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Oceaneering International (OII)
NYSE:OII
RESEARCH TOOLSreports
Risk Overview Q3, 2024
Risk Distribution
38% Finance & Corporate
18% Legal & Regulatory
15% Tech & Innovation
15% Production
9% Macro & Political
6% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Oceaneering International Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q3, 2024
Main Risk Category
Finance & Corporate
With 13 Risks
Finance & Corporate
With 13 Risks
Number of Disclosed Risks
34
+8
From last reportS&P 500 Average: 31
34
+8
From last reportS&P 500 Average: 31
Recent Changes
8Risks added
0Risks removed
0Risks changed
Since Sep 2024
8Risks added
0Risks removed
0Risks changed
Since Sep 2024
Number of Risk Changed
0
-1
From last reportS&P 500 Average: 3
0
-1
From last reportS&P 500 Average: 3
See the risk highlights of Oceaneering International in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 34
Finance & Corporate
Total Risks: 13/34 (38%)Above Sector Average
Share Price & Shareholder Rights2 | 5.9%
Share Price & Shareholder Rights - Risk 1
Provisions in our corporate documents and Delaware law could delay or prevent a change in control of our company, even if that change would be beneficial to our shareholders.Share Price & Shareholder Rights - Risk 2
We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such preferences, powers and relative, participating, optional and other rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.
Accounting & Financial Operations5 | 14.7%
Accounting & Financial Operations - Risk 1
The use of estimates could result in future adjustments to our assets, liabilities and results of operations.Accounting & Financial Operations - Risk 2
Our internal controls may not be sufficient to achieve all stated goals and objectives.Our internal controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. The design of any system of internal controls and procedures is based, in part, on various assumptions about the likelihood of future events. We cannot assure that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Accounting & Financial Operations - Risk 3
Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an uncertain indicator of our future revenue and earnings.There can be no assurance that the revenue included in our backlog will be realized or, if realized, will result in profits. Because of project cancellations or potential changes in the scope or schedule of our customers' projects, we cannot predict with certainty when or if backlog will be realized. Material delays, suspensions, cancellations or payment defaults could materially affect our financial condition, results of operations and cash flows. We may be at risk of delays, suspensions and cancellations in the current market environment.
Reductions in our backlog due to cancellation by a customer or for other reasons would adversely affect, potentially to a material extent, the revenue and earnings we actually receive from contracts included in our backlog. Many of our ROV contracts have 30-day notice termination clauses. Some of the contracts in our backlog provide for cancellation fees in the event customers cancel projects. These cancellation fees usually provide for reimbursement of our out-of-pocket costs, revenue for work performed prior to cancellation and a varying percentage of the profits we would have realized had the contract been completed. However, under limited circumstances, such as certain bankruptcy events, no cancellation fee would be owed to us. Further, even if a cancellation fee is owed to us, a customer may be unable or may refuse to pay the cancellation fee. We typically have no contractual right upon cancellation to the total contract revenue as reflected in our backlog. If we experience significant project terminations, suspensions or scope adjustments to contracts reflected in our backlog, our financial condition, results of operations and cash flows may be adversely impacted.
Accounting & Financial Operations - Risk 4
Operating activities.Added
Our primary sources and uses of cash flows from operating activities for the nine months ended September 30, 2024 and 2023, are as follows:
Nine Months Ended(in thousands)Sep 30, 2024Sep 30, 2023Cash Flows from Operating Activities:Net income (loss)$91,369 $52,874 Non-cash items, net90,167 88,579 Accounts receivable and contract assets(51,653)(135,237)Inventory(31,819)(23,825)Current liabilities18,597 61,015 Other changes(41,824)13,734 Net Cash Provided by (Used in) Operating Activities$74,837 $57,140
The decrease in cash related to accounts receivable and contract assets in the nine months ended September 30, 2024, reflects the timing of project milestones and customer payments. The decrease in cash related to inventory in the nine months ended September 30, 2024, was primarily due to higher activity and related increases in our Manufactured Products and Subsea Robotics inventory. The increase in cash related to current liabilities in the nine months ended September 30, 2024, reflects the timing of vendor payments.
