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    TDW
    Earnings call· Mar 2026(Q1 FY26)

    TIDEWATER Q1 FY26 earnings call TDW

    May 5, 2026 Source

    Executive summary

    Tidewater Q1 FY26 — Strong Operational Execution Amid Geopolitical Headwinds

    Tidewater delivered strong Q1 FY26 results, with revenue and gross margin exceeding internal expectations driven by robust operational execution and favorable day rates. The company is actively managing the cost impacts from Operation Epic Fury while maintaining its full-year guidance. Strategic M&A, notably the Wilson & Sons acquisition, is on track to close by Q2, reinforcing Tidewater's global presence and capital allocation strategy remains focused on value-accretive opportunities, with a positive long-term outlook for day rate improvements driven by market tightening and increased offshore activity.

    Highlights

    5

    • Q1 revenue reached $326.2 million, exceeding expectations due to higher utilization and stronger day rates.

    • Gross margin was just under 49%, slightly up quarter-over-quarter and over 3 percentage points above internal plan.

    • Generated $34 million of free cash flow in Q1, tracking with expectations for the full year 2026.

    • Maintaining full-year 2026 revenue guidance of $1.43 billion to $1.48 billion and gross margin guidance of 49% to 51%.

    • Wilson & Sons acquisition of 22 PSVs for $500 million is progressing as expected, with closing anticipated by the end of Q2.

    Concerns

    5

    • Free cash flow decreased sequentially due to less working capital benefit and higher drydock spend.

    • Operation Epic Fury resulted in $2.3 million in Q1 costs (hazard pay, insurance, fuel), with ongoing costs estimated at $10 million to $11 million per quarter if the conflict continues.

    • Q2 gross margin is expected to decline by about 5 percentage points sequentially due to conflict-related cost increases.

    • New tendering activity in the Middle East has slowed due to elevated risk, though pent-up demand is expected post-resolution.

    • Pemex underlying financial pressures continue to weigh on sentiment in Mexico.

    Guidance & targets

    15
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $1.43 billion to $1.48 billion
    high materiality
    High
    Full-year 2026 Gross Margin
    49% to 51%
    high materiality
    High
    Q2 Revenue
    roughly flat with the first quarter
    medium materiality
    High
    Q2 Gross Margin
    decline by about 5 percentage points sequentially
    high materiality
    High
    Full-year 2026 Stand-alone G&A Costs
    about $125 million
    medium materiality
    High
    Wilson's Acquisition Additional G&A Costs
    approximately $7 million
    low materiality
    High
    Full-year 2026 Drydock Costs
    approximately $122 million
    medium materiality
    High
    Wilson's Acquisition Additional Drydock Costs
    approximately $16 million
    low materiality
    High
    Full-year 2026 Capital Expenditures
    approximately $51 million
    medium materiality
    High
    Full-year 2026 Maintenance CapEx
    approximately $36 million
    medium materiality
    High
    Wilson's Acquisition Additional CapEx
    about $1 million
    low materiality
    High
    Net Leverage
    less than 1x
    high materiality
    High
    Day Rate Increases (Fleet-wide)
    roughly $3,000 to $4,000 per day per year
    high materiality
    Medium
    Legacy Tidewater Full-year 2026 Revenue (from backlog)
    $1.1 billion
    medium materiality
    High
    Legacy Tidewater Full-year 2026 Utilization
    approximately 80%
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Consolidated
    Revenue decline primarily due to two fewer days in the quarter and lower utilization from higher drydock days. Gross margin percentage slightly ahead of Q4.
    Average day rates: +1% QoQActive utilization: 80.6% (down from 81.7% in Q4)
    		$326.2 million—-3%48.8%
    Europe and Mediterranean
    Revenue increase driven by higher day rates, partially offset by decreased utilization due to a heavy drydock schedule and vessel mobilizations. Med region expected to be strong longer term.
    Day rates: +9% QoQUtilization: -7 percentage points QoQGross margin: +3 percentage points vs. expectation
    		+5.5%——-2 percentage points QoQ
    APAC
    Gross margin increase due to higher utilization from fewer repair days and strong day rate increase, partially offset by small increase in operating costs from two vessel transfers into the area.
    Day rates: +7% QoQUtilization: increased
    		———+3 percentage points QoQ
    Africa
    Gross margin increase primarily due to higher utilization from fewer idle days, despite lower day rates. Operating costs decreased due to fewer vessels and operating days. Some slowdown expected in Q2, but big pickup from Q3 onwards.
    Utilization: +5 percentage points QoQDay rates: -4% QoQOperating costs: -15% QoQ
    		———+4 percentage points QoQ
    Middle East
    Gross margin increase due to fewer operating days and lower R&M expense, partially offset by higher conflict-related costs. New tendering activity has slowed due to elevated risk.
    Operating costs: -5% QoQDay rates: small drop QoQUtilization: slight drop QoQ
    		———+1 percentage point QoQ
    Americas
    Revenue and gross margin decline due to lower utilization from higher drydock/repair days and decreased day rates. Operating costs decreased due to two vessels transferred out of the region.
    Utilization: -4 percentage points QoQDay rates: -3% QoQOperating costs: -10% QoQ
    		-$12 million QoQ——-4 percentage points QoQ

