What Tidewater (TDW) Said on Its Q3 Earnings Call

Key Points

• Tidewater’s Q3 revenue rose to $360.4 million from $342.3 million in Q2, while net income was $17.5 million. New-contract day rates increased 12.5% sequentially to just over $27,000 per day.
• The company forecast 2027 revenue of $1.70 billion to $1.75 billion and gross margins of 51% to 53%, with improvement expected through the year as higher vessel rates flow into contracts. Its $1.1 billion backlog represents about 64% of midpoint revenue guidance.
• Tidewater raised Q3 free cash flow to $90.9 million and said Wilson Sons integration is on track to finish in early 2027. It has about $475 million remaining under its share-repurchase authorization, but says value-accretive acquisitions remain its preferred use of capital.

Tidewater NYSE: TDW expects revenue and margins to climb in 2027 as higher offshore vessel rates work through its contracts, executives said on the company’s third-quarter earnings call.

The company reported third-quarter revenue of $360.4 million, up from $342.3 million in the second quarter, and net income of $17.5 million, or $0.35 per share. Results included one month of revenue from the acquired Wilson Sons fleet.

President and CEO Quintin Kneen said the company’s weighted average Leading Edge day rate, a measure of rates on new contracts, rose for a third consecutive quarter. It increased 12.5% sequentially to just over $27,000 per day, according to Senior Vice President West Gotcher.

“As vessels across our fleet roll off older contracts and onto current market rates, those higher rates flow into our results,” Kneen said. The average contract duration, including Wilson Sons, is approximately six quarters, he said.

2027 Outlook Calls for Higher Revenue and Margins

Tidewater initiated 2027 revenue guidance of $1.70 billion to $1.75 billion and gross margin guidance of 51% to 53%. Gotcher said revenue and margins are expected to be roughly flat in the first quarter before improving as the year progresses.

The outlook assumes active utilization of approximately 82%. In response to an analyst’s question, Kneen said the guidance also incorporates an average day-rate increase of about $2,700 per day year over year, with rates expected to rise sequentially through 2027.

Gotcher said combined fleet backlog represented $1.1 billion of 2027 revenue, or approximately 64% of the midpoint of the guidance range. He cautioned that unplanned maintenance and additional drydock time remain risks to backlog revenue.

For 2026, Tidewater revised its revenue guidance to $1.43 billion to $1.44 billion and its gross margin range to 47.5% to 48.5%. The company expects fourth-quarter revenue to rise approximately 11% from the third quarter, primarily because it will include a full quarter of Wilson Sons results.

That outlook also reflects higher-than-anticipated repair downtime, reduced capacity and slightly lower-than-anticipated contract extension rates in the Americas. Together, those factors are expected to affect fourth-quarter revenue by approximately 3%, Gotcher said.

Cash Flow Rises as Wilson Sons Integration Continues

Third-quarter free cash flow rose to $90.9 million from $64.4 million in the prior quarter, helped by higher revenue, a working-capital benefit and lower capital spending, Chief Financial Officer Sam Rubio said. Adjusted EBITDA rose to $140.1 million from $135.5 million.

Gross margin was 46.8%, compared with a consistent margin in the second quarter. Average day rates increased 3.6% sequentially, while active utilization fell to 79.2% from 81.4%, Rubio said.

Wilson Sons contributed $17.1 million to the sequential revenue increase and added $7.8 million in operating costs. Kneen said integration of the acquired business is going well and is expected to be completed at the beginning of 2027.

Gotcher said Wilson Sons’ current vessel rates are below market rates in Brazil, creating potential for increases over the next several years. He cautioned that the timing and size of the uplift remain difficult to quantify, partly because Petrobras tendering has been slower than anticipated.

Repurchases Resume, With M&A Still a Priority

Tidewater repurchased approximately $25 million of shares after closing the acquisition, leaving about $475 million available under its current $500 million authorization. Gotcher said the purchases through mid-October totaled approximately 300,000 shares at an average price of $83.14.

Kneen said value-accretive acquisitions remain the company’s preferred use of capital, while share repurchases will be made opportunistically. Asked about potential acquisition markets, he said Tidewater is less focused on the U.S. Gulf than it was previously and sees opportunities in Africa and Asia, depending on price.

At quarter-end, net leverage was below 0.9 times and liquidity was approximately $650 million, including a $250 million revolving credit facility, Kneen said. Rubio said Tidewater had assumed $224.5 million of debt related to Wilson Sons as of Sept. 30.

Regional Demand and Conflict Costs

Chief Operating Officer Piers Middleton described offshore vessel demand as firm and supply as tight, while noting differences across regions. He said the U.S. Gulf remains soft, Petrobras tendering in Brazil has been delayed around elections, and activity in Asia Pacific is expected to pick up in 2027 as new drilling campaigns begin.

Middleton said Tidewater plans to maintain a short-term chartering strategy to push rates. In the question-and-answer session, he said drilling offers the greatest potential leverage for the business, while subsea construction work also provides opportunities to increase rates.

Conflict-related costs associated with Operation Epic Fury totaled $5.6 million in the third quarter and are expected to ease to about $5 million in the fourth quarter. Rubio said the company had collected approximately $600,000 in customer reimbursements for eligible direct costs and had not included assumed reimbursements in its guidance.

About Tidewater (NYSE:TDW)

Tidewater Inc. provides offshore support vessels and related marine services to the energy industry. Its vessels transport personnel, equipment and supplies between shore bases and offshore facilities, and support activities such as anchor handling, towing, platform operations and offshore construction. The company operates a diverse fleet that includes platform supply vessels, anchor-handling tug supply vessels, crew boats and other specialized vessels. These services help customers carry out offshore exploration, development and production, as well as certain renewable-energy and subsea projects.

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