Bristow Group Inc. (NYSE:VTOL) Q1 2024 Earnings Call Transcript

Bristow Group Inc. (NYSE:VTOL) Q1 2024 Earnings Call Transcript May 11, 2024

Bristow Group Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone, and welcome to Bristow Group Reports First Quarter 2024 Investor Call. Today’s call is being recorded. After the speakers remarks there will be a question-and-answer session. [Operator Instructions] At this time, I would like to turn the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Redeate Tilahun: Thank you, Christine. Good morning, everyone, and welcome to Bristow Group’s First Quarter of 2024 Investor Call. I’m joined on the call today with our President and Chief Executive Officer, Chris Bradshaw; and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I’d like to take this opportunity to remind everyone that during the course of this call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on Slide 3 of our investor presentation. You may access our investor presentation on our website. We will also reference certain non-GAAP financial measures such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and our investor presentation. I’ll now turn the call over to our President and CEO. Chris?

Christopher Bradshaw: Thanks, Red, and thank you all for joining our Q1 investor call, which will have a different format and content than our typical quarterly earnings calls. Today, in addition to reviewing strong Q1 results, and affirming our full year 2024 guidance, we’ll provide an update on the state of Bristow’s business, talk about market conditions and trends in both Offshore Energy Services or OES, and Government Services, provide a current overview of the Global Offshore Helicopter Fleet, and review financial guidance for 2025, and targets for 2026. While this is the typical time of the year that we would issue guidance for the following year, namely 2025, we are taking the additional step of issuing financial targets for 2026 as well.

This advanced outlook is not something that we would necessarily expect to repeat in future years, but we think it is appropriate, given the ongoing transformational developments in our business as we commence the transition of the Irish Coast Guard contract and benefit from the ongoing activity ramp in our Offshore Energy Services business, all of which becomes more evident in 2026. So with that objective in mind, today’s call will be more akin to mini analyst day or an investor conference presentation with more of a conversational tone. First, though, we’ll begin with a brief review of our Q1 financial results, and I’ll turn it over to Jennifer for that.

Jennifer Whalen: Thank you, Chris. Good morning, everyone. I’d like to kick off with the sequential quarter comparison of Bristow’s financial results. EBITDA adjusted to exclude special items, asset disposition and foreign exchange was $47.5 million for the first quarter of 2024 compared to $46 million in the fourth quarter or a $1.5 million increase. Operating revenues were lower by $200,000, primarily due to lower seasonal activity in our fixed wing business, partially offset by increases in Offshore Energy Services and Government Services. Operating expenses were $2.2 million lower in the current quarter, primarily due to lower fuel and repairs and maintenance costs. General and administrative expenses were $800,000 lower, primarily due to lower professional service fees and lower insurance costs, partially offset by higher personnel costs.

Interest income was lower due to lower investment balances. As noted in our previous earnings call, the other income line item is primarily comprised of noncash foreign currency gains and losses, which was excluded from our adjusted EBITDA calculation. Moreover, Bristow continues to benefit from a strong balance sheet and liquidity position. As of March 31, our available liquidity was $223 million, and our adjusted free cash flow was $22 million for the quarter. As we’ve stated before, and we’ll demonstrate in the presentation to follow this discussion, we believe that this business model will continue to generate strong cash flows. At this time, I’ll turn the call back to Chris to continue the rest of the presentation. Chris?

Christopher Bradshaw: Thanks, Jennifer. At what was strong in Q1, we’re pleased to report those results. For those who are following along with the slides, whether on the webcast or on Bristow’s website, I’ll reference Slide 7 and make a note on safety, which is Bristow’s number one core value and our highest operational priority. I think for this audience, we always like to note that we would not have the business that we do or the customer base that we do were it not for Bristow’s world-class safety management system and safety track record. This focus on safety and our target zero culture is really foundational to everything that we do at Bristow. On Slide 7, we provide a snapshot, a high-level snapshot of our status as the global leader in innovative and sustainable vertical flight solutions.

