Bristow Group Inc (VTOL) 2019 Q3 法說會逐字稿

Good day and welcome to the Era Group Reports Q3 2019 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Crystal Gordon, SVP and General Counsel. Please go ahead.

Thank you, Casey, and good morning, everyone. Welcome to Era's third quarter 2019 earnings call. I am here today with our President and CEO, Chris Bradshaw; our Senior Vice President and CFO, Jennifer Whalen; and our Senior Vice President, Grant Newman; Stuart Stavley; and Paul White as well as our Corporate Controller, Tricia Schroeder; and our Finance Director, Seema Parekh.

You may access our recent earnings press release and presentation slides on our website, erahelicopters.com.

Let me remind everyone that during the call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on Slide 3 of the earnings presentation.

I'll now turn the call over to our President and CEO. Chris?

Thank you, Crystal, and welcome to the call, everyone. As always, I will begin our prepared remarks with a note on safety, which is Era's most important core value and our highest operational priority. We are pleased to report that Era achieved our dual goals of 0 air accidents and 0 recordable workplace incidents year-to-date 2019. The company has not experienced an air accident in the last 3 years, and we have now gone over 770 consecutive days without a recordable workplace incident. I want to thank and commend all of the hard-working Era team members for their focus and dedication to achieve this world-class safety performance.

Turning to an update on our financial position. We have continued to strengthen Era's already strong balance sheet and industry-leading financial flexibility. As of quarter end, Era's total liquidity was approximately $232 million including $108 million of cash on hand. Our net debt balance was just $55 million, which is an 80% reduction from when the industry downturn began in late 2014.

During Q3 2019, we generated approximately $17 million of free cash flow, increasing Era's year-to-date free cash flow total to $24 million.

With a strong balance sheet, limited near-term debt maturities, manageable fixed charge obligations and a flexible order book, Era remains well positioned for positive free cash flow generation.

I will now turn it over to our CFO for a review of Q3 financial results. Jennifer?

Thank you, Chris. EBITDA adjusted to exclude asset dispositions and special items was $9.5 million for the third quarter of 2019 compared to $8 million in the second quarter of 2019. Contributing to this $1.5 million increase in EBITDA was a $3.4 million increase in revenues due to higher utilization of helicopters in our U.S. oil and gas business.

Operating expenses were higher by $0.7 million due to increased personnel, insurance and fuel costs, partially offset by lower repairs and maintenance expenses.

EBITDA in Q3 was negatively impacted by foreign currency losses of $0.7 million due to the strengthening of the U.S. dollar relative to the Brazilian real.

Moving on to the third quarter of 2019 compared to the third quarter 2018 results. EBITDA adjusted to exclude asset dispositions and special items was higher by $0.2 million. The increase in EBITDA resulted from higher revenues of $4.3 million primarily due to higher utilization in oil and gas operations and new contracts in our dry-leasing and emergency response service lines.

Operating expenses were $3 million higher primarily due to increased repairs and maintenance and personnel costs.

Foreign currency losses were $0.6 million higher due to the strengthening of U.S. dollar relative to the Brazilian real.

Finally, cash flow provided by operating activities was $10 million in the current quarter, further enhancing the company's liquidity position and financial flexibility.

At this time, I'll turn the call back over to Chris for further remarks. Chris?

Thank you, Jennifer. Q3 2019 represented Era's highest quarterly revenue generation in the last 2 years and the highest quarterly adjusted EBITDA results since Q1 of 2018. These improved financial results were driven by increased activity levels in each of our service lines including a 9% sequential quarter increase in U.S. Gulf of Mexico revenues.

With that, let's open the line for questions. Casey?

(Operator Instructions)

And our first question comes from Bill Mastoris with Baird.

Chris, mentioning the increased activity levels, but what seems to be a stalling of energy prices with the exception of maybe natural gas, do you see maybe a pipeline of new contracts that might be up for bid? Or should we expect that activity levels are going to remain relatively flat now, but at elevated levels versus this time last year? That's the first question.

