Executive Summary / Key Takeaways

• Oceaneering International is capitalizing on a strengthening offshore energy market, particularly in Subsea Robotics (SSR) and Offshore Projects Group (OPG), while strategically expanding into high-growth non-energy sectors like Aerospace and Defense Technologies (ADTech) and mobile robotics.
• The company's core ROV business demonstrates improving profitability driven by pricing progression and operational efficiencies, maintaining a leading market share in drill support and increasing utilization in higher-margin vessel-based activities.
• Significant contract wins, including a large Department of Defense award for ADTech and growing backlog in Manufactured Products, underpin management's forecast for substantial revenue and operating income growth across all segments in 2025.
• Investments in differentiated technology, such as hybrid ROV/AUVs and digital integrity management solutions, are expected to enhance competitive positioning and create new revenue streams in both energy and non-energy markets.
• Despite macroeconomic and geopolitical uncertainties, management's reiterated 2025 guidance for EBITDA ($380M-$430M) and positive free cash flow, supported by a strong balance sheet and ample liquidity, signals confidence in the company's ability to execute its growth strategy.

Oceaneering International: Leveraging Subsea Strength for Diversified Growth

Oceaneering International, Inc. is a global technology company with deep roots in engineered services and robotic solutions for the offshore energy industry. Over decades, the company has built a formidable presence, particularly in subsea robotics, becoming a recognized leader. This foundation in navigating complex, harsh environments has not only positioned OII to capitalize on the current upcycle in offshore energy but also provides a springboard for strategic diversification into adjacent high-growth markets like defense, aerospace, and manufacturing. The company's overarching strategy centers on leveraging its core competencies in robotics, engineering, and operational execution to drive growth in both traditional and new frontiers, aiming to build a more resilient and profitable business model.

The offshore energy market, OII's traditional stronghold, is showing renewed vitality. Supportive oil and gas prices, increasing deepwater Final Investment Decisions (FIDs), and a projected rise in subsea tree awards and installations signal a healthy environment for OII's core services and products. This backdrop provides a tailwind for the company's Subsea Robotics (SSR), Offshore Projects Group (OPG), and Manufactured Products segments. Simultaneously, OII is actively pursuing opportunities in non-energy sectors, applying its technological expertise to solve challenges in defense, space exploration, and industrial automation, primarily through its Aerospace and Defense Technologies (ADTech) segment and mobile robotics offerings within Manufactured Products.

In the competitive landscape, OII operates alongside major players like TechnipFMC (FTI), Baker Hughes (BKR), and Helix Energy Solutions Group (HLX), each with varying strengths. While competitors like FTI and BKR often possess greater scale and broader portfolios spanning the entire energy value chain, OII distinguishes itself through specialized subsea robotics capabilities and a focused approach to engineered solutions. OII holds a leading market share in work-class ROV services, particularly in drill support, and its operational performance, including a reported 99% ROV uptime rate in 2024, provides a competitive edge that supports pricing power. Compared to peers like HLX, OII's diversification into non-energy markets offers a degree of insulation from pure oil and gas price volatility, although this also introduces different market dynamics and execution challenges. Financially, while OII's margins and growth rates may trail some larger, more integrated competitors, its focus on high-return opportunities and operational efficiency is aimed at closing this gap over time.

Technological Differentiation and Innovation

At the heart of Oceaneering's strategy lies its differentiated technology, particularly in subsea robotics and increasingly in autonomous systems and digital solutions. The company's fleet of 250 work-class ROVs is a core asset, providing essential services for drilling support and vessel-based operations. These ROVs, coupled with proprietary tooling, offer operational interfaces and capabilities crucial for complex subsea tasks. Management highlights that performance-based contracts, where OII's operational reliability is a key differentiator, are contributing to improved pricing. Average ROV revenue per day utilized reached $10,788 in the first quarter of 2025, reflecting this pricing progression.

Beyond its established ROV fleet, OII is investing in next-generation technologies. The development of hybrid ROV/AUV systems, such as the Freedom Vehicle, exemplifies this innovation. This technology, initially developed for a significant Department of Defense contract, also has commercial applications, demonstrated by a pipeline inspection for Total (TTE) that reportedly achieved a 50% reduction in time and emissions compared to existing methods. This hybrid capability offers enhanced efficiency and reduced environmental impact, providing a tangible benefit to customers and a potential competitive advantage for OII in subsea inspection and intervention markets. The company expects to deliver the Freedom Vehicle for the U.S. Navy in the second quarter of 2025.

Furthermore, the acquisition of Global Design Innovation (GDI) strengthens OII's digital and integrity management offerings. GDI's data-driven approach, utilizing AI and machine learning for assessing offshore platforms, helps customers optimize inspection campaigns and predict equipment failures with fewer personnel on site. Management sees a significant opportunity to deploy this technology underwater using ROVs, combining laser scanning and video analysis to quantify corrosion and analyze subsea infrastructure. This integration of digital solutions with robotic capabilities is expected to create new revenue streams and drive additional ROV dive hours, enhancing the value proposition for customers and contributing to the growth of the IMDS segment. These technological advancements, coupled with investments in supporting infrastructure like a new ERP system for ADTech, are foundational to OII's strategy to improve operational efficiency, expand its service offerings, and strengthen its competitive moat in both traditional and emerging markets.

