Bristow Group Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Bristow raised its guidance for 2025 and 2026 adjusted EBITDA, with the midpoint of 2026 guidance 27% above the midpoint of 2025.
  • Positive Sentiment: Offshore Energy Services revenues increased by $13 million in Q2 due to higher utilization and favorable foreign exchange, contributing to a $6.5 million rise in adjusted operating income.
  • Negative Sentiment: Government Services revenues grew by $6.6 million but adjusted operating income declined by $7.7 million this quarter, driven by elevated subcontractor and personnel costs from contract transitions.
  • Positive Sentiment: Operating cash flow was nearly $100 million higher sequentially, enabling a $15.3 million accelerated debt paydown, repurchase of 120,000 shares at $32.41 each, and plans for a 2026 dividend program.
  • Negative Sentiment: Bristow experienced an AW139 helicopter landing incident offshore Brazil that damaged the aircraft structure, though no injuries occurred.
AI Generated. May Contain Errors.
Earnings Conference Call
Bristow Group Q2 2025
00:00 / 00:00

There are 9 speakers on the call.

Operator

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

Speaker 1

Thank you, Leila. Good morning, everyone, and welcome to Bristow Group's second 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. Chris?

Speaker 2

Thank you, Red, and good morning, everyone. I will begin with a note on safety, which is Bristow's number one core value and our highest operational priority. The company experienced one air accident in Q2 twenty twenty five, which involved an AW139 helicopter landing on an offshore platform in Brazil. There were no injuries to personnel nor any damage to the offshore facility, but the aircraft was damaged. The event was unusual in that all indications fell within the parameters of a normal landing procedure, but shortly after touching down, a portion of the aircraft structure buckled causing damage.

Speaker 2

In terms of workplace safety, we had a very good quarter with continued declines in the number of recordable injuries and lost work time. 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. We are pleased to report strong second quarter results and to raise Bristow's financial guidance for both 2025 and 2026. I would highlight that the midpoint of 2026 adjusted EBITDA guidance represents a 27% increase over the midpoint of 2025 adjusted EBITDA guidance, reflecting the strong growth expectations for our business.

Speaker 2

Robust cash flow generation positions us to execute on Bristow's established capital allocation framework and both accelerated debt pay down and opportunistic share repurchases commenced in the second quarter. I will now hand it over to our CFO for a more detailed discussion of Q2 results and our financial outlook. Jennifer?

Speaker 3

Thank you, Chris, and good morning, everyone. I would like to reiterate Chris' comments on how pleased we are to report another quarter of strong financial results and to be able to raise 2025 and 2026 adjusted EBITDA guidance. Turning to our sequential quarter financial results on a consolidated basis. Bristow's revenues were $25,900,000 higher in the second quarter, nearly half of which was driven by higher revenues in our Offshore Energy Services, or OES, segment, and the remainder of the increase almost evenly split between government services and other services revenue. Adjusted EBITDA was $60,700,000 this quarter, reflecting a $3,000,000 increase compared to last quarter.

Speaker 3

Revenues from our OES segment were $13,000,000 higher, primarily due to higher revenues in Europe of $6,400,000 resulting from increased utilization and favorable foreign exchange impacts in Norway higher revenues in The Americas of $3,700,000 due to higher utilization in The U. S. And higher revenues in Africa of $3,000,000 resulting from higher utilization and additional aircraft capacity introduced into the region. The $6,500,000 increase in adjusted operating income from OES was primarily due to higher revenues, partially offset by higher operating expenses, which included higher reimbursable expenses of $2,500,000 as well as higher training and travel, subcontractor and repairs and maintenance costs of $1,200,000 each. Moving on to Government Services.

Speaker 3

Revenues were $6,600,000 higher, predominantly due to the ongoing transition of the Irish Coast Guard, or IRCG, search and rescue contract and higher utilization in our U. K. Search and rescue business. Adjusted operating income for this segment was $7,700,000 lower this quarter due to higher subcontractor costs of $5,100,000 and higher personnel costs of $2,800,000 related to the previously mentioned ongoing contract transition. Unfavorable foreign exchange rate impacts of $3,000,000 higher repairs and maintenance costs of $2,000,000 and higher fuel costs of $600,000 offsetting the increased revenue.

