Bristow Group Inc. Price & Performance (VTOL)

Good morning, everyone. And welcome to Bristol Group's fourth quarter and full year 2024 earnings call. I am joined on the call today our President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I like to take this opportunity to remind everyone that during the course of this call, management may make forward looking statements that are subject uncertainties that are described in more detail on Slide three 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 and our investor presentation. I'll now turn the call over to our President and CEO, [indiscernible] Thank you, Brad. I want to thank all the Bristow team members around the world for their continued focus [indiscernible] Which is Bristow's number one core value and our highest operational priority. In terms of workplace safety, the company delivered a 32% decrease in loss workdays in 2024 compared to the prior year. Which represents a significant HSE performance improvement. With respect to aviation safety, as a reminder, we experienced a tragic air accident during a search and rescue training exercise offshore Norway, on February 28, 2024, with six crew members on board.

While five crew members were rescued, we tragically experienced one fatality as a result of the accident. And we will carry this loss with us always. The investigation process is ongoing and we will refer you to the preliminary reports published by the authorities in Norway. We continue to fully cooperate in the investigation process We do not have any other material updates at this time. While always a difficult transition to make, I will now turn our comments to the company's operational and financial performance. We are pleased to report very strong fourth quarter financial results. Which exceeded the upwardly revised outlook range for Q4 and full year 2024. This outperformance was driven by strong growth in our Offshore Energy Services business. Where industry fundamentals remain positive and we continue to believe that we are in the midst of a multiyear upcycle. In our Government Services business, we are focused on the ongoing launch of SAR Services for the Irish Coast Guard, and the transition of operations [indiscernible] in The United Kingdom. Those are large and complex projects with extended transition timelines running through the second half of twenty twenty five in Ireland and through the end of twenty twenty six for UK's R2G.

While we are facing challenges along the way with [indiscernible] [indiscernible] our commitment to delivering successful outcomes for the governments and communities we serve remains unwavering. I will now hand it over to our CFO for a more detailed discussion of financial [indiscernible] Thank you, Chris. Today, I will begin with a review of Briska's Bristow sequential quarter financial results on a consolidated basis before moving on to an introduction of our new really newly realigned business segment, and review of the full year 2024 results on a segment basis. Adjusted EBITDA in the fourth quarter of twenty twenty four was $57,800,000 compared to $60,200,000 in the third quarter. Revenues decreased $11,600,000 primarily due to lower aircraft availability and unfavorable foreign exchange rate impact across all segments. Partially offset by the commencement of a new government services contract in Ireland. Operating expenses were $9,600,000 lower due to lower operating personnel costs as a result of the finalization of a labor agreement in The UK in the third quarter, lower fuel costs due to fewer flight hours and decreases in global fuel prices and lower repairs and maintenance costs primarily due to decreased power by the hour or PBH expenses. These decreases were partially offset by higher costs related to the commencement of the new government services.

Okay.

General and administrative expenses were $1,500,000 higher primarily due to higher incentive compensation costs related to the company's full year financial results, Other expenses of 6,200,000.0 resulted from foreign exchange losses of $12,600,000 dollars which as noted in the previous earnings calls primarily comprises non cash foreign currency gains and losses. That are excluded from our adjusted EBITDA calculation. [indiscernible] These foreign exchange losses were partially offset by an insurance recovery of 4,500,000.0 and a favorable interest adjustment to our company's pension liability of $1,700,000 of our newly realigned business segment and a brief introduction to each operating segment. Due to the recent expansion of our government services business, via the addition of new contracts in multiple jurisdictions we reevaluated the various factors that make our existing lines of service unique. Such as end customer profile, management responsibility and contract dynamic. In the fourth quarter of twenty twenty four, we realigned our segment from a single reportable Segment Aviation Services the three reportable segments. The first is Offshore Energy Services or OES. Which provides aviation services [indiscernible] from and between offshore energy installations globally. The second is government services. Which provides and support support helicopter services to government agencies globally.

