Bristow Group - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 revenue was $386.3m and diluted EPS was $1.72; Adjusted EBITDA rose to $67.1m, continuing sequential improvement from Q2 and Q1. Management tightened FY25/FY26 guidance ranges and reiterated a 2026 adjusted EBITDA midpoint implying roughly 27% YoY growth versus 2025 midpoint.
• Offshore Energy Services (OES) softened sequentially on lower Europe/Africa utilization, partly offset by Americas; Government Services and Other Services strengthened, aided by Irish Coast Guard ramp and Australia activity. Vendor credits materially helped repairs and maintenance costs this quarter.
• Revenue modestly missed Wall Street consensus by ~$13.7m (estimate $400.0m vs actual $386.3m); EPS consensus was not available. The miss was driven by supply-chain constraints impacting aircraft availability and utilization, and fewer aircraft on contract in the North Sea and U.S. [functions.GetEstimates]*.
• Guidance was tightened: FY25 adjusted EBITDA to $240–$250m and FY26 to $295–$325m; OES adjusted operating income expected ~$200m in FY25 and $225–$235m in FY26. Management framed 2026 as an inflection year as government contracts reach full run-rate; free cash flow in 2026 is guided at ~$140m midpoint (after ~$100m capex).
• Key potential stock catalysts: continued government contract ramp, confirmation of vendor credits cadence and supply-chain normalization, 2026 FCF realization, and clarity on North Sea fleet replacements and Brazil/Africa aircraft deployments.

What Went Well and What Went Wrong

What Went Well

• Government Services improved: revenues +$8.4m QoQ; adjusted operating income +$4.8m QoQ as an additional Irish Coast Guard base commenced operations.
• Adjusted EBITDA up $6.4m QoQ to $67.1m, supported by revenue growth and lower G&A; management reaffirmed strong 2026 growth outlook (~27% YoY adj. EBITDA midpoint).
• Management highlighted vendor credits as a positive offset on maintenance costs this quarter, citing credits tied to asset purchases, OEM performance/delays, and long-term maintenance contract incentives. Quote: “We benefited more materially from such credits this quarter… and continue to value our strong relationships with our OEM”.

What Went Wrong

• OES revenues and adjusted operating income fell $2.4m QoQ on lower utilization in Europe and Africa, only partially offset by higher Americas utilization.
• Supply-chain challenges persisted across models (S-92 improvement but AW189 now impacted), affecting aftermarket parts and new delivery timing; fewer aircraft were on contract in the North Sea and U.S..
• Revenue missed consensus (~$400.0m) by ~$13.7m; management attributed pressure to aircraft availability constraints and pockets of softer activity (North Sea); EPS consensus was unavailable [functions.GetEstimates]*.

Transcript

Speaker 0

Good day, everyone, and welcome to Bristow Group's third quarter of 2025 earnings call. Today's call is being recorded. After the speaker's remarks, there'll 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 the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Speaker 4

Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's third quarter of 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 as 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. To begin, I want to commend the Bristow team for their steadfast dedication to deliver safe, efficient, and reliable services despite the persistent supply chain challenges that have plagued the aviation industry in general. The civilian helicopter industry in particular, for the last four years. I appreciate our team's unwavering commitment to operational excellence and delivering the best possible outcomes for our customers and stakeholders. We are also pleased to report another quarter of strong financial performance with adjusted EBITDA of $67.1 million in Q3 2025. Looking forward, Bristow continues to have a positive outlook for offshore energy services activity. Deep water projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies. We believe offshore projects will receive an increasing share of upstream capital investment. This positive long-term demand outlook is paired with a tight supply dynamic.

The fleet status for offshore-configured heavy and super-medium helicopters remains near full effective utilization levels. The ability to bring in new capacity remains constrained, with production lines that must be shared with military aircraft orders and current manufacturing lead times of approximately 24 months. We believe the tight supply of offshore helicopters supports a more constructive outlook for our sector relative to some other offshore equipment sectors. In addition, 2026 represents an important inflection point for Bristow's government services business. As we reach the full operational run rate under the Irish Coast Guard contract and continue the transition to the new U.K. Star 2G contract in the United Kingdom. While the cost incurred to effectuate these contract transitions has caused a negative drag on profitability in 2025. That impact inverts in 2026. With adjusted operating income from our government services business nearly doubling year over year.

