Hello, and welcome to Oceaneering's fourth quarter and full year 2025 earnings conference call. My name is Sarah, and I will be your conference operator. All lines have been placed on mute to prevent any background noise. There will be a question and answer period after the speaker's remarks. With that, I will now turn the call over to Hilary Frisby, Oceaneering's Senior Director of Investor Relations.

Thanks, Sarah. Good morning and welcome to Oceaneering's fourth quarter and full year 2025 Earnings Conference Call. Today's call is being webcast and a replay will be available on our website. With me today are Rod Larson, President and Chief Executive Officer, who will provide our prepared comments, and Mike Somerl, Senior Vice President and Chief Financial Officer. After Rod's remarks, we will open the call for questions. Before we begin, please note that statements made during this call regarding our future financial performance, business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter press release, which is posted on our website. I'll now turn the call over to Rod.

Good morning, and thanks for joining the call today. We closed out 2025 with strong execution across the business, making continued progress against our strategic priorities. Our performance reflected continued pricing progression in key businesses, strong operational delivery, and growing contributions from aerospace and defense technologies or ad tech. Importantly, this translated into meaningful cash generation with our cash balance increasing to $689 million at year end, further strengthened. We generated order intake of $3.7 billion, which represented a book-to-bill ratio, and adjusted EBITDA margins by 140 basis points, with each operating segment realizing year over year, achieved 99% ROV uptime for the second consecutive year and for the seventh time in the past ten years, improved ROV business by seven years, won the highest ever initial contract, integrated GDI into our Integrity Management and Digital Solutions or IMDS segment, repurchased approximately 1.8 million shares for $40 million and grew our cash balance by $191 million. As safety remains foundational to everything we do, I'm especially proud of our record low total recordable incident rate, or TRIR, of 0.22 achieved. Today, I'll cover our fourth quarter and full year 2025 results, our market outlook for 2026, our consolidated guidance for 2026, and our segment outlook for the full year by reviewing our fourth quarter 2025 results. We've delivered a solid fourth quarter in line with typical seasonality, driven by strong operational execution in several of our business segments compared to the fourth quarter of 2024 consolidated revenue of 669 million dollars was driven by substantial growth and a decrease in energy was primarily due to the unusually high number of international intervention and installation projects that are offshore projects group or OPG 24 consolidated operating income of 65.4 million dollars also declined year-over-year with increases in ad Tech Manufactured Products and Subsea Robotics, or SSR, partially offsetting significantly lower results in OPG. Stemming from the intervention and installation projects in the fourth quarter, IMDS was also lower compared to last year. We reported net income of $178 million, or $1.76 per share, a 207. This improvement was largely due to a $156 million. Our consolidated adjusted EBITDA of $90.5 million was at the high end of our guidance range, but as expected, declined year-over-year for the state. Additionally, during the fourth quarter, we generated $221 million of cash from operating activities and invested approximately $30 million in organic capital expenditures with approximately 55% allocated to growth and 45% to maintenance. Free cash flow for the quarter was $191 million, benefiting from the timing of customer payments including early receipt of payment of December 31st, 2025. Our cash balance was $689 million, a 38% increase. Now let's look at our segment. SSR operating income of $67.8 million was 7% higher. EBITDA margins improved to 38% from 36%, largely due to ROV business and revenue. Average ROV revenue per day utilized increased 7% from $10,481.20 with a fourth quarter. These pricing improvements offset the impacts of lower offer for drill support. On December 31, 2025, we had 60% of the contracted floating rig market with ROV contracts on 81 of the 136 floating rigs. We ended the quarter and the year with a fleet of 250 ROV systems, including 16 turning to manufactured products. Our fourth quarter revenue of $132 million decreased 7% year-over-year. Operating income of $20.4 million and operating income margin of 15% increased considerably due to conversion of high margin backlog in our millicals business and improved results in our non-energy projects. Year-end 2025 backlog was $511 million, a decrease of 15% compared to December 31st, 2024. The book-to-bill ratio of 0.84 for the full year of 2025 declined compared to 0.97 in the full year of 2024, largely based on the timing of orders. It is worth noting that manufactured products full year 2025 revenue of $569 million and operating income of $72 million represented their highest level since 2020 when we combined our energy and non-energy products. OPG revenue of $131 million decreased 29% compared to the same quarter last year while operating income decreased to $15 million and operating income margin declined to 11%. This was expected and as noted earlier primarily due to large international intervention and installation projects that OPG performed in the fourth quarter of 2024 that did not repeat in the fourth quarter. For IMBS, fourth quarter revenue declined due to lower activity levels in Europe and West Africa. Operating income declined by $2 million due to a combination of lower revenue and a loss associated with the resolution. Quarter 2025 operating income increased 43 percent and operating income margin and improved to 11% on a 29% increase in revenue as compared to the same period last year. These improvements are the result of new contracts awarded during the year and reflect our strategic initiative to increasingly leverage our offshore knowledge and capabilities to grow this segment. In addition to previously announced contract awards, ADTEC completed 2025 with two fourth-quarter awards on unexercised options that are expected to generate meaningful revenue in 2026. AdTech's current backlog establishes a strong multi-year foundation for revenue growth, extending beyond the traditional five-year planning size. Fourth quarter 2025, unallocated expenses of $52 million increased 26% compared to the same period last year, primarily for increased accruals for performance-based costs. Now I'll turn my focus to our consolidated full-year 2025 results compared. For 2025, consolidated revenue increased 5% to $2.8 billion, marking our fifth consecutive year of revenue growth. With the exception of IMDS, each of our operating segments achieved revenue increases. Consolidated 2025 operating income of $305 million, improved by $58 million, or 24%, and adjusted EBITDA of $401 million, improved by $54 million, or 16%. EBITDA growth was realized for all. Cash flow from operations increased $116 million to $319 million, primarily due to timing of customer collections. We invested $111 million in organic capital expenditures, representing a 4% increase. For the full year of 2025, free cash flow was $208 million, compared to $96.1 million in 2024. At year end, we had total liquidity of $904 million, comprised of $689 million in cash and cash equivalents, and $215 million from our undrawn revolving credit facility. Now, turning to our 2026, we expect AdTech to be our primary growth driver in 2026 based on our current backlog and expectations for increased spending across the FedFence environment with information administration. Brent crude oil prices at $50 to low $60 range, a level we believe supportive of deep water activity broadly consistent. Spinergy forecasts the deep water rig demand, which is indicative of RV activity. Based on our current backlog, anticipated order intake, and market fundamentals, we project consolidated revenue in 2026. Year-over-year, ad tech revenue will improve significantly. SSR and IMDS revenue improvement will largely offset anticipated declines in OPG and manufactured products. Our current energy-related backlog includes a mix of multi-year contracts, including awards and ROV and surveys for multi-year OPG contracts for inspection, maintenance, and repair, or IMR, contract in Mauritania, and for rides-reless lightwell intervention. For the year, we anticipate generating $390 to $440 million of EBITDA, with year-over-year improvements in all of our segments except for OPG. At the midpoint of this range, our 2026 EBITDA would represent a modest increase over our 2025 adjusted EBITDA. EBITDA margins are expected to improve in manufactured products in IBS, remain stable in SSR and EdTech, and decrease. We anticipate generating positive free cash flow of $100 million to $120 million. The year-over-year reduction in free cash flow primarily reflects the early receipt of approximately $37 million in customer payments in the fourth quarter of 2025 that were originally scheduled for the first year. At the midpoint of our EBITDA and free cash flow ranges, our cash conversion rate for 2025 and 2026 combined will be almost 40%, as has been the case over the last couple of changes associated with lower customer receipts, associated with early collections in 2025 that were scheduled for 2026, and the payment of performance. For 2026, we forecast our organic capital expenditures to total between $105 and $115 million with approximately 40% allocated to growth. And compared to 2025, our energy-focused capital expenditures are projected to be down 12%. We forecast our 2026 interest expense net of interest income to be in the range of $21 to $26 million on increased tooling volume. In 2026, as expected, we also deployed our Freedom Autonomous Underwater Vehicle, or AUV, on commercial operations in West Africa. We expect to deliver a second Freedom Vehicle of our fleet transition plan. We are pleased to announce that our new— For manufactured products, we expect meaningful improvements in operating income on slightly lower revenue, driven by continued conversion of our existing high absorption levels across our three umbilical plants, increased order activity in rotator, and cost reductions in our non-energy product lines. Operating income margin is expected to average in the mid-teens for the year. For OPG, revenue is expected to decrease, and operating income is expected to decrease significantly as projects shift toward traditional IMR work from installation and intervention work. We also project lower activity levels in the U.S. Gulf and West Africa, partially offset by high. Overall, for 2026, OPG operating income margins are expected to average in the mid-teens range for the year. INBS operating income is forecasted to improve significantly on increased revenue with growth opportunities in digital and engineering services. Operating income margin is expected to improve to be in the mid-single-digit range for the AdTech operating income is expected to improve on significantly higher revenue with revenue and operating income growth in all three of our government-focused businesses. Operating income margins are expected to average in the low teens for the year. Our growth expectations are underpinned by 2025 contract awards that span product development, maintenance, inspection, specialized technical services, and ongoing operations in complex maritime space, according mission-critical defense and some allocated expenses to average approximately $50 million per quarter, with increases associated with the wage inflation IT costs. Now I'll discuss our outlook for the first quarter of 2026 as compared to the first quarter of 2025. On a consolidated basis, we expect our consolidated revenue to decrease and even to be in the range of $80 million to $90 million. This guidance range is driven by our expectation for lower activity levels in energy markets at the start of 2026, which we expect to improve as the year progresses. For SSR, we project revenue to increase slightly and operating income to decrease given the geographic mix of ROV activity. We anticipate the mix to be more favorable as we progress through the year. In manufactured products, we forecast operating income to increase significantly on slightly lower revenue due to continued backlog conversion and the absence of the inventory release that impacted our theme park ride business in the first year. We expect OPG revenue and operating income to decrease significantly on lower vessel utilization and changes in project mix in the U.S. Gulf and lower international activity. We project IMDS revenue and operating income to be relatively flat. For AdTech, we expect significantly higher revenue and increased operating income on changes in project mix. We forecast unallocated expenses to be in the range of 50 million. In closing, I want to thank our employees for their dedication throughout 2025. Through their efforts, we saw momentum in each of our segments that gives us increased visibility into the future, including strengthening contributions from AdTech, growing opportunities in digital and software services, and expanding opportunities. And as we move into 2026, we remain focused on working safely and reliably, supporting our customers, and creating value for our shareholders. We appreciate everyone's continued interest in Oceaneering and will now be happy to take any questions you may have.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad if you would like to withdraw your questions simply press star one again please ensure that your phone is not up you on mute when called upon thank you your first question comes from Keith Beckman with Pickering Energy Partners your line is open hey thanks for taking my question good morning good morning I wanted to ask kind of around I noticed you guys and talked about increased defense and government spending.

