Civeo(US:CVEO)2022-10-28 23:39Financial Data and Key Metrics Changes - Civeo Corporation reported total revenues of $184.2 million for Q3 2022, with a GAAP net income of $5.2 million, or $0.32 per diluted share, and adjusted EBITDA of $35 million [14][6] - Year-over-year revenues increased by 19%, and adjusted EBITDA rose by 34%, driven by increased activity across all three geographic segments [6][7] - Free cash flow generated in the quarter was $38.6 million, leading to a reduction in net leverage to below 1.0 times [7][8] Business Line Data and Key Metrics Changes - In Canada, revenues increased to $103 million from $84.1 million year-over-year, with adjusted EBITDA rising to $25.6 million from $19.8 million [16] - Australian segment revenues were $73.8 million, up from $65.1 million, with adjusted EBITDA increasing to $16.9 million from $14.8 million [19] - U.S. revenues rose to $7.4 million from $5.9 million, with adjusted EBITDA loss improving to $33,000 from a loss of $544,000 [21] Market Data and Key Metrics Changes - Canadian billed rooms totaled 731,000, up 19% year-over-year, while Australian billed rooms were 525,000, up 7% from the previous year [18][20] - The Canadian dollar's weakness against the U.S. dollar negatively impacted revenues and adjusted EBITDA by $3.7 million and $0.9 million, respectively [17] - The Australian dollar's weakness also affected results, decreasing revenue and adjusted EBITDA by $5.5 million and $1.3 million, respectively [19] Company Strategy and Development Direction - The company is focused on deleveraging and has reduced net leverage to 0.9 times, providing flexibility to weather market volatility and evaluate capital deployment opportunities [8][22] - Civeo plans to prioritize safety, manage costs according to market outlook, enhance hospitality offerings, and seek revenue diversification through organic growth and M&A opportunities [34][33] - The company expects Canadian mobile camp activity to decline as pipeline construction winds down, impacting profitability [26][31] Management's Comments on Operating Environment and Future Outlook - Management noted that customer capital spending drives occupancy, and while commodity prices remain constructive, customers are focused on cash flow generation and capital discipline [30][49] - The outlook for 2023 indicates flat occupancy in Canadian lodges with modest upside, while Australia may see a modest increase in occupancy due to expansionary activities [31][32] - Management expressed cautious optimism regarding the Australian integrated services business, despite expecting margin compression due to labor shortages and inflation [32][30] Other Important Information - The company has renewed its share repurchase authorization to buy back up to 5% of its total common shares outstanding over the next 12 months [9] - Capital expenditures for Q3 2022 were $8.8 million, primarily related to maintenance spending [22] Q&A Session Summary Question: Margin degradation in the fourth quarter - Management indicated that the biggest margin degradation would be in Canada due to significant downturns in occupancy and increased utility costs [37] Question: Timing of demobilization costs - Management stated it is too early to determine when demobilization costs will occur in 2023, but they expect continued activity into the year [38] Question: Managing cost pressures - Management discussed leveraging multiyear contracts with annual inflation adjustments and operational efficiencies to manage cost pressures [39][40] Question: Revenue decline in mobile camps - Management noted that the decline in mobile camp revenue is due to holiday downtime and overall oil sands activity downturn in Q4 [44] Question: Capital allocation and growth opportunities - Management emphasized a balanced approach to capital allocation, focusing on stock buybacks and growth opportunities while maintaining a strong balance sheet [52]