Q3 2021 Geospace Technologies Corp Earnings Call
To begin should you need audio assistance during todays program up please.
Zero.
Yeah.
Welcome to the Geo space technologies third quarter, 2021 earnings conference call.
On your call today from T O space is Mr. Rick Wheeler, President and Chief Executive Officer. He is joined by Robert Kurt on the company's Chief Financial Officer, and Mark Tinker C. E O S. T O space subsidiary quantum Technology Sciences.
Today's call is being recorded and will be available on the G. S piece technologies Investor Relations website. Following the call at this time all participants have been placed in a listen only mode on the floor.
Or will be opened for your questions. Following the presentation.
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Good.
Thank you Britney.
Good morning, and welcome to Geospatial Technologies conference call for the third quarter of our 2021 fiscal year.
Again, I'm, Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined by Robert Kurt on the company's Chief Financial Officer.
Also Mark Tinker, Dr. Mark Tinker CEO of our quantum technology Sciences subsidiary should be able to join us a little later all on in the call.
I'll first give an overview of the third quarter and Robert will follow with index commentary on our financial performance. After a few last remarks, well open the line for questions that Robert Marc and I can hopefully answer.
Some of today's statements may be considered forward looking as defined in the private Securities Litigation Reform Act of 1995. This includes comments about product markets revenue recognition planned operations and capital expenditures.
Payments are based on our present awareness, while actual outcomes are affected about factors and uncertainties, we cannot predict or control both known and unknown risks can lead to different performance of results from what we say around flight a day. These risks and uncertainties included those discussed on our SEC form 10-K, and 10-Q filings.
As a convenience we will link.
Link a recording of this call on the Investor Relations page of our Geo space Dot Com website, I encourage everyone to visit and browse the site to learn more about geo space and its products and our subsidiaries no debt. The information discussed on reported in this morning's call is time sensitive and may not be accurate at the time, 1 listens to the replay.
After the markets closed yesterday, we released our financial results for the third quarter of fiscal year 2021, which ended June 30th 2021 as.
As mentioned with the world's aspiration is focused on our global wide recovery from the COVID-19 pandemic. It was encouraging to see that revenue on our third fiscal quarter slightly exceeded that of last year's third quarter.
It was even more encouraging the combined revenue for the first 9 months of fiscal year 2021 reflected an increase of almost 14% over the same period last year.
These increases occurred despite the significant reduction in both periods of revenue received from rentals of our Ob ex Marine nodal recording systems.
As we previously reported in our last call certain follow on surveys that intended to utilize our obs system were delayed or canceled due to COVID-19 restrictions and Lockdowns, which left these systems underutilized.
Noteworthy however that rental revenue in this third quarter more than doubled in comparison to the preceding quarter. This provide some indication of Ob ex demand improving as new projects go forward.
In opposition to the lower revenue from our oil and gas market segment revenue from our adjacent market segment experienced major year over year increases for both the 3 and 9 months periods ended June 32021.
The respective increases over the last year of 84% and 30% can be attributed in both periods due to a variety of factors. These include stronger sales of our smart water meter cables and connectors higher utilization of our contract manufacturing services and greater demand for our graphic imaging products.
When recovery from the COVID-19 pandemic gains additional momentum we anticipate the demand for these products will continue to trend upward.
We believe the steady overall gross exhibited in our adjacent market segment offers tangible evidence that our deep rooted expertise and innovative engineering and manufacturing.
Then use to bring ever increasing technological value to an ever expanding market.
Along these lines, our recently announced acquisition of Quanta LLC further demonstrates our strong commitment to deliver state of the art Iot solutions to the diversified yet highly technologically aligned industry Smart city initiatives.
Our cloud based controls and data management provided by the <unk> quantum platform and its products helped both water utilities and property managers can serve critical water resources and reduce their costs are.
Our quantum technology Sciences subsidiary, which makes up our emerging market segment contributed $1.1 million to third quarter revenue, bringing the segments 9 month year to date total to $10 million.