For the company as a whole, I would highlight that the midpoint of Bristow's 2026 adjusted EBITDA guidance represents a 27% increase over the midpoint in 2025, reflecting the robust growth expectations for our business. I will now hand it over to our CFO for a more detailed discussion of Q3 results and our financial outlook. Jennifer.

Speaker 2

Thank you, Chris. Good morning, everyone. As Chris noted, we are pleased to report another quarter of strong financial results, with total revenues reflecting an increase of $9.9 million and adjusted EBITDA reflecting an increase of $6.4 million on a consolidated sequential basis, both of which were primarily driven by our government services and other services segments. We have also updated and tightened our 2025 and 2026 outlook ranges, which I will discuss further on during this call. Turning now to our sequential quarter segment financial results, beginning with our offshore energy services, or OES, segment. Revenues and adjusted operating income were both $2.4 million lower this quarter. Revenues in Europe and Africa were $6.6 million and $1.5 million lower, respectively, primarily due to lower utilization, while revenues in the Americas were $5.7 million higher, primarily due to higher utilization.

The lower revenues were partially offset by lower general and administrative expenses due to a decrease in professional services fees. Overall, operating expenses were consistent with the preceding quarter, primarily due to higher personnel costs of $7.3 million due to the absence of a seasonal personnel cost benefit in Norway in the preceding quarter and higher benefits and overtime costs in the current quarter. These increases were offset by lower repairs and maintenance costs of $5.3 million, driven by higher vendor credit, and a decrease in other operating expenses of $2.3 million. Moving on to government services, revenues were $8.4 million higher, primarily due to the ongoing transition of the Irish Coast Guard contract as an additional base commenced operations in the third quarter.

Operating expenses were $2.8 million higher and largely comprised of higher subcontractor costs, increased amortization of deferred costs, and higher personnel costs, all of which were related to the new government services contract. Repairs and maintenance costs, however, were $4 million lower due to higher vendor credit and the timing of repairs. General and administrative expenses were $0.8 million higher, primarily due to higher professional services fees and personnel costs related to contract transitions. Adjusted operating income for this segment was $4.8 million higher this quarter. Before we move on to our other services segment, I'd like to provide color on the references to vendor credits in our OES and government services segments.

In our industry, OEM or vendor credits are common practice and generally provided for reasons such as credits tied to asset purchases, particularly when a customer has placed orders for several aircraft, OEM performance and delays, and incentives when entering or extending long-term maintenance contracts or as refunds when exiting such contracts. While we have historically received vendor credits and applied them towards aircraft and inventory parts purchases or ongoing maintenance, we benefited more materially from such credits this quarter and continue to value our strong relationships with our OEM. As a reminder, Bristow is the world's largest operator of S-92, AW189, and AW139 helicopter models, which remain the most in-demand models for both offshore crew transportation and SAR missions. Finally, revenues from other services were $3.8 million higher, primarily due to higher activity in Australia of $4.8 million, partially offset by the conclusion of a dry lease contract.

The higher revenues were partially offset by higher operating expenses of $1.9 million related to the increased activity in Australia. As a result, adjusted operating income was $1.9 million higher this quarter. Moving on to Bristow's financial outlook. You may recall from our 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 rate of foreign currencies relative to the US dollar, namely the British pound sterling and to a lesser extent the euro. As such, we are tightening our 2025 adjusted EBITDA range to $240 million-$250 million on total projected revenues of $1.46 billion-$1.53 billion.

For 2026, we are tightening our adjusted EBITDA range to $295 million-$325 million on total projected revenues of $1.6 billion-$1.7 billion. This represents an approximately 27% increase in adjusted EBITDA from the 2025-2026 midpoint. Given better visibility into operating costs and expected customer activity levels, we are updating the adjusted operating income guidance ranges for our OES segment to approximately $200 million for 2025. Despite current market conditions in the energy sector, we expect strong performance from the segment to continue in 2026, as evidenced by the updated adjusted operating income range of $225 million-$235 million, representing a 15% year-over-year increase from the midpoint.

While margins in our government services segment improved this quarter and the capital investment for our two new government contracts have largely concluded, we expect this segment will continue to feel the effects of new contract transitions until they are fully operational. The strong margins and earning potential of this business will continue to improve as the operations and revenues for the contracts continue to ramp. The 2026 midpoint for our adjusted operating income range reflects a 76% increase compared to 2025. In other services, we expect the improved economics of our regional airline in Australia to persist and for this segment to remain consistent and cash flow accretive. Turning now to cash flows. Operating cash flows generated approximately $122 million year-to-date 2025 compared to $126 million in the prior year.

