Tidewater Inc ((TDW)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Tidewater Inc. revealed a mixed sentiment among investors and analysts. While the company presented a positive long-term market outlook and demonstrated strong cash flow generation, these positives were tempered by short-term challenges, including a net loss due to debt charges and regional pressures on day rates.
Revenue and Gross Margin Exceed Expectations
In the third quarter, Tidewater Inc. reported revenue of $341.1 million, surpassing expectations. This achievement was attributed to higher-than-expected average day rates and utilization, leading to a gross margin of 48%, which was about 200 basis points better than the guidance provided earlier.
Strong Free Cash Flow Generation
The company generated $83 million in free cash flow during the third quarter, contributing to a total of nearly $275 million for the first nine months of the year. Tidewater projects to end 2026 with close to $800 million in cash, showcasing its robust cash flow generation capabilities.
Positive Long-term Offshore Vessel Market Outlook
Tidewater expressed optimism about the long-term outlook for the offshore vessel market, driven by increasing demand from FPSO deployment and EPCI projects. This positive outlook persists despite the current softness in the drilling market.
Share Repurchase Authorization
The company has retained a $500 million share repurchase authorization, which represents approximately 18% of its outstanding shares. This move underscores Tidewater’s confidence in its financial stability and future prospects.
Net Loss Due to Debt Extinguishment Charge
Tidewater reported a net loss of $806,000 for the quarter, or $0.02 per share, primarily due to a $27.1 million charge related to the early extinguishment of debt. This charge has impacted the company’s short-term financial performance.
Pressure on Day Rates in Key Regions
The company continues to face pressure on day rates, particularly in the UK, Africa, and West Africa. These challenges are attributed to various regional issues and slowdowns affecting the market.
Decline in Average Day Rates
The third quarter saw a decline in average day rates, which were 2% lower compared to the second quarter, standing at $22,798. This decline reflects ongoing challenges in maintaining day rate levels.
Forward-looking Guidance
Looking ahead, Tidewater has provided guidance for 2026, expecting revenue to range between $1.32 billion and $1.37 billion, with a gross margin of 48% to 50%. The company anticipates ending 2026 with approximately $800 million in cash, assuming no major expenditures on mergers and acquisitions or share repurchases. This guidance reflects a belief in the continued recovery of the offshore market, driven by robust production support and construction demand, alongside a potential increase in drilling activity by the end of 2026.
In summary, Tidewater Inc.’s earnings call highlighted a mix of optimism and caution. While the company is well-positioned for long-term growth with strong cash flow and a positive market outlook, it faces short-term challenges, including debt-related losses and regional rate pressures. Investors will be keenly watching how Tidewater navigates these challenges while capitalizing on future opportunities.