Q1 2020 Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby syncopation.
[music].
It's called my name is Joe well and I will be a coordinator for today.
All participants I know listen only mode.
We will be facilitating a question answer session after their prepared remarks by management.
Good question. During this session you want me to press Star one on your telephone if you acquire any further since he's got stars yeah.
I'll now turn over the presentation to the Aastrom did not senior Vice President and Chief Financial Officer Ms. Aastrom. Please proceed.
Thank you Joe well good morning, good welcome to Rignets first quarter 2020 earnings call, we hope you're all doing well.
A copy of our earnings press release that supporting schedules, including schedules, which reconcile but not yet metrics will discuss today to GAAP metrics, you're supposed to do our website www dot rig that well do our investor Relations page.
There was if you would like to release it a PDF format, we posted that as well.
This morning, we posted a new investor deck on our website under Webcasts and presentations will be referring to a number of slides in the deck and it might you get downloaded to follow along.
Before we get started I'd like to make you aware that we will be making forward looking statements today.
Any statements that are not historical facts, including favorites related but not limited to market expectations of future plans and aspirations are forward looking statements that involve certain risks uncertainties and assumptions. These include but are not limited to risks associated with the general nature of the oil and gas industry cost.
And other third party interactions our strategy and other factors detailed in the risk factor section of Rignets. Most recent annual report on form 10-K and at our other filings with Securities Exchange Commission should one or more of these risks or uncertainties materialize or should the underlying person.
Sure, it's pretty incorrect actual results may vary materially from those indicated.
Rignet disclaims any duty to update the information presented on this call.
I'd like turn the call over to Steve pickup Rignets, Chief Executive Officer in President Steve.
Thank you Lisa good morning, everyone. Thank you for joining us on today's call.
On the phone with me is of course, Lee our CFO I'm as well as Errol Lydia our Chief operating officer.
Before I begin I want to think the men and women around the world at Rignet, who are working so diligently in these extraordinary times.
From a workshop personnel with continued to assemble test in ship equipment to keep our outside and do Mcs projects on time on track to our technicians in the field, who are ensuring critical communications remain online.
Your sales force, who is engaging with existing and potential customers into our office staff with transition to work from home.
I want to thank you on behalf of our board management and shareholders Your Brazilian adaptability.
Look engagement.
Creativity or what drives our success.
On Friday before market open and as you will see on slide six of our new investor deck with it reported a net loss for the quarter $26.8 million, where $1.34 per share based on revenues $58.8 million.
This includes a 23.1 million dollar without $1.15 per share noncash charge for impairment of goodwill.
Adjusting for this net loss for the quarter was $3.7 million for 18 cents per share.
Revenue increased by 2.2% versus the prior year quarter, it was lower by 8.3% compared to fourth quarter, mostly due to a particularly busy ended the year on a few projects as I said.
Adjusted EBITDA, a non-GAAP measure, we define or personally lease and one of our key performance metrics was eight week $4 million with <unk> for the first quarter <unk>.
Adjusted EBITDA was essentially flat compared to the prior year quarter in down 30% from a particularly strong fourth quarter.
We will provide some more color on the financials.
It's only thing too short months since we provided or last update.
But the world has changed dramatically.
<unk> oil industry in particular, it's been hit not only by the demand reduction caused by code that 19, quarantining, but also by the ensuing price war between the Saudis in Russia.
As we've seen even with the historic supply cuts agreed to buy lots in April we're still an oversupplied situation with depressed commodity prices, which we believe is likely to lead to reduce energy activity route at least twentytwenty.
Although we are optimistic that is the global economy reopens, we will begin to see demand rebound and that will get us closer to a supply demand balance with some price support.
I was rignet responding to this move environment.
You'll see on slide seven of our new Investor deck, we've had three primary areas of focus.
First and foremost we're safe guarding our employees to make sure certain that they are able to continue working it's normally this possible.
Fortunately, we're technology company in the transition to work from home environment globally has been school and effect.
Our IP Department has done an outstanding job to ensure we are all connected and able to carry on.
In terms of workloads I boot to the cloud over the last two years, certainly helped us steel more effectively with the situation.
We are actively.
Cautiously evaluating when will we will return to our offices.
But even in the event that doesn't occur soon.
Comprehensive you organization will continue to respond in a positive highly effective manner.
