# Letter to Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_OII_2022/NYSE_OII_2022.mmd` · pages 2-8_

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Letter to Shareholders

![](images/2_0.jpg)

Rod Larson

2022 marked Oceanering's fourth consecutive year of improved adjusted EBITDA performance, in addition to net income that was positive for the first time since 2017. Our improved results were primarily due to growth in energy markets that spurred increased offshore activity in our Subsea Robotics (SSR) and Offshore Projects Group (OPG) segments, which realized improved pricing and increased utilization in the second half of the year. Compared to 2021, our 2022 consolidated revenue increased 11% to \(2.1 billion, with revenue growth in our OPG, SSR, and Manufactured Products segments being partially offset by revenue declines in our Integrity Management and Digital Solutions (IMDS) and Aerospace and Defense Technologies (ADTech) segments.

We generated \(121 million in cash flow provided by operating activities and invested \)81.0 million in capital, while generating positive free cash flow and increasing our cash balance at year end by $30.6 million to $569 million.

## We are pleased with the following notable achievements of 2022:

- The entire Oceanearing organization remained focused on life-saving rules, identifying high hazard tasks and developing engineered solutions to mitigate risks. This resolve led to a decline in total recordable incident rate (TRIR) from 0.4 in 2021 to 0.3 in 2022.

• Each of our five operating segments achieved positive operating income and positive adjusted EBITDA.

• Our combined SSR and OPG segments achieved meaningful year-over-year improvements in revenue and EBITDA.

- Our SSR business continued to achieve outstanding drill-support ROV performance, with 99% average uptime achieved during the year.
- We achieved commercial technical readiness for our Freedom™ system, a hybrid remotely operated vehicle (ROV) / autonomous underwater vehicle (AUV).

- Our Oceanearing Mobile Robotics business launched its MaxMover \( ^{TM} \)  autonomous counterbalance forklift product; we have seen strong industrial interest since its introduction to the market, as evidenced by significant contracts with a major manufacturer to deliver 85 forklifts in 2023 and 2024.

- Our ADTech segment secured several meaningful contracts during the year, despite a decline in revenue caused by delays stemming from the U.S. federal government budget approval process, including a multi-year contract by the U.S. Navy to provide subsea systems to support the modified Virginia-class submarine platform, and a multi-year contract to develop next-generation extravehicular spacesuits as part of a team led by Collins Aerospace.

## Many of our annual financial metrics improved sequentially in 2022. Here are a few:

• GAAP net income was positive for the first time since 2017.

• Consolidated backlog grew by 15%, from \(1.7 billion on December 31, 2021 to \)1.9 billion on December 31, 2022.

- One-year backlog conversion expected at the beginning of 2023 increased significantly as compared to the expectations at the beginning of 2022.

• Cash and cash equivalents increased by $30.6 million to $569 million.

- Our enterprise value grew to \(1.9 billion at the end of 2022, as compared to \)1.3 billion at the end of 2021, on the strength of our increasing share price.

Sustainability remains a core focus. We have made additional progress on our environmental, social and governance initiatives, including: improving climate-related disclosures; fostering employee career development, as evidenced by internal promotions to senior management; diversifying perspectives of the executive leadership team with the appointment of our new Chief Legal Officer; and preparing for compliance with proposed SEC rules to standardize disclosures around climate and cybersecurity risks. Importantly, we continue to develop and evolve technologies using our digital and core robotics expertise to help our customers address personnel shortages, safety, and cost efficiencies, while also mitigating carbon emissions.

We anticipate 2023 to be another year with sequential improvement in our financial results. We are forecasting our 2023 consolidated revenue to grow by more than 10% based on year-end 2022 backlog, the expected meaningful increase in backlog conversion, anticipated 2023 order intake, and current market fundamentals. We forecast increased revenue in each of our operating segments, led by Manufactured Products and SSR. Based on current market conditions, we expect good opportunities for improved pricing and margins in our energy-focused businesses and stable pricing and margins in our government-focused businesses. Our ability to increase our cash position over the last several years gives us significant flexibility to manage our $400 million debt maturity in November 2024.

I am extremely excited about the positive market indicators for our businesses, including the opportunity to improve our prices and margins in our traditional businesses and the growing prospects to leverage our robotics experience into new markets. We remain committed to generating cash, which allows us to continue developing and delivering technologies that help our customers produce hydrocarbons in a cleaner and safer manner while increasing our investments into new markets, including renewables, digital asset management, aerospace and defense solutions, and mobility solutions.

Achieving success requires a team effort, and none of our accomplishments would have been possible without our dedicated and passionate employees and management team. I want to personally thank our employees for driving our successes at Oceanering. I also want to thank our shareholders who have shown increasing confidence in our ability to grow and transform our company.
President and Chief Executive Officer
March 2023

President and Chief Executive Officer
March 2023