Civeo Corporation (NYSE:CVEO, Financial) today reported financial and operating results for the second quarter ended June 30, 2023.
“In the second quarter of 2023, we delivered financial results in line with our expectations while continuing to operate safely and effectively. We generated solid free cash flow in the quarter which was used to repurchase approximately 212,000 Civeo shares and pay down $6.5 million in debt. The second quarter’s results demonstrate the value of our diversified revenue drivers and were notable for the significant year-over-year growth in our Australian segment, driven by a 33% increase in integrated services revenue related to new contracts as well as a 14% increase in Australian owned-village revenue. This quarter’s Australian village occupancy marks the highest level we’ve experienced since 2014. The improvement in Australia in the quarter was offset by lower LNG-related Canadian lodge occupancy and mobile camp activity,” said Bradley J. Dodson, Civeo's President and Chief Executive Officer.
Mr. Dodson concluded, “As we highlighted on the first quarter earnings conference call, our two strategic priorities for the remainder of 2023 were mitigating inflationary pressures in our Western Australian integrated services business and evaluating commercial alternatives for our Canadian McClelland Lake lodge assets. I'm happy to report that during the second quarter we made progress on both. We will provide additional updates regarding these developments on our earnings conference call later today.”
Second Quarter 2023 Results
In the second quarter of 2023, Civeo generated revenues of $178.8 million and reported net income of $4.5 million, or $0.30 per diluted share. During the second quarter of 2023, Civeo produced operating cash flow of $19.4 million, Adjusted EBITDA of $31.6 million and free cash flow of $12.9 million.
By comparison, in the second quarter of 2022, Civeo generated revenues of $185.0 million and reported net income of $9.1 million, or $0.54 per diluted share. During the second quarter of 2022, Civeo produced operating cash flow of $21.7 million, Adjusted EBITDA of $37.1 million and free cash flow of $17.6 million.
The year-over-year decrease in Adjusted EBITDA in the second quarter of 2023 was primarily driven by lower Canadian LNG-related lodge occupancy and mobile camp activity, partially offset by increased billed rooms at the Australian Bowen Basin villages.
Business Segment Results
(Unless otherwise noted, the following discussion compares the quarterly results for the second quarter of 2023 to the results for the second quarter of 2022.)
Canada
During the second quarter of 2023, the Canadian segment generated revenues of $95.5 million, operating income of $3.2 million and Adjusted EBITDA of $19.8 million, compared to revenues of $109.0 million, operating income of $11.2 million and Adjusted EBITDA of $28.7 million in the second quarter of 2022. Results from the second quarter of 2023 reflect the impact of a weakened Canadian dollar relative to the U.S. dollar, which decreased revenues and Adjusted EBITDA by $5.1 million and $1.1 million, respectively.
On a constant currency basis, the Canadian segment experienced an 8% period-over-period decrease in revenues largely related to Canadian mobile camp activity winding down as well as a 6% year-over-year decrease in Canadian lodge billed rooms. Adjusted EBITDA for the Canadian segment decreased 27% due to the aforementioned dynamics as well as inflationary pressures across the business.
Australia
During the second quarter of 2023, the Australian segment generated revenues of $82.5 million, operating income of $9.2 million and Adjusted EBITDA of $19.6 million, compared to revenues of $67.8 million, operating income of $5.5 million and Adjusted EBITDA of $15.5 million in the second quarter of 2022. Results from the second quarter of 2023 reflect the impact of a weakened Australian dollar relative to the U.S. dollar, which decreased revenues and Adjusted EBITDA by $5.7 million and $1.3 million, respectively.
On a constant currency basis, the Australian segment experienced a 30% period-over-period increase in revenues primarily driven by increased integrated services revenue related to new contracts as well as a 16% year-over-year increase in village billed rooms. Adjusted EBITDA for the Australian segment increased 35% due the aforementioned dynamics, partially offset by a weakened Australian dollar relative to the U.S. dollar.
