Earnings call transcript: Reach Subsea Q2 2025 sees stock dip amid revenue growth

Reach Subsea reported its Q2 2025 earnings, showcasing a revenue increase to NOK 684 million, up from NOK 623 million in Q2 2024. Despite this growth, the company’s stock price fell by 8.15% to NOK 7.55 from a previous close of NOK 8.22. The dip follows a decrease in EBIT margin and pre-tax profits compared to the same quarter last year. According to InvestingPro analysis, the company maintains strong fundamentals with a P/E ratio of 8.48x and impressive revenue growth of 21.57% over the last twelve months.

Want deeper insights? InvestingPro offers 7 additional key tips about Reach Subsea’s performance and prospects.

Key Takeaways

• Revenue for Q2 2025 increased by 9.8% year-over-year to NOK 684 million.
• Stock price dropped by 8.15% following the earnings announcement.
• EBIT margin decreased from 19% in Q2 2024 to 13% in Q2 2025.
• The company launched new autonomous vessels and expanded its digital operations.

Company Performance

Reach Subsea’s Q2 2025 performance highlighted significant revenue growth compared to the previous year. However, the company’s EBIT margin fell to 13%, down from 19% in Q2 2024, and pre-tax profit declined to NOK 88 million from NOK 111 million. The company continues to lead in subsea inspection and monitoring, with a strategic focus on expanding its fleet and digital capabilities.

Financial Highlights

• Revenue: NOK 684 million, up 9.8% year-over-year.
• EBIT Margin: 13%, compared to 19% in Q2 2024.
• Pre-tax Profit: NOK 88 million, down from NOK 111 million in Q2 2024.
• Cash Position: NOK 170 million.

Market Reaction

Reach Subsea’s stock experienced an 8.15% decline, closing at NOK 7.55. This movement reflects investor concerns over decreased profitability margins and pre-tax earnings, despite the revenue increase. The stock is now trading closer to its 52-week low of NOK 6.04, well below the high of NOK 9.86.

Outlook & Guidance

Looking forward, Reach Subsea plans to expand its Reach Remote fleet, aiming for long-term deployment of 10–20 remote vessels. The company forecasts an EPS of 0.08 USD for FY2025 and 0.11 USD for FY2026, with revenue projections of USD 264.35 million and USD 300.32 million, respectively. InvestingPro analysis reveals an overall Financial Health score of GREAT (3.55/5), suggesting strong fundamental positioning for future growth.

For comprehensive analysis of Reach Subsea’s growth trajectory and detailed financial metrics, access the full Pro Research Report, available exclusively on InvestingPro.

Executive Commentary

CEO Justin Arnold emphasized, "Technology innovation is at the core of our strategy," highlighting the company’s commitment to enhancing its digital and remote operations capabilities. He also reiterated the company’s motto, "Everything within reach," reflecting its strategic focus on service excellence and operational efficiency.

Risks and Challenges

• Geopolitical turbulence affecting project timelines and decision-making.
• Fluctuations in offshore wind activity impacting revenue streams.
• Decreased EBIT margins pose challenges to profitability.
• Market consciousness and project postponements may affect future growth.

Q&A

During the earnings call, analysts inquired about the Reach Remote Two’s contract in Australia, which is expected to last 60-70 days. The company also addressed concerns over the decrease in backlog, attributing it to client consciousness rather than market loss. With a market capitalization of $244 million and strong profitability metrics, Reach Subsea maintains a solid market position.

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Full transcript - Reach Subsea (REACH) Q2 2025:

Justin Arnold, CEO, REACH Subsea: Good morning, and welcome to our second quarter twenty twenty five webcast for each subsea arsenal. Our report and presentation were released this morning. I am Justin Arnold, CEO, and I’m here with our CFO, Brigitte Wendelbuhjohansen. I will start with the key highlights and some of the achievements from the quarter. And additionally, I will show how we are positioned for both navigating in a dynamic market as well as growth.

Also an update on our Reach Remote progress. Brigitte will then cover our financials more in details. Please submit questions via the webcast player. We will address them in the Q and A session after the presentation. Our second quarter results are weaker than last year and not up to our ambitions of course, and this is mainly due to lower utilization of assets.

