Bristow Group Inc. (NYSE:VTOL) Q2 2025 Earnings Call Transcript

Bristow Group Inc. (NYSE:VTOL) Q2 2025 Earnings Call Transcript August 7, 2025

Operator: Good day, everyone, and welcome to Bristow Group Reports Second Quarter 2025 Earnings Call. Today’s call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Redeate Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Redeate Tilahun: Thank you, Leila. Good morning, everyone, and welcome to Bristow Group’s Second Quarter 2020 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 3 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?

Christopher S. Bradshaw: Thank you, Red, and good morning, everyone. I will begin with a note on safety, which is Bristow’s #1 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, portion of the aircraft structure buckled causing damage. In terms of workplace safety, we had a very good quarter with continued declines 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 paydown 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?

Jennifer Dawn Whalen: Thank you, Chris, and good morning, everyone. I would like to reiterate Chris’ 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 revenue. 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 impact of 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 U.K. 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 impact of $3 million, higher repairs and maintenance costs of $2 million and higher fuel costs of $0.6 million.

offsetting the increased revenue. As the transition comes to completion for both IRCG and UKSAR 2G contracts, we will expect adjusted operating income margins to return to or exceed pre-2024 levels and for full year impact of subsequent years to contribute meaningfully to our financial results, providing reliable capital return 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 experienced 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 million to $260 million and our 2026 adjusted EBITDA guidance range to $300 million 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 million to $205 million on revenues of $980 million to $1 billion. The factors contributing to the increased guidance in this segment includes 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 million to $50 million on revenues of $360 million 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 million to $25 million on revenues of $120 million 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 collections. 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 contracts, 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 UKSAR 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 transition and the return of capital to shareholders. At this time, I’ll turn the call back to Chris for further remarks. Chris?

Christopher S. Bradshaw: 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 SAR 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 date 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 earnings 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 [indiscernible], 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 deepwater 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 ’26. This confidence is supported by the stability of our Government Services business, the heavy weighting of our Offshore Energy Services business to 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?

Q&A Session

Operator: [Operator Instructions] Your first question will come from Jason Bandel with Evercore ISI.

Jason Mark Bandel: Great. Chris, Jennifer and Red, first question, just given the headwinds in the macro for the Offshore Energy Services sector in general, we haven’t really seen too many companies and have the ability to raise their guidance this earnings season. You reaffirmed the original guidance last quarter. So what gives you greater confidence in the outlook here to kind of raise it now? And can you dig a little bit deeper into some of the primary drivers behind the ’25 and ’26 increase that you mentioned in the prepared remarks?

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

Jason Mark Bandel: Okay. And then given the oil price volatility that we’ve kind of seen some customers slow the decision-making and have a lower sense of urgency when it comes to contracting of services and 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-oriented customers at this time?

Christopher S. Bradshaw: Good question. And fortunately, the short answer is no. Actually, our biggest struggle currently is managing through supply chain challenges to meet customer demand. It’s challenged right now to keep up with the current level of demand. And 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.

Jason Mark Bandel: Understood. And then just a last one from 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 ’26 or hopefully improve in the second half of ’26 and into ’27, how much of that increase is already factored into your ’26 guidance, if any?

Christopher S. Bradshaw: 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. But 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 7 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.

Operator: Your next question will come from Jason (sic) [ Joshua ] Sullivan from the Benchmark.

Joshua Ward Sullivan: 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?

Jennifer Dawn Whalen: 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 those 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.

Joshua Ward Sullivan: Got it. And then just 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?

Christopher S. Bradshaw: 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. So again, 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.

Joshua Ward Sullivan: Then maybe 1 on the advanced mobility market. Any updates from the announcement with the Norway Advanced Air Mobility Sandbox, I think you were doing with BETA?

Christopher S. Bradshaw: Yes. And a very timely question, actually. We’re excited to share that the first flight for the Norway Test Arena project is scheduled for this Friday, August 8, which is an exciting real-world application of this new technology, all-electric aircraft. And we’re honored to partner with BETA, 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.

Joshua Ward Sullivan: Got it. And 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?

Christopher S. Bradshaw: 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 U.K., the U.S., even parts of Africa have shown some interest. So we’re 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.

Joshua Ward Sullivan: Got it. And then just one last one on the free cash flow profile and cash deployment starting. Can you just update us on how should we think about sustaining CapEx, target net debt, just update us on the priorities there?

Jennifer Dawn Whalen: 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 7 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 $15 million paydown of our UKSAR debt. So 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.

Operator: Our next question will come from Steve Silver with Argus Research.

Steven Silver: Congratulations on the quarter. Given the strong free cash flow in Q2 and the improved working capital in the quarter, I was curious if there’s any color 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?

Christopher S. Bradshaw: Yes. 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. So 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. So we look forward to kicking that off in the new year as well.

Steven Silver: Great. That’s helpful. And could you provide any color on what considerations factored into the decision to accelerate the principal payments to the UKSAR equipment facility over any other debt instruments?

Jennifer Dawn Whalen: Sure. Thank you for the question. Our UKSAR debt currently is our highest cost debt, and it had no prepayment tendency. So it was the best choice for our first pay down.

Operator: [Operator Instructions] Our next question will come from Keith Beckmann with Pickering Energy Partners.

Keith Beckmann:

Pickering Energy Partners LP: 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 deepwater activity?

Christopher S. Bradshaw: Yes. Keith, 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. But coming back to our Offshore Energy Services business, there, our contracting model is exposed really to 80% production support. So we have relatively less exposure to short-cycle drilling and exploration. And 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.

So that derisks some of that exposure to actual flight activity as well. So 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 5-year contract to support that longer-term production type work.

Keith Beckmann:

Pickering Energy Partners LP: Awesome. That’s great color. And if I could sneak 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 lower floating rig activity show up in results? Would it be mostly confined to lower average flight hours kind of like what you’re seeing?

Christopher S. Bradshaw: Yes. Good question. I would say, overall, we don’t anticipate that scenario reference 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 ’26 and beyond, we think those offshore projects are continuing to be well positioned within the oil and gas company portfolios. But 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 ranges that we’ve provided.

Operator: Our final question will come from Colby Sasso with Daniel Energy Partners.

Colby Sasso: 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? And if you haven’t been impacted to your knowledge, has this been impacting any of your competitors?

Christopher S. Bradshaw: Yes, 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 and 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 0 tariff basis, which obviously is constructive. For us, I think it’s constructive for the overall industry supply chain. So 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.

Colby Sasso: Makes sense. And 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 deepwater opportunities will come in the next 3 to 5 years. Could you talk about where you’re expecting to see the most growth in your Energy business in the next couple of years?

Christopher S. Bradshaw: 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 U.S. Gulf is a pretty constructive market. I mean, in terms of percentages, it won’t increase at the same rates, but there are incremental opportunities here. And then 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. And 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.

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

Christopher S. Bradshaw: 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.

Operator: This concludes today’s call. You may now disconnect at any time.