Bristow Group - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $350.5M, down 0.8% sequentially; diluted EPS was $0.92 and Adjusted EBITDA was $57.7M, essentially flat versus Q4 2024, while operating income improved to $33.5M.
• Offshore Energy Services (OES) margins expanded (Adjusted Operating Income +$3.1M QoQ) on $7.1M lower repairs and maintenance, offset by higher training costs; Government Services revenue rose $3.4M on the Irish Coast Guard ramp; Other Services declined seasonally by $6.0M.
• Management affirmed 2025 and 2026 guidance (total revenue $1.42–$1.615B and $1.525–$1.775B; Adjusted EBITDA $230–$260M and $275–$335M) and highlighted FX sensitivity of ~±$1.2M to Adjusted EBITDA per £0.01 move in GBP/USD.
• Call commentary flagged tariffs and macro risks but reiterated confidence given OES production weighting (~80%) and long-term SAR contracts; catalysts include the Sikorsky S‑92 long-term support agreement and Norway advanced air mobility (AAM) demonstrations beginning in Q3 2025.

What Went Well and What Went Wrong

What Went Well

• OES profitability: Adjusted Operating Income rose to $47.1M (+$3.1M QoQ) as repairs and maintenance fell by $7.1M; management noted continued constructive market conditions and tight equipment supply supporting rates.
• Government Services ramp: Revenue +$3.4M QoQ primarily from the Irish Coast Guard transition; segment Adjusted Operating Income +$3.9M QoQ.
• Strategic positioning and guidance: “We continue to have a positive outlook… supported by the stability of Government Services, weighting of OES to production support, and geographic breadth” — CEO Chris Bradshaw; 2025/2026 guidance affirmed.
• S‑92 support agreement: Long-term Sikorsky TAP contract provides price visibility/stability and >90% parts coverage for Bristow’s >60 S‑92 aircraft, a meaningful cost/availability mitigant.

What Went Wrong

• Seasonal softness in Other Services: Revenue fell $6.0M QoQ with Adjusted Operating Income down $4.5M, driven by Australia seasonality, FX headwinds, and lower dry-leasing.
• Working capital drag on cash flow: Operating cash flow was $(0.6)M as working capital used $56.4M, tied to receivables timing, government contract start-up costs, and inventory builds to mitigate supply chain risks.
• Higher tax expense: Income tax expense was $10.2M versus a Q4 benefit, reflecting earnings mix and deductible interest expense, partially offset by deferred tax assets recognition.

Transcript

Operator (participant)

Good day, everyone, and welcome to Bristow Group Report's first quarter 2025 earnings call. Today's call is being recorded. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, simply press star followed by the number five on your telephone keypad. At this time, I'd like to turn over the call to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Redeate Tilahun (Senior Manager of Investor Relations and Financial Reporting)

Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's first quarter 2025 earnings call. I am joined on the call today with our President and Chief Executive Officer, Chris Bradshaw, and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I'd like to take this opportunity to remind everyone that during the course of this call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on slide three of our investor presentation. You may access the 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 the investor presentation. I'll now turn the call over to our President and CEO, Chris.

Chris Bradshaw (President and CEO)

Thank you, Red. I will begin with a note on safety, which is Bristow's number one core value and our highest operational priority. The company achieved our target of zero air accidents in Q1 2025. In terms of workplace safety, we experienced fewer recordable injuries and fewer lost workdays than the first quarter of 2024, and we are currently on track to achieve the company's workplace safety targets for 2025. I want to thank all the Bristow team members around the world for their continued focus on placing safety first every day. Turning to financial performance and outlook for the company, we are pleased to report very strong first quarter financial results and to affirm Bristow's financial guidance for both 2025 and 2026.

We recognize that macroeconomic risks and uncertainty have increased significantly since the beginning of the year, and I want to briefly address the potential impacts on Bristow's business. Recently implemented U.S. tariffs on steel and aluminum imports, including some aircraft parts, introduce incremental costs and additional complexities into the industry's already complex supply chain. The new tariff regime has negative implications for repairs and maintenance costs on our U.S.-based aircraft fleet and introduces additional uncertainty for component delivery timelines. Having said that, in the scope of our overall financial guidance, we do not expect the direct impact of these costs to have a material impact on the company's financial performance. The greater risks relate to concerns about slowing economic activity, which could result in decreased demand for crude oil and natural gas.

