offshore delivery model presentation

What is onsite and offshore model? Hybrid delivery models

A project delivery model is a term that is widely used within the IT industry. It is a way of project delivery based on the location of labor resources. The choice of a delivery model can affect the success of the entire project.

Our article is all about how the software engagement models operate and how they can operate more efficiently. Let’s figure out the relationship between project success and practices and understand the pain points of project managers. We will answer the question “What is an onsite and offshore delivery model?”, and compare onsite, offshore, and hybrid cooperation with outsourcing vendors as well. Besides, you will learn what suits your needs best, onsite software development or offshore project development.

You may find it useful: How to set up a dedicated team for your project?

What is onsite model?

The onsite delivery model often called the onshore model, is defined as a way of software development and delivery when vendors send their qualified employees to the client’s site.

The vendor’s team continually interacts with the customer’s team members. Together, they collect information, develop, implement, maintain and support the project. One distinctive feature of the onsite model is that the tasks assigned by a customer are completed by the outside employees.

This type of engagement model is perfect for short-term projects. Customers choose the onsite delivery model mainly for re-engineering projects with a repetitive scope of work. The other case is when customers have unclear requirements for the project.  

The onsite model is the most effective in cases when continuous interaction between the customer’s team and outside experts is required. Outside employees are able then to approve the client’s requirements at every single step of SDLC.

More about engagement models in the IT industry .

The key benefits of onsite model

Customers use the onsite development model when they need to migrate to the new technology or modify their legacy systems. The popularity of this model is explained by a certain number of the following advantages:

onsite delivery model benefits

On-hand information. Both, a vendor and a customer, can get first-hand information from their employees to learn about the current work progress.

Face-to-face communication enables on-time detection of emerging issues and efficient problem-solving.

Effective collaboration. As there is no time and distance gap between both sites, there is almost no misunderstanding within a team.

Time effectiveness. It often happens that clients offer some changes at the latest stages of the software development lifecycle. When a team uses an onsite delivery model, there are no chances of late changes. Everything is done on time.

Enhanced time to market. The product is delivered faster due to the above-mentioned advantages.

What is offshore model?

The offshore development model is a popular delivery model that is based on the vendor’s site. The offshore delivery model is also known as outsourcing. The customers order software development from developers in different countries . The client has no face-to-face interaction with the vendor. However, a customer is able to communicate with the team members via video calls, etc. This way of software development is good for well-structured and planned projects which have clear SRS documentation. Offshore development centers are quite popular nowadays.

Are you going to outsource software development? Check out a list of the 10 best countries for IT outsourcing.

The key benefits of outsourcing

Clients choose this way of cooperation with developers when their projects are expected to last long. The major advantages of outsourcing include the following pros:

• Low costs. It’s cheaper to outsource IT projects to countries with low labor costs.
• Perfect outcomes. The quality of the developed projects is no worse than those developed by in-house engineers.
• No hidden prices. A client is able to get an accurate estimation according to the payment models offered by an outsourcing company.
• Round-the-clock support. Typically, offshore developers offer 24/7 support services, which means you mustn’t be pegged to the time differences.

Whereas there are a lot of advantages of using an offshore delivery model, clients must be aware of the risks related to this type of partnership. Make sure you know about these risks.

Learn more about offshore dedicated teams.

What is the difference between onsite and offshore?

what is difference between onsite and onshore

What is onsite and offshore model? Hybrid model

What is an onsite and offshore model? A hybrid model (offshore onsite model as it is also often called) is a mixed type of onsite and offshore cooperation. This engagement model is one of the most successful models used by lots of companies. The work is distributed between onsite and offshore teams. Typically, 20-30% of tasks are completed by the onsite employees, and the rest is done by the offshore team members.

Let’s find out what assignments onsite workers do .

• Initial requirements capture
• Project planning
• Executing the project
• Dealing with the client and managing partnerships

Below are assignments offshore employees complete usually :

• Discussing the requirements
• Monitoring that the final results match the initial requirements
• Continuous interaction and support

The key benefits of hybrid model teams

The hybrid delivery model outsourcing is good for sophisticated product development, and complicated and long-term IT projects. While enjoying the benefits of outsourcing, the client still gets an onsite team to address any queries or issues without the burden of managing a large-scale onsite team. Here is an example of the responsibilities distribution:

hybrid delivery model

People often choose t he hybrid delivery model because of the cost savings of utilizing offshore resources while reducing the total infrastructure cost (for the onsite team). Among the pros of an onsite-offshore model are the following benefits:

• Direct communication
• High effectiveness
• Best resources
• Cost-effectiveness
• Best practices in resource management

The management and administration costs involved in maintaining both the onsite and offshore employees may inhibit many service providers from going for the onsite-offshore model. Also, cultural differences between the onsite employees and offsite team members need to be managed effectively to get the best results.

Are you looking for developers? Check out our staff augmentation options .

How to get maximum productivity from the offshore team

Today, a lot of companies are offshoring their information technology to countries with lower wages. Usually, offshore team meaning is perceived as cost reduction, entering a large labor pool, increasing international opportunities, increasing the quality of service, and exploiting around-the-clock development. However, oftentimes almost all of these goals of offshoring are not or partly met.

Let’s analyze why certain offshore projects are unsuccessful and how they should be set up in order to meet the predetermined goals. How do coordinate an offshore software development project to increase the chance of success?

Before proceeding to the question above, we should answer one more question “What is a successful project?”

Project success

A short time ago, costs, time, and savings were the most important things determining success. A project should not cost more than it was budgeted. A project should be completed on time, and the results of the work should lead to benefits that are higher than the costs of the project. These things a re the main factors ensuring success, although recently, extra elements of success were added.

So, let’s define a successful software development project as a software development project where the delivered product meets the scope, has at least the expected quality, is completed on time, and does not exceed its total budgeted costs, and communication.

In our company, we adhere to these principles. T he teamwork of business analysts, tech leads, and project managers assures accurate estimations . They select the right people and bring a team together according to a customer’s project requirements.

Our senior managers and business analysts are mostly former developers with a strong background in software engineering. Thus, they follow all the steps of the software development life cycle and understand how important each of the stages is. These people select the right candidates having all the necessary skills to complete a particular project.

Before bringing a team together, every single member of the team takes a special test to define how psychologically compatible he/she is with other members of the team. P rofessional recruiters develop these tests, and the latter provide accurate results.

Learn more about DICEUS .