Our next area of focus is to continue to deliver our customary outstanding service to our customers.
And of course to look for opportunities to grow the business as our customers were constantly looking for new services that can help keep your cost structure.
And we have a number of such solutions that can be turned up quickly to help our customers do just that.
From our adapted did you intelligence service Avi I touring Telly eight I back real time machine learning solutions.
In terms of overall service delivery, our biggest challenge has been with respect to our workshop spaces in Aberdeen Lafayette.
These are areas within our facilities. We've continued to operate in order to assemble can test much of the equipment that is dispatched to the field.
He is a spaces where employees need being close contact with one another.
I'm pleased to say that our local leadership teams, who sounds creative solutions to continually.
<unk> work in these facilities.
We have seen and are seeing some customer driven puts comments with respect to getting a quick shipped out because customers are generally unable given cobot 19 restrictions to perform in person acceptance testing right now.
We've been working with them to explore doing some of these acceptance tests to be a video.
Which has resulted in some success since the start but the second quarter.
Most were pleased to tell you did with respect to dispatching service technicians to various field locations. We've really had no interruptions with the exception of a single customer site in Iraq, where the government issues could ban on all travel.
It's a bit of a mixed bag on the new opportunities one.
In the current environment, we're clearly seeing situations that are negatively impacting us first we've seen many oil and gas companies slash the capital budget spending programs in some cases by 30% to 40% versus the original 2020 plans.
Much of this reduction is targeted onshore U.S. activity the shale basins.
Not surprisingly, we're seeing many U.S. land rigs being staff.
With the lag with the land rig count.
Down wouldn't 50% since mid March.
Well, that's concerning let me share a little color on our exposure.
You can see that more clearly on slide 12 of our new investor deck.
For full year 2019, U.S. land in production site.
Made up about 30% of our other site category, which in turn makes up about 20% Mcs revenues.
Mcs revenues were about 68% of told revenues in 2019.
So from a total revenue perspective, U.S. land, including production.
It's a little less than 4% of total revenue in generally delivers lower gross margins than offshore sites, meaning.
No negative or U.S. onshore exposure is relatively small.
Of course, we're also seeing some impacts offshore.
The industry has seen some early contract terminations, along with rig stacking where customers have stuck there generally reducing or turning down communication services.
Too early to tell what the ultimate impact because it will be although the revenue trajectory will be down.
For Q1 offshore rigs split, 73% Jackups in 27% floaters.
We believe we will see deepwater exploration slow during this period, but hopefully nonstop and hopefully development working shallow water will continue, particularly the middle East we're about 50% of the global Jackup fleet is employed.
Many investors have asked if this is going to be like the 2014 2016 timeframe.
Well, it's in early innings enough for a few thoughts.
Activity levels going into this downturn or nowhere near what they were going to last downturn.
In fact, it's not unreasonable to say that the drilling industry never really recovered from the last downturn in terms of day rates or utilization either for floaters for Jackups.
Nonetheless, we have already experienced a decline in activity, particularly in the spot market.
Pricing for US today is also quite different from the last cycle.
We went into the last downturn generally join contracts with high prices and strong margins.
Much of that is either rolled off who contract expiration or has been completed way during the last downturn.
This is important because its customers ask for discount and they are recipient we simply don't have the same margin to give.
Additionally contract terms under the interest we procure is different than existed in the previous downturns.
In some cases, we can move bandwidth will reduce bandwidth when our customers stack rigs.
Greetings somewhat more variable cost model that existed in the prior downturns.
But I do want to point out could be in with suppliers tend to be less willing to implement temporary price reductions that would otherwise helped offset the impacts our energy customers request to deliver price reductions to them.
We've also diversified revenue stream since the last downturn.
First within the communications part of our business Weve Gainshare integrate mark.
But we gained share even faster in both the midstream pipeline market and the production market.
Both of these sub sectors are much less impacted by the price of oil.
Of course oil flows through pipelines, regardless of the commodity price and as it relates offshore production those production facilities requires enormous capital investment in the Opex cost once those facilities turn on a relatively small meaning turning down is far less likely than temporarily suspending were Jill.
During the drilling campaign.
Second we have expanded our system integration business in some of the projects. We are building out actually benefit from lower input prices, making that revenue stream a bit more resilient as well.
Third we have a revenue stream in our apps in I O T segment that can help our customers reduce their cost structure in almost any area the energy value chain.
