Full Year 2020 Geospace Technologies Corp Earnings Call
Hosting the call today from Geospace is Mr., Rick Wheeler, President and Chief Executive Officer.
He is joined by Robert crude on the company's Chief Financial Officer, and Mark Tinker CEO of Geospace subsidiary Quantum technologies Sciences.
Today's call is being recorded and will be available on the Geospace technologies Investor Relations Web site following the call.
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And it is now my pleasure to turn the floor over to Rick Wheeler, Sir you may begin.
Thank you Chris [noise].
Good morning, and welcome to Geospace Technologies conference call for the fourth quarter and year end 2020 fiscal year.
I am Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined by Robert Kurta, The company's Chief Financial Officer will also have had with US Dr. Mark Tinker CEO of our quantum technologies Sciences subsidiary on.
I'll first give an overview of the fourth quarter and year end and Robert will follow with some in depth commentary on our financial performance I will then make a few last remarks before opening the line so that Robert Mark and I can answer your questions.
So almost a day statements may be considered forward looking as defined in the private Securities Litigation Reform Act of 1995, including comments about product markets revenue recognition planned operations and capital expenditures. These statements are based on our president awareness, while actual outcomes are affected by uncertainties and other factors we cannot.
Throw up or do.
Both known and unknown risks can lead to undesirable results or performance differences from what we say are in flights a day such risks and uncertainties include those discussed in our FCC forms 10-K, and 10-Q filings broken.
For convenience as was mentioned we will link a recording of this call on the Investor Relations page of our Geospace Dot Com website.
Our website has actually been recently revamped and refreshed and I encourage everyone to visit it and have a low.
Note that the information discussed discuss this morning and reflected in this reporting is time sensitive and may not be accurate at the time on listens to the replay.
Yesterday after the market close we released financial results for our fourth and final quarter of fiscal year 2020 ended September Thirtyth 2020.
As we noted the Tobin 19, pandemic, which continues to negatively impact economies everywhere began relatively early on our 2020 fiscal year.
In response, we implemented and still maintain heightened health and safety protocols and our operations to help protect our employees, while ensuring our valued customers are served in the matter, which they've grown accustomed to.
Despite the negative impact Toby 19 has had on each of our business segments. We are pleased that our <unk>. Our fiscal year 2020 total revenue of 87.8 million was within a percent of last years total.
And that's over the course of the year as we generated over $18 million in cash from operations.
Note also that this reported revenue figure does not include any amounts from our sale in the second quarter of a GCL land recording system to one of our customers. This.
This purchase valued at 12, and a half million dollars included $10 million a financing through a promissory note.
By the end of September 2020, almost $5 million had been received toward the system, including interest charges on the note.
Principal payment amounts toward this sale are listed on our balance sheet as part of non current deferred revenue, which we intend to recognize it at a later date from collection of the notice is likely.
As was the case throughout the fiscal year, our fourth quarter results continued to be fueled by demand for our Ob ex Ocean bottom recording systems in fact rental contracts for our old the ex Marine systems drove revenue from our wireless exploration products above last years Mark.
This health and partially offsetting reduced demand for other products in our oil and gas segment as well as the weaker demand we experienced for various products in our adjacent markets business.
Reduced demand in all cases was largely brought about by the negative effects of Soviet 19.
The efforts to combat this disease have driven down the world's demand for oil and gas, which has led to the largest imbalance of supply over demand ever experienced with the majority of seismic exploration activities currently suspended demand for our oil and gas products remains limited on.
Our adjacent markets graphic imaging products have also seen setbacks. These products are used in the printing processes merchandising and promotions of sports Entertainment schools tourism and other social gathering events.
Due to COVID-19, many of these type activities have been curtailed that's lowering demand for these products.
Recognizing this lower demand for our products in rentals and in keeping with our comps are conservative financial management, we took steps to lower our operating costs with a reduction in force in the third quarter of fiscal year 2020.
Although our return to some form of normalcy from these circumstances seems almost certain the timing and extent of such recovery is unclear.
Late in the fourth quarter of fiscal year 2020, we received a request from a major oil and gas producer to provide a proposal for the manufacture and installation of a large scale seabed permanent reservoir monitoring or PRM system.