Onsite offshore engagement model: How to communicate with offshore teams

According to the technical report “Improving offshore communication by choosing the right coordination strategy” written by Matthias Fabriek, Mischa van den Brand, Sjaak Brinkkemper, Frank Harmsen, and Remko Helms, poor quality of communication leads to less knowledge exchange. Less knowledge exchange leads to lower success. Lower perceived success influences communication negatively.

Here are some onsite-offshore communication model tips:

Tip 1. Focus on communication and coordination

Communication is t he key instrument to overcome distances between onsite and offshore employees and a client.

Tip 2. Coordinate and control communication

Control is adhering to goals, policies, standards, and quality levels. Coordination means all managing activities that influence the project and, thus, communication.

If coordination is not sufficient, team performance and the final result will also not be sufficient. This turns out to be one of the main sources why offshore projects fail: project management is not adapting to the new offshore situation that is different from a distributed situation in the home country.

Tip 3. Measure coordination

The following coordination areas need attention: organizational structure, risk management, infrastructure, process, conflict management, team structure, and team organization. H ere are five main categories:  

• Standards: Standards include all methodologies, rules, dictionaries, procedures, etc. They are focused on delivering the right product (scope) with the right quality.  
• Plans: This category includes all schedules, milestones, and other plans. They all are focused on delivering the product on time and within the budget.  
• Formal mutual adjustment is all about coordinating formal communication. This category includes the creation of hierarchies, the planning of formal meetings, etc. Delegation is also an important aspect that affects team performance over distance: people have certain responsibilities in the project or the process.  
• Informal mutual adjustment: Some small measures can be taken to increase the chance of informal communication between people.
• Team selection: The knowledge and experience of all team members together influence the success of the project. T hree dimensions define the team’s maturity : team technical competency, team motivation , and distributed teamwork skills (the ability to cooperate in a distributed environment).

The five previously mentioned categories of coordination measures meet onsite offshore support model challenges and aim at improving communication and knowledge exchange.

Who is a project coordinator? Onsite offshore coordinator responsibilities

To provide proper coordination of projects developed according to the onsite offshore delivery model, companies often hire coordinators. They may help you coordinate the work of different teams in various projects, for example, in onsite offshore testing model.

Our project managers and coordinators are professional business analysts having excellent knowledge of how to make your startup or business grow with the proper software solution. They delve deeply into your business processes and generate the best-suited ideas for your project according to your needs and requirements.

To sum it up, offshore project meaning is a wide notion, and the project success depends on a great number of factors. Whatever delivery model you choose, you should consider these factors before starting a project.

Let’s sum up the advantages of the three models under this review:

Offshore model

• High-cost savings
• A single point of contact
• A minimum 4-hour overlap with the on-site team
• Clear, responsive communications

Onsite model

• Face-to-face communication with team members
• Maximum control and coordination of time and effectiveness
• A negligible communication gap
• Reduced recruitment costs

Hybrid model

• Transparent project status and clear communication at all levels
• An in-depth understanding of each other’s working styles leads to long-term benefits
• Optimized resources, quality, project, and process management
• Cost advantages of having offshore software developers

Besides, a client should take into consideration the five categories of coordination measures while working with offshore employees: standards, plans, teams, and formal and informal mutual adjustment. Follow our blog to learn more about the successful cooperation with in-house, on-site, or offshore employees. We are here to help you manage your projects effectively and choose the most suitable onsite offshore model.

What is onsite and offshore model?

Onsite and offshore model is a mixed type of cooperation within software development projects. A customer collaborates both with in-house IT teams and remote teams. Developers’ work is coordinated by dedicated project coordinators or managers. This type of delivery models is often chosen by technology companies, start-ups, and SaaS companies that need to scale up their development process or find specific skills.

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How innovators are changing IT offshoring

Despite the global downturn, the IT offshoring and outsourcing industry has continued to grow, though at a slower pace. The recession’s main effect has been heightened competition among the hundreds of IT service providers that handle a variety of tasks for global corporations. Now, a small group of winners is emerging from the fray, threatening to erode the offshore franchise of many Tier-1 and Tier-2 suppliers in countries such as India, the Philippines, and Russia.

Our 2008–09 survey of the global IT offshoring and outsourcing industry—covering 200 relationships among companies in Asia, Europe, and North America, including 65 of the Fortune 200—shows that these rising suppliers have had a broad impact. In fact, they are redefining many traditional management practices; changing the long-standing model for contracting offshore services, by focusing on the quality of services delivered rather than the usual benchmarks of costs per offshore hire; collaborating with clients in new ways; and gaining more control over outsourcing strategies.

What’s more, our results show that this new group of IT service providers is developing the broader and deeper pools of talent that global clients increasingly demand and using progressive techniques to manage and retain these workers. Perhaps that’s why such companies had the highest rankings for overall client satisfaction and employee retention in our survey, logging high scores across their entire client base and showing a consistent year-on-year improvement. By contrast, clients thought that most of the other established Tier-1 and Tier-2 companies were just doing an “average job,” and their performance isn’t improving. In another major shift, they can no longer win bids solely by differentiating on price, since almost all suppliers are now cost competitive.

Meanwhile, the leading providers’ characteristic practices are becoming more important. The four most important practices our survey identified are a new delivery model for services, a greater ability to supply business expertise rather than just IT know-how, more successful talent management, and clearer metrics for judging results. We expect that these practices will become more important and widespread as clients push the offshore industry to achieve higher performance levels and provide more sophisticated offerings.

Changing the delivery model

The most widely adopted model for delivering offshore services is called staff augmentation, but it is ceding ground to the more robust managed-services model. Under the traditional system, clients pay for each staff member a supplier adds to complete an IT contract—from the help desk operators who handle service problems to Java or mainframe software developers. Clients seek the lowest cost per head, which encourages stiff price competition among suppliers, but gives the vendor limited incentive or accountability for the outcomes and quality, as no specific requirements or deliverables are specified in the contract.

Under the managed-services model, suppliers agree to deliver a specified capability or functionality with a desired level of service for a given price: for example, they contract to provide data center support for a year within certain volume and downtime parameters or to support production operations with clear, mutually agreed upon service levels. This model requires a higher level of trust, as clients cede more control to suppliers. Clients benefit by locking in the services they need without having to manage variable resource requirements at the offshore venue tightly.

One pharma company moving to the new model invested considerable time upfront with its offshore supplier to document the underlying business processes and build internal capabilities (such as management tools, standardized work statements, and templates for service-level agreements) where it wanted a high level of support. Then the company created and managed a knowledge transfer process to ensure a successful and timely transition to the new delivery model. Although several months passed before the benefits started to accrue, the quality of the supplier’s work improved and the company shifted additional operations to it. Overall productivity rose.

