Good morning and welcome to our Third Quarter 2024 webcast for Reach Subsea ASA. Our report and presentation were released this morning, and I am Jostein Alendal, Chief Executive Officer, and with me is Chief Financial Officer Birgitte Wendelbo Johansen. I will start with the key highlights and achievements from the quarter, as well as some views relating to the progress of our Reach Remote 1 and 2 USVs, and Birgitte will then cover our financials in detail. A quick note: please submit questions via the webcast player. I will address them in the Q&A session after the presentation. The financial performance of the quarter documents our continued growth with a revenue increase of almost 30% compared to the third quarter last year.
That said, the revenue growth in this quarter is not only driven by high project activity but also by increased reimbursable sales, which typically have slightly lower margins due to the low risk profile. However, the EBIT level is above the third quarter last year, as expected, and when looking at the revenue these first nine months, we have now passed the full year revenue level of 2023, reaching above NOK 2 billion . We are maintaining strong fleet utilization while gradually unlocking additional potential through our step-by-step plan. The company is on a new level compared to just 12 months ago, with more organic growth to come. Our commitment to safety and exceptional project execution are core to our business, so a big thanks to all our team members, both offshore and onshore, for the outstanding performance also this quarter.
Reach Remote 1 is now sailing for her first exam, this acceptance test. Meanwhile, clients are lining up to be a part of the solution, and the EU Innovation Fund has granted us EUR 14.3 million for scale-up of Reach Remote. The outlook is evidenced by a vital market and our capabilities to meet the growing demands, and our order backlog and outstanding tender value are remaining strong. Let's take a closer look at the key factors influencing our previous results and the outlook ahead. Our order backlog and tender volume are higher compared to the same cut-off last year, and one comment there is, when comparing to last quarter this year, both order book and tenor volume are slightly lower, but this is consistent with the regular bid cycles we experience in the market.
A vital part of our capacity to deliver to our clients is the fleet, and we have a relevant fleet on competitive terms, supporting our growth ambitions for the years ahead. The fleet is mobilized for subsea projects to maximize utilization and creating additional organic growth, and the Agalas new build arriving in 2026 is designed with a focus on a greener future, and the steel cutting started last month. We continuously assess the expansion of our chartered fleet, exploring both project-based and long-term charter opportunities. Reach Remote 1 and 2 is a part of our fleet and will join the fleet in 2025, which I will discuss in a bit, so now let's take a look at the activities across our fleet in the last quarter.
The Viking Reach spent her time in the North Sea conducting survey and light construction work before heading off for a scheduled 40-day yard stay. Havila Subsea is currently operating in the Gulf of Mexico, handling ocean bottom node operation, and Deep Cygnus returned to work this quarter, performing IMR operations and supporting trenching activities in the North Sea. GO Electra was remobilized with a work-class ROV system and service spread in the quarter, carrying out IMR and service scopes throughout the quarter. Olympic Triton provided IMR and construction support in the North Sea, while Northern Maria was chartered out for subsea inspection work. The Olympic Taurus completed her full subsea and survey mobilization, kicking off IMR operations. Offshore Surveyor is on duty for the Australian authorities, conducting hydrographic mapping.
Meanwhile, our survey USVs, the Orca 1 and 2, are busy in the Gulf of Arabia, creating hydrographic charts for the Saudi government, showcasing how unmanned technologies in complex areas reduce HSE exposure while enhancing efficiency and project delivery. Looking forward, our Reach Remote USVs are getting ready for operations, and Reach Remote 1 is now conducting her first exam. This groundbreaking project integrates unmanned surface vessels with subsea robotics, including ROVs, AUVs, and other underwater tooling. Both vessels are now on the water with sea trials nearing completion. Once approved, the vessels will begin a technology qualification program in the North Sea, sponsored by Equinor, TotalEnergies, and other international energy companies. The program, lasting about a month, will demonstrate the full functionality of the unmanned concept, covering pipeline inspection, surveys, and ROV interventions, with secure data transfer to shore.
