Tidewater Inc ((TDW)) has held its Q1 earnings call. Read on for the main highlights of the call.
Tidewater Inc’s recent earnings call painted a largely positive picture for the company, with strong revenue and gross margin performance setting a promising tone for the year. The call highlighted record day rates and successful share repurchases, signaling robust financial health. However, the company also acknowledged challenges in the North Sea and Mexico, high drydock expenditures, and receivables issues in Mexico as areas of concern.
Strong Revenue and Gross Margin Performance
Tidewater Inc reported a first-quarter revenue of $333.4 million, surpassing expectations thanks to higher average day rates and improved utilization. This performance resulted in a gross margin exceeding 50% for the second consecutive quarter, underscoring the company’s operational efficiency and market strength.
Record Day Rates and Utilization
The company achieved a new quarterly record for day rates at $22,303, exceeding expectations by more than $500 per day. This achievement was bolstered by improvements in utilization, contributing significantly to the company’s strong financial performance.
Significant Free Cash Flow Generation
Despite facing higher drydock and capital expenditures, Tidewater generated approximately $95 million in free cash flow during the first quarter. This figure represents the second-highest quarterly free cash flow since the offshore recovery began, highlighting the company’s effective cash management strategies.
Successful Share Repurchase Program
Tidewater successfully executed its share repurchase program, fully utilizing the $90 million available under existing debt agreements. The company repurchased 2.3 million shares at an average price of $39.31, reflecting confidence in its financial position and future prospects.
Positive Market Outlook
The company expressed optimism about the market’s intermediate to long-term prospects, supported by long-term contracts and customer commitments. This positive outlook suggests continued strength in Tidewater’s core markets.
Challenges in the North Sea and Mexico
Despite the overall positive sentiment, Tidewater acknowledged ongoing demand-side challenges in the North Sea and Mexico. These issues have impacted day rates and vessel utilization, presenting hurdles that the company aims to address.
High Drydock and Capital Expenditures
Tidewater incurred over $30 million in additional drydock and capital expenditures in the first quarter compared to the previous quarter. While these expenditures were higher than anticipated, they are part of the company’s strategy to maintain and enhance its fleet.
Receivables Collection Issue in Mexico
A significant concern for Tidewater is the outstanding receivable balance of $35.1 million from its primary customer in Mexico. The company has not received payment for several quarters, posing a challenge to its financial management.
Forward-Looking Guidance
Looking ahead, Tidewater reiterated its full-year revenue guidance of $1.32 billion to $1.38 billion, with a gross margin range of 48% to 50%. While a sequential revenue decline of about 5% is expected in Q2, the company anticipates improved utilization and margins in the latter half of the year. The global market outlook remains positive, particularly in regions like Brazil and the Middle East, despite ongoing challenges in the North Sea and Mexico.
In summary, Tidewater Inc’s earnings call reflected a generally positive sentiment, driven by strong revenue and gross margin performance, record day rates, and a successful share repurchase program. While challenges in certain markets and high expenditures were noted, the company’s forward-looking guidance and market outlook suggest continued resilience and growth potential.