Good day. And welcome to the Bristow Group Reports Fiscal Q1 2021 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Crystal Gordon, Senior Vice President, General Counsel. Please go ahead, ma’am.

Thank you, Travis, and good morning, everyone. Welcome to Bristow Group's first quarter fiscal year 2021 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. Let me remind everyone during the 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 our 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 investor slides. I'll now turn the call over to our President and CEO. Chris?

Thank you, Crystal, and welcome to the call everyone. As always, I will begin our prepared remarks with a note on safety, which is Bristow’s most important core value and our highest operational priority. I want to thank and commend all of our Bristow team members for their focus and dedication to play safety first every day, despite the numerous potential distractions in the world around us. Since the close of the merger, we have achieved our targets of zero air accidents and have experienced just one minor lost time workplace incident. We remain committed to achieving the highest safety standard to ensure that all of our customers and employees return home safely. Since we last spoke to this audience in early May, we have successfully completed the merger between Bristow and Era well ahead of the originally contemplated schedule. We are pleased to report that the integration progress is going well. We have increased the amount of identified synergies to at least $45 million of annualized run rate cost savings, which is $10 million higher than the previous total. As of July 30, the synergy project representing $16 million of annualized savings have already been completed. We expect the full amount of the identified synergies we realized in the next 12 to 24 months, resulting in a more efficient cost structure for the company. The timing of the merger has proven advantageous as the benefits of the combination are more important now than ever. The new Bristow is a larger, more diversified and financially stronger company, better positioned to manage industry challenges. As you have seen, our Q1 fiscal 2021 financial results were adversely impacted by the COVID-19 outbreak and dislocation in oil markets as flight hours decrease and certain customers exercise their contractual rights to terminate contracts. I will now turn it over to our CFO for a more detailed review of financial results. Jennifer?

Thank you, Chris. Pro forma adjusted EBITDA for the 12 month period ended June 30, 2020 was $172.5 million. This number represents that the results for the combined company would have been had the merger been in effect for the full 12 month period. Please note that this number is before the positive impact of synergies as it only includes a de minimis contribution from synergies in the last three weeks of June. With respect to the company's results as reported in our SEC filings, given the close of the merger on June 11 and the fact that Bristow was the accounting acquirer in the transaction. The current quarter only includes 19 days of operating results from legacy Era Group Inc. Prior periods only include operating results of legacy Bristow Group Inc. Please note that the accounting for the merger as well as the impact of fresh-start accounting following Legacy Bristow Chapter 11 restructuring process will impact the compatibility of financial results for the next several quarters. With that established, I will now turn to sequential quarter comparison of Bristow's financial results. EBITDA adjusted to exclude special items and asset dispositions was $46 million for the first quarter of fiscal year 2021, compared to $21.5 million in the fourth quarter of fiscal year 2020, or an increase of $24.5 million. This increase was primarily due to foreign currency gains of $1.4 million versus losses of $14.8 million in the previous quarter, and a decrease in expenses. Excluding the impact of these foreign currency fluctuations, the increase in adjusted EBITDA would have been $8.4 million. Revenues decreased $12.9 million, primarily due to lower utilization related to lower oil prices and COVID-19 impacts. Operating expenses were $21.5 million lower due to decreased personnel, maintenance, fuel and other operating expenses due to decreases in utilization previously outlined. General and administrative expenses were $7.2 million higher due to increased professional service fees and other costs related to the merger. Additionally, we took an impairment on our joint venture in Brazil Lider due to actions we have taken to exit that investment. Finally, we generated adjusted free cash flow of $26 million for the quarter. At this time, I'll turn the call back to Chris for further remarks. Chris?

Thank you, Jennifer. We expect challenging conditions in the oil and gas industry to persist for the foreseeable future. Visibility remains limited and we cannot predict the timing or shape of the eventual industry recovery. However, it has always been our team’s strategy to maintain a business model that is viable and generate positive cash flow regardless of the commodity price environment. We demonstrated the ability to do that during the prior downturn and we are committed to doing so going forward. We have a strong balance sheet and $300 million of total liquidity, including $260 million of cash on hand. With our robust financial position, efficient cost structure and experience managing through industry downturn, we are well prepared to navigate through difficult industry conditions. Furthermore, the timing of the merger presents opportunities to create value by realizing cost synergies and operational efficiencies, supporting continued positive cash flow generation for the company. With that, let's open the line for questions, Travis?