In Auyngene, in our second quarter, we have seen some idle periods for some of our vessels in a market that is more conscious. We have all experienced the ongoing geopolitical turbulence and naturally this also makes its way to our industry. We are facing a conscious market in a world that continues to shift where some decisions are put on hold and activities are postponed. This is also reflected in our order backlog and tender volume, which is slightly down compared to last year. However, the long term outlook is good.

The CapEx outlook for next year and beyond remains sound. And the OpEx activities maintaining existing offshore infrastructures will continue and also increase. Hence, we are stable and resilient part of our business for the years ahead. Also, our services offering and capabilities remain highly relevant across all offshore industries. Although the financial performance of the quarter is weaker, our half year results for 2025 is all time high.

We stay focused on our strategy on building our global company with investments for the future and at the same time navigate in the present market with all its movements and changes. Bumps in the road should be expected and cost of vessels and vessel commitments are our biggest cost elements. And I will highlight the flexibility we have in our fleet. Our business model is based on leasing demand vessels rather than ownership. Partly ownership is reserved for a few strategic core assets.

The fleet structure provides us with a good predictability through our combination of fixed agreements and profit share models. The options gives us flexibility to replace vessels or reduce the fleet if deemed appropriate. Our charter agreements have also cost effective rates compared to current market prices, which is also reflected in the options. The two new IMR vessels scheduled for delivery in ’twenty six and ’twenty seven represent modern technology, especially on the fuel side. Whether these vessels will expand the current fleet or replace existing vessels remains to be seen and depends on the market situation.

There’s nothing to suggest that a fleet downsizing is necessary given today’s market outlook. However, if that situation were to change unexpectedly, we are well positioned and can reduce tonnage on a short notice. Based on this, we have a strong and flexible position with the ability to adapt to market changes in the coming years. The Rigs Remote one and two, which has now joined our fleet, are key growth enablers. I will come back to this in a bit.

But further, flexibility in fleet is one thing. Our ability to sell services across sectors add on to the overall flexibility. Our services are in demand both in well established markets like oil and gas and wind and in new growing sectors. What all these markets have in common is that the clients’ assets needs to be planned, installed, operated, monitored and eventually decommissioned in the ocean space. Our services support all of these phases and can be divided into three main categories: IMR services, that is inspection, maintenance and repair, as well as light construction work.

Uptime on production is a top priority for our clients, and we provide efficient solutions to help them with that priority, which is why they keep coming back. Framework agreements and being an approved supplier are essential in this segment. Surveying and inspection services involve collecting and processing data from the seabed and subsea installations. The client received fully processed deliverables such as maps, three d models and reports that support their decision making. These services are offered both independently and increasingly as integrated solutions.

In the monitoring segment, we have built strong expertise in geological monitoring using our own unique technology, which is especially well suited for detecting changes in gas and CO2 levels in reservoirs. It might not be widely known, but we monitor about 80% of Norway’s gas production today and we are now exporting our concept to other regions with extensive gas production. The contract with Woodside in Australia is a good example there. Another example from this quarter, where we used the same methods and technologies from typical oil service in other segments. Late spring this year, our team took a deep dive into investigating the wreck of the Second World War German submarine, which rests at 160 meters of water off the coast of Norway.

We provided the Norwegian coastal administration with updated data at resolution not seen before at this site. Using our remotely operated vehicle, our team conducted a high resolution survey and data gathering of both the wreck and the surrounding area. All the collected data and more than 160,000 images were processed using our in house developed workflow to produce the highly detailed three d model of the wreck you can see here. We also mapped the subsurface using a combination of standard sensors and new electromagnetic system technologies. This is to be able to give a better estimation of how deep the wreck is buried below the seabed surface.

These detailed three d models give the client an accurate and in-depth know how of their subsea assets. So either a wreck as here, an oil and gas or wind installation, we produce highly efficient inspection, data collecting and processing. And then over to even more technology for the future. Finally, we can also present Reach Remote one and two in our operational fleet. The Reach Remote investment is a good example where we address both the current and the future.

Following our successful pilot, Reach Remote one has completed commercial campaigns in the North Sea. The survey and IMR work for Equinor and Total Energies further validating her position as a safe, efficient and cost effective alternative to manned vessels. Further, she is now on a job for Shell on the Aumel Lange field for the next four weeks. This validation reflects not only the vessel’s technical functionality, but also the strength of our teams who successfully plan and execute campaigns from onshore control centers. With this, we have also demonstrated an extremely short way to market with a new concept.

