Civeo Reports Third Quarter 2021 Results

·14 min read

HOUSTON & CALGARY, Alberta, October 28, 2021--(BUSINESS WIRE)--Civeo Corporation (NYSE:CVEO) today reported financial and operating results for the third quarter ended September 30, 2021.

Highlights include:

  • Reported third quarter revenues of $155.1 million, net income of $0.1 million and operating cash flow of $33.9 million;

  • Delivered third quarter Adjusted EBITDA of $26.2 million and free cash flow of $31.0 million;

  • Reduced net leverage ratio to 1.86x as of September 30, 2021 from 1.98x as of June 30, 2021;

  • Completed a replacement and refinancing of its entire credit agreement to, among other things, extend the maturity date of all of the Company's total debt outstanding to September 8, 2025; and

  • Announced recently that its Board of Directors authorized the Company to repurchase up to 5% of its total common shares outstanding, or approximately 715,000 common shares, over the next twelve months.

"In the third quarter of 2021, Civeo made significant progress towards our financial objectives. We replaced and refinanced our entire credit agreement, announced the board authorization of a share repurchase program and generated significant free cash flow in a tough operating environment. During the quarter we reduced our total leverage ratio below 2.0x and reduced our aggregate total debt below $200 million" stated Bradley J. Dodson, Civeo's President and Chief Executive Officer.

Mr. Dodson concluded, "While we are encouraged by these significant achievements, the Company remains focused on operating safely, generating free cash flow and reducing our debt balance."

Carolyn Stone, Civeo's Senior Vice President and Chief Financial Officer, added "We were pleased to announce our new bank agreement, which provides the Company with four years of tenor. This longer tenor affords us the flexibility to evaluate other capital allocation priorities, such as our recently announced share repurchase program and potential growth opportunities."

Third Quarter 2021 Results

In the third quarter of 2021, Civeo generated revenues of $155.1 million and reported a net income of $0.1 million, or $0.00 per diluted share. During the third quarter of 2021, Civeo produced operating cash flow of $33.9 million, Adjusted EBITDA of $26.2 million and free cash flow of $31.0 million.

By comparison, in the third quarter of 2020, Civeo generated revenues of $142.9 million and reported net income of $6.5 million, or $0.39 per diluted share. During the third quarter of 2020, Civeo produced operating cash flow of $35.4 million, Adjusted EBITDA of $36.0 million and free cash flow of $34.4 million.

Overall, the increase in revenues in the third quarter of 2021 compared to 2020 was primarily due to an increase in billed rooms in the oil sands lodges and Canadian mobile camp activity. The decrease in Adjusted EBITDA in the third quarter to 2021 compared to 2020 was primarily driven by $3.6 million of other income in the third quarter of 2020 related to proceeds from the Canadian Emergency Wage Subsidy ("CEWS") program and increased labor costs in our Australian business during the third quarter of 2021.

(EBITDA is a non-GAAP financial measure that is defined as net income plus interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA adjusted to exclude certain other unusual or non-operating items. Free cash flow is a non-GAAP financial measure that is defined as net cash flows provided by operating activities less capital expenditures plus proceeds from asset sales. Please see the reconciliations to GAAP measures at the end of this news release.)

Business Segment Results

(Unless otherwise noted, the following discussion compares the quarterly results for the third quarter of 2021 to the results for the third quarter of 2020.)

Canada

During the third quarter of 2021, the Canadian segment generated revenues of $84.1 million, operating income of $6.1 million and Adjusted EBITDA of $19.8 million, compared to revenues of $71.8 million, operating income of $1.0 million and Adjusted EBITDA of $21.3 million in the third quarter of 2020. Adjusted EBITDA for the third quarter of 2021 did not include any other income related to proceeds from CEWS. The third quarter of 2020 Adjusted EBITDA included $3.6 million of other income related to proceeds from CEWS. Results from the third quarter of 2021 reflect the impact of a strengthened Canadian dollar relative to the U.S. dollar, which increased revenues and Adjusted EBITDA by $4.4 million and $1.0 million, respectively.

On a constant currency basis, the Canadian segment experienced an 11% period-over-period increase in revenues largely driven by a 21% year-over-year increase in billed rooms, primarily in the oil sands lodges, related to increased customer activity as a result of the recovery of oil prices from the impact of COVID-19. Adjusted EBITDA for the Canadian segment decreased 7% year-over-year primarily due to the lack of other income related to proceeds from CEWS, partially offset by an increase in billed rooms coupled with increased mobile camp activity.

Australia

During the third quarter of 2021, the Australian segment generated revenues of $65.1 million, operating income of $4.4 million and Adjusted EBITDA of $14.8 million, compared to revenues of $64.7 million, operating income of $9.9 million and Adjusted EBITDA of $21.5 million in the third quarter of 2020.

