Q1 2024 Geospace Technologies Corp Earnings Call
Operator: www.davidnierenberg.com Please call. At this time, all participants have been placed into a listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question at that time, press star 1 on your telephone keypad.
Uh huh.
[music].
Welcome to the GSE.
24 earnings call.
Operator: If at any point your question has been answered, you may, from pressing start. We ask that you please pick up your handset to allow optimal sound. Lastly, if you should require operator assistance, press star zero. It is now my pleasure to turn the floor over to Richard.
Right.
The space is Mr.
Thank you officer.
Sure.
Today's call.
These technologies.
Okay.
During the call.
At this time, all participants have been placed into a listen only mode.
The floor will be opened for your questions. Following the presentation. If you would like to ask a question at that time.
Please press star one on your telephone keypad if at any point. Your question has been answered you may move yourself from the queue by pressing star two.
We ask that you. Please pickup your handset to allow optimal sound quality lastly, if you should require operator assistance press Star Zero is now my pleasure to turn the floor over to Rick Wheeler, Sir you may begin.
Walter R. Wheeler: All right. Thanks, Natalie. Good morning, and welcome to Geospace Technology's conference call for the first quarter of fiscal year 2020. I'm Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined by Robert Curta, the company's Chief Financial Officer. In our prepared remarks, I'll first provide an overview of the first quarter, and Robert will then follow up with more in-depth commentary on our financial performance. After some final comments, we'll then open the line for questions. Today's commentary on markets, revenue, planned operations, and capital expenditures may be considered forward-looking, as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on what we know now, but actual outcomes are affected by uncertainties beyond our control or prediction.
Alright, Thanks Natalie.
Good morning, and welcome to Geospatial Technologies conference call for the first quarter of fiscal year 2024.
I'm, Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined by Robert Kurt is the company's Chief Financial Officer.
In our prepared remarks, I'll first provide an overview of the first quarter and Robert will then follow up with more in depth commentary on our financial performance.
After some final comments, we'll then open the line for questions.
Today's commentary on markets revenue planned operations and capital expenditures may can be considered forward looking as defined in the private Securities Litigation Reform Act of 1995.
These statements are based on what we know now but actual outcomes are affected by uncertainties beyond our control or predictions.
Walter R. Wheeler: Both known and unknown risks can lead to results that differ from what is said or implied today. Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings. For convenience, we will link a recording of this call to the investor relations page of our geospace.com website, and I encourage everyone to visit and browse the site to learn more about Geospace and our products. However, note that today's recorded information is time sensitive and may not be accurate at the time one does listen to the recording.
Both known and unknown risks can lead to results that differ from what he said or imply today. Some of these risks and uncertainties are discussed in our SEC Form 10-K, and 10-Q filings.
For convenience, we will link a recording of this call on the Investor Relations page of our Geo space Dot Com website, and I encourage everyone to visit and browse the site to learn more about geo space and our products.
Note that todays recorded information is time sensitive and may not be accurate at the time when does listen to the replay.
Walter R. Wheeler: Yesterday, after the market closed, we released our financial results for the first quarter of fiscal year 2024, which ended December 31st, 2023. We were gratified to start the new fiscal year with our fourth straight quarter of profitability. Along with improved industry demand for products in our oil and gas market segment, we believe our streamlining of operations over the last year and our attention to financial discipline were instrumental in carrying over profitability to the new fiscal year. First quarter revenue of $50 million represents the highest quarterly figure achieved in nearly 10 years.
Yesterday after the market closed we released our financial results for the first quarter of fiscal year 'twenty 'twenty, four which ended December 31st half 2023.
We were gratified to start the new fiscal year with our fourth straight quarter of profitability.
Along with improved industry demand for products in our oil and gas market segment, we believe our streamlining of operations over the last year and our attention to financial discipline were instrumental in carrying over profitability to the new fiscal year.
First quarter revenue at $50 million represents the highest quarterly figure achieved in nearly 10 years and.
Walter R. Wheeler: And net income exceeding $12.7 million softly demonstrates the type of value we strive to deliver to our shareholders. The sale and delivery of our newest technology Ocean Bottom Node, known as the Mariner, was the pinnacle element in delivering our first quarter performance. As we previously announced, a $20 million rental contract for the Mariner system was converted to a $30 million sale in late December.
And net income exceeding $12 7 million subs demonstrates the type of value, we strive to deliver to our shareholders.
The sale and delivery of our newest technology Ocean bottom node known as the Mariner was the pinnacle element and delivering our first quarter performance.
As we previewed with the previously announced $20 million rental contract for the Mariner system was converted to a $30 million sale in late December.
