GEOS - Earnings call transcript Q2 2019 | Geospace Technologies Corporation

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Operator

Good day, and welcome to the Geospace Technologies Second Quarter 2019 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rick Wheeler, President and Chief Executive Officer. He is joined by Tom McEntire, the Company’s Vice President and Chief Financial Officer. Today’s call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. now Wheeler. to is over the It Rick to Instructions] my turn pleasure floor [Operator may you Sir, begin.

Rick Wheeler

our our I’m Good Chief Geospace and Tom for of McEntire, Technologies an quarter Keith. the Chief performance. of Financial an conference XXXX second be Thanks, morning, I’m will Vice will call the and with offer Executive Officer, the start second then which joined few financial questions. Company’s the call Company’s remarks, and Officer. Wheeler, the in-depth Rick welcome and then to a fiscal provide I’ll President of overview year. Tom open after by for commentary line I’ll quarter final and President the

looking various differences Litigation product uncertainties these capital Private knowledge as defined Some while those or based Both can results today’s operations undesirable recognition, statements factors of or in are and what and actual our Reform say include outcomes in comments our about of on forward Securities XXXX, markets, including revenue All such and lead XX-K planned forms risks present statements may filings. expenditures. SEC considered perception XX-Q Act to or unknown control. the uncertainties cannot known we imply and predict and performance discussed risks are by and from in influenced we and be

this call discussed sensitive of Investor the time of months to and market the as listens Because this of link the convenience, date recording financial mentioned, second on six matter year is a after quarter of page be will close, morning Yesterday As XXXX. fiscal being results it accurate our may not the geospace.com of replay. we for one on Relations information we first the released website. our a the

market OBX periods. As stated specifically markets our results rental growth oil in both gas our fueled our and segment increased for

best our recording XXXX, by in in past months Geospace the posted second three ended four world continues merits bottom the March scheduled and of the fiscal delivery revenue reflect systems X,XXX fact, quarter. three the XX,XXX continued Use currently financial around and ocean fiscal results OBX quarterly in our strengthen our for years our rental are OBX quarter years. another to stations investment. deployed for In stations XX, fourth and by performance highest the are Approximately customers

its steady adjacent confident the markets. in adjacent addition, experienced gas along markets demonstrated gas help path that our continues remain of the and to the our in same our performance overall from segment over XX, markets, segment slight XX% XXXX, segment combined from increased and three year we as to a periods period will and respectively, ago. this Despite month March mitigate ended demand market the product by revenue oil our from continue growth. and reduction In revenue fluctuations XX% In six compared that oil

As equipment the mentioned, in rentals driver of OBX both periods. were main our

$XX increase due primarily in the million quarter, stations of products entered fourth quarter revenue seismic the at repair seismic fiscal from occur addition, a before expected services. for year major an additional the to generate to XXX duration. to for in minimum greater contract of traditional of days. demand into another that an a equipment nonrefundable OBX we rental marine periods recently to time is is expected products OBX compared XXX which we about to Revenue contractor international X,XXX with the In traditional XX% contract at its and our second our from over saw rentable the ranging deposit utilized Delivery inclusive

periods over recognition a certain contract increases comparative primarily decline $X.X products respective an in segment product XXX% last these be year's associated of last the one is wireless Since our both slight nonrefundable revenue previous demand due million X% fiscal by of periods OBX year, the this the of compared Negatively second quarter rentals of year deposit of integral are of part revenue wireless for over with and our both noted reflected months. a cancellation to It from and first land an where from just included GSX impacting customers. of OBX However, systems sales sensors. six XXXX, XXX% months the should line, products. and rental specialty to reductions reduction six of lower were that experienced year over our

products foreseeable and for remains revenue our demand remain products demand Although and weak in growing opportunities. the marine investment strong plan products, OBX will believe the needs we continue these we to our future, for relatively market for wireless satisfy our land-based to

