Tidewater Inc ((TDW)) has held its Q4 earnings call. Read on for the main highlights of the call.
Tidewater Inc. recently held its earnings call, revealing a strong financial performance for 2024. The company reported significant revenue growth, increased day rates, and successful share repurchases. However, while the long-term outlook remains positive, 2025 is expected to present some challenges, including muted demand growth, regional performance disparities, and pressure on day rates. Tidewater’s strategy continues to focus on disciplined capital allocation and opportunistic share repurchases.
Significant Financial Improvements in 2024
Tidewater Inc. reported impressive financial improvements in 2024, with revenue growing by 33% year over year. The company saw average day rates increase by nearly $4,500 per day, while net income nearly doubled. Adjusted EBITDA grew by almost 50%, free cash flow tripled, and net debt was reduced by $149 million, showcasing a robust financial position.
Successful Share Repurchase Program
In 2024, Tidewater actively returned capital to shareholders for the first time since 2018, repurchasing $91 million of shares in the open market. The company utilized $119 million of cash to manage down the number of shares outstanding, reflecting its commitment to enhancing shareholder value.
Strong Free Cash Flow Generation
Tidewater generated $131 million of free cash flow in 2024 and has plans for substantial free cash flow generation in 2025. This financial strength provides the company with the flexibility to pursue strategic initiatives and further enhance shareholder returns.
New Share Repurchase Authorization
The Board of Directors has authorized an additional $90.3 million of share repurchase capacity as of the call date. This move underscores Tidewater’s commitment to returning value to shareholders and maintaining a disciplined capital allocation strategy.
Positive Long-term Outlook for Offshore Vessel Demand
Despite a more muted growth in offshore drilling activity for 2025, Tidewater remains optimistic about the long-term demand for offshore vessels. The company anticipates increased demand driven by subsea demand and FPSO activity beyond 2025.
Mixed Regional Performance
Tidewater experienced significant improvements in regions like West Africa and the Middle East. However, these gains were offset by a pullback in the Asia Pacific and the Americas, highlighting the mixed regional performance.
Softening Demand in 2025
The company anticipates a more muted growth in offshore drilling activity throughout 2025, with fewer offshore rigs expected compared to 2024. This is likely to impact the demand for offshore vessels in the coming year.
Pressure on Day Rates
There was pressure on leading edge day rates across vessel classes during Q4, particularly in the UK due to regulatory and tax structure adjustments. This presents a challenge for Tidewater as it navigates the evolving market conditions.
Challenges in Financing New Builds
Tidewater faces challenges in financing new builds, as current day rates and contract terms do not justify newbuild ordering. Additionally, there is limited appetite in the financing markets for newbuild projects, posing a hurdle for future expansion.
Increased Receivables
Receivables increased in Q4, primarily driven by delays in payments from PEMEX in Mexico. This situation highlights the challenges Tidewater faces in managing its accounts receivable.
Guidance for 2025
Tidewater provided guidance for 2025, forecasting a revenue range of $1.32 to $1.38 billion and a gross margin of 48% to 50%. The company anticipates a slight improvement in 2025 compared to 2024, with the midpoint of revenue guidance supported by approximately 81% of already secured backlog and options. While a first-quarter revenue decline of about 6% is expected due to seasonal weakness, a material uplift in utilization is foreseen by the third quarter.
In summary, Tidewater Inc.’s earnings call highlighted a strong financial performance in 2024, with significant revenue growth and successful share repurchases. While the long-term outlook remains positive, 2025 is expected to bring challenges, including muted demand growth and pressure on day rates. The company’s disciplined capital allocation strategy and focus on shareholder value remain central to its approach as it navigates the evolving market conditions.