Ion Geophysical (IOGPQ) 9 Aug 202020 Q2 Earnings call transcript

Greetings, and welcome to the ION Geophysical Second Quarter 2020 Earnings Call. At this time all participants are in a listen-only mode [Operator Instructions].

As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Ms. Rachel White, Vice President, Corporate Communications for ION Geophysical. you. Thank

begin. may You

Good Conference welcome joining Call. operator. Quarter us ION's XXXX Earnings We morning, you, to and Second today. Thank appreciate your

Chris Executive on President Chief Executive Financial indicated Slide our and today As X, Vice President and and Officer; are Chief Officer. Mike Morrison, hosts Usher,

you have website, accessible using also I accompany slides will Before I today's the iongeo.com. via to of items call, over call few turn are link to our on cover. There them, which replay call. a to a We'll find be today's

SEC statements in we during statements. results our me Before these to including XX-K projected let remind to filings, begin, performance are or other in statements call you various materially statements. forward-looking which that constitute may detailed from certain and those uncertainties, latest those made cause may risks differ subject this our These and

Our remarks non-GAAP measures. today also may financial include

including be will non-GAAP details our turn Slide most can measures I'll who over yesterday. measures, regarding the X. directly on these financial now call reconciliations to Additional found release to issued Chris, GAAP the begin financial earnings in comparable

how quarter you, strategy us. Today, second for Good execution morning, joining in Thank summarize ION our progress market. everyone. again we'll to positioning Rachel. Thanks we're and succeed challenging dynamically results, a

commodity with the Our to on COVID-XX related contraction expectations second and services and oversupply results to were weighing customer spend our market demand quarter consistent the due broader oilfield oil price. destruction

imbalance dramatically During the and quarter, reduced prices. a supply reached that global demand historic

quarter contraction position. years. impacts meet some We demand, first to asset-light our adjusted comparable harvesting and year-on-year of EBITDA we've the X mitigated or increased of even broke despite anticipated made. half By realizing revenues. reductions are X than cost line the our to all condition, Cash we the significantly, equal robust revenues first XX% our despite from sales nearly a and prior primarily in our on lower than near-term business quickly scaling market revenues unprecedented However, bottom cash to - greater

The and had am top health pleased very of of creative few and adoption dynamics responded fulsome technology engagement documented remains remote have employees' progress our solutions strategy of conditions team. I success with given our execution and like our basis weather our our strategy and COVID-XX through market cash of the the They've Thankfully, market as enable I'd I'm priority. to new disruption operations. cost minutes we very acceleration execution, us development dynamically proud digital position, on well-being of few model. Our very lower cases, ultimately improved combination near-term improve. spend recent a will volatility. market thrive to the and of

call, combination the market a we prices quarter caused of during a in oil resulted As that mentioned surplus our disruption production significant than coronavirus in drop increased to more and last demand first XX%.

fundamentals overall end E&P As focus E&P and on slowdown Absent the the so, have than the visibility customers is to to low demand remain demand outbreak, necessary will budgets in the second and a activity projected receive an is at their half in In a for the Since that XXXX demand normal. then, ION'S should drive in of of has Onshore Analysts steeper declines we and already oil a more a crude now, amid a couple the and challenging. and a agreement production E&P seismic signed which more than record by are positive to catalyst be be ease. seen have challenging quarters and and average disproportionately had given June. rebounding balance data second pandemic transformation than next digital material tell note, gas of reduce $XX our factors second expect E&P of seismic than improved low quarter rebound the the Supply in us were Brent the budget should and year, delayed Even market. cut. help oil wave XXXX half therefore, the watermark broader of and prices often as offshore activity severe a the and second contraction persistent year, back discretionary supply. reached major an to doubled uncertainty but also are was seismic recovery, given is April, continue of purchases more North demand suggest nexus international mid-XXXX. Exploration cut offerings positive to recovered expected expected restructuring spending ecosystem. of market, our but year. levels this the near-term has COVID-XX, cost On to the has half which restrictions on global result, of higher This is geographic by E&P should offshore. the reductions XX% America by stabilize levels

