Bristow Group - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $376.4M, diluted EPS $1.07, and Adjusted EBITDA $60.7M; Bristow raised FY2025 Adjusted EBITDA guidance to $240–$260M and FY2026 to $300–$335M.
• Against S&P Global consensus, Q2 revenue missed ($376.4M vs $387.0M), EPS missed ($1.07 reported GAAP diluted EPS vs $0.76 Primary EPS consensus; note metric definitions differ), and EBITDA was near consensus (company Adjusted EBITDA $60.7M vs S&P EBITDA consensus $57.9M; definitions differ).*
• Offshore Energy Services drove sequential strength (+$13.0M QoQ), while Government Services saw an operating loss due to transition costs and FX headwinds despite higher revenue.
• Capital allocation accelerated: $15.3M UKSAR debt prepay and $3.9M share repurchases; total liquidity was $316.5M at quarter-end.
• Strategic catalysts: raised 2025–2026 guidance, ongoing UKSAR2G and IRCG transitions, and AAM progress via Norway Test Arena flights of BETA’s ALIA CX300.

What Went Well and What Went Wrong

What Went Well

• Offshore Energy Services revenue up $13.0M QoQ, with utilization gains in Europe (+$6.4M), Americas (+$3.7M), and Africa (+$3.0M); Adjusted Operating Income up $6.5M.
• Strong free cash generation: Free Cash Flow $94.5M and Adjusted Free Cash Flow $95.3M in Q2.
• Management tone and guidance: “We are pleased to report another quarter of strong financial results and to raise 2025 Adjusted EBITDA guidance to $240-$260 million and 2026 Adjusted EBITDA guidance to $300-$335 million,” — Chris Bradshaw, President & CEO.

What Went Wrong

• Government Services posted an operating loss of $1.9M (vs $6.0M income in Q1) despite +$6.6M revenue, driven by higher subcontractor and personnel costs, FX headwinds (~$3.0M), repairs & maintenance, and fuel.
• FX and non-operational impacts: income tax expense rose to $20.4M (vs $10.2M in Q1) due to mix and lower deductible interest; net interest expense increased on UKSAR prepayment amortization.
• Other operating expense categories increased QoQ: “Other” operating expenses rose by $15.1M sequentially, reflecting activity-related costs and transition investments.

Transcript

Speaker 6

Good day, everyone, and welcome to Bristow Group Inc. Reports' second 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 would like to ask a question during that time, simply press star followed by the number five on your telephone keypad. At this time, I would like to turn the call over to Redeate Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Speaker 2

Thank you, Leila. Good morning, everyone, and welcome to Bristow Group's second 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 risk 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.

Speaker 1

Thank you, Red, and good morning, everyone. I will begin with a note on safety, which is Bristow's number one core value and our highest operational priority. The company experienced one air accident in Q2 2025, which involved an AW139 helicopter landing on an offshore platform in Brazil. There were no injuries to personnel nor any damage to the offshore facility, but the aircraft was damaged. The event was unusual in that all indications fell within the parameters of a normal landing procedure, but shortly after touching down, a portion of the aircraft structure buckled, causing damage. In terms of workplace safety, we had a very good quarter with continued decline in the number of recordable injuries and lost work time. 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, we are pleased to report strong second quarter results and to raise Bristow's financial guidance for both 2025 and 2026. I would highlight that the midpoint of 2026 adjusted EBITDA guidance represents a 27% increase over the midpoint of 2025 adjusted EBITDA guidance, reflecting the strong growth expectations for our business. Robust cash flow generation positions us to execute on Bristow's established capital allocation framework, and both accelerated debt paydowns and opportunistic share repurchases commenced in the second quarter. I will now hand it over to our CFO for a more detailed discussion of Q2 results and our financial outlook. Jennifer?

Speaker 3

Thank you, Chris, and good morning, everyone. I would like to reiterate Chris's comments on how pleased we are to report another quarter of strong financial results and to be able to raise 2025 and 2026 adjusted EBITDA guidance. Turning to our sequential quarter financial results on a consolidated basis, Bristow's revenues were $25.9 million higher in the second quarter, nearly half of which was driven by higher revenues in our Offshore Energy Services, or OES, segment, and the remainder of the increase almost evenly split between government services and other services revenues. Adjusted EBITDA was $60.7 million this quarter, reflecting a $3 million increase compared to last quarter.

