Civeo Reports Third Quarter 2020 Results
HOUSTON & CALGARY, Alberta—Oct. 28, 2020– Civeo Corporation (NYSE:CVEO) today reported financial and operating results for the third quarter ended September 30, 2020.
- Reported third quarter revenues of $142.9 million, net income of $6.5 million and operating cash flow of $35.4 million;
- Delivered third quarter Adjusted EBITDA of $36.0 million and free cash flow of $34.4 million;
- Generated $80.7 million of operating cash flow and $77.8 million of free cash flow year-to-date;
- Completed an amendment and extension to its entire credit agreement to, among other things, extend the maturity date of all of the Company’s total debt outstanding by eighteen months to May 30, 2023;
- Reduced leverage ratio to 2.16x as of September 30, 2020 from 2.34x as of June 30, 2020; and
- Today announced the renewal of four contracts to provide hospitality services through Civeo’s Action Catering business in Western Australia with expected revenues under these contracts totaling A$135 million over two-year terms
“The third quarter results demonstrated our company’s emphasis on safety, revenue diversification and operational execution. I’d like to once again thank our employees for their continued dedication to safety and service during these difficult times. In Australia, our customers’ activity in the metallurgical coal and iron ore markets continues to drive occupancy, contract awards and renewals. We are pleased today to announce four two-year contract renewals through our Action Catering business in Western Australia,” stated Bradley J. Dodson, Civeo’s President and Chief Executive Officer.
Mr. Dodson continued, “We were also very pleased to complete the amendment and eighteen month extension to our credit agreement and appreciate the continued support of our key bank partners. The revised agreement affords the Company additional time to pursue our financial objectives of focusing on free cash flow generation and debt reduction while we explore longer term debt capital solutions.”
Mr. Dodson added, “Despite the COVID-19 and oil price-related disruptions this year in Canada, we experienced a sequential increase in billed rooms across a majority of our lodges in the third quarter. While our oil sands customers’ production and turnaround activity was not back to 2019 levels, we are encouraged by the recovery from second quarter 2020 lows.”
Mr. Dodson concluded, “The third quarter results exhibited the business’ free cash flow generation ability, allowing us to further reduce our aggregate leverage and better position the company for the future. While we are expecting seasonally reduced billed rooms sequentially in the fourth quarter of 2020 in both Canada and Australia due to holiday downtime, we are cautiously optimistic that the positive trends experienced in the third quarter will continue into 2021.”
Third Quarter 2020 Results
In the third quarter of 2020, Civeo generated revenues of $142.9 million and reported net income of $6.5 million, or $0.03 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.
By comparison, in the third quarter of 2019, Civeo generated revenues of $148.2 million and reported net income of $4.5 million, or $0.02 per diluted share. During the third quarter of 2019, Civeo produced operating cash flow of $23.6 million, Adjusted EBITDA of $36.2 million and free cash flow of $20.3 million. The third quarter of 2020 Adjusted EBITDA was in line with the third quarter of 2019 primarily due to increased occupancy in our Australian Bowen Basin villages and $3.6 million of other income related to proceeds from the Canada Emergency Wage Subsidy (“CEWS”), largely offset by decreased occupancy in our Canadian lodges.
(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 impairment charges, adjustments regarding an asset retirement obligation recorded in the third quarter of 2019 and certain costs associated with Civeo’s acquisition of Action. 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 2020 to the results for the third quarter of 2019.)
During the third quarter of 2020, the Canadian segment generated revenues of $71.8 million, operating income of $1.0 million and Adjusted EBITDA of $21.3 million, compared to revenues of $91.1 million, operating income of $2.9 million and Adjusted EBITDA of $25.0 million in the third quarter of 2019. The third quarter of 2020 Adjusted EBITDA included $3.6 million of other income related to proceeds from the CEWS.
On a constant currency basis, the Canadian segment experienced a 20% period-over-period decrease in revenues driven by a 42% year-over-year reduction in billed rooms related to decreased customer activity due to the decline in oil prices and the COVID-19 pandemic. Adjusted EBITDA for the Canadian segment decreased 15% year-over-year primarily due to lower billed rooms in the oil sands lodges, partially offset by the CEWS proceeds.