Thank you, sir. [Operator Instructions] Our first question comes from Bill Mastoris, Baird.

Hi, Chris, and congratulations on completion of the merger. If you could give us a little bit about your thinking right now just in this really tough operating environment, which could unfortunately involve other contract cancellations. Is this going forward, at least in the near-term, going to be a matter of reducing costs? Just to go ahead and then kind of shrink yourself into profitability, where do you say, hey, you know, we aggressively have to go out into other areas such as search and rescue contracts and maybe accept lower margins, but at least it would give us a baseline revenue from which we could build at, at some future point. So that's my first question. Looking forward how do you create value and improve your credit metrics?

Good morning, Bill, and thank you for the question. As you noted, we expect to face a tough operating environment. However, we know the playbook for that. In fact, the playbook from the last downturn hasn't even been on the shelf long enough to gather it up. So we know the steps that we need to take, the levers that we need to pull. Certainly, addressing our cost structure is a big part of that. We need to make sure that we have the most efficient cost structure possible. And again, we know the areas to address there. This is a downturn, but we've seen downturn before and we know how to react to those. And again, we believe that our job really is to have a business model that can generate positive cash flow regardless of the commodity price environment. I'm glad you asked about other end markets. We do have a diversified business today, including a stable base of revenue in our government services contracts, including the UK SAR contracts that we have. We do believe we have the ability to leverage our core competencies as a company to continue to diversify into other end markets. And we are looking for opportunities to do that.

Okay. And then Chris, a quick follow up. You've been really good in generating free cash flow at your time at Era. And with the prospect for generating free cash flow, what does the playbook look like right now? Is it one that is involving taking that and allocating that free cash flow just to build liquidity? Or is this one where you say that we're going to go ahead and we're going to deliver our balance sheet a little bit further, and I recognize that that's a delicate balancing act. And please feel free to go ahead and elaborate if there's any other factors that I might not have mentioned.

Important question, and we do have a sizable cash balance today, and we do expect to continue to generate positive cash flow in terms of the alternatives we have to deploy that capital broadly speaking, of course, we can return capital directly to shareholders. We can pay down debt, deliver the balance – deleverage the balance sheet. We could use it to effect M&A or consolidation, or we could deploy it for growth CapEx. I think the last one is pretty low on the list given the industry conditions today. But I think given where we are today and what we're seeing in the industry and the unlimited amount of visibility, certainly protecting the balance sheet will be important. And so, you may see us use cash to reduce the amount of debt that we have outstanding, but I think it's important to note that it's not mutually exclusive from returning capital directly to shareholders. We'll continue to evaluate that opportunity and approach that opportunistically and we can do both over time.

And so that makes the question, Chris, what level of cash or liquidity do you feel like you comfortably need to operate the company?

We haven't disclosed a specific number. However, the amount of cash we have today on the balance sheet is well in excess of that. What would be our normal minimum cash balance in a typical environment is going to be higher in a market like today, where there is more limited availability and difficult industry conditions. So we may hold more cash than we would need to in a more positive market, but that being said, we do have some cash that we can put to use. And again, I think, our priorities near-term are going to be protecting the balance sheet, but that's not mutually exclusive over time from returning capital.

Okay. Thank you very much.

Thanks, Bill..

Our next question comes from Adam Ritzer [ph], Investor.

Hi, good morning. How are you guys doing?

Good morning, Adam. How are you?

I'm doing pretty good. So let's add a number of questions, obviously. In the Q, it said that a pro forma revenue, you would have had the operations for the full quarter would have been $305 million versus $270 million reported. Could you give an EBITDA number off that pro forma revenue number?

Adam, good morning. We haven't disclosed a pro forma EBITDA number for the quarter. We have disclosed is that if you look at the last 12 month period ending June 30, the pro forma EBITDA for the combined company would have been $172 million, important to note that's before the positive benefit of synergies. And as we noted in our prepared remarks, we did increase our synergy to $45 million on an annualized run rate basis.