We borehole revenue reservoir result Our month increases. from three don't both reservoir and reductions our services reservoir-related borehole six products the reductions last saw experience month to services. tools in lower of our any a direct revenue of products, compared seismic March XX, ended year. periods XXXX expect significant and for are and sensors sales to The

extends permanent for acquired available However, adopters products PRM November industry for PRM from of of users fiber reservoir revenue based of ongoing with systems, these or by in enhanced our options customers. domain OptoSeis in optic our foreseeable potential the sensing potential we the greatly XXXX, see on Furthermore, discussions believe monitoring, we is and which future. our technology this there's potential

We fiscal open tender system to year in PRM later XXXX. expect an for occur

to from begin However, not that we such ultimately awarded fiscal award an if such revenue tender year would XXXX. believe earlier a than earned any Geospace, were

X% same quarter, a Our adjacent of year. million of produced markets $X.X the segment the period last in revenue from second reduction

reflected months less first under these from a year, of revenue just X% products fiscal previous the from year. the For reduction six of the

is demand will reflect reflect believe for segment we lower for manufacturing Despite imaging Revenue offset, to demand products cable in contract in offshore periods, and market we of meter-related adjacent water growth. incorporating quarterly July In solely of the emerging our as our variations and XXXX. the Technology protect international increases. markets. our products borders this comprised this both seismic services Quantum decreases of acoustic and for demand Sciences focuses by For products in products segment physical Quantum, known and to our domestic from specialty technology Quantum in perimeters acquired products on saw sales partial subsidiary, secure the offered services. both revenue monitor, and from segment, markets thermal continue the our and which

segment from the For of at comparative XXXX, $XXX,XXX ended the no there somewhat three negligible this and are the periods. XX, revenue. periods prior recency and for And respective our year of due March periods six to acquisition Quantum, month revenue $XX,XXX was of

near from in significant the anticipate this segment term. contributions not do we noted, As revenue

opportunity meaningful more our design, this over to detail. and revenue and financial the perimeter in However, in Tom the continues efforts this point, create deployment for border for believe At we the ongoing to markets the of manufacture progressive an future. contributions I'll for technology now call security turn

Tom McEntire

good and morning, Rick, Thanks, everyone.

I compared everyone our like million $XX.X to March of In this begin, quarter yesterday's Before press earnings release revenue I XX, morning. second of last that would revenue our not guidance for will we reported during million. we remind to specific provide $XX.X revenue year's call or any XXXX, ended

or to quarter was $XXX,XXX per diluted share. $X.XX last the a million diluted for or of loss compared income $X.X net year's share of per net loss Our $X.XX

year. $XX the compared million March $XX.X revenue months XXXX, last to ended For million revenue X XX, reported of of we

revenue $X.X repairs marine and revenue and primarily by follows: an million higher $X.XX year's for gas traditional loss diluted or to compared year. services our product was million This decrease Our for net increase X the was of $XX.X specialty $X period net diluted six last primarily as of million compared million compared to in X% million, This $X.XX loss Our or increase revenue of caused per increase our a revenue products. revenue. year. share Traditional is demand per million, second sensor last $X.X breakdown quarter product for and an reflects $X the revenue A months XX% month for demand our the decrease of of last was for revenue $X.X of share. products lower was oil product to

of decline last nonrefundable a deposit a demand revenue recognition periods offset contract. from $X.X by Both compared $X.X product GSX fiscal of a a customer's quarter was X quarter OBX $X.X periods, in revenue compared was million, of last the for and a revenue million rental for systems million year. compared Wireless of from include $X.X an to increase decrease million, the for revenue year. year. to products. sales XX% our XXX% Our for rental second million, an of partially resulting million resulted from of of our increase $XX.X wireless revenue the to was million months both In product last of product $XX.X the was the for demand of XXXX Reservoir $X year revenue XXX% increase revenue cancellation of higher of