Our survey shows that client organizations relying primarily on the managed-service rather than staff augmentation model reap great advantages: the best and most efficient work, the highest satisfaction levels, and the lowest attrition rates among their suppliers’ employees (Exhibit 1). Managed services may also make it possible for clients and suppliers to improve offshore results more than the traditional approach does. According to an executive at the pharma company, “While you do have to invest time up front, managing it on an ongoing basis is much less of a hassle. And you actually get more control when you focus on deliverables and things that matter rather than micromanaging the team remotely, which doesn’t work and results in a lot of frustration on both sides.”

The more satisfying model

Developing business domain expertise

The work suppliers undertake is shifting significantly as well. Historically, clients have sought an offshore supplier with experience in their technology platforms—for example, skills in a particular programming language or in managing server installations. These contractors supported commodity onshore business processes for their clients at a significantly lower cost than the clients’ could achieve themselves. The new paradigm moves the suppliers’ work up the value chain. More and more, contracting revolves around expertise in specific business processes, or domains, such as loan origination skills, credit card processing, or account opening.

When client and supplier work regularly within a domain, the supplier can deepen its expertise and leverage it in subsequent assignments. The benefits can be substantial: some survey respondents report efficiencies of 20 to 30 percent for at-scale domains. So it usually makes sense for a client to limit its offshoring in any domain to a few suppliers, which, over time, gain a better understanding of its objectives and requirements. As these relationships become more mature, as much as 60 to 70 percent of IT support for that business domain can be offshored effectively.

According to a banking company’s CIO, this kind of focus on business domain and mutual investment in domain expertise forces clients to develop a clearer view of the way their demand for offshoring services will evolve over the medium term. They should then communicate that understanding to help their suppliers develop business depth in those domains. From the perspective of a supplier, investments to build its expertise can help it to win repeat business and, ultimately, to become the client’s strategic partner.

Managing talent better

Of course, the economic slowdown has led to a degree of slackness in some of the normally tight markets for offshore labor, though the suppliers in our survey report that they still face strong competition in hiring and retaining highly skilled talent. But the survey found that in some client–supplier relationships, attrition rates are low and satisfaction is high. In these relationships, talent is managed in a significantly different way.

The key to minimizing attrition is for clients to give suppliers wide-ranging authority to manage their teams locally. In part, that means working cooperatively with suppliers, developing their local team leaders, and letting them manage projects themselves. These best practices can make attrition rates fall dramatically (Exhibit 2). In one instance, a client closely integrated its domestic and offshore teams and sent its home-based employees to the offshore site, where they spent a substantial amount of time during the project’s early phases. As part of the effort, the client brought onshore and offshore managers together to determine how to build the supplier’s skills for a complex business process. Attrition rates dropped to 10 percent, from the 30 percent levels common in the offshoring industry. As one executive put it, “our philosophy shifted away from ‘supplier talent management and supplier attrition are supplier problems’ to develop a partnership.”

Talent-management support

Clients can also help their suppliers to reduce attrition by mixing more challenging work (such as high-end development projects) with repetitive tasks (say, system maintenance, production support, or simple enhancements of previous work). A financial-services firm, for example, gave a supplier both the routine chore of maintaining and providing production support for finance P&L systems and the more demanding job of creating a next-generation derivatives platform. When more of this kind of challenging work comprises 30 to 40 percent of the workflow, our survey shows, attrition levels can fall to as little as half of those common in relationships where work is uniformly tedious.

Metrics and transparency

In the survey, the highest levels of satisfaction and performance were reported by client companies that focus their offshoring performance metrics on a limited number of goals relevant at the CIO level. That’s not the traditional approach; clients have relied on an assortment of detailed, mostly cost-focused metrics that failed to frame their strategic objectives and achieve sustained performance improvement. Successful client–supplier partnerships are moving away from such legacy reporting systems, which reinforce the micromanagement aspects of the staff augmentation model.

More modern measurements focus on three to five goals, such as maturing the offshore delivery model, minimizing time-consuming handoffs between onshore and offshore units, improving quality, or improving time to market for new products and services. The corresponding high-level metrics might include the percentage of work covered by managed-services versus staff augmentation contracts or the onsite-to-offshore ratio for processes. By concentrating on fewer metrics and identifying issues that affect goals directly, clients communicated more effectively with their suppliers and speeded up whatever course corrections were necessary.

The most effective way of influencing and improving a supplier’s performance is to provide for greater transparency and then focus on outliers, where performance is either lagging or above average. According to one IT manager, “Creating transparency, alone, got half of the job done. Once we started showing suppliers their scores compared to other suppliers in the portfolio, it brought out the best in them.”

The rules of the game in IT offshoring and outsourcing are in motion. Many executives think that in the postrecession environment, a “new normal” marked by constant pressure to lower costs and improve services will take hold. The trends we have identified in our survey suggest that a structural change is occurring in the offshore sector. Companies showing early success in this transformation are moving beyond the traditional focus on lower-cost and routine work. The new offshore model will involve highly skilled workers performing a range of strategic tasks and new organizational forms that place greater value on partnerships and managing talent.

Michael Bloch is a senior partner in McKinsey’s Paris office, and Allen Weinberg is a senior partner in the New York office. Both are leaders in McKinsey’s outsourcing and offshoring practice. Dejan Boskovic is a senior expert in the New York office.

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What is Onsite-Offshore Model?

By now, you probably know what offshoring is and that’s why it led you here. But have you heard about the onsite-offshore model? It’s the latest disruptive business operation that emerged in the past few decades.

Many business owners prefer it for its numerous advantages including the undeniable cost-effective impact. Get to know more about the onsite-offshore model as we discuss what it is about and detail how onsite and offshore models are combined.

Hybrid Model: Onsite-Offshore Model

The onsite-offshore hybrid model is a combination of onsite and offshore models for delivering products or services. The vendor/provider and the client could be located in any place – they could be in the same city or in countries halfway across the globe from each other. The tasks are assigned and shared between the onsite team and the offshore team. The distribution of work will depend on the agreement between the provider and the client. In most situations, about 30% to 40% of the tasks are performed and completed by the onsite team while the remaining tasks are done by the offshore team.

However, there are situations when the onsite team would do 60% to 70% of the tasks while the rest is done by the offshore team and vice-versa. There are other situations when the onsite and offshore teams would share the tasks 50/50 or equally. The main benefits of the onsite-offshore hybrid model are maximizing the efficiency of costs and resources. Savings in labor and its associated costs and infrastructure expenses are achieved because the offshore team is located in a lower-cost country. Expertise and resources in the onsite and offshore teams are fully utilized if both teams are located in countries with different time zones. This means the smooth transition of tasks can be achieved online so that any unfinished work in the onsite team can be turned over to the offshore team and vice-versa.