Speaker 3

As the transition comes to completion for both IRCG and UK SAR two gs contracts, we will expect adjusted operating income margins to return to or exceed pre-twenty twenty four levels and for full year impacts in subsequent years to contribute meaningfully to our financial results, providing reliable capital returns well into the middle of the next decade. Finally, revenues from our other services were $6,300,000 higher, resulting from seasonally higher utilization in Australia. As a reminder, our operations in Australia experienced fewer passengers during the wet season from December through March, and activity typically picks up in the second and third quarters. Adjusted operating income was $4,100,000 higher this quarter due to the increased activity. Moving on to Bristow's financial outlook.

Speaker 3

Though ongoing uncertainty continues in the global economy, we have been well positioned to have better visibility than most. As such, we are increasing our previously reported 2025 adjusted EBITDA range $240,000,000 to $260,000,000 and our 2026 adjusted EBITDA guidance range to 300,000,000 to $335,000,000 In our OAS segment, we expect market conditions to remain constructive in 2025 and to generate adjusted operating income of approximately 200,000,000 to $2.00 $5,000,000 on revenues of $980,000,000 to $1,000,000,000 The factors contributing to the increased guidance in this segment include better visibility into operating costs and expected customer activity levels. In our Government Services segment, we expect to generate adjusted operating income of approximately 40,000,000 to $50,000,000 on revenues of $360,000,000 to $400,000,000 This segment will continue to feel the effects of the new contract transitions until they are fully operational. As I noted earlier in the call, 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 in 2026 and beyond. In our Other Services segment, we expect to generate adjusted operating income of approximately 20,000,000 to $25,000,000 on revenues of 120,000,000 to $130,000,000 primarily due to improved economics in our regional airline in Australia.

Speaker 3

You may recall from previous earnings calls that the primary factors that could bias results to either end of our guidance range include supply chain dynamics that impact aircraft availability, customer activity levels influenced by global energy demand, new contract transitions and the exchange rates of foreign currencies relative to S. The dollar, namely the British pound sterling and the euro. Turning now to cash flows. Operating cash flows were almost $100,000,000 higher than the preceding quarter and $38,000,000 higher than the prior year. Working capital changes also saw an improvement of approximately $34,000,000 this quarter, primarily resulting from the timing of customer collections.

Speaker 3

Bristow continues to benefit from a strong balance sheet and liquidity position. As of June 30, our available liquidity was approximately $317,000,000 and we have now funded 92% of the capital investments needed for our new government services contract, with the remaining capital investment expected to conclude in the coming weeks. As Chris noted, we are happy to begin executing on our previously announced capital allocation target, which included a $15,300,000 accelerated principal payment on our U. K. SAR debt facility and the repurchase of nearly 120,000 shares of common stock in open market transactions represented an average cost per share of $32.41 both of which occurred during the current quarter.

Speaker 3

As of June 30, dollars 121,000,000 remained available under our $125,000,000 stock repurchase program. We consistently evaluate the best uses of our cash flow and aim to yield the highest value and return on capital. We will continue to execute on our capital allocation strategy, which currently prioritizes maintaining a strong balance sheet, the conclusion of investments needed to complete the government services contract transition and the return of capital to shareholders. At this time, I'll turn the call back to Chris for further remarks. Chris?

Speaker 2

Thank you, Jennifer. And I want to thank all the Briscoe team members working diligently on the ongoing launch of search and rescue services for the Irish Coast Guard and the transition of operations to the SAR two gs contract in The United Kingdom. While we have faced challenges along the way with unexpected regulatory and supply chain delays, the company is on track to meet the revised milestone date and our commitment to delivering successful outcomes for the government and communities we serve remains unwavering. From a financial standpoint, 2025 was known to be a transition year for our Government Services business as reflected in our guidance. The full earning potential of this business should become evident in 2026 and beyond, and we expect these contracts to deliver compelling financial returns well into the middle of the next decade.