Reach Remote 2, following the same sea trials as number one, will have a slightly shorter program. This initiative is the cornerstone of our next generation remote services, setting new standards for global maritime and subsea operations, and in partnership with Kongsberg and Massterly. Interest in the Reach Remote is growing internationally, and we are well positioned to introduce new technology to the markets across different regions. We have a strong pipeline of national and international projects suited for these vessels. While slightly behind schedule, we are confident that Reach and Reach Remote will soon be well established in key markets and time zones. Reach Remote 1 and 2 are just the beginning. The Ship of the Year award in September and the industry collaboration are fueling our progress. The EU Innovation Fund grant underscores the strong belief in the concept extending beyond Reach Subsea.
So as the Reach Remote 1 completes her final exam, we are planning to scale up the Reach Remote fleet. But now I will hand over to Birgitte for the financial update.
Thank you, Jostein. Good morning. Before I start, just a reminder that you can ask questions in the chat on the webcast. Looking at the third quarter, we see another period with strong underlying financial performance, well above the same period last year. Revenue was NOK 835 million compared to NOK 651 million in 3Q last year. Year to date, we have reached a milestone of just about NOK 2 billion in revenue compared to NOK 1.5 billion last year. The strong increase in revenue is linked to high project activity as well as increased reimbursable sales in projects. And these sales normally have reached NOK 112 million in 2023. And the year-to-date EBIT is NOK 284 million compared to NOK 252 million for the first nine months of 2023. And bear in mind that the last year's EBIT included a sales gain of NOK 30 million.
Pre-tax profit for the third quarter was NOK 115 million compared to NOK 92 million last year, and year-to-date, the pre-tax profit was NOK 217 million compared to NOK 208 million the first nine months of 2023, and again, last year's nine-month figures included a sales gain of NOK 30 million. Our investment program for 2024 includes Reach Remote as well as scaling up the service scope on our marketed fleet by mobilizing work ROVs, service spreads, and other equipment. We continue to have a solid cash position and our net interest-bearing debt, excluding the IFRS 16 charter commitment, is still negative, so let's look into the details and what lies behind the figures. These graphs illustrate Reach's financial development the last seven years on a rolling 12-month basis.
We've had a substantial revenue growth as a result of increased activity with expansion to new business segments and regions with increased asset base. By increasing the IQ, or the scope on the vessels, we have grown both our revenue and profits steadily over time. And our acquisitions the last three years have contributed strongly to our performance and our ability to offer integrated projects to our clients. And our revenue has increased by more than 140% over the last two years and has exceeded NOK 2.5 billion. We have focused on a sustainable and profitable growth, and our operating result and pre-tax profit have improved in line with the revenue growth.
If we look at the revenue mix split between segments, sectors, and regions in the quarter, our third quarter turnover from renewables and the other sector is quite steady of about 30%, while projects in the oil and gas sector represented about 70%. We also split our revenue on our two major market segments, data and solutions. The split here is not 100% academic, as we experience that quite a few projects include both segments. Solutions refers to a service project where we do installments, maintenance, repair, decommissioning, etc., and data is where we deliver a data package to our clients, typically a survey of a pipeline, seabed, cable route positioning, inspection, and so on. When Reach Remote enters the market, the survey projects will be even more important for Reach.
The last year, we have had substantial investments in technology development within monitoring, survey, and data segment, which we expect to see the results of in our financials in the coming years. In 3Q, about 60% of the turnover came from solutions due to a few larger service and walk-to-work contracts, including a high number of vessel days, while 40% came from data. The activity within data, which includes survey projects without vessel exposure, is higher, estimated to be around 50/50 to solutions measured in project days. 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 third quarter, activity in Europe, including Norway, represented about 70% of our revenue compared to 42% last year. The 2024 figure is driven by large turnover projects in the North Sea and Europe.