Accounting & Financial Operations - Risk 5
Management's Discussion and Analysis of Financial Condition and Results of OperationsAdded
" included in our annual report on Form 10-K for the year ended December 31, 2023.
Overview of our Results
Our diluted earnings per share for the three- and nine-month periods ended September 30, 2024 were $0.40 and $0.89, respectively, as compared to $0.29 and $0.52, respectively, for the corresponding periods of the prior year. In the third quarter of 2024, activity levels in our energy-focused businesses remained steady year-over-year, with notable operating performance improvements year-over-year in our Subsea Robotics and Manufactured Products segments. Compared to the same periods in the prior year, our operating income was 23% higher on a 7% increase in revenue and our operating income for the nine-month period ended September 30, 2024, was 26% higher on a 10% increase in revenue.
In the nine-month period ended September 30, 2024, we utilized $36 million of cash for maintenance capital expenditures and $37 million for growth capital expenditures, which was funded from our $75 million of cash provided by operating activities. We also repurchased shares of our common stock for approximately $10 million. These items along with the sale of an equity investment and assets and purchase of debt securities were contributors to our $9.7 million cash reduction during the first nine months of 2024.
Results of Operations
We operate in five business segments. Our segments are contained within two businesses-services and products provided primarily to the oil and gas industry, and to a lesser extent, the mobility solutions and offshore renewables industries, among others ("Energy"), and services and products provided to non-energy industries (Aerospace and Defense Technologies ("ADTech")). Our four business segments within the Energy business are Subsea Robotics, Manufactured Products, Offshore Projects Group ("OPG") and Integrity Management & Digital Solutions ("IMDS"). We report our ADTech business as one segment. Our Unallocated Expenses are those not associated with a specific business segment.
Consolidated revenue and profitability information are as follows:
Three Months EndedNine Months Ended(dollars in thousands)Sep 30, 2024Sep 30, 2023Sep 30, 2024Sep 30, 2023Revenue$679,811 $635,180 $1,947,711 $1,770,077 Operating Income (Loss)71,333 57,929 168,390 133,878 Operating Income (Loss) %10 %9 %9 %8 %
We generate a material amount of our consolidated revenue from contracts for services in the United States ("U.S.") Gulf of Mexico in our OPG segment, which is usually more active in the second and third quarters, as compared to the rest of the year. Revenue in our Subsea Robotics segment is subject to seasonal variations in demand, with our first quarter generally being the low quarter of the year. The level of our Subsea Robotics seasonality depends on the number of remotely operated vehicles ("ROV"s) we have engaged in vessel-based subsea infrastructure inspection, maintenance, repair and installation, which is more seasonal than drilling support. Revenue in each of our Manufactured Products, IMDS and ADTech segments generally has not been seasonal.
Energy
The primary focus of our Energy business is maintaining the positive momentum from our operational efficiency programs that leverage our asset base and capabilities for providing services and products for offshore energy operations and subsea completions. These efforts continue to benefit us during the current upstream spending cycle that is consistent with the ongoing increase in global demand for energy. We also are focused on deploying our capabilities to grow business in mobile robotics, offshore wind installations, nuclear, and other clean energy solutions.
The table that follows sets out revenue and profitability for the business segments within our Energy business. In the Subsea Robotics section of the table that follows, "ROV days utilized" is the number of ROV days for which we earn revenue during a specified period. "ROV days available" includes all days from the first day that a ROV is placed into service until the ROV is retired. All days in this period are considered available days, including periods when a ROV is undergoing maintenance or repairs. Our ROVs do not have scheduled maintenance or repair that requires significant time during which the ROVs are not available for utilization. "ROV utilization" percentage is defined as "ROV days utilized" divided by "ROV days available."
