DALLAS, TX -- February 28th, 2025 -- Civeo Corporation (NYSE: CVEO): Stonegate Capital Partners updates their coverage on Civeo Corporation. Despite challenges in the Canadian Segment, CVEO remains a strong free cash flow generator, reporting $68.4M in FCF for FY24. The Company announced its FCF guidance between $30M to $40M for 2025. Despite this, we believe that with disciplined capital allocation, a robust balance sheet, and continued expansion in Australia, Civeo is well-positioned to drive long-term value for shareholders, with an expected increase in FCF during the out years.
COMPANY UPDATES:
Quarterly Results: CVEO reported revenue, adj EBITDA, and adj EPS of $151.0M, $11.4M, and ($1.10), respectively. This compares to our/consensus estimates of $155.4M/$162.6M, $17.8M/$18.8M, and ($0.14)/($0.15), respectively. Consolidated revenue fell short of expectations; this underperformance was driven by weakness in both pricing and billed rooms volume in the Canadian segment, despite the robust performance observed in the Australian segment.
Capital Allocation: CVEO remained committed to returning capital to shareholders, repurchasing $29.6M worth of shares in FY24, including $5.6M in 4Q24. The Company reduced its net debt by $24.1M y/y, achieving a net leverage ratio of 0.5x as of FY24. In addition, the Company maintained a quarterly dividend of $0.25 per share, reflecting a 4.5% dividend yield.
Canadian Segment: The Canadian Segment experienced a 44% decline in revenues y/y, with Adj. EBITDA falling to ($4.7M). This was driven by a 42% reduction in billed rooms following the sale of McClelland Lake Lodge and lower occupancy at Sitka Lodge. Heightened economic and political uncertainty has pressured customers, leading to lower CapEx spend in the region. In response, CVEO has announced restructuring efforts, including a $3M one-time charge expected in 1Q25, reducing headcount by 25%, and cold-closing select lodges. Despite these challenges, the Company successfully renewed a major oil sands contract through June 2027.
Australian Segment: The Australian segment continues to be a bright spot for CVEO, with 4Q24 revenues surging by 23% y/y and Adj. EBITDA increasing to $22.2M. Performance will be bolstered by a six-year, A$1.4B integrated services contract renewal, which will cover 11 total villages. Further strengthening its position, CVEO executed a strategic acquisition in the Bowen Basin, purchasing four villages with 1,340 rooms and securing long-term contracts with major metallurgical coal producers. The acquisition, valued at ~$67M, is expected to contribute an annualized revenue and EBITDA of ~$32M and ~$17M respectively upon closing, expected in 2Q25. Management anticipates immediate cash flow accretion from this transaction, further solidifying Civeo’s growth trajectory in the region.
Guidance: CVEO announced its 2025 guidance with revenue projected to range from $630M to $660M and adj. EBITDA between $80M and $90M. We believe this is reasonable and have adjusted our model accordingly.
Valuation: We use both a DCF and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $28.77 to $31.92 with a mid-point of $30.23. Our EV/EBITDA valuation results in a range of $32.28 to $35.74 with a mid-point of $34.01.
