Civeo Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Civeo provides workforce lodging, catering and related services to natural-resource customers in Canada, Australia and the U.S. All dollar amounts below are U.S. dollars.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $125.4 million | $138.8 million |
| Operating loss | $9.9 million | $149.1 million |
| Net loss attributable to Civeo common shareholders | $10.0 million ($0.70 per diluted share) | $146.5 million ($10.43 per diluted share) |
| Cash from operating activities | $12.8 million | $20.8 million |
| Capital expenditures | $3.4 million | $2.7 million |
- Revenue declined 10%. Canada fell 22% to $61.9 million; Australia grew 21% to $59.6 million; U.S. revenue declined 62% to $3.9 million.
- Calculated consolidated gross margin was approximately 20.4%, versus 25.6% in Q1 2020. Reported segment gross margins also weakened: Canada 16.2% versus 19.0%; Australia 28.1% versus 39.8%; U.S. negative 28.5% versus positive 8.2%.
- Cash and cash equivalents were $5.5 million at March 31, 2021. Total debt was $238.1 million before unamortized issuance costs; balance-sheet debt, net of those costs, was $235.8 million. Total available liquidity was $112.4 million, including $107.0 million of unused revolving availability.
- Total assets were $710.2 million and total liabilities $346.0 million at quarter-end. The company reported $12.8 million of operating cash flow, $3.3 million of net cash provided by investing activities, and $16.7 million used in financing activities.
Changes and notable items
- The much smaller year-over-year net loss mainly reflects the absence of $144.1 million of Q1 2020 impairment charges: $93.6 million for Canadian goodwill and $38.1 million and $12.4 million for long-lived assets in Canada and the U.S. Q1 2021 had no impairment expense.
- Revenue pressure in Canada reflected lower lodge occupancy amid COVID-19 and reduced food-service activity; increased pipeline-related mobile-asset revenue partly offset the decline. Australian growth included stronger integrated-services activity and favorable currency translation, while higher labor costs weighed on margins.
- Other income was $4.9 million, primarily associated with sale of a Canadian manufacturing facility and mobile assets and $2.8 million of Canada Emergency Wage Subsidy proceeds. The manufacturing facility was sold during the quarter.
- Debt declined from $251.1 million at December 31, 2020 to $238.1 million at quarter-end. The company reported compliance with its debt covenants.
Outlook, risks and contingencies
- Management expected 2021 capital expenditures of approximately $20–$25 million, excluding acquisitions and growth spending contingent on customer contracts. It said planned spending could change with industry conditions, customer commitments and project timing.
- Management believed cash on hand and operating cash flow would meet anticipated liquidity needs for the next 12 months, while noting additional capital might be needed if assumptions change or acquisitions are pursued.
- Demand remains sensitive to commodity prices, customer activity and COVID-19 effects. Management cited subdued Canadian lodge occupancy, public-health restrictions affecting the LNG Canada project, uncertainty from China’s coal trade restrictions on Australia, U.S. shale activity, and Australian hospitality labor shortages.
- All $238.1 million of debt was floating-rate. A 100-basis-point rate increase was estimated to add approximately $2.4 million to annual interest expense. Currency movements also affect reported results; management estimated a hypothetical 10% adverse move in the Canadian and Australian dollars would produce translation losses of approximately $16 million and $28 million, respectively, in other comprehensive loss.
- Credit facilities mature May 30, 2023 and include leverage and interest-coverage covenants. The filing describes various pending or threatened claims but says management does not expect their ultimate liability to materially adversely affect financial position, results or liquidity. No specific earnings guidance was provided.
Key facts for investors to verify
- Whether Canadian lodge occupancy and LNG-related activity recover, and how customer demand responds to commodity prices and COVID-19 restrictions.
- Whether Australian integrated-services growth can offset labor-cost inflation and weaker activity at some villages.
- Execution and funding of the $20–$25 million 2021 capital-expenditure plan, alongside debt repayment and liquidity needs.
- Debt covenant headroom, floating-rate exposure and the May 2023 facility maturity as operating conditions evolve.
- The recurring nature of other income: Q1 included wage-subsidy proceeds and asset-sale-related income; the filing does not establish these as ongoing sources.