And lastly, other services. Which primarily comprised comprises six wing services providing transportation through scheduled passenger flights and aircraft charter services, dry leasing of aircraft to third party operators, [indiscernible] The realignment of our segments resulted in certain presentation changes that include a reclassification of our fixed income revenues supporting our energy business in Africa to our OES segment combining our fixed wing airline and combining reimbursable and operating revenues as well as combining reimbursable and operating expenses. The financial years presented including our forward looking guidance have been recast to conform with the revised presentation for ease of comparison. I will now cover our full year 2024 financial results by segment. Briscoe's revenues from OES were $113,000,000 higher in 2024 compared to 2023. This increase is attributed to higher utilization and increased rates in Africa, the commencement of new contracts in Brazil, higher utilization in other parts of The Americas, and the commencement of a new contract in Norway. This increase in activity and revenues was partially offset by higher repairs and maintenance costs of $20,100,000 and operating personnel costs of 8,700,000.0 due to the increased activity. Adjusted operating income from OES was $84,000,000 higher in 2024. Revenues from government services were $7,600,000 lower than 2023.

Primarily due to a change in rates after transitioning to the long term contract with the Dutch Grubbing Coast Guard or DCCG. Adjusted operating income was $10,000,000 lower in 2024 primarily due to aircraft availability penalties related to supply chain challenges [indiscernible] [indiscernible] and the transition to the long term DCCG contract. However, it is important to note that the duration of these contracts generally lasting ten or more years with additional one to three year extension options [indiscernible] long term cash flows with high credit quality customers strong margins and reliable capital returns once operations are fully ramped. Which I will discuss in more detail when we cover the Government Services outlook momentarily. Moving on to other services. Revenues from this segment were $12,600,000 higher in 2024 primarily due to higher utilization and increased rates. Adjusted operating income was consistent with the prior year as higher revenues were offset by higher operating costs in fixed wing services, at $12,700,000 As Chris noted, are pleased with the stronger than expected fourth quarter which exceeded our upward revised outlook range for Q4 and the full year 2024. Our consolidated financial performance in 2024 culminated in revenues increasing by $118,000,000 and adjusted EBITDA increasing by $66,300,000 which is a 39% increase compared to the prior year.

Turning now to cash flow. The $145,000,000 increase in operating cash flows is attributed to the increase in operating income and an improvement in working capital in 2024. Additionally, our adjusted free cash flows $161,000,000 in 2024, compared to $28,000,000 in 2023. Briscoe continues to benefit from a strong balance sheet and with As of December 31, our available liquidity was approximately $312,000,000 We have now funded 84% of the capital The remaining capital investment is expected to largely conclude in the first half of As we have noted in past earnings calls, and continue to reiterate now, we believe that our business model will continue to generate strong cash flow. This is becoming more evident through our new capital allocation framework. Moving on to Bristow's outlook. At this time, we are confirming our previously reported 2025 revenues guidance of $1,400,000,000 to 1,600,000,000.0 and adjusted EBITDA range of $230,000,000 to $260,000,000 as well as our 2026 target guidance of $1,500,000,000 to $1,800,000,000 total revenues, and adjusted EBITDA range of $275,000,000 to $335,000,000 2024 was a year of increased utilization Great. And Full Year Impact Of Contract Commencement. With Nigeria and Brazil a standout market. And while market conditions in our OES segment are expected to remain constructive in 2025, we expect headwinds from our continued supply chain shortages versus during the year.

Additionally, the cadence of our contract renewals is such that more of the contracts would commence in late twenty twenty five or 2026. So the more meaningful increases will be visible in 2026. However, given our current utilization levels, coupled with unmet lift demand, and long lead times for new builds, we expect to perform well if not better in 2025 as reflected in our OES adjusted operating income range, of $190,000,000 to $210,000,000 compared to the $173,000,000 in 2024. Regarding our outlook for our Government Services segment, adjusted operating income for the Government Services segment declined by approximately $14,000,000 2022 to 2024, primarily due to startup expenses of $4,000,000 in support of our new IRCG contract higher aircraft penalties in UK STAR, a $6,000,000 due to significant supply chain challenges and $4,000,000 in adverse foreign exchange impact. As the transition progresses for both IRCG and U. K. SRTG contracts, we expect adjusted operating income margins to return to 2023 levels at a minimum, and for aggregate adjusted operating income generated by our Government Service segment, increased by approximately 25% in 2026 relative to 2022.

