Oceaneering International(US:OII)2020-10-30 01:48Financial Data and Key Metrics Changes - The consolidated adjusted EBITDA for Q3 2020 was $45.1 million, exceeding public consensus and showing improvement compared to Q2 2020 [7][8] - The cash position increased to $359 million at September 30, 2020, up by $25.3 million from June 30, 2020, with $19 million of free cash flow generated [8][17] - Adjusted operating income improved by $5.1 million sequentially from Q2 2020 [8] Business Line Data and Key Metrics Changes - Subsea robotics adjusted operating income declined by $1.3 million on flat revenue compared to Q2 2020, with adjusted EBITDA margin decreasing from 32% to a lower percentage [9] - Manufactured products saw a 10% increase in revenue, with adjusted operating income improving slightly [13] - The aerospace and defense technology segment reported slightly higher sequential adjusted operating results on slightly higher revenue [15] Market Data and Key Metrics Changes - The average number of working floating rigs decreased to 85 in Q3 2020 from 96 in the prior quarter, impacting drill support services [11] - The drill support market share decreased to 57% with ROV contracts on 76 of the 133 floating rigs under contract at the end of September [12] Company Strategy and Development Direction - The company is focused on generating free cash flow and preserving liquidity, with a capital discipline policy in place [28] - A plan was announced to reduce annualized expenses by $125 million to $160 million by the end of 2020, with approximately $100 million of cost reductions initiated [24] - The company anticipates continued headwinds in the oil sector for 2021 but expects consolidated activity levels and EBITDA performance to resemble 2020 [25] Management's Comments on Operating Environment and Future Outlook - Management expects Q4 2020 results to decline sequentially due to lower seasonal offshore activity and customer budget exhaustion [18] - The tone from customers indicates a focus on maintaining production with minimal capital expenditure, particularly in integrity management [56] - Management is optimistic about the potential for free cash flow in 2021, driven by a release from receivables and ongoing cost improvements [42][43] Other Important Information - The company has a backlog of $318 million as of September 30, 2020, down from $380 million at the end of Q2 2020 [13] - Capital expenditures for Q3 2020 totaled $8 million, with a guidance range for full-year capital expenditures narrowed to $50 million to $60 million [17][23] Q&A Session Summary Question: Outlook for subsea robotics and manufactured products - Management expressed confidence in the subsea robotics segment, expecting a gradual recovery without a V-shaped rebound, and noted that manufactured products could stabilize with ongoing smaller projects [33][34] Question: Expectations for free cash flow in 2021 - Management clarified that significant free cash flow expectations for 2021 do not include CARES Act funds, focusing instead on maintaining EBITDA levels and working capital releases [42] Question: Maintenance spending outlook - Management indicated that integrity management spending is expected to remain strong, as companies prioritize cost avoidance and operational integrity [56] Question: Renewable energy segment exposure - Management acknowledged ongoing work in the renewable energy sector, particularly in offshore wind, but noted that it remains a small part of the overall business [70][71] Question: AdTech revenue breakdown - Management confirmed that 100% of the aerospace and defense technology segment is government-related, with a smaller portion attributed to space activities [76] Question: Cost-out program progress - Management indicated that they expect to achieve significant cost reductions by the end of 2020, with ongoing efforts to identify further savings in 2021 [49]