Financial Condition
As of June 30, 2023, Civeo had total liquidity of approximately $89.0 million, consisting of $77.6 million available under its revolving credit facilities and $11.4 million of cash on hand.
Civeo’s total debt outstanding on June 30, 2023 was $136.1 million, a $6.5 million decrease since March 31, 2023.
Civeo reported a net leverage ratio of 1.2x as of June 30, 2023.
During the second quarter of 2023, Civeo invested $6.9 million in capital expenditures compared to $5.1 million invested during the second quarter of 2022. Capital expenditures in both periods were predominantly related to maintenance spending on the Company’s lodges and villages.
In the second quarter of 2023, Civeo repurchased approximately 212,000 shares through its share repurchase program for a total of approximately $4.2 million.
Full Year 2023 Guidance
For the full year of 2023, Civeo is increasing the lower end of its previously provided revenue and Adjusted EBITDA guidance ranges. The revised revenue and Adjusted EBITDA guidance ranges are $640 million to $650 million and $90 million to $95 million, respectively. The Company is decreasing full year 2023 capital expenditure guidance to a range of $35 million to $40 million. The $10 million decrease in capital expenditure guidance is entirely driven by downward revisions to the scope of the customer-funded infrastructure upgrades to three Australian villages announced last quarter. As these upgrades will be fully funded by the customer upfront, this change will not impact our 2023 free cash flow guidance.
Conference Call
Civeo will host a conference call to discuss its second quarter 2023 financial results today at 11:00 a.m. Eastern time. This call is being webcast and can be accessed at Civeo's website at www.civeo.com. Participants may also join the conference call by dialing (877) 423-9813 in the United States or (201) 689-8573 internationally and using the conference ID 13740254#. A replay will be available after the call by dialing (844) 512-2921 in the United States or (412) 317-6671 internationally and using the conference ID 13740254#.
About Civeo
Civeo Corporation is a leading provider of hospitality services with prominent market positions in the Canadian oil sands and the Australian natural resource regions. Civeo offers comprehensive solutions for lodging hundreds or thousands of workers with its long-term and temporary accommodations and provides food services, housekeeping, facility management, laundry, water and wastewater treatment, power generation, communications systems, security and logistics services. Civeo currently operates a total of 26 lodges and villages in Canada, Australia and the U.S., with an aggregate of approximately 28,000 rooms. Civeo is publicly traded under the symbol CVEO on the New York Stock Exchange. For more information, please visit Civeo's website at www.civeo.com.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements herein, including the statements regarding Civeo’s future plans and outlook, strategic priorities, guidance, current trends and liquidity needs, are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the accommodations industry, risks associated with the level of supply and demand for oil, coal, iron ore and other minerals, including the level of activity, spending and developments in the Canadian oil sands, the level of demand for coal and other natural resources from, and investments and opportunities in, Australia, and fluctuations or sharp declines in the current and future prices of oil, natural gas, coal, iron ore and other minerals, risks associated with failure by our customers to reach positive final investment decisions on, or otherwise not complete, projects with respect to which we have been awarded contracts, which may cause those customers to terminate or postpone contracts, risks associated with currency exchange rates, risks associated with inflation and volatility in the banking sector, risks associated with the company’s ability to integrate acquisitions, risks associated with labor shortages, risks associated with the development of new projects, including whether such projects will continue in the future, risks associated with the trading price of the company’s common shares, availability and cost of capital, risks associated with general global economic conditions, inflation, global weather conditions, natural disasters, global health concerns, and security threats and changes to government and environmental regulations, including climate change, and other factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Civeo’s most recent annual report on Form 10-K and other reports the company may file from time to time with the U.S. Securities and Exchange Commission. Each forward-looking statement contained herein speaks only as of the date of this release. Except as required by law, Civeo expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Information
EBITDA, Adjusted EBITDA, free cash flow, net debt, bank-adjusted EBITDA and net leverage ratio are non-GAAP financial measures. See “Non-GAAP Reconciliation” below for definitions and additional information concerning non-GAAP financial measures, including a reconciliation of the non-GAAP financial information presented in this press release to the most directly comparable financial information presented in accordance with GAAP. Non-GAAP financial information supplements and should be read together with, and is not an alternative or substitute for, the Company’s financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures.