This conserved is comfortably in that period of the oil prices.
For we've begun to venture into new vertical markets, including government, where services <unk> well.
We're working to support the government vertical and other industry verticals books directly into partners to leverage our best in class communication services, Cyber security solutions, and real time machine learning capabilities to deliver value to customers and those industries.
Therefore to deliver new revenue streams in March two rig.
All of this means that will we why we are in will be negatively impacted by oil prices. During this period, you're better prepared to deal with this part of the cycle than we ever had been in the past.
In terms of Q1 2020 impacts in the impacts that we are seeing here in the second quarter.
I think the biggest effect on US is that we're seeing decision times stretch it work order should be pushed to the right.
Slowing new revenue turned up across the business, particularly in the site in the absence I have two segments.
Within that Tonight key we've seen some projects that had been paused.
Routing workforce cracking project, we had with one large customer with their subcontractors pushed back due to privacy issues. Fortunately.
We were paid for all of our sunk cost on that are continuing to work with that Super major to redeploy at other global locations as they see our solution could absolutely drive improvements in health and safety performance.
We're still very busy responding to project bid bids in inquiries across all segments.
In fact, we were were awarded 4 billion dollar job, even during the first quarter herbicide business.
At Intelli in spite of some program to move the funding remains robust new page view. These are in the planning process with two super majors.
It's important to note that we don't believe these to late opportunities are necessarily going away and in fact, there even new and expanded opportunities in all segments to highlight a few things we're working on.
We have a couple of large upcoming our teams in the Mcs phase.
It will be competitive, but we believe we're well positioned in despite some of the big stacking. We're seeing that are still reports that operators issue new tenders for drilling rigs. So there may be additional comes opportunity for us there as well.
We're continuing to make progress on the yes, hopefully you can see on slide 13 of our new Investor day, the timing, we're expecting for these assets to begin contributing revenue.
While the schedule is always subject to change we don't believe and you get these projects are in danger. If not moving ahead. Remember these are long lived assets that will generate revenues for many years to come.
Our I O T business has not slowed.
There is little change in the business, where these devices are employed and we continue to pursue expansion opportunities.
In Q1, we were impacted by some delays in hardware waters, but the monthly surface part of the revenue stream has been study.
Until he added one third fracking customer Bill again, new deployment may slow as activity declines.
Within Telly, we're also working on a number of new initiatives the Super majors Revue S. as well as in the Middle East, where we're focused on analytical solutions to help them improve performance and deficiency.
We're also seeing some exciting interest outside of oil and gas in manufacturing, where we're leveraging solutions developed square large where a large international food and beverage manufacturer.
For other customers in this vertical looking to better monitor and control utility usage waste and productivity.
<unk>, our high resolution video solution.
It's also generated a lot of interest, particularly from customers seeking to cut cost to remote video monitoring.
Finally, we're seeing some positive results being accepted onto that you say schedule.
Enabling us to sell to federal state and local governments and are working with one contractor already to provide a secure communication service for government purposes.
In fact, we're also seeing some significant interest in cyber security solutions, we provide including cipher both here in the U.S. and abroad.
Let me now talking about the last of our sweet areas of focus.
Rignet is aggressively cutting cost and capital spending while preserving our ability to serve customers.
Nonessential spending has been eliminated including travel and professional fees.
We have a special team focused on identifying sites, where we expect produce bandwidth in are working proactively to reduce cost associated with these sites as quickly as possible.
Like many companies working in the oil field, we have reduced compensation for the board executives and employees.
Attempt to say jobs.
We drew Townsend reduced rwas down $3 million on our revolver to help preserve liquidity and flexibility.
And we applied for and received approval for the PPP long, which will help us continue to preserve critical jobs over 290 employees in Houston, Buffy yet Denver and other U.S. locations as these employees need pain critical communications infrastructure.
In short, we're pulling out all the stops to protect the business well still pursuing new revenue opportunities.
And in spite of the decline in oil prices all indications are that the strategy, we set out to execute after the last downturn, mainly diversification in terms of services and software and diversification both across the energy value chain and into other industries skill to write strategy. It will.
Served us well overtime.
With that let me hand, it back to me.
Thanks, Steve.
Referring back to slide six will begin with a summary of results I'll follow up with more detail on the segments and then I'll touch on the balance sheet and liquidity.