Walter R. Wheeler: This brought a significant amount of revenue forward into the first quarter that would have otherwise been received from incremental rental payments over the course of the year. Given that we don't anticipate another such sale in the immediate future, this transaction serves as a stark reminder of how commerce in our oil and gas market segment can be very lumpy from quarter to quarter. Navigating these ups and downs is familiar territory for geospace, and despite the volatility, we are encouraged by industry reports of major energy companies investing more broadly in conventional seismic exploration and 4D time-lapse monitoring. Those endeavors are known to benefit from our latest technology offerings, such as our Mariner and our Aquanaut ocean bottom nose.
This brought a significant amount of revenue forward into the first quarter that would've otherwise been received from incremental rental payments over the course of the year.
Given that we don't anticipate another set sail in the imminent future. This transaction serves as a Stark reminder of how commerce in our oil and gas market segment can be very lumpy from quarter to quarter.
Navigating these ups and downs is familiar territory for Geo space and despite the volatility we are encouraged by industry reports of major energy companies investing more broadly and conventional seismic exploration and 40 time lapse of monitoring.
Those endeavors are known to benefit from our latest technology offerings, such as our Mariner and our Aqua not ocean bottom nodes.
Walter R. Wheeler: This leads us to anticipate healthy utilization of our ocean bottom note rental fleet during the second half of the fiscal year. The first quarter reflected a modest decrease in revenue from our adjacent market segment compared to last year. We believe that decrease is the result of customers working through inventory purchases made earlier in the quarters before to stay ahead of their supply chain concerns.
This leads us to anticipate healthy utilization of our ocean bottom node rental fleet during the second half of the fiscal year.
The first quarter reflected a modest decrease in revenue from our adjacent market segment compared to last year. We believe that reduction is the result of customers working through inventory purchases made earlier in quarters before to stay ahead of their supply chain concerns.
Walter R. Wheeler: Despite the slightly lower revenue, we expect continued growth overall from this segment to remain strong into the foreseeable future. We believe our strategy of cultivating and delivering stable, predictable, and profitable revenue from this segment is working. Our confidence in continued improvement is supported by an ever-expanding commercial demand for smart infrastructure solutions, both domestically and abroad. This is further evidenced by the recent signing of a modest contract in the international market for our Aquana smart water valves, which should begin contributing to revenue in the second quarter. Revenue in the first quarter from our emerging market segment was generated through existing contracts between our quantum subsidiary and the U.S. federal government. Note that the opportunity for future contracts with the Customs and Border Protection Agency is solid, but those government decisions are not expected until later in the calendar year. Progress toward meaningful revenue contributions from this segment has developed more slowly than desired. However, quoting inquiries from energy companies for carbon capture monitoring projects, as well as other new and unique applications for quantum's analytical methods, are increasing.
Despite the slightly lower revenue, we expect continued growth overall from this segment to remain strong into the foreseeable future.
We believe our strategy of cultivating and delivering stable predictable and profitable revenue from this segment. He is working.
Our confidence for continued improvement is supported by an ever expanding commercial demand for smart infrastructure solutions, both domestically and abroad.
This is further evidenced by the recent signing of a modest contract in the international market for our Qantas Smartwater valves, which should begin contributing to revenue in the second quarter.
Revenue in the first quarter from our emerging market segment was generated through existing contracts between our quantum subsidiary in the U S Federal government.
Note that the opportunity for future contracts with the customs and border Protection agency is solid but those government decisions are not expected until later in the calendar year.
Progress toward meaningful revenue contributions from this segment has developed more slowly than desired. However, quoting inquiries from energy companies for carbon capture monitoring projects as well as other new and unique applications for quantum's analytical methods are increasing but despite high public interest in carbon capture.
Robert Curta: But despite high public interest in carbon capture, utilization, and storage, these projects seem to move slowly as country requirements and industry commitments still evolve. With that, I'll turn the call over to Robert to give a little bit more financial detail on our first quarter of 2024. Thanks, Rick. Good morning.
Utilization and storage these projects seem to move slowly as country requirements and industry commitments still a goal.
With that I'll turn the call over to Robert to give it a little bit more financial detail on our first quarter 2024.
Thanks, Greg 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.
Robert Curta: 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 first quarter ended December 31st, 2023, we reported revenue of $50 million compared to last year's revenue of $31.1 million. Net income for the quarter was $12.7 million, or $0.94 per diluted share, compared to the first quarter of last year's net loss of $100,000, or $0.01 per diluted share.
In yesterday's press release for our first quarter ended December 31, 2023, we reported revenue of $50 million compared to last year's revenue of $31 1 million.
Net income for the quarter was $12 7 million or 94 cents per diluted share compared to the first quarter of last years net loss of 100000 or one set per diluted share.