We expect full year impacts in subsequent years will contribute meaningfully to our financial results. And the strong margins stable long term cash flows with high credit quality customers will provide reliable capital return into the middle of the next decade. As illustrated on Slide 14, We continue to believe the growth in our government Services segment and diversification of Bristol's revenues will provide long term value to our customers, investors, as evidenced by the commencement of a dividend dividend payment in Q1 twenty twenty six. At this time, I'll turn the call back to Chris for further remarks. Chris?

Thank you. As summarized in our press release, and Slide 19 of the earnings presentation, we are pleased to announce Bristow's new capital allocation framework. With strategic priorities that include: protect and maintain a strong balance sheet and liquidity position, pursue high impact high return growth opportunities and return capital to shareholders via opportunistic [indiscernible] and quarterly dividend payments. Understanding that Offshore Energy Services our largest business segment, is inherently volatile We must sustain a robust balance sheet that can withstand all market cycles. As such, the company intends to pay down debt a balance of approximately $500,000,000 of gross debt by the end of twenty twenty six. At the same time, we will continue to execute on compelling growth opportunities. Such as the long term government SAR contracts as well as the attractive opportunities we have to introduce new AW189 helicopters, to meet customer demand and boost profitability, in our Offshore Energy Services segment. Furthermore, Bristol is committed to return capital to shareholders via a new quarterly dividend program intended to commence in Q1 twenty twenty six, with an initial dividend payment of $0.125 per share or $0.5 per share annualized, as well as opportunistic share buybacks under the company's new $125,000,000 share repurchase program.

We believe this disciplined and focused capital allocation approach provides multiple avenues to create additional value for Bristol's stakeholders Bristow. With that, let's open the line for questions. [indiscernible] [indiscernible] Sorry about that. At this time, we would like We'll pause for just a moment to compile the Q and A roster. Our first question comes from Jason Bandel with Evercore. Jason, Thanks. Good morning, Chris.

Jennifer and Red. Good morning.

My first question, let's start with offshore energy services. The business seems to be doing quite well. The outlook sounds constructive.

We're kind of used to hearing about white space headwinds and commodity macro headwinds and so forth. So can you guys, I guess, start by highlighting some of the dynamics that are going on in OES and expand a little bit on how your key utilization levels still high currently? Yes.

Happy to do so, Jason, and thanks again for joining the call. I think as we look at our sector, obviously, we are impacted by a lot of the same market drivers that impact offshore services spaces like the drillers, for example, And we certainly do follow those indicators, especially the floating offshore rig count as that's mostly the water depths and market that we serve. Our equipment sector is really different from that. We have our own supply demand dynamics And so what's keeping utilization levels so high and again today they really are at or near % effective utilization for the relevant [indiscernible] super medium and medium helicopter models is the fact that we had about a decade's period where there were very few, if any new deliveries coming into the market. Over that period of time, you had a number of helicopters that were sold into other end markets or were aged out or otherwise out of the available fleet So there's been a significant tightening of the supply So as demand has picked up over the last several years, we've resulted in this very [indiscernible] supply demand dynamic that's informing those at or near 100% effective utilization levels.

And importantly, with a very finite number of OEMs who manufacture helicopters the lead times today are really two plus years if you're looking for a new aircraft to be delivered. So that's part of what informs our visibility on the supply demand dynamic for our space over the next couple of years.

Great. And if you dig in a little bit deeper, Chris, just on, I guess, 2025 outlook here, just some of the key drivers to your growth to maintain that utilization kind of go around the globe here and then come note two or three pockets of strength that you're seeing?

Sure. Happy to do that. So for the purposes of this, I'll focus on the OES portion of our business. The markets where we are seeing more growth continued to be in West Africa Nigeria has been a very strong positive contributor to our business. We expect that to continue in 2025, 2026 and really beyond. Also Brazil, Brazil is an area where we've put more helicopters on contract both with Petrobras as well as independent producers there. So Brazil is an area where that has driven growth so far. We expect that to continue particularly in the latter half twenty five and into 2026 And then the Caribbean Triangle namely thinking about right now for the purposes of these comments, Suriname, is an area where we're seeing additional projects come up, additional demand for our offshore helicopter services there. So from a growth rate standpoint, those are the markets that I would highlight. But we also have strength in some of our more mature markets like the Gulf Of Mexico, for example. Not the same growth rates given the size but there is incremental demand here in The U. S. We just started a new S-ninety two contract for a customer here in The U. S. At the beginning of this year.