These demand concerns, combined with an increased supply of crude oil, as OPEC+ has announced additional supply increases sooner than previously contemplated, have resulted in a significant reduction in the price of oil, which has adverse implications for our customers' spending plans. Despite these adverse developments, we continue to have a positive outlook for Bristow's offshore energy services business. Deepwater projects remain favorably positioned within oil and gas company portfolios, and the attractive full-cycle economic returns from these projects are likely to drive continued investment in offshore activity for the foreseeable future. In summary, we are confident in affirming the company's financial guidance. This belief is further supported by the stability of our government services business, the heavy weighting of our offshore energy services business to production support activities, and the breadth and diversity of the geographic markets we serve.

I will now hand it over to our CFO for a more detailed discussion of Q1 financial results and our financial outlook. Jennifer.

Jennifer Whalen (SVP and CFO)

Thank you, Chris. Good morning, everyone. I will begin with a review of Bristow's sequential quarter financial results on a consolidated basis before covering the financial results of each of our segments in more detail. Revenues decreased $3 million primarily due to lower utilization resulting from seasonality in our other services segment, namely our fixed-wing operations in Australia, partially offset by higher revenues from new contracts and government services. Revenues from offshore energy services, or OES, remained consistent with last quarter. Adjusted EBITDA was $58 million this quarter, consistent with last quarter. While Q1 is generally our seasonally lowest revenue period, our costs were lower, primarily driven by lower operating and administrative expenses, offsetting the lower revenues. Focusing on our OES segment, revenues in Europe decreased $4.5 million due to lower utilization in the U.K.

Revenues in Africa increased $2.2 million due to additional aircraft capacity and higher utilization, and revenues in the Americas increased $1.9 million due to increased utilization of heavy helicopters in the U.S. The $3.1 million increase in adjusted operating income from OES was primarily due to lower repairs and maintenance expenses of $7.1 million, partially offset by $3.2 million of increased expenses due to higher training costs in the current quarter and the absence of a property tax benefit recognized in the preceding quarter. Moving on to government services, revenues were $3.4 million higher, primarily due to the Irish Coast Guard contract, which began its transition in late 2024. Adjusted operating income for this segment was $3.9 million higher this quarter. Finally, revenues from other services were $6 million lower as a result of lower seasonal activity in Australia, unfavorable foreign exchange rate impacts, and lower dry leasing revenues.

Adjusted operating income was $4.5 million lower this quarter due to these lower seasonal revenues, which were partially offset by a decrease in operating expenses also related to activity. Turning now to cash flows, working capital uses of $56.4 million this quarter primarily resulted from an increase in accounts receivables due to the timing of customer payments, an increase in costs related to the startup of new government services contracts, and increases in inventory to support new contracts and to mitigate risks related to supply chain challenges. As a result of these working capital changes, cash used in operating activities was $0.6 million this quarter. Bristow continues to benefit from a strong balance sheet and liquidity position.

As of March 31, our available liquidity was approximately $254 million, and we have now funded 86% of the capital investments needed for our new government services contracts, with the remaining capital investments expected to conclude in the coming months. As we continue to transition on our two new government services contracts and begin to execute on our capital allocation targets, we remain mission-focused on maintaining a strong balance sheet and believe that our business model will continue to generate healthy cash flows. Moving on to Bristow's financial outlook.

Though additional uncertainty has been introduced to the global economy and to the oil and gas industry in recent months for the reasons Chris noted, we are affirming our previously reported 2025 revenues guidance of $1.4 billion-$1.6 billion and adjusted EBITDA range of $230 million-$260 million, as well as our 2026 guidance of $1.5 billion-$1.8 billion of total revenues and adjusted EBITDA range of $275 million-$335 million. Supply chain dynamics that impact aircraft availability, customer activity levels influenced by global energy demand, and the exchange rates of foreign currencies relative to the U.S. dollar, namely the British pound sterling and the euro, are among the primary factors that could bias results to either end of our guidance range.

