Bristow Group Inc. Aktie

Good day, everyone, and welcome to Bristow Group's First Quarter of 2026 Earnings Call. Today's call is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to Redeate Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Thank you, Michael. Good morning, everyone, and welcome to Bristow Group's First Quarter of 2026 Earnings 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 would 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 the investor presentation. You may access the 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 the investor presentation.

I will now turn the call over to our President and CEO. Chris?

Thank you, Red. The company delivered on our goal of 0 air accidents in the first quarter, and the Bristow team remains committed to safety as our #1 core value and highest operational priority. Bristow's first quarter financial results place us on track for what is expected to be a transformational year for the company. We are pleased to affirm our financial guidance ranges for 2026, which notably reflect adjusted EBITDA growth of approximately 25% year-over-year. While geopolitical conflicts and tensions have driven turbulent and concerning global conditions thus far in 2026, these macro developments underscore the conviction we have in the outlook for Bristow's business.

I'll have more comments on the strong tailwinds poised to benefit the company later in the call. But for now, I will hand it over to our CFO for a detailed discussion of Q1 results and our financial outlook. Jennifer?

Thank you, Chris, and good morning, everyone. Today, I will begin with a review of Bristow's sequential quarter financial results on a consolidated basis before covering the financial results and 2026 guidance ranges for each of our segments. While the first quarter is typically our seasonally lowest quarter, Bristow's total revenues were $11.4 million higher compared to Q4 2025, primarily due to increased activity in our Government Services business and increased rates and activity in certain of our key Offshore Energy Services or OES markets. Adjusted EBITDA was $0.9 million lower in Q1, mainly due to higher repair and maintenance costs and lease and equipment costs across our segments. We are affirming our 2026 guidance ranges of $1.6 billion to $1.7 billion for total revenues and $295 million to $325 million for adjusted EBITDA.

Turning now to our segment financial results. Revenues in our OES segment were $6.9 million higher in Q1 versus Q4 2025, primarily due to increased rates and higher utilization in the U.S. and Trinidad, and higher utilization in Africa, which were partially offset by lower utilization in Europe. Adjusted operating income was $0.7 million lower, primarily due to higher operating expenses of $5.6 million and lower earnings from unconsolidated affiliates of $1.8 million, offsetting the higher revenues. Operating expenses in OES were higher primarily due to lower vendor credits recognized this quarter, coupled with additional aircraft leases, which were partially offset by lower personnel and other operating expenses.

During the quarter, the company recognized additional noncash depreciation expense of $6.4 million related to S76D medium helicopters used in our OES segment as it finalizes plans to return this model and transition to newer models as part of Bristow's ongoing fleet management efforts to better meet customer needs. The company plans to complete this transition of models by early 2027 and expects to recognize approximately $24 million of additional depreciation expense through the transition period.

Our 2026 OES revenue guidance range remains between $1 billion and $1.1 billion, and our 2026 adjusted operating income guidance range remains $225 million to $235 million for this segment.

Moving on to Government Services. Revenues were $7.8 million higher, primarily due to the transition of the Irish Coast Guard contract, including the full quarter impact of the base in Sligo that began operations last quarter and the commencement of operations at the final base in Waterford this quarter. Adjusted operating income was $1.9 million higher in Q1, primarily due to the higher revenues, partially offset by higher operating expenses of $4.8 million as a result of higher repairs and maintenance, increased headcount in Ireland, higher leased-in equipment costs related to the ongoing transition activities in the U.K. and higher general and administrative expenses of $0.5 million, largely related to professional service fees.

Our 2026 Government Services revenue guidance range remains between $440 million and $460 million, and the adjusted operating income guidance range remains $70 million to $80 million, which is roughly double that of 2025.

And finally, revenues from Other Services were $3.2 million lower in Q1, primarily due to lower seasonal activity in Australia, partially offset by favorable foreign exchange rate impact. Adjusted operating income decreased by $2.9 million due to the lower seasonal revenues, partially offset by reduced operating expenses of $0.4 million related to the lower seasonal activity. Our 2026 revenues and adjusted operating income guidance for this segment remain between $130 million and $150 million and $20 million and $25 million, respectively.

Turning now to cash flows and liquidity. Net cash used in operating activities was $8.3 million in the current quarter. The working capital used in the current quarter primarily resulted from an increase in accounts receivables, largely due to timing of customer payments. In comparison to the prior year, working capital changes consumed more cash flow in Q1 2025 than was the case in Q1 of this year. The company does not have material amounts of aged receivables, so we expect to see improvements in working capital in the coming quarters. As of March 2026, our unrestricted cash balance was $342 million with total available liquidity of approximately $394 million.

As a reminder, in January, Bristow closed a private offering of $500 million senior secured notes due in 2033 with a coupon of 6.75%. The company used a portion of the net proceeds to redeem its existing 6.875% senior notes with the remaining net proceeds to be used for general corporate purposes. We are very pleased with the successful refinancing transaction highlighted by an upsized deal at a lower coupon rate and extended maturity.

Bristow's financial flexibility, positive financial outlook and robust balance sheet represent a competitive advantage for the company and favorably position us to pursue various potential growth opportunities.

Lastly, Bristow paid $3.7 million in dividends during the quarter and on April 30 declared another dividend of $0.125 per share of common stock. This dividend is payable on May 29 to shareholders of record at the close of business on May 15.

At this time, I will turn the call back to Chris for further remarks. Chris?

Thank you. Looking forward, we believe Bristow is favorably positioned to benefit from three global megatrends, namely: increased defense spending; the importance of energy security; and the electrification of transportation.

Taking each of these in turn, number one: Increased defense spending. Given recent hostilities and the overall geopolitical landscape, we expect defense spending to increase significantly over a multiyear period. With the expected scale of these defense expenditures and the continued budgetary pressures for most countries in the Western world, we anticipate the need for increased public-private partnerships to realize these government and military objectives. We see additional growth opportunities in our core government search and rescue business as well as a broader spectrum of aviation services to government and military customers, particularly in Europe and the Americas. In the context of a complicated geopolitical landscape and expectations for higher defense spending, we believe there will be compelling organic and inorganic growth opportunities for a specialized aviation services provider with Bristow's track record, operational expertise and financial flexibility.

Number two: The importance of energy security. While oil and gas remain commodities, recent geopolitical events have placed an enduring emphasis on where hydrocarbon supplies are located and the established offshore energy basins that Bristow services represents some of the most attractive and secure sources of supply. Deepwater projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies. And we believe offshore projects will receive an increasing share of future upstream capital investment. This positive demand outlook is paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains tight and the ability to bring in new capacity remains constrained with long manufacturing lead times. This constructive supply and demand balance, combined with an increased prioritization of energy security, supports a positive outlook for the offshore helicopter sector.

Number three: The electrification of transportation. We have continued to advance Bristow's position as an early leader in the development of the advanced air mobility industry, which will incorporate the operation of next-generation aircraft powered by electric, hybrid electric, and other new propulsion technologies. As a leader in vertical flight solutions for over 75 years, Bristow has a unique opportunity to leverage our core competencies as an advanced proven operator to serve the needs of this new industry sector. We believe the company has created significant option value with minimal capital commitment to date in what is expected to be a large and rapidly growing addressable market for these new generation aircraft.

In conclusion, we have a very positive outlook for Bristow's business in 2026 and beyond as we continue the company's evolution as a scaled multi-mission aviation services provider with complementary business lines.

With that, let's open the line for questions. Michael?

[Operator Instructions] Our first question comes from Savi Syth from Raymond James.

First question may be on the fuel prices here, especially more so on the kind of the jet fuel price and availability. Just curious if that's affecting your business either directly or indirectly and your expectations as you go through the year?

Thanks for the question. Obviously, a lot of attention and rightfully so around the aviation jet fuel market globally. Fortunately, Bristow is naturally hedged as fuel is a pass-through in the vast majority of our business. For example, in all of our OES contracts, there is a pass-through of fuel cost to the end customer. There is one of our government contracts that has a slight lag in the reset mechanism, but that's more of a timing issue. So again, naturally protected through our pass-through mechanisms.

The one area of the business, which is a bit different is the commercial airline that we own and operate in Northern Australia. There, our recovery mechanisms are more around increasing rates and imposing as we recently have a fuel levy on ticket sales. In terms of supply of that aviation fuel, thankfully, we've had ample supply to date, and our suppliers assure us that we should continue to do so. That's obviously something we'll continue to monitor. And in a scenario where there may be some rationing, we think as a provider of critical transportation services, and search and rescue services that we should receive priority. But again, availability has not been an issue to date, and we are naturally hedged and protected through the pass-through mechanisms in our customer contracts.

Our next question comes from Josh Sullivan from JonesTrading.

Just as we think about trends in global defense spending, you're highlighting and the opportunity for Bristow, historically, we've primarily known you as a civilian search and rescue operator. But as we think about Bristow fitting into the broader defense spending cycle perspective, can you just highlight maybe where and how that conversation is going to evolve?