We see incremental demand over the course of 2526 as well.

Great. That's helpful, Chris. And let me get one last question here. In your appendix, you have a slide in the presentation on net asset value. Would love to kind of hear your thoughts on that and the importance of that slide. And also curious thoughts about why you think you're stock continues to kind of trade at the discount to NAV calculation you show on that slide? Thanks. Yes. Thank you for the question, Jason.

Once a year, we do have a third party firm that does an appraisal of all of the owned aircraft in Bristow's Bristow, So this does not include any attributed value to the leased helicopters. This is really just focused on all the aircraft that we own in the fleet. So this third party appraisal is done on an individual aircraft basis We roll that up into their estimation of the fair market value of the overall owned aircraft which is a little over $1,500,000,000 To that, we add the net book value of other tangible assets subtract total debt as well as other liabilities such as deferred taxes and this year that resulted in an aggregate net asset value of about $1,700,000,000 on a per share basis is roughly $57 per share of NAV. Which is is a significant premium to where the stock price is trading today. In terms of why there is such a discount to that NAV, I'll probably leave that for other market participants to speculate. Obviously, as a management team, we always think our stock price could be higher. That's a given. But we are pleased to release this year's version of the NAV, which again we disclose once a year.

Great. So much for the time. I'll turn it back. All right.

Thank you. Our next question will come from Jason Vandell at Evercore.

I think we just had Jason I'm sorry.

He was he moved up. Okay. I'm sorry about that. Our next question Can you hear me?

Yes. Hi, Josh. Good morning. How are you? Hey, good morning. Sorry. Just want to make sure. So you just mentioned Surname there as an opportunity for growth. Is pricing coming back in that market? At one point, there seemed to be a dislocation Our customers changing their perspective there?

Good morning, Josh, and thanks again for the question. We continue to see really positive strong, stable pricing across our offshore energy services business. I think that is informed by the tight utilization or the high utilization levels, the tight of supply and demand dynamic. So when we're looking to bid on new projects or new contracts, That's the type of growth. Consistency and sustainability that we're seeing in the pricing in the market right now.

And that includes Suriname. Really the growth in Suriname I would attribute more to incremental project demand as you have you've had some very successful discoveries, which is bumping the initiation beginning later this year of more development and exploration sorry, development and production work.

As well as it's promoting additional exploration work by other operators who are looking to to potentially hit promising reserves like those that have been discovered there already. Okay. Got it. And then I guess just looking at the 2024 results, you beat your own guidance What was the outsized driver compared to maybe what you saw at the end of Q3?

Thank you, Josh. Good morning. So we were pleased to deliver a better than expected results for the quarter. There were several items Africa has continued to be a driver Our OES business is a driver in Africa particularly, but also in Q4 you had You had both in The Brazil and The UK some attractive ad hoc opportunities as well. To help drive that.

Got it. And then I guess just excuse me, relatedly as we look at '25, why keep the current guide then? What are the major puts and takes to '25, I guess?

Sure. We always knew that 2025 was going to be a transition year with Our OES business continues to do well. However, as I noted in my prepared remarks, we do expect supply chain shortages In addition, many of our contract renewals commence in late 'twenty five or 'twenty six, so the impact of those really get reflected in 2026 and beyond. And for those reasons, we affirmed the guidance as had put it out [indiscernible] Which I think just if I could add there, I think is a a positive statement to make in light of what's going on elsewhere and in this climate for the offshore services space. Hopefully, it's sending a positive message that we can affirm our outlook for both 2025 and 2026 given the strength that we see for Christo's business. Got it. Got it.