Three Months EndedNine Months Ended(dollars in thousands)Sep 30, 2024Sep 30, 2023Sep 30, 2024Sep 30, 2023Subsea RoboticsRevenue$215,715 $197,343 $617,632 $553,016 Operating Income (Loss)65,698 47,818 171,685 123,699 Operating Income (Loss) %30 %24 %28 %22 %ROV Days Available23,000 23,000 68,500 68,250 ROV Days Utilized15,796 15,932 46,171 46,192 ROV Utilization69 %69 %67 %68 %Manufactured ProductsRevenue143,734 122,877 412,501 360,698 Operating Income (Loss)11,278 8,229 38,837 30,116 Operating Income (Loss) %8 %7 %9 %8 %Backlog at End of Period671,000 556,000 671,000 556,000 Offshore Projects GroupRevenue147,539 150,273 406,651 385,127 Operating Income (Loss)20,294 26,745 34,386 49,391 Operating Income (Loss) %14 %18 %8 %13 %Integrity Management & Digital SolutionsRevenue73,622 66,056 216,804 189,305 Operating Income (Loss)714 3,242 7,802 10,168 Operating Income (Loss) %1 %5 %4 %5 %Total EnergyRevenue$580,610 $536,549 $1,653,588 $1,488,146 Operating Income (Loss)97,984 86,034 252,710 213,374 Operating Income (Loss) %17 %16 %15 %14 %
Debt & Financing5 | 14.7%
Debt & Financing - Risk 1
Financing activities.Added
Debt & Financing - Risk 2
Investing activities.Added
In the nine months ended September 30, 2024, we used $63 million in net investing activities, primarily for capital expenditures of $73 million with over half being in our Subsea Robotics segment. Capital expenditures were higher during the first nine months of 2024, as compared to $67 million in the first nine months of 2023, primarily due to increased capital expenditures in our OPG segment to extend our capabilities for new contract awards and in our Manufactured Products segment related to our autonomous mobile robotic technology business. These increased capital expenditures were partially offset by lower capital expenditures in our IMDS segment.
For 2024, we expect our organic capital expenditures to total between $110 million to $130 million, exclusive of business acquisitions, which we expect to fund using our available cash.
We have several deepwater vessels under a mix of short-term charters where we can see firm workload and spot charters as market opportunities arise. During the second quarter of 2023, we entered into three new long-term charters for deepwater vessels, two of which began in the third and fourth quarters of 2023 and the other that began in the first quarter of 2024. Additionally, we have three long-term charters that began in 2022. With the current market conditions, we may add additional chartered vessels throughout the year to align with our strategy that balances vessel cost, availability and capability to capture work. We expect to do this through the continued utilization of a mix of short-term, spot and long-term charters.
Debt & Financing - Risk 3
Difficulty in obtaining sufficient capital could adversely impact our business and financial condition.A financial crisis or economic recession could have an adverse impact on our business and our financial condition. In particular, the cost of capital could increase substantially and the availability of funds from the capital markets could diminish significantly. Since the global recession in 2008, credit and capital markets have, from time to time, experienced volatility. Our ability to access the capital markets in the future could be restricted or available on terms we do not consider favorable. Limited access to the capital markets could adversely impact our ability to take advantage of business opportunities or react to changing economic and business conditions and could adversely impact our ability to continue our growth strategy. Ultimately, we could be required to reduce our future capital expenditures substantially and such a reduction could have a material adverse effect on our business and our consolidated financial condition, results of operations and cash flows. A financial crisis or economic recession could also affect our suppliers and our customers, causing them to fail to meet their obligations to us, which could have a material adverse effect on our revenue, income from operations and cash flows.
If one or more of the lenders under our revolving credit facility were to become unable or unwilling to perform their obligations under that facility, our borrowing capacity could be reduced. Our inability to borrow under our revolving credit facility could limit our ability to fund our future operations and growth.