Sure. We believe there are really multiple avenues of potential benefit for us. First of all, as you mentioned, in our core civilian Coast Guard search and rescue services, where we are the market leader in that segment. What we're seeing in a lot of conversations, particularly out of Europe right now is as those countries have committed to increase their defense spending, usually tied to percentages of GDP, they're looking for ways to balance their overall budgets. And one of the ways they could potentially do that is as they're spending more money on tanks and missiles, potentially outsourcing some of the civilian services like the Coast Guards. So, we're having conversations with more countries, again, particularly in Europe about potentially outsourcing their civilian services, which could be a source of growth for our core search and rescue business.

In addition to that, we already provide other aviation services to militaries and government customers such as troop movements and ISR or Intelligence, Surveillance, and Reconnaissance missions. We think those mission profiles will be an additional source of growth for Bristow as we look to expand our capabilities and expand our customer base that we're servicing by providing that broader spectrum of services.

And then on your side of things, the new international sandbox project in Norway with Electra.aero, how does that differ from the previous one with BETA? Is it a continuation with just a different aircraft? Are you seeking new insights, different use cases? Just curious how you guys are approaching these sandboxes.

Yes. I think we would characterize it as an evolution. It is a different aircraft that we'll be using this time. In the first test arena, there was a focus primarily on shorter routes, primarily around cargo logistics. In the new test arena, we're looking at broader regional air mobility applications, which could include both cargo and passenger transportation along really longer routes. So, more regional mobility with a different range and payload capability. So again, I would characterize it more as an evolution of the exploration of this new market for these next-generation aircraft.

And then just one last one on the operating expenses and working capital dynamics here in the first quarter or even first half. Can we just have a conversation what those are going to look like in the second half? Or what are the bigger tent poles there that are going to keep us on track with guidance here?

To start with working capital, I mean, this quarter was truly -- the draw on working capital was related to customer payments, which was similar to Q1 of 2025. Those have since been almost completely collected. So, I think on the working capital trends, it should potentially look similar to last year as far as that goes. On the rest of guidance, we give an annual guidance number, as you know, our Q4 and our Q1 are lower quarters than our Q3 and Q2. So that trend would continue.

I'd like to go back to Savi Syth from Raymond James. Did you have a follow-up question?

Yes. Just curious on the Slide 13. Could you remind us how global offshore production CapEx and OpEx translate into kinds of offshore opportunities? I'm guessing there is a lag in there, but I wonder if you could talk about how those two progress.

Sure. Happy to do that. So, with reference to that Slide 13 in the investor presentation, there is an expectation that drilling and exploration activity will pick up in the latter half of this year, and we expect overall offshore spending, both CapEx and OpEx to remain elevated at increasing levels through the end of this decade.

For the two components, OpEx or operating expenditures really relate to existing established projects, primarily production support, and 85% of the revenue that Bristow generates in our OES business are related to those production activities. So that's really a direct indicator of spend that goes to services like ours.

CapEx is related to new projects. So, this would be new exploration and development activities. Any increases there provide upside to us through that 15% of our OES business. So, we do have upside exposure there. And of course, any successful new discoveries on the exploration side are leading to next year's or following year's operating expenditure as production expands. So, the fact that growth of those -- both of those categories are expected to grow meaningfully over the next few years are positive tailwinds for our business.

Is there like a timeline generally that we should look forward to in terms of when these kinds of plans step up versus when it translates to Bristow's kind of P&L?

In terms of project timelines, it does have a spectrum to it. If it's a tieback to an existing platform, that will typically be faster than an entirely new greenfield project. But overall, we expect activity to increase in the latter half of this year. We'll see almost an immediate benefit from that. And then the flow-through from that into the rest of our business should pick up in 2027 and beyond.

But again, on specific timelines, if it's a subsea well tieback to a platform that's already there, it may be a 9-month lead time. If it's an entirely new greenfield project in an entirely new exploration area, you might be looking at 3 years between when exploration activities begin and when you have production start to flow. So, a pretty broad spectrum depending upon the type of activity.

Our next question comes from Alex Rygiel from Texas Capital.

Nice quarter. Can you update us on the OES contract resets in the U.S.?

Alex, thank you for the question. Here in the U.S., we have now reset effective in the beginning of this year, our largest OES contract in the U.S. Gulf. There are others that will reset over the course of this year. More broadly speaking, across our global portfolio, we expect by the end of this calendar year that essentially all of our OES -- our legacy OES contracts will have reset. So, we'll have the benefit of that this year and of course, more of a full year benefit in '27 and beyond.

And then can you elaborate on the specific operational and financial considerations that led to the decision to retire the S76D helicopters earlier than expected?

Sure. This decision was primarily based on operational considerations, including repair and maintenance coverage with the OEM and our ability to procure parts and inventory needed to support the fleet. It has a small installed base, and it's been difficult to continue to keep those flying. So, to meet our customers' needs, we've had to make a change.

Our final question today comes from Steven Silver from Argus Research.

So, it's an interesting concept laying out these megatrends that Bristow might be in position to participate in over the coming years. Can you just discuss your thoughts around the timing of the opportunities and really how you're balancing them with just the continued tight equipment supply and really the ever-changing geopolitical landscape?

Steve, thanks for the question. From a timing standpoint, I'd say that these are really already tangible in many ways. For example, the progress that's being made on the projects for the advanced air mobility initiatives that are out there. In addition to that, energy security is, I think, again, very tangible for everyone in the world right now and the importance of where your sources for supply are coming from. And then around the defense spending and government opportunity, again, I think very tangible just with the way headlines and developments are occurring in the world and the conversations that we're having with potential -- both existing and potential customers about new ways to support them.

So, it is already tangible, but we expect traction and momentum really to increase in the latter part of this year. And then we see this as a multiyear opportunity set. So, we see it as being quite durable in terms of opportunities to continue to grow the business.

In the context of the tight supply market that you mentioned, I think we -- that will always be a challenge in how you have enough supply to meet an increased demand. Thankfully, I think we're well positioned in the sense of being the largest operator in the space, having the largest fleet globally. It does present us with both challenges as well as opportunities to optimize the portfolio and where the assets are and are they generating the best return potential for that potential asset. And then I think, again, we have a competitive advantage in the sense of the financial flexibility that we have. It's really a differentiator versus our competitors in the market. So that allows us -- we can bring in aircraft on lease. We can also purchase them when that makes more sense. And being the biggest operator for most of our key OEMs on the vertical aircraft side, I think we're as well, if not better positioned than anyone to capitalize on that.

This concludes our question-and-answer session. I'll now turn the call back over to Chris Bradshaw for closing remarks.

Thank you, Michael. Thanks, everyone, for your time. We look forward to updating you again next quarter. In the meantime, stay safe and well.

This concludes today's call. You may now disconnect at any time.

Good day, everyone, and welcome to the Bristow Group's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's Fourth Quarter and Full Year 2025 Earnings 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 the investor presentation. You may access the 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 the investor presentation.

I'll now turn the call over to our President and CEO. Chris?

Thank you, Red. I will begin with a note on safety, which is Bristow's #1 core value and our highest operational priority. We experienced fewer lost workdays in 2025, the second consecutive year of improvement in this metric. The Bristow team remains committed to our Target Zero Safety culture and the belief that we each own safety every day.

By maintaining situational awareness and always looking out for one another, we can deliver on Bristow's commitment, zero accidents and zero harm. We are also pleased to report strong financial performance in 2025. Full year adjusted EBITDA of $246 million was in line with guidance for 2025, and we are affirming our financial guidance range of $295 million to $325 million for 2026, which reflects adjusted EBITDA growth of approximately 25% year-over-year. We expect strong cash flow conversion, which Jennifer will further detail in her commentary.

For now, I will refer you to Slide #15 in our earnings presentation, which summarizes the transformative growth in Bristow's business over the last few years. Since the pandemic era trough in 2022, we have experienced significant year-over-year growth in [indiscernible] adjusted operating income, adjusted EBITDA and margins. With the continued growth and diversification of our Government Services business, Bristow has evolved into a scaled, multi-mission aviation services provider with leading market positions in our core markets.

As reflected in our firm financial outlook, we expect adjusted operating income in our Government Services business to double in 2026. And the high-quality infrastructure-like cash flows from these contracts provide a durable cash flow foundation for the company. In addition, we expect adjusted operating income in our offshore energy services business to increase by approximately 15% in 2026, primarily due to improved terms on contract renewals.

In January, Bristow completed a successful refinancing of our senior notes, with an upsized $500 million transaction at a lower coupon rate of 6.75% and an extended maturity into 2033. Bristow's positive financial outlook, robust balance sheet and strong liquidity position, support the initiation of the company's cash dividend program confirmed by yesterday's announcement of a $0.125 per share dividend payable on March 26, 2026.

I will now hand it over to our CFO for a more detailed discussion of 2025 results and our financial outlook. Jennifer?

Thank you, Chris, and good morning, everyone. Today, I will begin with a review of Bristow's sequential quarter and full year financial results on a consolidated basis before covering the financial results and 2026 guidance ranges for each of our segments.

