Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Civeo Corp (NYSE:CVEO) experienced a 23% increase in revenues in its Australian segment compared to the fourth quarter of 2023, driven by increased activity in its integrated services business.
• The acquisition of four villages in the Australian Bowen Basin is expected to be immediately accretive to cash flow and expands Civeo Corp (NYSE:CVEO)'s presence in a new area.
• Civeo Corp (NYSE:CVEO) returned approximately $44 million of capital to shareholders in 2024 through dividends and share repurchases, representing 65% of the year's free cash flow.
• The company has successfully deleveraged over the past decade, reducing its debt and diversifying revenue sources, particularly through growth in the Australian integrated services market.
• Civeo Corp (NYSE:CVEO) is positioning itself for ongoing value creation by diversifying revenue streams and redirecting capital spend to favorable markets.

Negative Points

• Civeo Corp (NYSE:CVEO) reported a net loss of $15.1 million in the fourth quarter of 2024, with a decrease in adjusted EBITDA compared to the previous year.
• The Canadian segment faced challenges with lower filled rooms due to reduced capital spending by customers and economic and political uncertainty.
• Civeo Corp (NYSE:CVEO) will incur one-time restructuring costs of approximately $3 million in the first quarter of 2025 as it closes existing lodges and reduces overhead headcount by 25% in Canada.
• The company expects continued lower levels of customer spending in Canada, impacting its occupancy and revenue in the region.
• Currency exchange rate fluctuations have created a headwind for Civeo Corp (NYSE:CVEO)'s US-denominated results, impacting its financial outlook for 2025.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Signs with CVEO.

Q: Can you clarify the revenue breakdown between asset light and asset intensive businesses, and does it include catering and facility management at owned assets? A: Yes, the revenue breakdown includes third-party integrated services provided at customer-owned locations, combined with hospitality services performed at our own locations. (Bradley Dotson, CEO)

Q: Should we expect a normal seasonal distribution in 2025, or are there any specific factors to consider? A: Historically, 60-65% of the full year is generated in the second and third quarters, and this is expected to be the case in 2025 as well, excluding the impact and timing of the Australian acquisition. (Bradley Dotson, CEO)

Q: Regarding Canada, how much of the revenue stream is highly visible versus discretionary? A: Historically, Canadian turnaround activity, which is the primary driver of seasonality, occurs in the second and third quarters. This activity typically accounts for about 25-30% of total room nights on a full-year basis, and this is expected to continue. (Bradley Dotson, CEO)

Q: With the political uncertainty in Canada, do you expect this to be a long-term impact on customer behavior? A: We are preparing for a long-term shift in customer behavior regarding occupancy levels in the Canadian oil sands region. We are adjusting our cost structure accordingly, as we see a continued intent to reduce headcount on site. (Bradley Dotson, CEO)

Q: How does the economic weakness in China and pressure on metal prices affect your outlook in Australia? A: Despite softened prices, particularly on the met coal side, customer conversations remain positive. Customers are still looking for rooms and long-term contracts, and our outlook for owned villages in Australia remains strong. (Bradley Dotson, CEO)

Q: Can you discuss the acquisition in Australia and whether similar deals are likely in the future? A: We are looking for opportunities to buy additive locations that fit into our portfolio, primarily in Australia due to favorable macro dynamics. We also see a larger opportunity in integrated services in both Canada and Australia. (Bradley Dotson, CEO)

Q: How are you managing the Canadian business amid current uncertainties, and are further cost reductions possible? A: We consistently review our cost structure to match our outlook. We are right-sizing the business for the current reality and will continue to monitor market developments. (Bradley Dotson, CEO)

Q: What is your approach to returning free cash flow to shareholders, especially after the recent acquisition? A: Our framework is based on a fundamental dividend and opportunistic buybacks. Post-acquisition, we will be roughly one times levered, allowing us to continue deploying capital under the same framework. (Bradley Dotson, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.