Tidewater Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial amounts below are in U.S. dollars; millions are used unless otherwise noted. Comparisons are primarily with Q1 2023, except where identified as sequential. Tidewater operates offshore support vessels for the energy industry. The quarter includes the 37-vessel Solstad Acquisition, completed in July 2023, so year-over-year results are not directly comparable.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Total revenue | $321.2 million | $193.1 million | Up 66%; includes post-acquisition Solstad operations |
| Operating income | $81.9 million | $24.5 million | Operating margin 25.5%, versus 12.7% |
| Net income attributable to Tidewater | $47.0 million | $10.7 million | Diluted EPS $0.89 versus $0.21 |
| Operating cash flow | $54.8 million | $12.8 million | Includes $40.0 million of cash paid for deferred drydocking and survey costs |
| Investing cash flow | $1.5 million provided | $2.9 million used | Q1 2024 included $12.5 million of vessel-sale proceeds and $10.9 million of property and equipment additions |
| Financing cash flow | $44.6 million used | $5.2 million used | Included $12.5 million of debt principal payments, $3.5 million of repurchases and $28.5 million in taxes paid on share-based awards |
| Cash, cash equivalents and restricted cash | $289.7 million | $172.7 million | At March 31, 2024; includes restricted cash |
| Debt | $723.3 million | Not stated here as a comparable Q1 2023 figure | At March 31, 2024; $103.0 million due within 12 months |
| Working capital | $276.4 million | Not stated | At March 31, 2024 |
Performance and changes
- Revenue growth reflected the larger fleet following the Solstad Acquisition and higher vessel day rates. Versus Q1 2023, vessel revenue rose to $318.7 million from $191.2 million.
- Operating income benefited from higher revenue and a $11.0 million net gain on vessel dispositions, compared with a $2.2 million gain in Q1 2023. Tidewater sold three vessels in Q1 2024 for $12.5 million in proceeds.
- Vessel operating costs increased to $167.6 million from $115.5 million; depreciation and amortization increased to $56.3 million from $30.7 million. Interest and other debt costs rose to $19.5 million from $4.2 million, reflecting the company’s higher debt following the acquisition.
- Consolidated utilization was 81.5%, unchanged sequentially from Q4 2023; active utilization was 82.3%. Average vessel day rates rose 8.3% sequentially to $19,563. Management said the fleet was close to full utilization and day rates had increased in recent quarters.
- By segment, West Africa had the largest Q1 2024 vessel operating profit at $41.0 million, up 50% sequentially. The Middle East segment reported $1.5 million, down 27% sequentially; Americas profit fell 37% sequentially to $10.1 million.
Liquidity, debt and capital allocation
- Debt at quarter-end included a $300.0 million senior secured term loan, $250.0 million of 10.375% senior unsecured notes due July 2028, $175.0 million of 8.50% secured notes due November 2026, and supplier facility agreements. The $25.0 million revolving credit facility was undrawn.
- Cash and cash equivalents on the balance sheet were $280.9 million; restricted cash was $6.5 million current, with an additional $2.3 million of long-term restricted cash. Management said the majority of foreign-subsidiary cash was available without adverse tax consequences, while some funds awaited repatriation due to currency, partner and tax constraints.
- The company paid $15.6 million of interest in Q1 2024, compared with $0.1 million in Q1 2023. It made $12.5 million of principal payments during the quarter. Management stated that it expects cash and future operating cash flow to fund obligations and liquidity needs.
- Tidewater reported compliance with applicable debt covenants and expects ongoing compliance. Covenants include minimum liquidity and equity tests; certain debt also requires an interest coverage ratio of at least 2:1.
- A February 2024 authorization permits up to $48.6 million of repurchases, subject to financing-agreement limits. The company repurchased 38,831 shares for approximately $3.5 million in Q1. No dividends were declared.
Outlook, risks and notable items
- No numerical financial guidance was provided. Management expects offshore oil and gas market supply-demand conditions to remain favorable, citing resilient offshore investment, a constrained supply of support vessels and continued demand for hydrocarbons. Management also cautioned that energy prices and industry conditions remain volatile.
- Key risks include changes in oil and gas prices and customer spending, vessel utilization and day rates, operating and drydock costs, debt and covenant obligations, foreign exchange movements, political and regulatory conditions in international markets, and cybersecurity, environmental and legal exposures.
- The $11.0 million vessel-disposition gain boosted reported operating income and may not recur at the same level. The allowance for credit losses declined from $15.9 million to $3.7 million after a $10.9 million write-off of the remaining balance due from a Nigerian joint venture.
- Management reported no material change in risk factors from the 2023 Form 10-K, no material change in internal control over financial reporting during the quarter, and effective disclosure controls as of March 31, 2024. The company does not expect ordinary-course legal proceedings to have a material adverse effect.
Important facts for investors to verify
- How much of revenue and cash generation is attributable to the Solstad vessels, and whether the acquisition’s operating performance meets management’s expectations.
- Whether higher day rates and utilization can offset vessel operating, drydocking, interest and other costs; monitor segment-level utilization and margins.
- The timing and funding of the $103.0 million of debt due within 12 months, future principal payments, interest expense and ongoing covenant compliance.
- The sustainability of operating cash flow after drydocking needs and the extent to which results rely on vessel-sale gains.
- Further share repurchases under the $48.6 million authorization and any effect on liquidity, leverage or future capital needs.