In addition, we maintain our cash balances and short-term investments primarily in accounts held by major banks and financial institutions located principally in North America, Europe, Africa and Asia, and some of those accounts hold deposits that exceed available insurance. It is possible that one or more of the financial institutions in which we hold our cash and investments could become subject to bankruptcy, receivership or similar proceedings. As a result, we could be at risk of not being able to access material amounts of our cash, which could result in a temporary liquidity crisis that could impede our ability to fund operations.
Debt & Financing - Risk 4
Significant inflation and higher interest rates could adversely affect our business and financial condition.The United States experienced inflationary pricing and increasing construction and labor costs in 2022 and 2023. While the pace of inflation has reduced since 2022, future changes in inflation could have an adverse impact on our business and our financial condition by increasing our costs of materials and labor. In addition, changing and future monetary policies and actions of the Federal Reserve that result from such adverse market and economic conditions (such as raises to the target federal funds rate) could adversely affect our ability to obtain financing and raise our (or our customers') cost of capital. In a highly inflationary environment, we may be unable to raise pricing for our energy services and products at or above the rate of inflation, which could reduce our profit margins and our cost of capital, labor and materials could increase, which could have an adverse impact on our business and our financial condition.
Debt & Financing - Risk 5
Maintaining adequate letter of credit and bonding capacity is necessary for us to successfully bid on and win various contracts.In line with industry practice, we are often required to post standby letters of credit to customers or enter into surety bond arrangements in favor of customers. Those letters of credit and surety bond arrangements generally protect customers against our failure to perform our obligations under the applicable contracts. However, the terms of those letters of credit, including terms relating to the customer's ability to draw upon the letter of credit and the amount of the letter of credit required, can vary significantly. If a letter of credit or surety bond is required for a particular project and we are unable to obtain it due to insufficient liquidity or other reasons, we may not be able to pursue that project. We have limited capacity for letters of credit, and we rely substantially on bilateral letters of credit from various issuing banks in a number of markets. Moreover, due to events that affect the credit markets generally, letters of credit may be more difficult to obtain in the future or may only be available at significant additional cost. Letters of credit, including through our bilateral arrangements (which are cancelable in the discretion of the issuing banks), may not continue to be available to us on reasonable terms. Our inability to obtain adequate letters of credit and surety bonds and, as a result, to bid on new work could have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
Corporate Activity and Growth1 | 2.9%
Corporate Activity and Growth - Risk 1
Our business strategy contemplates future acquisitions. Acquisitions of other businesses or assets present various risks and uncertainties.Legal & Regulatory
Total Risks: 6/34 (18%)Above Sector Average
Regulation2 | 5.9%
Regulation - Risk 1
Public and investor sentiment regarding ESG matters and our industry could adversely affect our business operations and the trading price of our securities.Regulation - Risk 2
Laws and governmental regulations may add to our costs or adversely affect our operations.Our business is affected by changes in public policy and by federal, state, local and foreign laws and regulations, including those relating specifically to the offshore oil and gas industry. Offshore oil and gas exploration and production operations are affected by tax, environmental, safety and other laws, by changes in those laws, application or interpretation of existing laws, and changes in related administrative regulations. It is possible that such new laws and regulations, or changes to the application or interpretation of existing laws and regulations, may in the future add significantly to our operating costs or those of our customers or otherwise directly or indirectly affect our operations.
On August 16, 2022, President Biden signed the IRA into law. The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum tax for taxpayers with adjusted financial statement income in excess of $1.0 billion and a 1% excise tax on corporate stock repurchases made after December 31, 2022. We continue to analyze the potential impact of the IRA on our consolidated financial statements and to monitor guidance to be issued by the U.S. Department of the Treasury.