Robert Curta: Now our oil and gas product revenue. Traditional credit revenue for the three-month period ending December 31, 2023 was $1.8 million, compared to revenue of $2.8 million last year. The decrease in revenue is due to lower demand for seismic sensors.
Now our oil and gas product revenue traditional product revenue for the three months period, ending December 31, 2023 was $1 8 million compared to revenue of $2 8 million last year. The decrease in revenue is due to lower demand for seismic sensors.
Robert Curta: Our wireless product revenue for the quarter was $38.1 million, an increase of 121% compared to revenue of $17.2 million last year. The increase in revenue is due to the sale of our newest ocean bottom node called the Mariner. However, the increased revenue is partially offset by lower utilization of our OBX rental fee.
Our wireless product revenue for the quarter was $38 1 million, an increase of 121% compared to revenue of $17 2 million last year.
The increase in revenue is due to the sale of our newest ocean bottom node called the Mariner. The increased revenue was partially offset by lower utilization of our obs rental fleet. We do not expect this level of revenue to continue in the remainder quarters remaining quarters of this fiscal year.
Robert Curta: We do not expect this level of revenue to continue in the remaining quarters of this fiscal year. Moving to the adjacent markets product segment, our industrial product revenue for the first quarter was $6.4 million, a decrease of 19% compared to last year's revenue of $7.9. The decrease in revenue is due to lower demand for our smart water meter connectors and cables.
Moving to the adjacent markets product segment.
Our industrial product revenue for the first quarter was $6 4 million a decrease of 19% compared to last year's revenue of $7 9 billion.
The decrease in revenues due to lower demand for our smart water meter connectors and cables.
Robert Curta: Imaging product revenue for the three months ending December 31st, 2023 was $3.4 million, an increase of 17% when compared to $2.9 million from the same prior year period. The increase in revenue is due to higher demand for thermal film products and imaging equipment. Revenue from our emerging market segments for the first quarter of fiscal year 2024 was $234,000, compared to $93,000 for the first quarter of fiscal year 2021. The emerging market segment has a backlog of approximately $1.8 million, which is expected to be recognized during the current fiscal year. Our consolidated gross profit for the first quarter of the fiscal year 2024 was $22.8 million, compared to $10.5 million last year. The increase in gross profit is a result of the revenue from the sale of the Marinera ocean bottom nodes, which was partially offset by lower utilization of our OBX rental fleet and lower demand for our water meter cables and connections. The first quarter's operating expenses were $9.4 million, a decrease of 13% when compared to $10.8 million for the first three months of fiscal year 2021. The decrease is due primarily to lower personnel costs attributable to our workforce reduction in the first quarter of the prior fiscal year.
Imaging product revenue for the three months ending December 31, 2023 was $3 4 million, an increase of 17% when compared to $2 9 million from the same prior year period the.
The increase in revenue was due to higher demand for our thermal film products and imaging equipment.
Revenue from our emerging market segments for the first quarter of fiscal year 2024 is 234000 compared to 93000 for the first quarter of fiscal year 2023.
The emerging market segment has a backlog of approximately $1 8 million, which is expected to be recognized during the current first fiscal year.
Our consolidated gross profit for the first quarter of the fiscal year 2024 was $22 8 million compared to 10 5 million last year.
The increase in gross profit as a result of the gross profit from the sale of the Mariner Ocean bottom nodes, which was partially.
Offset by lower utilization of our <unk> rental fleet and lower demand for our water meter cables and connectors.
The first quarter's operating expenses were $9 4 million. This is a decrease of 13% when compared to $10 8 million for the first three months of fiscal year 2023.
The decrease is due primarily to lower personnel costs attributable to our workforce reduction in the first quarter of the prior fiscal year.
Fiscal year 2024 cash investments into our property plant and equipment was 779000 in cash investments into our rental fleet is $2 6 million.
We expect fiscal year 2020 for casual cash and capital investments into our rental fleet to be 5 million investments in property plant and equipment could be as much as $2 million for the fiscal year.
Our balance sheet at the end of the first quarter reflected $34 million of cash and short term investments that we made maintained additional borrowing availability at $15 million under our bank credit agreement.
Thus as of December 31, 2023 of the company's total liquidity was $49 million. We currently have no debt and over numerous real estate holdings in Houston and around the world that are owned free and clear without any leverage.
Robert Curta: Fiscal year 2024 cash investments into our property, plant, and equipment were $779,000, and cash investments into our rental fleet were $2.6 million. We expect fiscal year 2024 capital investments into our rental fleet to be $5 million. Investments in property, plant, and equipment could be as much as $2 million for the fiscal year. Our balance sheet at the end of the first quarter reflected $34 million of cash in short-term investments, and we maintained additional borrowing availability of $15 million under our bank creditor. Thus, as of December 31st, 2023, the company's total liquidity was $49 million. We currently have no debt and 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 turn the call back to Rick.
