Oceaneering International Inc (OII) 2025 Q3 法說會逐字稿

Welcome to the Oceaneering's third quarter 2025 earnings conference call. My name is Tina, and I will be your conference operator. (Operator Instructions)

With that, I will now turn the call over to Hilary Frisbie, Oceaneering's, senior director of investor relations.

Thanks, Tina. Good morning and welcome to Oceaneering's third quarter 2025 earnings conference call. Today's call is being webcast, and a replay will be available on Oceaneering's website.

Joining us on the call are Rod Larson, President and Chief Executive Officer, who will be providing our prepared comments. Allan Curtis, senior Vice President and Chief Financial Officer, and Mike Sumrell, senior Vice President of finance. After Rod's remarks, we will open the call up for questions.

Before we begin, I would like to remind participants that statements we make during this call regarding our future financial performance, business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the safe harbour provisions of the Private Securities Litigation Reform Act of 1995. Our comments today also include non-GAAP financial measures.

Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter press release, which is posted on our website. I'll now turn the call over to Rod.

Thanks for joining the call today. In the third quarter, we surpassed the high end of our guidance range generating consolidated Adjusted EBITDA $111 million marking our highest quarterly performance since the fourth quarter of 2015. These results were largely driven by the ongoing conversion of higher quality backlog in manufactured products, continued high activity levels, and a favourable project mix in our offshore projects group.

Progression in aerospace and defence technologies or ad tech as they onboard personnel and subcontractors to support large-scale programs and sustained remotely operated vehicle or ROV pricing and performance.

Today I'll focus my comments on our results for the third quarter of 2025, our outlook for the fourth quarter of 2025, our consolidated EBITDA and free cash flow guidance for the full year of 2025, and our initial full year 2026 guidance.

Starting with our third quarter of 2025 consolidated results as compared to the third quarter of 2024, we generated revenue of $743 million representing a 9% increase and operating income rose 21% to $86.5 million. We made meaningful progress in free cash flow, generating $77 million after utilizing $24.2 million for investments in the business.

We continue to return capital to shareholders, repurchasing approximately $10 million worth of our common stock shares, resulting in an ending cash position of $506 million.

Now let's look at our results by business segment for the third quarter of 2025 also compared to the third quarter of 2024.

Subsea robotics, or SSR revenue and operating income, were essentially flat, as was the EBITDA margin of 36%. ROB revenue per day utilized increased to $11,254 from $10,576 offsetting the effects of lower but still solid ROB fleet utilization of 65%.

Fleet use of 63% in drill support and 37% in vessel-based activity was similar to the same period last year. The revenue split between our RV business and our combined tooling and survey businesses as a percentage of our total SSR revenue, was 77% and 23% respectively, consistent with last year.

As of September 30th, 2025, we had 60% of the contracted floating rig market with ROB contracts on 78 of the 131 floating rigs under contract.

We maintained our fleet count of 250 ROV systems during the quarter. We sold a vessel which was underutilized in the survey market. We believe this will yield positive results in our survey business by reducing costs and focusing our efforts on delivering increased efficiencies through the enhanced simultaneous operations capabilities of the ocean intervention two.

Manufactured products operating income of $24.7 million and operating income margin of 16% doubled on a 9% increase in revenue. These results were driven by the continued execution of higher margin backlog through our umbilical manufacturing plants, as well as pricing improvements in our Gray lock and rotator product lines. Order intake during the quarter of $208 million was solid, and our backlog on September 30, 2025, was $568 million. Our book to bill ratio was 0.82 for the trailing 12-month period.

OPG operating income increased 17% to $23.7 million on a 16% increase in revenue with the operating income margin flat at 14%.

These results reflect healthy vessel utilization of the US Gulf and a favourable mix of intervention and installation projects for the quarter.

For integrity management and digital solutions, or IMBS operating income and operating income margin improved on a slight decline in revenue. These results reflect the absence of a one-time non-cash charge associated with the divestiture of our marine maritime intelligence division in the third quarter of 2024.