The majority of revenue from both periods is the result of completion efforts on the contract awarded to quantum by the Department of Homeland Security in April of 2020.
The contract calls for providing the U S border patrol with a highly effective border and perimeter security solution that utilizes our sophisticated sensor based systems in conjunction with Quantum's Ultra advanced analytics.
Taken together, our adjacent and emerging market segments combined to generate 45% of total revenue in both the 3 and 9 month periods ended June 32021.
Now just before I turn the call over to Robert Let me remind everyone that is in an effort to return meaningful value to our shareholders, We announced a stock repurchase plan in November of 2020.
I am pleased to report that as of August 4th 2021, We had purchased a total of 553588 shares of our common stock for approximately $4.7 billion since the program's inception.
The company has also authorized an additional $2.5 million for this buyback program now with that I'll turn the call over to Robert for more financial detail.
Thanks, Rick and good morning, 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 third quarter ended June 32021, we reported revenue of $23.1 million compared to last year's revenue of $22.7 day.
The net loss for the quarter was 787000 or 6 cents per diluted share compared to last year.
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I will let you know once the speaker's line has been reconnected.
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Hello.
Hugh.
Mr. Wheeler you were good to go the line is active.
Alright, I apologize everyone for the technical difficulties. We've had so we really don't know where we lost it we lost you on the call, but let me just begin with what we reported so after the markets closed yesterday, we released our financial results for the third quarter of fiscal year 2021, which ended June 30 at the 'twenty 'twenty 1.
As we mentioned with the world's aspirations focus on our global wide recovery from the COVID-19 pandemic. It was encouraging to see that revenue on our third fiscal quarter slightly exceeded last year's third quarter and it was even more encouraging that combined revenue for the first 9 months of the fiscal year 2021 reflected an increase of almost 14% over the same period last year.
Greece's occurred despite the significant reduction in both periods of revenue received from rentals of our Ob ex Marine nodal recording systems.
As we reported earlier in our call for the previous quarter certain volume on surveys that intends to utilize <unk> systems had been delayed or canceled due to COVID-19 restrictions and lockdowns, which led the system's underutilized.
Noteworthy however that rental revenue in this third quarter more than doubled in comparison to the briefing for this provide some indication of Ob ex demand improving as new projects going forward.
In opposition to the lower revenue from our oil and gas market segment revenue from our adjacent market segment experienced major year over year increases for both the 3 and 9 month periods ended June 32021, the respective increases over the last year of 84% and 30% can be attributed in both periods due to a variety of factors. These include stronger sales of our smart.
Water meter cables and connectors high utilization of our contract manufacturing services and greater demand for our graphic imaging products 1.
1 recovery from the COVID-19 pandemic gains additional momentum we anticipate the demand for these products will trend upward.
The steady overall growth exhibited in our adjacent market segments offers tangible evidence that our deep rooted expertise and innovative engineering and manufacturing continues to bring ever increasing technological value to an ever expanding market.
And along these lines, our recently announced acquisition of Quanta LLC further demonstrates our strong commitment to deliver state of the art Iot solutions to the diversified yet highly technologically aligned industry Smart city initiatives.
Our cloud based controls and data management provided by the <unk> quantum platform and products helped both water utilities and property managers conserve critical water resources and reduce their costs.
Our quantum technology Sciences subsidiary, which makes up our emerging market segment contributed $1.1 million to third quarter revenue, bringing the segments 9 month year to date total to $10 million. The majority of revenue for both periods is the result of the completion efforts on the contract awarded to quantum by the Department of Homeland Security in April of 2020.
The contract called for providing the U S border patrol with a highly effective border and perimeter security solution that utilizes our sophisticated sensor based systems in conjunction with Quantum's Altra advanced analytics.
Together, our adjacent and emerging market segments combined to generate 45% of total revenue for both the 3 and 9 month periods ended June 32021.
Before I turn the call over to Robert Let me remind everyone that in an effort to return meaningful value to our shareholders, We announced a stock repurchase plan in November of 2020.