Environmental / Social4 | 11.8%
Environmental / Social - Risk 1
Our aspirations, goals, commitment targets and initiatives related to sustainability, including emissions reduction and our public statements and disclosures regarding the same, expose us to numerous risks.Environmental / Social - Risk 2
Changes in data privacy and security laws, regulations and standards may adversely impact our business.Data privacy and security have become significant regulatory issues and the subject of rapidly evolving laws globally and in the United States. As a result, we may be subject to a growing patchwork of privacy regulation imposed by jurisdictions where we operate, including under the European Union's and U.K.'s General Data Protection Regulation, Brazil's General Data Protection Law and in the United States under various state privacy frameworks, such as the California Consumer Privacy Act. These regulatory frameworks apply to activities related to the collection, use, disclosure, and transfer of personal data that may be conducted by us or directly or indirectly through our vendors or subcontractors.
Data privacy and security regulations may significantly impact our business activities and require substantial compliance costs that adversely affect our business, operating results, prospects and financial condition. Additionally, any failure by us to comply with these regulations, including as a result of a personal data breach, could result in significant penalties and liabilities for us. Interpretations and enforcement of these laws continue to evolve, and changes to these regulatory interpretations or enforcement of these laws could create a range of new compliance obligations, which could cause us to incur additional costs. Furthermore, foreign, federal, state and local government bodies or agencies have, in the past, adopted-and may in the future adopt-more laws and regulations affecting data privacy and security.
Although these privacy and security laws share similar concepts, each applicable jurisdiction may include important variations, such as differing standards or obligations. Those variations may increase our compliance costs and place increased demand on our resources by creating complex monitoring, control and compliance challenges. Any failure by us to comply with these laws and regulations, including as a result of a personal data breach, could result in significant penalties and liabilities for us.
Our business and operations could become subject to future legislation, regulation, enforcement strategies and regulatory or judicial interpretations beyond those currently proposed, adopted or contemplated in the U.S. and abroad. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to our business may limit the use and adoption of, and reduce the overall demand for, our solutions.
Finally, if we acquire an entity that has violated or is not in compliance with applicable data privacy, security and protection laws or regulations (or contractual provisions), we may experience similar adverse consequences.
Environmental / Social - Risk 3
Environmental laws and regulations can increase our costs, and our failure to comply with those laws and regulations can expose us to significant liabilities.Risks of substantial costs and liabilities related to environmental compliance issues are inherent in our operations. Our operations are subject to extensive federal, state, local and foreign laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Permits are required for the operation of various facilities, and those permits are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines, injunctions or both. In some cases, those governmental requirements can impose liability for the entire cost of cleanup on any responsible party without regard to negligence or fault and impose liability on us for the conduct of or conditions others have caused, or for our acts that complied with all applicable requirements when we performed them. It is possible that other developments, such as stricter environmental laws and regulations, and claims for damages to property or persons resulting from our operations, would result in substantial costs and liabilities. Our insurance policies and the contractual indemnity protection we seek to obtain from our customers may not be sufficient or effective to protect us under all circumstances or against all risks involving compliance with environmental laws and regulations.
Environmental / Social - Risk 4
Legislative and regulatory responses to climate change and the ongoing "energy transition" could result in increased operating costs and capital expenditures and changes in demand for the services and products of our Energy business.The legislative and regulatory responses to climate change and its effects have the potential to negatively affect our business in many ways, including increasing the costs to provide the services and products of our Energy business, reducing the demand for and consumption of certain of those services and products, and the economic health of the regions in which we operate, all of which can create financial risks.
Legislation to regulate greenhouse gas emissions has, from time to time, been introduced in the U.S. Congress and such legislation may be proposed or adopted in the future. In addition, the Environmental Protection Agency ("EPA") has adopted regulations addressing greenhouse gas emissions, including the EPA's final methane rules, which impose several new methane emission requirements on the oil and gas industry, announced on December 2, 2023, during the United Nations Climate Change Conference in the United Arab Emirates ("COP28"). There also have been international efforts seeking legally binding reductions in greenhouse gas emissions, as well as non-binding efforts, including the non-binding agreement by more than 190 governments at COP28 to transition away from fossil fuels and encourage the growth and expansion of renewable energy. The United States was actively involved in the negotiations at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, which led to the creation of the "Paris Agreement." The Paris Agreement requires the signatory countries to review and "represent a progression" in their nationally determined contributions, which set emissions reduction goals, every five years.