Speaker 2

The outlook for our offshore energy services business remains positive. While increased supply from OPEC plus combined with demand uncertainty have raised concerns about the trajectory of upstream spending for the overall oil and gas industry, offshore projects remain favorably positioned within oil and gas company portfolios. The attractive full cycle economic returns from these projects are likely to drive continued investment for the foreseeable future as capital continues to rotate out of shorter cycle projects and into longer cycle deepwater investment. These positive demand conditions are paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains at or near full effective utilization levels.

Speaker 2

The ability to bring in new capacity remains limited with production lines that must be shared with military aircraft orders and current manufacturing lead times for approximately twenty four months. In conclusion, while macroeconomic risk and uncertainty are elevated, the outlook for Bristow's business remains very positive, and we are pleased to raise 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, the more stable production support activities, and the breadth and diversity of the geographic markets we serve. With that, let's open the line for questions.

Operator

Your first question will come from Jason Bhando with Evercore ISI. Your line is now open.

Speaker 4

Great, thanks. Good morning, Chris, Jennifer and Red. Good morning. First question, just given the headwinds in the macro for the Oilfield Services sector in general, we haven't really seen too many companies have the ability to raise their guidance this earning season. You reaffirmed the original guidance last quarter.

Speaker 4

So what gives you greater confidence in the outlook here to kind of raise it now? And can you dig a little bit deeper into some of the primary drivers behind the 2526% increase that you mentioned in the prepared remarks?

Speaker 3

Sure, Jason. I mentioned this in my prepared remarks, but we really do have some better visibility to our overall cost and to our customer activity, which has really allowed us to be able to raise that outlook.

Speaker 4

Okay. And then given the oil price volatility that we've kind of seen, some customers slow their decision making and have a lower sense of urgency when it comes to contracting of services in other parts of the OFS supply chain, even some of the more resilient OpEx spend areas. Are you seeing any changes in behavior among your production oriented customers at this time?

Speaker 2

Good question. And fortunately, the short answer is no. Actually, biggest struggle currently is managing through supply chain challenges to meet customer demand. It's a challenge right now to keep up with the current level of demand. And this is why we're moving existing aircraft in our portfolio to optimize utilization around our different geographies and also bringing in new aircraft to increase capacity in markets like Africa and Brazil.

Speaker 4

Understood. And then just the last one for me. Knowing that the majority of your OES revenue is generated from contracts supporting offshore production, as exploration and development drilling activity starts to improve in the 2026 or hopefully improve in the 2026 and into 2027, How much of that increase is already factored into your 2026 guidance, if any?

Speaker 2

We are including an expectation of increased activity in the latter 2026 into our guidance range. Obviously, we'll all have to wait and see how that materializes. That's one of the reasons that we do provide a range of a low end and a high end, but we are considering the impact of increased activity in offshore in the latter half of next year. This is one of the reasons that early last year, we placed a new order for AW189 offshore configured helicopters. We have seven firm orders there and 10 options, which provides us with the flexibility to bring in additional capacity to meet some of that growth should it materialize on compelling returns for our stakeholders.

Speaker 4

Great. Thanks for taking my questions. I'll turn it back.

Speaker 1

Thank you.

Operator

Your next question will come from Jason Sullivan from The Benchmark. Your line is now open.

Speaker 5

Hey, good morning.

Speaker 6

Good morning, Josh. Just looking at

Speaker 7

the increased subcontractor costs you mentioned this quarter, are these related to ongoing contractor transitions? Or should we expect them to persist?

Speaker 3

Good morning, Josh. Thanks for the question. While we always have some level of subcontractor activity for various different functions, it is elevated during the transition of the government services contract. Both of our new government services contracts include a fixed wing element being integrated into the operations for the first time. That portion of the subcontractor costs will continue, but a portion of the subcontractor costs relate to different activities to stand up the services and will not continue once we get fully transitioned.

Speaker 7

Got it. And then just as far as supply chain dynamics, you mentioned as a factor in guidance. What are you seeing as far as the availability of spares and just generally in the supply chain at this point?

Speaker 2

We're seeing some improvements. I'm pleased to share that. We're still not where we want to be. But some of the OEMs that have been struggling over the last couple of years have made significant strides in improving their delivery times of critical components. So, again, we expect this to continue to be a headwind for the near term, but I do want to note the progress that's been made and things are trending in the right direction there.