Adoption of new technology goes hand in hand with maintaining high standard in project execution and client satisfaction. During the offshore work, we have been operating with an assisting vessel, but this is expected to leave the scene as soon as the final documentation of the validation is processed by DNV and the MARA team authorities. The phase of technical development in remote operations is accelerating, with successful jobs driving further demand for expanded work scopes and add functionalities. This includes both tooling specialized for unmanned operations and enhanced communication and software capabilities. Reach Horizon, our in house developed virtual operation system, is emerging as a key standalone product, originally designed for Reach Remote and now deployed across conventional vessel operations.

While Reiss Remote one has received its share of fame, her twin sister Reiss Remote two has prepared for her own journey. She is also now ready for commercial operations and is now on her way to Australia for the first job for Woodside on the Skarbori field this winter. Our plans to scale up the fleet with more units and establish Reach remote in all time zones continues as the concept is no longer questioned. It’s a proven solution for subsea and maritime operations now and into the future. So So with this, I will hand over the word to Birgitte, who will take you through our financials.

Brigitte Wendelbuhjohansen, CFO, REACH Subsea: Good morning. Thanks for listening into our webcast. Remember that you can write questions in the chat while we speak. If we start by looking at the second quarter isolated, our utilization was somewhat lower than previous second quarters. Revenue was NOK $684,000,000 with a 13% EBIT margin compared to NOK $623,000,000 revenue in 2Q twenty twenty four with a 19% EBIT margin.

Year to date results are strong due to an exceptional strong first quarter and we have all time high revenue of NOK 1,400,000,000.0 compared to NOK1.2 billion in the 2024. Pre tax profit for the second quarter was NOK88 million compared to NOK111 million in the second quarter last year. In June, we took delivery from the yard of the Reach Mote two after a successful pilot and startup of commercial operations for the first USB. And the first half twenty twenty five cash flow is heavily impacted by investments, which includes mobilization related to these assets. Cash for quarter end was NOK170 million and our net interest bearing debt excluding the IFRS 16 lease equipments was NOK122 million.

Our increased debt per quarter end is related to the investments in Reach Remote, which are financed with bank loans. After quarter end, the July 2, we closed a bond loan of million, the first in Reach history. We’re very pleased to recognize that the market showed great interest in participating in the bond, as this was an important milestone for us to diversify our capital funding sources. These graphs illustrate Reach’s financial development the last eight years on a rolling twelve month basis. We’ve had a substantial revenue growth, a result of increased activity with new technology and assets and expansions to new business segments and regions.

Our M and A activity has contributed strongly to our performance and ability to offer integrated projects to our clients. And by increasing the capabilities of the vessels, we have grown both our revenue and profits steadily over time. Going forwards, we have good flexibility of growing our fleet with Bridge Remote one and two and the Agoras vessels, modern tonnage with many opportunities on the tendering side. We are focused on a sustainable and profitable growth and our operating results and pretax profit has a large extent improved in line with the revenue growth as you can see on the graph. Let’s look at the revenue mix split between segments, sectors and regions in the quarter.

Our second quarter turnover from Renewables and Other sector was 41%, while projects in the Oil and Gas sector represented 58%. We also split our revenue on our two major market segments, Data and Solutions. The split here is not 100% academic as we experienced that quite a few projects include both segments. Solutions refers to a service project where we do installments, maintenance, repair, decommissioning and etcetera. Data is where we deliver a data package to the client, typically a survey of a pipeline, seabed, cable route, positioning, inspection and so on.

The last year, we’ve had substantial investments in technology development within the monitoring survey and data, which we expect to see the results of in our financials in the coming years. In 2Q, about 77% of the turnover came from Solutions due to a few larger service contracts, including a high number of vessel days, while 23% came from data. We also present our geographical distribution of turnover to illustrate our strategic expansion to new areas, as well as meeting new and existing client needs. In the second quarter, activity in Europe, including Norway, represented about 65% of our revenue compared to 78% last year. Over to our balance sheet, we continue our sustainable growth also into 2025, balancing cash and working capital and debt with a robust equity level.