Revenues from our OES segment were $13 million higher, primarily due to higher revenues in Europe of $6.4 million, resulting from increased utilization and favorable foreign exchange rate impacts in Norway, higher revenues in the Americas of $3.7 million due to higher utilization in the U.S., and higher revenues in Africa of $3 million, resulting from higher utilization and additional aircraft capacity introduced into the region. The $6.5 million increase in adjusted operating income from OES was primarily due to higher revenues, partially offset by higher operating expenses, which included higher reimbursable expenses of $2.5 million, as well as higher training and travel, subcontractor, and repairs and maintenance costs of $1.2 million each. Moving on to government services, revenues were $6.6 million higher, predominantly due to the ongoing transition of the Irish Coast Guard, or IRCG, search and rescue contract, and higher utilization in our UK search and rescue business.

Adjusted operating income for this segment was $7.7 million lower this quarter due to higher subcontractor costs of $5.1 million and higher personnel costs of $2.8 million related to the previously mentioned ongoing contract transition. Unfavorable foreign exchange rate impacts of $3 million, higher repairs and maintenance costs of $2 million, and higher fuel costs of $0.6 million, offsetting the increased revenues. As the transition comes to completion for both IRCG and UK STAR 2G contracts, we will expect adjusted operating income margins to return to or exceed pre-2024 levels, and for full-year impacts in subsequent years to contribute meaningfully to our financial results, providing reliable capital returns well into the middle of the next decade. Finally, revenues from our other services were $6.3 million higher, resulting from seasonally higher utilization in Australia.

As a reminder, our operations in Australia experience fewer passengers during the wet season from December through March, and activity typically picks up in the second and third quarters. Adjusted operating income was $4.1 million higher this quarter due to the increased activity. Moving on to Bristow's financial outlook. Though ongoing uncertainty continues in the global economy, we have been well positioned to have better visibility than most. As such, we are increasing our previously reported 2025 adjusted EBITDA range to $240 to $260 million, and our 2026 adjusted EBITDA guidance range to $300 to $335 million. In our OES segment, we expect market conditions to remain constructive in 2025 and to generate adjusted operating income of approximately $200 to $205 million on revenues of $982 million. The factors contributing to the increased guidance in this segment include better visibility into operating costs and expected customer activity levels.

In our government services segment, we expect to generate adjusted operating income of approximately $40 to $50 million on revenues of $360 to $400 million. This segment will continue to feel the effects of the new contract transitions until they are fully operational. As I noted earlier in the call, 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 in 2026 and beyond. In our other services segment, we expect to generate adjusted operating income of approximately $20 to $25 million on revenues of $120 to $130 million, primarily due to improved economics in our regional airline in Australia.

You may recall from previous earnings calls that the primary factors that could bias results to either end of our guidance range include supply chain dynamics that impact aircraft availability, customer activity levels influenced by global energy demand, new contract transitions, and the exchange rates of foreign currencies relative to the U.S. dollar, namely the British pound sterling and the euro. Turning now to cash flows, operating cash flows were almost $100 million higher than the preceding quarter and $38 million higher than the prior year. Working capital changes also saw an improvement of approximately $34 million this quarter, primarily resulting from the timing of customer selection. Bristow continues to benefit from a strong balance sheet and liquidity position.

As of June 30, our available liquidity was approximately $317 million, and we have now funded 92% of the capital investments needed for our new government services contract, with the remaining capital investment expected to conclude in the coming weeks. As Chris noted, we are happy to begin executing on our previously announced capital allocation targets, which included a $15.3 million accelerated principal payment on our UK STAR debt facility and the repurchase of nearly 120,000 shares of common stock in open market transactions, representing an average cost per share of $32.41, both of which occurred during the current quarter. As of June 30, $121 million remained available under our $125 million stock repurchase program. We consistently evaluate the best uses of our cash flow and aim to yield the highest value and return on capital.

We will continue to execute on our capital allocation strategy, which currently prioritizes maintaining a strong balance sheet, the conclusion of investments needed to complete the government services contract transitions, and the return of capital to shareholders. At this time, I'll turn the call back to Chris for further remarks. Chris?