Consolidated quarterly revenue for the first quarter was $58.8 million up 2.2% compared to $57.5 billion than the prior year quarter and a decrease of 8.3% from $6.1 billion the fourth quarter of 20 like <unk>.
The increase compared to one cute 19 is primarily due to satisfy coupled with absent higher tea and partially offset by currency yes.
The 5.3 billion dollar decrease compared to the fourth quarter of 2019.
$4.6 billion would do decide what we need some good progress on projects in the fourth quarter and about $1.3 billion whats from absent <unk> T, partially offset by an increase in C. S and the result of equipment sales.
Net loss attributable to common stockholders for the first quarter 2020 was $26.8 billion or a $1.34 per share, including non cash impairment of goodwill or a lot from $3.7 billion for 18 cents per share excluding the impairment charge.
Adjusted EBITDA was $8.4 billion for the first quarter of 2020 compared to $8.4 billion in what you'd like GE and $11.9 billion for Q Gee.
You want to me well numbers that are last call. We reminded everyone that as has been a case. The last couple of years first quarter. Adjusted EBITDA, you generally lower than the previous quarter for a variety of reasons, including G.A. being higher in the first quarter.
That was the driver Kia along with lower one Q revenues for Q4 Q.
Touching on the noncash impairment like many companies energy space, the dual effects of cope with 19 and oil price declines served as triggering events for a review of goodwill as a result of that with you. We determined that the carrying value of certain reporting units was in excess of their fair value and gets.
But that it would be appropriate to fully impaired the goodwill for our M.C.S. identify segments.
The result, with a 23.1 billion dollar Dod cash charge composed of $21.8 billion for NCS and $1.4 billion, putting aside.
Following the apparently the only goodwill on the balance sheet is $20.5 billion apps.
He.
As a reminder, goodwill does not amortized we regularly conducting impairment test and have found to be impaired we write it down.
Also there was no tax impact of the impairment.
Let's move onto the segments.
Managed communication services revenue was $39.9 billion for the quarter compared to $39.3 billion or the prior quarter and 42.3 billion in one cheese 19.
Revenue compared to the prior quarter was up about 1.6% on higher equipment sales offset by somewhat lower service and installation revenue.
First quarter 2019 included higher service installation revenues, which were generated by the T mobile and installation of last year as well as higher microwave traffic revenues, mostly related to north sea traffic.
Segment gross margin in one Q 20 was 36.1% down from 38.3% for the fourth quarter bagged tea add from 36.3% into the first quarter of 91.
One contributor of lower gross margin at once you 20 was fights for revenue decline, but we weren't able to reduce corresponding bandwidth costs as quickly.
As Steve mentioned, we have a team focused on working that issue.
Yes, I kept for the first quarter of 2020 was 13 51 up by 11 compared to the prior quarter down by nine compared to 13 61 Q like cheap.
Compared to Fourq, you Nike, we gained seven offshore drilling rigs all jackups and one offshore production site.
Maritime was also up by a net six this was partially offset by a day three other sites being down.
Absent Aiotv revenue was $8.7 billion for the quarter up 9.1% compared to eat in the prior year quarter, but down 1.3 billion or 13.3% compared to 10.1 billion in the prior quarter.
There are a number of moving parts here, So let me give elderly beach.
You know Ti revenue decrease as we saw lower bandwidth usage, what you 20 compared to both one cubic teed you had fourq you'd like GE.
We also saw slower equipment sales in one Q 20, compared to both quarters about half of the segment Delta compared to four Cuban 19 chain provider cheap.
In apps revenue was up compared to one Q 19.
The increase was largely result of until we wrapping up across a number of customers.
Fortunately, we saw a drop compared to Fourq 19, as some work getting would do the result of what's going on and being industry.
Include you. He told me specific projects kick various customers.
And revenue was also off on a few other things like better action, our north Sea whether service.
As well as other client facing applications will turn to actually down.
The split in Q1 20 between absent IYR t. with about 51% Aiotv and 49% apps. We continued to project segment will be increasingly levered towards axis. We go forward.
Systems integration revenue for the quarter was $10.1 million up 41.3 per se from 7.2 billion in one Q 19.
Yeah, 31.4% from 14.7 billion prior quarter.
As you know revenues are tied to our progress on projects and Fourk, United We made great progress on our projects. We also made good progress pick one Q 20, but not quite as much.