It is not possible at this time to predict the timing and effect of climate change or to predict the effect of the Paris Agreement (or similar international agreements) or whether additional greenhouse gas legislation, regulations or other measures will be adopted. However, more aggressive efforts by governments and non-governmental organizations to reduce greenhouse gas emissions appear likely and any such future laws and regulations could result in increased compliance costs or additional operating restrictions applicable to our Energy business customers and/or us. For example, in August 2022, President Biden signed the Inflation Reduction Act ("IRA") into law, which imposes a charge on methane emissions from certain petroleum and natural gas system facilities and could have an indirect impact on demand for the goods and services of our Energy business, and on December 2, 2023 during COP28, the EPA announced its final methane rules, which impose several new methane emission requirements on the oil and gas industry. Our business could also be impacted by governmental initiatives to incentivize the conservation of energy or the use of alternative energy sources. These initiatives to reduce energy consumption or incentivize a shift away from fossil fuels could reduce demand for hydrocarbons, thereby reducing demand for the goods and services of our Energy business, and adversely impact our business, financial condition, results of operations and cash flows.
The adoption of additional climate change laws or regulations in the future could result in increased costs for our Energy business customers and us to (1) operate and maintain operating facilities, (2) install new emission controls or abatement technologies (such as CCS technologies) on operating facilities and (3) administer and manage greenhouse gas emissions programs. If we are unable to recover or pass through a significant level of our costs related to complying with climate change regulatory requirements imposed on us, they could have a material adverse effect on our results of operations and financial condition. Further, such legislation or regulation could prevent customer projects from going forward, thereby potentially reducing the need for our products and services. In addition, to the extent financial markets and insurance carriers view climate change and the greenhouse gas emissions of our Energy business customer base as a financial risk, this could negatively impact our cost of and access to capital and insurance.
Climate change also subjects us to the risk of increased negative publicity. Negative public perception regarding us and/or the energy industry resulting from, among other things, concerns raised by advocacy groups about oil spills, greenhouse gas emissions, climate change and explosions of or leaks from pipelines carrying crude oil, refined petroleum products or natural gas, may lead to increased regulatory scrutiny, which may, in turn, lead to new safety and environmental laws, regulations, guidelines and enforcement interpretations. These actions may cause operational delays or restrictions, increased operating costs or capital expenditures, additional regulatory burdens and increased risk of litigation for us and our energy industry customers. Furthermore, governmental authorities exercise considerable discretion in the timing and scope of permit issuance required for the operations conducted by or for our energy industry customers and, in many cases, the public may engage in the permitting process. Negative public perception could cause such permits to be withheld, delayed, or burdened by requirements that restrict our ability to profitably conduct business for our energy industry customers. Ultimately, these risks could result in reduced demand for the services and products of our Energy business, which would adversely impact our revenues, and increased costs that may adversely affect our profitability and cash flows.
In addition, climate change legislation and regulation may subject us to increased competition to develop innovative new products that result in lower emissions. Please refer to the risk factor entitled "Our operations could be adversely impacted by the indirect consequences of climate change and climate-related business trends" for a discussion of the impact of other climate-related consequences on our business, financial condition, results of operations and cash flows.
Tech & Innovation
Total Risks: 5/34 (15%)Above Sector Average
Innovation / R&D2 | 5.9%
Innovation / R&D - Risk 1
Our business strategy also includes development and commercialization of new technologies to support our growth. The development and commercialization of new technologies require capital investment and involve various risks and uncertainties.Innovation / R&D - Risk 2
Subsea Robotics.Added
We believe we are the world's largest provider of ROV services and, generally, this business segment has been the largest contributor to our Energy business operating income. Our Subsea Robotics segment revenue reflects the ROV utilization percentages, fleet sizes and average pricing in the respective periods. Our ROV tooling provides an additional operational interface between an ROV and equipment located subsea. Our survey services business provides survey and positioning, and geoscience services. The following table presents revenue from ROV services as a percentage of total Subsea Robotics revenue:
Three Months EndedNine Months Ended Sep 30, 2024Sep 30, 2023Sep 30, 2024Sep 30, 2023ROV77 %76 %78 %77 %Other23 %24 %22 %23 %
Subsea Robotics operating income for the three- and nine-month periods ended September 30, 2024, increased as compared to the corresponding periods of the prior year on higher revenue, as a result of higher average revenue per day in 2024 resulting from improved ROV pricing.