As a matter of note we have the largest installed base of PRM systems in the world with configurations utilizing either high resolution electro magnetic sensors or our unique optus ice fiber optic sensor technology.
In the event of a favorite response the potential customer is expected to award a contract in the second or third quarter of our 2021 fiscal year. If we were to be awarded the contract revenue from the contract would not likely be recognized until the latter part of fiscal year 2021 and beyond.
Unrelated to this tender we are also continuing our discussions with other major oil and gas producers for possible PRM systems.
And we were also well underway and the execution of a 10 million dollar contract awarded to US in April 2020 by the U.S. customs and border protection U.S. border patrol to provide a technology based border and perimeter security system.
Revenue from this contract is expected to be recognized in our 2021 fiscal year, which began on October Onest 2020, and in September Thirtyth 2021.
At this point I'll now turn the call over to Robert So he can provide more financial detail.
Thanks, Rick and good morning, everyone before I begin I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during our call. This morning.
In yesterday's press release for our fourth quarter ended September Thirtyth 2020, we reported revenue of 21.5 million compared to last year's revenue of 28.9 million.
Net loss for the quarter was 3.9 million or 29 cents per diluted share compared to the fourth quarter last years net income of 8.7 million or 63 cents per diluted share.
For the year ended September Thirtyth 2020, we reported revenue of 87.8 million compared to revenue of 95.8 million last year.
Our net loss for the year was 19.2 million or on $1.42 per diluted share compared to last year's net loss of 146000 or one cents per diluted share.
Fiscal years 2020, net loss was burdened with a 1.1 million net increase in the fair value of contingent earn out liabilities related to our acquisitions of on them and off the size and a 670 $671000 charge for goodwill impairment and the Companys Olin.
Gas business segment.
Fiscal year 2019 benefited from a 7 million dollar gain from the sale of non essential real estate and a 2.1 million net reduction in the fair value of contingent earn out liabilities related to our acquisitions of quantum enough to size.
Excluding these adjustments for fiscal year 2020, the company would have reported a net loss of 17.5 million or $1.29 per day per diluted share while fiscal year 2019 would have resulted in a net loss of 9.3 million or 70 cents per diluted share.
It brings a breakdown on for all oil and gas product revenue is as follows our traditional product revenue for the fourth quarter was 1.1 million an increase of 83% compared to revenue of 600000 last year.
Revenue for the year was 6.7 million a decrease of 30% compared to last year's revenue at 9.5 million.
The increase in revenue in the fourth quarter of 2020 is due to comparing to the historic low levels of revenue from the same period last year. The revenue decline in the annual period is attributed to lower demand for our traditional products as a result of minimal seismic exploration activity.
Due to the low demand for oil and gas caused by the COVID-19 pandemic.
Our wireless product revenue for the quarter was 13 million a decrease of 35 per cent compared to revenue of 20 million last year.
For the full year wireless product revenue was 54.1 million an increase of two per cent compared to 52.7 million in the per year.
The fourth quarter decrease is due to lower sales from rental of our wireless products.
The modest annual revenue increase for fiscal year 2020 over fiscal year 2019 is the result of demand for OPX system rental fleet.
We expect to reduce revenue from the rental of OPX systems in fiscal year 2021, due to the reduced global demand for oil and gas.
As a reminder, we have not recognize revenue revenue in fiscal year 2020 for the 12 and a half million GCL products. So delivered in the second quarter and secured by $10 million promissory note.
As of September Thirtyth 2020, we have received almost 5 million in cash for principal and interest payments from our customer our customer continues to remain current on all payment obligations.
The principal payments received in cost of revenue associated with the sales have been recorded on our balance sheet as part of long term deferred revenue and long term deferred cost of revenue we plan to recognize the revenue and cost of revenue for this transaction will determine the collection of the promissory note is probable.
Our reservoir product revenue for the fourth quarter was 110000, a decrease of 56 per cent compared to revenue of 252000 last year.
Revenue for the full year was 930 36000 decrease 65 per cent compared to their revenue of 2.7 million last year right.
