Bristow Group Inc (VTOL) 2021 Q2 法說會逐字稿

Good day, and welcome to the Bristow Group Reports Fiscal Quarter 2 2021 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Senior Vice President, General Counsel, Crystal Gordon. Please go ahead, ma'am.

Thank you, Connor, and good morning, everyone. Welcome to Bristow Group's Second Quarter Fiscal Year 2021 Earnings Call.

I'm joined on the phone today with our President and Chief Executive Officer, Chris Bradshaw; and Senior Vice President, Chief Financial Officer, Jennifer Whalen.

Let me remind everyone, 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 our investor presentation. You may access our investor presentation on our website. We will also reference certain non-GAAP financial measures, such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release in investor slides.

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 Bristow's most important core value and our highest operational priority.

Despite the numerous potential distractions, we have achieved our target of 0 air accidents thus far in FY '21. I want to thank all of our Bristow team members for their continued devotion to play safety-first. We remain committed to achieving the highest safety standards to ensure that all of our customers and employees return home safely every day.

On the financial front, Bristow generated a substantial amount of free cash flow in Q2, which further increased our robust cash balance to more than $300 million, with total liquidity of almost $360 million by quarter end. The company's financial strength facilitated the return of capital to shareholders as we repurchased approximately 1% of the previously outstanding shares at an average price of $21.93 per share in the month of September.

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

Thank you, Chris. As a reminder, the close of the merger was on June 11 and due to the fact that Bristow was the accounting acquirer in the transaction, the previous quarter only includes 19 days of operating results from Legacy Era Group Inc. compared to a full quarter in the current quarter results. Prior periods only include operating results of Legacy Bristow Group Inc.

Please note that the accounting for the merger as well as the impact of fresh start accounting following Legacy Bristow's Chapter 11 restructuring process will impact the comparability of financial results for the next few quarters.

To help with the comparability of the periods presented, I will focus on the pro forma results as if Legacy Bristow and Era will emerge for the entirety of the periods presented.

With that reminder, I will now turn to a sequential quarter comparison of Bristow's pro forma financial results. Revenues decreased $1 million primarily due to lower utilization in oil and gas services partially offset by increased activity in fixing services and U.K. SAR. Operating expenses were $15 million higher due to increased severance and fuel costs.

General and administrative expenses were $29 million lower due to the absence of merger closing costs and lower salary expenses. Please note that severance and merger closing costs are considered special items and are excluded from adjusted EBITDA. As such, pro forma EBITDA adjusted to exclude special items and asset dispositions was $54 million for the second quarter of fiscal year 2021 compared to $48 million in the first quarter or an increase of $6 million. This increase was primarily due to foreign currency gains in the current quarter.

Moving on to the pro forma current year quarter versus prior year quarter analysis, pro forma EBITDA adjusted for special items and asset dispositions was $54 million for the current quarter versus $39 million. The primary driver for the increase in pro forma EBITDA is foreign currency gains in the current quarter compared with losses in the prior year quarter. Revenues decreased $68 million primarily due to lower utilization in oil and gas and fixing services.

Operating expenses were $44 million lower due to decreased activity and lower lease costs due to aircraft lease reductions in Chapter 11 cases and the absence of lease return out. General and administrative expenses were $3 million lower primarily due to lower salary expense.

Finally, we generated adjusted free cash flow, excluding net CapEx of $57 million for the quarter. In addition, we generated $41 million in proceeds from the sale of helicopters during the quarter.

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

Thank you, Jennifer. Looking forward, we expect challenging conditions in the offshore oil and gas industry to persist for the next year or so. We also want to advise investors that the next fiscal quarter comes at a time when activity levels may decline, and we are not yet benefiting from the full run rate impact from the merger synergies and other cost-saving initiatives. However, it has always been our strategy to maintain a business model that is viable and generates positive cash flow regardless of the commodity price environment. We will continue to accomplish that objective by employing a dynamic approach to managing our cost structure, continually looking for opportunities to realize efficiencies.

As part of this, we will maximize the utilization of our owned aircraft fleet and return leased aircraft at their schedule lease maturity dates. These lease returns will further support positive cash flow generation for the company.

The synergies identified as part of the Bristow-Era merger will further enhance the efficiency of our cost structure. As you may recall, we increased the amount of identified synergies to at least $45 million of annualized run rate cost savings, which is $10 million higher than the original total. As of October 30, synergy projects representing over $20 million of annualized savings have already been completed. We expect the full amount of the identified synergies to be realized by midyear 2022.

