Akastor (AKAST) Q3 2024 earnings summary

Executive summary

• Portfolio companies delivered strong operational and financial results in Q3, with HMH achieving record EBITDA and margin performance year-over-year and quarter-on-quarter.

• HMH remains the most valuable investment, representing about 70% of total net capital employed, and continues to prepare for a potential IPO, pending favorable market conditions.

• Drillform, a leader in automated drilling tools, was acquired for USD 21 million in July, expanding HMH's onshore capabilities.

• Dan Rabun was appointed Chairman of the Board in October 2024 to strengthen IPO readiness.

• All AKOFS Offshore and DDW Offshore vessels operated through the quarter, with high utilization rates and significant contract backlog secured post quarter-end.

Financial highlights

• HMH reported Q3 revenue of USD 213 million, up 5% year-on-year and 3% quarter-on-quarter; adjusted EBITDA was USD 46 million, up 32% year-on-year and 11% quarter-on-quarter, with a margin of nearly 22%.

• Orders for HMH were USD 194 million, down 6% year-on-year but up 8% sequentially.

• Free cash flow for HMH was flat in Q3, with cash and equivalents at USD 33 million at quarter-end.

• DDW Offshore delivered NOK 97 million in revenue and NOK 40 million in EBITDA, both significantly up from the previous quarter.

• Group consolidated revenue was NOK 99 million, with EBITDA at NOK 25 million for Q3 2024.

Outlook and guidance

• Management remains positive for 2024, expecting continued strong performance from portfolio companies.

• HMH expects margins to fluctuate but remain strong over the long term; free cash flow is expected to turn positive in Q4 as balance sheet stabilizes.

• DDW Offshore's cash flow is expected to improve with new contracts commencing in early 2025, providing strong visibility.

• IPOs for HMH and NES Fircroft are being considered, contingent on improved peer valuations and market conditions.

• Akastor targets liquidity through separate listings and aims to distribute proceeds from future realizations to shareholders.