Performance Reflecting Strategic Momentum

Oceaneering's recent financial performance underscores the traction of its strategy. The first quarter of 2025 saw consolidated revenue climb to $674.5 million, a 13% increase year-over-year, with operating results doubling to $73.5 million. This strong start was primarily fueled by robust performances in the SSR and OPG segments. SSR revenue increased by 10% year-over-year, with operating income rising 35%, driven by higher average ROV revenue per day ($10,788 in Q1 2025) and improved fleet utilization (67% in Q1 2025 vs. 64% in Q1 2024). The shift towards a slightly higher percentage of vessel-based ROV activity (38% in Q1 2025 vs. 34% in Q1 2024) also contributed positively.

The OPG segment delivered a particularly strong performance in Q1 2025, with revenue soaring 43% year-over-year and operating income increasing dramatically from $0.8 million to $35.7 million. This significant improvement was attributed to the continuation of international projects, improved vessel utilization in key regions like the Gulf of Mexico, and the absence of drydock costs that impacted the prior year period. Manufactured Products revenue saw a modest 4% increase, but operating income declined due to a specific inventory reserve related to the theme park ride business, partially offset by strength in energy-related products. The ADTech segment's operating income decreased slightly on relatively flat revenue, primarily due to readiness costs associated with recent contract awards.

Liquidity remains a point of strength for OII. As of March 31, 2025, the company held $382.0 million in cash and cash equivalents and had $215.0 million available under its Revolving Credit Facility, with no borrowings outstanding.

Net working capital stood at $629.0 million. While cash balances saw a decrease in Q1 2025, largely due to operating cash usage influenced by working capital timing and capital expenditures, the company's debt maturity profile, with the nearest significant maturity being the $500.0 million of 2028 Senior Notes, provides ample time and flexibility. Management views its liquidity position as adequate to support operations, capital commitments, and strategic growth initiatives.

Outlook and Future Trajectory

Management's outlook for 2025 signals continued positive momentum across the business. The company reiterated its full-year 2025 EBITDA guidance in the range of $380 million to $430 million, representing a significant increase over 2024 adjusted EBITDA. This confidence is underpinned by a strong first quarter performance, robust order intake of approximately $1.2 billion in Q1 2025, and a backlog that has improved year-over-year.

Segment-specific forecasts highlight the expected drivers of this growth. SSR is projected to see improved operating results on a high single-digit revenue increase, with EBITDA margins expected to average in the mid-thirty percent range, driven by sustained pricing progression and efficiency gains. Manufactured Products anticipates significantly improved operating income and margins on increased revenue, supported by the conversion of its $543 million backlog and improvements in non-energy lines. OPG expects improved operating results on flat to slightly increased revenue, benefiting from improved vessel utilization, a favorable project mix including higher-margin intervention work, and reduced drydock costs. IMDS is forecast for significantly improved operating results on increased revenue, reflecting the positive impact of the GDI acquisition and the absence of prior losses. ADTech is poised for significant growth in both revenue and operating income, largely attributable to the substantial Department of Defense contract award, with operating income margins expected in the low teens.

Organic capital expenditures for 2025 are projected between $115 million and $120 million, focused on growth opportunities in robotics platforms and IT infrastructure, including $15 million to $20 million for a new ERP system implementation. The company expects to generate positive free cash flow in 2025, exceeding the level generated in 2024. This forward-looking picture is based on assumptions of continued supportive market conditions in offshore energy and successful execution on strategic initiatives in non-energy sectors.

Risks and Considerations

While the outlook is positive, investors should be mindful of potential risks. The company remains exposed to volatility in the oil and natural gas markets, which could impact customer spending on offshore projects. Geopolitical uncertainties, including tariffs, retaliatory tariffs, and changes in OPEC+ production, continue to pose potential headwinds, although management believes its guidance appropriately accounts for these factors. Execution risk exists in delivering on large, complex contracts, particularly in newer areas like the significant ADTech award and the expansion of mobile robotics. Operational challenges, such as vessel downtime or project delays, can impact segment performance, as seen in prior periods. Furthermore, the collectability of accounts receivable and the realization of contract assets, particularly on suspended projects, carry some uncertainty regarding timing. Litigation and other contingencies inherent in the business also present potential, albeit currently assessed as non-material, liabilities.

Conclusion

Oceaneering International is strategically positioned to leverage its core strengths in subsea robotics and engineered solutions to benefit from the current upswing in offshore energy activity while simultaneously cultivating new growth avenues in diversified markets. The company's differentiated technology, operational expertise, and expanding portfolio of services and products provide a solid foundation. Strong recent financial performance, coupled with a positive outlook and robust backlog, supports management's confidence in delivering significant growth and improved profitability in 2025. While macroeconomic and execution risks warrant monitoring, OII's strategic focus on high-return opportunities, technological innovation, and disciplined capital allocation, underpinned by a healthy balance sheet, presents a compelling narrative for investors seeking exposure to a company capitalizing on both traditional market recovery and emerging growth frontiers.