I'm pleased to report that as of August 4th 2021, we have purchased a total of 553588 shares of common stock.
Approximately $4.7 million since the program's inception. The company has also authorized an additional $2.5 million for this buyback program with that said I'll now turn the call over to Robert for more financial details.
Thanks, Rick and good morning, 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 third quarter ended June 32021, we reported revenue of $23.1 million compared to last year's revenue of $22.7 billion.
Net loss for the quarter was 787000 or 6 cents per diluted share compared to last year's net loss of $2.3 million or 17 cents per diluted share.
For the 9 months ended June 32021, we reported revenue of $75.4 million compared to revenue of $66.3 million last year.
Our net loss for the 9 month period was 9 billion or 60.67 per diluted share compared to last year's net loss of $15.4 million or 1.
$1.14 per diluted share.
Our oil and gas markets revenue is as follows our traditional seismic product revenue for the third quarter was $2 million, an increase of 67% compared to revenue of $1.2 million last year.
The increase in revenue was due to higher demand for our traditional seismic sensor products revenue for the 9 months of 2021 was $3.7 million net decrease of 33%.
Revenue of $5.6 million for the same prior year period.
The reduction of revenue is due to lower demand for our traditional seismic sensor products in marine seismic products.
Our wireless product revenue for the quarter was $9.6 million net decrease of 40% compared to revenue of $16.1 million last year.
Airless product revenue for the 9 months was <unk>.
$36.1 million a.
A decrease of 12% compared to revenue of $41.1 billion from the same period last fiscal year. The reduction in revenue for both periods is due to lower utilization of our Ob ex rental fleet caused by the effects from the COVID-19 pandemic.
Offsetting the reduction for the 3 months period is at $2.9 million dollar sale of land base wireless seismic products. The reduction in revenue for the 9 month period is largely offset by the recognition of 12 and a half million of revenue related to land sales.
Land base wireless seismic product system delivered to the customer in the prior year $9.9 million sales used ob ex rental equipment to the former lessee.
Equipment in the third quarter land based wireless seismic products, So I mentioned before.
We believe its worldwide COVID-19 related lockdowns.
Travel restrictions come toward the higher levels of utilization of our rental equipment.
It'll be ex rental equipment will be achieved as planned seismic projects will be will be resumed or committed.
Our reservoir product revenue for the 3 and 9 months periods ended June 32021 was $1.1 million at $1.7 million respectfully.
This reflects increases of 800000 for both periods when compared to the 3 and 9 month periods last year.
The increase in both periods is due to a higher level of performed engineering services.
We believe the best opportunity for meaningful revenue from this segment will be from future contracts for the design manufacture and deployment of P. R M system.
We continue to discuss P. R M products with multiple customers, but do not expect any significant PR related revenue to be recognized in fiscal year 2021.
Moving to our adjacent markets segment.
Our industrial product revenue from the third quarter of fiscal year, 2021 was $6.5 million an increase of 90% over the third quarter of 2020.
Industrial products 9 month revenues for fiscal year, 2021 is $15.8 million an.
An increase over the same period in 2020 or 42%.
Both periods revenue increases are due to higher sales of our water meter cable and connector products and higher demand for contract manufacturing services.
Imaging product revenue for the third quarter was 2.9 million an increase of 72% compared to last year's revenue 1.7 billion.
9 months revenue for imaging products for fiscal year 2021 is $8 million.
A 13% increase when compared to the same period in 2020 the increase in revenue for both periods was due to increased demand for our thermal imaging products.
Finally revenue from our emerging markets segment totaled $1.1 million for the 3 months.
And 10 million for the 9 months period ended June 32021.
Prior year revenue was 88000 for the third quarter and 557000 for the 9 month period ending June 32020.
The increase in revenue for both periods over the prior year is due to partially fulfilling the contract awarded in April 2020, with customs and border protection. The U S border patrol, we expect to complete this contract within fiscal year 2020 Corp.
Our third quarter of fiscal year, 2021, operating expenses decreased by $2.6 million or 24% compared to the third quarter of 2020.