The onsite and offshore model is also beneficial for projects that are complicated and will run on a long-term basis, and for products and services that are high-tech and sophisticated. The client is also freed from the responsibility of handling a dedicated project team since the onsite team is administratively managed by the offshore services provider.

Let’s discuss some of the tasks performed by the onsite and offshore teams. Take note that any of these tasks may not be exclusively performed by one team alone since one of the main features of the onsite-offshore model is the adjustability and flexibility of tasks. Both teams can exchange their tasks according to the needs and requirements of a project.

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Related Video: Leadership Skills for Remote Teams

What is an onsite model?

Onsite means that outsourcing companies or third-party vendors provide employees to clients that hire the expertise and other services of those employees. Both the vendors and clients are located in the same country. The vendor’s external or onsite team directly coordinates and works with the client’s team for task assignments. The vendor’s onsite team is usually located in the client’s office. But there are some cases of an onsite model wherein the external team is mostly located in the vendor’s office and the majority of their work with the client is done online.

An example of an onsite model is when the vendor’s main operations are located in San Francisco, California, while the client who hired the vendor is based in San Jose, California. The driving distance between San Francisco and San Jose is about 77 kilometers. If you travel by car with an average speed of 112 kilometers per hour, travel time between the two cities is about 45 minutes. In this setup, the vendor’s onsite team will stay in San Jose and report at the client’s office during the weekdays, and they go back to San Francisco during the weekends. Another option for the onsite team is to commute back and forth between the client and the vendor in the two cities every day. The advantage of the onsite model is that it is well-suited for short-term projects. It is ideal for projects with repetitive and manually tedious routines, and for projects that do not have complete or specific requirements and specifications because they can change and evolve as the project goes on.

Tasks to be Performed by an Onsite Team:

• Act as the connection between the client and the offshore team.
• Comprehend the requirements of the client and collect needed information that will be used by the offshore team for the development of the client’s product.
• Conduct interviews with the client and use the information from to interview for the initial planning and designing of the product development.
• Directly interact with the client to ask them if any adjustments need to be made to the project to prevent or reduce any last-minute revisions that may affect the schedule for the development and delivery of the product.
• Coordinate with the client to ensure the product is produced and delivered according to the client’s requirements and specifications.
• Adjust work schedules if applicable and necessary, according to the time zone of the offshore team.

What is an offshore model?

The offshore model or offshoring is the relocation of a company’s business process to a country that is not in the same geographical region. It can be done in two types – a company’s subsidiary in another country, or by a separate company providing offshoring services to a client. An example of the first type is the Ford Motor Company – a large American company that offshores some of its major business processes to India. This company has an IT subsidiary in India that handles all of its e-commerce and e-business solutions. The second type is an offshore service provider hired by clients to provide them with offshoring services. This is very much suited for IT-related services such as software development, web development, graphic design, content writing, copywriting, digital marketing, and search engine optimization.

Offshoring’s main advantage is that it gives your company access to a large talent pool and resources at a much lower cost compared to the costs of labor and resources in the parent country. When you hire an offshoring service provider from countries with a lower cost of labor, you save on expenses related to health insurance or medical care, social security, taxes, worker’s compensation, and other costs related to in-house employees.

An offshore service provider reduces costs related to setting up a development or productio n center in an offshore country because the provider is equipped with all the basic functioning infrastructure, such as office and production facilities, equipment, utilities, and other necessary physical infrastructure. Another advantage of offshoring is the streamlined transition of tasks and continuity of services between the local team and the offshore team.

Tasks to be Performed by an Offshore Team:

• Collect the needed information and other requirements that were gathered by the onsite team and use them to work on the actual development of the product.
• Concentrate on the foundation of the project’s business goals and requirements and coordinate and help the client and onsite team on how to achieve them.
• Share the team’s development workflow with the onsite team.

You can achieve your own onsite-offshore team with Full Scale! We have a pool of managers and developers who are ready to help you realize your vision for your software product! Hire offshore developers now or contact us for more information.

Learn More about Offshore Development

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Onsite Offshore Model PowerPoint Template

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Decoding Delivery Models: Understanding Onshore, Offshore, And Nearshore Testing

As software development becomes distributed globally, opting for the apt testing delivery model will be pivotal. While onshore, offshore, and nearshore each have benefits, a hybrid approach optimized for unique needs delivers maximum value. (Image by DCStudio on Freepik)

This blog deconstructs various models, factors to consider, and how leading software testing companies in India help design customized solutions. The objective is to enable informed decisions around leveraging diverse locations and blending delivery approaches.

Onshore Delivery Model:

Onshore involves testing resources based on the client’s domestic market. The pivotal perks will include:

• Proximity will permit frequent collaboration and quick turnarounds. Issues are addressed in real-time.
• Shared time zones will allow testing during the client’s work hours for seamless discussions.  
• Cultural familiarity will streamline communication and requirements comprehension.  
• Regulatory compliance, like data residency, is straightforward.  

However, onshore has limitations. Domestic resources and infrastructure increase costs, limiting budgets. It also provides no flexibility to scale globally or test round-the-clock.

Onshore suits projects requiring close collaboration on critical applications and frequent stakeholder interactions. It remains crucial for specialized domains like healthcare, finance, etc. due to compliance needs.

Offshore Delivery Model:

Offshore shifts testing to a different country, typically with lower costs, like India. The pivotal perks will include:

• Lower labor expenses allow up to 70% savings, freeing budgets for additional testing cycles.
• Established offshore centers offer thousands of skilled resources, infrastructure, and processes to scale seamlessly.
• Through distributed global locations, testing can be performed 24/7, leveraging the follow-the-sun methodology.
• India has domain-specific expertise across industries gained from extensive multi-national experience.  

However, offshore challenges include potential communication gaps due to distance, cultural differences, and time zone variations. It also has tighter compliance and security requirements.

Offshore delivers maximum value for standardized testing of well-documented products through specialized, large teams. It optimizes costs while providing round-the-clock support for global clients.

Nearshore Delivery Model:

Nearshore relocates delivery to a neighboring country with similar language, culture, and compliance needs. The primary perks are:

• Proximity ensures easier collaboration through shorter distances and faster turnarounds than offshore.
• Shared time zones will permit some overlapping work hours daily for discussions.
• Regulatory familiarity will streamline compliance due to regional legal ecosystem understanding.

However, nearshore also has limitations. Costs are higher than in offshore locations. Infrastructure, processes, and talent pool maturity may lag behind hubs like India.