Reductions in engineering services on lower demand for the sales tool and repair of our oral tools are responsible for the decrease in both periods we.
We do not expect meaningful revenue from these products unless and until we are engaged in a contract for the delivery of a permanent reservoir monitoring system.
During our fourth quarter results, we received a request a quote on a large scale PRM system from a major oil and gas producer.
Providing we reply to the request, we expect a potential customer to read to award the contract in the second or third quarter of fiscal year 2021.
If awarded the contract revenue will not will would not likely be recognized until the latter part of fiscal year 2021 and be on it.
Moving to adjacent markets products segment, our industrial product revenue for the fourth quarter was 4.4 million a decrease of 16% compared to last year's revenue of 5.3 million.
Revenue for the year was 615.6 million a decrease of 15 per cent compared to last year's revenue of 18.3 million we.
We believe this is we believe this declining revenue for both periods is primarily result of the COVID-19 pandemics effect on the demand for our products used in non oil and gas industrial markets and the need for our contract manufacturing services.
Imaging product revenue for the fourth quarter was 2.7 million a modest decline as compared to last year's revenue of 2.8 million.
Revenue for the full year was 9.8 million a decrease of 17, 17% compared to 11.8 million in fiscal year 2019. We believe these decreases are primarily attributed to the COVID-19 pandemic, causing lower demand for our imaging products.
Revenue from our emerging market segment totaled 177734, so thousand respectively for the three months in the year ended September Thirtyth 2020 per.
Our year revenue was 14000 for the fourth quarter and 159000 for the fiscal year 2019.
The increase in revenue is due to the sale of board.
Border and perimeter security products to a commercial commercial customer and initial site preparation and engineering related to the U.S. customs and border protection U.S. border Patrol contract Award from April 2020, most.
Most of the revenue for the 2 million dollar contract will be recognized in our fiscal year 2021.
Our consolidated gross profit for the fourth quarter was $5 million a decrease of 52 per cent compared to 10.4 million last year gross profit for the year was 23.4 million a decrease of 25 per cent compared to 31.4 million last year.
The decline in both in our gross profit resulted from a significant decline in product sales in the oil and gas and adjacent market business segments due to the decline in demand for our products as a result.
Of the COVID-19, pandemic and an increase in underutilized factory capacity due to lower manufacturing productivity.
When analyzing our 2020 and 2019, the operating expenses, excluding the effect of non cash adjustments to the fair value of contingent earn out liabilities and goodwill impairment or 2020 operating expenses for the fourth quarter.
9 million, a decrease of 11% compared to $10.2 million last year 2020 operating expenses for the first full the free full year was 39.7 million virtually equal to last year's operating expenses of 39.1 million in the fourth quarter on.
Operating expenses decreased due to the recovery of previously reserved aged accounts receivables lower engineering project expenditures and reduced sales and marketing expense.
Fiscal year 2020 cash investments into our rental fleet and property plant and equipment were $5.5 million and $2.9 million, respectively. We we expect fiscal year 2021 capital investment into our rental fleet will be minimal one less new contract new rental car.
Trex warrant additions to our fleet fiscal year 2021 capital investment in our property plant and equipment could be as much as $5 million.
Our balance sheet at September Thirtyth, 2020 reflected 32.7 million of cash and cash equivalents.
We had no long term data its outstanding and the borrowings available under our credit agreement was 17.7 million.
We own numerous real estate holdings in Houston are around the world that our own free and clear and without any leverage.
That concludes my discussion I'll turn the call back to Rick.
Thank you Robert.
[noise] COVID-19 continues to tightly gripped the economies of countries around the world and until there is a successful vaccine and infection rates consistently decline, there's really no way to forecast what a recovery look like.
Although the impact of the pandemic on some of our business segments was initially delayed the negative effects have largely caught up seismic exploration activity will likely remain minimal as long as oil and gas supplies outstrip demand and the destruction of demand brought about by COVID-19 reinforces this condition.
As certain of the businesses of some of our customers suffered from the Pandemics affects many of our adjacent market products will continue to see weaker demand.
However, a large element of our current efforts.
Focused on longer term strategic goals in projects of major customers that are looking much further into the future. This.