9 month operating expenses decreased by $7.1 million or 22% when compared to the same prior year period.
The decrease in operating expenses for the 3 in the day month periods due to reduced personnel costs related to our cost reduction program that began in fiscal year 2020, non cash decrease to the fair value of contingent earn out liabilities for our quantum of debt after type acquisitions.
A decrease in research and development project costs and a reduction in general business expenses related to our business operations.
Our 9 month cash investments into property plant and equipment is 2 and a half million dollars.
Our cash investment into our rental fleet is $1.5 million as of June 32021.
We expect fiscal year 2021 cash investments to our rental fleet to be approximately $2 million in cash investments into our property plant and equipment to be about $3 million.
Our balance sheet at the end of the third quarter reflected $30 million of cash and short term investments.
We have no long term debt outstanding and available borrowings under our credit agreement at $17.7 million.
In addition, we own numerous real estate holdings in Houston and around the world that are owned free and clear without any leverage that concludes my discussion and I'll alter.
I will turn the call back to Rick.
Thank you Robert.
While recoveries from the effects of the COVID-19 pandemic have made great progress the emergence of the delta variance and increasing case numbers in many areas.
Some pause and caution to any hard optimism on the timing of recovery.
Nonetheless, we are encouraged by the results that were achieved in the first 9 months of our fiscal year the demand for our obs system shows incremental improvement, even though some project opportunities have moved further out in time.
Also progress continues on our discussions with major oil and gas producers for permanent reservoir monitoring or E. R. M systems, and we believe on new tender RFP RM system could be released before the end of our fiscal year.
The growing interest of oil and gas producers in using our P. R. M systems to better manage their fields has never been higher and the depth of in depth investigative inquiries brought about in these discussion reflects very serious opportunities over the next several years.
Meanwhile, we continue to expand our growing profile of it dance products and services offered in our adjacent market segment. We believe the integration of our Qantas innovative products with our existing technology catalog creates multiple opportunities for future growth in this segment and in on our emerging market segment, we believe additional contract.
<unk> will follow where our quantum subsidiary as the deployed systems for the U S border patrol began to demonstrate their profound value.
In light of these opportunities in conjunction with our strong debt free balance sheet and on our outlook on the future remains positive and optimistic optimistic.
This concludes our prepared commentary and now I'll turn the call back over to Brittany for questions.
Florida is now open for questions. At this time, if you have a question or comment. Please press star 1 on your telephone keypad.
At any point. Your question is answered you may remove yourself from the queue. My question the pound key.
Again, we ask that while you pose your question you'll pick up your handset to allow for optimal sound quality.
Thank you we will take our first question.
Bill does demo with Titan capital.
Thank you I have a group of questions and let's start with PRA on next week could please.
I think this is the first time that I have heard you referenced serious opportunities or maybe just said very serious opportunities. So with that in mind do you have.
More I suppose or fewer.
Interested PRN.
Parties today than you did 1 or 2 quarters ago or is it the same group of prospective customers their level of interest is is just increasing.
I think it's essentially the same group of customers Bill.
Some of those discussions were perhaps earlier on in their initial forays of investigative work, but have absolutely progressed since that first and second quarter, but it's essentially the same group and they are serious because you know why we're not revealing the nature of our scope.
Some of these efforts they do involve some significant sales.
Would you like to characterize the size of what a significant field means in terms of revenue.
No it really can't do that I mean, that's just giving too much advanced.
So our perspective things and they can change over the course of time.
But clearly if you look at our history you know you can tell that.
There have been some significant projects that we put together and they certainly can fall into those same categories.
That said that's helpful. Rick and then are these parties on.
Prospects are they new to PRN or have they been than customers in the past.
Some are new to P. R M, except perhaps and their partner arrangements with other oil companies that were there that where operators are fields that had <unk>, but as you probably well know I mean that science is now very well established.
Given our focus on oil companies to manage their fields in such a way to get more out of their existing capital resources and they've already invested certainly warrants P. R. M.