As noted, we have a presence on six continents, all continents, except an Antarctica, with current customers in 18 different countries. Our current aircraft fleet is approximately 220, and we’d note that two third of the fleet is comprised of either S-92, AW189 or AW139 helicopters, which are the most in-demand helicopter models in both our offshore crew transportation market as well as the search and rescue markets that we serve. Important to note, that Bristow is the world’s largest operator of each of those three models. We’ll talk more about the market for those helicopters later in the presentation. In addition to our helicopter operations, we do have a fixed wing business and UAS services as well as other related aircraft services. With respect to our fleet, I think it’s important to note that 80% of our aircraft are owned with the balance being leased.

The majority of our fixed wing fleet is leased and also about 30 of the S-92s that we have in the fleet are leased, which provides some nice flexibility given the market dynamics that we’ll discuss later in the presentation. Looking at the company’s revenues, we have LTM revenues of $1.3 billion. Offshore Energy Services accounts for approximately 65% of that, Government Services a little more than 25%, with the balance in the fixed wing and other services that I referenced. Looking at Slide 9 provides some additional detail in our current global footprint. You’ll see here that we have a significant presence in what we view as key regions around the world. We have 11 different air operator certificates or AOCs that we operate, which represents a unique footprint and we believe unparalleled flexibility in the industry.

I would note, though, despite this global footprint, our ambition is not to try to do everything for everyone, everywhere. When it comes to our operating business, we really prefer to have scale in what we view as the key markets, and benefit from those economies of scale. We do complement our operating business with the dry leasing business where we own the helicopters and then lease them out to third parties and partners, which allows us to capitalize on demand and generate cash flows in certain markets where we are either not permitted to operate or where the competitive landscape is not attractive to enter as another operator. If you reference Slide 10 now, this summarizes the current contractual backlog of the company as of March 31 of this year, which stands at approximately $4.2 billion.

The methodology here is important, and it’s explained in the footnotes that are on the page. I just thought I encourage you to reference those. One, for example, is that our Offshore Energy Services or OES contract backlog as presented here does not include flight hour revenues, which are roughly 35% of the total revenues in a typical OES contract. So this is admittedly a bit understated as we’re just counting the monthly standing charge or MSC portion of the revenues in our OES business. But you’ll note that we have a massive backlog of long-term high-quality revenues from stable Government Services contracts, which equates to, again, $3.2 billion at the end of March. If you reference Slide 11, this highlights what we view as the significant upside opportunity from resetting rates to current market conditions as our legacy OES contracts do expire.

We are seeing increasing demand from higher upstream spending offshore, which we’ll review in some detail later in the presentation, combined with a tight equipment market with very limited new additions to the supply over the last 8 years and long lead times for any new builds from the OEMs. We saw that the second half of 2023 clearly evidenced a positive inflection point in our Offshore Energy Services business. And we view this as being in the early stages of a multiyear growth cycle in Offshore Energy. So when we think about only 30% of that portfolio being reset as of today, another 70% yet to come, we’re really optimistic and positive about the opportunity that we see in the coming contract window to reset the fullness of our Offshore Energy Services contract portfolio.

Jennifer Whalen: On Slide 12, you’ll see what I stated earlier when I was talking about Q1 around the fact Bristow does have a strong balance sheet and liquidity position, a couple of items to note here. In April, we did fund about GBP 26 million of our NatWest upsized debt that we had done earlier this year for the delivery of the first 2 AW139 for UKSAR2G. On the lower right-hand side of the slide, it shows the pro forma debt profile for the full funding of that previously announced upsize of NatWest debt. Again, as I noted earlier, our total liquidity as of the end of March 31 is $223 million. We feel like we’re in a good spot there. Also on the left-hand side, it shows our maturity profile with our senior secured notes, the only maturity of 5 and those mature in 2028.