Thank you Robert.
Our first quarter represents a great start to the new fiscal year, and although gaps in rental contracts for ocean bottom nodes will likely cause unevenness in our oil and gas markets revenue in the near term, we believe greater demand for these products will rebound later this fiscal year.
Meanwhile, we intend to continue nurturing the growth of our adjacent and emerging markets as well as build on our successes and operational efficiencies.
Binding our leadership in technology innovation with our strong balance sheet and financial discipline. We believe we have the necessary tools to meet these challenges.
This concludes our prepared remarks, and I'll now turn the call back over to Natalie for any questions from our listeners.
The floor is now open for questions at this time, if you have a question. Please.
Walter R. Wheeler: That concludes my discussion, and I'll turn the call back to Rick. Thank you, Robert. Our first quarter represents a great start to the new fiscal year, and although gaps in rental contracts for our ocean-bottom nodes will likely cause unevenness in our oil and gas markets' revenue in the near term, we believe greater demand for these products will rebound later this fiscal year. Meanwhile, we intend to continue nurturing the growth of our adjacent and emerging markets, as well as build on our successes in operational efficiency. Combining our leadership in technology innovation with our strong balance sheet and financial discipline, we believe we have the necessary tools to meet these challenges. This concludes our prepared remarks, and I'll now turn the call back over to Natalie for any questions from our listeners. The floor is now open for questions at this time. Press star 1 on your telephone.
Please press star one on your telephone keypad if at any point. Your question is answered you may remove yourself from the queue by pressing star two.
Again, we do ask why you pose your question that you pick up your handset and provide optimal sound quality.
Thank you.
First question comes from.
From 10 10 capital.
But all in all.
Then I'll begin.
Please go ahead. Thank you so Uh huh.
British Petroleum is doing a four D a survey.
Are you field that was recently announced how does that relate to geo space and potentially how does that relate to the comments that you made in the press release relative to a 40.
Well, we did not reveal any of the information with respect to the purchase of this mariner system, but certainly we're aware of these are opportunities that are manifesting out there in both 40 monitoring and in Greenfield exploration as it relates to the ocean bottom type systems.
So that plays well for us.
And so is it your and well I guess I'll ask relative to that Merit Mariner system sale did that go to an.
An oil company or did that go to a to a contractor know this that went to a contractor.
Operator: If at any point your question is answered, you may remove your... Press start. Again, we do ask why you pose your question and Satellite Optimization. Our first question comes from Bill Denzel. Then I'll begin. Thank you. So British Petroleum is doing a 4D survey in the Azari field that was recently announced. How does that relate to geospace and, potentially, how does that relate to the comments that you made in the press release relative to 4D? Well, we did not reveal any of the information with respect to the purchase of this Mariner system, but certainly, we're aware of these opportunities that are manifesting out there in both 4D monitoring and in greenfield exploration as it relates to the ocean bottom type system. So that plays well for us.
And are you anticipating that it will be used in traditional seismic or some of this stuff for the activity.
I suspect it will be used in both as a matter of fact.
Okay. Thank you and then in the press release, you also referenced that quoting activity.
Was.
Picking up in the energy Arena would you would you talk further to that point. Please.
Yeah, it's it's related still to the emphasis that theyre putting onto their marine.
No.
Production facilities and their marine reservoirs offshore.
We don't see just a whole lot progressing in the land environment as it relates.
Walter R. Wheeler: And so, I guess I'll ask relative to that Mariner Systems sale, did that go to an oil company, or did that go to a contractor? No, that went to a contractor. And are you anticipating that it will be used for traditional seismic or some of this 4D activity?
Generating commerce for us and some of that May occur later in the year, because if you think about it all of the <unk>.
Land equipment, that's out there a good portion of it has a reach end of life is still functioning, but there's new technology out there. So most of these quotes that we're seeing are with respect to our new ocean bottom surveys, where the Ob ex <unk>. The mariner would be the items of interest that would be.
Walter R. Wheeler: I suspect it will be used in both, as a matter of fact. OK, thank you. And then, in the press release, you also referenced that quoting activity is picking up in the energy arena. Would you talk further on that point, please? Yeah, it's related still to the emphasis that they're putting on their marine production facilities and their marine reservoirs offshore. We don't see just a whole lot progressing in the land environment as it relates to generating commerce for us.
Performing those.
And and that's both for <unk> and traditional our traditional three D. Then that's exactly right I mean the.
Field exploration still seems to be a highly oriented towards determining if there are reservoirs nearby some of the existing production facilities. They already have without having to construct more there are some that are that are you know <unk>.
<unk> fields than others, I guess, where there's some.
