Civeo Corporation 2026 Q3 Earnings Call

Thank you, and welcome to Civeo's Third Quarter 2026 Earnings Conference Call. Today, our call will be led by Bradley Dodson, Civeo's President and Chief Executive Officer, and Collin Gerry, Civeo's 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 anything other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. These forward-looking statements speak only as of the date of our earnings release and this conference call. We undertake no obligation to update or revise these statements, except as required by law. Any such remarks should be read in the context of the many factors that affect our business, including risks and uncertainties disclosed in our Forms 10-K, 10-Q, and other SEC filings. I will now turn the call over to Bradley.

Thank you, Regan, and thank you all for joining us today on our Third Quarter 2026 Earnings Call. I will start with the key takeaways for the quarter, then summarize our consolidated and regional performance. After that, Collin will provide further financial and segment-level details, and I will conclude our prepared remarks with our updated 2026 guidance and a preliminary qualitative look for 2027 by region. We will then open the call for questions. There are four key takeaways for the call today. First, we had a solid third quarter, and we are raising our full-year guidance. Revenue grew by 13% year over year, Adjusted EBITDA grew by 5%, and operating cash flow nearly doubled to $26.4 million. On the strength of our year-to-date performance, we are raising our 2026 revenue guidance to $710 million-$720 million, and our Adjusted EBITDA guidance to $89 million-$92 million.

The second key takeaway is Canada delivered. Revenue in the region grew 38% year over year, driven by stronger-than-expected turnaround activity in the oil sands region and our integrated services contract in Ontario. Some of that turnaround work was originally scheduled for the fourth quarter and was completed in the third. Adjusted EBITDA grew by 47%, outpacing revenue growth. The third key takeaway is available accommodation capacity in Western Canada is being absorbed. Since the end of the second quarter, we have secured contracts with a diverse set of customers for the deployment of approximately 700 mobile camp fleet rooms across Canada. These are the first meaningful mobile fleet awards we have had in several years, and they follow a six-year lodge contract renewal we announced in July. For the first time in several years, the conversation with customers in the region is shifting from price concessions to asset availability.

The fourth key takeaway is Australia remains the cash flow foundation of the business and is operating in an unusual environment. Metallurgical coal prices are above $250 a ton, yet our customers are behaving as they would at much lower prices because of elevated diesel costs, broader inflation, and higher royalties at these price levels are compressing margins. Our owned village occupancy is solid, just softer than we would have expected at these commodity prices. We expect that to persist through the end of the year and into 2027, and we are managing the business accordingly. I will start with our operational results for the quarter. On a consolidated basis, the third quarter results exceeded our expectations, driven by Canada. Adjusted EBITDA was $30.1 million, up 5% year-over-year, with the Canadian improvement and the stronger Australian dollar more than offsetting softer occupancy at our Australian-owned villages.

Going to the regions, in Australia, revenue increased 4% year-over-year in U.S. dollars, entirely as a result of stronger Australian dollar. In local currency, the revenue declined approximately 4%, reflecting lower occupancy in our Bowen Basin villages, partially offset by contractual rate increases across our integrated services contracts and increased shutdown activity. Our integrated services business continues to perform well and remains on track toward our goal of a run rate of AUD 500 million in annual services revenues by the year-end 2027. The owned villages business is well contracted and continues to generate strong cash flow, but we are not seeing activity levels that we would expect from customers at these coal prices, and I will come back to why in the outlook section.

Lastly, Civeo was recently recognized by Restaurant & Catering Australia in the industrial catering category, winning the state awards in Western Australia, Queensland, and South Australia, and sweeping the top three places nationally. Taking care of people with a safe environment, welcoming service, and award-winning food sets Civeo apart. Moving to Canada, billed rooms increased 35% year-over-year. Turnaround activity in our oil sands lodges was stronger than anticipated, and our Ontario integrated services contract contributed a full quarter of revenues. The cost structure we reset in 2025 is holding as volume returns. Adjusted EBITDA was up 47% on 38% increase in revenue, even as our revenue mix shifted towards integrated services, which carries inherently lower margins. Turning to the macro environment. In Australia, the met coal price is supportive, but customer behavior is being driven by costs rather than revenue.

In Canada, oil sands producers remain disciplined, but activity has been steadier than many expected, and infrastructure spending momentum in the country is increasingly tangible. LNG Canada’s Phase 2 final investment decision was an important first step for projects of national interest in Canada, and we are optimistic that other infrastructure will similarly move forward in Canada and the United States. That said, we are not in the business of forecasting FID timing. Our job is to put Civeo in the best position to support our customers when they do make those decisions. Turning to capital allocation, we completed the April 2025 authorization to repurchase 20% of the company in July, in conjunction with our convertible notes offering, and we are approximately 50% of the way through the subsequent 10% authorization.

