Tidewater (TDW) Q4 2025 Earnings Call Transcript

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DATE

March 3, 2026

CALL PARTICIPANTS

• Chief Executive Officer — Quintin Kneen
• Chief Financial Officer — Samuel R. Rubio
• Chief Operating Officer — Piers Middleton
• Vice President, Investor Relations and Treasurer — West Gotcher

TAKEAWAYS

• Revenue -- $1.35 billion for the year, a $7 million increase compared to the prior period.
• Gross Margin -- $665.8 million, with a margin percentage of 49.2%, up one percentage point year over year.
• Net Income -- $334.7 million, including a one-time non-cash tax benefit of $201.5 million from foreign tax credits.
• Adjusted EBITDA -- $598.1 million, up from $559.6 million in the previous year.
• Free Cash Flow -- $426 million for the year, an increase of $95 million, driven by lower dry dock costs and improved working capital, with $151 million generated in Q4 alone.
• Closing Cash Balance -- $580 million at year-end after robust quarterly cash generation.
• Q4 Revenue -- $336.8 million, driven by higher than expected average day rates and improved utilization.
• Q4 Gross Margin -- $164 million, with margin of nearly 49% and improvement sequentially from Q3.
• Average Day Rates -- $22,573 for the year, an increase of $1,300 per day, with leading edge day rates down slightly in Q4 relative to Q3.
• Fleet Utilization -- 78.7% for the year, with Q4 utilization at 81.7%, the highest since Q1 2024.
• Dry Dock Costs -- $98.6 million for the year, including $35 million for engine overhauls; Q4 dry dock costs were $13.9 million, down from Q3.
• Vessel Sales -- 12 vessels sold in the year, generating $17.6 million in cash proceeds; 2 vessels sold in Q4 for $5.3 million.
• M&A Activity -- Agreement to acquire Wilson Sons Offshore Ultratug for $500 million, funded with cash on hand and assumption of $261 million in debt at a 3.6% weighted average cost, with expected June 30, 2026 closing.
• Balance Sheet -- Net leverage ratio projected below 1x pro forma for the Wilson Sons acquisition, with no significant unsecured note repayments until 2030.
• Share Repurchase Authorization -- $500 million authorization retained, representing 13% of shares outstanding; no shares repurchased in Q4 as focus was on the Wilson Sons transaction.
• 2026 Guidance -- Revenue raised to $1.43 billion–$1.48 billion, gross margin guidance of 49%–51%, and utilization assumptions of approximately 80%.
• Backlog and Contract Coverage -- $1.1 billion in firm backlog and options, covering approximately 80% of the midpoint of legacy revenue guidance and 65% of 2026 available days.
• Capital Expenditures -- $25.8 million in 2025, with 2026 CapEx guidance of $51 million (not including $24.4 million for exercised vessel purchase options and $1 million related to Wilson Sons).
• G&A Costs -- $134.5 million in 2025, up $23.7 million due to professional fees and personnel costs, with 2026 guidance of $123 million for standalone business and $7 million incremental related to Wilson Sons in H2.
• Regional Highlights -- Q4 margin growth in Africa (up 6 points), APAC (up 3 points), and Middle East (up 1 point); Americas saw a margin decline of 8 points, Europe and Mediterranean down 1 point.
• Operational Realignment -- Strategic consolidation of a significant portion of the fleet under a single U.S. entity completed in Q4, generating tax advantages.
• Segment Commentary -- Middle East day rates increased by 9% in Q4, offsetting declines in other regions; African utilization up 13 percentage points, mainly from reduced idle and dry dock days.
• Market Outlook -- Management reported "materially higher" offshore drilling tenders and contracts, with demand expected to tighten as the year progresses and vessel supply remaining constrained.
• Customer Collections -- Q4 cash collections notable for large receipts from a major Mexican customer, reducing DSO by 14 days quarter over quarter.

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RISKS

• Management stated, "leading-edge day rate was down slightly in the fourth quarter compared to the third quarter," indicating short-term pricing pressure.
• Americas region gross margin declined by eight percentage points in Q4 due to a nine percentage point drop in utilization and a 6% increase in operating costs, mainly driven by higher repair and fuel expenses amid lower activity.
• Management cautioned that "The bigger risk to our backlog revenue is on unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks."
• CEO Kneen said regarding Pemex collections, "I need to see them continue to pay at that level," suggesting uncertainty in sustaining recent working capital benefits.

SUMMARY

Tidewater (NYSE:TDW) delivered increased full-year revenue, margin expansion, and record free cash flow, bolstered by a one-time tax gain from a fleet realignment. The company announced the $500 million Wilson Sons Offshore Ultratug acquisition, which is expected to further solidify its regional market presence and preserve a disciplined balance sheet. Management raised 2026 revenue and margin guidance, citing tightening vessel supply, mounting customer demand, and contract coverage that secures the majority of available days. Capital allocation remains balanced between potential share repurchases and strategic M&A, with significant cash reserves and limited near-term debt maturities. Management commentary and customer discussions indicate accelerated offshore project activity, particularly in West Africa, the Mediterranean, and Brazil, supporting a constructive medium-term outlook.