Working capital continues to be impacted by increases in inventory to support new contracts and mitigate risks related to supply chain constraints and an increase in other assets primarily related to startup costs for new government services contracts. However, we expect working capital to improve over time as supply chain constraints subside and our new contracts conclude their transition periods and reach their full operational run rate. Additionally, as of the third quarter, our unrestricted cash balance was approximately $246 million, with a total available liquidity of $313 million. Moving on to our previously announced capital allocation targets, we made an additional $25 million of accelerated principal payments on the UKSR debt facility in the current quarter, bringing the total accelerated payments to $40 million this year.

In summary, we remain focused on meeting our financial and operational targets and executing our capital allocation strategy while continuing to benefit from and working to maintain a strong balance sheet and liquidity position. At this time, I'll turn the call back to Chris for further remarks. Chris.

Speaker 1

Thank you. In conclusion, we are pleased to highlight the company's robust growth outlook for 2026, as evidenced by expected adjusted EBITDA growth of approximately 27% year-over-year. This outlook is supported by the growth and 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.

Speaker 0

At this time, I'd like to remind everyone, in order to ask a question, please 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. Our first question will come from Jason Bandel with Evercore ISI. Your line is now open. Please go ahead.

Speaker 3

Thanks. Good morning, Chris, Jennifer, and Red.

Speaker 1

Good morning.

Speaker 2

Morning.

Speaker 3

I wanted to first ask about your guidance in OES. Give you guys a lot of credit for providing two-year forward guidance on most, give only one quarter forward. Given the lower utilization in OES during the quarter, and I guess the tightening of the forward guidance that you talk about, Jennifer, maybe slightly lower, what kind of implications should we make about the market given that? Is this a sign that customer demand for helicopters is beginning to weaken in the short term, or how should we think about it?

Speaker 1

Yeah. Thanks for the question. As you noted, we did tighten the range this quarter. That's consistent with how we generally approach as we near the end of a period or the beginning of a new one, we'll look to narrow that range. In this case, that updated guidance did impact the midpoint by about 2%. In terms of the guidance around the OES business specifically, I would point to two main factors. First, we have experienced some persistent supply chain challenges that are impacting aircraft availability. In some cases, that might result in lost revenue opportunities. In other cases, particularly on some legacy contracts, it may result in some contractual penalties under the contract related to aircraft availability. The second category I would point to is fewer aircraft, a small number, on contract in the North Sea and the US. Overall, again, still expecting.

Positive offshore energy services activity and growth for our business. Overall, for the company, really highlighting that we're expecting 27% growth in our adjusted EBITDA year-over-year, which I think within our sector, within a peer group, is a real positive differentiator. I'm not sure that anyone else is pointing to that kind of growth in the next year.

Speaker 3

Yeah. No, I agree, Chris. As a follow-up to that, I guess this is more of a kind of a macro level. Can we discuss your current outlook for your main OES markets and regions, given some of the seasonality you have in your business? If you can kind of just go around and what you're seeing out there would be helpful.

Speaker 1

Yes. Happy to do that. I would probably start with Brazil, which is a market that we believe continues to have some of the best, if not the best, growth prospects for any of the offshore regions. Really right near there in the same category would be Africa, where we're seeing continued demand and a need for additional aircraft in our business there. I'd also add the Caribbean to that list, which is still growing. Each one of those markets are ones that, again, are still growing. We're seeing net aircraft inflows, meaning that we're mobilizing additional capacity into those markets to meet the demand. The U.S., I would say, is mostly stable, though with less ad hoc work. The US Gulf is an area where we typically would see a lot of ad hoc aircraft over and above the contracted fleet count.

That has admittedly decreased some, which I think is an indication of stable activity that is able to be addressed by the contracted fleet levels. Finally, on the less positive side would be the North Sea, which is softer in terms of activity.

Speaker 3

Thanks for that additional color. That was helpful. Just one last quick one, since you brought up in the prepared remarks on the vendor credits, since some might not be as familiar with those. Why were those materially higher this quarter? Do you guys typically include that in your guidance? Thanks.

Speaker 2

Sure. I mean, it's an indication of the increased activity that we've had. I noted the few different ways that credits come about, right? Buying aircraft. The incentives when you enter into long-term maintenance contracts, or you exit aircraft out of those contracts, and then OEM performance and delays. All of that is a mixture of all of those credits. This is not anything new. It's just an increased activity we've always experienced with credits. As activity levels continue to be increased, there is likely to be a heightened level of credits over the next period of time.