We do like the mix between this amortizing debt that we have and the bullet on our senior secured notes, it gives us some flexibility around paying down debt over time. And also, this shows since the maturity for the senior secured notes is not till 2028, it puts us in a good cash flow position over the next few years for optionality of our capital allocation strategy.

Christopher Bradshaw: In these next few slides, we’re going to review some of the macro trends that are ongoing in the Offshore Energy Services industry. If you reference Slide 14, the chart on the top portion of the page represents the cycles that we’ve seen between 1980 and what’s expected through 2025. What you’ll see is that the decade or so leading up to 2014 represents the golden years or at least the previous golden years for the Offshore Energy industry, when the industry was pushing into deeper waters further from shore. The helicopter industry responded by adding capacity in new larger helicopter models to service those deepwater projects. When the downturn began in 2015, which was severe and resulted in a lot of the industry turmoil and reorganizations for a lot of the helicopter operators as well as a number of other oilfield services related companies, it was obviously a challenging time for the industry.

We did see some recovery that started at the end of the last decade. But then, of course, as we know, the world was hit with the COVID-19 pandemic and subsequent oil market crisis. But what we’ve seen now and what we’ve already referenced is that a new up-cycle has clearly begun. Global demand has returned, and years of underinvestment have resulted in limited available supply. Offshore basins today offer a very competitive returns for the upstream companies and we see them as having a renewed focus and investment from the upstream industry. You’ll reference a couple of quotes also on this page from two of the leading offshore oilfield services analysts which, site offshore CapEx of $200 billion this year increasing to over $230 billion in a few years’ time, which is expected to be driven both by higher activity levels as well as higher pricing.

2015 summarizes one of the more important leading indicators for offshore activity. This is final investment decisions or FIDs for offshore projects. As you’ll note, they are expected to surpass $100 billion in each of 2024, ’25 and ’26. This represents almost $500 billion in FIDs between 2023 and 2026. Slide 16 highlights another leading indicator for offshore helicopter demand. As you’ll see here, right that energy projects that the global demand for floating rigs will grow by 32% between 2023 and 2028. As more drilling rigs come into the market, that will drive an increase in demand for helicopters for the portion of our business, which is servicing drilling and exploration activity. As you might recall, most of our business, though, was related to ongoing production.

And if you looked at a similar chart for FPSOs, you would see a similar growth in demand for helicopter to service those offshore production facilities as well. So in summary, the fundamentals for our Offshore Energy Services business are very strong, I would say, more positive than any time that I can recall since entering the helicopter industry. So after several difficult years, we’re now seeing some positive tailwinds and very strong fundamentals for our OES business. In this next section, we’ll talk more about our global leading Government Services business. If you look at Slide 18, this is a summary of our current contracts. First, just a few things to note about the nature of these contracts. We are providing primarily search and rescue services.

We do some other services, including personnel transportation, but most of the core of these contracts is providing search and rescue for countries, whether that be the whole of the United Kingdom, the Netherlands, the Dutch Caribbean properties from Curaçao in the South and Saint Martin in the North, the Falklands Islands where we’re servicing the U.K. Ministry of Defense or the Irish Coast Guard contract, which we will be starting up later this year. These are long-term stable contracts generating cash flows from high credit quality government customers that provide attractive margins and capital returns for the company. Speaking a bit to the stability, if you look at the revenues that we generate from these contracts, approximately 85% of our total revenues are the monthly standing charge.

So this is the standby charge that we get paid to be there at the ready to provide this critical service. Flight hour activity represents the balance of the other 15% of total revenues. If you were to look at this page at the time of the merger, the list would have only included our foundational U.K. SAR contract. Over the last couple of years, we’ve been successful in capturing opportunities, and we’ve been able to make investments to grow and diversify this leading Government Services business to include NLCR — NLSAR, the Dutch Caribbean, Falklands, and as noted, now Ireland. Turning now to Slide 19. This provides some additional information on what represents Bristow’s two largest customer contracts. In the summer of 2022, we were successfully awarded the GBP 1.6 billion UKSAR2G contract, we’ll begin that transition process soon.