And then I guess just one or actually a couple on the new capital allocation framework. Congratulations on that. But if we take the priorities, as you mentioned, just one by one, maybe first in the debt, how quickly should we expect you to start paying that down? Thank you for the comments on that, Josh. We are pleased to roll that out and introduce and we look to start implementing that. On the debt we are looking to pay down debt to gross debt balance of approximately $500,000,000 by the end of next year. And we expect to initiate those advance payments beginning in Q2 of this year. So just over the next couple of months we should initiate those advanced debt payments.

And then on the second priority just on growth With the Irish Star and UK contract being the helicopters associated with that, coming to the end at some point. What are the other growth outlets that might require some capital over the next two years? Nothing immediately identified. Although we do think there will be some additional opportunities that make come to market. Those include Australia, where that we expect that the existing SARS support services there for the government in Australia will come to Tinder over the next couple of years. There might be some opportunities in The Middle East. Where we're seeing some potential interest to launch search and rescue services to privatize those services for those communities. As well as in Europe, probably more around training opportunities that could exist. There's obviously a high focus on military and security in Europe. Right now. And I think there's an interest in looking to the private sector to help support some of the training necessary to keep pace with that increased defense activity. So those would be a few areas that we would highlight. But again, nothing identified at this time that would would impact CapEx over the time frame you referenced.

Got it.

And then I just go on the buybacks. When should we expect those to begin? And on the new dividend policy, what is the strategy there? Is there a ratio or metric that you're following? [indiscernible] Steve. Thanks for that question as well. On the buybacks, we are planning to take an opportunistic approach to deployment of capital to repurchase shares. So there's nothing programmatic about the timing or cadence for those. It'll depend on the situation and prevailing market conditions. On the dividends, our intention is to initiate that quarterly dividend payment beginning in Q1 of twenty twenty six. We're initiating that at $12.5 per share quarterly or $0.5 per share annualized.

Initially.

That's informed really by the size of the and stability of the government services cash flows. That the company is expected to generate. So the sizing really I would think about as being a function of our government services business We do have a long term ambition on being able to to grow that dividend payout over time, but again, that's the amount that we intend to initiate in Q1 of twenty twenty six.

Got it. And then just one last one.

On the advanced mobility market, you've got some of the eVTOL players talking about international markets some of the first areas for operations. Obviously, you guys have some very good operating certificates globally. What's your perspective on the market right now and how it might develop over the next year or so? As you're aware, Josh, but just for the benefit of the broader audience, we have spent some time and resources over the last several years now really analyzing that space, advanced air mobility, studying and understanding the technology understanding the variances between the different products that are being developed and may come to market. The teams that are behind them, We've been in a lot of discussions with those. We have announced some partnerships with some of those. We are interested in how the new technology can be deployed demand from our existing customer base as well as a potential new set of customers. In terms of timing, Really those aircraft are still in the certification stage. It's uncertain exactly what those timelines will be. I think there's a lot of optimism that the first Western Advanced Air Mobility products will be certified later this year Obviously, there's some uncertainty around that, particularly with what's going on with the regulatory authorities that are relevant here.

But we'll be optimistic that those timelines will advance We were pleased to publicly announce that Bristol will be participating in really a of its kind exercise later this year in a regulatory sandbox in Norway where we will be operating one of those products namely Betas [indiscernible] aircraft in Norway on a real world, real life basis testing that technology in partnership with not just beta, but also the government there. So that's an exciting opportunity to demonstrate some real world data help prove out some of the assumptions and use cases And I think hopefully clarify a visible path to more commercial operations for these technologies Great. You for the time. Thanks, Josh. Thank you. Our next question will come from Savi Syth with Raymond James. Hey, good morning, everyone. Just had actually a couple of follow-up questions. Just on the government services side, I recognize those are kind of longer term contracts and you've mentioned this a little bit in terms of Europe, but clearly there's a lot of noise around government spending in The U. S. I was just kind of wondering if you're seeing anything that today that gives you kind of reason to be more optimistic or have concerns on The U. S. Side of things?

Obviously, there's for the question. There's a lot to follow there. Heavy news flow in The U. S. Certainly I think our view right now is we expect continuation of the same with some optimism for potential incremental opportunities, our growth over time, particularly if the government is focused on being more efficient and thinking about how they can adopt and work with more of a private sector model to capture some of those efficiencies. That could be an incremental opportunity, but we will continue to actively monitor the news flow and look to see where we could potentially clean some of those opportunities for Bristol.