Backlog into business declined to $22.4 billion as of March 31, 2020.
From $26.2 billion at December 31st.
Our revenue burn, we added about $4.6 million in backlog during the quarter.
Gross margin for outside increased to 22.1% from 14.4% in the prior quarter and from 30.5% in the prior year quarter.
The GM in the first quarter of 2020 with enhanced like progress on projects with higher margins compared to the prior quarter.
S.G. day expenses.
Total $16.6 million in one Q 20, compared to $13 million are good for Q, 19, and $20.3 billion one cubic cheap.
Increased compared to the prior quarter, it's primarily due to stock based compensation. That's portions of our short term bonuses are granted equity the first quarter it'd be here.
That's today in the prior year quarter included legal costs, the $2.1 billion associated with Gx settlement.
Capital expenditures for the three months ended March 31, 2020 totaled $3.7 billion compared $8 million, an import United team and $7.1 billion in one cubic feet.
As of March 31.
Accrued capital expenditures were <unk> point $9 billion compared to two and a half million dollars as of December 31 2019.
At $4.4 million as of March 31, 20 Nike.
Additionally, during the fourth quarter, we finance certain satellite equipment valued at $2.8 billion.
It's about was included in other liabilities of the balance sheet at 12 31, but as we told you what our last call. This was reclassified as debt on our 331 balance sheet.
After accounting for the accrued capital expenditures capital expenditures on a cash basis were $5.3 billion for the quarter ended December 31st.
Our first quarter Capex with substantially composed of success based commitments and capitalized labor.
During the quarter, we generated about $2 billion the free cash flow.
We calculate this by starting with adjusted EBITDA, that's attracting cash capex as well as principal pay but an interest cash taxes and some other cash add backs you may recall, we had a principal payment holiday in one Q. After we completed the extension of our credit facility.
Our one Q dumper is up about 700000 compared to the fourth quarter and up almost $7 million compared to one Q by <unk>.
With respect to the balance sheet I've summarized our situation on slide 21.
As of March 31, 2020 cash was $13.6 million are outstanding debt was 113.8, including both current and long term.
At quarter end ARD consolidated leverage ratio that's defined the credit facility was 3.00 versus our capital of 3.25.
And as a reminder, that's how to grow gross debt basis with terms defined in our credit agreement.
After the quarter, we drew down an additional 14 mill or $3 billion on the revolver to secure liquidity and flexibility. So we're almost fully drawn on the revolver, although we have not use that cash.
We're continuing to manage our liquidity, but it is tight as customers continue to slow pace the current environment.
They are team remains diligent however, and we are focused on bringing cash the door add on cutting costs.
Many of you have asked about whether the company is apply for when we started a paycheck protection program.
As Steve said, we've applied and we were approved for 6.8 billion dollar loan, which we expect to use for proof expenditures as defined under the program.
We anticipate obtaining forgiveness for the back spoke about possible.
We believe we did not have access to other capital sources as you go with the first quarter of this year, we tried to increase availability under our credit facility and while we were pleased to access the facility with our very supportive Bank group.
Able to increase its size.
To raise equity capital the thing about as the P.P. load. We secured we would have we would be required to have a stockholder vote, which could take months or fit into the narrow exception allowed by NASDAQ with potentially very on favorable terms.
These funds will provide us with much needed flexibility you continued to support over 290, U.S. jobs that will enable us to delay, making any workforce reductions that could have a negative impact on our ability to deliver our critical services to our customers and to our overall business.
Finally, we know we don't give guidance, but our last call. We did say, we had gold them, increasing revenue and adjusted EBITDA year over year.
I think given how much the environment has changed that's not going to be the case and in fact without providing any specifics we expect both metrics to be down compared to 2090.
That's probably not a surprise to anyone.
Of course, the situation is very fluid and as Steve mentioned, where it really getting here. So I think that's perhaps all will say on the subject during the call.
And with that let me turn it over to Steve.
Thank you leave before we open for questions. Let me think all of our shareholders, who supported our proxy proposals.
We voted on deals that are E. G M, which was held this last this past Thursday and all of those proposals passed. Thank you very much. We appreciate your support.
Alright, Joelle why don't we go ahead and open it for any questions we might have.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, we compared to Q1 day roster.
[noise] NFS question comes from Allen Klee with National Securities. Your line is how open.