And then last summer, we were successfully awarded the EUR 670 million Irish Coast Guard contract. And as noted, the fourth quarter of this year is when we’ll commence the transition for both of those contracts. These are very large projects. The transition will take some time. The Irish Coast Guard contract will not be fully operational across all the bases really until just past the midpoint of 2025. And the UKSAR2G contract, we’ll not finish that transition until the end of 2026. So as you look at the guidance we’ll provide later in the presentation, 2025 is really more of a transition year as we ramp up for Ireland in particular. In 2026 and beyond, we’ll benefit from the full year impact of that. There is a meaningful investment amount required to ramp up on these significant new contracts.

You’ll see about $300 million between UKSAR2G and IRCG. This is mostly for the purchase of new aircraft, also modifications that we’ll be making to some existing aircraft and the build-out of new bases, particularly in Ireland. The majority of that investment, as you’ll note here on the page is concentrated this year in 2024 with a much smaller amount in 2025. On Slide 20, we provide a graphical summary of the timeline for these key Government Services contracts. You’ll see that the investments we’re making now will result in attractive long-term cash flow yields for the company well into the middle of the next decade. Over the last couple of years, we have established Bristow as the clear global leader in providing these critical services to governments.

When the next renewal processes and cycles come up in several years, we believe that we’re very favorably positioned to win and continue this leadership status in Government Services. Transitioning to the next section, we provide a high-level view of the competitive landscape in offshore helicopters on Page 22. You’ll note that Bristow is really the one truly global operator today, again with customers in 18 different countries. There are a couple of super regional players and some regional operators with whom we compete. Beyond that, it’s a relatively fragmented country-by-country landscape in the industry. On Slide 23, we provide a high-level overview of the global offshore helicopter fleet. Just a note here on methodology, this top line where it’s this market that is our understanding, leveraging some third-party resources for the current in service, so those aircraft that are currently in service today for the overall market.

And then you’ll see that we provide a Bristow set of columns as well for each of these models, which is our portion of the global fleet for each of these. Again, these are the same S-92, AW189 AW139 models we referenced earlier in discussing our fleet. It also captures the H175, which we do not currently operate but it’s the other leading super medium model available in the global fleet today. You’ll see here that beyond the total market in service, we also highlight a couple of the end markets, which are most relevant for Bristow. So these won’t sum up to the total because there are other markets, namely government, military heads of states that make up the difference, but we focus on the next 2 rows on Offshore Energy Services and Government SAR.

You’ll see here that, again, we have a leading presence in 3 of the biggest models here, the 92, the 189 the 139 Bristow is the leading global operator of each of those model helicopters. If we turn now to Slide 24, this provides an overview of the supply picture and new deliveries over time. You’ll note that this slide really looks a lot like the overall upstream spending slide that presented cycles, which we reviewed earlier in the presentation with a significant ramp up, new capacity coming into the market up until 2014. And then really a precipitous decline as the downturn occurred in 2015 and beyond. You’ll see that there were really very few new deliveries over the last several years. And we now have very limited available capacity in the market at this time.

If you look at the last few years, most of these recent deliveries have mostly gone to closed system markets such as China, certain markets in the Middle East that really do not impact the helicopter fleet of the markets that we’re competing with. As we referenced earlier in the presentation, this has resulted in a very tight supply/demand, supply and demand balance, and that tight supply environment has resulted in significant net increases and leading edge rates throughout the industry, which we stand to benefit from increasingly at Bristow. On Slide 25` we provide a little more information on — focused on the S-92 model specifically. So the S-92 heavy helicopter model, this is a 19-passenger plus the two pilots, traditional heavy aircraft.

