Civeo(CVEO) - 2023 Q2 - Quarterly Report

Part I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2023, and 2022, including statements of operations, comprehensive income, balance sheets, changes in shareholders' equity, and cash flows, with detailed notes Unaudited Consolidated Statements of Operations This section details the company's revenues, costs, and expenses, leading to operating income and net income (loss), showing a decrease in Q2 2023 revenues and a net loss for the six-month period compared to the prior year Consolidated Statements of Operations (in Thousands, Except Per Share Amounts) | Financial Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $178,843 | $184,954 | $346,434 | $350,632 | | Operating Income | $10,172 | $14,242 | $6,268 | $18,479 | | Net Income (Loss) | $4,167 | $10,230 | $(2,144) | $12,138 | | Diluted Net Income (Loss) Per Share | $0.30 | $0.54 | $(0.13) | $0.60 | Unaudited Consolidated Statements of Comprehensive Income (Loss) This section reconciles net income (loss) to comprehensive income (loss), primarily showing the impact of foreign currency translation adjustments, with Q2 2023 seeing a significant positive swing due to favorable currency adjustments Consolidated Statements of Comprehensive Income (Loss) (in Thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $4,167 | $10,230 | $(2,144) | $12,138 | | Foreign Currency Translation Adjustment | $2,081 | $(20,024) | $(95) | $(12,012) | | Comprehensive Income (Loss) | $6,248 | $(9,794) | $(2,239) | $126 | Consolidated Balance Sheets This section presents the company's financial position as of June 30, 2023, compared to December 31, 2022, showing a slight decrease in total assets and shareholders' equity while total liabilities remained stable Consolidated Balance Sheet Highlights (in Thousands) | Account | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $175,878 | $153,549 | | Total Assets | $558,962 | $566,184 | | Total Current Liabilities | $102,682 | $128,257 | | Total Liabilities | $263,629 | $262,483 | | Total Shareholders' Equity | $295,333 | $303,701 | Unaudited Consolidated Statements of Changes in Shareholders' Equity This section details the changes in shareholders' equity accounts for the three and six months ended June 30, 2023, primarily driven by a net loss, common share repurchases, and share-based compensation, resulting in a decrease in total shareholders' equity Changes in Shareholders' Equity (in Thousands) | Description | Six Months Ended June 30, 2023 | | :--- | :--- | | Balance, December 31, 2022 | $303,701 | | Net income (loss) | $(2,144) | | Currency translation adjustment | $(95) | | Common shares repurchased | $(7,970) | | Share-based compensation | $2,044 | | Balance, June 30, 2023 | $295,333 | Unaudited Consolidated Statements of Cash Flows This section outlines cash movements from operating, investing, and financing activities for the six months ended June 30, 2023, resulting in a net increase in cash and cash equivalents for the period Consolidated Statements of Cash Flows (in Thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $19,761 | $23,631 | | Net cash flows used in investing activities | $(8,998) | $(5,155) | | Net cash flows used in financing activities | $(6,919) | $(19,894) | | Net change in cash and cash equivalents | $3,467 | $(1,500) | Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations of accounting policies and specific financial statement items, noting changes in reportable segments and future revenue recognition - The company operates in two principal reportable business segments: Canada and Australia, with the U.S. operating segment no longer meeting quantitative thresholds as of Q1 2023[91][236] Disaggregated Revenue by Segment (in Thousands) | Segment | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Canada | $184,923 | $204,975 | | Australia | $159,533 | $131,349 | | Other | $1,978 | $14,308 | | Total Revenues | $346,434 | $350,632 | - As of June 30, 2023, the company expects to recognize $670.5 million in revenue from remaining performance obligations on contracts greater than one year[44][66] - The company repurchased 380,900 common shares for $8.0 million during the six months ended June 30, 2023[111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, emphasizing the influence of commodity prices, inflation, and foreign exchange rates, while maintaining sufficient liquidity for future needs Overview and Macroeconomic Environment The company's business is highly sensitive to commodity prices, particularly oil, metallurgical coal, LNG, and iron ore, facing inflationary cost pressures and the non-renewal of a significant Canadian contract, while Australian operations show strong growth - Demand for services is largely sensitive to expected commodity prices (oil, met coal, LNG, iron ore) and their impact on