Speaker 2

And then maybe one

Speaker 7

on the advanced mobility market. Any updates from the announcement with the Norway advanced air mobility sandbox? I think you're doing with beta.

Speaker 2

Yes. And a very timely question actually. We're excited to share that the first flight for the Norway Tessarina project is scheduled for this Friday, August 8, which is an exciting real world application of this new technology, all electric aircraft. And we're honored to partner with Beta, Avanor and the Norwegian government on this innovative sandbox project, which will allow us to evaluate really the real world use cases for the aircraft with routes and capabilities and test how these next generation AEM aircraft can be deployed out in the world.

Speaker 5

Got it. And do

Speaker 7

you think we'll see more SandBox announcements over the next year or so with other manufacturers that you might have relationships with? How should we envision this opportunity evolving over the next couple of years?

Speaker 2

Yes, we are optimistic that there will be more SandBox like projects of this nature in other jurisdictions over the next couple of years. We're exploring those opportunities. It could be in places such as The UK, U. S, even parts of Africa have shown some interest. So, we're going to pursue those opportunities in earnest and I do think that they are likely to occur in other geographies over that period of time.

Speaker 2

Got it. And then just one

Speaker 7

last one on the free cash flow profile and cash deployment starting. Can you just update us on how should we think about sustaining CapEx, net target net debt, just update us on the priorities there?

Speaker 3

Sure. As I noted, we're about 92% done with the government services contracts, which is the large CapEx that we've been working through for the last couple of years. We do have orders for seven new AW189s to be deployed over the next couple of years as well. We did put in our as part of our capital allocation strategy that we're going to pay down our gross debt to $500,000,000 and started that pay down in this quarter with $15,000,000 pay down of our UK SAR debt. So we're starting to deploy the cash that is coming out of the free cash flow that's coming out of the business as we move out of this heavy investment cycle into a more sustained cycle.

Speaker 7

Great. I'll leave it there. Thank you for the time.

Speaker 6

Thanks, Josh.

Operator

Our next question will come from Steve Silver with Argus Research. Your line is now open.

Speaker 6

Thanks, operator, and congratulations on the quarter. Thanks for taking my questions. Given the strong free cash flow in Q2 and the improved working capital in the quarter, I was curious if there's any color you could provide on the capital allocation strategy, given the fact that you only used a modest portion of the share repurchase program in Q2?

Speaker 2

Yes. As you noted, we still have a lot of capacity under the Board approved share repurchase program. About $121,000,000 remains under the $125,000,000 We had previously messaged when we announced the capital allocation framework that our priorities in Q2 would really be completing the investment capital spend for those big government projects that Jennifer was talking about, as well as beginning the accelerated debt pay down to reach our gross debt target that Jennifer referenced. So, we actually pulled forward, if anything, some of the timing of those opportunistic share repurchases into Q2. Going forward, as announced, we will continue to take an opportunistic approach to the share repurchases.

Speaker 2

We've also announced that beginning in 2026, the company intends to initiate a cash dividend program. So we look forward to kicking that off in the New Year as well.

Speaker 6

Great. That's helpful. And could you provide any color on what considerations factored into the decision to accelerate the principal payments to The UK SAR equipment facility over any other debt instruments?

Speaker 3

Sure. Thank you for the question. Our our UK SAR debt currently is our highest, cost debt, and it and it had no prepayment penalty. So it was the best choice for our first pay down.

Speaker 6

Okay, great. Thanks so much and congratulations again. Thank you.

Operator

Our next question will come from Keith Beckman with Pickering Energy Partners. Your line is now open.

Speaker 5

Hey, good morning. Could you walk us through how your contracting model makes you somewhat insulated from an activity drop that is impacting the outlook for other OFS companies with exposure to deepwater activity?

Speaker 2

Yes. Good morning, Keith, and happy to do that. I would say, first, before getting into the contracting model, just a quick note on business mix. We do have a sizable portion of our revenues, about 33% that come from non oil and gas activity. These are the long term very stable government services contracts as well as the fixed wing business that we have.