Some of that infrastructure would have to be built out.
Walter R. Wheeler: Some of that may occur later in the year because, if you think about it, all of the land equipment that's out there, a good portion of it has reached end of life, it's still functioning, but there's new technology. So most of these quotes that we're seeing are with respect to new ocean bottom surveys where the OBX and or the Mariner would be, you know, the items of interest that would be performing. And that's both 4-D and traditional 3-D, then?
But it is going to be for both for D and and new exploration.
And and.
Taking this a.
Step further I think slumber he had indicated that the final investment decisions in the deepwater shallow water.
For the next couple of years and we're gonna be massive Oh is that really what you are talking about here is basically the same thing that Schlumberger is saying, it's just that you're you're benefiting on the quoting activity yes.
Walter R. Wheeler: That's exactly right. The greenfield exploration still seems to be highly oriented towards determining if there are reservoirs nearby some of the existing production facilities they already have without having to construct more. There are some that are greener fields than others, I guess, where some of that infrastructure would have to be built out.
Yeah, I think it's the same industry reports that we read and and are Privy to with respect to how those activities you're going in.
The needle is pointing in the direction of more capital investment, which is required for for this sort of exploration activity and seismic projects to go forward.
Walter R. Wheeler: But it is going to be for both 4-D and new exploration, and, and. Taking this a step further, I think that Schlumberger has indicated that the final investment decisions in deep water and shallow water for the next couple years are going to be massive. Is that really what you are talking about here, is basically the same thing that Schlumberger is saying, it's just that you're benefiting from the quoting activity? Yeah, I think it's the same industry reports that we read and are privy to with respect to how those activities are going. The needle is pointing in the direction of more capital investment, which is required for this sort of exploration activity and seismic projects to go forward. And then, if I could, to Aquana, and then after that, to Quantum.
And then I'd.
I'd like to jump if I could to a quanta and then after that the quantum so a quantity you referenced an order that's going outside of the U S. If we heard correctly would you please expand.
On your comments there yes.
This is an order that has an international destination outside of the U S.
Yeah, it's a modest.
Order as that turns out and not one that we necessarily felt was a.
Warranting, a any sort of independent release of its own with respect to news, but it is certainly worth mentioning and it's sort of the the ramp up you know the first fruits of.
That sort of product and we're really anxious to see that get out.
And then relative to two quantum there's a I think a million eight and backlog was referenced what is that backlog from are these orders that you've already talked about.
Walter R. Wheeler: So, Aquana, you referenced an order that's going outside of the U.S. If we heard correctly, would you please expand on your comments there? Yeah, this is an order that has an international destination outside of the U.S. It's a modest order, as it turns out, and not one that we necessarily felt was warranting any sort of independent release of its own with respect to news, but it's certainly worth mentioning. And it's sort of the ramp-up, you know, the first fruits of that sort of product, and we're really anxious to see that get out. And then relative to quantum, there's, I think, a million eight in backlog was referenced. What is that backlog from?
Yes. These are like the we have the DARPA contract, which we did announce and some other activities going on and.
Even some.
Follow up work will say with some of the border patrol things.
And then relative to the border patrol there was a reference in the release to the to the later in this calendar year.
Is that tied to a new budget is that tied to an evaluation period, what's the what's leading to the view that our later in the calendar year is the right time to be thinking about that.
Right now this comes from a publication that the government provided.
Walter R. Wheeler: Are these orders that you've already talked about? Yes, we have the DARPA contract, which we did announce, and some other activities going on, and potentially even some follow-up work, we'll say, with some of the Border Patrol. And then relative to the Border Patrol, there is a reference in the release to later in this calendar year. Is that tied to a new budget? Is that tied to an evaluation period? What's leading to the view that later in the calendar year is the right time to be thinking about that?
Not that long ago, but.
With respect to what the intentions were other government.
This is the government accountability office I think theory that presented that that that pros and it was their indication that.
The systems that are currently in place ours being a Premier example of that are going through an examination and that.
Walter R. Wheeler: Right. No, this comes from a publication that the government provided not that long ago, but with respect to what the intentions were of the government. Was it the Government Accountability Office, I think, that presented that prose?
Additional decisions on new deployments would not come until sometime late in 2024, So that's really where that comes from.
Understood and then I think that the 10-K references that quantum revenues are anticipated to increase this year would you kind of bring that comment in and tie this all together for us.
Walter R. Wheeler: And it was their indication that the systems that are currently in place, ours being a premier example of that, are going through an examination, and that, you know, additional decisions on new deployments would not come until sometime late in 2024. So that's really where that understood. And then I think that the 10-K references that quantum revenues are anticipated to increase this year. Would you kind of bring that comment in and tie this all together for us?