This includes oil and gas companies eager to find new reserves near existing assets using our old be X systems as well as those intending to maximize recoveries from existing fields using our PRM systems also certainly transcending. This pandemic is a critical mission of the U.S. customs and border protection U.S. border control as we go about.
Filling our contract to provide the department of Homeland security with a technology solution to protect our borders and society at large.
We believe our strong balance sheet with ample liquidity and no debt gives us the fundamental strength to weather. This pandemic Andy merge on good footing as such we believe we are well positioned to leverage our comprehensive engineering and syndicate significant manufacturing operations in pursuit of new specialized industrial manufacturing customers and in support of.
National and Homeland security missions.
By maintaining our on manufacturing operation, we de risk our supply chain and enabled rapid time to market for our new products, all of which makes us highly attractive for partnership and fulfillment of commercial and government contracts.
And other matters I'd take special pleasure and welcoming the recent additions to our board of directors of Margaret said Ashworth, former Vice President of government relations for Northrop Grumman and Ken Asbury, former President and CEO of CAC I International.
The experience each of them bring from their remarkable careers and accomplishments will bring fresh and diverse perspectives to our board and future strategies, creating new value for our shareholders.
I'd also like to make note of the stock repurchase program, just announced an authorized by our board of directors in accordance with this program diskette discretionary purchases through open market transactions of up to $5 million in aggregate had been authorized actual purchases under the program will depend on various factors, including stock price trading day.
While young and our general business and market conditions.
In closing and as we enter this Thanksgiving season, let me give thanks to our hardworking employees, who get all their all in supporting our operations and valued customers and my additional Hardy. Thanks go out to our loyal shareholders, who continue to confidently recognize our value and our ability to withstand and emerge from these on certain times.
This concludes our prepared remarks, and I'll now turn the call back over to Chris for questions.
The floor is now open for questions. At this time, if you have a question or comment Please press star and one on your Touchtone phone if at any point. Your question is answered that you may have or maybe yourself from the queue by pressing the pound key again, we do ask that while you pose your question you pick up your handset to provide optimal.
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And our first question comes from Bill Dezellem from Titan capital.
Please go ahead.
Great. Thank you you've given us a lot to add lots of Q on here.
Start a if we could win that PRM a tender.
Yes.
Existing customer or a new customer that that has let this tender out.
Oh, well, we certainly have experience with this customer so they're on existing customer.
I mean, there is as you might well know and all of these endeavors. There's typically many partners involved as it were but certainly this customer is one that we dealt with in the past.
And so Rick may we interpret that as as the partner or.
Well, maybe not be the one who made the final decision or was it a name that was announced to the public previously, but they were on one of the fields. So they would know the capabilities of of your system well I thinking on almost all these circumstances the partners pretty much make all their names known so I would say even.
And earlier work that we've done that their name was certainly mentioned.
Understood great. Thank you and so the reason I'm asking the question is with.
Oil prices at a low.
Uh huh.
Uninspiring level, they're making a decision to go ahead with a tender on.
That implies that they have some real.
They have a favorable view of the ROI.
Even at the at current oil prices and so that's just my theory, I guess would you talk to to how the customer is viewing net and and how they are you know what the what ROI they've had in the past and and and quite a day would be letting the tender out now sure.
From a you know they don't really revealed there explicit ROI is as it were but I think you're fundamentally absolutely right in the sense that they recognize the.
The return on on these investments.
The good news on its really along the lines of what I've mentioned before there are there are certain aspects of looking forward well beyond what COVID-19 is doing and even prior to the pandemic. You know there there were certainly supply Ms imbalances or the.
Nonetheless, if you are looking longer term and.
And maximizing the recovery of an existing asset you already have that it makes sense. You know these systems for I mean more than two decades now I mean have have been known.
To have a on a.
A beautiful return on the investment in the manner that allows the reserve to be managed and where to mitigate circumstances, where productions or or being reduced and get them back up again so.
So I think this is just a normal course of action for those that are looking longer term.
You know besides the existing very temporal circumstances that we're going through right now.
