in innovative and sustainable vertical flight solutions, and we are committed to leading responsibly.

Speaker 2

Fristo's fourth annual sustainability report will be published in the coming weeks, which reaffirms our steadfast dedication, responsible growth and environmental protection for our employees as well as the diverse communities we take great pride in serving. Our overall goal remains consistent. We seek to minimize our environmental footprint, while maintaining the resilience of our operations through an inclusive workforce and an active outreach in the places where we work and call home. In conclusion, while macroeconomic risk and uncertainty have increased significantly in recent months, The outlook for Bristow's business remains positive, and we are confident in affirming the company's financial guidance for both 2025 and 2026. This confidence is supported by the stability of our Government Services business, the heavy weighting of our Offshore Energy Services business to more stable production support activities and the breadth and diversity of the geographic markets we serve.

Speaker 2

With that, let's open the line for questions.

Operator

Our first question will come from Josh Sullivan with The Benchmark Company. Your line is now open. Please go ahead. Hey,

Speaker 4

good morning.

Speaker 2

Good morning, Josh.

Speaker 4

Just given the uncertainty in the broader market, a lot of companies in the space have suspended guidance, and you guys are reaffirming that in 'twenty six as well. Is this a wait and see approach to tariffs? Or what gives you confidence to continue with the outlook here?

Speaker 2

Given the factors that you referenced, what's going on in the broader economy, we did take a hard look at our outlook, starting first with a view on the macro and the oil and gas industry with a particular focus on offshore activity. And we're having customer conversations regularly, essentially daily, to make sure that we understand our customers' plans and expectations for the aircraft that we have located around the world. And all of these factors and the combination gave us the confidence to reaffirm our previously issued guidance for not just this year, but also next year in 2026 as you referenced. And I would say, Josh, that's further supported by a few factors. One, the stability that exists in the cash flows from our Government Services business and those long term contracts two, the fact that 80% of our offshore energy revenues come from production support activities, are more stable in times like these and three, the broad breadth and diversity of the geographic markets that we serve.

Speaker 2

So again, that gave us, in summary, the confidence to reaffirm guidance for this year and there.

Speaker 4

And then you guys recently announced a long term S-ninety two agreement with Sikorsky. Can you just expand on the benefits of the new agreement and what it entails?

Speaker 2

Yes, happy to do that. We were very pleased to reach this agreement with Sikorsky for S-ninety two support for Fristo's global fleet of S-ninety two helicopters, both search and rescue as well as offshore energy. The primary benefits are that this provides us price visibility and price stability for a large portion of our fleet well into the next decade, which provides again better stability and ability to manage the business that we have from that fleet globally.

Speaker 4

And then just as far as the CapEx investment, the search and rescue Irish opportunity, how have helicopter OEMs been with deliveries at this point? What's left in that, I guess, 14% of the CapEx related to the contract? Are you confident in that 86% at this point?

Speaker 3

Sure. Yes. I mean, the helicopter deliveries, there have been some supply chain challenges for the OEMs as well as we've experienced. But we have been receiving the helicopters. We have a couple left to receive.

Speaker 3

And so we're fairly confident in that number based on the couple of helicopters we have left to receive.

Speaker 2

And I'd say the remaining amount of CapEx probably is more related to infrastructure and modifications, not necessarily the airframe itself. It. Then I guess just

Speaker 4

one last one. In regard to the advanced air mobility opportunity, Norway moving along with eCitel flights, any updates there?

Speaker 2

In Norway, specifically, we are happy to be part of an important new project there. Last year, Avanor and the Norwegian Civil Aviation Authority entered into a new collaboration agreement to establish Norway as an international test arena for zero and low emission aircraft. And in March of this year, the first formal agreement for demonstration flights was signed with U. S.-based aircraft manufacturer Beta Technologies, and Us, with Fristo as the operator. The goal of this new test arena is to demonstrate it on a real world basis and gain knowledge from operations and learning to prepare the ecosystem for the foundation of this future industry.

Speaker 2

Those demonstration flights will begin with cargo flights, so no passengers on board. They'll begin with cargo. They're going to be conducted using Beta's ELEIA aircraft with Bristow Norway as the operator. So again, we're excited to be part of what is really one of the first real world applications of these new aircraft and technology. Great.

Speaker 2

Thank you for the time. Thanks, Josh.

Operator

The next question comes from the line of Steve Silver with Arcus Research.