These S-92s were manufactured with a specific 30,000 flight hour lifespan, which is rather unique in the helicopter industry. You don’t have typically this kind of specific formulaic life span, which has been designated here with 30,000 flight hours. As noted here, the earliest deliveries of S-92s began in 2004. So the oldest models are approximately 20 years of age now. The average age of our Bristow owned S-92 is about 14 years, and some of our oldest models are beginning over the next few years to approach this 30,000 flight hour limit. As S-92s age out of the market, there are going to be other aircraft such as the AW189 and the H175, which we’ve been talking about, that will serve as a competitive alternative in certain markets. If you look at Slide 26, this is a slide that we presented before.

Again, this is third-party data from Air & Sea Analytics on the offshore helicopter fleet. You’ll see here, for the relevant models that we’ve been discussing over the last several slides, effective utilization is at or near 100%, so again a very tight supply dynamic, which is impacting the market today. On Slide 27, we have a summary of a recent order book that we announced with Leonardo for new AW189 helicopters to meet customer demand and boost versus profitability. We believe that this fleet expansion will help us drive EBITDA growth at attractive returns for our stakeholders. We announced 10 orders for Offshore Energy Services equipped or configured AW189 helicopters and also 10 options that we can bring in if we see the demand for those.

I think it’s important to note, just a little more information for those perhaps less familiar about the 189s and the super mediums as an asset class, these can really service most of the missions that the traditional heavy helicopters like the S-92 have serviced to date at a meaningfully lower operating cost. So that the lower ROA operating cost, it also is at lower CO2 emissions, which is an important consideration for a number of our large customers. So in summary, this is an efficient solution for most of the missions that the traditional heavy helicopters were performing. We’ll transition now to a discussion about our guidance for 2024 and beyond.

Jennifer Whalen: So for the next few slides, I’ll go over the financial outlook for the next couple of years, starting on Slide 29. As a reminder, in June of last year, we did issue guidance for 2024, and that guidance has been affirmed this quarter. We have been talking about the strategy for the company for some time, and that strategy included the new government power contracts as well as servicing the increased offshore energy market, and we’re pleased to share the financial outlook for 2025 and 2026. Just a little bit more detail, our 2024 outlook reflects the run rate for contracts that started in 2023 as well as the rate impact for renewed contracts. 2025 outlook reflects the transition of UKSAR2G as well as the start of the Irish Coast Guard contract.

As Chris had noted earlier, the Irish Coast Guard contract won’t be fully operational until mid-2025. In addition, 2025 is a lighter year for Offshore Energy contract renewals, with 2026 having more reset impact and the full year of Irish SAR. And as you’ll see in the upcoming slides, the next couple of years show meaningful growth in adjusted EBITDA. Slide 30. The bar chart on this slide indicates the midpoint of the guidance. As you know, when we issued 2023 guidance, adjusted EBITDA was projected at $150 million to $170 million, and we ended 2023 at $171 million. Also to note, the Government Services range is understandably tighter than the range for offshore energy to account for the volatility in our Offshore Energy business. As you can see here, the compound annual growth for 2022 through 2026 is just over 22%.

And if you look at the right side of the slide, the midpoint for 2026 is almost 80% higher than where we ended 2023, which is illustrated on the next slide. On Slide 31, we’re showing the different impacts that are leading up to the 2026 targets that we’ve outlined. First, in Offshore Energy, we show the full year impact of the contracts that commenced in 2023, including new contracts in both Brazil and Norway. Secondly, new and renewed contracts that expect — that we expect to reset a more attractive rate, added capacity that’s driven from our investment in the fleet that will be deployed on contracts with attractive terms and better pricing. And we expect additional activity with Offshore Energy growth that will increase utilization of our existing aircraft.

In addition, the Government Services is contributing significantly to the increase in adjusted EBITDA related to the new contracts that we discussed, primarily U.K. SAR, Irish Coast Guard but as well as the other contracts that we’ve won over the last few years. In summary, the longer-term Bristow financial outlook demonstrates the new earnings power for the company as we execute our strategy in both Government Services and Offshore Energy, and we’re delighted to present the strong value proposition to you.