Yeah, Rick do we remember correctly when a British petroleum did their first <unk> or made their first acquisition of equipment that oil prices at that time or in the 20 to $30 level and they came out with a white paper that indicated that there that they had a.
Quite a high return on investment if I'm remembering correctly, yeah that goes back way far, but you're exactly right that was 2003 when we its created that first system and had it installed but.
But yes. The answer is yes to that and so let me just pick the number of $25 a barrel with $40 per barrel oil today.
What's the difference and how that ROI calculation would be I guess, what cost have changed over that time period or.
We surmise that even at $25 a that that there would still be a good ROI, so that $40 I it would be even better.
My my recollection may be wrong, but I thought the price of oil at that point in time actually dip well below that number you mentioned when that first PRM system was put in.
In terms of establishing what ROI would be in today's world I'm sure that would just be a matter of a examining the inflationary aspects across the various market segments that it evolves, but you know I I certainly don't have those numbers right in front of me.
Okay, great. Thank you and then quite additional insights would you like to share about the.
On the there are companies that are evaluating the PRB on that you referenced in the press release.
I think again they are looking at the future with the eyes of optimizing their their ability to make money on the existing assets that they have that's what PRM does I mean in fact.
In more recent times you know these PRM systems have been evaluated for are being put in service very early on in the life of the of the reserves. So.
In some cases in earlier times. These type systems were placed in service. After they had been net producing from the reservoir for for quite some time.
These days because of their understanding of how that optimizes the their recoveries there considering that it is in much earlier circumstances.
Rick does that increase the size or the size of the market for you.
Oh, that's hard to say I mean, the market has always been one that's a very specific and very sparse to a large extent I mean, there's there's not a lot of PRM systems out there we have almost all of them I think theres, a handful or two or so that are not ours are not ones that are technologies in place.
Hi, Dan.
You know as far as whether the market is burgeoning that's not from me to say I mean, we're out there just trying to service the needs that they raised and we have a technology that allows them to do so.
Great. Thank you I'm going to switch gears entirely.
If I may.
The two new directors a that you have brought on.
What what are they thinking that they can bring to the table for you.
A whole lot I mean, besides there additionally experience in dealing with the government contracts and other services as it relates to the government. They just bring overall growth.
Great credentials with respect to business as a as a general rule. So I'm very much looking forward to their input and pretty much on everything that we do so I don't I don't see any sales.
Limited area of their contribution at all.
Oh no. It looked very qualified it was certainly not a <unk> questioning why why you would choose them I was just wondering if they had something each of them in particular that they're feeling like they can really bring to bring to the fold for you and and in particular.
[music].
Said with with the.
Experience in the appropriations process.
From a much larger company perspective or is there anything in particular that that maybe specifically useful there.
Well I I believe there is I mean fundamentally that that experience helps us develop our strategies and a there's a lot to that and in many cases a week.
We have.
Have gone.
Gone down the passive as best we understand and the guidance that she is going to be able to help provide us in those same endeavors is just going to be you know remark.
Hi, Mark.
Great. Thank you I can either step back in or I do have a some additional questions at which would you prefer.
That's up to you in the moderator [laughter] well unless the moderator cuts me off all I will continue [laughter] the Democratic Congresswoman a alyssa slow slocan I believe it is in Michigan did put a bill out in September kind of Rick.
Questing, a comprehensive border patrol plan right.
Interest to identify deploy and integrate the emerging on it at advanced technologies I think there have been also some other bills or that kind of under the same vein <unk>. What is the implication of such a thing and has this bill made any progress in Congress.
Jay implication is certainly that the technology that she's referencing there certainly.
100% intersects our technology and capabilities, what we provide is a high technology solution. It's it's one that oh.
Oh really reaches across the island in all regards of those that are concerned with their border and perimeter security I don't know the status of that particular Bill Marshall.
Marshall on the line he may know a little bit of information on that.
Hi, Bill, Yes, I'm not sure the satisfy their but it does show.
That there is.
But the new incoming administration that we might see.
A bit of a shift from.
More of a balancing I would say between physical security solution to a balance of both physical security and that's a logical approach.
Approach to securing our borders.
So mark kind of taking that one step further are you anticipating that day, New administration will net net be favorable to to quantum's ability to to generate.
