Civeo Reports Fourth Quarter and Full Year 2022 Results

: Business Wire; Posted On Feb 28, 2023

Highlights:

Fourth quarter revenues of $162.2 million, net loss of $13.0 million and operating cash flow of $29.4 million;
Fourth quarter Adjusted EBITDA of $15.1 million and free cash flow of $25.8 million;
Full year revenues of $697.1 million, net income of $2.2 million and operating cash flow of $91.8 million;
Full year 2022 Adjusted EBITDA of $112.8 million and free cash flow of $82.6 million;
Repurchased 40% of its outstanding Class A Series 1 preferred shares in the fourth quarter of 2022, which was the equivalent of approximately 6% of the Company’s fully diluted common shares outstanding at the time of the transaction;
Following the aforementioned preferred share repurchase and prior to year-end 2022, the remaining balance of preferred shares was converted into common shares, which are now the only class of shares outstanding; and
Recently announced two five-year contract awards in Australia with expected revenues of approximately A$937 million.

HOUSTON & CALGARY, Alberta--(BUSINESS WIRE)--Civeo Corporation (NYSE:CVEO) today reported financial and operating results for the fourth quarter and year ended December 31, 2022.

“Despite inflationary headwinds in 2022, Civeo reported strong results. We operated safely while achieving higher revenues and Adjusted EBITDA compared to 2021. We also generated significant free cash flow and substantially reduced our total debt balance as well as our net leverage ratio,” said Bradley J. Dodson, Civeo's President and Chief Executive Officer.

Mr. Dodson continued, “We continued to prioritize returning capital to shareholders by repurchasing the equivalent of approximately 1.5 million common shares during 2022. We allocated approximately $45 million of capital, or over 50% of the Company's 2022 free cash flow, to these repurchases. We will continue to evaluate opportunities to return capital to shareholders in 2023 as well as opportunities to deploy capital for both organic and inorganic growth.”

Mr. Dodson added, “Looking forward, we are encouraged by the recent contract awards in Australia with their significant terms and expected occupancy. In both cases, these contract renewals retained Civeo's previous work with the customer and granted us additional locations or additional room commitments, while taking share from competitors.”

Fourth Quarter 2022 Results

In the fourth quarter of 2022, Civeo generated revenues of $162.2 million and reported a net loss of $13.0 million, or $1.31 per diluted share. The loss results in part from $5.7 million in costs associated with impairments on assets in Australia and the U.S. During the fourth quarter of 2022, Civeo produced operating cash flow of $29.4 million, Adjusted EBITDA of $15.1 million and free cash flow of $25.8 million.

By comparison, in the fourth quarter of 2021, Civeo generated revenues of $159.8 million and reported net income of $9.8 million, or $0.58 per diluted share. During the fourth quarter of 2021, Civeo produced operating cash flow of $25.3 million, Adjusted EBITDA of $34.5 million and free cash flow of $26.1 million.

Overall, the decrease in Adjusted EBITDA in the fourth quarter of 2022 compared to 2021 was primarily due to (1) $8.5 million of non-operating items such as the impact of a stronger U.S. dollar relative to the Canadian and Australian dollars, increased stock-based compensation expense due to a higher stock price and larger gains on sales of assets in the fourth quarter of 2021; (2) $3.3 million of customer and insurance settlements which positively impacted the fourth quarter of 2021; (3) a $2.9 million increase in SG&A largely related to higher information technology expenses and professional fees; and (4) approximately $4.7 million of increased operating costs largely driven by inflationary pressures, partially mitigated by increased Australia village occupancy.

Full Year 2022 Results

For the full year 2022, the Company reported revenues of $697.1 million and net income of $2.2 million, or $0.21 loss per share. Adjusted EBITDA for the full year 2022 was $112.8 million. This compared to revenues of $594.5 million and a net loss of $0.6 million, or $0.04 per share, for the full year 2021. Adjusted EBITDA was $109.1 million in 2021. Results for the full year of 2022 reflect the impact of weakened Australian and Canadian dollars relative to the U.S. dollar, which decreased revenues and Adjusted EBITDA by $38.2 million and $8.1 million, respectively.

The increase in Adjusted EBITDA in 2022 as compared to 2021 was largely driven by Canadian contract camp activity in the first half of 2022, partially offset by the weakened Australian and Canadian dollar.

Business Segment Results

(Unless otherwise noted, the following discussion compares the quarterly results for the fourth quarter of 2022 to the results for the fourth quarter of 2021.)

