Oceaneering International (OII) Q3 Earnings call transcript Oct 24, 2024

Oceaneering International, Inc., a leading global provider of engineered services and products primarily to the oil and gas industry, recently held its third quarter 2024 earnings call. The call, led by CEO Roderick Larson and CFO Alan Curtis, highlighted the company's financial performance and provided insights into its future outlook. In this article, we will analyze the key themes and trends that emerged from the call.

Financial Performance and Guidance

Oceaneering reported a net income of $41.2 million or $0.40 per share on revenue of $680 million for the third quarter of 2024. Adjusted net income stood at $37.2 million or $0.36 per share. The company's adjusted EBITDA was $98.1 million, in line with its guidance and consensus estimates. Free cash flow for the quarter was $67 million, and the company repurchased 422,229 shares for approximately $10 million.

For the full year of 2024, Oceaneering expects to generate adjusted EBITDA within the revised range of $340 million to $350 million. Free cash flow guidance remains unchanged in the range of $110 million to $150 million. Looking ahead to 2025, the company has initiated EBITDA guidance in the range of $400 million to $430 million, representing a 20% increase over the midpoint of its 2024 adjusted EBITDA guidance.

Business Segment Performance

The third quarter of 2024 saw significant improvements in Oceaneering's Subsea Robotics (SSR) and Manufactured Products segments. SSR operating income was 37% higher on a 9% increase in revenue, with operating income margins expanding by 623 basis points. EBITDA margin improved to 36% from 31% due to factors such as improved ROV pricing and execution, performance improvements in tooling and survey groups, and ongoing cost control measures.

The Manufactured Products segment also showed strong performance, with operating income increasing by 37% on a 17% increase in revenue. Order intake during the quarter was solid, and the backlog on September 30, 2024, was $671 million, an increase of $115 million over the third quarter of 2023.

Strategic Initiatives and Outlook

Oceaneering is focusing on several strategic initiatives to drive growth and improve operational efficiency. These include the outsourcing of manufacturing operations for its MaxMovers counterbalance forklifts, which is expected to improve margins as volume increases and the razor-razor blade business model takes effect. The company is also investing in automation and digital solutions to enhance its capabilities in the defense industry, particularly in the area of autonomous underwater vehicles (AUVs).

Looking ahead, Oceaneering expects to see increased revenue and improved operating income across all operating segments, led by notable gains in SSR, manufactured products, and ADTech. The company is also focusing on international expansion, particularly in the area of intervention and installation projects, and the implementation of a new ERP system to improve operational efficiency.

Conclusion

Oceaneering's third quarter 2024 earnings call provided a comprehensive overview of the company's financial performance and strategic direction. Despite facing challenges such as hurricanes and the divestiture of its Maritime Intelligence business, Oceaneering has managed to deliver strong financial results and maintain a positive outlook for the future. With a focus on organic and inorganic growth, operational efficiency, and strategic investments in digital solutions and automation, Oceaneering is well-positioned to capitalize on opportunities in the oil and gas industry and beyond.