Yes, good morning.
My first question is.
The actions you've taken so far to cut your your operating expenses to do you have a sense of what the run rate savings of that could be on a quarterly basis.
All else being equal.
Alan we have a hold out costs.
On the order of between $15 million to $20 million across Cogs.
That's gionee and that's on an annualized basis.
Actually sorry, that's not annualize that was that was the effect really of looking at three quarters of spends are really from Q2 through the end of year.
And Oh, we've also taken down that Capex expected capex expenditure that's expenditures as well.
Yeah, that's that's exactly right Steve were down a I would say and again largely it's going to be success based but right now we're looking at maybe somewhere.
Slightly below mid teens.
That's great that I was going to be my second question [laughter] thought it might be.
[laughter] because they are good.
And then just.
To understand so you you board 3 million from your revolver post corridor.
And I guess, the P.P. money of 6.8 million that's.
Is that also post quarter end.
That's correct yes.
Okay. So between the two with and that's.
Close to 10 million.
Okay.
Yes, that's right.
Right.
You also talked to in your.
On your slide presentations and your do discuss.
Looking at government assistance in various jurisdictions does that apply to something besides the PPP.
It does Alan Yes, there are a number of programs in various jurisdictions around the world. So for example in Singapore, where you know we have an office.
There is a small refund that the government is giving all businesses you added a the same kind of saying these are not that material amounts that we would report, but certainly a you know every little bit helps.
In we're we're staying quite can didn't to those kind of you know opportunities both U.S. and in other parts of the world.
For obvious reasons.
Okay. Thank you and then.
Good.
Yeah. We did it was I mean, I give you a lot of credit touch you were able to sequentially grow your site count in this environment <unk> clearly shows you're gaining share and doing something right or more than something [laughter], but is there anyway to breakout kind.
The new adds versus shutdowns that dot to those numbers and then maybe if you.
If you've gotten any indications you know of what's going to potentially good shut down.
In the near term <unk> also in relation to you announced you know some wins of do business.
So Alan I couldn't I mean, I think maybe the only really.
[noise] breakout I could give you was maybe on the rig threats to the offshore rig from where we as I said mentioned, we added seven jackups.
And then we actually added to floaters and lost two floaters. So that a debt you know gate of zero floater size.
And with respect to what potentially you know gonna be churned off.
Yeah, that's a good where we get notice of that.
Obviously as our customers are getting notice themselves.
So again, it's pretty fluid situation, but I don't arrow and his team of sales executives at customer service delivery managers are are in contact with our customers around the world everyday to help understand exactly what the situation is and what we could be looking forward to narrow I don't know if you want to add it.
Comment there or Steve.
Yes so.
Just a little bit first you know I'm pretty impressed and encouraged by our ability to execute in times. Like this are operations group has really been able to hold this altogether.
You know so customer satisfaction for the service that we deliver is playing an important factor.
What's going on today.
You know, yes, we're seeing customers acid discount, yes, there's some jobs that are canceling but.
You know the key thing for US right now is to make sure that our customers services don't suffer and we've been doing a great job that but I'm, even more encouraged by the opportunities that are coming into the pipeline and you know I can't tell you exactly the numbers, what offset what everything's fluid everything's dynamic but.
You know to see the pipeline is still.
Very active and that were.
We've got a busy proposals group that so proposals out every week I'm glad certainly hasn't slowed it slowed down means that you know there's still some other opportunities out there outside of just the core drilling markets. It.
We've been chasing in a lot of this comes from the expansion out into the production facilities and the other products and services were offering like <unk> and also Intel than others.
That's great, but maybe just following up front you you talked about opportunities in government to its government.
As a percent of how much you're selling into government today is it a meaningful number or is it not you have material.
No not yet.
But where are you know were quite encouraged by the level of engagement that we have not just here in the U.S., but at the internationally as well, yeah, particularly the bid that lease.
Okay and then.
You gave some very good.
Data points to kind of compare this downturn the prior one.
Is it fair to say the conclusion of that is kind of and everyone's crystal ball does not very good these days, but based on what you know today that.
This downturn.
Might not be as bad as the last one or do you do not know enough to be able to say that.
Well in terms of the downturn itself I don't know, we know enough yet to know how we'll compare but what I do feel confident about is that we are better prepared to deal with the downturn whatever it ends up looking like given what we've done to transformed the business over the last call.