Ad tech operating income significantly increased by 36% to $16.6 million on a 27% increase in revenue, with operating income margin improving slightly to 13%, driven largely by increasing activity levels associated with contract wins in our defence business.

Unallocated expenses of $46.3 million were in line with our guidance for the quarter.

Turning to our outlook for the fourth quarter of 2025 as compared to the 4th quarter of 2024, we expect revenue to be lower as improvements in a tech and SSR will only partially offset the reduction in international OPG projects. Consolidated EBITDA is projected to be in the range of $80million to $90 million.

By segment for SSR, we anticipate increased revenue and operating income, with even a margin expected to be in the mid to upper 30% range.

Our expectation for improved results is based on continued progression of RV revenue per day utilized and improved utilization in our survey group with projects starting in the fourth quarter in the US Gulf, Europe, and West Africa.

For manufactured products, we expect significantly improved operating income on lower revenue with continued conversion of higher margin backlog and cost reductions associated with our non-energy products.

For OPG, we project revenue and operating income to decrease significantly due to the absence of large scale international intervention and installation projects that favourably impacted the 4th quarter of 2024, lower vessel activity levels in the US Gulf and the project timing.

With respect to our leased vessel fleet, we have one charter in the international market that is expiring during the quarter that we do not intend to renew due to our expectation for seasonally lower activity. And allowing us to better match lease costs to future projects.

Yes, we forecast revenue to decrease and operating income to decrease significantly due to lower activity. For Ad tech, we anticipate significant increases in both revenue and operating income on higher activity levels in our defence business. We project unallocated expenses to be in the $45 million dollar range.

For the full year of 2025, based on our fourth quarter, even of guidance combined with our year-to-date ETA results, we expect to generate adjusted even in the range of $391 million to $401 million. Our strong free cash flow generation in the 3rd quarter gives us confidence to maintain our full year guidance range of $110 million to $130 million.

Now looking forward, I'd like to provide you with our initial outlook for 2026. As we announced yesterday, we are initiating consolidated Ebi guidance in the range of $390 million to $440 million driving similar levels of free cash flow as we expect to generate in 2025.

This is based on our expectations for significant growth in ad tech and stable activity levels across our energy focused businesses. In particular, for SSR, we forecast similar RV utilization levels since 2025. At improved pricing levels, together with increased volume from survey will generate slight increases in revenue and operating income and stable even in margins.

For manufactured products, we project significantly improved operating income and improved operating margins on decreased revenue due to the continued conversion of higher margin backlog as well as improved performance and cost reductions from our non-energy product lines.

For OPG, we expect revenue and operating income to decrease on changes in project mix. While significant opportunities exist, customer schedules have not yet finalized. For IMDS, we forecast increased revenue and operating income.

And for ad tech, revenue and operating income are expected to increase significantly, and operating income margins are expected to be similar to 2025 levels as we execute large scale projects that have been ramping up throughout the year.

Our 2026 forecast is based on the expectation that the government shutdown will be resolved in 2025. We plan to continue share repurchases in 2026 with approximately 5.8 million shares remaining under our existing repurchase authorization. We will provide more detailed guidance for 2026 during the year-end reporting process.

In summary, we continue to see growth opportunities in each of the markets we serve beyond 2025, driven by supported long-term commodity prices, improving visibility into an increasing number of contracted floating rigs in the second half of 2026 and beyond, stability in RV revenue per day utilized.

Our ability to optimize our revenue mix between our customers CapEx and OpEx spend, growth in global defence spending, and increased market demand for our mobile robotics technologies.

Now, before we take questions, I want to take a moment to acknowledge an important milestone. As we previously announced, Allan plans to retire from his role as CFO on January 1st. During his 30 years with Oceaneering and 10 years as CFO, Allan has been more than a financial steward. He's been a trusted adviser, a steady hand, and a thoughtful leader.

