DALLAS, TX -- July 29th, 2025 -- Civeo Corporation (NYSE: CVEO): Stonegate Capital Partners updates their coverage on Civeo Corporation. CVEO reported 2Q25 revenue, Adj. EBITDA, and Adj. EPS of $162.7M, $25.0M, and ($0.25), respectively. This compares to our/consensus estimates of $167.5M/$163.0M, $25.6M/$22.6M, and $0.03/$0.18, respectively. Revenue was slightly below expectations, with upside driven by the Australian segment and offset by continued macro-driven headwinds in Canada. Adjusted EBITDA declined y/y, primarily due to the continued challenges in the Canadian business.
Company Updates:
Acquisition Closed: On May 7, 2025, CVEO closed its acquisition of four villages in Australia’s Bowen Basin. The acquired assets contributed approximately $4.9M in revenue and $3.5M in EBITDA over the final two months of the quarter and are expected to deliver ~$30M in annualized revenue and ~$11M in EBITDA. Management highlighted further margin leverage opportunities from integration.
Canadian Segment: Revenues declined 37% y/y to $50.0M while Adj. EBITDA decreased to $7.5M from $17.3M y/y. Billed rooms fell to 450,000 from 752,000 y/y, with daily rates declining to $94 (from $96) primarily due to FX pressure and mix. Management cited weaker oil sands activity and customers focus on cost. CVEO has implemented cost reduction measures, including a cold closure of two lodges and ~$3.0M of restructuring costs as the Company works with consultants on longer-term cost optimization.
Australian Segment: Revenue rose 4% y/y to $112.7M while Adj. EBITDA grew 10% y/y to $23.7M. Strength was driven by higher billed rooms (up 10% y/y to 690,000) and robust performance from both owned villages and integrated services. Room rates were $76, down from $78 y/y due to FX, though constant-currency pricing improved. The acquisition of four Bowen Basin villages and recent contract wins underpin continued strength, with occupancy across the portfolio expected to remain strong in 2H25 despite volatility in met coal pricing. Contract wins in the quarter included, a new three-year integrated services agreement (A$64M) and a four-year A$250M renewal. Integrated services remain a core growth priority, with management reaffirming its AUD 500M revenue target by 2027.
Capital Allocation: Net debt increased to $154M in 2Q25, reflecting $65M from the above mentioned acquisition and $19M for share repurchases. CVEO repurchased ~883K shares in the quarter (~7% of shares outstanding) and has completed 30% of its new buyback authorization. Management reaffirmed its goal to use no less than 100% of annual FCF toward completing the 20% buyback plan.
Guidance: CVEO reiterated FY25 guidance for revenue of $640M–$670M and Adj. EBITDA of $86M–96M. CapEx remains guided at $20M–$25M. Management expects modest improvement in 2H25 results due to a full quarter of acquired assets, cost initiatives in Canada, and stable occupancy in Australia. Free cash flow is expected to improve significantly in 2H25 after seasonal working capital and tax payments weighed on 1H results.
Valuation: We use both a DCF and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $26.13 to $30.24 with a mid-point of $28.03. Our EV/EBITDA valuation results in a range of $25.97 to $33.17 with a mid-point of $29.57.