data a sales seek of by first, are tend regimes They simpler year's activities for in existing adopting to of with fiscal event. to aim budgeted among likely high-grading different transition of be remote will budget. with barrel, envision first geographies the ROI to platforms coupled improved they mix multiclient While unique our with also operations improving aftermath of often in machine to rebalance more portfolios automation. achieve return Many companies E&P improved data this rapid and geology, better and learning, customers this to the cut their be access, and broader digital with will that footprint. lower COX cost their

continue from expect present. benefit the strategic We early to landscape main this initiatives drive opportunities to our

imaging XD and have largely our the to this to investment earnings activity company large tends Services project later portfolio XD limited next North but potential. XD multiclient pre-funding we our priority majority acquisition new COVID-XX reservoir for X may more thrilled shifts year program to new data about $X to to Tier start of $X the E&P larger secured installation. E&P disruptions avoid XD revenues A library closer where Gemini from program from year and This wind offshore a & expect enter programs and I'm new We we This market. in and summer. phase salient be consistent investment to to major is the a strategy further Sea, market. acquire multiclient an travel reduced our Despite challenges, revenue our Technology XD builds to the shift which capital initial Historically, seismic-sourced leverages farm exploration-focused, of scale a this multiclient multiclient business. Let's and technology. and X% to shift success new offshore our billion reimaging billion diversification on was the

area, partners. As new a last most customers data. and program the program limited cost sections in making play XD perspective. risk excited and one of this from to Continental new reminder, Shelf, the be shore is covers drilling our where conservative sanctioning opening is approach existing infrastructure, by cost other Recent of prolific there requires interest financial which underwritten or underexplored that close modern U.K. it attractive This multiclient a

reimaging Ministry highly in with We new Energy. successful continue to Mauritania first Mauritania. on of multiclient a the in build with in project program portfolio programs the of low-cost, partnership Mines XD It's Petroleum our and high-return

Leveraging XX,XXX of square enhance we and include pending Ministry's reimage resolution data's kilometers and industry XD XD support. latest to can experience, about extensive the our and data, scope and data the subservicing the of expand reimaging kilometers XX,XXX aim integrate technology will about We to sites. significantly

fit library that we in sold strategic company's data areas rounds encouraging the dramatically data On reduced side, it without amidst license to a is spending regime, ambitions.

landscape. In Panama, example, For located licensed a energy stagnant plan, our to we of is license library companies significant an theme in potential an round their they helping adapt providing and E&P for to developing which resurgence new government gas had while the offshore is example how a been strategically Panama-SPAN, awaiting transition as resource changing hub, with the combined as inform announcement. important LNG gas of a E&P

as complementary rebalance We are continuing quarter XD business will seismic comprehensive more The to innovative data-rich companies progressing lower collaboration library strategic for to develop and million signed increasing E&P ways efficiency. for develop to environment their an cost portfolio. with opportune time agreement XD integrated data comes uniquely be we a E&P are during creating business comprise to and and inform PGS The reach to operators. The looking and time, data model. well identify prospects data marketed, seamless ION the over at is PGS jointly partnerships nearly an efficient X intend combined kilometers global decisions of library will data. exploration our

testing technology We to enhance in is pull are for technology. There improved source differentiated compelling existing that the and more It's robustness further in are with many validated have a challenges. extended and around frequency system's seismic. Gemini, improvements imaging strong market now along data this extensive quality, deploy ingredient and and after key compliance. applications appraisal and development which substantially field support recognition We and applications, environmental industry-funded solving our better mission-critical continuing enhanced with uniquely

has and We regulatory deployment Gulf the of with and approved Mexico progressing the nicely Gemini of we bodies later geography. first expect approvals in the The are readily summer. in other to our U.S. been have commercial permits this U.K., technology by in relevant approved

able with group offset the was offerings. some in slowdown Our Operations to digitalization activity seismic Optimization of

quarter positive AnyWare The services-led ecosystem. several operations strong management. seismic in E&P deployments E&P given remote of of their contractor on see and that uptake us during infield decision-making. offshore ION comprehensive digital across reporting progress the help ION AnyWare line with solutions and awareness initiatives phrased will that headwinds our business the the situational dynamic to transformation continue technology survey majors We the that support portfolio received supported facilitate significant We feedback dashboard also heretofore revenue protect and customer

is and now new outside noted last and the we and of ports push call, to our oil bridgehead gas As on time harbors. believe hard