customer spending[96] - Inflation and supply chain issues have negatively impacted and are expected to continue to impact labor, food, and fuel costs[98] - The land lease and hospitality contract for McClelland Lake Lodge, which generated ~C$60 million in 2022 revenue, expired in mid-2023, with the company actively marketing these assets for new opportunities[101][147] Results of Operations This section compares operating results for the three and six-month periods ending June 30, 2023, and 2022, showing a decrease in consolidated revenues and operating income primarily due to reduced Canadian mobile asset activity and inflationary pressures, partially offset by Australian segment growth Q2 2023 vs Q2 2022 Results (in Thousands) | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $178,843 | $184,954 | $(6,111) | | Operating Income | $10,172 | $14,242 | $(4,070) | | Net Income | $4,463 | $9,568 | $(5,105) | H1 2023 vs H1 2022 Results (in Thousands) | Metric | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $346,434 | $350,632 | $(4,198) | | Operating Income | $6,268 | $18,479 | $(12,211) | | Net (Loss) Income | $(1,890) | $10,978 | $(12,868) | - Canadian segment revenue decreased 12% in Q2 2023, driven by reduced mobile asset activity from pipeline projects and lower lodge occupancy[161] - Australian segment revenue increased 22% in Q2 2023, driven by increased activity at owned villages and integrated services contracts[141] Liquidity and Capital Resources As of June 30, 2023, the company had total available liquidity of $89.0 million, consisting of cash and unused credit facility availability, with management asserting sufficiency to meet anticipated needs for the next 12 months Available Liquidity (in Thousands) | Component | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Unused availability | $77,611 | $96,130 | | Cash and cash equivalents | $11,421 | $7,954 | | Total available liquidity | $89,032 | $104,084 | - Expected capital expenditures for 2023 are in the range of $35 million to $40 million[178][152] - Management believes that cash on hand and cash flow from operations will be sufficient to meet anticipated liquidity needs for the next 12 months[207] Critical Accounting Policies The company confirms that there have been no material changes to the critical accounting policies and estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the judgments, assumptions, and estimates upon which the company's critical accounting estimates are based[186] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies its principal market risks as exposure to changes in interest rates and foreign currency exchange rates, with hypothetical adverse movements potentially impacting interest expense and comprehensive loss - A 100 basis point increase in floating interest rates would increase consolidated annual interest expense by approximately $1.4 million[214] - A hypothetical 10% adverse change in the value of the Canadian and Australian dollar relative to the U.S. dollar would result in translation adjustments of approximately $19 million and $22 million, respectively[215] Item 4. Controls and Procedures Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[216] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[225] Part II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various pending claims and lawsuits arising from its commercial operations, but management believes the ultimate liability will not have a material adverse effect on its financial position, results of operations, or liquidity - The company is party to various pending claims and lawsuits but believes the ultimate liability will not have a material adverse effect on its financial position, operations, or liquidity[218][60] Item 1A. Risk Factors This section refers readers to the detailed discussion of risk factors included in the company's Annual Report on Form 10-K for the year ended December 31, 2022, indicating no material updates in this quarterly report - For information about risk factors, the report refers to the section entitled "Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2022[227] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common share repurchase activity for the second quarter of 2023, under which 212,222 common shares were repurchased for approximately $4.2 million Common Share Purchases (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2023 | — | — | | May 2023 | 97,420 | $20.11 | | June 2023 | 114,802 | $19.45 | | Total | 212,222 | $19.75 | Item 5. Other Information The company reported no other material information for disclosure under this item for the period - None[229] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer pursuant to SEC rules, as well as Inline XBRL documents - Exhibits filed with this report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[38]