• Piers Middleton announced the release of the company's sixth sustainability report in early April, underlining an ongoing commitment to environmental, social, and governance practices.
• CEO Kneen commented, "when demand slightly exceeds vessel supply, pricing leverage accelerates quite quickly," highlighting asymmetric market dynamics as supply tightens.
• Management does not expect a build cycle for new vessels before average day rates reach roughly $30,000, suggesting replacement, not expansion, will prevail in the near term.
• Quintin Kneen clarified that, for contracts with Saudi Aramco in the Middle East, "there is nothing in the contracts that gives them the privilege to cancel at will," limiting immediate downside from current geopolitical events.

INDUSTRY GLOSSARY

• PSV (Platform Supply Vessel): An offshore vessel designed to transport supplies and equipment to and from offshore oil and gas platforms.
• AHTS (Anchor Handling Tug Supply Vessel): Specialized vessels capable of towing, anchor handling, and supply tasks supporting drilling rigs and production platforms.
• EPCI: Stands for Engineering, Procurement, Construction, and Installation—projects involving the full lifecycle of offshore infrastructure delivery.
• DSO (Days Sales Outstanding): A working capital metric indicating average number of days to collect payment from customers.
• OSV (Offshore Support Vessel): A general term for ships supporting offshore oil, gas, or wind activities, including PSVs and AHTS vessels.

Full Conference Call Transcript

Quintin Kneen; our Chief Financial Officer, Samuel R. Rubio; and our Chief Operating Officer, Piers Middleton. During today's call, we will make certain statements that are forward-looking and refer to our plans and expectations. There are risks, uncertainties, and other factors that may cause the company's performance to be materially different from that stated or implied by any comments that we are making during today's conference call. Please refer to our most recent Form 10-Ks for additional details on these factors. These documents are available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, 03/03/2026.

Therefore, you are advised that any time-sensitive information may no longer be accurate at the time of any replay. Also during the call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our earnings release located on our website at tdw.com. And now, with that, I will turn the call over to Quintin. Thank you, West. Good morning, everyone, and welcome to the Tidewater Inc. fourth quarter and full year 2025 earnings conference call.

I will start the call this morning discussing Tidewater Inc.’s performance during 2025, providing some highlights of the fourth quarter, update you on our current views on capital allocation, and then discuss our outlook for the market and vessel supply and demand including our initial thoughts on any impact from Operation Epic Fury. We will then provide some additional detail on our financial outlook and give you our 2026 guidance. Piers will give you an overview of the global markets and global operations and then Sam will wrap it up with our consolidated financial results.

Entering 2025, there was a good deal of uncertainty as to how the market would unfold and what the pace of offshore activity would look like. Our view was not dissimilar, but we did believe that the broader set of demand drivers for our vessels would help deliver a year consistent to 2024. That proved to be the case. In the face of last year's softer offshore drilling demand and general macro uncertainty, I am pleased to say that Tidewater Inc. nonetheless delivered its best year in recent memory by nearly every metric. We generated year-over-year revenue growth, gross margin expansion, and average day rate growth.

We generated EBITDA of nearly $600 million and generated nearly $430 million of free cash flow, well outpacing the free cash flow generated in 2024, which itself was the recent high point for the offshore industry activity. This performance against the broader industry backdrop not only speaks to the resiliency of Tidewater Inc.’s business model, but also to the resiliency of the company we have endeavored to build over the last eight years, with a relentless focus on scalable infrastructure and operational excellence. Fourth quarter revenue and gross margin came in ahead of our expectations. Revenue came in at $336.8 million due primarily to higher than anticipated average day rate and slightly better than anticipated utilization.

Gross margin came in at nearly 49% for the quarter, an improvement quarter over quarter and about 250 basis points better than we expected. Fleet utilization continued to benefit from better than anticipated uptime and lower than expected downtime for repair and dry dock days. Additionally, during the fourth quarter, we completed a strategic internal realignment of our vessel ownership to consolidate a significant portion of the fleet under a single wholly owned U.S. entity. During the fourth quarter, we generated $151 million of free cash flow, bringing the full year 2025 total free cash flow to nearly $430 million.

Fourth quarter free cash flow came in materially higher than the first three quarters of the year, which was the result of a meaningful working capital benefit, which Sam will provide more detail on later, combined with our lowest quarterly dry dock spend of the year. We are very pleased with the free cash flow generation of the business, ending the year with nearly $580 million of cash on the balance sheet. We made a comment last quarter that we would find it unacceptable to build this kind of cash on the balance sheet and would look for ways to put the cash to more productive, economically accretive use.

Subsequent to the end of the fourth quarter and as announced last week, we entered into an agreement to acquire Wilson Sons Offshore Ultratug for $500 million. In addition to our expectation of maintaining the existing debt, we plan to fund the remaining purchase price with cash on hand. We are very excited about the addition of Wilson’s for a wide variety of strategic and financial reasons, many of which we discussed last week. But this is exactly the type of capital allocation opportunity we target.

This acquisition has many merits as it relates to the strategic and operational capabilities, but it also provides a compelling use of capital to realize an economic return well in excess of our cost of capital. Importantly, we are able to maintain a healthy balance sheet pro forma for the transaction given the structure of our unsecured debt, revolving credit facility capacity, and the continued cash flow generation of the business. It is worth noting that during the fourth quarter, we did not repurchase any shares under our repurchase program as we were working on the Wilson’s acquisition. We retain our $500 million share repurchase authorization and capacity, which represents 13% of our shares outstanding as of yesterday's close.