Okay. Okay. So you're just – again you can't say directionally what it would have been if you had the business for the whole quarter, okay. Can you talk about Lider? I know you guys – it looks like, did you take a full impairment and wrote that down to zero now?

That's correct. We did. And we have taken steps to exit the investments in Lider. We're doing that under a partial dissolution provision of the Brazilian constitution. So we will no longer be a shareholder in Lider by the end of this month. We've made the decision to focus our resources and investment on the legacy Aeróleo now Bristow platform in Brazil going forward and use that business the 100% owned and controlled former Aeróleo platform to pursue further opportunities in Brazil and the future.

Got it. And not being an expert on the Brazilian constitution, do you think are you going to be able to generate any cash proceeds from selling that? What do you – can you talk a little bit about what expectations might be for any value realization from Lider?

We do except to receive proceeds from our minority shareholder interest. However, it would be preliminary at this point to speculate on the amount or timing for receiving those proceeds.

Okay. So anything to get is better than zero, right?

I think that’s fair to say.

Okay. Can you talk a little bit about the progression during the quarter? Was March, April, May, June – was there any months that you said, hey, this was really the worst month and maybe now in July, you're coming into August, things are getting better. Can you talk about the progression at all?

Good question. Certainly, an unusual quarter that's laid out. I would say at the beginning of the quarter, the impacts that we were seeing were more directly related to the virus and our customers trying to adjust their workforce logistics to the new reality in a COVID-19 environment and there were some reduced flight hours as – as that happened. And as there were needs to bring people offshore when there were suspected events on an offshore platform. As the quarter progressed, I think, the activity that we observed was probably more related to the commodity price environment and the situation that our oil and gas customers find themselves in. And so that's where we did see certain customers provide notice of reducing their contracted aircraft fleet. So that did play out as the quarter progressed. I think, as we've now gotten through the post June period, we've seen some more stabilization of our activity in terms of knowing what our customers are planning to do a little more comfort from everyone operating in this new environment with COVID-19 and they need to try to mitigate the spread of the virus wherever possible. I think going forward we do expect to see some headwinds in our offshore oil and gas business given what's going on in that industry. But again, we think we're well positioned with our financial strength, our efficient cost structure, certainly our experience managing through downtowns like this and our confident and our ability to weather this difficult period and continue to generate positive cash flow as we do that.

Okay. So net-net, does that mean July and August was a little better than May, June with COVID and oil? And there are so many issues going on. It's kind of hard to get a real read on this. Can you – any insight on to where things stand now versus a few months ago?

Yes. I think you're right in pointing out Adam, there is limited visibility. And for that reason we're not providing forward-looking financial guidance and not commenting, at this time, about future periods beyond June. We do expect that there will be headwinds in our offshore oil and gas business. But again, we know the levers we need to pull to address those challenges that we face. We're prepared to do that. And we're actively managing the business to make sure that we're right-sized and competitive for the level of activity that does exist in the market.

Got it. And in terms of cash and free cash, is the $12.5 million of interest expense in the quarter? Is that a good run rate to use on a go-forward basis on like a $50 million annual interest expense?

Directionally, yes. I mean, obviously, there will be some variability from quarter-to-quarter, and as I noted, we may use some cash to pay down debt, so it's not a static number.

Okay, got it. And what about CapEx? What do you think the – obviously, you said you're not going to spend any money on growth CapEx, it looks like there is no need to buy any further equipment. What do you think the maintenance CapEx is for the combined companies now on a full year basis?

I won't update the guidance, but there were some disclosures in our S-4 related to the merger that that showed combined CapEx in that low $30 million range on for maintenance. And again, that's – that really is either spare parts, addressing facility needs, IT systems, ground support equipment, et cetera.

Okay. So you think it's still going to be that high, even though the quarter seemed like you only spent a few million bucks.

Well, given the conditions, we will be active in managing our spend in all categories and making sure that every dollar is justified.

And how about cash taxes? What kind of cash taxes you think you guys should be or could be paying?