Total revenues and adjusted EBITDA were $9 million and $7 million lower in Q4 compared to Q3, respectively. Primarily due to lower seasonal activity in our other services and Offshore Energy Services segment. As Chris noted, we are pleased to report another year of strong financial results with total revenues in 2025, up $75 million compared to 2024 and adjusted EBITDA of $246 million, which is approximately 4% higher than last year and in line with our previously published outlook. At this time, we are affirming our 2026 guidance ranges of $1.6 billion to $1.7 billion for total revenues and $295 million to $325 million for adjusted EBITDA.

Turning now to our segment financial results. Revenues in our Offshore Energy Services, or OES segment, were $3 million lower in Q4, primarily due to the end of fixed wing services in Africa and lower utilization in the U.S. Adjusted operating income was consistent with the preceding quarter as the lower revenues were partially offset by higher earnings from unconsolidated affiliates coupled with lower net operating expenses, largely due to lower subcontractor and repair maintenance costs.

Year-over-year, OES revenues were $24.4 million higher, primarily due to increased utilization and additional aircraft capacity in Africa of $21.7 million and higher utilization in the Americas of $19.2 million, primarily driven by the U.S. and Brazil. Revenues in Europe were $16.5 million lower due to lower utilization. Adjusted operating income was $30 million higher in the current year primarily due to the higher revenues, coupled with lower general and administrative expenses of $5.9 million and lower operating expenses of $3.6 million. The decrease in G&A costs was attributable to lower professional service fees, insurance and lease costs, while operating expenses benefited from lower R&M costs, lower fuel prices and lower insurance premiums, which were partially offset by higher personnel and other operating costs related to increased activity.

Our 2026 OES revenues guidance range is between $1 billion and $1.1 billion compared to $990 million reported for 2025. And our 2026 adjusted operating income guidance range is $225 million to $235 million compared to $203 million in 2025. Moving on to Government Services. Revenues were $0.8 million lower primarily due to lower seasonal activity in the U.K. but were partially offset by the commencement of operations at an additional base in Ireland.

Adjusted operating income was $3.2 million lower in Q4, impacted by higher repairs and maintenance of $2.9 million, resulting from lower vendor credit and the timing of repairs and [indiscernible], coupled with higher personnel costs of $1.6 million related to contract transitions, which were partially offset by lower other operating expenses. Full year revenues from Government Services were $49.8 million higher in the current year with the commencement of the Irish Coast Guard contract and higher U.K. SAR revenues largely resulting from favorable FX impact and the commencement of fixed-wing services. Adjusted operating income was $12.6 million lower in the current year primarily due to higher expenses attributable to the commencement of new contracts in Ireland and the U.K., partially offset by the higher revenue. The outlook for our government services business is positive.

As illustrated by the 2026 revenues guidance range of $440 million to $460 million and adjusted operating income guidance range of $70 million to $80 million, which is roughly double that of 2025, as shown on Slides 14 and 15. With strong margins and earnings potential of this business will continue to improve as the operations and revenues for these contracts continue to ramp and certain cost of side as transitions to the new contracts conclude in 2026.

And finally, revenues from our other services were $5.2 million lower in Q4, primarily due to lower seasonal activity in Australia and adjusted operating income was $4.1 million lower due to the lower revenue partially offset by lower operating expenses of $1.2 million related to lower seasonal activity. On a full year basis, revenues from other services were $0.8 million higher in the current year as a result of higher activity, partially offset by lower revenues due to the conclusion of certain dry lease contracts.

Adjusted operating income was $5.4 million lower in the current year, primarily due to higher operating expenses of $5.9 million, offsetting the higher revenues of $0.8 million. The increase in operating expenses was due to higher activity in Australia. We expect the improved economics in our regional airline in Australia to continue for this segment to remain consistent and cash flow accretive.

In our 2026 revenues and adjusted operating income guidance for this segment is between $130 million and $150 million and $225 million, respectively. Moving on to cash flows and liquidity. As of December 2025, our unrestricted cash balance was approximately $286 million with total available liquidity of approximately $347 million. In recent years, working capital has been impacted by increases in our various other assets, primarily related to start-up costs for new government services contracts and inventory to support new contracts and mitigate risks related to supply chain constraints. Despite these impacts, the business has continued to generate strong operating cash flows.

In 2025, Cash flow from our operations generated $198 million compared to $177 million in the prior year, and adjusted free cash flow was approximately $26 million higher in the current year. We expect the business to continue generating strong free cash flows into 2026 and working capital to improve over time as supply chain constraints subside and our new contracts include their transition period, reaching their full operational [indiscernible].

Lastly, as Chris noted, in January, Bristow closed a private offering of $500 million senior secured notes due in 2033, with a coupon of 6.75%. The company used a portion of the net proceeds redeemed the [indiscernible] senior notes, with the remaining net proceeds to be used for general corporate purposes. This refinancing has increased the pro forma cash balance and liquidity of the company.

Today, Bristow has no near-term debt maturities, attractive financing with lower coupon rate and improved terms, amortizing equipment financing that include flexible prepayment terms and growth and net leverage ratios that have continued to reduce each year. In summary, we are pleased with Bristow's financial performance this year and with the outcome of this transaction and remain committed to protecting and maintaining a strong balance sheet and liquidity position, while furthering shareholder return initiatives with the commencement of our new cash dividend program.

At this time, I'll turn the call back to Chris for further remarks. Chris?

Thank you. I will now refer you to Slide #21 in our earnings presentation, which summarizes Bristow's annual net asset value or NAV disclosure. As a reminder, we provide this NAV presentation annually in compliance with certain covenants and other disclosure obligations.

The helicopter fair market values are based on a desktop appraisal performed by a third-party expert as of December 31, 2025. The NAV calculation takes this estimated fair market value of Bristow's owned aircraft, plus the book value of other tangible assets, less total debt and deferred taxes, to arrive at an aggregate NAV of approximately $1.8 billion or $60 per share. Thus far in the call, we have discussed Bristow's financial outlook for 2026 and outlook supported by the growth and stability of our government services business, the heavy weighting of our offshore energy services business, the more stable production support activities and the breadth and diversity of the geographic markets we serve.

Looking forward, we would now like to share some perspectives beyond the confines of calendar year 2026. Bristow continues to have a positive long-term outlook for offshore energy services activity. Deepwater projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies. And we believe offshore projects will receive an increasing share of future upstream capital investment. This positive demand outlook is paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains tight, and the ability to bring in new capacity remains constrained with long manufacturing lead times on production line that must be shared with military aircraft orders. We believe this constructive supply/demand balance supports a positive outlook for the offshore helicopter sector. As noted earlier, with the continued growth and diversification of our government services business, Bristow has evolved into a scale, multi-mission aviation services provider. We see additional growth opportunities in our core government search and rescue business as well as a broader spectrum of aviation services to government and military customers.

In the context of a complicated geopolitical landscape, and expectations for significant increases in defense spending. We believe there will be compelling organic and inorganic growth opportunities for a specialized aviation services provider with Bristow's track record, operational expertise, and financial flexibility.

Finally, as summarized on Slide #5 of the earnings presentation. We have continued to advance Bristow's position as an early leader in advanced air mobility. We recently completed Bristow's first electric aviation project conducted as an international test arena in Norway in partnership with the local regulator and our partners at Beta technologies, where we flew over 100 missions and 6 months of operational testing.

In addition, we recently secured some of the first delivery slots, including slot number one, for the hybrid electric, highly versatile Electra EL9 Ulta short take-off and landing aircraft. Bristow also recently announced an expanded role and advancing the U.K.'s first electric air travel network through a new collaboration with vertical Aerospace and Skyport infrastructure with initial service targeted for early 2029. We believe that Bristow has created significant option value with minimal capital commitment to date and what is expected to be a large and rapidly growing addressable market for these new generation aircraft.

With that, let's open the line for questions. Luke?

[Operator Instructions] The first question will come from Jason Bandel with Evercore ISI.

So you affirmed your '26 OES guidance and noted improved terms on contract renewals. Can you talk about how far into the renewal cycle you currently are? Has there been any kind of changes to rates as these contracts renew and how much of this is reflected in your guidance?

Yes. As of our last disclosure, we were about 50% through rolling over our Offshore Energy Services customer contract portfolio, and we expect to be substantially complete with that conversion by the end of this calendar year. So by December of this year, effectively all of the OES customer contract portfolio, we'll have reset. The impact is reflected in our guidance for 2026 and most of the 15% uplift in the adjusted operating income for that segment is due to those improved contract terms.

On average, globally, the rate uplift for leading-edge contracts compared to the legacy contract rates they're replacing is about 25%. There are some regional differences, some higher and some lower, but on average, it's been about 25%, and that's holding pretty consistent.

Got it. And then next, can you highlight, I guess, the regions here that are going to be driving your growth in '26 and where you are most likely to mobilize additional capacity, whether it's taken from other markets or just from a new aircraft deliveries?

Yes, happy to do that. The regions where we're seeing more demand and growth and where we're mobilizing additional aircraft capacity include Africa, which has been a strong region for us for the last couple of years, and we expect it to remain that way in 2026 as well as Brazil, which has been one of the fastest-growing deepwater basins. And again, we expect that to continue. Those are probably 2 of the faster-growing ones that I would highlight in terms of where additional capacity is moving into.