In our OES segment, we expect market conditions to remain supportive in 2025 and to generate adjusted operating income of approximately $190 million-$210 million on revenues of $950 million-$1 billion, a significant improvement in profitability compared to 2024. In Europe, we expect activity levels to remain mostly stable in 2025, though in general, the North Sea is a mature market with limited growth opportunities. We believe the Americas and African markets will continue to contribute positively to growth in our 2025 results. In our government services segment, 2025 remains a transition year as we incur startup costs related to the new contracts, while the cadence of revenues is tied to a schedule that commences as each phase becomes fully operational. The strong margins and earning potential of this business will not become fully evident until the operations and revenues for these contracts have fully ramped.

We expect this segment to contribute meaningfully to our financial results, and the stable long-term cash flows with high credit-quality customers will provide valuable diversification and reliable capital returns to our investors well into the middle of the next decade. At this time, I'll turn the call back to Chris for further remarks. Chris?

Chris Bradshaw (President and CEO)

Thank you. We continue to believe that Bristow is well-positioned as the global leader in vertical flight solutions. The company's current fleet includes 211 aircraft located across six continents and 18 different countries. Bristow is the world's largest operator of each of the S-92, AW189, and AW139 helicopter models, which remain the most in-demand models for both offshore crew transportation and SAR missions. In our offshore energy services business, we continue to have an optimistic outlook for a long duration upcycle. The fleet status for offshore configured heavy and super medium helicopters remains at or near full effective utilization levels. With current manufacturing lead times at approximately 24 months, the ability to bring in new capacity is constrained.

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 to the U.K. SAR-2G contract in the United Kingdom. Those are large and complex projects with extended transition timelines running through the beginning of 2026 in Ireland and through the end of 2026 for U.K. SAR-2G. While we are facing challenges along the way with unexpected regulatory and supply chain delays, our commitment to delivering successful outcomes for the governments and communities we serve remains unwavering. Bristow's vision is to lead the world in innovative and sustainable vertical flight solutions, and we are committed to leading responsibly. Bristow's fourth annual sustainability report will be published in the coming weeks, which reaffirms our steadfast dedication to responsible growth and environmental protection for our employees as well as the diverse communities we take great pride in serving.

Our overall goal remains consistent. We seek to minimize our environmental footprint while maintaining the resilience of our operations through an inclusive workforce and an active outreach in the places where we work and call home. In conclusion, while macroeconomic risk and uncertainty have increased significantly in recent months, the outlook for Bristow's business remains positive, and we are confident in affirming the company's financial guidance for both 2025 and 2026. This confidence is supported by the stability of our government services business, the heavy weighting of our offshore energy services business to more stable production support activities, and the breadth and diversity of the geographic markets we serve. With that, let's open the line for questions. Luke?

Operator (participant)

At this time, I would like to remind everyone in order to ask a question, press Star, then the number five on your telephone keypad. If you'd like to withdraw your question, press Star and the number five once again. We'll pause for a moment to compile the Q&A roster. Okay. Our first question will come from Josh Sullivan with The Benchmark Company. Your line is now open. Please go ahead.

Josh Sullivan (Managing Director)

Hey, good morning.

Chris Bradshaw (President and CEO)

Morning, Josh.

Josh Sullivan (Managing Director)

Just, you know, given the uncertainty in the broader market, you know, a lot of companies in the space have suspended guidance, and you guys are reaffirming that in 2026 as well. Is this a wait-and-see approach to tariffs, or what gives you confidence to continue with the outlook here?

Chris Bradshaw (President and CEO)

Given the factors that you referenced, what's going on in the broader economy, we did take a hard look at our outlook, starting first with the view on the macro and the oil and gas industry with a particular focus on offshore activity. We are having customer conversations regularly, essentially daily, to make sure that we understand our customers' plans and expectations for the aircraft that we have located around the world. All of these factors in combination gave us the confidence to reaffirm our previously issued guidance for not just this year, but also next year and 2026, as you referenced. I would say, Josh, that is further supported by a few factors. One, the stability that exists in the cash flows from our government services business and those long-term contracts.

