Q0 2020 Realignment Deck Finals22.q4cdn.com/.../2020/09/Q0-2020-Realignment-Deck-Final.pdf · 2020. 9. 28. · “expect,” “anticipate,” “plan,” “forecast,” “budget,”

Oceaneering.com

Investor Presentation Realignment of Reporting Segments

September 2020

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Non‐GAAP Disclosures:

This presentation includes several “non‐GAAP” financial measures, as defined under Regulation G of the U.S. Securities Exchange Act of 1934, as amended. Oceaneering reports its financial results in accordance with U.S. generally accepted accounting principles but believes that certain non‐GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of its ongoing operations and are useful for period‐over‐period comparisons of those operations. The non‐GAAP measures in this presentation include EBITDA, Adjusted EBITDA, Adjusted Operating EBITDA and Free Cash Flow. These non‐GAAP financial measures should be considered as supplemental to, and not as substitutes for or superior to, the financial measures prepared in accordance with GAAP. The definitions of these non‐GAAP financial measures and reconciliations to the most comparable GAAP measures are provided in the Supplemental Information section of this presentation, beginning on page 20.

Forward‐Looking StatementsThose statements are made by using various underlying assumptions and are subject to numerous risks, contingencies and uncertainties, including, among others: factors affecting the level of activity in the oil and gas industry; supply and demand of drilling rigs; oil and natural gas demand and production growth; oil and natural gas prices; fluctuations in currency markets worldwide; future global economic conditions; the loss of major contracts or alliances; future performance under our customer contracts; and the effects of competition. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward‐looking statements prove incorrect, actual outcomes could vary materially from those indicated.

For additional information regarding these and other factors that may affect our actual results, see our periodic filings with the Securities and Exchange Commission, including our most recent Reports on Forms 10‐K and 10‐Q

You should not place undue reliance on forward‐looking statements. This presentation reflects the views of Oceaneering's management as of the date hereof. Except to the extent required by applicable law, Oceaneering undertakes no obligation to update or revise any forward‐looking statement.

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In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, Oceaneering cautions that statements in this presentation that express a belief, expectation, or intention are forward looking. Forward‐looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “forecast,” “budget,” “goal,” or other words that convey the uncertainty of future events or outcomes.

The forward‐looking statements in or in connection with this presentation include, among other things, statements about: future liquidity; targeted cost reductions and annualized cost savings initiated to date; realigned business segments driving increased value, leveraging expertise, and promoting increased efficiencies and cost‐reduction objectives; our outlook for 2020, and the factors underlying our outlook, including as to free cash flow and our focus on generating positive free cash flow. Although we believe that the expectations reflected in those forward‐looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct.

New Operating Model

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Subsea Robotics ‐ Our Subsea Robotics (“SSR”) segment consists of our prior Remotely Operated Vehicles (“ROV”) segment, and ROV tooling (previously in our Subsea Products segment) and survey services (previously in our Subsea Projects segment). Senior Vice President, Martin J. McDonald is leading this segment.

Manufactured Products ‐ Our Manufactured Products (“MP”) segment consists of our manufactured products business (previously in our Subsea Products segment), and theme park entertainment systems and automated guided vehicles (“AGV”) (previously in our Advanced Technologies segment). The alignment of entertainment systems and AGV with our manufactured products business allows us to leverage our manufacturing and project management expertise in these commercial businesses. Senior Vice President, Shaun R. Roedel is leading this segment.

Offshore Projects Group ‐ Our Offshore Projects Group (“OPG”) segment consists of our prior Subsea Projects segment, less survey services and global data solutions, and our service and rental business, less ROV tooling (previously in our Subsea Products segment). This combination brings together business units that frequently work together and promotes increased efficiency in bidding, project management, and the use of offshore technicians. Senior Vice President, Benjamin M. Laura is leading this segment.

Integrity Management & Digital Solutions ‐ Our Integrity Management & Digital Solutions (“IMDS”) segment consists of our prior Asset Integrity segment and our global data solutions business (“GDS”) (previously in our Subsea Projects segment). The inclusion of GDS in this segment facilitates optimized digital and software solutions to our integrity management services. Senior Vice President, Kishore Sundararajan is leading this segment.

Aerospace and Defense Technologies ‐ Our Aerospace and Defense Technologies (“ADTech”) segment consists of our government business (previously in our Advanced Technologies segment), focused on defense subsea technologies, marine services, and space systems. Senior Vice President, Philip G. Beierl is leading this segment.