Got it. And last one for me, just on a popular topic this quarter in terms of the discussion around Venezuela. We generally think about the entree opportunities there, but there has been some offshore gas development in the past. How do you view potential opportunities for Bristow in Venezuela? And just given your presence in the Caribbean, would you have any kind of advantages if you decide to enter that market?

Yes, there could be. We're not expecting near-term opportunities to materialize for offshore helicopters. Though we will be supporting some work out of Trinidad into joint basins that overlap with Venezuela, which are more likely to go forward now. But as you noted, we do have a large presence in the Americas. That includes a long time presence in Trinidad, where we do both crew change and search and rescue work as well as the [indiscernible] and including Curacao. So given our presence in the region, I think if and when opportunities do materialize, we're as well positioned as anyone to take advantage of them.

The next question comes from Josh Sullivan with Jones Trading.

Just wanted to ask on U.K. SAR 2G, just on the transition, how is that coming along? Supply chain issues or otherwise state of the world? Any delays or risks to aircraft delivery time lines we should be thinking about?

Thank you for the question, Josh. I'd say, overall, the transition from the current U.K. SARH contract to the new U.K. SAR 2G contract is going well. And I want to extend my gratitude to the the whole team, everyone on the Bristow team as well as [indiscernible] team that are working on that. There have been some aircraft delays, consistent with the supply chain issues that have plagued the aviation industry and certainly the civilian helicopter industry over the last few years.

I think Leonardo is having some of those with their suppliers and vendors as well. So we have had some aircraft delivery delays, which is complicated the time line, but we're working closely in collaboration with our customer at the Marine and Coast Guard agency to manage through those issues. And the communication is going well. And again, overall, the contract transitions U.K. SAR 2G is progressing along.

Got it. And then I guess on the Irish side, now you have the full suit of bases online and the costs you mentioned in the prepared comments there, Jennifer, can you just talk about what costs are going to be subsiding through '26 and how that ramps down?

Sure. So there are still transition costs for the Irish 1 contract into 2026 as we took the new over the last phase in February. There's still training that needs to occur. These pilots are moving from one aircraft type to a new aircraft type. So it's primarily that training and getting everyone up to speed and ready to go on the new contract.

Then maybe just switching over to advance [indiscernible] ability, congrats on Norway Sandbox and getting that done. But curious if you could give us any insights into findings or how significant that initiative was towards your future plans, but you guys are on the tip of the spear there. So it's always interesting to hear your perspective.

I would say very significant. This was really a first-of-its-kind project globally, and we were able to operate the aircraft really on a daily basis in partnership with the local regulator and beta technologies and get some valuable real-world insights. There will be a formal report published in a couple of months. I don't want to preempt that. But I would say at a high level, there are some learnings related to the battery storage, battery charging as well as radar position and communication of the aircraft. There'll be more to say on that when the full report comes out. But again, we were really excited to complete that project, which is one of the first of its kind globally.

And then just one last one. Chris, your comments on just the defense market, given geopolitically what's going on and your interest there. But then combining it with the reality that you guys are at the tip of the spear and the advanced mobility market and the interest the defense market has in those applications. Are you looking at your combined capabilities here? Is that going to be an advantage? Or are you thinking more traditional kind of defense sort of orientation?

We're thinking both. We're thinking traditional defense orientation, and we're already doing work today with the U.K. MOD, and we've done some work historically with the U.S. military, but we think that opportunity set will be a big one for us going forward. But also, I think you're spot on, Josh, in mentioning that our early leader position and advance our mobility should be a strong interplay with government and militaries, which are expected to be some of the biggest customers globally for those new generation aircraft.

The next question comes from Savi Syth with Raymond James.

I wonder if you could talk a little bit about the thinking and the shift in your debt strategy here and how you're thinking about kind of balance sheet targets going forward?

Sure. We were happy to execute the transaction that we did in January and we were able to upsize that with an attractive coupon in terms and really dramatically better credit spreads than the last issuance that we had. We did state that we plan to pay down debt by the end of 2026, and that would likely be our U.K. SAR 2G equipment financing and all things being equal, that will still be the case.

In the meantime, we will plan to evaluate other opportunities so we still feel comfortable where we're at on that and we're happy to get that refi done.

Got it. And then just on the aircraft deliveries that are expected here in '26. Could you remind me kind of the plan on the financing front on that, Jennifer?

So we do have orders for 7 AW189 this year. We we do plan to either pay for those with cash on hand or lease them or do something else around that, but no significant financing needed based on what we did in the bond deal. We did pledge a couple of those in that bond deal.

Got it. And then just finally, if I might ask one last question just on the electro announcement that came -- it sounded like this included some agreements on PDPs. Just could you talk about or provide a little bit more detail on kind of the timing and level of investment in that area?

Yes. Thank you for the question, and happy to address that. To date, we only have a few million dollars of capital commitments that have been made -- the agreements that we have in place are subject to certain milestones around certification and aircraft performance. If those are met. And if we see the compelling market opportunities we have the option to bring those aircraft in. And specifically to the Electra that would be up to $30 million for the ones that have been ordered thus far and the financing for anything that we would do around advanced air mobility. We think we have the ability to execute given the financial flexibility that Bristow has built today with our balance sheet and liquidity position.

[Operator Instructions] Our next question will come from Alex Fragile with Texas Capital.

As it relates to your guidance, can you talk to some of the variables that could either surprise you on the upside or the downside?

Sure. Happy to answer that. So there are a few items that would buy a size or to the high side or the low side of the range, really the macro environment price of oil, stability of prices could -- about 15% of our revenues do come from exploration, which would be the most affected by those foreign exchange rates, particularly the British pound and the euro on our search and rescue contracts in Ireland and the U.K.

We do get paid in those currencies and those that could bias us one way or the other depending on what happens with to those currencies. And then further, either supply chain constraints or improvements could also affect that is us 1 way or the other.

That's very helpful. And then can you also help us to sort of understand where the next kind of notable government contracts might develop? And what that time line might look like?

Yes. There's not a published tangible time line for a lot of the search and rescue projects to date. But I would note that there are a lot of conversations that are going on now, particularly with European governments A lot of them have made commitments to spend more on defense over the next several years. And one of the ways, from a budgetary standpoint, they may look to balance that is potentially outsourcing some of the non combatant services like a civilian Coast Guard.

So we are having encouraging conversations with a few different countries in Europe today about outsourced coast guard opportunity similar to what we're already doing for countries like the U.K., Netherlands, Ireland, et cetera. So we remain optimistic about the pipeline for additional government search and rescue work. And then beyond that, we do see a broader set of opportunities for an aviation service partner to work in public-private type partnerships with militaries and governments in both Europe and the Americas to meet some of the defense -- increased defense spending objectives that they have.

Our final question will come from Steve Silver with Argus Research.

First, referencing the NAV slide, does the cited $1.6 billion in fair market value of the owned aircraft reflect any of the new aircraft that have been committed for purchased but not yet delivered or does that just apply to the current fleet?

Steve, thanks for the question. No, the fair market value of the aircraft on the NAV side reflects the third-party appraisal of of the aircraft that Bristow has in the fleet today and does not include the anticipated new delivery. However, there are deposits in the the new aircraft and the other PP line on that NAV slide.

Great. And so even though commercialization is still a few years out now, but as AAM gets closer to the market and Bristow's now secured initial delivery slots, is there any early view that you guys have on the supply dynamics that you envision for that market that could help define the pace of an eventual commercial rollout?

It will start small as those companies mature their manufacturing capabilities. So it could be single digits to low double digits in the first year ramping up pretty quickly after that. But I think it will be a measured pace within this decade. But likely scaling to a much larger hundreds of units across the different manufacturers as we roll the calendar into the next decade.

Great. And 1 last one, if I may. Earlier, you discussed the improved terms on the 2026 contract renewals for OES supporting adjusted operating income growth. Can you provide any details on the percentage of the total contract book that was up for renewal this year? And any parameters around contracts coming up for renewal over the next couple of years that you're envisioning?

So about 50% of the OES customer contracts had renewed prior to the end of 2025 and most of the rest of potentially all will have renewed by the end of this calendar year. The benefits of that within calendar 2026 are reflected in the guidance range that you provided and future years will include the full year benefit of those. It's been a healthy rate uplift, again, about 25% on average globally for leading-edge rates compared to the legacy contract rates that they're replacing. And most of the 15% increase in our adjusted operating income from our OES segment in 2026 is due to those improved contracts.

This concludes our question-and-answer session. I will now turn the call over to Chris Bradshaw for closing remarks.

Yes. Thank you, Luke, and thanks, everyone, for joining the call. We look forward to updating you again next quarter. In the meantime, stay safe and well.

This concludes today's call. You may now disconnect at any time.

Good day, everyone, and welcome to Bristow Group's Third Quarter of 2025 Earnings Call. Today's call is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's Third Quarter 2025 Earnings Call. I am 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 the 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 the investor presentation. I'll now turn the call over to our President and CEO. Chris?

Thank you, Red. To begin, I want to commend the Bristow team for their steadfast dedication to deliver safe, efficient and reliable services despite the persistent supply chain challenges that have plagued the aviation industry in general and the civilian helicopter industry, in particular, for the last 4 years. I appreciate our team's unwavering commitment to operational excellence and delivering the best possible outcomes for our customers and stakeholders.