XX% For of also the decline of of from periods revenue reservoir product last service X-month compared products and to decrease both revenue for borehole period, due a to decrease was a a $X decrease for The revenue $X.X year. demand in primarily our was in revenue. million million,

our segment. product markets to on adjacent Moving

to Our our offset These year. quarter Imaging cable for last X% of product higher $X.X The XX% resulted slight revenue in $X.X to for compared compared product $X.X revenue $X.X X% our year. a second industrial a million increase decrease products. Industrial $X.X second $X.X revenue for million, to million, $X.X product million was of year. the revenue revenue Imaging was was for products decrease contract increase month film revenue for our revenue to was product from for revenue the period demand six million $X.X the of in million, last of the decrease periods six by products. a in periods were partially decreases an of of demand a X% for revenue. primarily increase manufacturing demand both last was offshore revenue month attributable in decrease The both increase compared lower period for year. meter an service compared million, last million to of quarter water and

our $XX.X second Our of was gross gross gross million OBX The million compared in periods from resulted high wireless utilization for million was by $XX.X were caused a profit to gross million. for I’m rental manufacturing cost six a fleet higher gross last month period our increase $X $XX.X the year. $X factory both of the decline by profit profit of – million, over profit caused increase XXX% OBX year’s increase significant in sorry, The margins profit revenue to quarter last product an and compared rental profit unutilized activity. gross of in only

for While due rental million and demand the product second until These operating for to gross increases utilization of year. expenses businesses. an of nodal we and has our the the profit to incremental traditional Operating landbased gas compared our expenses recent XX% $X.X expect were remain month the for and to were significantly associated our last demand OBX low last seismic products, million XX% quarter $XX.X the product for increases expenses oil OptoSeis marine of six costs recently to $XX.X increase factory increased products. year’s margins million. wireless Operating million, increase an acquisitions our $X.X compared of primarily operating Quantum with were due to period of our

year XX, For include $XXX,XXX million $X and March investments and were six XX, more. asset or and investments $X.X operating be into expect expenses significant ended respectively. our our respectively. three rental ended for month cash periods the of be the and three demand for plant and equipment, costs and million acquisitions respectively.Cash $XX equipment month the plant we into equipment million year month XXXX, These investments rental were $XX.X these OBX related million XXXX rental and of estimate could property XXXX into fleet We and costs fiscal million the March to six $X marine Because fiscal $XXX,XXX periods cash $X.X approximately equipment month intangible amortization property, XXXX, our total million. our will

cash As a year our we to these balances investments, cash result decline expect XXXX. of fiscal consolidated in

borrowings available agreement of end had balance million cash debt short-term our reflected and were long-term second of quarter at the investments. $XX Our the We under outstanding in no $XX million. credit the sheet

remarks, real and In turn world Houston estate over Rick. and and in are I'll owned leverage. back own holdings clear the without to prepared numerous call that free addition, we the my any That around concludes

Rick Wheeler

as cautiously increased recorded environment, our market continue equipment lingering by to for to gas exemplified Unmistakably, that advantage ocean identified leverage components quarter oil challenges as missed the OBX others. Tom. where marine as segment. rental that very market challenges to Thanks, for bottom our pleased are affected the gas demands segment, reflected continue in improvements affect in profitability industry revenue We're seismic remain highest some and of more surveys. take than the four market well In in net second product our fiscal we will this our and oil I quarterly investments years.

continued We This that back also will emerging that is product future concludes the has create now adjacent believe effective in questions. shown diversification market already opportunities future in and developments turn our segment and current further a I'll our years. for in and Keith both the markets remarks, fiscal call these efforts results, to prepared and over strategy

Operator

[Operator from take instructions] question David Nierenberg We'll Investment our first with Nierenberg Management.