We have discussed our capital allocation philosophy over the last year or two. We have said consistently that given the strength of our balance sheet, we felt comfortable using a substantial amount of cash for share repurchases and/or M&A transactions, as long as the near-term cash flow visibility provides us the ability to quickly delever back down to below 1x net debt to EBITDA. As discussed last week, we expect to be below 1x net debt to EBITDA pro forma for the acquisition even as of closing, assuming a June 30 closing date. Although still developing, Operation Epic Fury adds an aspect of uncertainty to our operations in the Middle East, but thus far no real changes.

Our largest geographic area of operation within this segment is Saudi Arabia, which makes up 80% of this segment's revenue for 2025, and everything there is business as usual. Our vessels in the UAE and Qatar are safely in port but remain on hire and no customers have inquired about evacuations. We do expect an increase in insurance costs while hostilities are ongoing, but that incremental cost is immaterial to our business. Diesel costs are also rising, but fuel is a pass-through to our customers. Similar to the increase in insurance cost, the impact is immaterial to our overall business.

It is still early in developing, but thus far, the developments do not change our outlook for 2026, which remains optimistic, particularly as it relates to the pace of offshore drilling activity. Observable offshore drilling leading indicators such as tenders and contracts are materially higher over the past few months compared to earlier in 2025, which suggests that operators are progressing in earnest to commence additional offshore projects in the future. In our conversations with our customers, the commentary is similar to what we hear publicly. Offshore international projects are of high interest and pretender and tender conversations for our vessels continue.

One other indicator, which is a bit more structural in nature, from recent oil and gas industry reports, is that the last decade of underinvestment has led to a declining resource base for many E&P companies. There have been indications that oil companies are acknowledging this challenge beyond looking just to fill the gap through their own M&A, through the rollback of capital return programs to focus on exploring activities and otherwise on activities focused on growing a given company's resource base.

Combining this resource need with a longer-term hydrocarbon demand curve that looks materially higher than estimated even a year ago provides a significant incentive for our customers to explore and develop existing assets and take advantage of a healthy long-term hydrocarbon demand environment. We believe that the offshore resource base provides a compelling opportunity for oil companies to find new resource bases, and believe that these fundamental factors will support an increase in drilling activity not only as we progress through the year, but for at least the next few years. I have only spoken about drilling, but the other areas of activity where we benefit—production support, offshore construction, and EPCI work—are all likely to benefit in the scenario outlined.

To the extent that drilling activity does increase in a structural way, this will likely occur in frontier regions that require new subsea infrastructure and ultimately FPSO installations to efficiently move product to market. This element of our business continues to serve us well today, and would also provide for incremental vessel demand. It is useful to contrast this intermediate demand picture with the current state of vessel supply, which, as we often say, is the most important determinant of the long-term financial health of our business. The demand curve for vessels is highly inelastic. When vessel supply slightly exceeds demand, our pricing power is fairly restrained. However, when demand slightly exceeds vessel supply, pricing leverage accelerates quite quickly.

The global fleet of vessels has been essentially unchanged, if not declining slightly, over the past few years. In 2024, there was a handful of newbuild vessels that were ordered, representing roughly 3% of the global fleet. We have not seen any newbuilds ordered since then. Given the lead time on newbuild orders—somewhere between two to three years—and some of the structural reasons that were limiting newbuild ordering that we have discussed in the past, the vessel supply and demand picture I have illustrated depicts what we believe to be an exciting outlook for the offshore vessel industry. In summary, we are pleased with how the business performed through 2025 with a particularly strong finish to close out the year.

We are excited to welcome the Wilson’s organization into the Tidewater Inc. family and will work diligently to close the transaction and to integrate the business. We will look to continue to efficiently allocate capital to the highest returning opportunities we have against a compelling vessel supply and demand that we believe is in the early stages of developing. And with that, let me turn the call back over to Wes for additional commentary.

West Gotcher: Thank you, Quintin. Subsequent to the end of the fourth quarter, we announced the acquisition of Wilson Sons Offshore Ultratug for $500 million in an all-cash transaction. We expect to finance this transaction using cash on hand and the assumption of approximately $261 million of debt provided by BNDES and Banco do Brasil. The assumed debt carries a weighted average cost of 3.6%. Further, the assumed debt has a long-term amortization profile that stretches out to 2035, with no particular year of amortization adding any significant maturities to our current debt maturity profile. Assuming a 06/30/2026 closing date, we expect to have a net leverage ratio below 1x.

As Quintin mentioned, we did not repurchase any shares during the third quarter due to the Wilson’s acquisition—excuse me, during the fourth quarter due to the Wilson’s acquisition. At the end of the fourth quarter, we retained our $500 million share repurchase authorization. As a reminder, under our outstanding unsecured bonds, we are unlimited in our ability to return capital to shareholders, provided our net debt to EBITDA is less than 1.25x, pro forma for any share repurchase. Under our revolving credit facility, we are also unlimited in our ability to repurchase shares, provided that net debt to EBITDA does not exceed 1x.

However, to the extent we exceed 1x net leverage, we still retain the flexibility to continue to return to shareholders, provided that free cash flow generation is in excess of cumulative returns to shareholders. From a financial policy perspective, our approach to leverage remains consistent. Our general test is that so long as we can return to net debt zero in about six quarters, we are comfortable to proceed with a given outlay of capital.