We are also pleased to report another quarter of strong financial performance with adjusted EBITDA of $67.1 million in Q3 2025. Looking forward, Bristow continues to have a positive outlook for offshore energy services activity. Deepwater projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies. And we believe offshore projects will receive an increasing share of upstream capital investment. This positive long-term demand outlook is paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains near full effective utilization levels.

The ability to bring in new capacity remains constrained with production lines that must be shared with military aircraft orders and current manufacturing lead times of approximately 24 months. We believe the tight supply of offshore helicopters supports a more constructive outlook for our sector relative to some other offshore equipment sectors. In addition, 2026 represents an important inflection point for Bristow's Government Services business as we reach the full operational run rate under the Irish Coast Guard contract and continue the transition to the new UKSAR2G contract in the United Kingdom. While the costs incurred to effectuate these contract transitions have caused a negative drag on profitability in 2025, that impact inverts in 2026 with adjusted operating income from our Government Services business nearly doubling year-over-year.

For the company as a whole, I would highlight that the midpoint of Bristow's 2026 adjusted EBITDA guidance represents a 27% increase over the midpoint in 2025, reflecting the robust growth expectations for our business. I will now hand it over to our CFO for a more detailed discussion of Q3 results and our financial outlook. Jennifer?

Thank you, Chris, and good morning, everyone. As Chris noted, we are pleased to report another quarter of strong financial results with total revenues reflecting an increase of $9.9 million and adjusted EBITDA reflecting an increase of $6.4 million on a consolidated sequential basis, both of which were primarily driven by our Government Services and Other Services segments.

We have also updated and tightened our 2025 and 2026 outlook ranges, which I will discuss further on during this call. Turning now to our sequential quarter segment financial results, beginning with our Offshore Energy Services or OES segment.

Revenues and adjusted operating income were both $2.4 million lower this quarter. Revenues in Europe and Africa were $6.6 million and $1.5 million lower, respectively, primarily due to lower utilization, while revenues in the Americas were $5.7 million higher, primarily due to higher utilization. The lower revenues were partially offset by lower general and administrative expenses due to a decrease in professional services fees. Overall, operating expenses were consistent with the preceding quarter, primarily due to higher personnel costs of $7.3 million due to the absence of a seasonal personnel cost benefit in Norway in the preceding quarter and higher benefits and overtime costs in the current quarter.

These increases were offset by lower repairs and maintenance costs of $5.3 million, driven by higher vendor credit and a decrease in other operating expenses of $2.3 million. Moving on to Government Services. Revenues were $8.4 million higher, primarily due to the ongoing transition of the Irish Coast Guard contract as an additional base commenced operations in the third quarter. Operating expenses were $2.8 million higher and largely comprised of higher subcontractor costs, increased amortization of deferred costs and higher personnel costs, all of which were related to the new government services contract.

Repairs and maintenance costs, however, were $4 million lower due to higher vendor credits and the timing of repairs. General and administrative expenses were $0.8 million higher, primarily due to higher professional services fees and personnel costs related to contract transitions. Adjusted operating income for this segment was $4.8 million higher this quarter. Before we move on to our Other Services segment, I'd like to provide color on the references to vendor credits in our OES and Government Services segment.

In our industry, OEM or vendor credits are common practice and generally provided for reasons such as credits tied to asset purchases, particularly when a customer has placed orders for several aircraft, OEM performance and delays and incentives when entering or extending long-term maintenance contracts or as refunds when exiting such contracts. While we have historically received vendor credits and applied them towards aircraft and inventory parts purchases or ongoing maintenance, we benefited more materially from such credits this quarter and continue to value our strong relationships with our OEMs.

As a reminder, Bristow is the world's largest operator of S92, AW189 and AW139 helicopter models, which remain the most in-demand models for both offshore crude transportation and SAR missions. Finally, revenues from other services were $3.8 million higher, primarily due to higher activity in Australia of $4.8 million, partially offset by the conclusion of a dry lease contract. The higher revenues were partially offset by higher operating expenses of $1.9 million related to the increased activity in Australia. As a result, adjusted operating income was $1.9 million higher this quarter.

Moving on to Bristow's financial outlook. You may recall from our previous earnings calls that the primary factors that could bias results to either end of our guidance range include supply chain dynamics that impact aircraft availability, customer activity levels influenced by global energy demand, new contract transitions and the exchange rate of foreign currencies relative to the U.S. dollar, namely the British pound sterling and to a lesser extent, the euro. As such, we are tightening our 2025 adjusted EBITDA range to $240 million to $250 million on total projected revenues of $1.46 billion to $1.53 billion. For 2026, we are tightening our adjusted EBITDA range to $295 million to $325 million on total projected revenues of $1.6 billion to $1.7 billion.

This represents an approximately 27% increase in adjusted EBITDA from the 2025 to 2026 midpoint. Given better visibility into operating costs and expected customer activity levels, we are updating the adjusted operating income guidance ranges for our OES segment to approximately $200 million for 2025. Despite current market conditions in the energy sector, we expect strong performance from this segment to continue in 2026 as evidenced by the updated adjusted operating income range of $225 million to $235 million, representing a 15% year-over-year increase from the midpoint.

While margins in our Government Services segment improved this quarter and the capital investment for our 2 new government contracts have largely concluded, we expect this segment will continue to feel the effects of new contract transitions until they are fully operational. The strong margins and earning potential of this business will continue to improve as the operations and revenues for the contracts continue to ramp. The 2026 midpoint for our adjusted operating income range reflects a 76% increase compared to 2025. And in other services, we expect the improved economics of our regional airline in Australia to persist and for this segment to remain consistent and cash flow accretive.

Turning now to cash flows. Operating cash flows generated approximately $122 million year-to-date 2025 compared to $126 million in the prior year. Working capital continues to be impacted by increases in inventory to support new contracts and mitigate risk related to supply chain constraints and an increase in other assets primarily related to start-up costs for new government services contracts. However, we expect working capital to improve over time as supply chain constraints subside and our new contracts conclude their transition periods and reach their full operational run rate.

Additionally, as of the third quarter, our unrestricted cash balance was approximately $246 million with a total available liquidity of $313 million. Moving on to our previously announced capital allocation targets. We made an additional $25 million of accelerated principal payments on the U.K. SAR debt facility in the current quarter, bringing the total accelerated payment to $40 million this year. In summary, we remain focused on meeting our financial and operational targets and executing our capital allocation strategy while continuing to benefit from and working to maintain a strong balance sheet and liquidity position. At this time, I'll turn the call back to Chris for further remarks. Chris?

Thank you. In conclusion, we are pleased to highlight the company's robust growth outlook for 2026 as evidenced by expected adjusted EBITDA growth of approximately 27% year-over-year. This outlook is supported by the growth and stability of our Government Services business, the heavy weighting of our offshore energy services business to more stable production support activities and the breadth and diversity of the geographic markets we serve. With that, let's open the line for questions. Luke?

[Operator Instructions] Our first question will come from Jason Bandel with Evercore ISI.

I want to first ask about your guidance in OES. I give you guys a lot of credit for providing 2-year forward guidance on most -- you have only 1 quarter forward. But given the lower utilization in OES during the quarter, and I guess the tightening of the forward guidance that you talked about, Jennifer, could be slightly lower, what kind of implications should we make about the market given that? And is this a sign that customer demand for helicopters is beginning to weaken in the short term? Or how should we think about it?

Yes. Thanks for the question. As you noted, we did tighten the range this quarter. That's consistent with how we generally approach as we near the end of a period/beginning of a new one, we'll look to narrow that range. In this case, that updated guidance did impact the midpoint by about 2%. But in terms of the guidance around the OES business specifically, I would point to 2 main factors. First, we have experienced some persistent supply chain challenges that are impacting aircraft availability.

In some cases, that might result in lost revenue opportunities. In other cases, particularly on some legacy contracts, it may result in some contractual penalties under the contract related to aircraft availability. And then the second category I would point to is fewer aircraft, a small number on contract in the North Sea and the U.S. But overall, again, still expecting positive offshore energy services activity and growth for our business. And overall, for the company, really highlighting that we're expecting 27% growth in our adjusted EBITDA year-over-year, which I think within our sector, within a peer group is a real positive differentiator. I'm not sure that anyone else is pointing to that kind of growth in the next year.

Yes. I agree, Chris. And as a follow-up to that, I guess this is more of a kind of a macro level. Can we discuss your current outlook for your main OES markets and regions given some of the seasonality you have in your business? And if you can kind of just go around and what you're seeing out there would be helpful.

Yes, happy to do that. I would probably start with Brazil, which is a market that we believe continues to have some of the best, if not the best growth prospects for any of the offshore regions. Really right near there in the same category would be Africa, where we're seeing continued demand and a need for additional aircraft in our business there. And I'd also add the Caribbean to that list, which is still growing. So each one of those markets are ones that, again, are still growing.