David Nierenberg

I anybody today If hockey multiple suggested would you say fan, have goal. comments is your shots that a on

Rick Wheeler

our doing we're best. Well,

David Nierenberg

to propitious. way take things best win the on are to is And when shots particularly goal,

multiple things, on macro offshore your after the five you wanted to several comments or on. could it view, you a of I point is the coming ask get back near to I of term, I would from In like unpack So year me aspects because goal a looks see for like drought. four if exploration shots some

has Secondly, competitive in think, more I'd PRM today I the used believe about they that be which advantages that past you I a modalities, share like against comments to to OBX are enabling that been have system on may important lot term, in medium Then the this that, you encouraging I been market in please amplify in hear believe your other gain your years. have and space. than

to given you for again, the over then, for I'd about Multiple that. shots in perimeter controversies thoughts amplify like black, to security give to all And finally, about term, like Thanks, as I'd the being longer borders, opportunity the your hear businesses the and long-term So the again. prospects on on well. goal. monitoring

Rick Wheeler

I of me. We'll right. to remind All any it, components you questions and can try address forgotten those if

land XXXX, even part looking more than I in think significantly you're well, over industry We're as the that and historically the the seeing right. certainly marine recovering of XXXX is side.

examine As about XX% it were last and we offshore. discoveries understand year over actually well -- it, of

and of the as towed can to what and overall increasing general So OBX for that's And and actually competitive full seeing general, use is offer give the them earth very quite and to advantages this that needs and capabilities. streamers, motion line data equipment an better our their that quality it. ocean compared discipline from it's ocean we're is preferring bottom imaging that and with bottom industry industry, in The much in expensive as such, the to this were contractors we're from some the fact does and knows respect a demand. those aren't accepting to available science with have other record improvements kind demand the they as efficiencies that seeing equipment cabletype the systems seem have improved using necessarily

as to up were. continuing pursue issues we're it lined all So it those of because

and well traditional aware that where much of certainly enlarged back type of way of On very doing with now, have always have get some more throttled the more seem multiple mobilization audiences of but the year for in acquisition every there's with being has of our an repeated. kind now years, technology proposed those a Systems early, nonetheless, recent OptoSeis industry through they've Monitoring the that broader and conversations of we and those of preference surveys are as back that PRM the advantage expenditures the having that But discussions more to fallen to Reservoir technology. costs capital side, in definitely these Department is

respect has do years So more it feel in with work. more been for so opportunities to in PRM recent we encouraged that sense, than

market an within things. that ever technologies to beginning intelligence to more through evolving offer good react border and that On past made the occurs that and really are subsidiary development respect and security perimeter progress and in that have the Quantum our we those need been extremely changers with Those to and realms. side, there the a still see done lot the in that There's has offer. acceptance are game forward overall reliability monitoring data are enormous capabilities to that that's very the the products much those conceptually such and staring in how gathering

going about into it's that, excited take but some very we're manifest revenue. those time to to So for

Operator

our Dezellem take ahead. we'll from Tieton with Capital. question next And go Bill Please

Bill Dezellem

group also of a questions. have I

would of First that or R&D all, you talk and about why so year was $X.X versus million a up ago?

Rick Wheeler

Sure, as are responsible expenses operating acquisition Bill. of of function I the Quantum and our expenses OptoSeis a R&D I new certainly increased and the products primary Clearly, mean, see to product you OBX those for increases largely the all other of see. some there. that part reflect increases respect with wireless enhancing but to those and you of our that were and that, that believe endeavors a

Tom McEntire

That's right.

Bill Dezellem

versus then, that, little December down SG&A you to was talk quarter. Would see to surprised And a I the please?

Tom McEntire

lost Bill, I to exactly for costs people of driving and they’re But and tend fees for mostly terms driving is what’s variable other have fixed what expenses exactly costs go that. you. I’m legal answer things an for down. and some guess, The comments we I are and that, have to G&A don’t as in up that

Bill Dezellem

the to region Then asking relative jump I exploration this question. in most spirit seeing spirit I’m the of bit? OBX, admittedly picking the what is just or where that’s little question the globe regions the world potential? will a the and And more up And and you are to of of the less on another interest Geospace in