To have a hard look at doing so in addition, with carbon capture what it is today is in terms of our goal.
Oftentimes the enhanced oil recovery out of these fields is accomplished through injection of C. O 2 so.
You know, there's there's additional aspects that make this interesting.
Okay that is helpful and then.
Did mention that you see a tender.
But net actually before we go there.
The geographies debt that these systems are being discussed to be deployed in the.
The same as what we have seen you deploy in the past or are these new geographies new.
New regions of the World I, suppose I should say.
Well, we've operated all over the world. So these geography, certainly are adjacent or in similar waters is where they had been before in many cases, there's a lot of deep water interest.
That's helpful to you, but they're all over the debt.
Nope.
Alright, Thank you and then relative to the tender.
Tenders that you anticipate or think could happen by the end of September is this the same company.
At had a tender in the past that the terms were onerous and you chose not to submit 2 or is this a a new.
A new prospect.
No. This is the same company.
There were just some business considerations that precluded.
Participating in that original tender, but as.
There's every expectation that the new tender will come out in that timeframe.
And is it your expectation with that having discussions with the customers that this will be a tender that you will be comfortable responding to or is that still to be determined.
That's to be determined, but we're certainly hopeful of that our discussions have been very fruitful with respect to what some of the issues were that that we all needed to confer on our end.
And hopefully that has been accomplished but we'll see.
Alright that is a that is helpful. And then Mark I don't want you to feel left out here again.
So may I switched to quantum edge.
And then.
There was a reference in the release that kind of prompts this question.
Is it or what can you share.
To indicate that the system is working as debt.
As the border patrol hopes or what is it debt that needs to be demonstrated and has that been demonstrated.
2 of them already maybe just let's just open it up broadly placed.
Hi, Bill nice to speak with you again.
Part of our contract to successfully close it out required formula system's acceptance testing.
And that is when we go through a series of government witnessed and participated tests.
To make sure the system perform to spec.
We have successfully completed that.
You have successfully completed the debt that you just said.
Yes, Sir.
So now let me kind of.
Bringing the question to a more basic level for those of us on the outside.
What can you share it.
Share with us to indicate or or demonstrate that the system is.
Yes.
Doing things that are good for the border patrol.
Okay.
Very little.
Yeah.
Now that the system is operational.
It is now being used by them.
To meet the mission that it was designed to serve passed that it starts to enter into law enforcement activities that are.
I'm not always on privilege to when and if and when I am I am unable to share.
I am sorry for that frustrating answer, but that's the current case.
Totally understand I'm going to try a slightly different.
It's slightly different angle.
If we were to have those of us on the outside if we were to have the same.
Insights.
That is the border patrol has shared with you.
They have gained wood wood.
Yes.
Would we see the value to the system, yet or is it still too early for that.
I think we all would be seen value.
Thank you and then 1 additional.
1 additional question just timing of the next order so in light of the fact that even for us Les.
Lehmann, we would see value. If we are if we had the proper clearance.
Yeah.
What's what's needed now to to move us to the next.
To the next purchase.
Well now we're subject to the headwaters of government funding, which is.
Capital Hill.
So as you as everyone on the call insurers aware, where we're seeing a fiscal year 'twenty 2 budgets start to emerge.
It's likely that we will enter into a continuing resolution.
For homeland security budget that interest into likely December possibly January.
So this is the this is the hurry up and wait process.
The funds and budgets become more established.
Based on the performance and the needs of the agencies that these funded budget support so.
We're now sitting back late in the system to do its job.
Supporting net operation in the manner that we can and making sure that.
The necessary.
Decision makers are aware of its value.
And to that point since this system has been deployed.
Has there been.
Have there been items at that.
Those are holding the purse strings in Congress.
Have seen that would make them more likely to want to fund.
You've asked a very targeted question and I would love to give you the answer.
I can't at this time.
I'm sorry.
That's alright, thank you for.
For the health and well look forward to.
What happens after we're done weighted.
Thank you Bill Thank you.