Christopher Bradshaw: Thanks, Jennifer. As noted, we’re really excited about the fundamentals for our business, the momentum that we have. I think looking at more than a 20% compound annual growth in the company’s cash flows evidence is what we talk about in terms of really multiyear growth cycle and a very positive outlook for the business. So with that, we want to talk a bit about our high-level capital allocation strategy, referencing Slide 32 of the presentation. So this will be really similar to what we’ve discussed since the time of the merger a few years ago. We do believe that it’s important to protect a strong balance sheet. We are exposed through our OES business to the volatility of the oil and gas cycle, and we think maintaining a strong balance sheet is important to withstanding those cycles over the long term.

In that regard, since the merger closed, we have sold more than 25 aircraft that were underutilized assets, mostly older models, so not the models that we’ve been focused on in this presentation, but really older model, mostly legacy helicopters. We’ve been able to, again, protect our leverage amounts. We’re at roughly 2.2 times net debt-to-EBITDA today, which is a level that we’re comfortable with. We will go higher than that at the end of this year, given the investment cycle that we’ve talked about. But because of the strong cash flows that we reviewed, we’ll be able to get back down to roughly that 2 times net leverage amount in a fairly quick manner. We have been investing for growth. Again, as we’ve talked about throughout this presentation, we’ve been successful in growing and diversifying our leading Government Services business, which provides a very stable long-term cash flow foundation for the company at very attractive returns.

We’ve also been effective in moving around our offshore configured helicopter fleets to respond to trends in demand around the world coming from the Offshore Energy business, and are poised now to benefit from the ramp in activity that we’re seeing and the increase in rates, which we expect and have referenced throughout this presentation. And finally, shareholder returns are an important part of our capital allocation strategy. Post-merger, we did buy back roughly $60 million of stock, which was about 10% of the market capitalization at that time. As noted in this discussion, we’re investing today to ramp up for these foundational Government Services contracts, which is an investment cycle that is particularly focused in 2024. As we get into 2025 and beyond, obviously, a return of capital to shareholders, whether that’s evaluating stock buybacks, either programmatic or opportunistic or potential dividends, we’ll be at or near the top of our considerations for our capital allocation strategy.

And again, we expect to crystallize our shareholder return strategy upon the conclusion of the current investment period. In summary, I want to recap what we see as some of the key investment highlights for Bristow. We are the global leader in vertical flight solutions. As we are looking at an accelerating multiyear growth cycle in Offshore Energy Services, we stand to be a primary beneficiary of that ramp in activity given our status in the key regions around the world. As noted, we have been successful in investing to grow and diversify our highly profitable Government Services business. We are clearly the global leader in that offering, which we think positions the company very well today, but also for the long-term future. We think this end market diversification presents some meaningful value enhancement beyond just the oilfield exposure that we have.

From a financial standpoint, the company has been able to maintain a strong balance sheet and robust free cash flow generation, which we expect to continue. And hopefully, we’ve highlighted in this presentation that in our fleet, we have a high level of strong asset value with long-lived aircraft that maintain a significant amount of their residual value over time. With that, we’re happy to open the line for questions. Operator?

Operator: [Operator Instructions] Our first question comes from James West with Evercore. Your line is now unmuted.

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Q&A Session

James West: Hey guys, hey Chris, hey Jennifer, good morning.

Christopher Bradshaw: Good morning, James.

James West: So, Chris, I think you did a great job of outlining kind of the next several years and what you guys — what you, Jennifer, and the company see for the outlook and certainly, we agree with the robust outlook for Offshore Energy Services. I’m curious, with respect to the contracts that will reprice, specifically the ones that are coming up in 2025 and more so I guess in 2026, it sounds like. What type of current — if we were to take, say, current leading edge pricing versus where these contracts are priced today, what kind of an uplift should we expect to see? And what impact will that have to the margin profile?