His ability to challenge assumptions while remaining open to the perspectives of our employees, customers, investors, and other stakeholders has helped us shape our strategy in meaningful ways. More than that, Allan is a true Oceaneer—embodying our culture of innovation, collaboration, and a relentless commitment to excellence. His steady presence has shaped not only our financial direction but also the way we lead and work together.

Allan, on behalf of all Oceaneers and our Board of Directors, thank you for all you've done for our team and for Oceaneering. We look forward to your continued contributions as you transition to an advisory role.

I'm also happy to introduce Mike Summerall, our Senior Vice President of Finance, who joined the call today. Mike brings deep industry experience, and we look forward to his contributions to Oceaneering's continued growth.

We'll now be happy to take any questions you may have.

(Operator Instructions)

Joshua Jayne, Daniel Energy Partners

Thanks. Good morning. First one for me—just when I think about the business moving forward toward the Ocean Intervention II, I think it was in August, and it was helpful to see the scale and capabilities of the vessel.

One of my takeaways from the upgrades was how you'll ultimately be able to perform simultaneous autonomous survey operations. Maybe you could speak to that a little bit more—the advantages that's going to provide and how we should think about those capabilities and the business moving forward.

Sure. I think, Josh, I mean you saw some of that during the tour, but the main takeaway is being able to do more with less. So you decrease the surface expression, you decrease fuel usage, you decrease personnel on board—so much more efficient, not just from a cost standpoint, but also from a standpoint of being able to do more.

The other thing that isn't necessarily intuitively obvious is that because we're doing these things simultaneously and gathering this data, you're actually cross-checking data. So you're getting data from two different sources at the same time, and you get a better idea early on about your data quality.

So I think all in all, it just provides the customer a more robust solution and gets that data into their hands sooner.

Okay, thanks. And then also, this quarter you announced a significant Subsea Robotics contract with Petrobras—it was $180 million. Could you speak to that market in 2026, how you expect it to hold up versus other geographies, and do you expect your market share in Brazil to increase moving forward for your other energy business lines?

Sure. I would just say, first of all, I was down there about a month ago and got to meet with customers, including Petrobras. And you know, the markets really robust. I mean, they've got some pretty significant plans. They've got Pelotas, which is coming up. They just got approval—I think some of you might have seen it in the news—to drill up north near the mouth of the Amazon, which kind of puts them in that Atlantic margin along with Suriname and Guyana. So, I mean, very exciting stuff up there.

So it is ever forward in Brazil. They're looking really hard at what they have ahead of them, and these are as big opportunities as we've probably ever seen in Brazil. I think market share continues to increase.

My conversations certainly led me to believe—like I would say even more than in the past but coming back recently—their interest in technology is really big. I mean, they are first adopters of a lot of the most interesting things we do.

We've got things like a riser inspection system that will actually fly and do riser inspections, and we've done mooring line inspections on some of the assets. So I think both those things drive them to exploration places, but also, with aging infrastructure, the ability to continue to work in existing fields and exploit those investments they've already made.

So, I just think Brazil's a very exciting market, and we're well positioned there.

Okay, thanks. And then maybe just one more quick one—just on the tech business, which continues to grow from a number of the awards you announced. You highlighted in your 2026 guidance that there's confidence it'll be an increasing portion of your business going forward.

Can you speak to how that business is expected to compete for capital moving forward, and where you ultimately see it as a percentage of your business over the next three to five years?

And then I'll turn it back. Thanks.

Sure. I think the nicest thing about it is that as the business grows, it's really low capital intensity—and that's one of the most exciting things about scaling up that business. It's a lot of engineering know-how. It's a lot of products we build.

It actually allows us to sweat the footprint we already have currently. I've talked a lot about this—people ask about it. We've got this defence business and we've got this energy business.

They're really hard to separate. We do a lot of robotics, a lot of vehicle work, and all of those things happen throughout Oceaneering, right? So some of the things those customers want are really well aligned with our IMDS business, for example. Some of them are really well aligned with the SSR business, obviously.