We're seeing net aircraft inflows, meaning that we're mobilizing additional capacity into those markets to meet the demand. The U.S., I would say, is mostly stable, though with less ad hoc work. So the U.S. Gulf is an area where we typically would see a lot of ad hoc aircraft over and above the contracted fleet count. That has admittedly decreased some, which I think is an indication of stable activity that's able to be addressed by the contracted fleet levels. And then finally, on the less positive side would be the North Sea, which is softer in terms of activity.

That was helpful. And just one last quick one since you brought up in the prepared remarks on the vendor credits since some might not be as familiar with those. Why were those materially higher this quarter? And do you guys typically include that in your guidance?

Sure. I mean it's an indication of the increased activity that we've had. I noted a few different ways that we -- that credits come about, right, buying aircraft, the incentives when you enter into long-term maintenance contracts or you exit aircraft out of those contracts and then OEM performance and delays. So all of that is -- it's a mixture of all those credits. We -- this is not anything new. It's just an increased activity we've always experienced these credits. So as activity levels continue to be increased, there's likely to be a heightened level of credits over the next period of time.

Our next question comes from the line of Josh Sullivan with JonesTrading.

So how many aircraft are you aiming to take delivery of for each of your segments? And then I guess if you could just touch on maybe the timing and location where these aircraft are expected to be deployed?

Yes. I would say there are really 2 categories of pending deliveries. The first are aircraft that we've actually already taken delivery of from the OEM, but are not yet placed into our operating fleet count as we're completing final configuration and modifications on those aircraft. In our Government Services business, that would be the right category for the pending deliveries. So we've taken delivery of 5 aircraft that are, again, undergoing final modifications now before being placed into operations. 2 of those are AW189s that are going to the Irish Coast Guard contract in Ireland. And 3 of them are AW139 aircraft that are going to the new SAR2G contract in the United Kingdom.

The second category of pending deliveries are aircraft that are still under construction by the OEM. We have not yet taken physical delivery of these aircraft. That category would characterize the remainder, which is 7 offshore, so OES configured AW189s that we have on order. We know where those are going. Those locations are going to be split between Brazil, Africa and the North Sea.

Got it. And then where -- between those 2 groups or just generally, where are the primary supply chain bottlenecks at this point?

Yes. We're still seeing significant supply chain issues, I'd say, across the board, unfortunately. So this is impacting the aftermarket. So delays for parts, components that we need to maintain the aircraft, keep them operational and in service. Over the last few years, we had more of a concentration of that type of challenge in a particular model, namely the S-92 heavy helicopter.

However, we're seeing -- well, that situation has actually improved some, so it's ameliorated. So not quite where we would want it to be. We're seeing now similar issues with other helicopter models, for example, the AW189. So aftermarket support would be one category. This is now also impacting the timing of new deliveries. So not so much for the government side because I mentioned, we've already taken delivery of those aircraft now and are putting them through final modifications. But on the offshore configured AW189s, we expect there will be delays in aircraft coming off the production line.

A lot of that relates to something you'll be familiar with, Josh, which is just the complexity of a modern aviation supply chain where the OEM itself over the last several decades has outsourced to an increasing number of subcontractors and vendors. And as they're now looking to produce these aircraft, they're having their own struggles in sourcing some of the components on time to meet the expected delivery schedules. So it's really both aftermarket and new deliveries that are being impacted by these supply chain issues in the industry.

And I guess maybe a related question, just what does CapEx maybe look like in '26 as a result?

We see total CapEx in '26 of about $100 million. So that's in round numbers, roughly $20 million of maintenance and another $80 million of growth on a net basis, which is really related to those offshore configured AW189s that I mentioned. The one thing I would highlight there is if you take that full $100 million of CapEx growth and maintenance, run it through the waterfall of the guidance we've provided, you're still looking at approximately $140 million of free cash flow in 2026 at the midpoint of guidance, which on a company that has an equity market cap of roughly $1 billion, $140 million is a pretty healthy free cash flow yield in our view.

Yes. And then I guess just one last one. Just any updates on the advanced mobility trials, BETA, Elroy, others? Just how is that dynamic progressing?

Yes. Thanks for the question. I'd say that's going very well. As you may be aware, we launched in August a Norway Sandbox project, which really represents a first-of-its-kind real-world flight testing of precertified aircraft that's being sponsored by the Norwegian government in partnership with the OEM, which in this case is Beta Technologies. And congratulations to our friends and partners at Beta Technologies for their IPO on the New York Stock Exchange yesterday. It was a nice milestone for them.

And here in the test arena in Norway, we're using the Beta CX300 all-electric aircraft that's being operated by Bristow. So what this is allowing us to do is collect real-world data to validate assumptions and learn. So what's the aircraft, what are the batteries actually doing in different temperatures at different altitudes, et cetera, and take that, incorporate that again into the learnings, which, again, first of its kind test arena, we see this as being an important step in commercializing advanced air mobility. And we see this type of model being probably likely replicated in other countries and with other AAM model aircraft as well.

Our next question is from Steve Silver with Argus Research.

They are mostly housekeeping. Just in terms of the asset sales that you guys reported this quarter and then also the proceeds from the sale of 2 helicopters, I was hoping you could provide any color just on the nature of these sales and whether we should expect any further activity like this over the coming years?

Sure. Steve. So we opportunistically sell assets when they're no longer needed in our fleet. And typically, there are older assets that have outlasted their feasibility in the markets we serve and sold them -- and typically sold to other markets like utility or firefighting. In addition, we will look at opportunities to do sale-leaseback transactions when those make sense for helicopters in our fleet. In the case of this quarter, we performed a sale-leaseback transaction on one of our new SAR aircraft, which accounted for much of that sales proceeds for this quarter, and we did then sell an older asset as well.

Great. And one more, if I may. On the income tax benefit in Q3, I was hoping you could just discuss the future outlook on the tax line, especially on the effective tax rate and what your thoughts are as the net income position of the company continues to grow?

Sure. So related to this quarter, each quarter, we do review our -- the attributes for our different tax positions by our different jurisdictions that we're in. This quarter, we determined that the valuation allowance we had on our Australian operation could be removed due to the positive results we have with that part of our business.

So this release of the valuation allowance was the primary driver for the onetime tax benefit. So I wouldn't expect that -- that was a onetime deal. So as our profitability does improve, our tax rate will be closer to a normalized tax rate. We have -- we're in many different jurisdictions. So it will be some average tax rate a little bit somewhat north of what the U.S. tax rate is.

Our final question will come from the line of Colby Sasso with Daniel Energy Partners.

A number of larger integrated E&Ps have talked on their conference calls about a need for more exploratory drilling over the next few years. Do you see this as a focus for your customers moving forward?

Yes. Thanks for the question. Yes, we do see that as a focus moving forward. Our business is really much more weighted to production support activity with 85% of our revenues from offshore energy services driven by production activities. For the remainder, though, we are exposed to exploration. And I'd say our view is probably mostly in line with consensus and that we continue to believe that deepwater projects are favorably positioned with attractive relative return prospects within our oil and gas customer portfolios. And so we see an increasing share of capital investment from the upstream going into deepwater and offshore projects. And we see that as being a solid long-term driver and outlook for the business. And in our case, really coupling that with a very tight supply picture with a limited number of available heavy and super medium offshore configured helicopters today.

Makes sense. And as a quick follow-up, you noted a new aircraft headed to the North Sea, but several drillers have moved their rigs out of Norway in recent years, setting no near-term upside in rates or utilization in that market. Additionally, E&Ps are not bullish on the U.K. energy industry either. Can you expand on why you see the need for new builds going into that market?

Yes. Fair question, and I appreciate the opportunity to expand upon that. So I would say that we do not see upside or growth in the North Sea necessarily. It is a mature market that over the long run is more likely to decline than otherwise. However, what's going on in this situation is that these are helicopter fleet replacements.

So namely new AW189 that will be replacing legacy S-92s that are aging out of the fleet. And so we have customers, upstream oil and gas companies that we're looking for a more reliable aircraft, a more modern aircraft and so it's an opportunity for us to provide that on a secure long-term contract with enhanced profitability, better returns than what they're replacing. So while not growth, this is certainly value accretive for the company.

This concludes our question-and-answer session. I'll now turn the call back over to Chris Bradshaw for closing remarks.

Thank you, Luke. And I appreciated the opportunity earlier to talk about what's going on in advanced air mobility and the important developments in that new industry sector for all-electric and hybrid aircraft platforms. As I mentioned, there are some important milestones and developments happening right now. We expect the first aircraft models in that sector to be certified next year, 2026, really just around the corner.

In theory, Bristow might take delivery of the first of those aircraft in 2026. However, we think that's less likely. We're not contemplating any contributions in our guidance for next year. It's probably more likely that Bristow would take its potential first deliveries in the 2027, 2028 time frame. But we do believe that advanced air mobility and both all-electric and hybrid aircraft are going to be a part of the future of aviation. And as the global leader in vertical flight for the last 75-plus years, we believe there's a role for Bristow to play there and are excited about the partnerships we're developing with some of these OEMs and pursuing market opportunities together.

We also remain excited about the growth that we're projecting for the business next year with that 27% increase in adjusted EBITDA, which we see as really a positive differentiator for the company. With that, we appreciate everyone's time today. I hope you stay safe and well. We'll talk again next quarter. Thank you.