More border security revenue.
The good work.
We have not experienced that yet so far so we'll see how this shakes out.
In our experience on that ill the value that we add is dairy bi partisan.
We've not seen any any issues Republican or Democrat concerns.
Concerning.
Their support of the value that we provide.
But what may be beneficial is.
Like I said more of a balancing and funding.
So while we while we have that support from a bipartisan standpoint, right. It's important to get that to reflect back into budget that would.
Actually allow the physical versus the technological solutions to be a better.
Better balance from a budgetary standard.
Great. Thank you and then I.
And he said help understanding kind of the implications of some things here relative to the border security. So you have to contract which was a one year contract beginning in early April of last year are probably this year going through early April 21, you were fortunate.
Good enough to be.
Be listed as a program of record.
And also have the S.P.I. our phase three status.
I don't think I understand the implications of each of those two aspects the program of record and the F.B.I., our phase three status and what that May or may not mean for the next for the next borders.
Border security contract on on the U.S. Mexican border.
Good points and fair questions I'm, having a program of record means that.
You'd be government agency is recognizing that they have a.
Hey capability here on need that they are now at 10 to address.
On to do so they established a program of record that can then be appropriately funded and.
Course, you have to have all the elements lined up to fund it but the first element you have to average that bucket. If you will with its defined scope to to receive those funds on then to that that.
Significant milestones for a customer it's not unique to it doesn't uniquely serve what we provide it provides.
Funding across the breadth of capabilities that they need and.
And we are one of those.
Yes, the our phase three.
It's something that says that we have the exclusive data rights for our technology.
To the United States.
So they are not able to field or use our capabilities.
Yeah provided by somebody else, it's kind of like a intellectual property protection.
So it doesn't mean, they can't use somebody else's solution.
If they want to use our solution our solution proves to be the best they've ever seen on does that is uniquely addressed by on.
So.
I don't want to jump ahead too far here, but is the implication then because you are a program of record.
There is.
Nothing is guaranteed by a high probability.
That starting April of this coming year that there will be an additional contract simply because that's part of Oh the solution for the problem that they have identified.
I wouldn't go that far I wanted to be very clear that the program of record isn't for quantum.
Or for Geospace is a government program of record.
It allows them to address certain classes threats.
Using a wide variety of technologies and techniques.
And again were a component of that but it's a it's a key milestone you gotta habit to go forward.
It's a very dynamic time in our United States government, we're living in the middle of something that's that's and first in history as we're looking at a transition of power on between an outgoing administration and the new administration and so there's a lot in this dynamic.
That would be challenging to predict as early as April.
So I think that we can.
I look to some of these these alignments that or that might be looking somewhat favorable but I don't think it's fair to put a time on on that would be so aggressive.
Great. Thank you and then one additional question I think I'll hop back in the queue I you have referenced on a one of the recent.
A recent conference calls that a the border patrol has selected you for at an application, which which they're now keeping.
Keep in mind.
Quiet in terms of what that application is oh are there other applications beyond this first one that are being considered and if so where are we at in the process with those.
On the our applications, but we're in the early phases.
The combined value of quantum and Geospace that keeps me excited every day.
Being able to deliver.
Information from acoustic data.
And that has a number of applications and we are engaged with the government as we speak on on the.
Yes exploration on one of the application it's completely early stage in my early stage I mean it.
It's we're beginning to explore the possibility of there being solution so with years out before that that closes, but they are aware of how.
Our capability can be valuable elsewhere.
Okay, I I misspoke, I am actually going to squeak, one more question and so back on the March quarter call. You had talked about the commercial systems integrator that you were out working with and so even prior to the press release, we were interested in an update since that was a several months ago.
So, but there was a sale that was referenced in the release to the commercial integrator is it the same one and right now the numbers are quite small so how do we go from a numbers in 2000 and order business and thousands of dollars 2 million.
<unk> dollars with with the commercial system.
That's another good observation bill.
It requires patience [laughter].
For some of our applications. They go into very sensitive areas and those sensitive areas require very very thorough testing.
And just use the analogy of any day.
Ah flight.