    Operational metrics

    19
    Total G&A cost
    $33.6 milliondown from $39 million in Q4 FY25
    Q1 FY26

    Decrease mostly due to lower professional fees (M&A transaction costs) and adjustments to compensation expense.

    Deferred drydock costs incurred
    $36.4 millionup from $13.9 million in Q4 FY25
    Q1 FY26

    Q1 is typically a heavy drydock quarter.

    Drydock days
    949
    Q1 FY26

    Affected utilization by about 5 percentage points.

    Capital expenditures (vessel modifications and upgrades)
    $14.9 million
    Q1 FY26

    Related to vessel modifications and upgrades.

    Payments on finance leases (vessel purchase options)
    $24.4 million
    Q1 FY26

    Related to exercising two purchase options for leased vessels; not reflected as CapEx.

    Vessel sales proceeds
    $3.3 millionlower than $5.3 million in Q4 FY25
    Q1 FY26

    Proceeds from selling two vessels.

    Operating costs
    $166.9 milliondown from $172.7 million in Q4 FY25
    Q1 FY26

    Decrease mainly due to lower R&M costs, lower other operating expenses, and two fewer days in the quarter.

    EBITDA
    $129.3 milliondown from $143.1 million in Q4 FY25
    Q1 FY26

    Sequential decrease.

    Net income
    $6.1 million
    Q1 FY26

    Reported net income for the quarter.

    EPS
    $0.12
    Q1 FY26

    Diluted earnings per share.

    Operation Epic Fury costs (Q1)
    $2.3 million
    Q1 FY26

    Costs incurred due to the Iran conflict, majority in the Middle East.

    Operation Epic Fury ongoing costs (estimated)
    $3.4 million
    per month

    Estimated ongoing additional costs related to the conflict, likely to continue into the near future.

    Share repurchase authorization remaining
    $500 million
    Q1 FY26 end

    Represents about 12% of shares outstanding as of May 4, 2026.

    Net debt to EBITDA covenant (bonds)
    <1.25x
    ongoing

    Unlimited ability to return capital to shareholders provided this covenant is met pro forma for any share repurchase.

    Net debt to EBITDA covenant (revolving credit facility)
    <1x
    ongoing

    Unlimited ability to repurchase shares provided this covenant is met.

    Term contracts entered
    18
    Q1 FY26

    Average duration skewed by two specific long-term contracts.

    Legacy Tidewater firm backlog and options as % of midpoint 2026 revenue guidance
    84%
    FY26

    Represents Q1 2026 revenue plus firm backlog and options for the legacy Tidewater fleet.

    Remaining available days for 2026 captured in firm backlog and options
    69%
    FY26

    For the legacy Tidewater fleet.

    Capacity available to be chartered (legacy Tidewater)
    11%
    FY26

    If the market tightens quicker than anticipated.

    Industry KPIs

    4
    MetricValueDetails
    Rpo backlog$1.1 billionUSD
    FCF CAPEX leverage$34.4 million FCF; $51 million CapExUSD
    M a integration progress$500 millionUSD
    Orders bookings by segment18 term contractscontracts

    Orderbook & backlog

    2
    Share repurchase authorization$500 millionQ1 FY26 end

    Represents ~12% of shares outstanding as of May 4, 2026.

    Legacy Tidewater firm backlog and options$1.1 billionQ1 FY26

    Represents FY26 revenue from Q1 plus firm backlog and options, covering 84% of the midpoint of legacy Tidewater's 2026 revenue guidance.

    Deals & partnerships

    1
    Wilson & Sons UltraTug OffshoreAcquisition of 22 PSVs focused exclusively on the offshore market in Brazil.$500 million

    Pre-integration work has already started, and the company is making good progress. Expected to close by the end of the second quarter.

    Capital programs

    1
    Major upgrade to Norwegian vesselplanned

    Included in the full-year 2026 capital expenditures guidance of approximately $51 million.

    Risks & headwinds

    6
    Operation Epic Fury (Middle East conflict) cost increasesongoing, near future

    $2.3 million in Q1 FY26; estimated $10 million to $11 million per quarter if ongoing

    Mitigation: Working with customers for reimbursement of wages and insurance costs; not yet included in guidance.