We're not going to provide specific disclosure on any one financial metric. We are given the limited amount of visibility and consistent with what a lot of our peers in the oil field services industry are doing today, not providing specific financial guidance.

Okay. I know you guys still have a significant number of S-92s that are still being released. I think it was like 32. What's the – are any of those rolling off over the next 12, 24 months, so your lease expense directionally can start coming down. Can you talk about that at all?

We do have some leases that will be expiring over the next 12, 24 months. We haven't discussed specifics there, but we are focused on maximizing the utilization of the owned fleet. And if there are certain aircraft that aren't needed, we may return them to the lessors and reduce our cash expense for those purposes.

So can you give any – I mean, can you give any more details how many, how much it could be? I'm just trying to see where there's some ability to return these plans that aren't really utilized right now?

We're not providing specifics on a per lease basis, but we will have the ability to reduce our least costs over the next 12 to 24 months as some roll off.

Got it. And I noticed recently in a back half you've pick up some contracts. I think the one contract that you guys didn’t renew. They also picked up a decent contract from CHC, and CHC is out there saying how Babcock is low ball in numbers and they're just trying to grab business. Can you talk about what's going on in the industry? Who's hurting? Babcock seems to win a couple of contracts, but their [indiscernible] still for sale? Can you talk about the competition at all?

I won't get into the specifics of any one customer, certainly won't get in the middle of the matter that you referenced. But I think it is fair to say that it remains a very competitive environment particularly in certain markets where there are frankly too many operators to sustainably be supported by the today's level of market activity. From our standpoint, and this has always been our approach, we need to remain disciplined and exercise financial rigor and worry about ourselves. And I think that – that will continue to be our plan moving forward and take care of what we can control.

Okay. I only have two more questions. I'm sorry to bother you, but it's been a while since we've chatted. There was a pretty interesting helicopter call back in the middle of July. I don't know if you guys listen to these things, but one of the gentlemen was talking about the potential for offshore wind contracts. And there was a pretty significant numbers being thrown around over the next 10 years. I know that you guys have some of the helicopters that they mentioned that would be amenable to do offshore wind. Can you talk about that at all? Have you done any of that business? Or are you looking into that? Just a little bit of information would be helpful.

Sure. And thank you for the question, Adam. I am familiar with the call that you referenced and the information. And certainly, we've been looking at that market for a very long time. We do believe that we have an opportunity at Bristow to leverage our core competencies to expand into other end markets and diversify our exposure. Offshore wind is one that, again, has long been on the list of attraction for us as a team. If you think about the fact that it's not tied to the price of oil, we do expect that it'll be a long-term secular growing market. And it's one where again, we have the ability to operate offshore in difficult operating conditions. And we have a lot of experience and hoisting through our search and rescue business and that's a part of the skill set that is needed and useful in offshore wind work. It is a really a nascent market in the U.S., but we have been following developments and as that market grows here in the U.S., which will be principally on the eastern seaboard over the next several years, it is something that we're looking at. It's a more mature market in parts of Europe and Asia. And now with the combined Bristow that we have exposure in some of those markets, it is again an area that we're interested in pursuing for the reasons that I mentioned and the attractiveness of the market characteristics.

Okay. That's interesting. And then the final question, I know you guys currently don't have a buyback in place. Have you had a board meeting to discuss that and with all of the cash you have, the free cash, the asset sales, is there any reason why you would not want to at least have a buyback in place now in this environment?

Yes, I don't want to comment on specific board actions or timing. But certainly, we are monitoring the opportunities. As you noted, we do have a good cash balance and we expect to continue to generate positive cash flow. We want to make sure we protect our balance sheet, as I noted earlier, given the limited visibility and the difficult conditions we’re facing today. But that is not mutually exclusive from being able to return capital to shareholders. So we're going to continue to look at that opportunistically and at this time, we'll monitor the conditions and make the announcements when appropriate.

Okay. Thanks so much for withstanding on my questions. I appreciate it.

Thanks, Adam. I'm always going to catch up.

[Operator Instructions] Our next question comes from John Deysher, Pinnacle.

Hey Chris, good morning.

Good morning, John.

