Tidewater Inc (NYSE:TDW) reported first quarter revenue and gross margin significantly above expectations, with both day rate and utilization outperforming.
Sequential improvement in performance noted, with the first quarter exceeding the fourth quarter, and the fourth quarter exceeding the third.
Day rate momentum was broad-based across all vessel classes, particularly in large class anchor handlers, with a notable 27% increase.
Tidewater Inc (NYSE:TDW) repurchased $3.5 million of shares on the open market during the quarter, and an additional $12.5 million subsequent to the quarter end, demonstrating strong capital return to shareholders.
The company remains optimistic about the continued pace of offshore activity acceleration due to constructive leading indicators observed in the first quarter.
Negative Points
Despite overall positive results, the company acknowledges the presence of seasonality which still impacts certain operating regions.
The supply of large anchor handlers is persistently tight, which could pose challenges if demand increases unexpectedly.
Tidewater Inc (NYSE:TDW) continues to pursue acquisitions but notes that share repurchases have been the most value-added use of capital, suggesting potential challenges in finding suitable acquisition targets.
The company's debt capital structure is being evaluated for potential restructuring to better suit the cyclical nature of the business, indicating current limitations.
There was an increase in vessel operating costs due to higher crew costs and dry-dock amortization, which could impact profitability if not managed effectively.
Q & A Highlights
Q: Good morning, gents. Some impressive results given the normal seasonal factors you've highlighted and Quinn, on the when you look at your leading edge contract rates, obviously they keep moving up last two quarters, kind of the rate of improvement had slowed, which I guess seasonally is probably pretty typical. But the way things are kind of setting up to pickup over the balance of the year, especially during the busy season. I'm curious your view on how we should think about the kind of rate of change of leading edge rates, given what activities doing just the seasonality impact, et cetera? A: Hey, Jim, thanks. You experienced it is somewhat muted as we go through Q4 and Q1 because those are just the weakest periods of the year. Globally. And so it doesn't surprise me that the rate of acceleration has leveled off a little bit as we went through the last two quarters. It's always hard to know it but in general, and we saw this last year before, I anticipate that we'll see a ramp up in Q2 and Q3. Certainly there probably is a limit to what that number goes to over time. It's certainly grown substantially over the past eight to 10 quarters, but I would look for more meaningful increases as we go through Q2 and Q3. And what we've been seeing at this pace last couple of years is it started out about $3,000 a year improvement in overall day rates than the movement up to for now is kind of on pace for five, right? So it has been accelerating about a $1,000 a year on average over the last two, three years. And it wouldn't surprise me to see that in 24 and into 25 as well.
Q: Got it. That's helpful. And as a follow-up, Piers, you kind of went through what's going on geographically and we obviously hear similar things in some of the different regions. I'm curious, as you look out over the next two or three years, where do you anticipate the biggest growth regions to come from at this point, I think come it's not much different from what we sort of say. A: I think all the areas are looking very positive. Um, I think Asia Pacific looks some like it will be strong going forward. We tend to see the NOCs in that region have been a little bit slower to pick up, but they're starting to talk about that. So I think that's one area. Obviously, Brazil has continued to be or some has been strong and Petrobras continues to I'm putting out, Tom, but that number is looking at 2030. So that looks like it will continue to be a strong area as well. I think it's all positive. So those are the sort of two standout areas and Africa continues to look very positive as well than Southern Africa in particular as well. There's a lot of work going on down there as well. So there's no bad spots at the moment is how I would leave it briefly here.
Q: Appreciate the color. Thanks. A: Thank you.
Q: Well, I want to touch upon two a theme starting with capital allocation and the capital structure. You've talked about getting a more streamlined debt structure and in my head that would typically entail that you're grouping all your current facilities together maybe for a larger, more long-dated bond. Is that something that has changed or that you're your own thinking around how an ultimate cap structure would look like has changed? A: Thanks for the question. Good to hear from you. I'm going to kick it over to West as you've been doing a lot of strategy thinking for us from a book from a capital structure perspective. But one of the things that we're certainly focused on is creating a debt capital structure that's consistent with the needs of our business. So so I just wanted to update them on the current thinking on.
Q: Yes, sure. Hey, Frederic, good morning or good afternoon to you. I appreciate the question. So I guess the way we're thinking about it today is, you know, certainly the cap that capital structure today is, you know, has been kind of piece together here over the past two years through refinancings and the acquisition and what we'd like to get to is a more appropriate debt capital structure for the cyclical business that we're in. So we're in a position today where we feel we have the flexibility to be opportunistic in evaluating ways to shape the capital structure going forward on based on what we can observe in the market, the debt capital markets, both here in the U.S. as well as in your home market appear to be relatively constructive on. A: We aren't facing any near-term maturities or anything of that nature. So we want to be thoughtful and judicious about how we approach that. But we do believe that we are approaching that time where it makes sense to give some real thought to it sort of the ultimate shape and complexion of that capital structure of our debt capital structure I still think remains to be seen, but it is an environment which we feel is supportive to our efforts to begin to evaluate that.
Q: And that's that's very helpful color. And on the back of that, I think you alluded to in your prepared remarks, and one of the ultimate goals here is to have more flexibility around how you spend the cash that you are generating and is going to generate at least on my numbers, but I see that you didn't during Q1 fully utilize the share repurchase agreement you accelerated a bit now in the second quarter, but I was wondering if you will, I think now that the share price has actually approached $100 per share. That's one of the regions where you would think that you would switch to As to dividends, for example, instead of doing share buybacks. So is how you have done any thinking around and how you would allocate capital between dividends and share repurchases under the baskets that you're allowed to use currently? A: Yes, I don't want to give anybody any indications of what we think our intrinsic value is, but it's certainly higher than where we're currently trading today. And obviously, we're very optimistic about the outlook is based on just the EBITDA growth and the cash flow generation of the business. But you're right, yes, there's a there's a point when the value that you see from repurchasing shares is limited. But I also see the potential for acquisitions. So you are right now and more focused on repurchases because those have been more value than acquisitions. However, acquisitions may become more attractive as we go through the next several quarters, and we'll maintain a focus on all of those things. So I would say if I had my druthers, I would still focus on value added acquisitions, but there's going to be so much