Speaker 3

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

Speaker 1

Thank you.

Speaker 0

Our next question comes from the line of Josh Sullivan with Jones Trading. Your line is now open. Please go ahead.

Hey, good morning.

Speaker 1

Morning, Josh.

How many aircraft are you aiming to take delivery of for each of your segments? I guess if you could just touch on maybe the timing and location where these aircraft are expected to be deployed.

Yes. I would say there are really two categories of pending deliveries. The first are aircraft that we've actually already taken delivery of from the OEM, but are not yet placed into our operating fleet count as we're completing final configuration and modifications on those aircraft. In our government services business, that would be the right category for the pending deliveries. So we've taken delivery of five aircraft that are, again, undergoing final modifications now before being placed into operations. Two of those are AW189s that are going to the Irish Coast Guard contract in Ireland. Three of them are AW139 aircraft that are going to the new Star-2G contract in the United Kingdom. The second category of pending deliveries are aircraft that are still under construction by the OEM. We have not yet taken physical delivery of these aircraft.

That category would characterize the remainder, which is seven offshore, so OES configured AW189s that we have on order. We know where those are going. Those locations are going to be split between Brazil, Africa, and the North Sea.

Got it. And then between those two groups, or just generally, where are the primary supply chain bottlenecks at this point?

Yeah. We're still seeing significant supply chain issues, I'd say, across the board, unfortunately. This is impacting the aftermarket, so delays for parts, components that we need to maintain the aircraft, keep them operational and in service. Over the last few years, we had more of a concentration of that type of challenge in a particular model, namely the S-92 heavy helicopter. However, while that situation's actually improved some, so it's ameliorated, though not quite where we would want it to be, we're seeing now similar issues with other helicopter models, for example, the AW189s. Aftermarket support would be one category. This is now also impacting the timing of new deliveries. Not so much for the government side, because I mentioned we've already taken delivery of those aircraft now and are putting them through final modifications.

On the offshore configured AW189s, expect there will be delays in aircraft coming off the production line. A lot of that relates to something you'll be familiar with, Josh, which is just the complexity of a modern aviation supply chain, where the OEM itself, over the last several decades, has outsourced to an increasing number of subcontractors and vendors. As they're now looking to produce these aircraft, they're having their own struggles in sourcing some of the components on time to meet the expected delivery schedules. It is really both aftermarket and new deliveries that are being impacted by these supply chain issues in the industry.

Got it. I guess maybe a related question, just what does CapEx maybe look like in 2026 as a result?

We see total CapEx in 2026 of about $100 million. That is, in round numbers, roughly $20 million of maintenance and another $80 million of growth on a net basis, which is really related to those offshore configured AW189s that I mentioned. One thing I would highlight there is if you take that full $100 million of CapEx, growth, and maintenance, run it through the waterfall of the guidance we have provided, you are still looking at approximately $140 million of free cash flow in 2026 at the midpoint of guidance, which, on a company that has an equity market cap of roughly $1 billion, $140 million is a pretty healthy free cash flow yield in our view.

Yeah. It's itself. I guess just one last one. Just any updates on the advanced mobility trials, Beta, Elroy, others? Just how is that dynamic progressing?

Yes. Thanks for the question. I'd say that's going very well. As you may be aware, we launched in August a Norway sandbox project, which really represents a first-of-its-kind real-world flight testing of pre-certified aircraft that's being sponsored by the Norwegian government in partnership with the OEM, which in this case is Beta Technologies. Congratulations to our friends and partners at Beta Technologies for their IPO in the New York Stock Exchange yesterday. It was a nice milestone for them. Here in the test arena in Norway, we're using the Beta CX-300 all-electric aircraft that's being operated by Bristow. What this is allowing us to do is collect real-world data to validate assumptions and learn. What is the aircraft, what are the batteries actually doing in different temperatures at different altitudes, etc.? Take that, incorporate that again into the learnings, which.

Again, first-of-its-kind test arena, we see this as being an important step in commercializing advanced air mobility. We see this type of model being probably likely replicated in other countries and with other AAM model aircraft as well.

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

Thanks, Josh.

Speaker 0

Our next question is from Steve Silver with Argus Research. Your line is now open. Please go ahead.

Speaker 6

Thanks, Operator, and thanks for taking my questions. They're mostly housekeeping. Just in terms of the asset sales that you guys reported this quarter. Also the proceeds from the sales to helicopters. I was hoping you could provide any color just on the nature of these sales and whether we should expect any further activity like this over the coming years.

