OCEANEERING INTERNATIONAL INC Q4 FY2024 earnings call

• In 2024, order intake was $2.9 billion, repurchased ~$20 million in shares, ROV uptime rate was 99%, and ROV pricing improved 13% year-over-year.
• SSR EBITDA margin improved 361 basis points to 36%, attained highest quarterly revenue since 2015, and surpassed $100 million in adjusted EBITDA first time since 2016.
• Won contract from Defense Innovation Unit, acquired Global Design Innovation Limited (GDi), reduced high potential incidents by 56%, and TRIR was 0.29 in 2024.
• 2025 outlook includes consolidated revenue growth mid to high single digits, EBITDA $380M-$430M, free cash flow $110M-$130M, and first quarter 2025 revenue and EBITDA expected to increase.

For the fourth quarter of 2024, Subsea Robotics (SSR) operating income was $63.5 million, 26% higher than the prior year with a 6% increase in revenue, and EBITDA margin improved to 36% from 32%. ROV revenue per day utilized was $10,706, a 12% year-over-year increase. Revenue split between ROV business and combined tooling and survey business was 77% and 23% of total SSR revenue. Manufactured products had fourth quarter revenue of $143 million, up 8%, but operating income was $4.2 million with a 3% margin, declining due to a reserve on an umbilical project. Offshore Projects Group (OPG) achieved highest revenue, operating income, and margin in 2024 during Q4, with operating income $39.3 million, margin 21% (up from 9%), and revenue up 14% to $184 million. Integrity Management and Digital Solutions (IMDS) had fourth quarter operating income down $1.2 million, margin 3% (down from 5%) due to acquisition/divestiture costs. Aerospace and Defense Technologies (ADTECH) had fourth quarter operating income down $1.1 million, margin 10%, due to project mix changes. For full year 2024, consolidated revenue increased 10% to $2.7 billion, operating income improved by $64.9 million, and adjusted EBITDA improved by $58.2 million.

• 2025 consolidated revenue projected to grow mid to high single digits with increased revenue in each operating segment.
• Anticipate EBITDA of $380 million to $430 million, with midpoint representing 17% increase over 2024 adjusted EBITDA.
• Expect positive free cash flow of $110 million in 2025.
• Organic capital expenditures expected to be between $130 million and $140 million in 2025, including ~$15 million to $20 million for ERP implementation.
• First quarter 2025 consolidated revenue expected to increase, with EBITDA in range of $80 million to $90 million.

• Geopolitical risks including changes in regulations and trade policies that may impact markets served.
• Budgetary reviews in the US that could impact government-related markets.

Q: Hi. Good morning. The upward progression of your ROVs average revenue per day has been impressive. At almost $10,800 in the quarter. Has that increase in pricing over the past several years, has that been driven more by the drilling support side or the vessel-based work? Or the combination of both? And just given the expectation of a lot of white space this year on deepwater rigs, do you expect maybe a flattish kind of trajectory from 4Q levels through the end of the year? Or do you expect that we'll actually surpass about, you know, $11,000 a day as we move through the year?

A: Thanks, Eddie. I would say, first of all, the pricing is coming from both. We're seeing improvements in both the vessel and the drill support. And then I guess we see the days or the activity being flattish, but because you know, it's the realization of price even from the exit rate we have. There's been ongoing negotiations. Obviously, it's not the same. I would say that the bites come, you know, in smaller bites or the improvements come in smaller bites. But it's still we're still seeing some upward progressions. So we expect to get even more through 2025 despite the flat days. And again, just kind of reassurance of that. Not unlike we had flattish days and flattish activity in 2024. We still see the opportunity to demonstrate value, 99% uptime, and get, you know, get that improvement in price over time.

Q: Hey. Good morning, everybody. I guess in the context of recent conference calls, we've heard from effectively almost all the offshore drillers that there's gonna be a reacceleration of contract activity occurring here, you know, through the first part of 2025. And, obviously, boding well for incremental activity in 2026 and 2027. So I guess a kind of two-part question around your ROV utilization assumptions. You know, for the year. Can you give us a reminder or refresher on, you know, how potential downtime or white space on rigs and how you've gotta factor that in for 2025? I think it's all in the days.

A: I mean, when we talk about the activity, I think in the rig activity, it's in our plan as flattish, and that's it's hard to take the average of what everybody is telling you. I think when Alan and I talk about it, it feels like we're maybe closer to the Transocean story than maybe some of the others. And that's just the blend of the assets we're on. I talked about these higher quality assets, but I think there's lots of things going on under the water. One of the things that's helped us is we've, you know, quietly grown our market share in Brazil. And so we're pushing up higher there. We didn't we never used to talk that much about Brazil because some of the Petrobras contracts were pretty onerous. And now that we see more of the drilling contractors contracting ROVs directly, and they really value uptime, we've been able to get better pricing and again more market share in Brazil. So that's one of those things that happens that's sort of in the mix that kind of gives us some protection against the white space that everybody's talking about.