OCEANEERING INTERNATIONAL INC Q3 FY2024 earnings call

• Delivered $98.1 million in adjusted EBITDA, in line with guidance and consensus, with $67 million free cash flow and a share repurchase of 422,229 shares for ~$10 million. - SSR EBITDA margin expanded to 36%. - Third quarter net income was $41.2 million ($0.40 per share) on revenue of $680 million. - Segment performances: SSR up, Manufactured Products up, OPG down, IMDS down (except core), ADTech flat. - Outlook: Fourth quarter revenue expected to increase led by Manufactured Products and OPG, adjusted EBITDA similar to Q3; 2024 adjusted EBITDA revised to $340M-$350M, free cash flow $110M-$150M; 2025 EBITDA guidance $400M-$430M, midpoint $415M, 20% increase from 2024 midpoint.

For the third quarter of 2024, Subsea Robotics (SSR) operating income was 37% higher on a 9% increase in revenue, with EBITDA margin expanding to 36%. ROV revenue per day utilized was $10,576 (13% higher), fleet utilization 69%, and days utilized 15,796. Revenue split for SSR was 77% from ROV and 23% from tooling/survey. Manufactured Products had operating income of $11.3 million, a 37% increase on a 17% revenue rise, with backlog at $671 million and a book-to-bill ratio of 1.21. Offshore Projects Group (OPG) saw declines in revenue, operating income, and margin due to project mix and vessel crane repair costs. Integrity Management and Digital Solutions (IMDS) had operating income/margin declines due to a divestiture charge, but core businesses improved. Aerospace and Defense Technologies (ADTech) had flat revenue with operating income/margin declines due to project costs and mix.

• 2024 adjusted EBITDA guidance: $340 million to $350 million, free cash flow guidance: $110 million to $150 million. - 2025 EBITDA guidance: $400 million to $430 million, midpoint $415 million, representing a 20% increase over 2024 midpoint. SSR expected to have improved revenue and margin, Manufactured Products forecast increased throughput, OPG expected international activity, IMDS higher operating income, ADTech significant revenue/operating income growth.

• Impact of two large hurricanes on offshore operations and onshore facilities. - Noncash charge from divestiture of Maritime Intelligence business. - Unallocated expenses, project mix changes, vessel downtime, delays in project schedules/awards.

Q: How much white space incorporated and what's the percentage pricing improvement for SSR?

A: No significant white space; pricing improvement depends on region and utilization of days in regions.

Q: Update on manufactured products outsourcing and order intake for automated forklifts?

A: Execution of outsourcing good, margin issues due to start-up; order intake for MaxMovers not ready for public consumption.

Q: Details on defense AUV contract delivery and CapEx plans?

A: Q2 2025 delivery of vehicle; CapEx focused on growth/differentiated tech like autonomy.

Q: SSR margin improvement, ROV pricing, and defense AUV business impact?

A: Margin improvement due to efficiency; ROV pricing depends on region; defense AUV business in Aerospace and Defense Technologies.

Q: Update on share repurchase and capital allocation?

A: Share repurchase to be between programmatic and opportunistic; focus on growth opportunities and managing dilution through employee stock plan.