Two, the fact that 80% of our offshore energy revenues come from production support activities, which are more stable in times like these. Three, the broad breadth and diversity of the geographic markets that we serve. Again, that gave us, in summary, the confidence to reaffirm guidance for this year and next.

Josh Sullivan (Managing Director)

You know, you guys recently announced a long-term S-92 agreement with Sikorsky. Can you just expand on the benefits of the new agreement and what it entails?

Chris Bradshaw (President and CEO)

Yes, happy to do that. We were very pleased to reach this agreement with Sikorsky for S-92 support for Bristow's global fleet of S-92 helicopters, both search and rescue as well as offshore energy. The primary benefits are that this provides us price visibility and price stability for a large portion of our fleet well into the next decade, which provides, again, better stability and ability to manage the business that we have from that fleet globally.

Josh Sullivan (Managing Director)

Just as far as the CapEx investment, the search and rescue Irish opportunity, you know, how have helicopter OEMs been with deliveries at this point? You know, what's left in that, I guess, 14% of the CapEx related to the contract? You know, are you confident in that 86% at this point?

Jennifer Whalen (SVP and CFO)

Sure. Yeah. I mean, the helicopter deliveries, there have been, you know, some supply chain challenges for the OEMs as well as, you know, as we've experienced. But we have been receiving the helicopters. We have a couple left to receive, and so we're fairly confident in that number based on the couple of helicopters we have left to receive.

Chris Bradshaw (President and CEO)

I'd say the remaining amount of CapEx probably is more related to infrastructure and modifications, not necessarily the airframes themselves.

Josh Sullivan (Managing Director)

Okay. And then I guess just one last one, you know, in regard to, you know, the advanced air mobility opportunity, Norway moving along with eVTOL flights. Any updates there?

Chris Bradshaw (President and CEO)

In Norway specifically, we are happy to be part of an important new project there. Last year, Avinor and the Norwegian Civil Aviation Authority entered into a new collaboration agreement to establish Norway as an international test arena for zero and low-emission aircraft. In March of this year, the first formal agreement for demonstration flights was signed with U.S.-based aircraft manufacturer Beta Technologies and us, Bristow, as the operator. The goal of this new test arena is to demonstrate it on a real-world basis and gain knowledge from operations and learning to prepare the ecosystem for the foundation of this future industry. Those demonstration flights will begin with cargo flights, so no passengers on board, will begin with cargo. They're going to be conducted using Beta's Alia aircraft with Bristow Norway as the operator.

Again, we're excited to be part of what is really one of the first real-world applications of these new aircraft and technologies.

Josh Sullivan (Managing Director)

Good. Thank you for the time.

Chris Bradshaw (President and CEO)

Thanks, Josh.

Operator (participant)

The next question comes from the line of Steve Silver with Argus Research. Your line is now open. Please go ahead.

Steve Silver (Security Analyst)

Thanks, operator, and thanks for taking my questions. My first question is, given the majority of Bristow's business is outside the U.S., I was hoping you could provide a little color on maybe some of the specifics of the potential cost exposure in a higher tariff environment.

Chris Bradshaw (President and CEO)

Hey, good morning, Steve, and thank you for the question. As you noted, the vast majority of our revenues, about 85%, are generated from activities outside the U.S. For the portion that is generated here in the U.S., we do have some exposure on the import of some aircraft parts from foreign countries, namely Europe, into the U.S. to support the ongoing repairs and maintenance of those U.S.-based aircraft. In the context of our overall financial results and our overall financial outlook, we do not expect this to have a material impact on our financial performance.

Steve Silver (Security Analyst)

Great. One more, if I may. It sounds like the use of cash in the quarter was more of a timing issue. I'm just curious as to whether you expect anywhere near the current levels of working capital uses throughout the rest of the year.

