Civeo(US:CVEO)2023-07-28 20:36Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were $178.8 million, with GAAP net income of $4.5 million or $0.30 per diluted share [6][60] - Adjusted EBITDA for the quarter was $31.6 million, operating cash flow was $19.4 million, and free cash flow was $12.9 million [6] - On a constant currency basis, revenues decreased by 8%, primarily due to a decline in mobile camp activity and lower billed rooms in Canadian lodges [61] Business Line Data and Key Metrics Changes - Revenues from the Canadian segment were $95.5 million, down from $109 million in Q2 2022, with billed rooms totaling 724,000, down from 771,000 [21][22] - For Australia, revenues increased to $82.5 million from $67.8 million year-over-year, with adjusted EBITDA rising to $19.6 million from $15.5 million [77] - Integrated services revenues were up 33%, driven by new contracts and increased occupancy in owned villages [3][64] Market Data and Key Metrics Changes - Australian billed rooms increased by 16% year-over-year, reaching 588,000 [7] - The average daily rate for Australian villages in U.S. dollars was $75, down from $77 in Q2 2022, primarily due to a weakened Australian dollar [7] - Canadian mobile camp activity is expected to wind down in the second half of the year, contributing to lower lodge occupancy [58][60] Company Strategy and Development Direction - The company is focused on enhancing hospitality offerings, managing costs, and maximizing free cash flow while returning capital to shareholders [65] - An inflation mitigation plan is in place, with expected benefits to be realized in the second half of 2023 [73][74] - The company is in active negotiations to sell the McClelland Lake Lodge assets, with minimal expected net demobilization costs [4][41] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation will remain a focus, despite strides made in mitigating its impact [5] - The company expects to see a material improvement in integrated services margins in the second half of the year [14] - There is cautious optimism regarding labor costs and recruitment efforts, with ongoing challenges in finding labor impacting operations [90] Other Important Information - The company repurchased approximately 212,000 shares for a total cost of about $4.2 million during the quarter [78] - Capital expenditures for Q2 2023 were $6.9 million, up from $5.1 million in the same period last year, primarily for maintenance and activating additional rooms [62] Q&A Session Summary Question: What is the outlook for capital allocation if assets are sold? - Management indicated that comments on capital allocation would remain consistent regardless of asset sales [83] Question: How does the seasonal pattern of EBITDA generation look this year? - The company expects to generate the bulk of EBITDA in Q2 and Q3, similar to historical patterns [84] Question: What is the status of Australian margins and contract rollovers? - Management noted that while margins are expected to improve, the fourth quarter margins may still be lower than the third [85] Question: Are there any updates on labor costs and recruitment efforts? - Management acknowledged ongoing challenges with temporary labor and is cautiously optimistic about contract relief [90] Question: Is there any movement in M&A opportunities in the Australian market? - The company is seeing some asset transactions available in Canada, but nothing significant in Australia at this time [51]