Yes, I think first off.
<unk> of these existing contracts are going to be contributors to that but I did mentioned it there are some new applications.
Of the analytics that quantum has developed in some other areas.
And it certainly looks like those are going to manifest some additional revenues as well carbon capture is taking a while.
Definite interest we have multiple discussions with those involved with that.
But it doesn't it seems to move at a snail's pace in many respects.
Walter R. Wheeler: Yes, I think, first off, completion of these existing contracts is going to be contributors to that. But I did mention that there are some new applications of the analytics that Quantum has developed in some other areas, and it certainly looks like those are going to manifest some additional revenues as well. Carbon capture is taking a while.
Okay, Rick I thought that was going to be my last question, but you are hooked me with your with your reference to other areas in energy would you. Please talk a little bit more about that.
No I really can't these are proprietary utilizations of that technology that we're working towards.
Towards and.
Walter R. Wheeler: You know, there's definite interest. We have had multiple discussions with those involved with that. But it doesn't, it seems to move at a snail's pace in many respects.
And I think once they are completed we will be able to have more discussion about that.
Okay. Thank you and congratulations on a putting a lot of money on the bottom line.
Thank you. Thank you.
Once again, if you do have a question. Please press star one on your telephone keypad at this time. Our next question comes from Robert Martin with CEB partners.
Thank you.
Walter R. Wheeler: Okay, Rick, I thought that was going to be my last question, but you hooked me with your reference to other areas in energy. Would you please talk a little bit more about that? No, I really can't.
Excellent quarter, gentlemen, I guess the million dollar question is what we follow it up with I had a question on the ratio.
Sales.
<unk> 30 million to the rental price at 20.
Walter R. Wheeler: These are proprietary utilizations of that technology that we're working towards, and I think once they're completed, we will be able to have more discussion. Thank you, and congratulations on putting a lot of money on the bottom line. Thank you. Once again, if you do have a question..., press 1 on your telephone keypad. Thank you. Well, excellent quarter, gentlemen.
It seems if the units were roughly the same it seems that there is uh huh.
This thing kind of real annuity there.
Because it seems like who would ran if it's only 50% more to purchase.
Well keep in mind correct in assuming that the offshore is tech.
One five times that of annual rent from my house that would be a little bit of a bargain but.
Operator: I guess the million-dollar question is what we follow it up with. I have a question on the ratio of the sales price at $30 million to the rental price at $20. It seems, if the units were roughly the same, it seems that there's a, you know, a discontinuity there, because it seems like who would rent if it's only 50% more to purchase? Am I correct in assuming that? I'll surely, as heck, you know, pay one and a half times the annual rent for my house.
Shareholder here.
I have a few questions because pardon my ignorance of the situation because there.
Theres not a lot of information available from management's communication with shareholders and I don't know if this has ever been answered it in past calls so could you just enlighten me as to that relationship. Thank you.
Yes, there is some reasonable logic in your and what Youre, saying, there, but certainly you know the.
The rental agreements that.
Walter R. Wheeler: That would be a little bit of a bargain, but I'm a new shareholder here. I have a few questions because, pardon my ignorance of the situation, because, you know, there's not a lot of information available from management's communication with shareholders, and I don't know if this has ever been answered in past calls. So could you just enlighten me as to that relationship?
We are known for our ones that the customer asked that rental proceeds is able to earn an equity interest in that and that equipment such that they can purchase it at a later date.
At below its initial.
List price value. So some of that is accommodated in the types of rental agreements that are reflected there.
Walter R. Wheeler: Yeah, there's some reasonable logic in what you're saying there, but certainly, the rental agreements that we are known for are ones where the customer, through that rental revenue, is able to earn an equity interest in that equipment such that they can purchase it at a later date below its initial list price value. So some of that is accommodated in the types of rental agreements that are reflected there. But it was certainly less than what the face value of the equipment was as it related to the overall sale, the outright sale, simply because it's going to be, you know, that revenue is delivered over the course of time. But yes, in this particular case, they examined the very situation you're saying, keeping in mind even the equity value they would have gained over the course of that rental contract, and felt it was better value for them based on the project and utilization if they were going to have to go ahead and purchase it in advance.
It was certainly less than what the face value of.
The equipment was as it related to the the overall sale.
Outright sale simply because it's going to be that revenue has delivered over the course of time.
But yes in this particular case they examine the very the very situation youre, saying keeping in mind, even the equity value. They would've gained over the course of that rental contract and felt it was better value for them based on the project and in utilization that we're gonna have to go ahead and purchase it in advance these or are they.
These are rather expensive.
<unk> of instruments, we do our best to keep the cost down on these instruments and we've made great progress and actually doing that especially with the Mariner because it has absolutely brand new technology in it.
