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OI

OCEANEERING INTERNATIONAL INC (OII)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record-cycle revenue of $713.5M (+9% y/y, +5% q/q) and adjusted EBITDA of $101.5M, with EBITDA margin steady at 14% and GAAP EPS of $0.55; management said Q4 adjusted EBITDA “slightly exceeded our implied EBITDA guidance and consensus estimates.”
  • Subsea Robotics (SSR) and Offshore Projects Group (OPG) drove outperformance: SSR EBITDA margin 36% on continued ROV pricing strength; OPG margin expanded to 21% on higher activity in the U.S. Gulf of Mexico and West Africa.
  • 2025 outlook: EBITDA guided to $380–$430M and FCF $110–$130M; lower bound trimmed due to geopolitical uncertainty; Q1 2025 EBITDA guided to $80–$90M. Capex $130–$140M including $15–$20M for an ERP rollout.
  • Manufactured Products backlog ended at $604M (book-to-bill 0.97 TTM) as energy strength offset Mobile Robotics softness; Q4 margin compressed to 3% due to a reserve on an umbilical project and mix.

What Went Well and What Went Wrong

  • What Went Well

    • SSR margin expansion sustained: SSR EBITDA margin reached 36% (up ~361 bps y/y), supported by ROV average revenue/day of $10,786 (+12% y/y). “We surpassed $100 million in adjusted EBITDA for the first time since 2016.”
    • OPG step-change in profitability: OPG revenue +14% y/y with operating margin up to 21% (from 9% y/y), driven by installation and intervention activity in West Africa and the Gulf of Mexico.
    • Cash generation and liquidity: Q4 operating cash flow $128.4M; FCF $94.5M; year-end cash $498M; repurchased ~403K shares in Q4 for ~$10.1M.

  • What Went Wrong

    • Manufactured Products margin pressure: Operating margin fell to 3% on an 8% revenue increase; a reserve on an umbilical project and Mobile Robotics timing weighed on profitability; backlog slipped to $604M.
    • IMDS and ADTech margin compression: IMDS operating margin declined to 3% (from 5% y/y); ADTech margin fell to 10% (from 12% y/y) on ERP costs and project mix.
    • Guidance lower bound trimmed: Management reduced the low end of 2025 EBITDA guidance to reflect geopolitical uncertainties, tempering upside expectations.

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($M)$654.6 $668.8 $679.8 $713.5
GAAP Diluted EPS$0.43 $0.34 $0.40 $0.55
Adjusted EPS$0.19 $0.28 $0.36 $0.37
Operating Income ($M)$47.5 $60.4 $71.3 $77.9
Operating Margin (%)7% 9% 10% 11%
EBITDA ($M)$77.4 $86.9 $98.5 $98.7
Adj. EBITDA ($M)$75.1 $85.9 $98.1 $101.5
EBITDA Margin (%)12% 13% 14% 14%
Adj. EBITDA Margin (%)11% 13% 14% 14%
Net Income ($M)$44.5 $35.0 $41.2 $56.1

Notes: Q4 adjusted EPS reflects FX and discrete tax items; see reconciliation.

Segment mix – Q4 2024

SegmentRevenue ($M)Op. Income ($M)Op. Margin (%)
Subsea Robotics (SSR)$212.2 $63.5 30%
Manufactured Products$143.0 $4.2 3%
Offshore Projects Group (OPG)$184.4 $39.3 21%
IMDS$75.1 $2.0 3%
ADTech$98.8 $9.9 10%
Unallocated—$(41.1) —
Total$713.5 $77.9 11%

KPIs

KPIQ3 2024Q4 2024
ROV utilization (%)69% 66%
ROV days utilized15,796 15,211
ROV avg revenue/day$10,576 $10,786
MP backlog ($M)$671 $604
CFO ($M)$91.9 $128.4
FCF ($M)$67.0 $94.5
Cash & equivalents ($M)$452 (end-Q3) $498 (end-Q4)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated EBITDAFY 2025$400–$430M (Oct-23) $380–$430M (Feb-19) Lowered low end
Free Cash FlowFY 2025“Exceed 2024” (Oct-23) $110–$130M (Feb-19) Formalized range
Net IncomeFY 2025n/a$160–$190M (Feb-19) New metric
CapexFY 2025$110–$130M for 2024 (context) $130–$140M incl. $15–$20M ERP (Feb-19) Higher vs 2024
EBITDAQ1 2025n/a$80–$90M (Feb-19/20) New guide
Unallocated expensesQ1 2025~$40M in Q4’24 (context) ~$45M (Feb-19/20) Higher run-rate