Jennifer Whalen (SVP and CFO)

Thank you. Steve, good morning. The short answer is no, but a little more detail, you're right. It is really timing, particularly with our customers. It is really, this was on the government services side, not related to delinquent accounts, just the timing on that. We do have some pre-operation costs for those contracts, the government services contracts that will continue, but at more muted levels. We will continue to invest in inventory where need be to protect us on the supply chain side. Again, the short answer is no, we shouldn't see these same levels going forward.

Steve Silver (Security Analyst)

Great. Thanks so much for the extra color.

Chris Bradshaw (President and CEO)

Thank you.

Operator (participant)

The next question comes from the line of Laura Lee with Deutsche Bank. Your line is now open. Please go ahead.

Laura Lee (Executive Assistant)

Thank you for taking my question. I think you mentioned some supply chain challenges and the constraints. Have you seen any changes or improvements in the recent months?

Chris Bradshaw (President and CEO)

Yes, we have, fortunately. There have been some incremental improvements that relate specifically to the S-92 fleet, where Sikorsky has addressed some of the delays related to certain components. We are still experiencing delays on other components, both for the S-92 fleet as well as some of our other helicopter fleets. That's a challenge we've been dealing with for a few years now. It's not unique to us in this space. It's one that is really impacting the broader overall aviation industry, but we have seen some incremental improvements in recent months.

Laura Lee (Executive Assistant)

Okay. Gotcha. Also, we talked about the eVTOL test arena in Norway later this year. Are you expecting to expand the scope?

Chris Bradshaw (President and CEO)

We certainly are hoping that will be the case. Excited to be a part of that project, which is really one of the first of its kind anywhere in the world. It is a well-structured project in our view in that you have the government and the regulatory authorities there in Norway really sponsoring this international test arena. You have Beta as the OEM coming in with the aircraft to provide that level of support, and then an opportunity for us at Bristow to operate the aircraft and demonstrate in a real world what they are able to do, prove out some of the assumptions that have existed in the development of the aircraft, and factor in some of the real-world things that happen around weather and other environmental conditions.

We expect that the results from these test flights will be positive, and we think if that is truly the case, that we're likely to see an expansion of these sort of operations, both in Norway and elsewhere in the world.

Laura Lee (Executive Assistant)

Okay. Gotcha. Yeah, appreciate it.

Chris Bradshaw (President and CEO)

Thank you.

Operator (participant)

Our final question today comes from Alex Wessel with Arctic Securities. Your line is now open. Please go ahead.

Alex Wessel (Analyst)

Hey, guys. Thanks for taking my question. I just wanted to go back to the offshore energy piece a little bit. You know, obviously, oil prices have continued to soften this year. Could you give sort of any indication of what price you're going to start seeing impact on the business and the outlook?

Chris Bradshaw (President and CEO)

Yeah. Good morning, Alex, and thank you for the question. Today, we're not seeing any tangible impacts on offshore activity as we look at the projects we're supporting for our customers and their plans for upcoming quarters. No impact as of now. We're fortunate in that deep-water projects are really well-positioned within the portfolios of these oil and gas companies. We believe that they offer attractive full-cycle economic returns relative to some of the other investment opportunities they have within their portfolios. We believe that the level of investment will continue for the foreseeable future, really at a Brent price at or above $60 a barrel. We do not anticipate any material impact on activity or our business.

Alex Wessel (Analyst)

All right. Great. So it's fair to say there hasn't been any impact on the offshore activity so far?

Chris Bradshaw (President and CEO)

Correct. As of today, we haven't seen any tangible impact on the level of offshore activity that we're supporting today or expected to support in the coming quarter.

Alex Wessel (Analyst)

All right. Thank you. Appreciate it.

Chris Bradshaw (President and CEO)

Thank you.

Operator (participant)

This concludes the question-and-answer session. I'll now turn the call back over to Chris Bradshaw for closing remarks.

Chris Bradshaw (President and CEO)

Thank you, Luke, and thanks to everyone for joining the call. We look forward to connecting again next quarter. In the meantime, stay safe and well.

Operator (participant)

This concludes today's call. You may now disconnect at any time.