Nearshore suits projects requiring frequent collaboration and quick turnarounds while still delivering cost optimization through regional proximity. It is ideal for regulated applications and critical systems.

Customized Delivery Models:

Leading software testing companies design hybrid models blending the above to maximize benefits:

• Onshore-offshore right-shore delivery will leverage both local and global resources based on priorities.
• The cluster model maintains distributed, co-located onshore teams globally for seamless support.
• Dedicated centers house exclusively dedicated resources in offshore locations. 
• Co-shoring leverages the strengths of multiple nearshore and offshore centers based on phases.
• Managed services take complete responsibility for testing functions through consultancy-led governance.

This flexibility will ensure optimal delivery, quality, costs, and collaboration aligned with unique client and project needs in dynamic business environments.

Evaluating Model Suitability:

The pivotal factors to consider when opting for a delivery approach include:

• Nature, complexity, and industry of the application 
• Testing scope, types, priorities, and timelines
• Collaboration and communication needs
• Regulatory, security, and compliance mandates
• Available investment and optimization goals  
• Vendor expertise, processes, scalability, and compliance credentials

A balanced and thorough evaluation of these parameters helps identify the most suitable model or right-shored hybrid approach. It will boost the perks while mitigating risks.

Managed Testing Services Model:

Managed services involve a vendor taking complete responsibility for testing functions through consultancy-led governance and delivery. The pivotal aspects will include:

Test Strategy & Consulting: Vendors help define the optimal testing approach, RoI-focused charter, and SOW

Resource Planning & Management: Right-sizing teams, allocating experts, career growth, and retention

Process Standardization: Maturing in-house processes to CMMI, automating workflows, KPIs, and reporting  

Tool Augmentation: Procuring, customizing, and maintaining tools to maximize coverage and efficiency

Center of Excellence: Building reusable assets, frameworks, libraries, and training programs.

Continuous Improvement: Benchmarking, audits, feedback-driven enhancements, quality initiatives

This ensures testing is always aligned with business objectives through expert oversight and flexibility. Resources are leveraged optimally across projects.

Co-Shored Delivery Model:

Co-shoring leverages the strengths of multiple nearshore and offshore centers based on priorities:

Planning Phase: Onshore experts define strategy, charter, estimations, and quality benchmarks.

Design Phase: Nearshore centers collaborate on requirements, test cases, and automation blueprints. 

Development Phase: Offshore resources execute automated regression suites and integration testing.

Deployment Phase: Nearshore validates pre-production environments and user acceptance testing.

Post-Release Phase: Offshore centers perform maintenance testing, release management, and support.

This phased model maximizes collaboration, quick turnarounds, and quality through a right-shored approach optimized for the software development lifecycle.

Cluster Delivery Model:

The cluster model distributes co-located onshore teams globally for seamless support across regions.

Dedicated Expert Teams: Small groups of 5-10 resources located near client sites.

Center of Excellence: The central team provides tools, frameworks, training, and process governance. 

Streamlined Collaboration: Frequent interactions with clients and other teams through a hub-spoke model 

Quick Turnarounds: Nearby resources address issues immediately without time zone delays.

Follow-The-Sun Testing: Baton passing allows testing 24/7 through clustered time zone coverage.

This ensures consistent quality, localized support, and faster resolutions through globally distributed localized assets.

Hybrid Delivery Model:

Hybrid blends multiple models, leveraging their unique strengths based on evolving needs:

Pilot Phase: Onshore experts validate the strategy, and critical test cases are reviewed.

System Testing: Offshore centers perform extensive regression, integration, and API testing.

UAT Phase: Nearshore validates pre-production builds, user flows, and edge cases. 

Post-Launch Phase: Offshore centers perform maintenance testing and support incidents.

Regulated Modules: Onshore experts handle financial and healthcare components.

This flexibility optimizes delivery, quality, and costs at each stage through a customized blended approach.

Conclusion:

With distributed global development, a one-size-fits-all delivery is rarely optimal. Opting for the right model based on nuanced organizational needs delivers maximum testing value. India offers customized solutions balancing quality, costs, and collaboration in this dynamic digital era.

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Bristow Group Inc. (NYSE:VTOL) Q1 2024 Earnings Call Transcript

Bristow Group Inc. (NYSE: VTOL ) Q1 2024 Earnings Call Transcript May 11, 2024

Bristow Group Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter ( see the details here ).

Operator: Good day, everyone, and welcome to Bristow Group Reports First Quarter 2024 Investor Call. Today's call is being recorded. After the speakers remarks there will be a question-and-answer session. [Operator Instructions] At this time, I would like to turn the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting.

Redeate Tilahun: Thank you, Christine. Good morning, everyone, and welcome to Bristow Group's First Quarter of 2024 Investor 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. Before we begin, I'd like to take this opportunity to remind everyone that during the course of this 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 our investor presentation. I'll now turn the call over to our President and CEO. Chris?

Christopher Bradshaw: Thanks, Red, and thank you all for joining our Q1 investor call, which will have a different format and content than our typical quarterly earnings calls. Today, in addition to reviewing strong Q1 results, and affirming our full year 2024 guidance, we'll provide an update on the state of Bristow's business, talk about market conditions and trends in both Offshore Energy Services or OES, and Government Services, provide a current overview of the Global Offshore Helicopter Fleet, and review financial guidance for 2025, and targets for 2026. While this is the typical time of the year that we would issue guidance for the following year, namely 2025, we are taking the additional step of issuing financial targets for 2026 as well.

This advanced outlook is not something that we would necessarily expect to repeat in future years, but we think it is appropriate, given the ongoing transformational developments in our business as we commence the transition of the Irish Coast Guard contract and benefit from the ongoing activity ramp in our Offshore Energy Services business, all of which becomes more evident in 2026. So with that objective in mind, today's call will be more akin to mini analyst day or an investor conference presentation with more of a conversational tone. First, though, we'll begin with a brief review of our Q1 financial results, and I'll turn it over to Jennifer for that.

Jennifer Whalen: Thank you, Chris. Good morning, everyone. I'd like to kick off with the sequential quarter comparison of Bristow's financial results. EBITDA adjusted to exclude special items, asset disposition and foreign exchange was $47.5 million for the first quarter of 2024 compared to $46 million in the fourth quarter or a $1.5 million increase. Operating revenues were lower by $200,000, primarily due to lower seasonal activity in our fixed wing business, partially offset by increases in Offshore Energy Services and Government Services. Operating expenses were $2.2 million lower in the current quarter, primarily due to lower fuel and repairs and maintenance costs. General and administrative expenses were $800,000 lower, primarily due to lower professional service fees and lower insurance costs, partially offset by higher personnel costs.