Canada

During the fourth quarter of 2022, the Canada segment generated revenues of $88.0 million, operating loss of $6.1 million and Adjusted EBITDA of $11.8 million, compared to revenues of $92.2 million, operating income of $6.9 million and Adjusted EBITDA of $23.1 million in the fourth quarter of 2021. Results from the fourth quarter of 2022 reflect the impact of a weakened Canadian dollar relative to the U.S. dollar, which decreased revenues and Adjusted EBITDA by $6.9 million and $1.0 million, respectively.

On a constant currency basis, the Canadian segment experienced a 3% period-over-period increase in revenues driven by a 6% year-over-year increase in billed rooms. Despite the increase in billed rooms, Adjusted EBITDA for the Canadian segment decreased year-over-year primarily due to inflationary pressures and certain non-operating items that benefited the fourth quarter of 2021. Operating loss for the fourth quarter of 2022 includes asset impairment charges of $3.8 million.

Australia

During the fourth quarter of 2022, the Australia segment generated revenues of $73.1 million, operating loss of $2.7 million and Adjusted EBITDA of $13.1 million, compared to revenues of $62.3 million, operating income of $2.2 million and Adjusted EBITDA of $13.6 million in the fourth quarter of 2021. Results from the fourth quarter of 2022 reflect the impact of a weakened Australian dollar relative to the U.S. dollar, which decreased revenues and Adjusted EBITDA by $8.0 million and $1.5 million, respectively.

On a constant currency basis, the Australian segment experienced a 30% period-over-period increase in revenues driven by increased integrated services activity and a 12% year-over- year increase in billed rooms. Adjusted EBITDA from the Australian segment increased year-over-year due to increased village occupancy and integrated services activity, partially offset by inflationary pressures throughout the business.

U.S.

The U.S. segment generated revenues of $1.1 million, operating loss of $3.7 million and negative Adjusted EBITDA of $0.4 million in the fourth quarter of 2022, compared to revenues of $5.3 million, operating loss of $3.0 million and Adjusted EBITDA of $3.3 million in the fourth quarter of 2021. The revenue and Adjusted EBITDA decrease was primarily due to a $3.8 million gain on sale of assets from the fourth quarter 2021 sale of our West Permian Lodge and the sale of the segment's offshore and wellsite businesses in the second half of 2022. Operating loss for the fourth quarter of 2022 includes asset impairment charges of $1.9 million.

Financial Condition

As of December 31, 2022, Civeo had total liquidity of approximately $104.1 million, consisting of $96.1 million available under its revolving credit facilities and $8.0 million of cash on hand.

Civeo’s total debt outstanding on December 31, 2022 was $132.0 million, a $5.8 million increase from September 30, 2022 and a $43.1 million decrease from December 31, 2021.

Civeo reported a net leverage ratio of 1.1x as of December 31, 2022.

During 2022, Civeo invested $25.4 million in capital expenditures, up from $15.6 million during 2021. This increase is primarily due to increased maintenance spending on the Company's lodges and villages.

Full Year 2023 Guidance

For the full year of 2023, Civeo expects revenues of $630.0 million to $650.0 million, EBITDA of $85.0 million to $95.0 million and capital expenditures of $25.0 million to $30.0 million.

Conference Call

Civeo will host a conference call to discuss its fourth quarter 2022 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 asking for the Civeo call or using the conference ID 13736531#. 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 13736531#.

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 26 lodges and villages in Canada, Australia and the U.S., with an aggregate of approximately 28,000 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, and ability to pay down debt 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 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, inflation, global weather conditions, natural disasters, global health concerns, such as the COVID-19 pandemic, 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 most recent annual report on Form 10-K 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.

Non-GAAP Financial Information

EBITDA, Adjusted EBITDA, free cash flow, net debt, bank-adjusted EBITDA and net leverage ratio are non-GAAP financial measures. See “Non-GAAP Reconciliation” below for definitions and additional information concerning non-GAAP financial measures, including a reconciliation of the non-GAAP financial information presented in this press release to the most directly comparable financial information presented in accordance with GAAP. Non-GAAP financial information supplements and should be read together with, and is not an alternative or substitute for, the Company’s financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures.

- Financial Schedules Follow -

CIVEO CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

	THREE MONTHS ENDED						TWELVE MONTHS ENDED
	DECEMBER 31,						DECEMBER 31,
	2022			2021			2022			2021

Revenues	$	162,193		$	159,794		$	697,052		$	594,463

Costs and expenses:
Cost of sales and services		127,671			117,220			517,063			436,462
Selling, general and administrative expenses		19,390			14,396			69,962			60,600
Depreciation and amortization expense		21,396			20,173			87,214			83,101
Impairment expense		5,721			—			5,721			7,935
Other operating expense (income)		261			191			74			313
		174,439			151,980			680,034			588,411
Operating income (loss)		(12,246	)		7,814			17,018			6,052