New Operating Model

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Integrity Management & Digital Solutions (IMDS)

• Non‐destructive Testing (NDT)• Inspection• Integrity oDigital Solutions: Maritime Shipping and Global Data Solutions

Manufactured Products (MP)

• Distribution Systems • Connection Systems

o Entertainment Systems (Theme Parks)

oAutomated Guided Vehicles (AGV) solutions

Offshore Projects Group (OPG)

• Vessels• Offshore Services• Route Clearance & Trenching

o Service & Rental (well intervention, IWOCS, large work packages)

Aerospace and Defense Technologies (ADTech)

• Defense Subsea Technologies•Marine Services• Space Systems

SubseaRobotics (SSR)

• ROVoROV Toolingo Survey Services (survey & positioning, and geoscience)

• Business remains in renamed segment o Business shifted from different segment

Manufactured Products

Five Operating Segments

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Subsea Robotics

Offshore Projects Group

Integrity Management & Digital Solutions

Aerospace and Defense Technologies

Energy*

Non‐Energy

* Manufactured Products includes non‐energy Mobility Solutions businesses: Entertainment Systems and AGV.

Financial Overview, Quarterly

6

31% 26% 28%

24% 31% 23%

17% 14%17%

13% 12% 13%

15% 17% 19%

0%

25%

50%

75%

100%

2019 Q2 2020 Q1 2020 Q2

Revenue Adjusted Operating EBITDA*

65%56% 57%

12%16% 13%

7%5% 8%

2%6% 1%

14% 17% 21%

0%

25%

50%

75%

100%

2019 Q2 2020 Q1 2020 Q2

$66.9M$71.2M $82.1M

*Adjusted Operating EBITDA and percentages exclude Unallocated Expenses and the effects of certain specified items. For reconciliation of Adjusted EBITDA to Operating Income, see the Supplemental Information.

$536.7M $427.2M$495.8M

Aerospace/Defense Tech


Integrity Mgmt/Digital Sol


Subsea Robotics

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1H 2020 Revenue, Recast

Segment Revenue

1H as Reported

Service and Rental

Subsea Projects

Adtech Commercial

1H Recast New

Operating Model

ROV 210,558 20,408 28,038 ‐ 259,004 Subsea Robotics

Subsea Products 325,493 (90,248) ‐ 31,859 267,104 Manufactured Products

Subsea Projects 117,781 69,840 (39,527) ‐ 148,094 Offshore Projects Group

Asset Integrity 107,209 ‐ 11,489 ‐ 118,698 Integrity Management & Digital Solutions

Advanced Technologies 202,843 ‐ ‐ (31,859) 170,984 Aerospace and Defense Technologies

Total 963,884 ‐ ‐ ‐ 963,884

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Q2 2020 Revenue, Recast

Segment Revenue

Q2 as Reported

Service and Rental

Subsea Projects

Adtech Commercial

Q2 Recast New

Operating Model

ROV 98,778 8,454 12,002 119,234 Subsea Robotics

Subsea Products 130,655 (43,862) 13,777 100,570 Manufactured Products

Subsea Projects 56,326 35,408 (17,894) 73,840 Offshore Projects Group

Asset Integrity 48,077 5,892 53,969 Integrity Management & Digital Solutions

Advanced Technologies 93,380 (13,777) 79,603 Aerospace and Defense Technologies

Total 427,216 ‐ ‐ ‐ 427,216

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Q1 2020 Revenue, Recast

Segment Revenue

Q1 as Reported

Service and Rental

Subsea Projects

Adtech Commercial

Q1 Recast New

Operating Model

ROV 111,780 11,954 16,036 139,770 Subsea Robotics

Subsea Products 194,838 (46,386) 18,082 166,534 Manufactured Products

Subsea Projects 61,455 34,432 (21,633) 74,254 Offshore Projects Group

Asset Integrity 59,132 5,597 64,729 Integrity Management & Digital Solutions

Advanced Technologies 109,463 (18,082) 91,381 Aerospace and Defense Technologies

Total 536,668 ‐ ‐ ‐ 536,668

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Q2 2020 compared to Q1 2020

Primary Variance Factors

Consolidated Results Declined Lower revenue paired with actions to substantially reduce structural costs, which helped sustain consolidated margin.

Subsea Robotics Declined 9% decline in days on hire, particularly drill support days on working floating rigs. Manufactured Products Declined Energy Products business was impacted by delayed receipt of materials, customer‐

driven project delays, and reduced working hours due to COVID‐19. Entertainment business also adversely affected by COVID‐19 effects.