Management cited geopolitical uncertainties for trimming the low end of FY25 EBITDA.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
ROV pricing and utilizationROV avg revenue/day +16% y/y to $10,528 (Q2); correlation with rig dayrates; contracts rolling ~20%/qtr; utilization high 60s–low 70s (Q2–Q3). Avg revenue/day $10,786 (+12% y/y); utilization 66%; mgmt expects flattish days but continued pricing progression; 59% market share on contracted floaters. Positive pricing momentum; stable-to-slightly lower utilization
OPG mix and marginsQ2: margins pressured by drydock and mix; Q3: recovering with expected low-20% Q4 margin. Q4 OPG margin 21% on West Africa/GOM installations and interventions; strong outlook into 2025 on light well intervention. Improving margins, higher-value work
Manufactured Products backlog & MaxMoverBacklog $713M (Q2), 1.56x TTM book-to-bill; outsourcing mobile robotics manufacturing; margins to improve as backlog converts. Backlog $604M; TTM book-to-bill 0.97; Q4 margin hit by umbilical reserve; pipeline “healthy”; Grayloc niche highlighted. Mixed: backlog dip and near-term margin pressure; medium-term improving
ADTech programs and defense AUVQ2 ADTech hit by X-EVAS dispute; defense AUV (Freedom) awarded; TAM evolving. Continued project mix/ERP cost pressure in Q4; defense AUV delivery targeted Q2’25; growth expected in 2025 led by OTECH. Near-term headwinds; 2025 growth setup
Digital/AI/remote opsExploring remote piloting; dependent on 5G/low latency; predictive maintenance improving SSR efficiency. Acquisition of GDi (digital/software) with water deployment ambition; continued efficiency focus. Building digital capabilities

Management Commentary

  • “We attained our highest quarterly revenue since the fourth quarter of 2015 and we surpassed $100 million in adjusted EBITDA for the first time since the second quarter of 2016.”
  • “OPG operating income…improved…to $39.3 million…based on increased installation and intervention activity levels in West Africa and the Gulf of Mexico.”
  • “Average ROV revenue per day utilized was $10,786…while fleet utilization of 66%…was slightly lower.”
  • “We have adjusted the lower end of our [2025] guidance range for EBITDA” due to geopolitical uncertainties.
  • On light well intervention: “Some of the best margin work for us…using a vessel of opportunity instead of a specialty vessel or drill rig.”
  • On Manufactured Products margin outlook: backlog has “improved margin sitting in backlog” with benefits from “continuous throughput” absorption in 2025.

Q&A Highlights

  • ROV pricing trajectory: Despite “white space” on rigs, management expects continued upward pricing progression from the $10.8K/day exit rate even with flattish activity.
  • Manufactured Products orders/book-to-bill: No explicit 2025 book-to-bill guidance; sales pipeline viewed as healthy; Grayloc connectors highlighted as a growing niche.
  • OPG growth drivers: Light well intervention cited as high-margin, capital-light catalyst; increased rework of existing infrastructure supports stability.
  • Remote piloting: Opportunity expands with 5G/low latency connectivity; ongoing investments in predictive maintenance and efficiency in SSR.
  • M&A and digital: GDi acquisition augments digital inspection; more opportunities visible; focus on assets where OII is the “best owner.”

Estimates Context

  • We were unable to retrieve S&P Global consensus in real time due to API limits; as such, we cannot provide numeric consensus comparisons for revenue or EPS for Q4 2024 at this time (consensus unavailable). However, management stated Q4 adjusted EBITDA was “slightly above…consensus estimates.”
  • Implications: With EBITDA slightly above consensus and robust OPG margins, Street models may raise SSR/OPG profitability for 2025, but the lowered FY25 EBITDA low end ($380M) could cap upward revisions to consolidated EBITDA until macro/geopolitical risk fades.

Key Takeaways for Investors

  • Mix shift is favorable: Sustained SSR pricing power and OPG’s 21% Q4 margin support a higher-quality earnings mix and potential for operating leverage into 2025.
  • Near-term watch: Manufactured Products margin recovery hinges on backlog conversion and mobile robotics normalization; backlog dipped to $604M, but mgmt cites a healthy pipeline.
  • 2025 setup: Despite lowered EBITDA low end, guidance midpoint implies y/y EBITDA growth; Q1 guide of $80–$90M de-risks the year’s start.
  • Cash and capital deployment: Strong cash generation and $498M cash balance support capex for growth (incl. ERP) and opportunistic buybacks; unallocated expense stepping to ~$45M/quarter.
  • Strategic edge: Light well intervention and digital initiatives (GDi, remote ops) can expand addressable markets and margins in OPG/SSR beyond cyclical IMR work.
  • Risk factors: Geopolitical and program timing (ADTech, government budgets) could affect 2025 cadence; white space on rigs could weigh on utilization though pricing momentum persists. 
All figures are sourced from Oceaneering’s Q4 2024 press release, 8-K, and earnings call unless otherwise noted. Citations included inline.

Appendix: Additional Relevant Press Releases (Q4 2024)

  • Acquisition: “Oceaneering Acquires Global Design Innovation Ltd.” (supports digital/software capability referenced by management).
  • Q3 2024 baseline: “Oceaneering Reports Third Quarter 2024 Results” (context for sequential trends and initial FY25 guide).