Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oceaneering International Inc (OII, Financial) reported a net income of $35 million or $0.34 per share on revenue of $669 million for the second quarter of 2024.
- Consolidated bookings exceeded $1 billion, with a manufactured products backlog ending the quarter at $713 million.
- SSR operating income was 46% higher on a 15% increase in revenue compared to the second quarter of 2023.
- The company expects third-quarter 2024 adjusted EBITDA to be in the range of $95 million to $105 million, indicating sequential improvement.
- Oceaneering International Inc (OII) is maintaining its full-year 2024 adjusted EBITDA guidance range of $340 million to $370 million, reflecting confidence in continued healthy activity levels in offshore businesses.
Negative Points
- ADTech's second-quarter 2024 operating income decreased significantly to $7.2 million, with operating income margin dropping to 7% due to a reserve related to a contractual dispute and lower than expected activity levels.
- Offshore Projects Group (OPG) saw a decline in operating income and operating income margin due to pre-contract award costs, additional dry dock costs, and project mix.
- Integrity Management and Digital Solutions (IMDS) had slightly lower operating income margins despite a 16% increase in revenue.
- The company anticipates lower operating income and operating income margin for manufactured products in the third quarter of 2024 due to receiving materials that will yield lower margin revenue and ongoing costs associated with implementing the mobile robotics growth strategy.
- Unallocated expenses are expected to be in the mid-$40 million range for the third quarter of 2024, indicating a potential increase in overhead costs.
Q & A Highlights
Q: ROV pricing up almost $1,500 a day compared to Q2 of last year. Is it fair to think that daily costs probably didn't grow more than $500 in the same period?
A: I think that's fair. We've had greater plateauing of costs and more stability in the business, which has helped control costs.
Q: Should we think about the ROV pricing and profitability as largely supported by existing backlog or leading-edge pricing?
A: It's on both counts. We've been able to raise prices on existing contracts and see evidence of the same in leading-edge pricing.
Q: How should we think about the ROV contract rollover cadence? Is it typical for 25% to 35% of the fleet to reprice every quarter?
A: That's a little high now. Contracts are extending more than a year, so it's closer to 20% per quarter.
Q: Is there any reason to think that the relationship between offshore rig rates and ROV rates will change this cycle versus prior cycles?
A: No, that relationship persists. Utilization on uncontracted rigs looks strong, and performance-based contracts are beneficial for us.
Q: Can you talk about the evolution of the automated core business and the timing around outsourcing manufacturing?
A: We received our first fully built forklift from the contract manufacturer this quarter. We expect to be fully transferred by the end of the year. We are also working on trials with potential volume buyers.
Q: What was the dollar amount associated with the contract dispute in ADTech?
A: I can't give exact numbers as it is still a dispute. We are still discussing with NASA on where it might land.
Q: What are your thoughts on executing a share repurchase program moving forward?
A: We are focusing on the back half of the year, looking at opportunities for share repurchases as we see more cash coming in from our customers.
Q: Can you comment on the outlook for the manufactured products business in Brazil and Mexico and globally?
A: Global activity is strong in the Atlantic margin, South America, West Africa, and the Gulf of Mexico. We see more projects being left there, particularly in the Gulf of Mexico.
Q: Can you talk about the addressable market for the Freedom AUV and the ultimate plans to build?
A: The Freedom AUV is best used as a scanning tool for pipelines, reducing time and emissions. We see commercial interest and opportunities for additional builds, including potential applications for the defense innovation unit.
Q: What are the main drivers that would offset the normal seasonal Q4 decline in EBITDA?
A: The two biggest movers are OPG, with opportunities in the Gulf of Mexico and internationally, and greater utilization of contracted rigs for SSR.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