On a constant currency basis, the Australian segment experienced 2% lower period-over-period revenues, driven by a 4% year-over-year decrease in billed rooms due to subdued customer maintenance activity in the Bowen Basin. Adjusted EBITDA from the Australian segment decreased 31% year-over-year due to lower village occupancy in the Bowen Basin, as well as higher labor costs across the village and integrated services businesses.

U.S.

The U.S. segment generated revenues of $5.9 million, operating loss of $2.1 million and negative Adjusted EBITDA of $0.5 million in the third quarter of 2021, compared to revenues of $6.4 million, operating loss of $3.2 million and negative Adjusted EBITDA of $1.5 million in the third quarter of 2020. Revenues and Adjusted EBITDA increased year-over-year primarily due to increased occupancy in the U.S. lodges.

Financial Condition

As of September 30, 2021, Civeo had total liquidity of approximately $78.2 million, consisting of $73.3 million available under its revolving credit facilities and $4.9 million of cash on hand.

Civeo’s total debt outstanding on September 30, 2021 was $195.2 million, a $31.6 million decrease since June 30, 2021. The decrease consisted of $25.1 million in debt payments from cash flow generated by the business and favorable foreign currency translation of $6.5 million.

Civeo reduced its net leverage ratio to 1.86x as of September 30, 2021 from 1.98x as of June 30, 2021.

During the third quarter of 2021, Civeo invested $3.4 million in capital expenditures, up from $2.4 million during the third quarter of 2020.

Full Year 2021 Guidance

For the full year of 2021, Civeo is raising the lower end of its previously provided revenue and Adjusted EBITDA guidance range to $570 million to $580 million and $95 million to $100 million, respectively. This guidance is based on our expectations as of today and assumes no material changes to the current macro environment, or conditions related to the COVID-19 pandemic. The Company is maintaining its full year 2021 capital expenditure guidance to $15 million to $20 million.

Conference Call

Civeo will host a conference call to discuss its third quarter 2021 financial results today at 11:00 a.m. Eastern time. This call is being webcast and can be accessed at Civeo's website at www.civeo.com. Participants may also join the conference call by dialing (877) 423-9813 in the United States or (201) 689-8573 internationally and using the conference ID 13724492#. A replay will be available after the call by dialing (844) 512-2921 in the United States or (412) 317-6671 internationally and using the conference ID 13724492#.

About Civeo

Civeo Corporation is a leading provider of hospitality services with prominent market positions in the Canadian oil sands and the Australian natural resource regions. Civeo offers comprehensive solutions for lodging hundreds or thousands of workers with its long-term and temporary accommodations and provides food services, housekeeping, facility management, laundry, water and wastewater treatment, power generation, communications systems, security and logistics services. Civeo currently operates a total of 27 lodges and villages in Canada, Australia and the U.S., with an aggregate of approximately 29,000 rooms. Civeo is publicly traded under the symbol CVEO on the New York Stock Exchange. For more information, please visit Civeo's website at www.civeo.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements herein include the statements regarding Civeo’s future plans and outlook, including guidance, current trends and liquidity needs, are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things, risks associated with global health concerns and pandemics, including the COVID-19 pandemic, any increases in or severity of COVID-19 cases (including due to existing or new variants) and the risk that room occupancy may decline if our customers are limited or restricted in the availability of personnel who may become ill or be subjected to quarantine, risks associated with the general nature of the accommodations industry, risks associated with the level of supply and demand for oil, coal, iron ore and other minerals, including the level of activity, spending and developments in the Canadian oil sands, the level of demand for coal and other natural resources from, and investments and opportunities in, Australia, and fluctuations or sharp declines in the current and future prices of oil, natural gas, coal, iron ore and other minerals, risks associated with failure by our customers to reach positive final investment decisions on, or otherwise not complete, projects with respect to which we have been awarded contracts, which may cause those customers to terminate or postpone contracts, risks associated with currency exchange rates, risks associated with the company’s ability to integrate acquisitions, risks associated with labor shortages, risks associated with the development of new projects, including whether such projects will continue in the future, risks associated with the trading price of the company’s common shares, availability and cost of capital, risks associated with general global economic conditions, global weather conditions, natural disasters and security threats and changes to government and environmental regulations, including climate change, and other factors discussed in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Civeo’s annual report on Form 10-K for the year ended December 31, 2020 and other reports the company may file from time to time with the U.S. Securities and Exchange Commission. Each forward-looking statement contained herein speaks only as of the date of this release. Except as required by law, Civeo expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

- Financial Schedules Follow -

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Revenues

$

155,063

$

142,857

$

434,669

$

396,351

Costs and expenses:

Cost of sales and services

111,430

97,434

319,242

283,880

Selling, general and administrative expenses

17,320

13,462

46,204

38,889

Depreciation and amortization expense

20,282

24,820

62,928

72,527

Impairment expense

7,935

144,120

Other operating expense

21

51

122

755

149,053

135,767

436,431

540,171

Operating income (loss)

6,010

7,090

(1,762

)