We have a cash and working capital position of just about million. As mentioned, taking delivery of the Reach remote and other investments has increased our debt to financial institutions. Our commitment related to active charter parties, hence our IFRS 16 leasing liabilities has been reduced in accordance with remaining time on charter parties. The equity share is almost 40% of the total balance sheet as per quarter end. Reach is well positioned for the remaining investments in Reach remote and vessel and equipment mobilization for our fleet in order for us to have all vessels ready for integrated subsea and survey projects as well as the planned scale up for the Reach remote units.

We use sustainability and ESG focus as a foundation for profitable growth in line with our strategic goals and KPIs. On the environment and safety side, we have had a good start of the year with no major spills or major accidents. Unfortunately, we had two LTIs this quarter, but we are very glad that our colleagues are fully recovered and back at work. We are investing heavily in remote operations and a modern environmentally friendly fleet. As part of working more remote, we rely more and more on digital security, and therefore we have put cybersecurity high on the agenda together with the ISO 27,001 certification.

We work continuously with improvements, focusing on compliance, but also nature related risk, impacts and opportunities, and are establishing our own REACH Academy for internal development of our colleagues. Thanks for listening. Joosten, I give the word back to you for a summary before we continue with the Q and A session.

Justin Arnold, CEO, REACH Subsea: Thank you, Birgitte. In summary, REACH Subsea is well positioned to capture market opportunities ahead. With a strong presence across the world, we bring recognized Subsea expertise to a global market. The long term outlook remains promising driven by investments in energy and infrastructure across oil and gas, offshore wind, subsea cables and emerging sectors like carbon storage and environmental monitoring. Strategic growth initiatives are well underway, supported by long term and flexible vessel capacity, a growing footprint and remote capabilities through Reach Remote.

We are constantly delivering excellent services with a solid operational track record, efficient project execution and optimized asset utilization. Technology innovation is at the core of our strategy. Our leadership in marine robotization and remote operations continues to drive efficiency, scalability and sustainability. Financial strength and sustainability remain our priority. Our performance enables smart investments, disciplined expansion and a shareholder focused growth path.

Backed by a highly skilled team and commitment to continuous improvements, we are set to deliver exceptional services, strong results and accelerate the shift towards next generation subsea operations. And with that, let me conclude the presentation with our saying everything within reach. Please continue to submit your questions in the webcast player, and we will return shortly to answer them.

Moderator/Unidentified Speaker, REACH Subsea: Yeah. I see we have received quite a few questions already. You can continue writing questions in the chat while we speak. We’ll try to answer everything as good as we can. The first question is for you, Justine.

Can you say something about the duration and scope on the Reach Remote two contract in Australia?

Justin Arnold, CEO, REACH Subsea: Yep. That’s, estimated to be in a couple of months. So we’re sixty, seventy days on the field.

Moderator/Unidentified Speaker, REACH Subsea: Yep. Thanks. The next one is, regarding the cash position, which was, reduced, in the second quarter. And there’s a question on what the cash position will be in q three. I guess I can answer to that.

As you know, we we raised the bond loan of NOK 500,000,000 in in July, early July. Of course, that will positively affect the cash cash position. So this this development in the cash position was according to our plan. We had a very strong cash position, but that was to be prepared for taking the investments in and and the other mobilizations that were done. So so it was a surprise for for us.

The next one is for you, Joosten. Reach Remote has been active in this quarter, mostly accompanied by a larger vessel, when will it be feasible for each remote to operate, independently?

Justin Arnold, CEO, REACH Subsea: I guess that’s, just around the corner. As I said, but a huge number of documents to be processed and so on. So we have said the next couple of weeks, a couple of times, but we still we are still there. So it’s just remember, this is the first in the world of this size in in vessel. So it’s quite sort of absorbed the, the amount of documentation needed to, to say, yes.

This is, without. But, in the next, I’ll say again, in the next couple of weeks. Yes.

Moderator/Unidentified Speaker, REACH Subsea: Yep. Thanks. The next one is also for you, Austen. How can the market shift so quick? What kind of work is shifting to the right?