Flight system that we brought into operations you know, whether the F 22, or something it could be decades in development for that to be completely tested before sort of leidos operational.
We are part of that he and we are part of that overall capability.
And so we are now under stages of selling kinda single unit systems in and the coin then for this tiered evaluation process on because it has to be you're getting thoroughly understood evaluated and accepted.
And so that's how you go from something more low order with a high potential.
And given the timeline that you see today, what would be a expected.
<unk> <unk> fiscal year that you expect a meaningful orders in that arena.
Oh, it's many years out its many many years out.
I like it because it it it gives us a state or a sense of that strategic revenue that we're positioning ourselves for his many.
Many years out.
Great. Thank you both for the time.
And our next question comes from Josh Cooley, who is a private investor. Please go ahead.
Hey, Rick.
I appreciate all the time I think the gentleman before me probably asked a little bit more thorough questioning that then I had for you guys regarding the seismic technology.
Maybe you can speak on any cash.
10, so opportunities that you guys have abroad internationally with border security.
Oh, well there certainly are other opportunities out there internationally in some of those circumstances, Oh, there they're not in the mood for purchase at this point in time or development. They are either a busy with what they already have but certainly there is interest there and where you know.
We do have continued discussions on those topics again, if mark wants to make some additional commentary there he's welcome to.
Yeah. The international Arena is is a very important one to us.
And our strategy has been to two stage ourselves into that.
And to do that and to garner the attention of the international community in international markets.
It's very beneficial to be able to demonstrate that you have on past performance are proven systems and operations and that's what we're coming to closure on now with the border patrol system are deploying on the border is very complex and it's taken a great deal of effort from our combined.
Teams as we merged them together to provide a complete end to end system I'm very excited about that or is it.
But its just been effort and we wanted to make sure we delivered that first.
And then we can look at bringing that past performance into the international market space.
Thank you.
And our next question comes from Brent Miley from.
<unk> capital. Please go ahead.
Hi, good morning.
A question on sort of one thing on the Capex comments, you mentioned it could be on up to $5 million likely to be contingent on Paul on sort of the PRM possible worrying about that kind of a contract or is there more.
Or are there other investments there that you're considering.
Yes.
I think some of it may be related to the PRM, but but most of it is related to other opportunities. We're looking towards and we're certainly not going to pull the trigger on any investment unless we think there's a.
Opportunities and revenue that comes along with it right.
Right I mean to to further what Robert just said, you're referring to the property plant and equipment type Capex and a large.
Large part of that is just a normal course of business.
We're going through.
We have certain projects.
[noise] associated with her automation and other things that do drive revenue and as as growth.
Growth in those areas and use a to manifest it makes sense, but again to Robert's point, there's certainly always a review of those prior to the actual expenditure that everything's still aligned.
For them to happen.
[noise] [noise] maybe.
I guess in that vein what are the areas that don't have potential growth into next year. I mean, obviously be kind of that you'll be actually is really been the main revenue driver on so maybe you could provide I mean help me understand what kind of visibility you've got into that I know some of that's rentals. Some small portion of that as sales, but if you actually are considered.
On some investments in automation and their revenue driven where are the areas that might kind of be hopefully going to rebound in the coming year or two.
Well, it's it's really hard to say, what's going on a rebound and continue as the previous exhibited growth a as a function of Ur COVID-19, you know certainly are a adjacent markets has taken the the biggest advantage of any automation efforts that we have put in place today and we certainly can tell.
On you to see those be with every potential.
Moving to grow there has without any doubt whatsoever been a an impact as a result of COVID-19, because in many cases of some of those products are used in the smart city a endeavors that are constantly going on but those have seen some reductions because they can't pursue some of those.
The project of Smart metering and other things that take place in this environment of Cove. It. So we have no doubt that that industry is going to recover and continue progressing in growing just simply because of what it represents a overall to society and and the enter these utility.
Companies, but the timing on that is just very very difficult to give you any insight on.
Okay sign off on that but on the on the side of things again, I know their fleets not going on currently yeah. What is what kind of visibility on having to the coming year in terms of the scenery utilization and so forth from it if any.