Further, our target leverage at any given point in time is 1x, although we will consider exceeding this target for M&A based on the relative merits of the transaction and the visibility and durability of the acquired cash flows, all with an eye to returning to our target leverage level with an ability to return to net debt zero in about six quarters. We will maintain a disciplined approach to deploying debt in such a way that we are able to achieve return-enhancing uses of capital while maintaining the strength of our balance sheet. We remain opportunistic on share repurchases, and we will look to execute share repurchase transactions when suitable M&A targets are not available.

We retain the option of evaluating M&A and share repurchase concurrently, but our financial policies and philosophies outlined dictate our relative appetite to pursue both concurrently. Turning to our leading-edge day rates, we will reference the data that was posted in our investor materials yesterday. Across the fleet, weighted average leading-edge day rate was down slightly in the fourth quarter compared to the third quarter. During the quarter, we entered into 21 term contracts with an average duration of six months, and so we are working to ensure that we maintain vessel availability for new contract opportunities as the market is expected to tighten later this year.

Turning to our financial outlook, we are updating our full-year 2026 guidance to contemplate the Wilson’s acquisition, assuming a June 30, 2026 closing date. We are raising our full-year 2026 revenue guidance to $1.43 billion to $1.48 billion and a full-year gross margin range of 49% to 51%. The updated guidance is reflective of the addition of the Wilson’s fleet and does not contemplate any changes to our guidance for the legacy Tidewater Inc. business. Our expectation remains that there is the potential for uplift depending on the strength of drilling activity picking up towards the end of the year.

Looking across 2026, firm backlog and options and January revenue for the legacy Tidewater Inc. fleet represent approximately $1.1 billion of revenue for the full year, representing approximately 80% of the midpoint of our legacy Tidewater Inc. 2026 revenue guidance. Approximately 65% of available days for 2026 are captured in firm backlog and options. Our full-year revenue guidance assumes utilization of approximately 80%, leaving us with about 11% of capacity to be chartered if the market tightens quicker than we are anticipating. Our largest class of PSVs and anchor handlers retain the most opportunity for incremental work, followed by our midsized anchor handlers and small and midsized PSVs.

Contract cover is higher earlier in the year, with opportunity available later in the year. The bigger risk to our backlog revenue is on unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks. With that, I will turn the call over to Piers for an overview of the commercial landscape.

Piers Middleton: Thank you, Wes, and good morning, everyone. Before I talk about the market and put some of Quintin and Wes’s comments into a wider global context, I wanted to mention that we will be releasing our sixth sustainability report in early April. This report, as always, is a global team effort. I would like to take this opportunity to thank everyone within the Tidewater Inc. team for their hard work and commitment helping to put this report together as we continue to showcase to all our stakeholders our historical as well as our future commitment to sustainability. Please look out for the report.

Turning back to the offshore space, as Quintin has already mentioned, 2025 was a very good year for Tidewater Inc., which is testament to the hard work of the whole team not just in maintaining market-leading day rates, but also continuing to improve our vessels' uptime with a laser focus on making the right investments in the maintenance and operations of our vessels to be the gold standard in the industry and thereby continuing to decrease our downtime for repair days year over year across the global fleet. We all came into 2025 with a level of uncertainty as to how the market would turn out.

So for our global teams to deliver such impressive results in a flattish market, I believe bodes very well for us as we start to see the expected tide of increasing demand turn in 2026. Demand had eased back slightly during 2025; however, long-term fundamentals of the business are still very much in Tidewater Inc.’s favor, and with the limited supply story, the only truly global footprint, and the largest and one of the youngest and best maintained fleets in the industry, we are well placed to springboard on from our 2025 results and make further progress in future years as expected demand growth comes back online in 2026. Turning to our regions. Starting with Europe and the Mediterranean.

The Mediterranean seems set fair to be very active during the year with several oil majors announcing and tendering for drilling programs in the region for commencement in 2026, as well as several EPCI projects kicking off throughout the year. So we expect a very active 2026 in the Mediterranean. In the North Sea, Norway looks set for a good few years ahead. With additional rigs expected in the region and some PSVs expected to leave the OSV space, the supply-demand balance should further tilt in our favor over the next few years.

Even in the UK, rumors continue to circulate that the UK government is discussing an early end to the windfall tax levy as soon as this year, although the more likely scenario is this would not fully come into play until 2027. But as we mentioned in our last call, this would be a significant shot in the arm for the industry in the UK. Lastly, in the North Sea, where we operate two large AHTSs, we have seen some early signs of large AHTS spot rates both in the UK and Norway cresting over $100,000 per day. While these are very short-term contracts, it is quite unusual to see day rates this high so early in the year.

With a couple of large AHTSs leaving the region over the winter for warmer climates, we do expect to continue to see strong rates for large AHTSs through the rest of 2026. In Africa, sentiment remains cautiously optimistic for 2026, strengthening drilling activity in West Africa and neighboring regions such as the Mediterranean and Mozambique coming back into play is expected to support high utilization and day rate increases across all AHTS and PSV segments throughout the year. A number of oil companies have released tenders for further exploration campaigns in 2026 in Namibia.