This concludes today's call. You may now disconnect at any time.

Good day, everyone, and welcome to Bristow Group Reports Second Quarter 2025 Earnings Call. Today's call is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to Redeate Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Thank you, Leila. Good morning, everyone, and welcome to Bristow Group's Second Quarter 2020 Earnings Call. I am going 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 and that are described in more detail on Slide 3 of our investor presentation. You may access the investor presentation on our website. We will also reference certain non-GAAP financial measures, such as EBITDA and free cash flow. Reconciliation of such measures to GAAP is included in the earnings release and the investor presentation.

I'll now turn the call over to our President and CEO. Chris?

Thank you, Red, and good morning, everyone. I will begin with a note on safety, which is Bristow's #1 core value and our highest operational priority. The company experienced one air accident in Q2 2025, which involves an AW139 helicopter landing on an offshore platform in Brazil. There were no injuries to personnel nor any damage to the offshore facility, but the aircraft was damaged. The event was unusual in that all indications fell within the parameters of a normal landing procedure, but shortly after touching down portion of the aircraft structure buckled causing damage.

In terms of workplace safety, we had a very good quarter with continued declines in the number of recordable injuries and lost work time. I want to thank all the Bristow team members around the world for their continued focus on placing safety first every day. Turning to financial performance, we are pleased to report strong second quarter results and to raise Bristow's financial guidance for both 2025 and 2026. I would highlight that the midpoint of 2026 adjusted EBITDA guidance represents a 27% increase over the midpoint of 2025 adjusted EBITDA guidance reflecting the strong growth expectations for our business. Robust cash flow generation positions us to execute Bristow's established capital allocation framework and both accelerated debt paydown and opportunistic share repurchases commenced in the second quarter.

I will now hand it over to our CFO for a more detailed discussion of Q2 results and our financial outlook. Jennifer?

Thank you, Chris, and good morning, everyone. I would like to reiterate with his comments on how pleased we are to report another quarter of strong financial results and to be able to raise 2025 and 2026 adjusted EBITDA guidance. Turning to our sequential quarter financial results on a consolidated basis. Bristow's revenues were $25.9 million higher in the second quarter, nearly half of which was driven by higher revenues in our Offshore Energy Services or OES segment, and the remainder of the increase almost evenly split between government services and other services revenue.

Adjusted EBITDA was $60.7 million this quarter, reflecting a $3 million increase compared to last quarter. Revenues from our OES segment were $13 million higher primarily due to higher revenues in Europe of $6.4 million, resulting from increased utilization and favorable foreign exchange rate impact of Norway. Higher revenues in the Americas of $3.7 million due to higher utilization in the U.S. and higher revenues in Africa of $3 million, resulting from higher utilization and additional aircraft capacity introduced into the region. The $6.5 million increase in adjusted operating income from OES was primarily due to higher revenues, partially offset by higher operating expenses, which included higher reimbursable expenses of $2.5 million as well as higher training and travel subcontractor and repairs and maintenance costs of $1.2 million each.

Moving on to Government Services. Revenues were $6.6 million higher, predominantly due to the ongoing transition of the Irish Coast Guard or IRCG search and rescue contract and higher utilization in our U.K. Certain Rescue business. Adjusted operating income for this segment was $7.7 million lower this quarter due to higher subcontractor costs of $5.1 million and higher personnel costs of $2.8 million related to the previously mentioned ongoing contract transition. Unfavorable foreign exchange rate impact of $3 million, higher repairs and maintenance costs of $2 million and higher fuel costs of $0.6 million. offsetting the increased revenue.

As the transition comes to completion for both IRCG and UKSAR 2G contracts, we will expect adjusted operating income margins to return to or exceed pre-2024 levels and for full year impact of subsequent years to contribute meaningfully to our financial results, providing reliable capital return on to the middle of the next decade. Finally, revenues from our other services were $6.3 million higher, resulting from seasonally higher utilization in Australia.

As a reminder, our operations in Australia experienced fewer pass-throughs during the wet season from December through March and activity typically picks up in the second and third quarters. Adjusted operating income was $4.1 million higher this quarter due to the increased activity. Moving on to Bristow's financial outlook. The ongoing uncertainty continues in the global economy, we have been well positioned to have better visibility than not. As such, we are increasing our previously reported 2025 adjusted EBITDA range of $240 million to $260 million and our 2026 adjusted EBITDA guidance range to $300 million to $335 million.

In our OES segment, we expect market conditions to remain constructive in 2025. And and to generate adjusted operating income of approximately $200 million to $205 million on revenues of $982 billion. The factors contributing to the increased guidance in this segment includes better visibility into operating costs and expected customer activity levels. In our Government Services segment, we expect to generate adjusted operating income of approximately $40 million to $50 million on revenues of $360 million to $400 million. This segment will continue to feel the effects of the new contract transition until they are fully operational.

As I noted earlier in the call, the strong margins and earnings potential of this business will not become fully evident until the operations and revenues for these contracts are fully ramped in 2026 and beyond. In our Other Services segment, we expect to generate adjusted operating income of approximately $20 million to $25 million on revenues of $120 million to $130 million, primarily due to improved economics in our regional airline in Australia. You may recall from previous earnings calls that the primary factors that could bias result to either end of our guidance range includes supply chain dynamics that impact aircraft availability, customer activity levels influenced by global energy demand, new contract transition and the exchange rates of foreign currencies relative to the U.S. to the U.S. dollar, namely the British [indiscernible] and the euro.

Turning now to cash flow. Operating cash flows were almost $100 million higher than the preceding quarter and $38 million higher than the prior year. Working capital changes also saw an improvement of approximately $34 million this quarter, primarily resulting from the timing of customer collections. Bristow continues to benefit from a strong balance sheet and liquidity position. As of June 30, our available liquidity was approximately $317 million, and we have now funded 92% of the capital investments needed for our new government services contract with the remaining capital investment expected to conclude in the coming weeks.

As Chris noted, we are happy to begin executing on our previously announced capital allocation target which included a $15.3 million accelerated principal payment on our UKSAR debt facility and the repurchase of nearly 120,000 shares of common stock in open market transactions representing an average cost per share of $32.41 both of which occurred during the current quarter. As of June 30, $121 million remained available under our $125 million stock repurchase program. We consistently evaluate the best uses of our cash flow and aim to yield the highest value and return on capital. We will continue to execute on our capital allocation strategy, which currently prioritizes maintaining a strong balance sheet, the conclusion of investments needed to complete the government services contract transition and the return of capital to shareholders.

At this time, I'll turn the call back to Chris for further remarks. Chris?

Thank you, Jennifer, and I want to thank all the Bristow team members working diligently on the ongoing launch of search and rescue services for the Irish Coast Guard and the transition of operations to the SAR 2G contract in the United Kingdom. While we have faced challenges along the way with unexpected regulatory and supply chain delays, the company is on track to meet the revised milestone data and our commitment to delivering successful outcomes for the government and communities we serve remains unwavering.

From a financial standpoint, 2025 was known to be a transition year for our Government Services business as reflected in our guidance. The full earnings potential of this business should become evident in 2026 and beyond, and we expect these contracts to deliver compelling financial returns well into the middle of the next decade. Outlook for our offshore energy services business remains positive. While increased supply from OpEx costs, Combined with demand uncertainty, I've raised concerns about the trajectory of upstream spending for the overall oil and gas industry.

Offshore projects remain favorably positioned within oil and gas company portfolios. The attractive full-cycle economic returns from these projects are likely to drive continued investment for the foreseeable future as capital continues to rotate out of shorter cycle projects and into longer cycle deepwater investments. These positive demand conditions are paired with the tight supply dynamic. The fleet status for offshore configured, heavy and super medium helicopters remains at or near full effective utilization levels. The ability to bring in new capacity remains limited with production lines that must be shared with military aircraft orders and current manufacturing lead times for approximately 24 months.

In conclusion, while macroeconomic risks and uncertainty are elevated, the outlook for Bristow's business remains very positive, and we are pleased to raise the company's financial guidance for both 2025 and '26. This confidence is supported by the stability of our government services business, the heavy weighting of our offshore energy services business, the more stable production support activities and the breadth and diversity of the geographic markets we serve.

With that, let's open the line for questions. Leila?

[Operator Instructions]

Your first question will come from Jason Bandel with Evercore ISI.

Great. Chris, Jennifer and Red, first question, just given the headwinds in the macro, the oil services sector in general, we haven't really seen too many companies that have the ability to raise their guidance this earning season. You've reaffirmed the original guidance last quarter. So what gives you greater confidence in the outlook here to kind of raise it now? And can you dig a little bit deeper into some of the primary drivers behind the 25% and 26% increase that you mentioned in the prepared remarks?

Sure, Jason. I mentioned this in my prepared remarks, but we really do have some better visibility to our overall cost and to our customer activity, which has really allowed us to be able to raise that outlook.

Okay. And then given the oil price volatility that we've kind of seen some customers slow the decision-making and have a lower sense of urgency when it comes to contracting of services and other parts of the OFS supply chain, even some of the more resilient OpEx spend areas? Are you seeing any changes in behavior among your production are to customers at this time?