I think that we're seeing a slowdown in that as I mentioned a in our in our earlier statements.
You know Uh huh.
Early on some of the other segments had a very much a delayed impact with respect to how COVID-19 was <unk>, having an effect, but but we have seen a catch up on that so largely I think that you know we have every expectation that that the OPX rentals.
Our <unk> are going to subside to some extent I mean, the number of quotes that are coming in are certainly reduced. The we also have a different a character to some of the quotes many of them are calling for deepwater activity, which is a highly interesting and and that's a much.
Much different product Oh in terms of its capabilities because of the depth that it can reach at all.
But in general we see the O. VX, continuing but we certainly believe there's there's going to be a lessening of demand there as time goes on.
Okay fair enough on on the sort of border patrol side of things.
It is if you were to frame up the next and I understand it's a very complex process and you're dealing with governments administration changes is testing I understand all that is is when you look at the timeframe you you'd characterize the potential market as being you know every bit as big as your current core business.
<unk>, that's sort of over a five day time horizon I'm, just trying to frame it up for sort of you know, we're long term investors, but I do kinda one understanding on when in terms of considering the PML that might become sort of more material to the kind of two to be.
Any external financials as or.
No I understand and I I still think that's going to take some time the uncertainty of what's going on now.
It's certainly not helping matters as it were a appropriations are gonna be delayed and go through probably a whole another round of a deliberation as far as that goes I think the important thing for US is that the technology. We provide is unique it's it it is a technology that has now.
Existed in the past it nodal, notably performs well and what it does in providing a listening and <unk> and in Irrs capability, most security aspects or or wrapped in in terms of the line of sight type of approach to things.
What we provide is something that doesn't need that and it certainly can detect and determine events and provide intelligent information its actionable oh without that need so.
Given that the you know the the uniqueness of the product.
It's going to it's going to take a little while for that to introduce a itself in the in the level that we expect but we do have every confidence that the technology represents itself.
On a way that can grow to the size of our oil and gas business.
On.
The current the current 10 million dollar contract I'm, assuming that that will be the vast majority that will be recognized I guess either on the first or second quarter. Given me on bid on that contract is that correct.
Certainly yeah, that's that's right that's absolutely correct.
Okay, and then is the best way to sort of think about that again be on some of the budgeting complexities.
Is the best way to think about it.
If this project works on actually I know that you had to do a lot of testing. So I think it does work on otherwise you wouldn't be even in the sort of.
You would have gotten that contract, but if that works or is that sort of the biggest near term opportunity basically two gets sort of incremental additions to that kind of a rollout in other words. If you did a mile on guidance in a certain area of on traffic and whatever there or is it fair to assume that there are many X times.
Yes.
Net so similar similar layouts and opportunities in terms of where you are on the border and so forth and sorry, if that's really a day, but basically I mean, if you if you've got one person penetrated into this thing really works do you have a chance to get to know on.
150 per cent penetrated over the next two three years there is absolutely more opportunity. It's along the lines of what we're putting in now it's not at all even near the central point of what that market demands. So the answer is yes to that there's plenty of opportunity in that regard.
Okay, Great I appreciate it thank you guys.
And our next question comes from Scott, One day from Mars and Cabot. Please.
Please go ahead.
Hi, Good morning, Hi, Scott.
Just a quick question Optus sys versus prior technology, I think there's only one system out there.
What's the value of fiber to your customer versus prior technologies.
You know, there's a significant interest in the fiber at this point in time so.
I would say that the highest points of interest in these permanent reservoir monitoring systems, as we speak or looking towards the fiber the conversation does vacillate a bit back and forth, but certainly just to be honest that their their interest seems to lie and that technology.
Thank you very much.
And it does appear that there are no further questions over the phone at this time I'd like to go ahead and turn it back to Scott for Rick for any closing comments all right well. Thank you, Chris and thanks to everyone, who joined our call today and.
Let me encourage everyone to have a very safe and happy Thanksgiving coming up.
With that we will you know get back with you on our first quarter of fiscal year 2021 in February so have a good Thanksgiving. Thanks bye-bye.
Thank you. This does conclude today's Geospace technologies fourth quarter and full year 2020 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.
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