Interest income was lower due to lower investment balances. As noted in our previous earnings call, the other income line item is primarily comprised of noncash foreign currency gains and losses, which was excluded from our adjusted EBITDA calculation. Moreover, Bristow continues to benefit from a strong balance sheet and liquidity position. As of March 31, our available liquidity was $223 million, and our adjusted free cash flow was $22 million for the quarter. As we've stated before, and we'll demonstrate in the presentation to follow this discussion, we believe that this business model will continue to generate strong cash flows. At this time, I'll turn the call back to Chris to continue the rest of the presentation. Chris?

Christopher Bradshaw: Thanks, Jennifer. At what was strong in Q1, we're pleased to report those results. For those who are following along with the slides, whether on the webcast or on Bristow's website, I'll reference Slide 7 and make a note on safety, which is Bristow's number one core value and our highest operational priority. I think for this audience, we always like to note that we would not have the business that we do or the customer base that we do were it not for Bristow's world-class safety management system and safety track record. This focus on safety and our target zero culture is really foundational to everything that we do at Bristow. On Slide 7, we provide a snapshot, a high-level snapshot of our status as the global leader in innovative and sustainable vertical flight solutions.

As noted, we have a presence on six continents, all continents, except an Antarctica, with current customers in 18 different countries. Our current aircraft fleet is approximately 220, and we'd note that two third of the fleet is comprised of either S-92, AW189 or AW139 helicopters, which are the most in-demand helicopter models in both our offshore crew transportation market as well as the search and rescue markets that we serve. Important to note, that Bristow is the world's largest operator of each of those three models. We'll talk more about the market for those helicopters later in the presentation. In addition to our helicopter operations, we do have a fixed wing business and UAS services as well as other related aircraft services. With respect to our fleet, I think it's important to note that 80% of our aircraft are owned with the balance being leased.

The majority of our fixed wing fleet is leased and also about 30 of the S-92s that we have in the fleet are leased, which provides some nice flexibility given the market dynamics that we'll discuss later in the presentation. Looking at the company's revenues, we have LTM revenues of $1.3 billion. Offshore Energy Services accounts for approximately 65% of that, Government Services a little more than 25%, with the balance in the fixed wing and other services that I referenced. Looking at Slide 9 provides some additional detail in our current global footprint. You'll see here that we have a significant presence in what we view as key regions around the world. We have 11 different air operator certificates or AOCs that we operate, which represents a unique footprint and we believe unparalleled flexibility in the industry.

I would note, though, despite this global footprint, our ambition is not to try to do everything for everyone, everywhere. When it comes to our operating business, we really prefer to have scale in what we view as the key markets, and benefit from those economies of scale. We do complement our operating business with the dry leasing business where we own the helicopters and then lease them out to third parties and partners, which allows us to capitalize on demand and generate cash flows in certain markets where we are either not permitted to operate or where the competitive landscape is not attractive to enter as another operator. If you reference Slide 10 now, this summarizes the current contractual backlog of the company as of March 31 of this year, which stands at approximately $4.2 billion.

The methodology here is important, and it's explained in the footnotes that are on the page. I just thought I encourage you to reference those. One, for example, is that our Offshore Energy Services or OES contract backlog as presented here does not include flight hour revenues, which are roughly 35% of the total revenues in a typical OES contract. So this is admittedly a bit understated as we're just counting the monthly standing charge or MSC portion of the revenues in our OES business. But you'll note that we have a massive backlog of long-term high-quality revenues from stable Government Services contracts, which equates to, again, $3.2 billion at the end of March. If you reference Slide 11, this highlights what we view as the significant upside opportunity from resetting rates to current market conditions as our legacy OES contracts do expire.

We are seeing increasing demand from higher upstream spending offshore, which we'll review in some detail later in the presentation, combined with a tight equipment market with very limited new additions to the supply over the last 8 years and long lead times for any new builds from the OEMs. We saw that the second half of 2023 clearly evidenced a positive inflection point in our Offshore Energy Services business. And we view this as being in the early stages of a multiyear growth cycle in Offshore Energy. So when we think about only 30% of that portfolio being reset as of today, another 70% yet to come, we're really optimistic and positive about the opportunity that we see in the coming contract window to reset the fullness of our Offshore Energy Services contract portfolio.

Jennifer Whalen: On Slide 12, you'll see what I stated earlier when I was talking about Q1 around the fact Bristow does have a strong balance sheet and liquidity position, a couple of items to note here. In April, we did fund about GBP 26 million of our NatWest upsized debt that we had done earlier this year for the delivery of the first 2 AW139 for UKSAR2G. On the lower right-hand side of the slide, it shows the pro forma debt profile for the full funding of that previously announced upsize of NatWest debt. Again, as I noted earlier, our total liquidity as of the end of March 31 is $223 million. We feel like we're in a good spot there. Also on the left-hand side, it shows our maturity profile with our senior secured notes, the only maturity of 5 and those mature in 2028.

We do like the mix between this amortizing debt that we have and the bullet on our senior secured notes, it gives us some flexibility around paying down debt over time. And also, this shows since the maturity for the senior secured notes is not till 2028, it puts us in a good cash flow position over the next few years for optionality of our capital allocation strategy.

Christopher Bradshaw: In these next few slides, we're going to review some of the macro trends that are ongoing in the Offshore Energy Services industry. If you reference Slide 14, the chart on the top portion of the page represents the cycles that we've seen between 1980 and what's expected through 2025. What you'll see is that the decade or so leading up to 2014 represents the golden years or at least the previous golden years for the Offshore Energy industry, when the industry was pushing into deeper waters further from shore. The helicopter industry responded by adding capacity in new larger helicopter models to service those deepwater projects. When the downturn began in 2015, which was severe and resulted in a lot of the industry turmoil and reorganizations for a lot of the helicopter operators as well as a number of other oilfield services related companies, it was obviously a challenging time for the industry.

We did see some recovery that started at the end of the last decade. But then, of course, as we know, the world was hit with the COVID-19 pandemic and subsequent oil market crisis. But what we've seen now and what we've already referenced is that a new up-cycle has clearly begun. Global demand has returned, and years of underinvestment have resulted in limited available supply. Offshore basins today offer a very competitive returns for the upstream companies and we see them as having a renewed focus and investment from the upstream industry. You'll reference a couple of quotes also on this page from two of the leading offshore oilfield services analysts which, site offshore CapEx of $200 billion this year increasing to over $230 billion in a few years' time, which is expected to be driven both by higher activity levels as well as higher pricing.