Justin Arnold, CEO, REACH Subsea: I think, well, the turbulence in the wintertime and some strange, the precedents, some tariff, you know, trade wars, and, it had and everything is in the inflicting of us as well. So, yeah, it’s not such surprise, but I think when you shift work or postpone work, it’s just gonna end up in the end up in the fourth quarter. We have seen that before many many times, over the years. And, so the well, it’s just a normal turbulence when big things are happening. So

Moderator/Unidentified Speaker, REACH Subsea: Yep. Thanks. The next one is also on, Remote. Yeah. It says it’s a question of duration, but there’s another one.

How’s the outlook for additional work in Australia for Reach Remote?

Justin Arnold, CEO, REACH Subsea: Oh, quite, quite good, actually. I forgot to mention that because the it’s sort of, the the outlook is, as a 100% annual utilization when you first start. And so the we have several clients. Well, we we try to line them up, so to speak, but there there is a lot of there is a lot of work in the pipeline, in that region. So, it it has been a long long term strategy for us to establish in all time zones.

So this is the first step in that long term strategy. So

Moderator/Unidentified Speaker, REACH Subsea: Yep. In the q one report, you mentioned that the order of HMO three and four would be placed by midsummer twenty five. Has this been done?

Justin Arnold, CEO, REACH Subsea: No. Not yet. We have it’s in the plan, so, but not yet.

Moderator/Unidentified Speaker, REACH Subsea: Yep. And as I guess the next question is a little bit related. Does the company has have any plan to place the loan of 500,000,000 until you need it? I guess I can confirm that, yes, there was a plan. We cannot disclose all the details there yet, but there is definitely a plan for for placing the, placing the money, until until we need it.

Yeah. Yeah. Do you have any details regarding the scale up speed for remote vessels going forward?

Justin Arnold, CEO, REACH Subsea: On the scale up, the speed of the numbers is also dependent on on clients. We are talking with a lot of clients for the number three and four. And it’s always a good thing to have some firm and fixed work in the other end when it comes to ordering new new vessels. But then the the speed will accelerate. And we have seen that just the past three, four months when we have been doing work in the North Sea and proved that yesterday the the concept is working.

The vessel is is solid, and it’s safe, and it’s it’s working, and it’s doing the job. So I yeah. I don’t know. The the the the speed of of scaling up is I think the depending on the on the speed in the coming months, I would say. But in the in the long term, yeah, our plan is to have the reach remote vessels and vessels in all time zones and and markets.

And the numbers, I don’t know, we will end up with 10 or 20. Time will show.

Moderator/Unidentified Speaker, REACH Subsea: Yep. Exciting plans. Looks like a lot of subsea vessels from the traditional vessel owners have become available in the late part of the summer and into the fall. How do you see the pricing being impacted by more competition?

Justin Arnold, CEO, REACH Subsea: There is a slight impact on the pricing, but, amazingly, the pricing of vessels remains high. But it it is just the the the vessels coming from the offshore wind offshore wind activity is quite, down, at the moment, but this will this will sort of change. So the dynamics of the market is this is is the same. So but the the pricing, is, is holding holding a level. That’s

Moderator/Unidentified Speaker, REACH Subsea: Yep. Can you talk about the long term economics of the remote? What does full utilization look like in terms, for for revenue? Will the OpEx reduction mostly benefit the client, or will it also increase reaches margins? When will the investment decision, for three and four be made?

Justin Arnold, CEO, REACH Subsea: I think we we answer we we are not guiding, Brigitte, are we? But the but it it it no. We we are not gonna give all way, all the benefits away to the clients, of course. There is a there is duration there. And and I think I comment on the on the speed on on scaling up.

So it’s it’s it’s nearby. And

Moderator/Unidentified Speaker, REACH Subsea: Yep. And there’s a question on the backlog. The backlog has been decreasing for four quarters in a row. Is the total market hesitating, or do your competitors take market shares?

Justin Arnold, CEO, REACH Subsea: I can comment on or elaborate on the on the order book. The and the or or firm order book, as we show it, does not include additional call offs and extensions and so on. So we know and we have more work within the frame contracts now than previous years. And then when our clients are a bit reluctant on giving out the call offs and so on, it’s just a matter of time and then it will come. So our firm order backlog is more the the more conscious a sign of a conscious clients, but the extensions and and additional call offs we get, there, it’s normally twice the size of the firm order book.