The 900 square meter plus PSV region in a country where over the last few years we have been very successful supporting our customers from our in-country base, and the expectation is that in early 2027 we should start to see a number of our customers kicking off field development in earnest in Namibia, which is more vessel intensive, especially in countries like Namibia with limited infrastructure. Similarly, in Mozambique, we are starting the year supporting TechnipFMC with four of our larger OSVs, with the expectation that we will start to see several other projects kick off in Q3–Q4 of this year and go well beyond 2027, as things continue to settle down safety-wise in-country.

Lastly, in Angola, we are seeing a lot of increased activity in-country, as the government continues to pressure the IOCs to increase production, and thereby a big focus on both improving existing fields for improved subsea but also through exploration for new fields, as Angola sees annual production rates stagnating. Overall, we are positive with the outlook for Africa as we get towards the latter part of 2026, and for the next few years beyond. The Middle East market remains tight with very limited availability of tonnage in the region, and we expect the region to remain supply constrained for the short to medium term. The opportunity will be there to continue to push rates throughout 2026.

Of course, as a word of caution, as Quintin just mentioned, we are watching carefully the ongoing situation in the region, and as of today, operations are continuing. However, the safety of our people and crew in the region are of the utmost importance, and as such, we will constantly be monitoring the situation and work with all of our stakeholders to make sure everyone stays safe. In Asia Pacific, Australia looks to be a flattish year compared to 2025, with most of our customers focusing on production, so we do not expect any significant incremental demand during 2026.

In Malaysia and Petronas specifically, we saw an uptick in activity in the latter half of 2025 which has meant that locally owned OSVs have now gone back to work, meaning there is less supply available to depress day rates in the wider region, which, with increased tendering activity in countries like Indonesia, Myanmar, and Vietnam, should mean that we are able to push rates upwards for the larger class of PSVs as we move into 2026. In the Americas, the Gulf of Mexico market outlook for 2026 looks flat at best and we expect there to be some pressure through the year.

There will be very limited work on the East Coast, which over the last few years has soaked up a number of boats in the Gulf during the summer months and kept the supply-demand balance in check. We have limited Jones Act exposure with only four or five of our U.S. boats currently working there, and we believe any softening in the Gulf will be more than offset by the growing demand we are seeing in the Caribbean.

In Mexico, with Pemex seeming to slowly be righting their listing ship, we are cautiously optimistic that by the end of this year we will really start to see some significant increase in the tendering activity driven both by Pemex, and also by a number of new operators that are targeted to be coming into the country to help Mexico focus on increasing its falling production rates.

Lastly, in Brazil, we are very excited about the long-term prospects in the country, evidenced by our recent announcement to acquire Wilson’s Ultratug, and as we talked about last week, we really believe that the combination of our two companies will create an even stronger platform to allow us to continue to support and meet the growing demands of our customers in Brazil.

Overall, as Quintin mentioned, we are very pleased with how our global team both on and offshore performed through 2025, and while we saw some softening in the offshore space during 2025, the market still continued to move in the right direction through the year, and we remain positive that the platform we have created will continue to be able to reap significant rewards for all of our stakeholders for many years to come. And with that, I will hand over to Sam. Thank you.

Samuel R. Rubio: Thank you, Piers, and good morning, everyone. At this time, I would like to take you through our financial results. My discussion will initially focus on the full year 2025 compared to 2024, followed by a deeper discussion of the sequential quarterly results from 2025 compared to 2025. As noted in our press release filed yesterday, we generated revenue of $1,350,000,000 for the year, an increase of approximately $7,000,000 versus our 2024 amount. Gross margin for the year was $665,800,000 compared to $649,200,000 in 2024. Our net income was $334,700,000 compared to $180,700,000 in 2024. Our net income for the quarter and full year 2025 includes the previously mentioned tax benefit related to a strategic realignment of our vessel ownership.

Included in that amount is a one-time non-cash tax benefit of $201,500,000, primarily related to the utilization of foreign tax credits that were previously subject to valuation allowances. The incremental tax basis is reflected in deferred tax assets for property and equipment. Average day rates improved by $1,300 per day for the full year to $22,573, while active utilization decreased slightly to 78.7% due to more idle days, partially offset by fewer dry dock and repair days. The strength in the day rates combined with the reduction in operating costs versus 2024 increased our gross margin by about one percentage point year over year to 49.2%. Adjusted EBITDA was $598,100,000 for 2025 compared to $559,600,000 in 2024.

We also generated $426,000,000 of free cash flow, an increase of $95,000,000 from 2024 due in part to a reduction in dry dock costs of $35,000,000. We also sold 12 vessels for total cash proceeds of $17,600,000. Working capital was a source of cash due to notable success in our cash collections during Q4. Our success in our Q4 cash collections was a large contributor to our free cash flow generation in 2025. Overall, 2025 was a good year with strong free cash flow delivery and solid operational execution, as well as completing important strategic initiatives including our debt refinance in Q3 and the previously mentioned vessel realignment.

Our improved balance sheet and future cash flow generating capability will continue to provide opportunities to deploy capital in M&A, as illustrated by the Wilson’s announcement last week, as well as repurchase our own shares. As a reminder, although we did not repurchase shares during Q3 or Q4, for the full year we used $98,000,000 in cash to reduce approximately 2,800,000 of our shares in the market during the year, including shares which were held back to pay roughly $8,000,000 in taxes related to vesting of employee share-based awards. I would now like to turn our attention to the fourth quarter, where we reported net income of $219,900,000, or $4.41 per share, which includes the tax benefit mentioned previously.