But.
Is this a cost effective as we can possibly manufacturer it.
But that being said they still remain you know a pretty big investment and that's why the rental.
Walter R. Wheeler: These are rather expensive instruments. We do our best to keep the cost down on these instruments, and we've made great progress in actually doing that, especially with the Mariner because it has absolutely brand-new technology in it. But as cost-effective as we can possibly manufacture them. But that being said, they still remain a pretty big investment, and that's why the rental of these units has been a historic method of the commerce. Okay. When you make a large sale like this, is there any kind of recurring revenue for providing data or analytics or services or, you know, refurbishment and maintenance, any of that kind of stuff? Or is it all, you know, a one-off transaction where that goes out the door, and that's all we see for the lifetime of that equipment? There is certainly an element of recurring revenue as it relates to maintenance and upgrades and things of that nature, but by far, it's a much smaller percentage and does not represent any significant amount going forward. And do we have a preference?
These units has been a historic manner of the commerce.
Okay.
And when you make a large scale like this is there any kind of recurring revenue for providing data or analytics or service or.
Refurbishment maintenance any of that kind of stuff or is it at all.
One off transaction, where.
That goes out the door and that's all we see for the lifetime of that equipment.
There is certainly an element of recurring revenue as it relates to maintenance and upgrades and things of that nature, but by far its a much smaller percentage and does not represent any significant amount going forward.
And do we have a preference when we'd rather rent everything or sell everything or doesn't it matter to our income statement.
Well selling is something we'd like to do.
The fact is that Oh.
We could and do rent equipment normally because it does represent such a large investment.
But its not really viable to only offer a rental market because there are competitors out there that build equipment.
It is intended to serve the same purpose.
Walter R. Wheeler: Would we rather rent everything or sell everything, or doesn't it matter to our income statement? Well, selling is something we like to do. You know, the fact is that we could and do rent equipment normally because it does represent such a large investment. But it's not really viable to only offer a rental market because there are competitors out there that build equipment that is intended to serve the same purpose.
And if and if a customer wants to buy the equipment. If we would not allow them to do so then they would probably go buy it from someone else.
Okay and then.
Also as a better use of our manufacturing facility.
Versus <unk>.
Okay do we know anything about the Tam from the last cycle and where the replacement cycle would be if if the last big up cycle seven years ago, where we're sort of re created over the next few years with the lagging and investment in the offshore area.
Walter R. Wheeler: And if a customer wants to buy the equipment, if we would not allow them to do so, then they would probably go buy it from somewhere else. Sounding our equipment also is a better use of our manufacturing facility, www.plastics-car.com. Okay, do we know anything about the TAM from the last cycle and where the replacement cycle would be if the last big up cycle seven years ago were sort of recreated over the next few years with the lag in investment in the offshore area? Well, with respect to our involvement, you know, it's a closed market. It's not a huge, an infinite sink for product demand, as it were. So that is a careful balance, actually, that we have to monitor with respect to how much we're willing to invest in our rental fleet compared to the volume of work that's being let out for utilizing that. That being said, it's not a firm number because it varies significantly because of the demand itself varying enormously between the oil companies, but that's where we're encouraged because we are seeing more capital investment coming from the oil companies towards the seismic exploration and monitoring of existing reserves.
Well with respect to our involvement.
It's a closed market, it's not a huge and incident sink for product.
Demand as it were so that is a careful balance actually that we have to monitor with respect to how much.
Willing to invest in our rental fleet.
Compared to the volume of work, that's that's being let out for utilizing this equipment.
That being said.
It's not a firm number because it varies significantly.
<unk> of the demand itself varying.
Enormously between the oil companies, but that's where we're encouraged because we are seeing more capital investment.
Coming from the oil companies towards the seismic exploration and monitoring of existing reserves.
Okay. Thank you I appreciate it.
Go back into the queue.
Once again, if you do have a question you May press star one on your telephone keypad at this time.
Our next question comes from Scott Bundy with Moors and Kathy.
Please go ahead. Good morning, guys, Hi, Scott couple of couple questions Robert regarding trade accounts and notes receivable.
Well, 50% of that number will you receive that over the next three to six months.
We will receive a payment, particularly on the mariner or rather quickly.
We anticipate to get have.
A sizable portion of that receivable paid before the end of the second quarter.
Operator: Okay, thank you. I appreciate it. I'll go back into the queue. And once again, if you do have a question, you may press star 1, the telephone keypad at next. Scott Bundy, Good morning, guys.
So so Rick with what appears to be close to 50 plus million dollars.
What.
What are you guys thinking about this as it relates to that amount of money and the fact that it's growing very nicely.