So you have seen that in previous years. So, yeah, we have a firm order book of a billion, and we end up with 3,000,000,000 in in in revenue. So it’s a it’s a it’s a dynamic there as well. But I’m not I’m not that scared of that. It’s just the, the nature of it.

So

Moderator/Unidentified Speaker, REACH Subsea: Yep. There was also a question on the order book and also the tenure volume, related to sectors and segments and so on. For example, data versus solutions and geography mix. Is there something we can say about that? Elaborate more?

Justin Arnold, CEO, REACH Subsea: Yeah. It would be, How should I say it’s complex projects because we are we are getting better and better in in gathering data and also process. Yeah. So the the Tender volume is more complex now than than maybe a couple of years ago where we we had more of the LOV services and and and vessel only. So now we are are more into the to to more sophisticated tenders.

And it’s globally. Yeah. So the the it’s it’s nice to see that we we we expand to to to other regions. Absolutely.

Moderator/Unidentified Speaker, REACH Subsea: And those of you who following the marine traffic, you can see with the SSR at all times, and you will also see there that we have expanded our geographical footprint quite significantly. So that’s that’s exciting. The next question is on Rachel Mode number one. What would she be doing after the Shell contract?

Justin Arnold, CEO, REACH Subsea: Remains we have lined up some work there. It remains to be announced. So but, hopefully, in the in the North Sea, but also quite heavy interest, other parts of the world. So it is, you know, quite exciting. You have to make some decisions.

That’s the

Moderator/Unidentified Speaker, REACH Subsea: Yep. Based on your outlook comment and your backlog, do you expect a better second half than a first half? I guess, the answer to that is still that we we don’t guide on on results. So, fortunately, no, no disclosures there. The next one is on Reach Mode, Huston.

Will you make any significant changes for the next Reach Mode units?

Justin Arnold, CEO, REACH Subsea: No. No. The, the the vessel itself, is, have shown that it is quite, effective tool. So the size and capacity and capabilities of, spot on. So I think we hit, we hit, we hit the target of, so the next two will be, same same size.

Moderator/Unidentified Speaker, REACH Subsea: Yep. And when the final improvements on the Reach remote number one are in place, can Northern Maria be totally freed for its own projects?

Justin Arnold, CEO, REACH Subsea: Yep. Yes. That’s the plan. That’s always an easy question.

Moderator/Unidentified Speaker, REACH Subsea: Are you looking into renegotiating rates on charter investors to be more competitive in the current market?

Justin Arnold, CEO, REACH Subsea: Yes. We can do that on the options, but remember, our our charter parties are a couple of years old. So the rates we have and the, models we have are quite competitive even in, if you if you’re gonna call call it a softer market. So we are yeah. The historical charter parties, they are are still very competitive.

Moderator/Unidentified Speaker, REACH Subsea: Yeah. So what is needed to push the button for reach remote three and four?

Justin Arnold, CEO, REACH Subsea: Yeah. I would like to, to have a a a fixed, charter party for my client, of course. And and that’s that’s that’s me. They they we are in with a a lot of different solutions around that. But it’s it’s close close to a decision on on the scale up.

So

Moderator/Unidentified Speaker, REACH Subsea: Yep. There’s one final question. You stated the good utilization on oil spreads in the ’25, but it looks like Triton has been idle the entire q three so far. Please explain.

Justin Arnold, CEO, REACH Subsea: Okay. 77% utilization is is not good. Sorry about that. But the it should have been we like to be around 90. But yeah.

So we had some idle times. That’s annoying in a second quarter, quarter. But that’s also the dynamics in in yeah. We we we bet on locations and then or air with us, and then it’s suddenly it’s not there. But, we have managed to to to move the vessels to other regions and so on.

So but, unfortunately, some idle times in a in a second quarter. That’s we haven’t experienced that for many years. So I was but in in the in the big picture, it it it looks it looks promising. The activity in the next year will be much higher in in yeah. All over in the market.

So

Moderator/Unidentified Speaker, REACH Subsea: Yeah. Then popped in, one final question. What was the estimated EBIT impact from Nora Maria being tied up with Reach Remote in q two? And I don’t think we disclosed the details around, each vessel, so we’ll keep that undisclosed for now. Yep.

Okay. That’s it. Thank you very much for listening in, and see you next quarter.

Justin Arnold, CEO, REACH Subsea: Yep.

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