We generated $336,800,000 in revenue compared to $341,100,000 in the third quarter. Average day rates were down about 3% versus the third quarter; however, we did see a nice increase in active utilization from 78.5% in the third quarter to 81.7% in the fourth quarter, which was our highest active utilization since Q1 2024. This utilization increase resulted mainly from the decrease in idle and write-off days. Gross margin in the fourth quarter was $164,000,000 compared to $163,700,000 in the third quarter. Gross margin percentage in the fourth quarter was almost 49%, nicely above our Q4 expectation and slightly ahead of our Q3 margin of 48%.

The increase in margin versus Q3 was primarily due to a decrease in operating costs. Operating costs for the quarter were $172,700,000 compared to $177,400,000 in Q3. In the quarter, there were three fewer vessels operating in Australia, which is a high operating cost area. Overall, we saw a decrease in salaries, travel, and consumable expenses, partially offset by increases in R&M and other vessel expenses. Adjusted EBITDA was $143,100,000 in the fourth quarter compared to $137,900,000 in the third quarter. For the year, our total G&A costs were $134,500,000, which is $23,700,000 higher than 2024, primarily due to increases in professional fees and personnel costs. This amount includes approximately $8,300,000 in transaction-associated costs related to our M&A diligence efforts.

G&A cost for the quarter was $39,000,000, $3,700,000 higher than the third quarter due primarily to an increase in professional fees and personnel costs. For 2026, exclusive of additional M&A costs, we expect Tidewater Inc. standalone G&A costs to be about $123,000,000. This includes an estimated $15,000,000 of non-cash stock compensation. Moreover, we expect to incur approximately $7,000,000 in additional G&A costs in the second half of this year related to the Wilson’s acquisition. Dry dock costs for the full year were $98,600,000, which includes approximately $35,000,000 of engine overhauls. Full year 2025 dry dock days affected utilization by about five percentage points.

In the fourth quarter, we incurred $13,900,000 in deferred dry dock costs compared to $17,600,000 in the third quarter. We had 672 dry dock days that affected utilization by about four percentage points in Q4. Dry dock cost for 2026 is expected to be approximately $122,000,000, which includes $46,000,000 of engine overhauls. 2026 dry dock days are expected to affect utilization by approximately five percentage points. Additionally, we expect to incur about $16,000,000 in dry dock costs in the second half of the year related to the Wilson’s acquisition. Full year 2025 capital expenditures totaled $25,800,000. In Q4, we incurred $5,100,000 in capital expenditures related to vessel modifications and upgrades, ballast water treatment installations, DP system, and IT upgrades.

For the full year 2026, we expect to incur approximately $51,000,000 in capital expenditures. The increase year over year is primarily due to a planned major upgrade to one of our Norwegian vessels, which is supported by customer contract. Optional upgrade or maintenance CapEx is expected to be approximately $36,000,000 during 2026. We will also spend an additional $24,400,000 in 2026 related to two purchase options we have exercised for vessels we have been leasing. The purchase option prices were below market value for these vessels. Finally, we expect to incur about $1,000,000 in CapEx in the second half of the year related to the Wilson’s acquisition.

We generated $101,200,000 of free cash flow in Q4 compared to $82,700,000 in Q3. In the quarter, we sold two vessels for proceeds of $5,300,000 and incurred $3,800,000 less in deferred dry docks. However, the free cash flow increase quarter over quarter was mainly attributable to significant working capital benefit achieved in Q4 due to an increase in cash collections. This was largely due to our cash collections related to our largest customer in Mexico, whose overall receivable balance decreased by more than $40,000,000. As a result, our overall DSO decreased by 14 days quarter over quarter.

As a reminder, following our debt refinancing, which was completed in Q3 2025, we only have small debt repayments that are related to refinancing of recently constructed smaller crew vessels. We have no payments until 2030 on our new unsecured notes. Following the anticipated close of the Wilson’s acquisition, our debt maturity and repayment profile will change to accommodate the newly assumed Wilson’s debt. We conduct our business through five operating segments. I refer to the tables in the press release and the segment footnote and results of operations in our 10-Ks for more details of our segment results.

In the fourth quarter, consolidated average day rates were down versus the third quarter; however, results varied by segment with our Middle East day rates improving by 9%, which was offset by day rates declining in each of our other regions. Total revenues were slightly lower compared to the third quarter, with increases in our Middle East and African regions offset by decreases in our APAC, Americas, Europe, and Mediterranean regions. Regionally, margin increased in Africa by six percentage points, and we also saw a three percentage point increase in our APAC region as well as a one percentage point increase in the Middle East.

Our Europe and Mediterranean region saw a decrease of one percentage point and the Americas declined by eight percentage points. The gross margin increase in our African region was primarily due to a large increase in utilization of 13 percentage points, combined with a slight decrease in operating costs and partially offset by a 2% decline in average day rates. The increase in utilization was due to fewer idle, dry dock, and repair days. Gross margin increase in the APAC region was due to an increase in utilization and a large decline in operating costs, partially offset by a day rate decrease of about 11%.