Year-to-date, we have returned $36.7 million to shareholders through repurchases, which more than satisfies our intention for 2026 under our framework of returning at least 75% of annual free cash flow. With shareholder returns on track for the year, our capital allocation emphasis in the near term has shifted towards preparing our Canadian assets for deployment on contracts we have won and opportunities we see in front of us. That is reflected in our increased CapEx guidance, which I will discuss in the outlook section. We will remain opportunistic on repurchases, but our priority right now is putting assets to work at attractive returns. As a reminder, we have repurchased approximately 26% of our shares outstanding since the beginning of 2025. Stepping back, the third quarter offers an early look at what this platform can do as demand returns in Canada.

Adjusted EBITDA grew faster than revenue, and operating cash flow followed. We have a well-contracted Australian business, Canadian business with a disciplined cost structure and improving utilization, and a growing opportunity set of North American infrastructure work, and the balance sheet to support all three. We believe that combination of operational readiness, capital discipline, and balance sheet flexibility positions Civeo well to create long-term value as these opportunities advance. With that, I will turn it over to Collin.

Thank you, Bradley, and thank you all for joining us this morning. Looking at the income statement, today we reported total revenues in the third quarter of $193.1 million, compared to $170.5 million in the third quarter of 2025, an increase of 13%. Net income for the quarter was $5.2 million, or $0.50 per diluted share, compared to a net loss of $0.5 million, or a net loss per share of $0.04 in the prior year period. During the quarter, Civeo generated Adjusted EBITDA of $30.1 million, compared to $28.6 million in the third quarter of 2025, an increase of 5%. Operating cash flow was $26.4 million, compared to $13.8 million in the prior year period. The $22.6 million year-over-year increase in consolidated revenue was driven primarily by Canada, which contributed $17.6 million of the increase on higher lodge occupancy and the Ontario integrated services contract.

The remaining approximately $5 million came from Australia, where the stronger Australian dollar added approximately AUD 9.6 million to reported revenues and more than offset a decline in local currency revenue. Adjusted EBITDA increased $1.4 million year over year. Canada contributed $3.5 million to the improvement, and the stronger Australian dollar added approximately $1.7 million. These were partially offset by lower Adjusted EBITDA in Australia on a constant currency basis, reflecting the lower occupancy in our higher-margin owned villages in the Bowen Basin that Bradley discussed. Let us now turn to the third quarter results for our two segments. I will begin with Australia. Third quarter revenues from our Australian segment were AUD 129.5 million, up 4% from AUD 124.5 million in the third quarter of 2025. Adjusted EBITDA was AUD 23.2 million, compared to AUD 25 million in the prior year period.

The stronger Australian dollar increased revenues and Adjusted EBITDA by $9.6 million and $1.7 million respectively. In local currency, Australia revenue declined approximately 4%. Lower occupancy in our Bowen Basin villages was partially offset by contractual rate increases across our integrated services contracts and increased shutdown activity in that business. Integrated services revenue was AUD 73.1 million, up 11% in USD and up approximately 2% in local currency. Australian-owned village billed rooms in the quarter were approximately 669,000, compared to approximately 763,000 in the third quarter of 2025. Our average daily rate for Australian-owned villages was AUD 84, compared to AUD 77 in the prior year period, with the increase primarily reflecting the stronger Australian dollar, and local currency rate was up approximately 2%. Turning to Canada. Third quarter revenues were $63.6 million, compared to $46 million in the third quarter of 2025, an increase of 38%, or approximately 40% in local currency.

Adjusted EBITDA was $11.1 million, compared to $7.6 million in the prior year period, an increase of 47%. The year-over-year increase in revenues was driven by higher occupancy at our oil sands lodges, reflecting stronger-than-expected turnaround activity, and the new integrated services contract in Ontario. Adjusted EBITDA grew faster than revenue, reflecting higher occupancy against the cost base we reset in 2025, partially offset by revenue mix that shifted towards integrated services, which carry lower margins by nature. Canadian billed rooms totaled approximately 516,000, compared to approximately 383,000 in the prior year quarter, an increase of 35%. Our average daily rate was $97, compared to $100 in the prior year period, primarily reflecting the mix of turnaround-related volume at contracted rates.