Oceaneering International(OII) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - The company generated $153 million in cash from operating activities in Q4 2023, with free cash flow of $119 million after $34 million in capital expenditures [2] - Consolidated 2023 operating income improved by $70.5 million to $181 million, and adjusted EBITDA increased by $56.4 million to $289 million [7] - The company retired $400 million of 2024 notes and issued a $200 million add-on to its 2028 debt, reducing long-term debt from $700 million in 2022 to $500 million in 2023 [2][10] - Cash balance at the end of 2023 was $462 million, with the nearest debt maturity of $500 million in February 2028 [2][10] Business Segment Performance - SSR segment saw a 32% EBITDA margin in Q4 2023, up from 31% in Q3 2023, driven by improved ROV pricing [3] - Manufactured products revenue increased by 8% in Q4 2023 to $133 million, but operating income margin declined to 4% due to project mix changes and startup costs [5] - ADTech segment operating income margin declined to 12% in Q4 2023 due to project mix changes [6] - OPG segment revenue improved in Q4 2023, but operating income margin declined to 9% from 18% in Q3 2023 due to project mix and pricing changes [82] Market and Industry Outlook - The company expects positive free cash flow of $110 million to $150 million and EBITDA of $330 million to $380 million in 2024 [1] - The autonomous forklift market is projected to grow by over 10% year-over-year, with the mobile robotics industry expected to grow by over 20% by 2030 [12] - The company anticipates improved pricing and margins in energy-focused businesses and stable pricing in government-focused businesses in 2024 [13] Strategic Direction and Competition - The company is focusing on leveraging its digital and robotics expertise to improve efficiency and reduce carbon emissions [11] - It acquired an uncrewed surface vessel (USV) to enhance its survey capabilities and saw a 266% increase in orders for its MaxMover autonomous forklift in 2023 [8] - The company secured a five-year contract with Petrobras for DPR systems, strengthening its presence in Brazil [85] Management Commentary on Operating Environment and Future Prospects - Management expects government-related markets to remain stable with modest growth, while offshore renewables and greenhouse gas reduction initiatives present growth opportunities [12] - The company anticipates improved ROV pricing, with potential to reach $11,000 per day by the end of 2024 [33][109] - Management highlighted the importance of operational efficiency and cost absorption in improving margins for manufactured products [110] Other Important Information - The company achieved 99% uptime in its SSR drill support ROV operations in 2023 and successfully completed its first commercial project using the Freedom hybrid ROV/AUV [67] - The ADTech segment secured contracts for space systems and defense technologies, including submarine rescue systems and ROVs [68] - The company published its 2022 Scope 1 and Scope 2 emissions report and established greenhouse gas reduction targets as part of its sustainability initiatives [70] Q&A Session Summary Question: ROV Pricing Trends - Management expects ROV pricing to continue improving, potentially reaching close to $11,000 per day by the end of 2024, depending on work mix and regional margins [33][109] Question: Autonomous Forklift Market Growth - The company anticipates 10% growth in the autonomous forklift market in 2024, with orders for 205 forklifts in 2023, a 266% increase over 2022 [8][37] Question: Manufactured Products Backlog and Margins - The company expects manufactured products revenue to remain flat in 2024, with margins improving in 2025 and 2026 as new strategies are implemented [110][95] Question: Shareholder Returns - Management is considering a share repurchase program in Q2 2024, pending board approval [26][40] Question: Manufactured Products Order Trends - The company expects manufactured products orders to remain at 2023 levels or slightly higher, with a focus on improving margins in the energy business [113][95]