- Financial Schedules Follow -
CIVEO CORPORATION | ||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues | $ | 178,843 | $ | 184,954 | $ | 346,434 | $ | 350,632 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales and services | 131,425 | 130,053 | 264,939 | 255,896 | ||||||||||||
Selling, general and administrative expenses | 16,459 | 17,682 | 32,649 | 32,895 | ||||||||||||
Depreciation and amortization expense | 20,701 | 23,083 | 42,363 | 43,210 | ||||||||||||
Other operating expense (income) | 86 | (106 | ) | 215 | 152 | |||||||||||
168,671 | 170,712 | 340,166 | 332,153 | |||||||||||||
Operating income | 10,172 | 14,242 | 6,268 | 18,479 | ||||||||||||
Interest expense | (3,604 | ) | (2,608 | ) | (7,260 | ) | (5,076 | ) | ||||||||
Interest income | 50 | 2 | 82 | 2 | ||||||||||||
Other income | 427 | 415 | 2,877 | 2,111 | ||||||||||||
Income before income taxes | 7,045 | 12,051 | 1,967 | 15,516 | ||||||||||||
Income tax expense | (2,878 | ) | (1,821 | ) | (4,111 | ) | (3,378 | ) | ||||||||
Net income (loss) | 4,167 | 10,230 | (2,144 | ) | 12,138 | |||||||||||
Less: Net income (loss) attributable to noncontrolling interest | (296 | ) | 662 | (254 | ) | 1,160 | ||||||||||
Net income (loss) attributable to Civeo Corporation | 4,463 | 9,568 | (1,890 | ) | 10,978 | |||||||||||
Less: Dividends attributable to Class A preferred shares | — | 490 | — | 977 | ||||||||||||
Net income (loss) attributable to Civeo common shareholders | $ | 4,463 | $ | 9,078 | $ | (1,890 | ) | $ | 10,001 | |||||||
Net income (loss) per share attributable to Civeo Corporation common shareholders: | ||||||||||||||||
Basic | $ | 0.30 | $ | 0.55 | $ | (0.13 | ) | $ | 0.60 | |||||||
Diluted | $ | 0.30 | $ | 0.54 | $ | (0.13 | ) | $ | 0.60 | |||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 14,970 | 14,148 | 15,064 | 14,122 | ||||||||||||
Diluted | 15,000 | 14,275 | 15,064 | 14,271 | ||||||||||||
CIVEO CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands) | ||||||||
June 30, 2023 | December 31, 2022 | |||||||
(UNAUDITED) | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 11,421 | $ | 7,954 | ||||
Accounts receivable, net | 140,090 | 119,755 | ||||||
Inventories | 7,171 | 6,907 | ||||||
Assets held for sale | 8,204 | 8,653 | ||||||
Prepaid expenses and other current assets | 8,992 | 10,280 | ||||||
Total current assets | 175,878 | 153,549 | ||||||
Property, plant and equipment, net | 275,561 | 301,890 | ||||||
Goodwill, net | 7,522 | 7,672 | ||||||
Other intangible assets, net | 80,635 | 81,747 | ||||||
Operating lease right-of-use assets | 14,023 | 15,722 | ||||||
Other noncurrent assets | 5,343 | 5,604 | ||||||
Total assets | $ | 558,962 | $ | 566,184 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 47,763 | $ | 51,087 | ||||
Accrued liabilities | 27,524 | 39,211 | ||||||
Income taxes | 100 | 178 | ||||||
Current portion of long-term debt | 14,664 | 28,448 | ||||||
Deferred revenue | 3,097 | 991 | ||||||
Other current liabilities | ||||||||