Speaker 1

Thank you, Jennifer, and I want to thank all the Bristow team members working diligently on the ongoing launch of search and rescue services for the Irish Coast Guard and the transition of operations to the UK STAR 2G contract in the United Kingdom. While we have faced challenges along the way with unexpected regulatory and supply chain delays, the company is on track to meet the revised milestone dates, and our commitment to delivering successful outcomes for the government and communities we serve remains unwavering. From a financial standpoint, 2025 was known to be a transition year for our government services business, as reflected in our guidance. The full earning potential of this business should become evident in 2026 and beyond, and we expect these contracts to deliver compelling financial returns well into the middle of the next decade. The outlook for our Offshore Energy Services business remains positive.

While increased supply from OPEC+, combined with demand uncertainty, have raised concerns about the trajectory of upstream spending for the overall oil and gas industry, offshore projects remain favorably positioned within oil and gas company portfolios. The attractive full cycle economic returns from these projects are likely to drive continued investment for the foreseeable future, as capital continues to rotate out of shorter cycle projects and into longer cycle deep water investments. These positive demand conditions are paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains at or near full effective utilization levels. The ability to bring in new capacity remains limited, with production lines that must be shared with military aircraft orders and current manufacturing lead times of approximately 24 months.

In conclusion, while macroeconomic risks and uncertainty are elevated, the outlook for Bristow's business remains very positive, and we are pleased to raise 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, the 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. Leila?

Speaker 6

At this time, I would like to remind everyone, in order to ask a question, please press the star and the number five on your keypad. Again, that is star five. If you would like to withdraw your question, please press star and number five once again. We'll pause for just a moment to compile the Q&A roster. Your first question will come from Jason Bandel with Evercore. Your line is now open.

Great, thanks. Good morning, Chris, Jennifer, and Red.

Speaker 1

Good morning.

First question, just given the headwinds in the macro for the oil sources sector in general, we haven't really seen too many companies that have the ability to raise their guidance this earnings season. You reaffirmed the original guidance last quarter. What gives you greater confidence in the outlook here to kind of raise it now? Can you dig a little bit deeper into some of the primary drivers behind the 2025 and 2026 increase that you mentioned in the prepared remarks?

Speaker 3

Sure, Jason. I mentioned this in my prepared remarks, but we really do have some better visibility into our overall costs and to our customer activity, which has really allowed us to be able to raise that outlook.

Given the oil price volatility that we've kind of seen, some customers slow their decision-making and have a lower sense of urgency when it comes to contracting of services in other parts of the OFS supply chain, even some of the more resilient OpEx spend areas. Are you seeing any changes in behavior among your production line to customers at this time?

Speaker 1

Good question. Fortunately, the short answer is no. Actually, our biggest struggle currently is managing through supply chain challenges to meet customer demand. It's a challenge right now to keep up with the current level of demand. This is why we're moving existing aircraft in our portfolio to optimize utilization around our different geographies and also bringing in new aircraft to increase capacity in markets like Africa and Brazil.

Understood. That's the last one for me. Knowing that the majority of your OES revenue is generated from contracts supporting offshore production, as exploration and development drilling activity starts to improve in the second half of 2026 or hopefully improve in the second half of 2026 and into 2027, how much of that increase is already factored into your 2026 guidance, if any?

We are including an expectation of increased activity in the latter half of 2026 into our guidance range. Obviously, we'll all have to wait and see how that materializes. That's one of the reasons that we do provide a range of a low end and a high end. We are considering the impact of increased activity in offshore in the latter half of next year. This is one of the reasons that early last year we placed a new order for AW189 offshore configured helicopters. We have seven firm orders there and 10 options, which provides us with the flexibility to bring in additional capacity to meet some of that growth should it materialize on compelling returns for our stakeholders.

Great. Thanks for taking my questions. I'll turn it back.

Thank you.

Speaker 6

Your next question will come from Josh Sullivan from The Benchmark Company. Your line is now open.

Good morning.

Speaker 1

Morning, Josh.

Morning, Josh?

Just looking at the increased subcontractor costs you mentioned this quarter, are these related to ongoing contractor transitions, or should we expect them to persist?

