Civeo Corporation
Q4 2020 Earnings Call Transcript

Published: 26 Feb 2021

[Operator:]

Good day, everyone, and welcome to the Civeo Corporation's Fourth Quarter 2020 Earnings Call. Today's call is being recorded. And at this time, I would like to turn the conference over to Regan Nielsen, Director, Corporate Development and Investor Relations. Please go ahead, sir.

[Regan Nielsen:]

Thank you, and welcome to Civeo's Fourth Quarter 2020 Earnings Conference Call. Today, our call will be led by Bradley Dodson, Civeo's President and Chief Executive Officer; and Carolyn Stone, Civeo's Senior Vice President, Chief Financial Officer and Treasurer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we're relying on the safe harbor protections afforded by federal law. Any such remarks should be read in the context of the many factors that affect our business, including risks disclosed in our Form 10-K, 10-Q and other SEC filings.

[Bradley Dodson:]

Thank you, Regan, and thank you all for joining us today on our fourth quarter earnings call. We hope that you and your loved ones are staying safe and well. In addition, we're thinking of our employees, customers and stakeholders who are affected by the historic winter weather last week in Texas and the surrounding states. We hope you are all safe, warm and getting to recover. I'll begin, as I have on all the earnings calls since the pandemic started by emphasizing that at Civeo, the safety and well-being of our employees, guests and contractors, is always our top priority. For today's call, I'll start with the key takeaways and then give a brief summary of our fourth quarter and full year performance. Carolyn will then provide a financial and segment-level review, and I'll conclude with our initial full year 2021 guidance and regional underlying assumptions to that guidance as well as some directional commentary as we prepare for our post COVID-19 world. And then we'll open up the call for questions. The key takeaways from our call today are

[Carolyn Stone:]

Thank you, Bradley, and thank you all for joining us this morning. Today, we reported total revenue in the fourth quarter of $133.4 million, with a GAAP net loss of $2.3 million or $0.16 per diluted share. During the fourth quarter, we generated adjusted EBITDA of $23.7 million, operating cash flow of $36.7 million and free cash flow of $33.2 million.

[Bradley Dodson:]

Thank you, Carolyn. I'd like to provide you with our full year 2021 guidance on a consolidated basis, then provide you with the underlying outlook for each of the regions as well as the underlying assumptions to our guidance. Following the successful end to 2020 in light of the economic conditions, we are initiating full year 2021 guidance of revenues of $555 million to $565 million and EBITDA of $90 million to $95 million. Our initial full year 2021 capital expenditures forecast is $20 million to $25 million.

[Operator:]

We do have a question from Stephen Gengaro with Stifel. Please go ahead.

[Stephen Gengaro:]

I hope everybody is doing well and recovering from the weather. So a couple of things I wanted to hit on, but I just want to start off. You gave a lot of detail on 2021 guidance, but a couple of things I want to ask about. The first is just seasonality. And I think most of the time you'll see kind of a normal drop-off in 1Q and then a ramp. How should we think about the seasonal patterns in '21 given your guidance?

[Bradley Dodson:]

Yes. We will see -- it's been a slower start to the year, really, both in Canada and Australia. In Canada, the limitations on headcount and industrial projects, is negatively impacting our activity in British Columbia, and so that's negatively impacting things. And it's been a little bit of a slow start in the oil sands region. We do, as you mentioned, see, particularly -- well, both in Canada and Australia, the maintenance season is typically Q2 and Q3. And so, if you think about our $90 to $95 million EBITDA guidance, about 65% of that happens in the middle of the year, so 2/3 of the earnings are in the middle half of the year, and then we'll have a slower start and then the fourth quarter, at least at this point, looks to be fairly normal, fairly consistent with the fourth quarter of this year. So, that's what we're seeing thus far, Stephen.

[Stephen Gengaro:]

And it sounds like you adjusted -- you look at 2020 with $13 million of benefit from the CEWS program. I'm assuming your guidance doesn't have anything in it for '21. And I also think does that suggest 1Q EBITDA is down year-over-year before growing and rising year-over-year going forward?

[Bradley Dodson:]

That is correct. We do not have any CEWS proceeds in the guidance we just gave, and we do expect EBITDA to be down year-over-year in the first quarter.

[Stephen Gengaro:]

Okay. Two other things, if you don't mind. The first is...

[Bradley Dodson:]

So, Stephen to add one additional point to that, it's a difficult comp year-over-year because January and February of 2020 were actually pretty good months and did not have a COVID impact. And so that's a tough comp, given that we're not out of the pandemic yet.

[Stephen Gengaro:]

Yes. No, if I recall, 1Q '20 was actually very strong even relative to expectations.

[Bradley Dodson:]

Yes.

[Stephen Gengaro:]

The -- you mentioned kind of a cautious shorter-term outlook in the U.S. business. If we start to see a ramp there and activity starts moving higher. Is that a business you would think about divesting over time?

[Bradley Dodson:]

Well, we took a lot of costs out of the business. Last year, we consolidated our activity into the more active basins. We've got it so that our district offices are now each on a contribution basis, positive. So, I feel like we've really right-sized the business, so it shouldn't -- we expect it to improve year-over-year. If we see a ramp-up in activity and can get it to where it's making money, which certainly, I think you know us well, would be pragmatic with anything in our portfolio. It's a business that with the way the cycles have worked over the last 5 to 10 years, it's never been -- U.S. business for accommodations has never been in a position where someone could consolidate it. It does need consolidation. But it's never gotten a long enough runway, if you will, where consolidation was feasible. But if we were to get to a point where it was worth making money and there was an attractive offer, we'd certainly take a look at it.

[Stephen Gengaro:]

Great. And then just one final one for me and that is when you walked through the guidance, and you laid out, I think, some of the parameters around your expectations. When I think about it, what are the -- what could be drivers of upside because I think you talked about some of the risks to the guidance. But as you think about the potential upside, what could move the needle in that direction?

[Bradley Dodson:]

Well, certainly, if we can get, I think, number one would be the Chinese Australian labor -- or I'm sorry, trade dispute. If that starts to abate then I think there's upside to Australia. We are -- if we can start getting better availability of labor in Australia, with some of the social safety net programs, both in Canada and Australia. There is less of an incentive for people to want to work in remote environments because they can stay at home and receive the safety net checks. If those programs start to phase out, then that might help with the labor situation and primarily in Australia, but we're also feeling it in Canada as well. So that would be upside on the margin side. And then the third one would be turnaround activity. In Canada, I think we've -- it is -- we are planning for it to be up but I think there's hopefully an opportunity for that to be higher than our initial expectations, our current expectation. And then the last one would be scope and breadth of pipeline accommodations. If we -- those -- if our camps in our section of -- the section that we're supporting of particularly the CGL pipeline, if we see our scope to expand there, that could be an opportunity for upside. Carolyn, is there anything else?

[Carolyn Stone:]

No. That was a good list.

[Operator:]

All right. And there are no further questions in the queue. I would like to turn the call back over to Bradley Dodson for any additional or closing remarks.

[Bradley Dodson:]

Well, thank you all for listening to our call today. Thank you for your interest in the Civeo stock. We hope you're all doing well and staying safe, and we look forward to speaking to you on the first quarter earnings call. Take care.

[Operator:]

That does conclude today's presentation. Thank you for your participation. You may now disconnect.