(143,820

)

Interest expense

(3,166

)

(3,646

)

(9,929

)

(13,095

)

Loss on extinguishment of debt

(416

)

(383

)

(416

)

(383

)

Interest income

2

20

Other (expense) income

364

4,542

6,066

17,209

Income (loss) before income taxes

2,792

7,603

(6,039

)

(140,069

)

Income tax (expense) benefit

(1,770

)

(180

)

(2,354

)

8,509

Net income (loss)

1,022

7,423

(8,393

)

(131,560

)

Less: Net income attributable to noncontrolling interest

478

434

534

914

Net income (loss) attributable to Civeo Corporation

544

6,989

(8,927

)

(132,474

)

Less: Dividends attributable to Class A preferred shares

482

472

1,440

1,411

Net income (loss) attributable to Civeo common shareholders

$

62

$

6,517

$

(10,367

)

$

(133,885

)

Net (loss) income per share attributable to Civeo Corporation common shareholders:

Basic

$

$

0.39

$

(0.73

)

$

(9.48

)

Diluted

$

$

0.39

$

(0.73

)

$

(9.48

)

Weighted average number of common shares outstanding:

Basic

14,277

14,160

14,255

14,118

Diluted

14,361

14,212

14,255

14,118

CIVEO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

2021

December 31,

2020

(UNAUDITED)

Current assets:

Cash and cash equivalents

$

4,948

$

6,155

Accounts receivable, net

108,058

89,782

Inventories

6,089

6,181

Assets held for sale

15,530

3,910

Prepaid expenses and other current assets

23,398

13,185

Total current assets

158,023

119,213

Property, plant and equipment, net

399,962

486,930

Goodwill, net

8,125

8,729

Other intangible assets, net

94,680

99,749

Operating lease right-of-use assets

19,265

22,606

Other noncurrent assets

3,987

3,626

Total assets

$

684,042

$

740,853

Current liabilities:

Accounts payable

$

45,193

$

42,056

Accrued liabilities

31,084

27,349

Income taxes

261

203

Current portion of long-term debt

30,473

34,585

Deferred revenue

24,219

6,812

Other current liabilities

5,718

5,760

Total current liabilities

136,948

116,765

Long-term debt

162,689

214,000

Operating lease liabilities

16,382

19,834

Other noncurrent liabilities

15,238

14,897

Total liabilities

331,257

365,496

Shareholders' equity:

Preferred shares

61,456

60,016

Common shares

Additional paid-in capital

1,581,248

1,578,315

Accumulated deficit

(918,539

)

(907,727

)

Treasury stock

(8,050

)

(6,930

)

Accumulated other comprehensive loss

(364,360

)

(348,989

)

Total Civeo Corporation shareholders' equity

351,755

374,685

Noncontrolling interest

1,030

672

Total shareholders' equity

352,785

375,357

Total liabilities and shareholders' equity

$

684,042

$

740,853

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended

September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(8,393

)

$

(131,560

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

62,928

72,527

Impairment charges

7,935

144,120

Loss on extinguishment of debt

416

383

Deferred income tax expense (benefit)

2,105

(8,941

)

Non-cash compensation charge

2,933

4,804

Gains on disposals of assets

(2,305

)

(2,581

)

Provision for credit losses, net of recoveries

155

45

Other, net

2,436

(2,730

)

Changes in operating assets and liabilities:

Accounts receivable

(21,516

)

5,355

Inventories

(193

)

194

Accounts payable and accrued liabilities

9,836

1,247

Taxes payable

61

51

Other current assets and liabilities, net

6,843

(2,239

)

Net cash flows provided by operating activities

63,241

80,675

Cash flows from investing activities:

Capital expenditures

(9,645

)

(6,244

)

Proceeds from disposition of property, plant and equipment

7,545

3,336

Other, net

4,619

Net cash flows provided by (used in) investing activities

(2,100

)

1,711

Cash flows from financing activities:

Term loan repayments

(117,595

)

(31,092

)

Revolving credit borrowings (repayments), net

62,474

(44,511

)

Debt issuance costs

(4,407

)

(2,583

)

Repurchases of common shares

(445

)

Taxes paid on vested shares

(1,120

)

(1,458

)

Net cash flows used in financing activities

(61,093

)

(79,644

)

Effect of exchange rate changes on cash

(1,255

)

865

Net change in cash and cash equivalents

(1,207

)

3,607

Cash and cash equivalents, beginning of period

6,155

3,331

Cash and cash equivalents, end of period

$

4,948

$

6,938

CIVEO CORPORATION

SEGMENT DATA

(in thousands)

(unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Revenues

Canada

$

84,057

$

71,785

$

229,223

$

204,119

Australia

65,118

64,685

188,774

170,869

United States

5,888

6,387

16,672

21,363

Total revenues

$

155,063

$

142,857

$

434,669

$

EBITDA (1)

Canada

$

19,801

$

21,289

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