Interest expense		(3,397	)		(3,035	)		(11,474	)		(12,964	)
Loss on extinguishment of debt		—			—			—			(416	)
Interest income		24			—			39			2
Other income		859			7,133			5,149			13,199
Income (loss) before income taxes		(14,760	)		11,912			10,732			5,873
Income tax benefit (provision)		2,689			(1,022	)		(4,402	)		(3,376	)
Net income (loss)		(12,071	)		10,890			6,330			2,497
Less: Net income attributable to noncontrolling interest		627			613			2,333			1,147
Net income (loss) attributable to Civeo Corporation		(12,698	)		10,277			3,997			1,350
Less: Dividends attributable to Class A preferred shares		302			485			1,771			1,925
Net income (loss) attributable to Civeo Corporation common shareholders	$	(13,000	)	$	9,792		$	2,226		$	(575	)

Net income (loss) per share attributable to Civeo Corporation common shareholders:
Basic	$	(1.31	)	$	0.59		$	(0.21	)	$	(0.04	)
Diluted	$	(1.31	)	$	0.58		$	(0.21	)	$	(0.04	)

Weighted average number of common shares outstanding:
Basic		13,835			14,165			14,002			14,232
Diluted		13,835			14,289			14,002			14,232

CIVEO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

	December 31,			December 31,
	2022			2021
	(UNAUDITED)
Current assets:
Cash and cash equivalents	$	7,954		$	6,282
Accounts receivable, net		119,755			114,859
Inventories		6,907			6,468
Assets held for sale		8,653			11,762
Prepaid expenses and other current assets		10,280			17,822
Total current assets		153,549			157,193

Property, plant and equipment, net		301,890			389,996
Goodwill, net		7,672			8,204
Other intangible assets, net		81,747			93,642
Operating lease right-of-use assets		15,722			18,327
Other noncurrent assets		5,604			5,372
Total assets	$	566,184		$	672,734

Current liabilities:
Accounts payable	$	51,087		$	49,321
Accrued liabilities		39,211			33,564
Income taxes		178			171
Current portion of long-term debt		28,448			30,576
Deferred revenue		991			18,479
Other current liabilities		8,342			4,807
Total current liabilities		128,257			136,918

Long-term debt		102,505			142,602
Deferred income taxes		4,778			896
Operating lease liabilities		12,771			15,429
Other noncurrent liabilities		14,172			13,778
Total liabilities		262,483			309,623

Shareholders' equity:
Preferred shares		—			61,941
Common shares		—			—
Additional paid-in capital		1,624,512			1,582,442
Accumulated deficit		(930,123	)		(912,951	)
Treasury stock		(9,063	)		(8,050	)
Accumulated other comprehensive loss		(385,187	)		(361,883	)
Total Civeo Corporation shareholders' equity		300,139			361,499
Noncontrolling interest		3,562			1,612
Total shareholders' equity		303,701			363,111
Total liabilities and shareholders' equity	$	566,184		$	672,734

CIVEO CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	TWELVE MONTHS ENDED
	DECEMBER 31,
	2022			2021

Cash flows from operating activities:
Net income	$	6,330		$	2,497
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		87,214			83,101
Impairment charges		5,721			7,935
Loss on extinguishment of debt		—			416
Deferred income tax expense		4,177			3,070
Non-cash compensation charge		3,787			4,127
Gain on disposals of assets		(4,917	)		(6,188	)
Provision for loss on receivables, net of recoveries		162			141
Other, net		3,223			2,200
Changes in operating assets and liabilities:
Accounts receivable		(14,447	)		(28,131	)
Inventories		(1,845	)		(526	)
Accounts payable and accrued liabilities		12,323			15,435
Taxes payable		5			(28	)
Other current assets and liabilities, net		(9,960	)		4,485
Net cash flows provided by operating activities		91,773			88,534

Cash flows from investing activities:
Capital expenditures		(25,421	)		(15,571	)
Proceeds from disposition of property, plant and equipment		16,286			14,306
Other, net		190			559
Net cash flows used in investing activities		(8,945	)		(706	)

Cash flows from financing activities:
Term loan repayments		(30,442	)		(125,483	)
Revolving credit borrowings (repayments), net		(3,374	)		49,157
Debt issuance costs		—			(4,412	)
Repurchases of common shares		(14,209	)		(4,649	)
Repurchases of preferred shares		(30,553	)		—
Other, net		(1,078	)		(1,120	)
Net cash flows used in financing activities		(79,656	)		(86,507	)

Effect of exchange rate changes on cash		(1,500	)		(1,194	)
Net change in cash and cash equivalents		1,672			127