But I think that's the exciting part — we are able to scale that up significantly without a lot of capital. The other thing that we're starting to see more and more, as you see NATO spending in Korea, you see some of the other areas of the world bearing more of the cost and more of the responsibility for defence.

We're seeing more international opportunities come up as well, and that's everything from things that we've seen in Taiwan, things that we've seen with AUKUS — the Australian, UK, and US submarine build. So it's growing on all fronts. The big, beautiful bill really put a lot of money back in the coffers for this work to go forward.

Yeah, I'll just add one quick comment. We had management meetings last week, and just to see the whole team rallying around this growth aspect of Aptech, and all the people from the energy side of the business — it was just nice to see 80 people sit there and rally around: how can we get there faster?

Thanks, I'll turn it back.

Scott Gruber, Citigroup.

Yes, good morning.

Good morning, Scott.

Morning, wanted to just get some more colour on one of the segments in 4Q of manufactured products. It's been a big source of growth this year, and you mentioned the continued strength on a year-to-year basis in operating income. But on lower revenues, it looks like it's declined — maybe a double-digit decline in revenues. What do you think that means for margins, and kind of what's driving it? Because, Rec, maybe I'll pass that one for us a bit more.

Yeah, give me second here, Scott. I'm looking at.

I don't know if we're applying a double-digit decline in revenue, and I think it's really the quality of earnings where we see the increase in operating income — even for the segment.

So, a lot of the backlog we've been talking about for the last two years, where we received the improved pricing — a lot of that's starting to flow through, as you witnessed this year. There's a good part of that still in backlog that we expect to execute in '26.

At the same time, we've taken some — I'll say — operational excellence focusses this area as well and continue to look at how we can improve our cost structure across the board. I think we're expecting to realize some additional benefit in '26 there. Yes.

Scott, maybe just while they're doing calculations — I mean, we're running the plants. The plants are booked. We've got a great runway for what we did in '25, but through '26 as well. I think Alan's mentioned it before — having good backlog in all three of the umbilical plants. We've got good throughputs. Greylock and Rotator are having some of their best quarters ever.

So, I don't think the revenue thing is meant to imply that we're not going to have a large book of work. I think it's really just a matter of how that timing happens. I would say the sales funnel looks good — we're booking into '27. So, it's just a matter of when those larger projects hit. But I'm not — I'm really — I mean, manufactured products is a good story for next year.

Yeah, oh yeah, I'm just a bit surprised that the revenue would be declining — the potential here in the fourth quarter relative to last year.

So, moving on to the Ad Tech — obviously another great source of growth for you guys. Can you just give us some additional colour on the kind of cadence of Ad Tech growth that's embedded in the 2016 guide?

Yeah.

I would kind of start with, we've been talking through, we're adding additional contractors, subcontractors and personnel for the large-scale project that we announced in Q1.

The team continues to on board those subcontractors and looking at. How we exit '25, I think is a good beginning to how we think we'll start '26, but we expect to still continue to ramp up some of the revenue throughout the remainder of '26 as well. So, we expect good progression year over year.

Really with the new program that we have been awarded and that's.

Just that program because it ramps through '27, but we've got some other things coming on as well, new opportunities, yet to be determined. So there's just a lot of excitement at ad tech, I think, we talked on the previous to Josh as well. There's, it's firing on all three cylinders actually in that business, so. It's hard to, it's hard to really quantify until we get those other pieces booked, but we just talk about that one big project. Alan, Allen hit it well. It'll wrap through '26 and into '27.

Got it. I appreciate all the colours. I'll turn it back. Thank you.

And with no further questions, thank you. I will now turn the call back to Rod Larson for closing remarks.

Well, since there are no more questions, I'd like to wrap up by thanking everyone for joining the call. This concludes our third quarter 2025 conference call. Have a great day.

(Operator Instructions)