The decline in operating costs and day rates are primarily due to three fewer vessels operating in Australia versus Q3. Utilization increase is primarily due to a decrease in idle and dry dock days, partially offset by an increase in repair days. The increase in the Middle East gross margin was primarily due to a 9% increase in average day rates, partially offset by higher operating costs. The cost increase was primarily due to higher R&M and personnel expenses. Utilization was roughly flat quarter over quarter.

Our Europe and Mediterranean region gross margin was marginally lower versus the previous quarter, and the gross margin decrease in our Americas region was driven by a nine percentage point decline in utilization as well as a 6% increase in operating costs. The cost increase was primarily due to higher R&M and higher fuel expense due to lower utilization compared to Q3. The decrease in utilization was due to higher dry dock and idle days. In summary, Q4 was a strong quarter. We delivered both strong financial results and free cash flow. Our balance sheet is in excellent position and the industry long-term fundamentals remain very strong.

We are especially excited about the Wilson’s acquisition in the highly important Brazilian market, and we remain optimistic about the opportunities that lie ahead for Tidewater Inc. With that, I will turn it back over to Quintin.

Quintin Kneen: Thank you, Sam. Jordan, I think we can go ahead and open it up for questions.

Operator: Great. In order to ask a question during this time, simply press star 1 on your telephone keypad. First question comes from the line of James Michael Rollyson from Raymond James. Your line is live.

James Michael Rollyson: Yeah, you can call me Jimmy. That is fine. Good morning, everyone. Quintin or Piers, so if you kind of lay out the day rate picture, right, leading edge has slipped the last couple quarters, which I guess just speaks to the whitespace timing and seasonality and that kind of stuff. But with what Piers went through, you know, with maybe a couple exceptions, it sounds like things are shaping up to get, you know, materially better as we move through this year and into next. Maybe just some context around the guidance and kind of your thoughts on how your fleet average day rates move throughout the year and heading into next. Right?

You were going up $4,000 a day for a couple years. That kind of trimmed back to, I think, was $1,300 that Sam mentioned. But how do you think that trajectory looks and kind of what is embedded at the midpoint of guidance for 2026?

Piers Middleton: Well, I will start. You know, obviously, we are expecting things to be somewhat flattish for 2026, but looking for a tightening in the market in the second half. We are not banking that into the guidance. But if we do see that tightening, my hope is that we are going to see those day rates climb in 2027 and 2028 at another $3,000 and $4,000 a day. So it is quite responsive to even small increases in demand for vessel usage. We are starting to see some signs of that.

So, you know, if you go back two or three years, there was some slackness in the Middle East, but, you know, you see that region was one of our best movers in the past quarter. I expect that to continue. I am getting very excited about what I am seeing develop in West Africa, and we saw some rate there. So as long as the world can still hold itself together and maybe, as Piers indicated, we get some relief from the taxing authorities in the UK, we will see that market tighten up globally. And then you will see those $3,000–$4,000 a day movements per year.

So I may have covered what Piers was going to say, but he and I are in separate locations. Let me just ask Piers if he wanted to add anything before we hand it back to you.

Piers Middleton: No. I mean, Quintin, you should join the commercial team. That was brilliant. Yeah. No. Nothing more to add. I mean, we are actually just—I think, Jim, we are seeing, you know, a lot of, I think as Quintin said in his opening remarks, a lot of additional tender and pretender type of conversation at the moment with our customers, which does really bode well for the sort of second half of this year. You know, big projects both on the E&P stuff and also on the drilling side as well. So, yeah, very optimistic as we get towards the latter half of the year.

And I think as Quintin said, then we get the chance to really push rates in 2027 to hopefully where we were in the last big time we got to really push rates.

James Michael Rollyson: Yeah. That is certainly exciting and nice to actually have visibility beyond just kind of hope of things going. And my follow-up is probably for Sam. Sam, if you kind of line up your midpoint of guidance, let us just say, for 2026 and the little bit higher dry dock CapEx and a little bit higher overall CapEx, and then, you know, however you are thinking about working capital as Pemex kind of catching up, how are you thinking about free cash flow generation right now for 2026?

Samuel R. Rubio: Yeah, Jim. Thanks. No. I think the free cash should stay fairly strong for 2026. You know, we did see in Q4 2025, obviously, we had a big bump in our cash collections. So, you know, if we look back over the last few years, you know, it should average out in the, you know, $300–$311 million somewhere.

Quintin Kneen: Yeah. I guess the other thing I would add to that, Jim, is that we did have a disproportionate bump in Q4 from the lump-sum collections from Pemex, and we are certainly very happy to see that. I need to see them continue to pay at that level. But if you look at the DSO for us, it is actually abnormally low for such an internationally and broad company, and that may normalize. So that may eat up some otherwise, you know, operational cash flow in 2026.

James Michael Rollyson: That is kind of where I was going. Thank you. Appreciate it, guys.

Samuel R. Rubio: Thanks, Jim.

Operator: Your next question comes from the line of Keith Beckman from Pickering Energy Partners. Your line is live.

Keith Beckman: Hey. Thanks for taking my question. Always appreciate the slide that you guys kind of put out on newbuild economics. Just kind of wanted to get a sense on maybe you see the maximum vessel life for a majority of the PSVs in the industry, and then when you think a rough timeline maybe on when you think we could face either serious upgrades and renovations or a full newbuild cycle? Obviously, looking much further down the road.