EdTech looks to be stronger throughout the year with some awards. What is the, what's kind of the typical lead time and process of government services type of projects from the time that they're awarded to kind of whenever they would show up for you typically? Is there a rough timeline on that or lead time?

It's really hard. It varies quite a bit. I mean, some things depending on like if there's services for existing products, they ramp up, they ramp up quickly. Some of the things we're working on, you know, new things, that starts with, you know, like every other project starts with engineering studies, and then you go to prototype. And I would just – just to give you an idea, it's a mix right now. So the things we've been talking about.

No, it's very helpful. Makes sense. And then the other question that I had was around ad tech as well again. Whenever you think about kind of the other segments in your business, How have those really helped supplement what AdTech does and kind of the growth we've seen in that segment? I think it's kind of like your knowledge around ROVs and maybe how that helps, but any color on that?

No, I think you're right on. And so, you know, we work in different places, right? So one of them is more about just sort of that that we talk about, you know, the other one is just about working in low-gravity environments.

And that was very helpful, and I appreciate you taking my question. I'll turn it back. No, thanks, Keith.

Your next question comes from Josh Jane with Daniel Energy Partners. Your line is open.

Hey, good morning, Josh.

Good morning. Thanks for taking my questions. First one, I was just curious, could you talk about the future of IMDS and then also your digital software offerings and how you could potentially expand them sort of outside what you're doing within energy?

Yeah, and those are, you know, kind of linked at the hip. For us, it's exciting because it's one of the first times we see sort of machine vision, machine learning, and AI coming to play. So we're going out to a rig, having people crawling, looking at pressure. We actually are doing lasers, the cool part.

That's helpful. And then just one more that I wanted to ask, I want to dig into M&A a little bit. I know it obviously hasn't been as much of a focus for you in the last couple of years, But just given that we've seen on, you know, we've seen some on the rig side recently announced some larger deals, and I would say the current administration is pretty favorable towards moving deals. Has any of this changed your thoughts moving forward on M&A, or, you know, should we expect Oceaneering just to sort of, you know, operate how they've been over the last couple of years and sort of sticking to your knitting with the focus on free cash flow generation and returning it to shareholders with your capital allocation?

I don't think it's going to change my mind on, you know, big industry. I mean, it does give us a little bit of confidence.

Understood. Thanks for taking my questions.

Dan, if you have a question, it is star one on your telephone keypad. Your next question comes from Brandon Carnivale with Half Moon Capital. Your line is open.

Hey, guys. Congrats on my great friend. Hey, thanks. So I'm curious if you're seeing any traction on the autonomous forklift side after kind of like the big delivery I think you had kind of exiting last year.

I would say there is a lot of interest and different people are looking at, you know, whether they want to use it for truck loading and unloading, which is a huge opportunity for us. And we've been working on improving the capabilities for doing that. but also wherever it's just it's a lot of a lot of interest it's spread out over a lot of what was it get to know you kind of activities you know somebody who wants to pick up two or three and do a test I think one of the things we learned is thanks guys great work yeah thank you concludes the question and answer session I'll turn the call to Rob Larson for closing remarks well since there's no more questions I'll just wrap up by thanking everybody for joining the call. This concludes our fourth quarter and full year 2025 conference call. Have a great day.

This concludes today's conference call. Thank you for joining.