For years.
Yes, not to say that won't be teen along the way of course, but I think we are right here.
Much better positioned than than we were during the last downturn.
Okay and then.
Moving to absent aiotv to.
So the the profitability declined and that is in is that kind of maybe where we think too.
The current profitability run rate is is kind of based on everything that's happened.
Oh, you know Alan I think that's that's a little bit difficult to say, it's down you know a little bit compared to what it was a December 31.
And it's about a.
Actually I think about flat compared to where it was.
Hi, it's actually up compared to where it was March 31 of 2019.
I think I talked to give guidance around that but Oh, you know over the course of the course for your 20 Nike you know we went from about 44%.
Gross margin it'd be apps my P. for that segment to 57.7% at 12, 31, or you know were down a little bit from that.
And we'll see how it develops but it looks like somewhere in that range and potentially increasing I think the more apps, we actually sell without having to do development work.
It should continue to drive that margin on a gross margin percentage upward.
Yeah, I might ask that.
No. It was gonna see I might add to that and that is it you know a drop in the apps in I O T.
Is quite different than a drop in the satellite communications were in satellite communications, we have significant amount of cost you know underlying the drops it we're seeing in absent I O T or more just a slowdown in customers delaying things and pushing them back but not canceling.
So you know as people go back to work in there you know out in the field and need these applications and also now starting to see that these applications or help do their job remotely because they can't be on site.
We're seeing renewed interest in quite a bit of proof of values and.
Collaboration with customers right now really curious about how those things can can support and while they are not able to be sitting specialists out in the field will turn around.
Yeah, that's a great point, and that's I think specifically where something like <unk>. Our video solution really can come in.
And provide that remote monitoring and let somebody who's working got a real time operation Center see what's happening out in the field real time. So one of the key elements of the strategy around diversification was this view that if they they lower oil price environment.
Maybe customers had already cut costs pretty significantly and they need it technology to help pick up the slack workload and let them do more smarter and I don't think that has changed in fact I think.
If anything what we're seeing is is the beep validation of that thesis, where you know again people are trying to cut costs and you're you're struggling to do it all the people fraud, you've actually got a do more with less and technology is the only way to do that.
[noise], Okay. Its we move on to ESI segment.
I know last year you had some.
Expected seasonality in some of the quarters I'm as that I guess, the timing of the backlog getting worked off is there anything like that we should think about this year.
I don't really thinks show a previous year.
You know we have as Steve mentioned, we've got a lot of bids in Aero mentioned as well a lot of a lot of bids in the pipeline. So we're kind of waiting to see results on those and of course.
You know we also have some existing change orders.
That could be pretty positive for us on some of the projects that are currently get the backlog. So I think I think.
That's probably the amount of color, we can give you all that scientists.
Okay. The quarter included a 4.2 million gain from the sale of noncore assets.
Can you just touch on what that isn't to the extent or any other.
Central opportunities in your portfolio.
So remember that was actually for last quarter Q4.
That we had that fail on Viasat and it was it was a number of cellphone towers for or towers that we own a that we determined that we're not really the natural owner of those.
So we sold those to a third party and we are still using some of the space off those towers or you know in terms of other existing asset sales or potential asset sales.
Again, we're not a terribly heavy asset cuff asset heavy company, but we are looking at a few things, which could potentially generate some revenue for us although I would say the timing is uncertain and you know discussions on these types of things can take a significant amount of time, Steve anything you want.
To add to that.
Well I think that that's right on in it.
They wouldn't necessarily generate revenue, but it would obviously generate.
Cash if we were to move forward with one of the within asset with a further asset sales.
Okay well.
Well. Thank you so much and no no good job in executing in a very tough environment.
Yeah, I think I think will appreciate it.
Hope you're well.
You too thank you [noise].
Thank you I'm not showing any further questions at this time and now that you tend to call back over to the Austin for closing remarks.
Thank you Joe well I appreciate that that we can certainly ah. Thank all of you for joining us on today's call.
Well look forward to speaking to you get an August when we report our second quarter earnings and debt, we actually hope that we can see many of you a person before that as the country starts to open back up that protects will be all start doing a little bit more traveling again.
In the meantime, Stephen I Errol were available for follow up calls today, so either give us a rig or said this email it will get something schedule and stay well. Thank you for joining about.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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