Let's look at the balance sheet. We continue our sustainable growth also in the third quarter of 2024, balancing cash and working capital and debt with a robust equity level. At the same time, we have delivered to our shareholders with paying dividend according to our policy. We have a cash and working capital position of NOK 374 million and limited existing financial debt to credit institutions. We have increased our charter commitment, hence our leasing liabilities. Our equity share is still around 30% of the total balance sheet. 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 survey projects and integrated projects, as well as the planned scale-up for Reach Remote units. We also have an update on our sustainability goals.
We use an ESG focus as foundation for profitable growth in line with our strategic goals and KPIs. We are on track preparing for CSRD and ESRS reporting by doing the initial double materiality analysis and identifying risks and opportunities from inside-out and outside-in perspectives, digging into both sub and sub-sub topics of what is or may become relevant for us. In the quarterly report, we present status on the key performance indicators for 2024, a combination of focus on emissions and the environment, social being a responsible employer worldwide and keeping a high governance focus. On the environmental side, we have a quite steady activity in non-oil and gas projects, and we had no major spills to the sea. Our CO2 footprint is below our maritime peers, and taking Reach Remote USVs to the market is now approaching a reality, as Jostein just said.
Safety is always our absolute priority, and we are proud to have strong positive HSEQ statistics, especially combined with the growth in project size and complexity. In addition to focusing on turnover and safety at work, we are proud to see that we are attractive for young talents and that our group of trainees is really growing. Within governance, we have continuous improvement projects to ensure that we always operate with the highest industry standards. This year, we have focused on training within compliance and cybersecurity, and we see that now that a solid portion of our employees have fulfilled all courses in our internal Reach educational portal. However, there are still a few left. So then I hand the word back to you, Jostein, for a summary.
Thanks to Birgitte. To sum up, Reach Subsea is well positioned for continued growth, and we have a strong presence across Norway, Sweden, the U.S., the U.K., Singapore, Australia, Trinidad, and Brazil. It's all backed by globally recognized subsea expertise. The market outlook is promising with significant investments expected around the globe, and we are poised to play a key role in this expansion. Nearly our entire fleet is mobilized for value-added sales, and our reputation and operational track record are solid. Our advanced technology and software provide a competitive edge. Financially, we are stronger year by year, allowing for smart investments and growth. Rest assured, our growth plans will remain disciplined and shareholder-friendly.
With our team's execution and favorable market conditions, we aim to deliver excellent services, achieving strong results and capitalize on the demand for both traditional and next-generation services, while also bringing new technology to the market through our global presence. So with that, let me conclude the presentation with our saying, "Everything within reach." But please continue to submit your questions in the webcast player, and we will return shortly to answer them.
Yeah, we have quite a few questions. First of all, how do you see Q4 in light of the past seasonality? I guess what we could say is that we have high activity also in Q4. We don't guide on margins and results, but the activity is very high, and we have more or less all vessels active. Planned for projects in Q4 as well, so that's good. Was it possible to carry out all planned maintenance work on the ships?
Yeah, I think, yeah, the maintenance, we have had two vessels in dock, one in the second quarter and one in third quarter slash over to fourth quarter. So we have one docking next year, Q1 slash Q2. Yeah.
Yep. How much revenue potential do you see with the available resources? I guess what we said before is we said something about the IMR. We can increase the revenue still some with the existing vessel fleet by increasing the scope on the vessels and the complexity of the projects. I don't know if there is anything more to add on that.
Yeah, I think we have the capacity to reach our goals of sort of next step. Next step is sort of between NOK 3 billion and NOK 4 billion in revenue. So when you are looking at a two, three years perspective, of course, we have higher ambitions, but for the time being, we have more capacity within the existing sort of fleet and also the equipment base, so.
Yep. The revenue share of data solutions has increased by 10%, and they are working on many software solutions. Can you tell us more about this?
Yeah, I think the software solutions is coming because the data acquisition and also when we introduce Reach Remote and so on, the data part of our revenue will increase. Of course, solutions will also be there because of our fleet with IMR vessels and sort of light construction capacities we have. So, but in the future, data will be coming more and more part of a bigger part of our revenues.