Taking out all of the noise from the first quarter, it looks like the quarter was actually pretty good. And I'm just wondering, do you feel the same way? Obviously there was a lot of numbers and noise but to our analysis, it actually looked like a pretty good quarter, even though revenues were down about 17% quarter-over-quarter.

I would agree with that characterization, John, I think, I do think given the condition that it was a good performing quarter for the company. There is a lot of noise as you appropriately referenced between the merger and then comparability of prior period, given fresh start accounting for the Bristow books, et cetera. But all of that said, I think your assessment is fair. It was overall I think, a good performance given the condition.

Okay, good. Well, congratulations on that. Regarding Adam's question on the buyback, at quarter-end last quarter, you actually had a buyback in place with Era. Does that continue with the Bristow Reorg? Or is that canceled? Or what is the status of that buyback that was in place?

We do think, John, that if we are going to execute upon some share repurchases, we may put in place a new plan, so that's an opportunity that we will look at.

Okay. So the old plan was effectively canceled with every organization.

We do believe we'll need to put a new one in place.

Okay. All right. The sale of the 10 H225s, when do you expect that to close and what do you think the proceeds will be?

So any day now, we've already collected the vast majority of the payment. It was a total of $45 million for the entire package. We're pleased by this transaction and welcome the opportunity to monetize those assets and redeploy the capital elsewhere. So any day now, we should close out the final portion of it.

Okay. So you got the $45 million before quarter-end or you got it sometime in July or August?

A mix. Some of it was received prior to the quarter-end and a chunk of it was received subsequent to June 30.

Okay. Can you tell us how much was received post June 30?

Jennifer, you might need to help me out here. I think it's somewhere in the $12-plus million range.

That's correct.

Okay, good. And then the assets held for sale. Is that all helicopters or are there certain businesses, certain business assets that are held for sale as well?

Not businesses, but there are a couple of fixed-wing aircraft in there, it’s fair to say that it's all aircraft.

Okay. It's all aircraft. Okay. And in terms of rationalizing it, you're coming out of the Brazilian operation. Are there any other operations that are not core going forward at this point, in your opinion?

Without getting into one specific one, we are taking this opportunity of having now come together with the Merger to evaluate all the components of our portfolio and make sure that each of the regions, each of the businesses that we're in, justifies itself through sustainable profitability. And so we're in the process right now of carrying out that evaluation, if there are any changes that we feel like we need to make we'll do that.

Okay. Fair enough. I guess and finally on the M&A side. Maybe you can elaborate what your thinking is there? Obviously, a lot of your competitors are probably struggling. Maybe that got key market shares in certain regions you want to be in, maybe there's an opportunity to advance the search and rescue operation by convincing government to outsource it you, kind of how does all that enter into your thinking?

What we do believe is, as you've referenced John, that there will be other potential M&A opportunities out there. We are evaluating the opportunities for consolidation. We think, there may be attractive situations in certain international markets that have a lot of the similar benefits that informed the Bristow Era merger and the ability to consolidate a market takeout cost. The better absorption of this significant fixed cost required to run an air carrier. So we are looking at those. I think there are markets in the North sea, some perhaps in Brazil that would be at the top of that list. So we will continue to monitor those situations and if something becomes actionable and is compelling from a value creation standpoint we may proceed with it.

Okay, great. Thanks very much, Chris and Jennifer,

Our next question comes from Sam Mitchell, Empyrean Capital.

Thank you for taking the question. So you put a $172 million LTM EBITDA. Can you provide an estimate of what that would be pro forma for Bristow’s post-bankruptcy lease costs?

Good morning, Sam. Thanks for the question. We haven't disclosed that, but we can follow up with you on that with the specific run-rate benefit would be adjusting for what was already captured and the recorded LTM period.

Great. And it sounds like you expect pressure on activity levels, given pressure in oil and gas. Can you comment on the pricing environment and any I guess either pressures or opportunity to best on pricing?

Well, we all, for competitive reasons, won't discuss specifics of pricing. However, I would note that in our sector really, there's not much to give on pricing, given the situation that we've been, the conditions that we've been in for the last several years. So when we have customers who are looking to reduce their cost exposure, we'll work with them to see if there's a more efficient way to structure the operations and support for them. But again, on the pricing front, there's just really not much of anything to get.