Speaker 5

My first question is, given the majority of Bristol's business is outside The U. S, hoping you could provide a little color on maybe some of the specifics of the potential cost exposure in a higher tariff environment?

Speaker 2

Hey, good morning, Steve, and thank you for the question. As you noted, the vast majority of our revenues, about 85%, are generated from activities outside The U. S. For the portion that is generated here in The U. S, we do have some exposure on the import of some aircraft parts from foreign countries, namely Europe, into The U.

Speaker 2

S. To support the ongoing repairs and maintenance of those U. S.-based aircraft. But in the context of our overall financial results and our overall financial outlook, we do not expect this to have a material impact on our financial performance.

Speaker 5

Great. And one more if I may. It sounds like the use of cash in the quarter was more of a timing issue. I'm just curious as to whether you expect anywhere near the current levels of working capital uses throughout the rest of the year?

Speaker 3

Thank you, Steve. The short answer is no. But a little more detail, you're right. It is really timing there, particularly with our customers. And really, this was on the Government Services side, not related to delinquent accounts, just the timing on that.

Speaker 3

We do have some preoperation costs for those contracts, the Government Services contracts that will continue, but at more muted levels. And we will continue to invest in inventory where need be to protect us on the supply chain side. But again, the short answer is no, we shouldn't see these same levels going forward.

Speaker 5

Great. Thanks so much for the extra color.

Operator

Thank you. The next question comes from the line of Laura Lee with Deutsche Bank. Your line is now open. Please go ahead.

Speaker 6

Hey, thank you for taking my question. And I think you mentioned some like supply chain challenges and the constraints. So have you seen any changes or improvements in the recent months?

Speaker 2

Yes, we have. Fortunately, there have been some incremental improvements that relate specifically to the S-ninety two fleet, where Sikorsky has addressed some of the delays related to certain components. We are still experiencing delays on other components, both for the S-ninety two fleet as well as some of our other helicopter fleets. That's a challenge we've been dealing with for a few years now. It's not unique to us in this space.

Speaker 2

It's one that is really impacting the broader overall aviation industry, but we have seen some incremental improvements in recent months.

Speaker 6

Okay. Got And also, we talked about like the EVTOR test arena in Norway later this year. So are you expecting to like expand the scope?

Speaker 2

We certainly are hoping that will be the case. Excited to be a part of that project, which is really one of the first of its kind anywhere in the world. It's a well structured project in our view in that you have the government and the regulatory authorities there in Norway really sponsoring this international test arena. You have Beta as the OEM coming in with the aircraft to provide that level of support and then an opportunity for us at Bristow to operate the aircraft and demonstrate in a real world what they're able to do, prove out some of the assumptions that have existed in the development of the aircraft and factor in some of the real world things that happen around weather and other environmental conditions. We expect that the results from these test flights will be positive and we think if that is truly the case that we're likely to see an expansion of these sort of operations both in Norway and elsewhere in the world.

Speaker 6

Okay. Got you. Yes, I appreciate it.

Speaker 2

Thank you.

Operator

Our final question today comes from Alex Wessel with Arctic Securities. I

Speaker 7

just wanted to go back to the offshore energy piece a little bit. And obviously, oil prices have continued to soften this year. Could you give sort of any indication on what price you're going to start seeing like impact on the business and the outlook?

Speaker 2

Yes. Good morning, Alex, and thank you for the question. Today, we're not seeing any tangible impacts on offshore activity as we look at the projects we're supporting for our customers and their plans for upcoming quarters. So no impact as of now. We're fortunate in that deepwater projects are really well positioned within the portfolios of these oil and gas companies.

Speaker 2

We believe that they offer attractive full cycle economic returns relative to some of the other investment opportunities they have within their portfolios. So we believe that the level of investment will continue for the foreseeable future really at a Brent price at or above $60 a barrel, we don't anticipate any material impact on activity or for our business.

Speaker 7

All right. Great. So it's fair to say there hasn't been any impact on the offshore activity so far?

Speaker 2

Correct. As of today, we haven't seen any tangible impact on the level of offshore activity that we're supporting today or expect to support the coming quarters.

Speaker 7

All right. Thank you. Appreciate it.

Operator

Thank you. This concludes the question and answer session. I'll now turn the call back over to Christopher Bradshaw for closing remarks.

Speaker 2

Thank you, Luke, and thanks to everyone for joining the call. We look forward to connecting again next quarter.

Operator

In the meantime, stay safe and well. This concludes today's call. You may now disconnect at any time.

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