Speaker 2

Sure. Good morning, Steve.

Morning.

We opportunistically sell assets when they're no longer needed in our fleet. Typically, they're older assets that have outlasted their feasibility in the markets we serve and typically sold in other markets like utility or firefighting. In addition, we will look at opportunities to do sale-leaseback transactions when those make sense for helicopters in our fleet. In the case of this quarter, we performed a sale-leaseback transaction on one of our new Star aircraft, which accounted for much of that sales proceeds for this quarter. We did then sell an older asset as well.

Speaker 6

Great. Thanks. One more, if I may. On the income tax benefit in Q3, I was hoping you could just discuss the future outlook on the tax line, especially on the effective tax rate, what your thoughts are as the net income position of the company continues to grow.

Speaker 2

Sure. Related to this quarter, each quarter we do review the attributes for our different tax positions by our different jurisdictions that we're in. This quarter, we determined that the valuation allowance we had on our Australian operation could be removed due to the positive results we have with that part of our business. This release of the valuation allowance was the primary driver for the one-time tax benefit. I wouldn't expect that tax, that was a one-time deal. As our profitability does improve, our tax rate will be closer to a normalized tax rate. We're in many different jurisdictions, so it'll be some average tax rate, a little bit somewhat north of what the U.S. tax rate is.

Speaker 0

Great. Thanks for the additional color. Our final question will come from the line of Kobe Sasa with Daniel Energy Partners. Your line is now open. Please go ahead.

Hi, thanks for taking my question. A number of larger integrated E&Ps have talked on their conference calls about a need for more exploratory drilling over the next few years. Do you see this as a focus for your customers moving forward?

Speaker 1

Yes. Good morning, and thanks for the question. Yes, we do see that as a focus moving forward. Our business is really much more weighted to production support activity, with 85% of our revenues from offshore energy services driven by production activities. For the remainder, though, we are exposed to exploration. I'd say our view is probably mostly in line with consensus in that we continue to believe that deep-water projects are favorably positioned with attractive relative return prospects within our oil and gas customer portfolios. We see an increasing share of capital investment from the upstream going into deep-water and offshore projects. We see that as being a solid long-term driver and outlook for the business. In our case, really coupling that with a very tight supply picture with a limited number of available heavy and super medium offshore configured helicopters today.

Makes sense. As a quick follow-up, you noted a new aircraft headed to the North Sea, but several drillers have moved their rigs out of Norway in recent years, citing no near-term upside in rates or utilization in that market. Additionally, EMPs are not bullish on the U.K. energy industry either. Can you expand on why you see the need for new builds going into that market?

Yes. Fair question. I appreciate the opportunity to expand upon that. I would say that we do not see upside or growth in the North Sea necessarily. It is a mature market that, over the long run, is more likely to decline than otherwise. However, what's going on in this situation is that these are helicopter fleet replacements. Namely, new AW189s that will be replacing legacy S-92s that are aging out of the fleet. We have customers, upstream oil and gas companies, that were looking for a more reliable aircraft, a more modern aircraft. For Bristow, it's an opportunity for us to provide that on a secure long-term contract with enhanced profitability, better returns than what they're replacing. While not growth, this is certainly value accretive for the company.

Thanks for the color. I'll turn it back.

Thank you.

Speaker 0

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

Speaker 1

Thank you, Luke. I appreciated the opportunity earlier to talk about what's going on in advanced air mobility and the important developments in that new industry sector for all-electric and hybrid aircraft platforms. As I mentioned, there are some important milestones and developments happening right now. We expect the first aircraft models in that sector to be certified next year, 2026, so really just around the corner. In theory, Bristow might take delivery of the first of those aircraft in 2026. However, we think that's less likely. We're not contemplating any contributions in our guidance for next year. It's probably more likely that Bristow would take its potential first deliveries in the 2027-2028 timeframe. We do believe that advanced air mobility in both all-electric and hybrid aircraft are going to be a part of the future of aviation.

As the global leader in vertical flight for the last 75-plus years, we believe there is a role for Bristow to play there and are excited about the partnerships we are developing with some of these OEMs and pursuing market opportunities together. We also remain excited about the growth that we are projecting for the business next year with that 27% increase in adjusted EBITDA, which we see as really a positive differentiator for the company. With that, we appreciate everyone's time today. I hope you stay safe and well. We will talk again next quarter. Thank you.

Speaker 0

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