Fleet utilization was 69% for the three-month periods ended September 30, 2024 and 2023. Fleet utilization decreased slightly to 67% for the nine-month period ended September 30, 2024 as compared to 68% for the nine-month period ended September 30, 2023. We retired five of our conventional work-class ROV systems and replaced them with five upgraded conventional work-class ROV systems during the nine months ended September 30, 2024, resulting in a total of 250 ROVs in our ROV fleet as of both September 30, 2024 and 2023.
Trade Secrets1 | 2.9%
Trade Secrets - Risk 1
We rely on intellectual property law and confidentiality agreements to protect our intellectual property. We also rely on intellectual property we license from third parties. Our failure to protect our intellectual property rights, or our inability to obtain or renew licenses to use intellectual property of third parties, could adversely affect our business.Technology2 | 5.9%
Technology - Risk 1
Our informational technology ("IT") and operational technology ("OT") systems are subject to interruption and cybersecurity risks that could adversely impact our operations.Technology - Risk 2
Integrity Management & Digital Solutions.Added
Our IMDS segment provides asset integrity management, corrosion management, inspection and nondestructive testing services, principally to customers in the oil and gas, power generation and petrochemical industries. We perform these services on both onshore and offshore facilities, both topside and subsea. We also provide software, digital and connectivity solutions for the energy industry.
Our IMDS operating results for the three- and nine-month periods ended September 30, 2024 decreased on higher revenue as compared to the corresponding periods of the prior year, primarily due to increased revenue and operating results for our integrity management business while our energy businesses were relatively flat. The decline in operating income was the result of a one-time, non-cash charge associated with the divestiture of our Maritime Intelligence division in September 2024.
Aerospace and Defense Technologies
Our ADTech segment provides government services and products, including engineering and related manufacturing in defense and space exploration activities, principally to U.S. government agencies and their prime contractors. Many of the services and products utilized in ADTech are applied technologies based on our core competencies and knowledge derived from decades of working in the offshore markets and solving complex problems in harsh environments.
Revenue and operating income (loss) information for our ADTech segment are as follows:
Three Months EndedNine Months Ended(dollars in thousands)Sep 30, 2024Sep 30, 2023Sep 30, 2024Sep 30, 2023Revenue$99,201 $98,631 $294,123 $281,931 Operating Income (Loss)12,219 14,140 32,271 33,993 Operating Income (Loss) %12 %14 %11 %12 %
ADTech operating results for the three-month period ended September 30, 2024, declined on relatively flat revenue when compared to the corresponding periods of the prior year, primarily due to increased project proposal costs and changes in project mix. ADTech operating results for the nine-month period ended September 30, 2024, declined on higher revenue when compared to the corresponding periods of the prior year. While ADTech experienced increased activity and margins in our defense subsea technologies business, such increase was offset by a reserve taken during the second quarter of 2024 for a contract dispute and lower activity levels in our space systems business.
Unallocated Expenses
Our Unallocated Expenses (
Production
Total Risks: 5/34 (15%)Above Sector Average
Manufacturing3 | 8.8%
Manufacturing - Risk 1
Our offshore oilfield operations involve a variety of operating hazards and risks that could cause losses.Manufacturing - Risk 2
Offshore Projects Group.Added
Our OPG segment provides a broad portfolio of integrated subsea project capabilities and solutions as follows:
subsea installation and intervention, including riserless light well intervention ("RLWI") services, inspection, maintenance and repair ("IMR") services, principally in the U.S. Gulf of Mexico and offshore Angola, utilizing owned and chartered vessels;installation and workover control systems ("IWOCS") and ROV workover control systems ("RWOCS");diving services;decommissioning services;project management and engineering; and drill pipe riser services and systems and wellhead load relief solutions.