In conclusion, we will continue to execute a capital disciplined approach, focused on generating positive cash flow, protecting the balance sheet and opportunistically returning capital to shareholders?

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

(Operator Instructions)

And we will take our first question. This will come from James West with Evercore ISI.

One, congratulations on EBITDA for the last executed quarter, especially given all the restructuring and everything else that's going on with the merger. The first thing I had is, I think you know my view on the stock and on the business that the cash flow resiliency would shine through as we got past kind of the merger and would likely result of multiple re-rating. But even cash flow this quarter was well ahead of my expectations. So I was curious, is there anything on the free cash flow side this quarter that was unusual? Or is this kind of what we should expect to see over the next several quarters, not the same, of course, but the seasonality that we'll see in the calendar fourth quarter this year.

Thank you for the question, James. And we are pleased with the results this quarter. The merger integration is going well. I think the team is doing a great job continuing to integrate and progress towards the value additive synergies that we've identified. I'll let Jennifer address the free cash flow question. A lot of it has to do with the strong adjusted EBITDA performance for the quarter. But Jennifer, can you expand upon that?

Sure. James. Yes, as Chris noted, we had a strong EBITDA, and that translated into a strong cash flow as our noncash amortization of debt and the noncash stock comp is offsetting the interest expense for the quarter. So it just really means that much of that EBITDA is falling into free cash flow.

Okay. Okay. Got it. And then on the share buybacks, obviously, opportunistic during the quarter. How do you guys think about when you want to take the balance sheet, of course, but you also want to be aggressive when you can be with reducing the share count, returning capital to shareholders. Is there a level of threshold? Is there some type of metrics you look at? And how do you guys think through share buybacks and what you would and maybe potentially wouldn't be in the market?

Yes. Very pleased to have the opportunity to return capital to shareholders, especially at the price at which we repurchase those shares. We think over the long term, that's going to be a very compelling value creation point for us. I think you presented the stage well, James. We want to both protect our balance sheet, and that will involve some gross debt reductions over time, but also be opportunistic in when we can return capital to shareholders. I think we're in a fortunate position with the financial strength of the company with our cash balance today and also the confidence we have and the ability to continue to generate positive free cash flow going forward but we can do both. And we did that immediately after announcing the new share repurchase program in September, and we'll take an opportunistic approach to that going forward.

So nothing specific in terms of certain prices that we're targeting, but we do think we can both protect the balance sheet and return capital to shareholders at the same time.

(Operator Instructions)

We will take our next question. This will come from John Deysher with Pinnacle.

With regards to the buyback -- well, first, congratulations on another good quarter in a tough environment. I was just -- I missed the buyback announcement, what is the total amount of the buyback?

So we announced that the Board has approved a $75 million share repurchase program, and we used approximately $7.6 million of that in the month of September before the quarter closed.

Okay. Can you share with us if you bought any shares in October? And if so, how many?

We're going to continue to be active in evaluating opportunities to return capital to shareholders. Our plan is to provide the disclosure on a quarterly basis. And as you might imagine, we get questions about this periodically throughout the quarter. So what we'd like to do is just announce it at the end of each quarter in terms of any activity that occurred during the period. And so we'll have an update on our next call.

Okay. Fair enough. In terms of the big picture, obviously, the end markets are not so great right now. But that makes no opportunity for you to in terms of expanding your share at the bottom. And I was just wondering strategically, if you're seeing any opportunities, both in terms of lease fleets that might be available or captive fleets of offshore E&P companies that might no longer be viewed as core assets? No specifics, but are you seeing anything at all in those areas?

There are situations like the examples you mentioned, John. We also think that in terms of other operating companies, there may be some attractive opportunities for consolidation in certain markets around the world going forward. And we are active in evaluating those. We do think that Bristow is -- as well positioned, if not better, positioned than anyone in the industry to take advantage of those opportunities. But we're also going to continue as we have throughout to take a very patient and disciplined approach there.

So any opportunity, whether it be another operator, a captive fleet or some of the examples that you mentioned, we'll have to meet our strategic priorities. That will have to be value added. It will have to be consistent with protecting our balance sheet and putting the company in a position where we will continue to generate positive free cash flow in the future.

Sounds good. It sounds like you're ready to move if something becomes available at the right price.

Yes, we're active. And I can't predict whether something will meet our requirements because we will be patient, but we certainly are active out there.

And at this time, there are no questions in queue. I would like to turn the conference back to Chris Bradshaw.

Thank you, everyone, for joining the call. I know it's a busy news week, this week. I appreciate the questions, James and John. We look forward to updating this community again on our next quarter call. And until then, stay safe and stay well. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.