Speaker 3

Good morning, Josh. Thanks for the question. While we always have some level of subcontractor activity for various different functions, it is elevated during the transition of the government services contract. Both of our new government services contracts include a fixed-wing element being integrated into the operations for the first time. That portion of the subcontractor costs will continue, but a portion of the subcontractor costs relate to different activities to stand up the services and will not continue once we get fully transitioned.

Speaker 1

Got it. As far as supply chain dynamics, you mentioned as a factor in guidance, what are you seeing as far as the availability of spares and just generally in the supply chain at this point? We're seeing some improvements. I'm pleased to share that. We're still not where we want to be, but some of the OEMs that have been struggling over the last couple of years have made significant strides in improving their delivery times of critical components. We expect this to continue to be a headwind for the near term, but I do want to note the progress that's been made and things are trending in the right direction there.

Maybe one on the advanced mobility market. Any updates from the announcement with the Norway Advanced Air Mobility Sandbox? I think you're doing with Beta Technologies.

Yes, a very timely question, actually. We're excited to share that the first flight for the Norway TETARINA project is scheduled for this Friday, August 8, which is an exciting real-world application of this new technology, all-electric aircraft. We're honored to partner with Beta Technologies, Avinor, and the Norwegian government on this innovative sandbox project, which will allow us to evaluate really the real-world use cases for the aircraft with routes and capabilities and test how these next-generation AAM aircraft can be deployed out in the world.

Do you think we'll see more sandbox announcements over the next year or so with other manufacturers that you might have relationships with? How should we envision this opportunity evolving over the next couple of years?

Yes, we are optimistic that there will be more sandbox-like projects of this nature in other jurisdictions over the next couple of years. We're exploring those opportunities. It could be in places such as the UK, the U.S., even parts of Africa have shown some interest. We are going to pursue those opportunities in earnest, and I do think that they're likely to occur in other geographies over that period of time.

Got it. Just one last one, on the free cash flow profile and cash deployment starting, can you update us on how should we think about sustaining CapEx and that target net debt? Just update us on the priorities there.

Speaker 3

Sure. As I noted, we're about 92% done with the government services contracts, which is the large CapEx that we've been working through for the last couple of years. We do have orders for seven new AW189s to be deployed over the next couple of years as well. We did put in our, as part of our capital allocation strategy, that we're going to pay down our gross debt to $500 million and started that paydown in this quarter with a $15 million paydown of our UK STAR debt. We're starting to deploy the cash that is coming out of the free cash flow that's coming out of the business as we move out of this heavy investment cycle into a more sustained cycle.

Great. I'll leave it there. Thank you for the time.

Speaker 1

Thanks, Josh.

Speaker 6

Our next question will come from Steve Silver with Argus Research. Your line is now open.

Thanks, operator, and congratulations on the quarter. Thanks for taking my questions. Given the strong free cash flow in Q2 and the improved working capital in the quarter, I was curious if there's any call that you could provide on the capital allocation strategy, given the fact that you only use a modest portion of the share repurchase program in Q2.

Speaker 1

Yep. As you noted, we still have a lot of capacity under the board-approved share repurchase program. About $121 million remains under the $125 million. We had previously messaged when we announced the capital allocation framework that our priorities in Q2 would really be completing the investment capital spend for those big government projects that Jennifer was talking about, as well as beginning the accelerated debt paydown to reach our gross debt target that Jennifer referenced. We actually pulled forward, if anything, some of the timing of those opportunistic share repurchases into Q2. Going forward, as announced, we will continue to take an opportunistic approach to the share repurchases. We've also announced that beginning in Q1 of 2026, the company intends to initiate a cash dividend program. We look forward to kicking that off in the new year as well.

Great. That's helpful. Could you provide any color on what considerations factored into the decision to accelerate the principal payments to the UK STAR equipment facility over any other debt instruments?

Speaker 3

Sure. Thank you for the question. Our UK STAR debt currently is our highest cost debt, and it had no prepayment penalty, so it was the best choice for our first paydown.

Okay, great. Thanks so much, and congratulations again.

Speaker 1

Thank you.

Speaker 6

Once again, if you have a question, you may press star five on your telephone keypad. Our next question will come from Keith Beckman with Pickering Energy Partners. Your line is now open.