Rick Wheeler

in elevated Even where deep do. to it’s actually in water virtually every It’s feasible an region. this seeing is interest

in So it’s waters, honestly, particular Bill, not it’s global. any international quite localized

Bill Dezellem

Mexico? Gulf And does U.S. that that include of

Rick Wheeler

the Mexico their place use. have of also bottom Gulf yes. nodes where seen certainly a As in far as is I ocean preference know, a

Bill Dezellem

market used split spirit they look? of cables any streamers split what And in would know the from but and who ocean how’s you today traditional suppose I is between being kind or I would bottom that don’t competitors, say that be,

Rick Wheeler

actually information methods have split between for say nodes. the available the stream towed to ocean bottom I Bill, don’t you in traditional Unfortunately, or you that tell

are is seen side ocean traditional products bottom-type work some as of evidence in in with providers, some the instrument and we But see We that used the pronounced marine saw we that in clearly, have which some are spanned products noted industry. increase us, increasing that our streamer of increases for equipment. we most that slight that the the

Bill Dezellem

Thanks to And more, I’m may. split -- so a is just I’m does I push going interested much less modest for little it as large market percentage the -- market share? to really share or a have a bit and if that. understand actually in exact a trying OBX

Rick Wheeler

Well, surveys think ones. the of right some are I now under important considerable

couldn't an is a to surveys market they’re years And number only guestimate really I being not tell technologies certainly I I ambition the tell their even of something I can for maturity. is you can’t these know at guess that again, been wish but -- moreover, some I’m have those seemingly -- But you where of because but I actual, could, I give increasing point fruition of the wouldn’t I So I surveyed but percentage, in share coming don’t now this you correct. time. areas that or that

Bill Dezellem

certainly fine. is Thank you very much. time That said appreciate taken. you have And

Rick Wheeler

Bill. Thanks,

Operator

take We'll Advisors. Sansone question from next with our Chris Sansone

Chris Sansone

is are that with inventory-wise Question you to OBX ocean it quarter. great. have third stations? deployments possible Congratulations you results on It's the Where third The additional up. in the quarter? respect bottom. about stand picking And the your

Tom McEntire

-- more the XX. fleet March fourth large the out we in deployed deployments. We the XX,XXX now think, that are have the those X,XXX. OBXs do there few all delivered but we it's going of are or contract and of in future built that for our bulk those a talked I biggest third being were our will be of it's about of of units Not because quarter, disclosed some in that on right I that quantity about quarter, believe units are Yes. the as

Chris Sansone

units of for year? any then demand demand of how in business Will sense in sense Great. that looking for XXXX next we And see and is rental types the more? deployment similar fiscal is Okay.

Rick Wheeler

that future, of in will point the prognosticate I interest if can geophysics unfold. holds of This has operations that market efficient market this the don't of we view can all evidenced I it this rental the what various healthy know far that data it in and type try continue continue can ways is from and to to the a but to there's say environment. using demonstrate type equipment. contractors that It this remain that of

You to in of see of even contractors sales markets. the these these might products types

And of bit in two be it's -- industry So is unfold in it's to quite optionality there years. yet how determined. this a can

Tom McEntire

on minimum into the year in one is from sign lined say they're But and they And have even now beyond investing the rental I this next contracts right work because capital majority XXX-day of good. up. of And our to nodes general we're the outlook for the have more ones rental we continuing terms. future we market perspective, going the days would XXX that's that keep looks believe the OBX that long-term looking

think I So pretty on is, it but the what Rick quickly. can as change market bullish we're said,

Rick Wheeler

to beyond of And contracts the time. lengths -- to abilities of be these contracts all their extended point, these contractual of duration have Tom's

Tom McEntire

was the we nodes the Chris, of the end quarter at had number XX,XXX. of And

Chris Sansone

sense Great. proprieties how and are might [indiscernible]. said worth considering unincumbered, much is you use overseas, of what's the you be that are unincumbered that Okay. that those guys And any question then regarding estimates imply you have the those [indiscernible] last properties there to properties is and selling of