Great. And then following up on kind of the last series of questions, well, before the Bristow Era deal, you probably be – you spoke about the need for consolidation. I guess it's the environment things be becoming more distressed. And yet the only free cash flow generating company at the healthy balance sheet, do you have any updated thoughts on whether that consolidation evolves via M&A or just simple organic share gains?

It could be both. And certainly, I think level of stress on the industry today may accelerate the actionability of some of the consolidation opportunity. Of course, all of it would have to make sense financially and the value creative relative to our other opportunities to deploy capital. But we do see some promise and believe that there could be some attractive opportunities for us to pursue on the M&A front.

Great. And then last question for me. So recognizing that you're not providing guidance the time or at this time – during your January presentation provided a target of $249 million of pro forma EBITDA, you increased the synergy number today, given the lack of cyclicality in the UK SAR business, is there kind of sort of a minimum level, you can provide in your comments on $200 million or more over the next 24 months, possible there? And just kind of any higher level color without specific guidance that you can provide?

Well, what I would say is that there are some gives and takes. I think you rightly point out that we have a very stable portion of our business in our government services work, including the UK SAR contract that you mentioned. In our offshore oil and gas business, we think that industry globally, that market globally is going to contract given the pressure that it's under. And that may largely come in the form of reduced exploration and development activity and so paring back to largely production support, understanding that there will be some exploration and development activity that moves forward even in a difficult environment like today. For example, the work that we support in Guyana is a good example of that. We do think that, that drilling and development activity will continue and will be a relative bright spot globally, and we benefit from that being the one provider in the country as well as across the border in Suriname, very similar dynamic. We're the helicopter provider today in Suriname, and we expect that, that activity will continue to be a relative bright spot globally given the promise of the reserves in that basin. And then, of course, we're very focused on what we can control and what we can control is our cost structure and making sure that we're as efficient as possible and looking for opportunities, not just in the synergies, where we did increase the identified target to $45 million, as you noted. But also in non-merger synergy-related areas where we can just operate more efficiently around the world. We will be looking at opportunities to do that so that we can continue to generate the positive cash flow, which we expect.

Okay. Thank you, Chris. Appreciate it.

Thank you, Sam.

[Operator Instructions] Our next question comes from Chris Vale, Tier One Capital.

Yes. Hi, guys. Great quarter and congratulations on getting this merger done.

Good morning, Chris and thank you.

So one question for me on the EBITDA in the quarter. From legacy Era, was there only a de minimis contribution to the $46 million from legacy Era. Is that correct?

That is correct, Chris. We just had 19 days of contribution in this current quarter from the legacy Era business. So your de minimis comment is very accurate.

Okay. And then I know you're not doing a pro forma, but you did disclose the full year legacy Era EBITDA. And of course, it has been reported quarterly up until now. So to me, it looks like it would have been $7 million of EBITDA just doing that arithmetic in Q2 at legacy Era. Am I doing my math right?

Jennifer, I don’t know if you want to address that one.

I mean, I haven't – you're in the ballpark, right? If you take the last three quarters and back into the number and on the Page 15 of the presentation has details.

Okay. So would I be crazy to say that it might have been $46 million plus $7 million or $53 million had we included legacy Era or in that ballpark?

Yes. I think that’s the right neighborhood, Chris. And again, I think important to stress, that's really all pre-synergies because given that there’s only 19 days in the period, just a de minimis amount of benefit from synergies during that time.

Great. Well, listen, congratulations again. That’s all I had. You guys are rockstars. When everybody else is going down, you guys are the last man standing and doing great, so good job.

Appreciate the kind words. Thank you, Chris.

There are no further questions in the queue at this time.

Thank you, Travis. Thank you, everyone, for joining the call. We look forward to talking again next quarter, which will be the first full quarter for the combined company. And we look forward to updating you then. In the meantime, I hope everyone stays safe and healthy. Take care.

Thank you, ladies and gentlemen. This concludes today’s teleconference. You may now disconnect.