TIDEWATER INC (TDW) Q2 2025 Earnings Summary

Executive Summary

• TDW delivered a clean beat: revenue $341.4M vs consensus $317.3M and diluted EPS $1.46 vs $0.48, driven by record average day rate ($23,166) and stronger uptime; gross margin was 50.1% for the third straight quarter .
• Management reiterated FY25 guidance (revenue $1.32–$1.38B, gross margin 48–50%), but trimmed near-term expectations: Q3 revenue down ~4% q/q and gross margin ~45%, citing softer day rates in the North Sea/West Africa and FX normalization .
• Strategic catalysts: completed a long-sought capital structure reset ($650M 9.125% senior unsecured notes due 2030 and a $250M undrawn revolver) and authorized a new $500M share repurchase program (>20% of market cap), enhancing flexibility for both M&A and buybacks .
• Setup into Q4 is constructive: utilization expected to improve as drydock days fall by half, supporting margin lift; firm backlog plus options of $585M covers ~93% of FY revenue guidance midpoint .

What Went Well and What Went Wrong

What Went Well

• Day rate and uptime outperformance: average day rate of $23,166 set a quarterly record; uptime lowered repair costs and fuel during idle days, lifting gross margin to 50.1% vs prior guidance of 44% .
• Free cash flow strength: FCF of $97.5M, second-highest since the recovery began; YTD FY25 FCF >$192M .
• Balance sheet and capital returns: issued $650M unsecured notes (9.125%, due 2030), added a $250M revolver, and launched a $500M buyback, while repurchasing 1.4M shares in Q2 for $50.8M at $36.80 avg .

Selected quotes:

• “Day rates outperformed our expectations by more than $1,300 per day, setting a new quarterly day rate record at $23,166... our gross margin of 50.1% came in well above our expectation of 44%…” — CEO Quintin Kneen .
• “Pro forma for the refinancing, Tidewater had liquidity north of $600M at the end of Q2…our new debt instruments provide substantial flexibility…we are excited to announce the $500M share repurchase program.” — SVP West Gotcher .

What Went Wrong

• Near-term softness and day rate pressure: management flagged softer leading-edge day rates in the North Sea and West Africa into Q3, with FX tailwinds fading .
• Regional headwinds: Africa revenues fell 22% q/q on winding down Orange Basin campaigns; gross margin decreased by 12pp on lower rates, utilization, and higher R&M/fuel .
• Working capital risk: Mexico AR remained unpaid for several quarters; at June-end ~14% of trade AR was from primary Mexican customer (historically collectible, but monitored) .

Financial Results

Notes:

• Company gross margin refers to vessel operating margin; adjusted EBITDA is non-GAAP per definitions in release .
• EBITDA consensus may not be directly comparable to company “Adjusted EBITDA” due to differing definitions .
• Values retrieved from S&P Global for consensus items (marked with *).

Segment revenue breakdown (vessel revenues):

Key KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are very pleased to have consummated this refinancing… Alongside the new bond, we put in place a $250,000,000 revolving credit facility that provides us with a significant amount of financial flexibility.” — CEO Quintin Kneen .
• “Under the bonds… unlimited ability to return capital provided our net leverage ratio… less than 1.25x… Revolver allows unlimited returns provided net leverage does not exceed 1x.” — SVP West Gotcher .
• “Near term… next quarter or two appear to be a bit softer… subsea and production related activity remains robust… should help set up for rates again pushing higher as drilling picks up in 2026.” — CEO Quintin Kneen .

Q&A Highlights

• M&A pipeline and discipline: Management more optimistic on actionable opportunities but will only transact if value exceeds repurchasing intrinsic shares .
• Q3 outlook clarity: Expect slight utilization improvement but printed day rate reduction (North Sea/West Africa softness and FX normalization) leading to ~4% revenue decline .
• Q4 uplift drivers: Drydock days to halve (~3pp utilization lift) plus subsea construction awards in Africa/APAC support activity and margins .
• Africa multi-year view: Near-term pause in drilling; development programs (Namibia/Angola/Congo/Nigeria) expected to ramp 2026+; subsea/production strong .
• Share repurchase sizing: $500M sized against cash on hand and ~$100M/quarter FCF; pace will flex with M&A .

Estimates Context

• Q2 beat vs consensus: revenue $341.4M vs $317.3M*, EPS $1.46 vs $0.48*, driven by record day rate and uptime/opex benefits; EBITDA comparisons depend on definition (company Adjusted EBITDA $163.0M) .
• FY25 consensus revenue ~$1.341B* is aligned with the company’s guided $1.32–$1.38B; given Q2 strength but Q3 pullback, models likely shift to stronger Q4 margins from lower drydock while keeping FY range intact .

Values retrieved from S&P Global for consensus items (marked with *).

Key Takeaways for Investors

• Execution upside: The Q2 beat was quality (day rate, uptime, opex), not one-off; however, management is transparent about near-term softness and FX fade .
• Capital returns and flexibility: $500M buyback and unsecured/revolver reset add real optionality; expect opportunistic repurchases balanced with accretive M&A .
• Near-term trade: Q3 prints likely weaker on rates; setup into Q4 more favorable as drydock days fall and subsea awards kick in; watch North Sea and West Africa rate trends .
• LT thesis intact: Subsea/production baselining combined with drilling ramp in 2026–2028 amid tight vessel supply supports reacceleration in day rates and margins .
• Regional mix matters: Europe/Mediterranean and Americas showed strength; Africa/APAC volatility should moderate as tenders/production work fill gaps .
• Working capital watch: Mexico AR remains elevated but historically collectible; not thesis-breaking but worth monitoring .
• Definitions matter: For EBITDA, use company-adjusted series when benchmarking profitability; consensus “EBITDA” may not match company definitions .