Quintin Kneen: Well, I will start. And as I indicated, Piers, Wes, and I are in separate locations. I am here with Sam. So he and Wes may want to add something because he maintains those slides. But I will tell you that the industry is a lot more capital disciplined than it has ever been in my two decades in the industry. I was at a conference about a month ago, and this was a big discussion, and nobody is interested in building. If you look at most people's financial statements, they use a 25-year depreciation life. But the fact is these boats can work well into 30, 35 years.

But they will need serious upgrades as they go forward, and that needs to be supported by day rates and so forth. So, you know, I think that we are going to see real modest to almost no building in the next year. And then if the industry does pull back—like I was just mentioning to Jim—in 2026 and 2027, and you start to see average day rates closer to $30,000 a day, you are definitely going to see some building. But at least from my discussions recently, I believe it is going to be very moderate and be more replacement-oriented. So we will have to see how it plays out.

But I still think that we need to see day rates closer to $30,000 a day before you see anybody spending a lot of money and certainly before you see banks supporting

Keith Beckman: Awesome. That is very helpful. And then my second question was just around—like, right now, obviously, you guys are focused on integrating the Brazil acquisition. I was just wondering if there are any other regions that could make sense to increase your fleet looking forward down the road, or on the other end of that, is there any sort of fleet rationalization that could make sense at some point on maybe some lower-spec boats?

Quintin Kneen: Well, you know, we sell boats on a regular basis, and Sam, I think, covered some of the boats we sold during the year. So every year, you know, there are some vessels that hit the wall. So, economically, we will sell them off. But certainly, the regions that we are in today are regions that we are dedicated to. I am actually—I mentioned it in one of the remarks, I think, earlier on the call. I cannot remember if it was in the questions or earlier on the call. But I am excited about West Africa.

I am starting to see things really solidify there, and, you know, historically I had been focused on the Americas, and obviously we got the deal done in Brazil. I guess now more I am tilting towards West Africa, but we will just have to see. You know, a lot of it has to do with price, and that is always hard to say.

Keith Beckman: I really appreciate you taking the time, and I will turn it back.

Samuel R. Rubio: Thank you.

Operator: Your final question comes from the line of Greg Lewis from BTIG. Your line is live.

Greg Lewis: Hey. Thank you, and good morning, and thanks for taking my questions.

Samuel R. Rubio: Certainly.

Samuel R. Rubio: Good morning.

Greg Lewis: Hey. I did want to talk a little bit about what is happening in the Middle East. You mentioned things are kind of just business as usual, I guess, in Saudi Arabia. I realize it has been years, right, since Saudi evacuated a rig. I think you probably have to go back to, what, Desert Storm, which I do not—I do not—I doubt—maybe, Quintin, maybe you were in the industry, but I do not know anyone else was. As we think about that, is there any kind of way to think about if we do evacuate rigs, as we think about the contracts with Aramco, are there, like, force majeure clauses?

Is there any kind of contract language that allows them to pause contracting or anything like that? How should we think about the—you know, realizing it is changing by the hour probably?

Quintin Kneen: So you are right to think about the Middle East as the primary active area, of course. I will tell you that when it comes to Saudi Aramco, they rule the roost, and, no, there is nothing in the contracts that gives them the privilege to cancel at will. But, you know, they are a strong force and they will come to us if they feel they need to reduce the vessel count. But the reality is, during these times, people need oil and the production becomes very important. And so, in that particular area where it is very production focused offshore, I expect that, you know, we may see things like insurance costs go up.

We may see things like personnel costs going up, because it sometimes gets harder for people to go there during those times. At least that is what we have seen in the past. But I am honestly, at this point, not concerned. But, you know, obviously, we will update you in the next month and a half or in May when we do the first quarter call. But, no, it is just what we do. So it is—for right now, it is just not a concern.

Greg Lewis: Okay. Great. And my other one, appreciating, you know, you guys have your ongoing merger with—happening. I guess I am just kind of curious. It looked like OceanPact is acquiring CBO in Brazil also. Has anything changed in Brazil that is kind of driving this kind of flurry of M&A activity? I feel like everybody has been waiting for potential consolidation in Brazil for, I do not know, a few years now. And it just seems like all at once, it is happening. Is there anything that has changed that is driving this? Just kind of curious if you have any kind of color you could provide around that.

It is the optimism that, you know, that is in Brazil today.

Quintin Kneen: You know, there was some back and forth in 2025 about what Petrobras was going to be doing and what the activity levels were going to be and, generally, you know, the strength of the South American market. And then I would tell you that people are just very focused on finding long-term contracts with good payers at good margins, and Brazil fits that bill. I think that it is just coincidental that these two transactions have happened real quickly.

You know, whisper talk has been that they have been going on for a couple of years, and so, as a result, you know, yeah, I think it is just more coincidental of the timing, but the general optimism in Brazil is quite nice.

Greg Lewis: Okay. Super helpful, and congrats on the quarter too.

Samuel R. Rubio: Thanks, Greg.

Operator: That concludes today's question and answer session. I will now turn the call back over to Quintin Kneen for closing remarks.

Quintin Kneen: Jordan, thank you, and thank you, everyone. We will update you again in May. Goodbye.

Operator: That concludes today's meeting. You may now disconnect.

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