Offshore Projects Group Improved Results reflected better project execution and ongoing cost reduction activity. Service/Rental declined on decreased activity, including tentative timing of our riserless light well intervention project in Angola.


Declined Lower revenue and non‐recurring costs on certain completed projects.


Improved Good performance by our government businesses.

Unallocated Expenses Improved Improved return on market‐based assets held in a trust for the benefit of certain post‐retirement obligations and lower information technology costs.

EBITDA, Adjusted $40.5M ↓$11.1M

Comparing Results* 2020 Q2 vs 2020 Q1

* ‘Results’ are Adjusted Operating Income; excluding EBITDA, Adjusted.

Subsea Robotics merges our underwater robotics and automation capabilities with the subsea delivery system by combining our ROV, Survey, and ROV Tooling businesses.

Remotely Operated Vehicles (ROV)Remotely operated, tethered submersible vehicles for drilling support and vessel‐based services, including subsea hardware installation, construction, pipeline inspection, survey and facilities inspection, maintenance and repair.

ROV Tooling ROV skid‐mounted tools, for rental, to support well intervention, drilling, construction, field maintenance, and plugging and abandonment activities.

Survey Services Mapping; Geoscience and Autonomous Underwater Vehicle (AUV); Positioning; and Remote Survey Services for drilling rigs, pipeline lay and derrick barges, and dynamically positioned, multi‐purpose construction vessels during the placement of structures, templates, and platforms for the marine construction process.

Subsea Robotics

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28%

Q2 2020Revenue

Adjusted EBITDA Margin 32%

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Manufactured Products brings together our competencies and expertise around advanced technology product development, manufacturing, and project management skills to include four business units:Energy, Manufactured Products ‐ 86% of Q2 MP Revenue

Distribution Systems Production Control Umbilicals supply electric and hydraulic power to subsea trees and inject chemicals into well streams.Connection Systems Field development hardware ‐‐connectors and valves‐‐ used to connect production trees to umbilicals and flow lines; and Pipeline Connection & Repair Systems (PCRS).

Mobility Solutions ‐ 14% of Q2 MP Revenue Automated Guided Vehicle (AGV) Systems Innovative, turnkey technology‐based logistic solutions on load carriers traveling the floor of a facility, minus an onboard operator. Entertainment Systems Evolutionary, motion‐based ride systems capable of delivering high‐energy thrills in fully immersive 3D media‐based theme park attractions.

Manufactured Products23%

Q2 2020Revenue


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Offshore Projects Group (OPG) provides a broad portfolio of integrated subsea project capabilities and solutions, including:

project management; subsea installation and intervention; IMR (inspection, maintenance and repair services); IWOCS (Installation and Workover Control Systems); RWOCS (ROV Workover Control Systems); large work packages (e.g. riserless light well intervention; hydrate remediation; well stimulation); dredging and decommissioning.

OPG provides seabed preparation, route clearance, and trenching services to the renewable energy and oil and gas industries.

Project scopes are supported by:• our six Jones‐Act compliant vessels:

three dynamically positioned, multi‐service vessels (MSV); andthree other support and research vessels;

• third‐party charters, as needed; and • manned diving operations for special services.

17%

Q2 2020Revenue


The Integrity Management & Digital Solutions (IMDS) segment combines asset inspection and integrity capabilities with the data services and products from our Global Data Solutions (GDS) and maritime shipping businesses to capture essential asset and transportation data required by customers to make informed, value‐adding decisions.

Asset Integrity Management NDT (Non‐destructive Testing); Inspection; and Asset Integrity ‐‐onshore and topside offshore‐‐ across the energy spectrum, oil and gas, nuclear, and renewables

Digital Solutions Global Data Solutions Offshore Communications and Information Tech; Video Mgmt; Marine Terminal Mgmt; Asset Tracking and Mgmt; GIS (geographic information system) and Esri services; Web‐based Enterprise Systems

Maritime and Cargo Logistics Services OceanSMART™; Media and Integrity Mgmt; Remote Asset Monitoring; Portvision ™

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13%

Q2 2020Revenue


Aerospace and Defense Technologies (ADTech) provides engineering services and related manufacturing, principally for the U.S. Department of Defense and NASA and its prime contractors.

Defense Subsea Technologies Design, build, and operate unique maritime and specialized harsh environment systems for government and commercial customers.