Hey, good morning. Could you walk us through how your contracting model makes you somewhat insulated from an activity drop that is impacting the outlook for other OFS companies with exposure to deep water activity?

Speaker 1

Yes. Good morning, Keith, and happy to do that. I would say first, before getting into the contracting model, just a quick note on business mix. We do have a sizable portion of our revenues, about 33%, that come from non-oil and gas activity. These are the long-term, very stable government services contracts, as well as the fixed-wing business that we have. Coming back to our offshore energy services business, our contracting model is exposed really to 80% production support. We have relatively less exposure to short cycle drilling and exploration. Within our contracts, the significant majority of the revenues are earned on the monthly standing charge, which we get paid to be there on a standby basis. That de-risked some of that exposure to actual flight activity as well. I think it's business mix, it's the heavy weighting to production, and it's also the duration.

Our typical contract is about a five-year contract to support that longer-term production type work.

That's great color. If I could take one more in, visibility for the floating rig count is pretty soft through the year-end. We think Q4 floater activity could come down 8 to 10% from Q2. If that happens, how would lower floating rig activity show up in results? Would it be mostly confined to lower average flight hours, kind of like what you're saying?

Yeah, good question. I would say overall, we don't anticipate that scenario referenced to impact our guidance ranges for this year. We have had an expectation for some new projects that would commence this year. Those we see actually materializing. In fact, one that we just began in Suriname. We don't really have anything on the come in terms of new drilling activity before the end of the year that would impact that guidance range. We do continue to maintain a constructive outlook for offshore activity overall. Certainly, as you get into 2026 and beyond, we think those offshore projects are continuing to be well positioned within the oil and gas company portfolios.

Again, just following up to the gist of your question, in terms of the potential white space or idle floater activity between now and the end of the year, we don't anticipate that impacting the guidance rates that we've provided.

Awesome. Thanks. Appreciate it.

Speaker 6

Our final question will come from Colby Sasso with Daniel Energy Partners. Your line is now open.

Hi, thanks for having me on the call.

Speaker 1

Hi, good morning.

Good morning.

Last quarter, you noted you weren't expecting much of a direct financial result from tariffs, but you noted R&M costs could go up as there may be uncertainty for component delivery times. Have you seen any issues with delivery times for components? If you haven't been impacted, to your knowledge, has this been impacting any of your competitors?

Yeah, timely question. Certainly. For Bristow, the answer is no. We haven't seen an impact to date. Obviously, there remains some uncertainty around global trade and the tariff environment. We are encouraged by some of the recent announcements, including the intended EU-U.S. trade deal, as well as the Brazil-U.S. trade deal, in that from everything that we understand, it's understood that the agreements will exclude civil aircraft and parts from the tariff regime, keeping those at a zero tariff basis, which obviously is constructive for us. I think it's constructive for the overall industry supply chain. Again, to date, no impacts adversely from tariffs on R&M costs or timing of deliveries. I can't speak for everyone else in the industry, but I would imagine that any delays others might be experiencing in terms of deliveries would be related to things other than tariffs.

Makes sense. As a quick follow-up, West Africa has received a decent amount of airtime on this quarter's offshore drillers calls with respect to where incremental deep water opportunities will come in the next three to five years. Could you talk about where you're expecting to see the most growth in your energy business in the next couple of years?

Yes, and thank you for the question. I would say in terms of the growth opportunities for our overall business, it includes markets like Brazil, where we still see quite a bit of incremental demand and growth potential and the need to move additional aircraft into Brazil to meet that demand. Also, the US Gulf is a pretty constructive market. In terms of %, it won't increase at the same rates, but there are incremental opportunities here. Coming around to probably the top of the list, which you referenced, which is Africa, this is a market where we, again, today our greatest challenge is keeping enough aircraft working to meet the demand.

We're looking to move additional aircraft from within our existing portfolio, also bringing additional aircraft capacity into our fleet to meet some of that demand that we see coming from Africa, given the projects that are expected to move forward there.

Thank you so much for the color. I'll turn it back.

Thank you.

Speaker 6

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

Speaker 1

Thank you, Leila, and thanks everyone for joining the call. I hope everyone stays safe and well, and we look forward to speaking again next quarter. Thank you.

Speaker 6

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