Authority We operations. feedback scheduling allocation SmartPort optimizing Port Marlin continue and port on automating berth from Montrose and to how and receive excellent is endorsements

the and Our concerted promising including all ION a authorities. webinars, opportunities campaign, several port and range of globally across the marketing sales industry-sponsored large generated

from out in X,XXX We year. port vessels midst Marlin new of and per are up SmartPort trials to the Europe from Africa in rolling handling XXX

the questions. and days, before XX deployed feedback strategic also providers. global ports contacts. and the financials, are in life are all out of vessel us to with Amazon so far, then early partnerships walk underway. different cycle, other Mike now it traffic as through early the trials solution Alongside in the I'll With to such we data technology our to this capabilities are wrap up XX I'll broaden been to value alliances validating turn taking on in sizes actively companies service of now is proposition Web securing we industry customer space over and the has We It progressing and product with geographies relatively actively that, our Services,

everyone. morning, Good Chris. Thanks,

& $XX our our revenues of comparable revenues quarter were prior revenues million much quarter and second just one line our with higher, lower focused years. example. X XX% the were Services The segment, higher In to near-term year-to-date Chris is deals. revenues, on on revenues cells. in in E&P multiclient XX%. data second We activity library down equal clients Panama-SPAN declined and million Despite Our of lower than $XX mentioned Technology line expectations to specific sight of from much better deal more engagement had due or transaction

Latin to we multiclient accounted focus investments of areas attractive is quarter's XX% revenues. for significant in programs our which on value in extracting flowing, from continue are where We developing this capital and America,

activity. Services Reservoir and revenues to Imaging proprietary tender XX% Our due lower decreased

& the total of we are at the pleased backlog since July. to end the a quarter increased of million However, Technology E&P of $XX our approximately that close Services XX%

XX% & to the primarily Our impact revenues Software Optimization segment, restrictions Operations decline, XX%. were $X on this Optimization down Services at highs a Services million, business, just year were ago. of was which due record travel COVID-XX segment a Within our revenues our

X key with extended However, multiple clients for our largest of our we call, years. since last command-and-control contracts

While a times. model long-term reoccurring software don't our business lease such we as treat nice software revenue backlog, in the hedge provides contracts our of

seismic due $X this revenues customer sales base. of share. a quarter spares repairs million were generated to loss Overall, of to towed we a XX% streamer loss per net decrease $X hard-hit a million, or and of Our $X.XX Devices a reduced equipment

a a April or Special yesterday. as Excluding reported our were be our existing per issued to determined related million found can tables pursuant entirely onetime and this special ought to reconciliation detailed $XX of of this relief to this share special quarter. items, primarily an in release items totaled our net guidance $X.XX received forgiven we we and of in recorded $X financial P&L. through government million we adjusted that credit loss of results in press items quarter therefore, A the be loss

us the this along mitigate bottom Our clearly the significant to helped with line. government impact program, relief, reduction cost

response a we flexible in asset-light efforts finish the $XX were million conditions, macroeconomic to Cash from will a lesser sequentially, previous of our reminder, them. And quarter. million receiving months net quarter extent, earlier year. the our for nearly XXXX, by these mentioned of impact this as back In fully the April, reductions in announced all over cost government As $XX strong and, second realizing relief. fully forward, benefit nearly reductions we adverse on $XX first realized we from the scaled cost excluding revolver borrowings, of to remaining The primarily another X cost of January. harvesting we increased sales structure and our going million added combined permanent cuts building

$XX we and was and million, market from COVID-XX due lower precaution balance as to million $XX revolver, including gas from oil drew our pandemic which cash uncertainty prices. Our

a total balance defined as facility, under revolving and cash $XX increased from the borrowing Our our combination liquidity, $XX capacity million. to credit of million our XX% available

result can to and We deliver INOVA the joint in in closing liquidity $XX quarter, weather sale of cash our of in second the lower closing subdued of near-term conditions. are due fourth subject a stake consume we expect we as our but anticipate quarter, the should the to to quarter we XX% cash which nonstrategic market our confident some revenues, third a conditions venture, to the boost our improved However, liquidity million equity position.