Appreciate that. And just follow-up on that, can I advance your ability side of the world I realize it's still very early days across, but if you look at your operations globally, where do you think it will be kind of easier to initiate or where there might be more demand to initiate? Some of these operations?

Yes. Our view is that it could could be outside of some of the major countries and regulatory bodies. So maybe [indiscernible] The U. S. Or Europe, but maybe some of the first places where you can actually these to work at scale would be in places like The Middle East, where you have a lot of interest, very heavy state sponsorship that can make things like that happen quickly. Or in Africa where again there's perhaps fewer hurdles there to launching operations of this nature. So in things that we're looking to do either direct [indiscernible] in partnership with other players in the space Those are some of the areas that that could could move more quickly than others in our view.

Helpful. Appreciate it. Thank you. Thank you.

Thank you. Our next question will come from Nikolay Tomfield, with Fernley Securities.

Hi there. Good morning. So I believe most of my questions already has been covered. But just want final question from my side. With the Irish Coastguard and The UK Star two gs contract, being in sort of, call it, the transition phase. When do you sort of believe that we when do you that we will see the full ramp up And the full earnings potential with these contracts? You'll start to see a cleaner picture in 2026 that won't be a perfectly clean one really, that'll be '27 and beyond. But we've always known that both 2024 and 2025 this year were going to be transition years as we are launching those services. We do have a pretty extended period of time of startup costs. Given the scale and complexity of these operations. So certainly, a bit of a drag from some of the startup costs impacting both '24 and '25 of profitability margins But 26% again should be a cleaner picture the earnings potential [indiscernible] and then '27 and beyond should be an even cleaner view on the earnings potential and profitability from that part of our business which we expect to carry on well into the middle of the next decade.

All right. That's good. Thank you.

Thank you.

Thank you. Our final question will come from Colby Hi. Thanks for having me on the call.

Multiples in the offshore multiples have compressed for offshore energy levered equities in the last twelve months.

You think about opportunities for growth for your business, have you seen any more opportunities become available given the multiple compression in the energy space?

Good morning and thank you for the question.

In our sector, since since Bristow is really the only public company today that [indiscernible] other public multiples to reference for the what could be potential M and A opportunities since they're private. Nevertheless, similar dynamics prevail, right? So I think certainly understand the nature of the question. We'll continue to look at those [indiscernible] And the relatively finite number in our space. There's only really a few players out there. [indiscernible] for ones that meet our parameters, and become actionable, we will spend the time to analyze them and see if there's a way to implement M and A that could be value added for shareholders. Certainly, we did that with the the Era Bristol merger in 2020. We were able to also add via direct acquisition a business to our government services, which expanded us into the Falklands and UK MOD business.

So we do have, I believe, a track record of being able to execute when the opportunities are there and we'll continue to and see if any of them become actionable over the near to medium term. Perfect. And as a quick follow-up, I know you've already touched on the U. S. Government a little bit, but tariffs are on again, off again, and there seems to be no But I wanted to ask how you're thinking about the potential impact to your company given you have some newbuild aircraft coming over the next few years? And if you're planning for this impact at all, Yes, that's an important question. Definitely something that we're actively monitoring. As an aviation operator, we do have a large and very international complex supply chain.

So tariffs are really anything that introduces uncertainty to that supply chain would be a potential issue for our business. We do have a portion of our supply chain that comes through Canada, engines and other components And we have a heavy portion of our supply chain that's coming out of Europe. So this is this is definitely an important issue that we monitor. As it relates to the new deliveries that we're bringing into the fleet, whether it's the H135 light twins that we're taking delivery of right now, or the AW189 orders that we have in place Those are fixed and firm prices. So we'll not be impacted by [indiscernible] Thank you. That's all I have.

Thank you. As a reminder, Thank you. We have no Bristow at this time.

I will now turn it back over for closing remarks.

Thank you, Angela, and thanks everyone for joining the call. Appreciate the time. Look forward to speaking again next quarter.

Thank you. The call has now concluded. Please feel free to disconnect.