2015 summarizes one of the more important leading indicators for offshore activity. This is final investment decisions or FIDs for offshore projects. As you'll note, they are expected to surpass $100 billion in each of 2024, '25 and '26. This represents almost $500 billion in FIDs between 2023 and 2026. Slide 16 highlights another leading indicator for offshore helicopter demand. As you'll see here, right that energy projects that the global demand for floating rigs will grow by 32% between 2023 and 2028. As more drilling rigs come into the market, that will drive an increase in demand for helicopters for the portion of our business, which is servicing drilling and exploration activity. As you might recall, most of our business, though, was related to ongoing production.

And if you looked at a similar chart for FPSOs, you would see a similar growth in demand for helicopter to service those offshore production facilities as well. So in summary, the fundamentals for our Offshore Energy Services business are very strong, I would say, more positive than any time that I can recall since entering the helicopter industry. So after several difficult years, we're now seeing some positive tailwinds and very strong fundamentals for our OES business. In this next section, we'll talk more about our global leading Government Services business. If you look at Slide 18, this is a summary of our current contracts. First, just a few things to note about the nature of these contracts. We are providing primarily search and rescue services.

We do some other services, including personnel transportation, but most of the core of these contracts is providing search and rescue for countries, whether that be the whole of the United Kingdom, the Netherlands, the Dutch Caribbean properties from Curaçao in the South and Saint Martin in the North, the Falklands Islands where we're servicing the U.K. Ministry of Defense or the Irish Coast Guard contract, which we will be starting up later this year. These are long-term stable contracts generating cash flows from high credit quality government customers that provide attractive margins and capital returns for the company. Speaking a bit to the stability, if you look at the revenues that we generate from these contracts, approximately 85% of our total revenues are the monthly standing charge.

So this is the standby charge that we get paid to be there at the ready to provide this critical service. Flight hour activity represents the balance of the other 15% of total revenues. If you were to look at this page at the time of the merger, the list would have only included our foundational U.K. SAR contract. Over the last couple of years, we've been successful in capturing opportunities, and we've been able to make investments to grow and diversify this leading Government Services business to include NLCR -- NLSAR, the Dutch Caribbean, Falklands, and as noted, now Ireland. Turning now to Slide 19. This provides some additional information on what represents Bristow's two largest customer contracts. In the summer of 2022, we were successfully awarded the GBP 1.6 billion UKSAR2G contract, we'll begin that transition process soon.

And then last summer, we were successfully awarded the EUR 670 million Irish Coast Guard contract. And as noted, the fourth quarter of this year is when we'll commence the transition for both of those contracts. These are very large projects. The transition will take some time. The Irish Coast Guard contract will not be fully operational across all the bases really until just past the midpoint of 2025. And the UKSAR2G contract, we'll not finish that transition until the end of 2026. So as you look at the guidance we'll provide later in the presentation, 2025 is really more of a transition year as we ramp up for Ireland in particular. In 2026 and beyond, we'll benefit from the full year impact of that. There is a meaningful investment amount required to ramp up on these significant new contracts.

You'll see about $300 million between UKSAR2G and IRCG. This is mostly for the purchase of new aircraft, also modifications that we'll be making to some existing aircraft and the build-out of new bases, particularly in Ireland. The majority of that investment, as you'll note here on the page is concentrated this year in 2024 with a much smaller amount in 2025. On Slide 20, we provide a graphical summary of the timeline for these key Government Services contracts. You'll see that the investments we're making now will result in attractive long-term cash flow yields for the company well into the middle of the next decade. Over the last couple of years, we have established Bristow as the clear global leader in providing these critical services to governments.

When the next renewal processes and cycles come up in several years, we believe that we're very favorably positioned to win and continue this leadership status in Government Services. Transitioning to the next section, we provide a high-level view of the competitive landscape in offshore helicopters on Page 22. You'll note that Bristow is really the one truly global operator today, again with customers in 18 different countries. There are a couple of super regional players and some regional operators with whom we compete. Beyond that, it's a relatively fragmented country-by-country landscape in the industry. On Slide 23, we provide a high-level overview of the global offshore helicopter fleet. Just a note here on methodology, this top line where it's this market that is our understanding, leveraging some third-party resources for the current in service, so those aircraft that are currently in service today for the overall market.

And then you'll see that we provide a Bristow set of columns as well for each of these models, which is our portion of the global fleet for each of these. Again, these are the same S-92, AW189 AW139 models we referenced earlier in discussing our fleet. It also captures the H175, which we do not currently operate but it's the other leading super medium model available in the global fleet today. You'll see here that beyond the total market in service, we also highlight a couple of the end markets, which are most relevant for Bristow. So these won't sum up to the total because there are other markets, namely government, military heads of states that make up the difference, but we focus on the next 2 rows on Offshore Energy Services and Government SAR.

You'll see here that, again, we have a leading presence in 3 of the biggest models here, the 92, the 189 the 139 Bristow is the leading global operator of each of those model helicopters. If we turn now to Slide 24, this provides an overview of the supply picture and new deliveries over time. You'll note that this slide really looks a lot like the overall upstream spending slide that presented cycles, which we reviewed earlier in the presentation with a significant ramp up, new capacity coming into the market up until 2014. And then really a precipitous decline as the downturn occurred in 2015 and beyond. You'll see that there were really very few new deliveries over the last several years. And we now have very limited available capacity in the market at this time.

If you look at the last few years, most of these recent deliveries have mostly gone to closed system markets such as China, certain markets in the Middle East that really do not impact the helicopter fleet of the markets that we're competing with. As we referenced earlier in the presentation, this has resulted in a very tight supply/demand, supply and demand balance, and that tight supply environment has resulted in significant net increases and leading edge rates throughout the industry, which we stand to benefit from increasingly at Bristow. On Slide 25` we provide a little more information on -- focused on the S-92 model specifically. So the S-92 heavy helicopter model, this is a 19-passenger plus the two pilots, traditional heavy aircraft.

These S-92s were manufactured with a specific 30,000 flight hour lifespan, which is rather unique in the helicopter industry. You don't have typically this kind of specific formulaic life span, which has been designated here with 30,000 flight hours. As noted here, the earliest deliveries of S-92s began in 2004. So the oldest models are approximately 20 years of age now. The average age of our Bristow owned S-92 is about 14 years, and some of our oldest models are beginning over the next few years to approach this 30,000 flight hour limit. As S-92s age out of the market, there are going to be other aircraft such as the AW189 and the H175, which we've been talking about, that will serve as a competitive alternative in certain markets. If you look at Slide 26, this is a slide that we presented before.