Speaker 2

But coming back to our offshore energy services business, there our contracting model is exposed really to 80% production support. So we have relatively less exposure to short cycle drilling and exploration. And within our contracts, the significant majority of the revenues are earned on the monthly standing charge, which we get paid to be there on a standby basis. So, that derisks some of that exposure to actual flight activity as well. So, I think it's business mix, it's the heavy weightings of production and it's also the duration.

Speaker 2

Our typical contract is about a five year contract to support that longer term production type work.

Speaker 5

Awesome. That's great color. If I could sneak one more in. Visibility for the floating rig count is pretty soft through the year end. We think Q4 floater activity could come down eight percent to 10% from Q2.

Speaker 5

If that happens, how would lower floating rig activity show up in results? Would it be mostly confined to lower average flight hours, kind of like what you're saying?

Speaker 2

Yes, good question. I would say, overall, we don't anticipate that scenario referenced to impact our guidance ranges for this year. We have had an expectation for some new projects that would commence this year. Those we see actually materializing, in fact, one that we just began in Suriname. We don't really have anything on the come in terms of new drilling activity before the end of the year that would impact that guidance range.

Speaker 2

We do continue to maintain a constructive outlook for offshore activity overall. Certainly, as you get into 2026 and beyond, we think those offshore projects are continuing to be well positioned within the oil and gas company portfolios. But again, just following up to the gist of your question, in terms of the potential white space or idle floater activity between now and the end of the year, we don't anticipate that impacting the guidance range that we provided. Awesome. Thanks.

Speaker 2

Appreciate it.

Operator

Our final question will come from Colby Sasso with Daniel Energy Partners. Your line is now open.

Speaker 8

Hi. Thanks for having me on the call. Hi. Good morning. Good morning.

Speaker 8

Last quarter, you noted you weren't expecting much of a direct financial result, from tariffs, but you noted R and M costs could go up as there may be uncertainty for component delivery times. Have you seen any issues with delivery times for components? And if you haven't been impacted, to your knowledge, has this been impacting any of your competitors?

Speaker 2

Yes, timely question, certainly. For Bristow, the answer is no. We haven't seen an impact to date. Obviously, there remains some uncertainty around global trade and the tariff environment. We are encouraged by some of the recent announcements including the intended EU U.

Speaker 2

S. Trade deal as well as the Brazil U. S. Trade deal. And that from everything that we understand, it's understood that the agreements will exclude civil aircraft and parts from the tariff regime, keeping those at a zero tariff basis, which obviously is constructive for us.

Speaker 2

I think it's constructive for the overall industry supply chain. So, to date no impacts adversely from tariffs on R and M cost or timing of deliveries. I can't speak for everyone else in the industry, but I would imagine that any delays others might be experiencing in terms of deliveries would be related to things other than tariffs.

Speaker 8

Makes sense. And as a quick follow-up, West Africa has received a decent amount of airtime on this quarter's offshore drillers calls with respect to where incremental deepwater opportunities will come the next three to five years. Could you talk about where you're expecting to see the most growth in your energy business in the next couple of years?

Speaker 2

Yes. And thank you for the question. I would say in terms of the growth opportunities for our overall business, it includes markets like Brazil, where we still see quite a bit of incremental demand and growth potential and the need to move additional aircraft into Brazil to meet that demand. Also The U. S.

Speaker 2

Gulf is a pretty constructive market. I mean, in terms of percentages, it won't increase at the same rates, but there are incremental opportunities here. And then coming around to probably the top of the list, which you referenced, which is Africa. This is a market where we, again, today our greatest challenge is keeping enough aircraft working to meet the demand and we're looking to move additional aircraft from within our existing portfolio, also bringing additional aircraft capacity into our fleet to meet some of that demand that we see coming from Africa given the projects that are expected to move forward there.

Speaker 8

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

Operator

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

Speaker 2

Thank you, Leila, and thanks everyone for joining the call. I hope everyone stays safe and well and we look forward to speaking again next quarter. Thank you.

Operator

This concludes today's call. You may now disconnect at any time.

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