Tom McEntire

to unable don't we're dry liquidity, leverage that know letting implying create we certainly facilities. anything. We're elsewhere, we really that's if that were And powder. could had do if to -- some gain those liquidity something just we not to I you

Operator

ahead. Research. can Chris Singular next to [Operator Please Instructions] We go with Sakai go

Chris Sakai

business Had I business done had delays. future? that press And a before? canceled the regarding they chances good XX that business who what on are a customer? with the the due to with the do that, will morning. you everyone, customer repeat you question in March they just customer Was Hi had the customer OBX been, release contract rental

WalterWheeler

too I as that can't time to continue as together at as it the that ran but customer with formulate they continuing that reveal can us they trouble were you have the were, with put they opportunities tell on. I far into to trying Well, business us they discussions about are as much to its history

So regions associated the contracts world just have can and timing and capital where also the surveys because times only of opportunities mother these of variations that variables of and a during of with the not some certain year are weather. lot of of nature seasonal but weather, only be explored the

So part, much cancel. a customer. need too reveal about I again, think I of had their that the much in to can't But

Chris Sakai

your what next borehole Okay thanks, big there driver for growth also, quarters? as to going and a far would as be products

Rick Wheeler

the particular product the Sure. category, our product permanent products systems. seismic also products, monitoring those is borehole tools reservoir exist In where category reservoir that and which in that are

the of bottom systems not are on are laid monitor reserves are ocean bottom permanently areas change ocean entrenched often from instrument those the systems, they as how can that these those produce they to them. borehole-type Now they so

revenue the we So revenues have increased where products, for that scale a necessarily fall into large of there history the products possibility product chance and which are past borehole because of that's much because good we're think in in saying shows category, those don't that those times not improvement. those of

Chris Sakai

borehole? But how improvement with don't come you much the see

WalterWheeler

type there's a need borehole amount that investigations and for to the work a to seismic monitoring mean, that. I limit certain and a fracking in all point. done saturation doing of a thatso be certain there's there's Well, needs

just sort that. So I defines of market think the itself

Operator

We'll line go your open. take our private Benny Please question ahead [ph]. next from is Alexandroff investor,

Rick Wheeler

to good hear it’s Benny Hey you.

Unidentified Analyst

Thank again. questions. follow -- you. to Couple good So of

margins wireless. And improve do from the that utilization to much for demand here of are margins First, Tom the you well remain to How said improved. fleets GSX move? on two, GSX for going need

Tom McEntire

I to and Yes, product margins sale margins. not referring Benny, really was rental

now, is utilized saturated the channels with not market And that fully. being are so right

even of we’re GSX product remain a for or in so our our for more channels the occurs. And new some until market products, newer low until wireless there’s margins demand that expecting to

Unidentified Analyst

was looking for on years Thank there you’re you. I at? that any happen potential sales. talk there couple OBX And to talks, get OBX ago, in healthier anything the my of the three to or might market said get is sales, next needs a us for you sales. that’s question lot remember XXXX OBX a but And are that that

Rick Wheeler

contractors There I survey type all opportunities are doing the discussions. are in are are certainly of the presented well to the utilization that that think forth. And number puts examining higher this of them that

to equipment. of the decision potential given by increased and the utilization their type of equipment is this driven largely So, backlog expectation take route. there And of may buy the better discussions activity those

Unidentified Analyst

so again. look you to and much Thank to you talk

Rick Wheeler

You too,

Operator

the And have to further return questions. no it for will Rick I appears we or floor Wheeler any additional closing remarks.

Rick Wheeler

speaking August. quarter Thanks with joined sometime our we And to third our conference you in look goodbye. Thank you, everyone and in call Keith. And forward that today. to thanks call

Operator

Geospace a disconnect Second this Conference wonderful conclude day. time. Call. This Please will today’s Technologies Have lines your XXXX at Earnings Quarter

Geospace Technologies (GEOS) 4 May 192019 Q2 Earnings call transcript