Marine ServicesFull‐service ship repair capabilities for U.S. Naval vessels, including submarines, surface ships and craft, and deep submergence systems. Design, repair, maintenance, modification, and installation of hull, mechanical, and electrical (HM&E) systems.

Space Systems Turnkey design, development, manufacturing, certification, maintenance, testing, and sustaining engineering for space‐based robotics and automation, satellite servicing, human space flight systems, and thermal protection systems.

1515


19%

Q2 2020Revenue


Liquidity and Cash FlowLiquidity at June 30, 2020

• $334 million of cash and cash equivalents

• $500 million undrawn unsecured revolving credit facility available until October 2021; thereafter $450 million available until January 2023

• $500 million of senior notes due November 2024 is nearest maturity

Cash flow for the quarter ended June 30, 2020• Cash flow from operations, $38 million

• Capital expenditures, $11 million

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Cost Reduction

Targeted cost reductions of $125 million to $160 million:• 1H 2020: $125 million of annualized cost savings initiated (includes $40 million of depreciation)• Remaining actions to be implemented during 2H 2020

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Decisive Resizing/Restructuring Actions Being Taken

Category Actions Being TakenEfficiency‐enabling projects and facility rationalization

Increasing focus on remote operations to reduce the number of people working offshore; consolidation, reduction or elimination of facilities; driving quality tenets through the company to reduce cost of poor quality.

Simplify operating structure by aligning like‐for‐like activities

Permanent headcount reductions; elimination of management layers.

Compensation Senior leadership base salary reductions (15% for CEO, 10% for SVPs and 7.5% for VPs); 50% reduction in 401(k) match; reduced expected payouts under short‐term and long‐term incentive plans.

Supply chain and inventory Supply chain savings from bundled purchases and renegotiated contracts; eliminate non‐productive assets to lower inventories and carrying costs.

Depreciation $35 million to $40 million reduction

Outlook 2020

• Cost Reductions: $125 million ‐ $160 million• Run rate achieved by year‐end 2020

• excludes volume‐related direct cost reductions

• Capital Expenditures: $45 million ‐ $65 million

• Cash Tax Payments: $30 million ‐ $35 million

• CARES Act Tax Refunds: $16 million ‐ $34 million

• Generate Cash from Working Capital

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Positive Free Cash Flow

Investor Relations ContactMark PetersonVice President, Corporate Development and Investor [email protected]

19

Supplemental Information

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Net Income (Loss) Reconciliation to EBITDAEarnings before interest, taxes, depreciation and amortization (EBITDA) is a non‐GAAP financial measurement. Oceaneering’s management uses EBITDA because we believe that this measurement is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance, and that this measurement may be used by some investors and others to make investment decisions. You should not consider EBITDA 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. EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company. The following table provides a reconciliation between net income (loss) (a GAAP financial measure) and EBITDA (a non‐GAAP financial measure) for Oceaneering’s historical and projected results on a consolidated basis for the periods indicated:

21* For reconciliation of EBITDA to Adjusted EBITDA, see the Supplemental schedules that follow.

For the 3 months endedJun 30, 2020 Jun 30, 2019 Mar 31, 2020

($ in millions)

Net Income (Loss) $ (24.8) $ (35.2) $ (367.6)Depreciation & Amortization 38.7 50.3 356.2 Subtotal $ 13.9 $ 15.1 $ (11.4)Interest Expense/Income, Net 11.1 8.3 11.2 Amortization incl'd in Interest, Net 0.3 (0.3) (0.3)Income Tax Expense 5.5 17.2 (30.3)EBITDA $ 30.8 $ 40.3 $ (30.8)Adjusted EBITDA* $ 40.5 $ 40.3 $ 51.6

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Operating Income (Loss) Reconciliation to Adjusted EBITDA and Adjusted Operating EBITDAAdjusted EBITDA excludes the effects of certain specified items, as set forth in the table that follows. Adjusted Operating EBITDA is Adjusted EBITDA before Unallocated Expenses. We believe these are useful measurements for investors to review because they provide consistent measure of the underlying results of our ongoing business by individual business segment and on a consolidated basis. Furthermore, our management uses these measurements as measures of performance of our operations. Adjusted EBITDA and Adjusted Operating EBITDA are non‐GAAP financial measures. The following table provides a reconciliation between operating income (loss) (a GAAP financial measure) and Adjusted EBITDA and Adjusted Operating EBITDA (non‐GAAP financial measures) for Oceaneering’s historical results on a consolidated basis and by segment for the periods indicated.