Yep. The tender volume has fallen. Do you see a slowdown in the market here?
No, on the contrary. It's just fluctuation in the cycles in our clients' tenders, so we are in these late in the year, and then I expect the tender volume to increase during the winter because of the cycle of tendering for next season and so on. So it's not the market, no, by far.
Are there currently efforts to conclude long-term contracts or recurring revenues, or do you want to continue to use the spot market and remain flexible?
Yeah, I think we like the spot market, of course, in a rising market. That's the fun part. But we like to have a, or the ambition is to have a good mix of long-term contracts and play in the spot market. We have fixed some long-term for next year for a couple of vessels, and yeah, a good mix there is the ambition.
Yep. Are there any plans for further M&A activities?
Yeah, that's a good question. We have focused on organic growth going forward the next year. The past two years, we have had a focus on M&A and non-organic growth. So I guess, well, you never know. You never know what the future will bring, but the focus for us now is organic growth, at least for next year.
Yep. What is the timetable for the Reach Remote vessels?
Timetable is, we are now performing the sea trials, and hopefully they are finished with that in some weeks. And then we are preparing for the pilot. And the pilot is scheduled for approximately a month for the first vessel. So going into the first quarter and be ready for the season in 2025. That's the time schedule. And then as soon as we have decided where to position the first two vessels, we are planning the scale-up sort of going forward. So that's the time schedule I have at the moment.
Yep, then it's a financial question. Is it possible to disclose the level of reimbursable revenue in 3Q of 2024? I don't have an exact figure, but around a little less than 10% of the total revenue is directly linked to cost plus sales. Good morning. Can you give some color on the tendering volume, which is down from Q2? Which regions are down and what has driven this? Is there anything we can say about the regions?
Yeah, yeah, the tender volume is also in a cycle, as I mentioned earlier. But the regions are sort of, it is a global market, so it's not region-specific. Yeah.
Nope. Yep. Do you see rate and utilization levels for the upcoming winter season compared to the last couple of winter seasons? I guess that's also a question of guiding to some extent. We see very high activity. That is well known, and we do believe in a very strong market. However, we don't guide on revenues or profits. So I guess we can refer to the market, which is very strong. Other oil service segments are reporting slowing contracting and clients becoming more cautious in signing up for new projects. Do you see similar trends in subsea in recent months?
We don't see any slowing in the oil and gas sector. Maybe the renewables is slowing down a bit. They have their struggles, of course. But we don't see in the subsea segment any sort of slowing down.
Yep. A few large IMR contracts have been awarded lately, especially on the Norwegian Continental Shelf. Do you see opportunities for Reach Subsea to be awarded such long-term contracts?
We are working on that. And hopefully, yeah, we will have some long-term contracts. We have long-term frame contracts within light construction and survey and also IMR. So it's just to get the call-offs. And it is a good sign that our end clients are now securing long-term capacity. And that's a sign of a rising market. And indeed, it's a sign that there is a mismatch between capacity and demand. But at one point, we will also have some more long-term contracts in that type of market. But it is a good sign.
Yep. How is Reach Subsea managing cash flow and amid current market conditions? Can you elaborate on the company's strategy for maintaining liquidity and managing debt? I guess I said something about it in the presentation. We have a quite conservative approach to our liquidity and also debt situation, which we have shown over time. And we plan to continue in the same way with the same strategy to be quite conservative. However, of course, that will be challenged with the increase of the scale-up of the Reach Remote. However, we plan to still be quite conservative and balanced when it comes to equity and debt and also watching the cash position, of course. Can you tell us about the fleet clients? Are these strong and solid companies?
Our clients?
Yep.
Yeah, our clients are solid. Typically, it's the energy companies. So there are sort of around 30-40 international energy companies around the world. And they are solid counterparts.
Yep. That was all. We'll have more questions. Thank you very much for watching. We'll see you next quarter. You can follow us on social media in the meantime for smaller updates. See you in Q4.
Yeah, see you then.