Again, this is third-party data from Air & Sea Analytics on the offshore helicopter fleet. You'll see here, for the relevant models that we've been discussing over the last several slides, effective utilization is at or near 100%, so again a very tight supply dynamic, which is impacting the market today. On Slide 27, we have a summary of a recent order book that we announced with Leonardo for new AW189 helicopters to meet customer demand and boost versus profitability. We believe that this fleet expansion will help us drive EBITDA growth at attractive returns for our stakeholders. We announced 10 orders for Offshore Energy Services equipped or configured AW189 helicopters and also 10 options that we can bring in if we see the demand for those.

I think it's important to note, just a little more information for those perhaps less familiar about the 189s and the super mediums as an asset class, these can really service most of the missions that the traditional heavy helicopters like the S-92 have serviced to date at a meaningfully lower operating cost. So that the lower ROA operating cost, it also is at lower CO2 emissions, which is an important consideration for a number of our large customers. So in summary, this is an efficient solution for most of the missions that the traditional heavy helicopters were performing. We'll transition now to a discussion about our guidance for 2024 and beyond.

Jennifer Whalen: So for the next few slides, I'll go over the financial outlook for the next couple of years, starting on Slide 29. As a reminder, in June of last year, we did issue guidance for 2024, and that guidance has been affirmed this quarter. We have been talking about the strategy for the company for some time, and that strategy included the new government power contracts as well as servicing the increased offshore energy market, and we're pleased to share the financial outlook for 2025 and 2026. Just a little bit more detail, our 2024 outlook reflects the run rate for contracts that started in 2023 as well as the rate impact for renewed contracts. 2025 outlook reflects the transition of UKSAR2G as well as the start of the Irish Coast Guard contract.

As Chris had noted earlier, the Irish Coast Guard contract won't be fully operational until mid-2025. In addition, 2025 is a lighter year for Offshore Energy contract renewals, with 2026 having more reset impact and the full year of Irish SAR. And as you'll see in the upcoming slides, the next couple of years show meaningful growth in adjusted EBITDA. Slide 30. The bar chart on this slide indicates the midpoint of the guidance. As you know, when we issued 2023 guidance, adjusted EBITDA was projected at $150 million to $170 million, and we ended 2023 at $171 million. Also to note, the Government Services range is understandably tighter than the range for offshore energy to account for the volatility in our Offshore Energy business. As you can see here, the compound annual growth for 2022 through 2026 is just over 22%.

And if you look at the right side of the slide, the midpoint for 2026 is almost 80% higher than where we ended 2023, which is illustrated on the next slide. On Slide 31, we're showing the different impacts that are leading up to the 2026 targets that we've outlined. First, in Offshore Energy, we show the full year impact of the contracts that commenced in 2023, including new contracts in both Brazil and Norway. Secondly, new and renewed contracts that expect -- that we expect to reset a more attractive rate, added capacity that's driven from our investment in the fleet that will be deployed on contracts with attractive terms and better pricing. And we expect additional activity with Offshore Energy growth that will increase utilization of our existing aircraft.

In addition, the Government Services is contributing significantly to the increase in adjusted EBITDA related to the new contracts that we discussed, primarily U.K. SAR, Irish Coast Guard but as well as the other contracts that we've won over the last few years. In summary, the longer-term Bristow financial outlook demonstrates the new earnings power for the company as we execute our strategy in both Government Services and Offshore Energy, and we're delighted to present the strong value proposition to you.

Christopher Bradshaw: Thanks, Jennifer. As noted, we're really excited about the fundamentals for our business, the momentum that we have. I think looking at more than a 20% compound annual growth in the company's cash flows evidence is what we talk about in terms of really multiyear growth cycle and a very positive outlook for the business. So with that, we want to talk a bit about our high-level capital allocation strategy, referencing Slide 32 of the presentation. So this will be really similar to what we've discussed since the time of the merger a few years ago. We do believe that it's important to protect a strong balance sheet. We are exposed through our OES business to the volatility of the oil and gas cycle, and we think maintaining a strong balance sheet is important to withstanding those cycles over the long term.

In that regard, since the merger closed, we have sold more than 25 aircraft that were underutilized assets, mostly older models, so not the models that we've been focused on in this presentation, but really older model, mostly legacy helicopters. We've been able to, again, protect our leverage amounts. We're at roughly 2.2 times net debt-to-EBITDA today, which is a level that we're comfortable with. We will go higher than that at the end of this year, given the investment cycle that we've talked about. But because of the strong cash flows that we reviewed, we'll be able to get back down to roughly that 2 times net leverage amount in a fairly quick manner. We have been investing for growth. Again, as we've talked about throughout this presentation, we've been successful in growing and diversifying our leading Government Services business, which provides a very stable long-term cash flow foundation for the company at very attractive returns.

We've also been effective in moving around our offshore configured helicopter fleets to respond to trends in demand around the world coming from the Offshore Energy business, and are poised now to benefit from the ramp in activity that we're seeing and the increase in rates, which we expect and have referenced throughout this presentation. And finally, shareholder returns are an important part of our capital allocation strategy. Post-merger, we did buy back roughly $60 million of stock, which was about 10% of the market capitalization at that time. As noted in this discussion, we're investing today to ramp up for these foundational Government Services contracts, which is an investment cycle that is particularly focused in 2024. As we get into 2025 and beyond, obviously, a return of capital to shareholders, whether that's evaluating stock buybacks, either programmatic or opportunistic or potential dividends, we'll be at or near the top of our considerations for our capital allocation strategy.

And again, we expect to crystallize our shareholder return strategy upon the conclusion of the current investment period. In summary, I want to recap what we see as some of the key investment highlights for Bristow. We are the global leader in vertical flight solutions. As we are looking at an accelerating multiyear growth cycle in Offshore Energy Services, we stand to be a primary beneficiary of that ramp in activity given our status in the key regions around the world. As noted, we have been successful in investing to grow and diversify our highly profitable Government Services business. We are clearly the global leader in that offering, which we think positions the company very well today, but also for the long-term future. We think this end market diversification presents some meaningful value enhancement beyond just the oilfield exposure that we have.

From a financial standpoint, the company has been able to maintain a strong balance sheet and robust free cash flow generation, which we expect to continue. And hopefully, we've highlighted in this presentation that in our fleet, we have a high level of strong asset value with long-lived aircraft that maintain a significant amount of their residual value over time. With that, we're happy to open the line for questions. Operator?

Operator: [Operator Instructions] Our first question comes from James West with Evercore. Your line is now unmuted.

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