For the 3‐mth Period EndedJune 30, 2020

Subsea Robotics



Integrity Management

& Digital Solutions

Aerospace and Defense

Technologies

Unallocated Expenses and

other Total($ in thousands)

Operating Income (Loss) as reported in accordance with GAAP $ 11,662 $ 3,865 $ (4,135) $ (1,825) $ 13,430 $ (28,179) $ (5,182)Adjustments for the effects of:

Depreciation and amortization 25,080 3,587 8,255 757 658 361 38,698Other pre‐tax — — — — — (2,653) (2,653)EBITDA 36,742 7,452 4,120 (1,068) 14,088 (30,471) 30,863

Adjustments for the effects of:Restructuring expenses and other 1,380 1,212 1,405 1,536 — 175 5,708Foreign currency (gains) losses — — — — — 3,908 3,908

Total of adjustments 1,380 1,212 1,405 1,536 — 4,083 9,616Adjusted EBITDA $ 38,122 $ 8,664 $ 5,525 $ 468 $ 14,088 $ (26,388) $ 40,479

Revenue $ 119,234 $ 100,570 $ 73,840 $ 53,969 $ 79,603 $ 427,216Adjusted EBITDA Margin 32 % 9 % 7 % 1 % 18 % 9 %

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For the 3‐mth Period EndedJune 30, 2019

Subsea Robotics




& Digital Solutions


Technologies



Operating Income (Loss) as reported in accordance with GAAP $ 14,714 $ 3,542 $ (5,027) $ (464) $ 9,362 $ (31,762) $ (9,635)Adjustments for the effects of:

Depreciation and amortization 31,640 4,987 9,826 2,025 644 1,182 50,304Other pre‐tax — — — — — (328) (328)EBITDA 46,354 8,529 4,799 1,561 10,006 (30,908) 40,341

Adjustments for the effects of:Foreign currency (gains) losses — — — — — (59) (59)

Total of adjustments — — — — — (59) (59)Adjusted EBITDA $ 46,354 $ 8,529 $ 4,799 $ 1,561 $ 10,006 $ (30,967) $ 40,282


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For the 3‐mth Period EndedMarch 31, 2020

Subsea Robotics




& Digital Solutions


Technologies



Operating Income (Loss) as reported in accordance with GAAP $ (94,083) $ (66,138) $ (79,323) $ (121,535) $ 12,971 $ (32,649) $ (380,757)Adjustments for the effects of:

Depreciation and amortization 139,187 15,964 74,907 124,343 687 1,108 356,196Other pre‐tax — — — — — (6,264) (6,264)EBITDA 45,104 (50,174) (4,416) 2,808 13,658 (37,805) (30,825)

Adjustments for the effects of:Long‐lived assets impairments — 61,074 7,522 167 — — 68,763Restructuring expenses and other 919 1,984 1,216 2,231 — 280 6,630Foreign currency (gains) losses — — — — — 7,050 7,050

Total of adjustments 919 63,058 8,738 2,398 — 7,330 82,443Adjusted EBITDA $ 46,023 $ 12,884 $ 4,322 $ 5,206 $ 13,658 $ (30,475) $ 51,618


Free Cash Flow“Free Cash Flow” (FCF) is a non‐GAAP financial measurement. FCF represents cash flow provided by operating activities less organic capital expenditures (i.e., purchases of property and equipment other than those in business acquisitions). Management believes that this is an important measure because it represents funds available to reduce debt and pursue opportunities that enhance shareholder value, such as making acquisitions and returning cash to shareholders through dividends or share repurchases.

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For the 3 months endedJun 30, 2020 Jun 30, 2019 Mar 31, 2020

($ in thousands)Net Income (loss) $ (24,788) $ (35,182) $ (367,598)Non‐cash adjustments:

Depreciation and amortization, including goodwill impairment 38,698 50,304 356,196Other non‐cash 41 495 64,137

Other increases (decreases) in cash from operating activities 23,567 37,968 (84,885)Cash flow provided by (used in) operating activities 37,518 53,585 (32,150)Purchases of property and equipment (10,631) (40,898) (27,229)Free Cash Flow $ 26,887 $ 12,687 $ (59,379)

Documents

Q0 2020 Realignment Deck Finals22.q4cdn.com/.../2020/09/Q0-2020-Realignment-Deck-Final.pdf · 2020. 9. 28. · “expect,” “anticipate,” “plan,” “forecast,” “budget,”