Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong financial performance with revenue of NOK 623 million in Q2, up from NOK 607 million last year, excluding one-off effects.
- Successful sea launch and technology qualification contract with Equinor for Reach Remote.
- Increased vessel capacity through long-term charters, including the extension of Havila Subsea and addition of Offshore Surveyor.
- Significant growth in order backlog and outstanding tender value, more than doubling compared to last year.
- Continued innovation in technology, including the launch of the Reach Dragonet gradiometer system and advancements in remote operations.
Negative Points
- Deep Cygnus was out of service for almost 90% of the quarter, impacting potential revenue by NOK 60-120 million.
- Increased interest expenses related to IFRS 16 charter commitment debt and unrealized currency loss.
- Slight delay in the Reach Remote project, with vessels slightly behind the original plan.
- High dependency on the oil and gas sector, with 69% of Q2 revenue coming from this segment.
- Potential challenges in maintaining balance between long-term contracts and spot market opportunities.
Q & A Highlights
Q: Can you please explain the margins of the solutions and data divisions in more detail?
A: The margins in both the solutions and data divisions are quite similar because they operate in the same market area with the same suppliers and clients. Therefore, there are no significant margin differences between the two segments. - Birgitte Wendelbo Johansen, CFO
Q: With your deep insight into every tender and market of the world, how has the outlook for the next three to five years changed in your view since going into 2024?
A: The market outlook has improved significantly. We are transitioning from a downturn over the past eight years to an upturn for the coming years. There is a big imbalance between supply and demand due to a lack of investments and recruitment in our industry. We expect to see some market upturn, although we are not yet into crazy pricing. - Jostein Alendal, CEO
Q: What would the turnover have been if Deep Cygnus had not been 90% out of service this quarter?
A: One such vessel typically generates between NOK30 million and NOK50 million each month. Therefore, the increased turnover would have been somewhere between NOK60 million and NOK120 million if Deep Cygnus had been operational. - Birgitte Wendelbo Johansen, CFO
Q: How do you plan to work through the growing backlog? Are these services that generate higher turnover for the same ship deployment?
A: Our backlog is increasingly dominated by services rather than vessel-only revenue. This shift means higher-margin projects and exciting opportunities around the world, leading to a higher-margin backlog compared to last year. - Jostein Alendal, CEO
Q: Could you give an indication of the revenue impact of the DRIX units? Are the margins in line with the rest of Reach?
A: The DRIX units are smaller vessels, but they are very efficient tools for data deliveries, which have the same margin as other projects. Overall, the DRIX units contribute positively to our margins. - Jostein Alendal, CEO
Q: Can you please clarify how much cash outlay remains on the Reach Remote post the Q2 report? And how much cash outlay remains on the vessel upgrades?
A: Most of the financing for Reach Remote will be bank financing, following an equity-first principle. Detailed information can be found in Note 13 of the report. - Birgitte Wendelbo Johansen, CFO
Q: Do you see additional need for capacity, or are you happy with the current setup?
A: We are always looking into expansions, both in traditional services and the robotic world. We will take it step by step, but there is a good market for us to expand. - Jostein Alendal, CEO
Q: How do you see the upcoming winter season compared to previous years?
A: The upcoming winter season looks promising due to our increased global presence and the general market activity. We expect a good winter season and beyond. - Jostein Alendal, CEO
Q: Can you elaborate on the options for further expansion of the Reach Remote fleet? What are your plans?
A: We plan to scale up the Reach Remote fleet once the first two units are operational. We aim to have a fleet of Reach Remotes in the near future, with delivery times and other factors to be considered. - Jostein Alendal, CEO
Q: Do you have any long-term contracts in your portfolio, or is it possible to add some?
A: We maintain a balance between long-term and short-term jobs. While we have a couple of vessels occupied for the next year, we prefer not to lock up all our capacity for too long. - Jostein Alendal, CEO
Q: How do you see competition pressure as other companies share ambitious targets in the market where you operate? How do you differentiate from competition?
A: Competition is good as it drives us to be better. We strive to be the best and differentiate ourselves through our expertise and innovative solutions. - Jostein Alendal, CEO
Q: Are there any unmanned vessel yard stays scheduled for the second half of 2024?
A: Yes, Viking Reach will go into the yard in September, and there might be shorter docking periods for Taurus and Northern Maria. Taurus is finishing its docking soon. - Birgitte Wendelbo Johansen, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
