Tidewater(US:TDW)2024-08-10 00:20Financial Data and Key Metrics Changes - The company reported net income of $50.4 million or $0.94 per share for Q2 2024, with revenue increasing by 5.6% to $339.2 million compared to Q1 2024 [26][34] - Average day rates increased by 8% from $19,630 per day in Q1 to $21,130 per day in Q2, which was the main driver for the revenue increase [26][34] - Gross margin percentage increased slightly to 47.7% from 47.6% in Q1, with gross margin in Q2 amounting to $161.9 million compared to $152.5 million in Q1 [27][34] Business Line Data and Key Metrics Changes - Day rates improved across all vessel classes and geographic segments, with broad-based improvements indicating robust vessel demand and tight supply [6][34] - The average duration of new contracts entered during Q2 was just under 5 months, the shortest since reporting this figure began [15][34] - The company entered into 21 contracts with a composite leading-edge term contract day rate of $28,754, although the average for the quarter declined by 6% sequentially due to a higher number of smaller vessels coming off long-term contracts [15][34] Market Data and Key Metrics Changes - The Americas and Asia Pacific regions led the day rate improvements, both exceeding 9% [33][34] - The Middle East region saw a slight decline in revenue, contrasting with increases in other regions [33][34] - The company has a contracted backlog of approximately $568 million for the remainder of 2024, with $317 million contracted for Q3 and $251 million for Q4 [17][34] Company Strategy and Development Direction - The company aims to capitalize on a supply-constrained vessel market amid rising demand to push day rates and drive earnings growth [12][34] - There is a focus on acquisitions, particularly in North and South America, but the company remains disciplined in its approach to ensure value accretion for shareholders [11][72] - The company is committed to improving its debt capital structure while maintaining flexibility for capital allocation opportunities [14][72] Management's Comments on Operating Environment and Future Outlook - Management noted that project delays are primarily due to logistics and supply chain issues rather than economic factors, maintaining optimism for 2025 and beyond [37][66] - The company expects a significant uptick in activity in 2025, with a lighter dry dock schedule anticipated compared to 2024 [65][69] - Management remains confident in the long-term demand for offshore vessel support, with expectations of continued improvement in day rates and margins [12][34] Other Important Information - The company repurchased approximately $33 million of shares year-to-date, with a total of nearly $68 million since the buyback program began [10][34] - The company incurred $40.1 million in deferred dry dock costs in Q2, with expectations of $39 million in Q3 and $14 million in Q4 [31][34] - Free cash flow for Q2 was reported at $87.6 million, an increase of $18.2 million from Q1, attributed to strong customer collections [32][34] Q&A Session Summary Question: Outlook for 2025 and beyond - Management indicated that while there are delays in project start-ups, the long-term outlook remains positive, with no anticipated slowdown in 2025 or 2026 [37][66] Question: Leading-edge rates and contract mix - Management confirmed that leading-edge day rates for larger classes of vessels showed strong momentum, despite a mix skewing lower due to smaller vessels recontracting [40][41] Question: Q4 gross margin expectations - Management expects a gross margin exit rate of about 58% in Q4, driven by reduced dry dock costs and increased vessel uptime [42][43] Question: M&A market and capital allocation - Management remains disciplined in pursuing acquisitions, focusing on value accretion, while also considering share repurchases as a use of free cash flow [72][73]