Oceaneering International, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with FY 2021. Oceaneering provides subsea robotics, offshore project services, manufactured products, integrity and digital solutions, and aerospace and defense services. Energy generated $1.723 billion, or about 83%, of 2022 revenue; foreign operations contributed approximately 53% of consolidated revenue.
Financial performance
| Metric | 2022 | 2021 | Change / context |
|---|---|---|---|
| Revenue | $2.066 billion | $1.869 billion | Up 11% |
| Gross margin | $307 million; 15% | $264 million; 14% | Margin improved 1 percentage point |
| Operating income | $111 million; 5% | $40 million; 2% | 2021 included $32 million of charges |
| Net income (loss) | $26 million | $(49) million | Diluted EPS was $0.26 versus $(0.49) |
| Cash from operations | $121 million | $225 million | Lower mainly as receivables, contract assets and inventory consumed cash |
| Capital expenditures | $81 million | $50 million | Higher spending included ROV upgrades and replacements |
| Cash and cash equivalents | $569 million | $538 million | At year-end |
| Debt | $700 million principal | $700 million principal | $400 million due 2024; $300 million due 2028 |
FY 2022 operating cash flow less capital expenditures was approximately $40 million; this is a simple calculation, not a company-defined free-cash-flow measure. Working capital was $729 million. The company reported $215 million of unused commitments under its revolving facility, which was undrawn at year-end and matures in April 2026. It reported compliance with the facility’s covenants.
Segment performance and changes
- Subsea Robotics: Revenue rose 15% to $622 million; operating income increased to $118 million from $77 million. ROV utilization improved to 62% from 58%.
- Offshore Projects Group: Revenue rose 29% to $489 million; operating income increased to $49 million from $31 million, with improved pricing and activity.
- Manufactured Products: Revenue rose 11% to $382 million and operating income was $12 million, versus a $16 million loss in 2021. The prior-year comparison included approximately $30 million of Evergrande-related charges; excluding those charges, 2022 operating results declined, reflecting inflation and weaker theme-park and mobile-robotics results.
- Integrity Management & Digital Solutions: Revenue fell 5% to $230 million; operating income declined to $15 million from $19 million, amid lower activity and wage inflation.
- Aerospace and Defense Technologies: Revenue fell 7% to $343 million; operating income declined to $44 million from $61 million. Management cited lower defense subsea and space-systems activity, including early-year effects of the U.S. government Continuing Resolution.
Total firm backlog was $1.947 billion at year-end, up from $1.699 billion; $641 million was expected to be performed after one year. Backlog is not a guarantee of revenue and may be adjusted or cancelled.
Outlook, risks and unusual items
- Management outlook: The company expected 2023 revenue to increase in each operating segment, led by Subsea Robotics and Manufactured Products, and anticipated sequential improvement in operating results. It expected improved pricing and margins in energy businesses, relatively stable results in IMDS, and higher ADTech revenue and operating results. These are management expectations, not guaranteed outcomes.
- Investment and capital allocation: Planned 2023 capital expenditures were $90 million to $110 million, including $45 million to $50 million for maintenance and $45 million to $60 million for growth. Management cited the 2024 debt maturity as a continuing priority. The company had not declared a quarterly dividend since 2017 and did not anticipate reinstating one.
- Tax and cash matters: Income tax provision was $53 million on $79 million of pretax income; the filing cites geographic earnings mix, valuation allowances and other items. Approximately $20 million of CARES Act-related tax refunds remained receivable, but management did not expect receipt in 2023. A $6 million additional deferred-tax valuation allowance was recorded in 2022.
- Contract and estimate exposures: The company recognized a $5.2 million projected loss on Manufactured Products contracts in 2022. At year-end, it reported approximately $19 million of contract assets on a suspended customer contract and was discussing timing of remaining payments; collection timing was uncertain. Revenue estimates on fixed-price contracts depend on estimated costs to complete.
- Principal risks: Results remain sensitive to offshore oil and gas spending, commodity prices, customer cancellations and backlog conversion, inflation and labor costs, availability and cost of vessels and materials, foreign-exchange and repatriation restrictions, climate and energy-transition policies, offshore operating hazards, government funding, cybersecurity and regulatory changes. Angola cash conversion is controlled by the central bank.
- Other: 2022 operating results had no charges of a similar nature to the 2021 total of $32 million, which included the Evergrande contract termination loss. Routine litigation was disclosed; the company did not expect other matters to have a material adverse effect, while noting outcomes are uncertain. The auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- How 2023 guidance and backlog conversion compare with actual segment revenue, utilization, pricing and margins.
- The refinancing or repayment plan for the $400 million of notes due November 2024, and continued compliance with credit-facility covenants.
- Whether operating cash flow improves as receivables and inventory rise, and whether planned capital spending is funded without weakening liquidity.
- Collection and timing of the suspended-contract balance and remaining tax refunds; assess related customer and tax uncertainty.
- The effect of inflation, wage costs, foreign exchange and energy-transition developments on margins and demand.