And once again, if he would like to have if you have a question. Please press the star and 1 on your Touchtone phone at this time.
And we'll take our next question from Scott Bundy with Morris and Cabot.
Hi, Rick.
Hi, Scott Nice to hear from you. Thank you very much I have a question Mark.
I'm going to.
I'm going to reference if you don't mind to sort of get to the answer the.
Border patrol improve southwest border technology, but significant challenges remain it was.
Put together an that'd be wary.
2 third of this past year I'm quite sure you are aware of it.
And just bear with me for a second here. It says border patrol expects that security improvements introduced by the new board of Wall Mei.
Increase the threat of cross border tunneling.
But according to border patrol currently lacks adequate technologies to detect tunnels tunneling activities or monitor permanent cross border tunnels just.
Bear with me for 1 more second here.
According to a senior program official until recently the tunnel detection capabilities that existed on the market where technically.
Immature and did not meet.
The border patrol mission.
So my question is.
And if you go through this report they indicate.
That 6 miles of sensors will be laid down.
And you know the potential for another 100 miles in the future or my question is.
Do we have competition.
That wasn't the question I was expecting.
With that report.
Sometimes you have to have competition to progress on opportunity within the government.
I think our systems are standalone.
And the Intel recently part might be a profound revelation within that report.
And from.
You'll probably ask there's somebody ask it slightly differently.
What's left to do to open the eyes of.
People.
To make them aware of just what.
You guys have done in the past what you obviously can't talk about I understand.
What's left we have to serve the nation.
And in so doing theres going to be latency of those revelations to the individuals on this call.
That's where I get stuck.
So we serve the mission we serve the border patrol their mission their job and we are a component of a massive law enforcement organization in the border control.
And when they have successes they execute those successes.
And we may or may not be 1 of the key contributors to that.
But later downstream as those law enforcement operations are concluded.
Become a little bit more revealing as to whats occurred and so that latency is the is the challenge between where we are today and getting the system in performance running which was a big milestone that we're all very proud of and now serving the mission and enjoying some successes.
Past that I either have to speculate in ways I love to do but not appropriate on this call.
Alright.
I I get that let me just.
This is just from my own ignorance. If you don't line in this report they go through a pretty significant detail about.
Let me just use and dwell on Elbit systems.
In terms of.
Line of sight.
Activity and we all know debt there was appropriation to Andrew will have pretty significant amount of money I think it was in the order of a couple of hundred million dollars. So.
What do you what do you think Andrew did to get 200 million.
That debt that you guys need to do to get whatever.
They didn't get it.
So there there's a lot of good marketing going on their deals or not.
You have to perform and you have to execute through the contract with a long period of time some.
Some of those things are are more for it and what they're able to talk about because they are using line of sight technologies that we all enjoy every day.
We at geospatial on quantum have profound non line of sight capabilities.
We know serve oil and gas effectively and now that we're bringing that into the security and surveillance market, we have to be guarded.
Their effectiveness and so for us to get those funds. That's what we're doing so these dominoes are falling and sequences they're supposed to.
Again the systems in the ground its performance is now meeting Michigan.
And going forward so.
As we continue to meet that mission.
I think downstream from here.
We'll be pleased with where we ended up.
My last question I think you can answer this I found it quite interesting in the state of the Union address debt.
President Biden said.
Something to the effect that wait to see the technology, we have at the border.
Or something to that effect is it fair to say he is aware of what's going on.
[laughter].
I wouldn't be surprised if he was aware of what's going on.
You are aware of what I'm talking about.
Yes.
Thank you very much guys.
Thank you.
Scott.
And there are no further questions at this time I will turn the program back over to Rick Wheeler for any additional or closing remarks.
Alright, well, thank you Britney and thanks to everyone, who joined our call today, we look forward to speaking with you again on our conference call for the fourth quarter of fiscal year 'twenty 'twenty 1.
In November so thanks, again, sorry for the earlier technical difficulties Goodbye.
Thank you. This does conclude today's Geo space technologies third quarter 2021 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.
Okay.
Yeah.
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