Cash and cash equivalents, beginning of period		6,282			6,155
Cash and cash equivalents, end of period	$	7,954		$	6,282

CIVEO CORPORATION
SEGMENT DATA
(in thousands)
(unaudited)

	THREE MONTHS ENDED						TWELVE MONTHS ENDED
	DECEMBER 31,						DECEMBER 31,
	2022			2021			2022			2021
Revenues
Canada	$	88,013		$	92,155		$	395,997		$	321,378
Australia		73,098			62,300			278,252			251,074
United States		1,082			5,339			22,803			22,011
Total revenues	$	162,193		$	159,794		$	697,052		$	594,463

EBITDA (1)
Canada	$	11,803		$	23,125		$	83,248		$	76,326
Australia		9,286			13,570			57,118			48,727
United States		(2,351	)		3,283			(1,957	)		1,815
Corporate and eliminations		(9,356	)		(5,471	)		(31,361	)		(25,663	)
Total EBITDA	$	9,382		$	34,507		$	107,048		$	101,205

Adjusted EBITDA (1)
Canada	$	11,803		$	23,125		$	83,248		$	76,326
Australia		13,094			13,570			60,926			56,662
United States		(438	)		3,283			(44	)		1,815
Corporate and eliminations		(9,356	)		(5,471	)		(31,361	)		(25,663	)
Total adjusted EBITDA	$	15,103		$	34,507		$	112,769		$	109,140

Operating income (loss)
Canada	$	(6,058	)	$	6,892		$	17,023		$	12,816
Australia		(2,715	)		2,230			14,731			7,303
United States		(3,736	)		(3,038	)		(8,330	)		(8,869	)
Corporate and eliminations		263			1,730			(6,406	)		(5,198	)
Total operating income (loss)	$	(12,246	)	$	7,814		$	17,018		$	6,052

(1) Please see Non-GAAP Reconciliation Schedule.

CIVEO CORPORATION
NON-GAAP RECONCILIATIONS
(in thousands)
(unaudited)

	THREE MONTHS ENDED				TWELVE MONTHS ENDED
	DECEMBER 31,				DECEMBER 31,
	2022		2021		2022		2021

EBITDA (1)	$	9,382	$	34,507	$	107,048	$	101,205
Adjusted EBITDA (1)	$	15,103	$	34,507	$	112,769	$	109,140
Free Cash Flow (2)	$	25,757	$	26,128	$	82,638	$	87,269
Net Leverage Ratio (3)					1.1x

(1)	The term EBITDA is a non-GAAP financial measure that is defined as net income (loss) attributable to Civeo Corporation plus interest, taxes, depreciation and amortization. The term Adjusted EBITDA is a non-GAAP financial measure that is defined as EBITDA adjusted to exclude certain other unusual or non-operating items. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Civeo has included EBITDA and Adjusted EBITDA as supplemental disclosures because its management believes that EBITDA and Adjusted EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provide investors a helpful measure for comparing Civeo's operating performance with the performance of other companies that have different financing and capital structures or tax rates. Civeo uses EBITDA and Adjusted EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan.

	The following table sets forth a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) attributable to Civeo Corporation, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles (in thousands) (unaudited):

	THREE MONTHS ENDED					TWELVE MONTHS ENDED
	DECEMBER 31,					DECEMBER 31,
	2022			2021		2022			2021

Net income (loss) attributable to Civeo Corporation	$	(12,698	)	$	10,277	$	3,997		$	1,350
Income tax provision (benefit)		(2,689	)		1,022		4,402			3,376
Depreciation and amortization		21,396			20,173		87,214			83,101
Interest income		(24	)		—		(39	)		(2	)
Loss on extinguishment of debt		—			—		—			416
Interest expense		3,397			3,035		11,474			12,964
EBITDA	$	9,382		$	34,507	$	107,048		$	101,205
Adjustments to EBITDA
Impairment of long-lived assets (a)		5,721			—		5,721			7,935
Adjusted EBITDA	$	15,103		$	34,507	$	112,769		$	109,140

	(a)	Relates to asset impairments in the fourth quarter of 2022 and the second quarter of 2021. In the fourth quarter of 2022, we recorded a pre-tax loss related to the impairment of long-lived assets in our Australian segment of $3.8 million and a pre-tax loss related to the impairment of long-lived assets in our U.S. segment of $1.9 million, which is included in Impairment expense on the unaudited statements of operations.

		In the second quarter of 2021, we recorded a pre-tax loss related to the impairment of long-lived assets in our Australian segment of $7.9 million, which is included in Impairment expense on the unaudited statements of operations.

Contacts

Carolyn J. Stone
Civeo Corporation
Senior Vice President & Chief Financial Officer
713-510-2400

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