Operator: A couple of questions, Robert, regarding trade accounts and notes receivable. Will 50% of that number be received by you over the next three to six months? We will receive payment, particularly on the Mariner order, rather quickly, and we anticipate to get a sizeable portion of that receivable pay before the end of the second quarter. So, Rick, with what appears to be close to $50-plus million, what are you guys thinking about as it relates to that amount of money and the fact that it's growing very nicely? Well, I mean, we have operational needs for that money. I mean, to the extent that, you know, we do anticipate our rental revenue will see a hit to the extent that that $20 million contract, for example, that was going to generate more incremental revenue over the course of time is going to represent a deficit in the near term.
Well I mean, we have operational needs for that money I mean to the extent that.
We do anticipate our rental revenue will see a hit to the extent that that $20 million contract. For example that was going to generate more incremental revenue over the course of time.
Is going to represent a deficit in the near term and these gaps that we that we mentioned too which seem to be a seasonal affair with some of these offshore exploration activities and seismic projects that were involved in so that money will go a long way towards operational needs.
At this point in time, and then we will certainly examine whether.
There are other deployments of that cash that makes sense.
So regarding PRN or Theres still.
Potential final investment decisions out there that you guys are aware of that you might be associated with.
There are.
And as we've said before you know those we don't expect anything to really happen. This fiscal year towards the conclusion of those discussions, but yes. There are still discussions associated with DRM systems with more than one oil company.
Walter R. Wheeler: And these gaps that we mentioned, too, which seem to be a seasonal affair with some of these offshore exploration activities and seismic projects that were involved. So that money will go a long way towards operational needs at this point in time, and then we will certainly examine whether, you know, there are other deployments of that cash that make the difference. So regarding PRM, are there still potential final investment decisions out there that you guys are aware of that you might be associated with? There are, and as we've said before, you know, we don't expect anything to really happen this fiscal year towards the conclusion of those discussions, but yes, there are still discussions associated with PRM systems with more than one oil company as they examine either initial data that they've acquired to give them a better feel for how they want Lastly, guys, regarding quantum, can you give us an idea, and I'm just going to use the word, of pilot programs associated with these people who are, you know, quoting, where you guys are coding activities. Are there a number of pilot programs out there?
They examine either.
Initial data.
We've acquired to give them a better feel for how they want to instrument a permanent situation on those reservoirs.
And that that is exactly why that it's not going to be imminent when that happens.
Lastly, guys rigor.
Regarding quantum can you give us an idea.
Can you use the word.
Pilot programs associated with these people who are quote.
Quoting.
Where you guys are quoting activity there are a number of pilot programs out there.
Yes, there are actually several that are under discussion.
I don't think we believe all of them are going to happen all at one time.
They will incrementally be ones that come to pass.
But there's definitely more than one out there and of course, we're still talking to the government and various situations about new deployments of that technology with our.
Walter R. Wheeler: Yes, there are actually several that are under discussion. But I don't think we believe all of them are going to happen all at once. They will gradually be ones that come to pass, but there's definitely more than one out there. And, of course, we're still talking to the government in various situations about new deployments of that technology with government agencies as well. So as part of this CapEx, a result of these pilot programs that you are putting to work out there. No, I don't think there's any significant CapEx involved in what needs to go on for evaluation.
Government agencies as well.
So as part of this capex.
As a result of these pilot programs that you are.
Putting to work out there.
No I don't think Theres no theres no significant capex involved and what needs to go on there.
For evaluation that's interesting.
Uh huh.
Okay got it.
They're just not large.
I got it enough for them to make an evaluation is what you're telling me that's exactly right you got it.
Okay. Thank you.
Thanks Scott.
If there's no further questions at this time I will now turn the floor back over to Mr. Rick Wheeler for any additional or closing remarks.
Alright, well, thank you Natalie and thanks to everybody that listened to our call today, we look forward to speaking with you again on our conference call for the second quarter of fiscal year, 2024, which will be in may so thanks and goodbye.
Walter R. Wheeler: That's interesting. Hmm. They're just not large.
Walter R. Wheeler: I got it. Enough for them to make an evaluation, is what you're telling me. That's exactly right. You've got it. Okay. Thank you. Thanks, Scott. If there are no further questions at this time, I will now turn the floor back. Thank you to Walter Wheeler for any additional work. All right. Well, thank you, Natalie. And thanks, everybody, that listened to our call today. We look forward to speaking with you again on our conference call for the second quarter of fiscal year 2024, which will be in May. So, thanks and goodbye. Thank you. This does conclude today's Geospace Technologies First Quarter 2020 Earnings Conference call. Please disconnect your line at this time and have a wonderful day.
Thank you. This does conclude today's Gsv's Technologies' first quarter 2020 earnings conference call. Please disconnect. Your lines at this time and have a wonderful day.
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