Good question. And fortunately, the short answer is no. Actually, our biggest struggle currently is managing through supply chain challenges to meet customer demand. It's a challenged right now to keep up with the current level of demand. And this is why we're moving existing aircraft in our portfolio to optimize utilization around our different geographies and also bringing in new aircraft to increase capacity in markets like Africa and Brazil.

Understood. And then that's the last 1 for me. Knowing that the majority of your OES revenues generated from contracts supporting offshore production as exploration and development drilling activity starts to improve in the second half of 2016 or hopefully improve second half 2016 and into 27. How much of that increase is already factored into your '26 guidance, if any?

We are including an expectation of increased activity in the latter half of 2026 into our guidance range. Obviously, we'll all have to wait and see how that materializes. That's 1 of the reasons that we do provide a range of a low end and a high end. But we are considering the impact of increased activity and in offshore in the latter half of next year. This is 1 of the reasons that early last year, we placed a new order for AW189 offshore configured helicopters. We have 7 firm orders there and 10 options, which provides us with the flexibility to bring in additional capacity to meet some of that growth should it materialize on compelling returns for our stakeholders.

Your next question will come from Jason Sullivan from the Benchmark.

Just looking at the increased subcontractor costs you mentioned this quarter. Are these related to ongoing contractor transitions? Or should we expect them to persist?

Josh, [indiscernible] thanks for the question. While we always have some level of subcontractor activity for various different functions, it is elevated during the transition of the government services contract. Both of our new government services contracts include a fixed wing element being integrated into the operations for the first time at that portion of those subcontractors will continue but a portion of the subcontractor costs relate to the different activities to stand up the services and will not continue once we get fully transitioned.

Got it. And then just as far as supply chain dynamics, you mentioned as a factor in guidance. What are you seeing as far as the availability of spares and just generally in the supply chain at this point?

We're seeing some improvements. I'm pleased to share that. We're still not where we want to be. But some of the OEMs that have been struggling over the last couple of years have made significant strides and improving their delivery times of critical components. So again, we expect this to continue to be a headwind for the near term, but I do want to know the progress that's been made, and things are trending in the right direction there.

Then maybe 1 on the advanced mobility market. Any updates from the announcement with the Norway star Mobility sandbox. I think you were doing with beta.

Yes. And a very timely question, actually. We're excited to share the first flight for the Norway Test arena project is scheduled for this Friday, August 8, which is an exciting real-world application of this new technology, all electric aircraft. And we're honored to partner with beta, Avanor and the Norwegian government on this innovative sandbox project, which will allow us to evaluate really the real-world use cases for the aircraft with routes and capabilities and test how these next-generation AAM aircraft can be deployed out in the world.

Got it. And do you think we'll see more Sandbox announcements over the next year or so with other manufacturers that you might have relationships with there. How should we envision this opportunity evolving over the next couple of years?

Yes. We are optimistic that there will be more sandbox like projects of this nature in other jurisdictions over the next couple of years. We're exploring those opportunities that could be in places such as the U.K., the U.S., even parts of Africa have shown some interest. So we're going to pursue those opportunities in earnest, and I do think that they're likely to occur in other geograties over that period of time.

Got it. And then just 1 last 1 on the free cash flow profile and cash deployment starting. Can you just update us on how should we think about sustaining CapEx target net debt, just update us on the priorities there?

Sure. As I noted, we're about 92% done with the government services contracts, which is the large CapEx that we've been working through for the last couple of years. We do have orders for 7 new AW189s to be deployed over the next couple of years as well. We did put in our -- as part of our capital allocation strategy that we're going to pay down our gross debt to $500 million and started that pay down in this quarter with $15 million paydown of our UKSAR debt. So we're starting to deploy the cash that is coming out, the free cash flow that's coming out of the business as we move out of this heavy investment cycle into a more sustained cycle.

Our next question will come from Steve Silver with Argus Research.

Congratulations on the quarter. Given the strong free cash flow in Q2 and the improved working capital in the quarter, I was curious if there's any color you could provide on the capital allocation strategy, given the fact that you only use a modest portion of the share repurchase program in Q2?

Yes. As you noted, we still have a lot of capacity under the approved share repurchase program, about $121 million remains under the $125 million. We had previously messaged when we announced the capital allocation framework that our priorities in Q2 would really be completing the investment capital spend for those big government projects that Jennifer was talking about as well as beginning the accelerated debt paydown to reach our gross debt target that Jennifer referenced. So we actually pulled forward, if anything, some of the timing of those opportunistic share repurchases into Q2.

Going forward, as announced, we will continue to take an opportunistic approach to the share repurchases. We've also announced that beginning in Q1 of 2026, the company intends to initiate a cash dividend program. So we look forward to kicking that off in the new year as well.

Great. That's helpful. And could you provide any color on what considerations factored into the decision to accelerate the principal payments to the UKSAR equipment facility over any other debt instruments?

Sure. Thank you for the question. Our UKSAR debt currently is our highest cost debt, and it had no prepayment tendency. So it was the best choice for our first pay down.

[Operator Instructions]

Our next question will come from Keith Bachman with Pickering Energy Partners.

Could you walk us through how your contracting model makes you somewhat insulated from an activity drop that is impacting the outlook for other OFS companies with exposure to deepwater activity?

Yes. Keith, and happy to do that. I would say, first, before getting into the contracting model, just a quick note on business mix. We do have a sizable portion of our revenues, about 33% that come from non-oil and gas activity. These are the long-term very stable government services contracts as well as the fixed wing business that we have. But coming back to our offshore energy services business, there, our contracting model is exposed really to production support. So we have relatively less exposure to short-cycle drilling and exploration. And within our contracts, the significant majority of the revenues are earned on the monthly standing charge, which we get paid to be there on a standby basis. So that derisks some of that exposure to actual flight activity as well. So I think it's business mix, it's the heavy weighting to production, and it's also the duration. Our typical contract is about a 5-year contract to support that longer-term production type work.

Awesome. That's great color. And if I could sneak 1 more in. Visibility for the floating rig count is pretty soft through the year-end. We think Q4 floater activity could come down 8% to 10% from Q2. If that happens, how lower floating rig activity show up in results? Would it be mostly confined to lower average flight hours kind of like what you're seeing?

Yes. Good question. I would say, overall, we don't anticipate that scenario reference to impact our guidance ranges for this year. We we have had an expectation for some new projects that would commence this year. Those we see actually materializing. In fact, 1 that we just began in Surinam. We don't really have anything on the come in terms of new drilling activity before the end of the year that would impact that guidance range. We do continue to maintain a constructive outlook for offshore activity overall. Certainly, as you get into 2016 and beyond, we think those offshore projects are continuing to be well positioned within the oil and gas company portfolios.

But again, just following up to the gist of your question, in terms of the potential white space or idle floater activity between now and the end of the year, we don't anticipate any that impact in the guidance range that we provided.

Our final question will come from Colby Sasso with Daniel Energy Partners.

Last quarter, you noted you weren't expecting much of a direct financial result from tariffs, but you noted R&M costs could go up as there may be uncertainty for component delivery times. Have you seen any issues with delivery times for components? And if you haven't been impacted to your knowledge, has this been impacting any of your competitors?

Yes. Timely question. Certainly, for Bristow, the answer is no, we haven't seen an impact to date. Obviously, there remains some uncertainty around global trade and the tariff environment. We are encouraged by some of the recent announcements, including the intended EU U.S. trade deal as well as the Brazil U.S. trade deal in that from everything that we understand, it's understood that the agreements will exclude civil aircraft and parts from the tariff regime, keeping those at a 0 tariff basis, which obviously is constructive. For us, I think it's constructive for the overall industry supply chain. So again, to date, no impacts adversely from tariffs on R&M costs or timing of deliveries.

I can't speak for everyone else in the industry, but I would imagine that any delays others might be experiencing in terms of deliveries would be related to things other than tariffs.

Makes sense. And as a quick follow-up, West Africa has received a decent amount of airtime on this quarter's offshore drillers calls with respect to where incremental deepwater opportunities will come in the next 3 to 5 years? Could you talk about where you're expecting to see the most growth in your energy business in the next couple of years?

Yes. And thank you for the question. I would say, in terms of the growth opportunities for our overall business, it includes markets like Brazil, where we still see quite a bit of incremental demand and growth potential and the need to move additional aircraft into Brazil to meet that demand. Also, the U.S. Gulf is a pretty constructive market. I mean in terms of percentages, it won't increase at the same rates, but there are incremental opportunities here. And then coming around probably the top of the list, which you referenced, which is Africa. This is a market where we -- again, today, our greatest challenge is keeping enough aircraft working to meet the demand, and we're looking to move additional aircraft from within our existing portfolio, also bringing additional aircraft capacity into our fleet to meet some of that demand that we see coming from Africa, given the projects that are expected to move forward there.

This concludes our question-and-answer session. I will now turn the call back over to Christopher Bradshaw for closing remarks.

Thank you, Leila, and thanks, everyone, for joining the call. I hope everyone stays safe and well, and we look forward to speaking again next quarter. Thank you.

This concludes today's call. You may now disconnect at any time.