    Q2 gross margin declineQ2 FY26

    5 percentage points sequentially

    Mitigation: Due to cost increases associated with Operation Epic Fury; company is seeking recoupment for about half of these costs.

    Slowdown in new tendering activity in Middle Eastnear term

    Low tendering activity expected to persist in the near term

    Mitigation: Anticipate pent-up demand and activity rebound once conflict is resolved; lack of new supply may positively impact day rates.

    Pemex underlying financial pressuresongoing

    Weighing down sentiment in Mexico

    Mitigation: Seeing some uptick in tendering activity from other oil companies in the country for 2027 and 2028.

    Short-term slowdown in OSV tendering activity in Brazilfirst half of 2026

    Expected to pick back up after elections

    Mitigation: Expected to pick back up after elections are completed in Q4 of this year; long-term outlook remains positive.

    Unanticipated downtimeongoing

    Risk to backlog revenue

    Mitigation: Due to unplanned maintenance and incremental time spent on drydocks.

    What to watch in Q2 FY26

    5

    Wilson & Sons Acquisition Close

    end of Q2 FY26
    CurrentProgressing as expected
    TargetClosed

    Why it matters

    Successful closing is crucial for re-entering the Brazilian market and executing the company's global strategy.

    On approvals, things are moving as expected, and we still anticipate closing by the end of the second quarter.

    Q&A highlights

    7

    Is the tightness in the anchor handler market, particularly in the North Sea, a regional development or a global trend?

    Piers Middleton explained that the North Sea spot market, driven by consolidation and increased rig towing/subsea construction, is leading the tightness. He expects this regional trend to have a 'trickle-down effect' globally over the next few quarters, indicating it's a positive sign for larger anchor handlers.

    “Generally, what we see is this -- the spot market in the North Sea tends to drive a lot of the sort of noise elsewhere as well. So we expect that to sort of have a trickle-down effect through the rest of the globe over the next few quarters.”

    asked by Ben Summers · answered by Piers Middleton

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 Performance and Operational Execution

    Tidewater reported Q1 FY26 revenue of $326.2 million and a gross margin of just under 49%, both exceeding internal expectations. This strong performance was attributed to higher utilization and stronger day rates, coupled with efficient operational execution that resulted in less downtime for repairs and fewer drydock days than anticipated. The company generated $34 million in free cash flow, aligning with its full-year 2026 expectations, despite a sequential step down due to working capital changes and higher drydock spend.

    02

    Impact of Operation Epic Fury

    Operation Epic Fury in the Middle East had minimal disruption to vessel activity in Q1, with utilization and revenue in March exceeding forecasts. However, the conflict led to $2.3 million in incremental costs during Q1, primarily for crew hazard pay, insurance, and fuel. Management expects these elevated costs to continue, estimating $10 million to $11 million per quarter if the situation persists, and is actively seeking recoupment for about half of these direct cost increases from customers. New tendering activity in the region has slowed, but pent-up demand is expected to rebound post-resolution.

    03

    Wilson & Sons Acquisition Update

    The acquisition of Wilson & Sons UltraTug Offshore, comprising 22 PSVs for $500 million, is progressing as planned and is expected to close by the end of Q2 FY26. Pre-integration work is underway, and the company is making good progress in preparing to integrate the business. This acquisition is strategic for reestablishing Tidewater's presence in the Brazilian market, which is viewed as a priority and a long-term growth area.

    04

    Capital Allocation Strategy

    Tidewater's capital allocation framework prioritizes value-accretive M&A opportunities, but also views share repurchases as an attractive way to return capital to shareholders. The company did not repurchase shares in Q1 due to the pending Wilson's acquisition, but retains a $500 million authorization. The balance sheet remains strong, with net leverage expected to be less than 1x post-Wilson's closing, providing flexibility for future M&A or buybacks.

    05

    Market Outlook and Day Rate Expectations

    The company anticipates a tightening market in late 2026 and into 2027-2028, which is expected to drive meaningful day rate improvements of roughly $3,000 to $4,000 per day per year across the fleet. This positive outlook is supported by increased focus on energy security, a structural improvement in demand for offshore activity, and rising rig demand. Offshore drilling activity, in particular, is seen as a strong positive for vessel demand.

    06

    Regional Market Dynamics

    The North Sea OSV spot market strengthened significantly in Q1, with AHST spot rates reaching record highs above $350,000 per day in Norway. Africa saw a large increase in utilization, driven by drilling campaign overruns and EPCI work. While Middle East tendering slowed, the long-term outlook for the region and globally is seen as positive due to geopolitical shifts. Brazil's long-term outlook remains strong despite short-term tendering slowdowns, and Asia Pacific is experiencing increased demand from NOCs and IOCs.

    AI-generated summary of the company’s earnings call. Not investment advice.