Christopher Bradshaw: Thank you for the question, James. We’re seeing leading-edge rates really being 25% or more higher than the legacy contracts that are expiring. So it’s a meaningful uplift in rates. And because of the operating leverage that we have in our business and the incremental margin that we’re able to capture there, it has really a profound impact on the company’s cash flows. Probably the best example of that today or to-date, I should say, has been Nigeria, so our business in Nigeria, where we’ve been for more than 60 years. At the time of the merger and that ’20, 2020, which is obviously a challenging period, that was really more of a breakeven financial business for us. But because of the fact that we’ve been able to reset in that particular market, a majority of the contracts now, more than half, and that’s just due to the timing of when contracts were scheduled to expire, that’s really turned that business around into a meaningful cash flow contributor to the overall company.

So we’re really excited about the prospects of replicating that success in the other OES markets that we serve around the world.

James West: Okay, got it. That makes a lot of sense. Okay. That’s good to hear. And then with respect to capacity, you laid out the capacity that has been ordered and is coming but the retirements are out — look like they’re outweighing that. Do you expect to see a build cycle? Or is the industry, given the restructuring and how difficult we had the time period through — well, before COVID, then into COVID, do you think that there’s more discipline now in the market and that your contractors will look more towards like what you guys are doing with your electric program and things like that?

Christopher Bradshaw: We are seeing a much more disciplined industry today than we saw in the years leading up to 2014, where there were a lot of speculative orders that had been placed with the OEMs, which, of course, when the downturn happened, resulted in some excess capacity. But in today’s environment, the actual production capacity is much more limited. So the S-92 production line is closed. Bell is not currently manufacturing any relevant helicopter models. So it’s really primarily to OEMs, namely Airbus and Leonardo, that are manufacturing the relevant model. So it’s a relatively limited overall capacity. The order book is limited today. We have to share that production line with the military. So the amount of slots that are available for civilians are — for the civilian market is relatively limited.

We have an order book for 189s, which we announced. There’s a modest amount of other orders out there for the relevant models that we’ve been discussing. But again, we’re not seeing anywhere near the type of speculative orders that were probably in the market leading up to 2014, and we hope that remains the case.

James West: Got it. Thanks Chris.

Christopher Bradshaw: Thank you.

Operator: Our next question comes from Josh Sullivan with the Benchmark Company. Your line is now open.

Joshua Sullivan: Hey good morning.

Christopher Bradshaw: Good morning, Josh.

Joshua Sullivan: Just as far as Q1, you had typically a seasonally lower quarter. What really drove the outperformance here?

Jennifer Whalen: Thank you for the question, Josh. Good to hear from you. It is true that we experienced seasonality in Q4 and Q1 due to various factors, weather, less daylight hours. What you’re really seeing in Q1 is the impact of the new run rate for the contracts that started in Norway and Brazil in the second half of 2023. So our jumping off point is a higher point going forward.

Joshua Sullivan: So should we expect kind of a different seasonal flow going forward then?

Jennifer Whalen: I mean we’re going to still have seasonality. It’s just that the new — the new low end seasonality is a little — is higher than the old low end seasonality.

Joshua Sullivan: Got it. And then as far as the longer-term guidance, why was this the right time to provide the outlook?

Jennifer Whalen: So as I talked about a little bit in my slide, ’25 is really a year where we’re transitioning these 2 very large projects, as Chris was talking about. So really, we’re trying to get to, what does that new earnings power after we get through this transition start to look like? And that was why we went out a little farther, just trying to give a little more clarity to folks that have been asking a lot of questions, particularly around the Government Services side of the business. But also, we do have the Offshore Energy side of the business, which is also having reset rates and higher activity as well. So really, it was just to try to give a little bit more clarity around these next couple of years as we move to these new big contracts.

Joshua Sullivan: Got it. And then you went through a lot of the detail in the prepared remarks there. But if we look at each of the years, how do we think about the higher end of some of these ranges and then the lower end as well within each of the years?