During the third quarter of 2020, the Australian segment generated revenues of $64.7 million, operating income of $9.9 million and Adjusted EBITDA of $21.5 million, compared to revenues of $47.7 million, operating income of $4.7 million and Adjusted EBITDA of $17.2 million in the third quarter of 2019. The third quarter of 2020 results reflect the impact of a strengthened Australian dollar relative to the U.S. dollar, which increased revenues and Adjusted EBITDA by $2.8 million and $0.9 million, respectively.
On a constant currency basis, the Australian segment experienced a 30% period-over-period increase in revenues primarily driven by increased activity from our Action Catering business coupled with increased occupancy at our Bowen Basin villages. Australian village occupancy increased 13% year-over-year largely due to continued improvement in metallurgical coal activity across the Bowen Basin. Adjusted EBITDA from the Australian segment increased 25% year-over-year due to higher village occupancy coupled with increased activity from our Action Catering business. Australian revenues in the third quarter of 2020 increased more year-over-year than Australian Adjusted EBITDA due to the inherent lower margins in the service-only business model of Action Catering.
Civeo today announced that it has been awarded four contract renewals in Western Australia through its Action Catering business to provide hospitality services. The contracts are expected to generate A$135 million in revenues over two-year terms.
The U.S. segment generated 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, compared to revenues of $9.3 million, operating loss of $2.2 million and Adjusted EBITDA of $0.3 million in the third quarter of 2019. Revenues and Adjusted EBITDA declined year-over-year primarily due to lower drilling and completion activity coupled with lower occupancy in the U.S. lodges.
Civeo recognized an income tax expense of $0.2 million, which resulted in an effective tax rate of 2%, in the third quarter of 2020. During the third quarter of 2019, Civeo recognized an income tax benefit of $6.6 million, which resulted in an effective tax rate of 421%. The effective tax rate for the three months ended September 30, 2019 was impacted by a tax benefit of $3.0 million related to a reduction in the Alberta, Canada income tax rate as well as a $2.1 million tax benefit related to the change in the valuation allowance in Australia resulting from the July 2019 acquisition of Action Catering.
As of September 30, 2020, Civeo had total liquidity of approximately $85.6 million, consisting of $78.7 million available under its revolving credit facilities and $6.9 million of cash on hand.
Civeo’s total debt outstanding on September 30, 2020 was $272.5 million, a $27.0 million decrease since June 30, 2020. The decrease consisted of $33.4 million in debt payments from cash flow generated by the business, partially offset by an unfavorable foreign currency translation impact of $6.4 million.
Civeo reduced its leverage ratio from 2.34x as of June 30, 2020 to 2.16x as of September 30, 2020.
Civeo recently announced the completion of an amendment and eighteen-month extension to its entire credit agreement. Among other things, the amended credit facility extends the maturity date of all of the Company’s total debt outstanding by eighteen months to May 30, 2023; increases interest rate spreads above base rates by approximately 100 basis points above prior spreads; and decreases the total revolving commitment to $167.3 million, a level more consistent with currently expected needs, which will reduce undrawn commitment fees.
During the third quarter of 2020, Civeo invested $2.4 million in capital expenditures, down from $4.3 million during the third quarter of 2019 due to the completion of the Sitka lodge expansion in 2019.
Full Year 2020 Guidance
For the full year of 2020, Civeo is increasing its revenue and Adjusted EBITDA guidance to a range of $515 million to $520 million and $100 million to $105 million, respectively. This guidance is based on our expectations as of the date hereof and assumes no material changes to the current macro environment, or conditions related to the COVID-19 pandemic and the responses thereto. The Company expects full year 2020 capital expenditures of less than $15 million.
Civeo will host a conference call to discuss its third quarter 2020 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 (866) 548-4713 in the United States or (323) 794-2093 internationally and using the conference ID 6194051#. 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 6194051#.
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 28 lodges and villages in Canada, Australia and the U.S., with an aggregate of approximately 30,000 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.
Read More: https://ir.civeo.com/news-releases/news-release-details/civeo-reports-third-quarter-2020-results