Bill, I think we felt for a while that the offshore oil and gas market recovery was underway, but that recovery would be a gradual one, and I think what we see in our Q3 results is consistent with that. We did see an increase in utilization and driving incremental improvements in revenues and EBITDA. And based upon the information that's available to us today, we believe that a consistent level of customer activity is likely to exist, particularly in the U.S. Gulf of Mexico in Q4 of this year and into 2020.

And Chris, are there any new contracts that are coming up for bid?

In our markets, there are always new tenders that we are evaluating. Some are shorter-term in nature, and they may last for 2 or 3 months at a time depending upon the number of wells that the exploration program is addressing. So we do have contracts, and at any given period, we typically have some shorter-term contracts that are coming to an end and others that are beginning. But I think what we're seeing is that the cadence of those projects across the customer base is improving off the levels of the downturn, but that improvement is really a gradual one. Nothing dramatic in terms of increased customer activity.

Okay. So even though it's gradual, where do you kind of sit in some of your thoughts for maybe taking any new aircraft deliveries? I know that in the past, you've mentioned that you're going to address it when it comes up. But are we at the level now where this involves some serious consideration? Or where exactly are we right now?

So we're pleased with the optionality that we negotiated with our long-term partners at the OEMs. I think that if we had to make all the decisions tomorrow in a hypothetical scenario, we would probably not take new aircraft today based upon the information that's available. That being said, we do have the option. We negotiated that to bring in additional aircraft, should market opportunities present themselves, but we're not there as of today.

Okay. And then my final question just has to do with, as you indicated, you're flush with liquidity, any thoughts now on maybe debt repurchases and maybe going ahead and getting maybe even a little bit more defensive until maybe the market recovers and where you can take advantage of what opportunities might be out there? So it is kind of a retrenchment question a little bit, but is that actually on the docket?

Good question. I think we believe that our strong balance sheet, including the cash balance and the financial flexibility we have, give us multiple opportunities to drive value creation for shareholders. In the past, we have purchased a good portion of the senior unsecured notes that are due in 2022. In fact, we bought back about 25% of the original issue amount to get the current balance below $145 million. That's something we'll continue to evaluate. We've also at times repurchased shares. So far this year, we repurchased about 5% of our previously outstanding unrestricted shares. We'll continue to evaluate share repurchases on an opportunistic basis. We also believe that in the context of the potential for industry consolidation, a strong balance sheet, a cash balance and that financial flexibility could be an asset in helping to effect that consolidation. So really all of those opportunities remain on the table, and I think we will take an opportunistic approach in evaluating how we deploy our capital going forward.

(Operator Instructions) At this time, I'm showing no further questions in the queue.

Great. Thank you, Casey, and thank you, everyone, for joining. We look forward to speaking again next quarter.

Mr. Bradshaw?

Yes.

I do have one more question here from HJ Lee with International Value Advisers, sir.

Okay.

Could you discuss a little bit about the EC135 disposals during the quarter?

Sure. We did sell 3 EC135s during the quarter. This is consistent with our longstanding strategy of evaluating secondary market sales as part of the portfolio options that we have. So in general, any aircraft that becomes available, we will evaluate 1 of 3 options: First, the cash flows that we can project operating it for our own end customer; second, what cash flows we might earn from leasing it out to another operator; and third, the cash that can be realized today from sales to the secondary market. And generally speaking, we'll take the highest net present value alternative of those 3 options. In this case of these 3 EC135s, we felt that the cash proceeds that came in from the purchase offer were the best return potential for those aircraft, so we sold them and we think that capital could be better redeployed elsewhere.

Who was the type of the buyer?

We actually sold these into a financial company that is placing them into the air medical industry.

Ladies and gentlemen, at this time, this concludes today's question-and-answer session. I will now turn it back to Mr. Bradshaw for closing remarks.

Great. Thanks, again, Casey. Thanks for your time, everyone. Be safe. We'll talk again next quarter.

Ladies and gentlemen, this concludes today's teleconference, and you may now disconnect.