Our OPG operating results decreased on lower revenue for the three-month period ended September 30, 2024, as compared to the corresponding periods of the prior year, primarily due to changes in project mix in our international markets, vessel crane repair costs and associated vessel downtime in the third quarter of 2024. Our OPG operating results decreased on higher revenue for the nine-month period ended September 30, 2024, as compared to the corresponding period of the prior year, primarily due to changes in the project mix and drydock expenses incurred during the first quarter of 2024.
Manufacturing - Risk 3
Manufactured Products.Added
Our Manufactured Products segment provides distribution systems such as production control umbilicals and connection systems made up of specialty subsea hardware, along with clamp connectors and subsea and topside control valves. We also provide turnkey solutions that include program management, engineering design, fabrication/assembly and installation of autonomous mobile robotic technology to industrial, manufacturing, healthcare, warehousing and commercial theme park markets.
Our Manufactured Products revenue and operating results increased for the three- and nine-month periods ended September 30, 2024, as compared to the corresponding periods of the prior year. Revenue was higher in the three- and nine-month periods ended September 30, 2024, primarily due to increased order intake in 2022 and 2023 leading to increased activity in the first nine months of 2024. Operating results were improved in the three- and nine-month periods ended September 30, 2024, as compared to the corresponding periods of the prior year, primarily due to an improved project mix and our ability to leverage our existing cost base.
Our Manufactured Products backlog was $671 million as of September 30, 2024, compared to $622 million and $556 million as of as of December 31, 2023 and September 30, 2023, respectively. Our book-to-bill ratio was 1.21 for the trailing 12 months ended September 30, 2024, as compared to 1.31 for the year ended December 31, 2023, and 1.41 for the trailing 12 months ended September 30, 2023.
Employment / Personnel2 | 5.9%
Employment / Personnel - Risk 1
The loss of the services of one or more of our key personnel, or our failure to attract, assimilate and retain trained personnel in the future, could disrupt our operations and result in loss of revenue.Employment / Personnel - Risk 2
Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could weaken our ability to win contracts, which could result in reduced revenue and profits.Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one or more of our employees, agents or partners could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with the U.S. Foreign Corrupt Practices Act ("FCPA"), which prohibits companies and their intermediaries from making improper payments to non-U.S. officials, as well as the failure to comply with government procurement regulations, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting and various other applicable laws or regulations, including the U.K. Bribery Act. We operate in some countries that international corruption monitoring groups have identified as having high levels of corruption. Our activities create the risk of unauthorized payments or offers of payments by one of our employees or agents that could be in violation of the FCPA or other applicable anti-corruption laws. The precautions we take to prevent and detect misconduct, fraud or non-compliance with applicable laws and regulations may not be effective, and we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines, penalties or other sanctions, which could have a material adverse effect on our business and our consolidated financial condition, results of operations and cash flows.
Macro & Political
Total Risks: 3/34 (9%)Above Sector Average
International Operations1 | 2.9%
International Operations - Risk 1
Our international operations involve additional risks not associated with domestic operations.Natural and Human Disruptions1 | 2.9%
Natural and Human Disruptions - Risk 1
Our operations could be adversely impacted by the indirect consequences of climate change and climate-related business trends.Capital Markets1 | 2.9%
Capital Markets - Risk 1
Foreign exchange risks and fluctuations may affect our profitability on certain projects.Ability to Sell
Total Risks: 2/34 (6%)Above Sector Average
Competition1 | 2.9%
Competition - Risk 1
We may not be able to compete successfully against current and future competitors.Demand1 | 2.9%
Demand - Risk 1
We derive most of our revenue from companies in the offshore oil and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and gas prices.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.