actively address scheduled December our with to With its We resolve XXXX. and that back banking optimistic it year, I'll are the advisers that, well we maturity bondholder evaluate best our to bond largest our and to way Chris. remain ahead in turn working this of still it will

our precarious business quickly Mike. market meet to our to and second asset-light our ability in In scale performance the demand. summary, Thanks, quarter demonstrates effectively

reduction expect That We X, gas demand times past even with be expected shareholder structural like energy much Challenging to and we're deepwater impetus demand. to material changes the are COVID-XX, the year, has is also in XXXX, after that opportunity. in maybe over like, and starting rebound. wave Today's second creating activism looks a it the occurred transition, fundamentals and the said, challenging trough market create to horizon that steadily the same in XXXX evolve. been oil next seismic in with

less been We to So shifting closer last to how are consistent. streamlined for cuts. where focused revenue to multiclient program more be to we SmartPort larger, we potential which by and offshore, Marlin We on important have are our by And for evolving each Building portfolio and XD positioning impacted this trials ultimately our ourselves promising our year tends XD strategic internationally execution limited to focus a underway most multiple recent a and higher budget and X business our is focused on for been E&P has initiatives the further success? the high years, we improve priorities better the expand market, reservoir new active deliver business. our return We the singularly cost segment multiclient and results. prefunding secured diversifying XX%, into established success market. structure reimaging and position in acquisition on have

We our markets. are enhance these that offerings entry our partnerships into can accelerate developing or strategic

launching new finding including impact remote We volatility, business new the clients, price remotely oil new of have ways and measures taken mitigate working coronavirus to for to our exploring and before offerings engage. models

on infrastructure or enhancing as data such cloud. to such transformation value that migrating substantial the as deliver our either back-office our our digital digital embarking are IT library We to add platform programs pragmatic clients efficiencies

the and valuable in technology We are ION can environment. be more how relevant current exploring

our areas. We technology, revenues on the our healthy to XXXX. new ratio on in differentiation revenue maintain of that R&D of year, XX% XX% continuing invest are technical than to and key Last to maintain track more we're for from stemmed

to energy value With meeting we strategy turn while demand We continue portfolios. improved that, existing rebalance accelerating back to it for to companies in lower and and are needs we maximizing and well believe market given will next position remains solutions. We adoption expect I basis the Q&A. technologies rationalize operator we'll cost robust, the of the digitalization an important decade, for over near-term while growing believe role our data E&P are new and cash disruption progress. positioned weather execution play

first [Operator Instructions] of Our proceed & Rusch Company. question. with question comes Colin the your from with line Oppenheimer Please

questions. But can for for that much I the level just opportunities are can is also lower situation? Thank morning. Colin. Kaye And the you're now demand. the from a Good to speak this oil start, on guess seeing to taking from environment you have in so interest you This arising bit obviously, willing Noah an expand that environment? we acquisition companies of you be maybe more to on partner might

you. hear This you me thank Noah, is Chris. Can okay?

I Thanks. can well. hear you

Perfect.

acquisition mean say you M&A? Or when So acquisition data? new you of opportunities, you mean

Yes.

Yes.

Okay.

So yes it lower demand. is a so of period - certainly,

is Although level remarks, and as Mike both And at backlog mentioned for the and certainty discrete the to interest more mentioned of around in actually steady that settling sure, yes, be sight markets partnering ports script. markets we're as and looking projects level said a harbors. some our what's with prior, line hence, in in pretty actually and than there in core But traditional there's at client the we the as I prepared well engagement a new on improvement there but proceeding. lower of seems or

a at capabilities entrepreneurial other the who ours, some actively are new readiness to together. with readiness there's and have that are to markets very I think folks complementary and we're loves companies working work were that penetrating,

familiar new that's and as important good, we all with. markets that's less enter really we're So

a historically, they really data E&P time well. the group in land business, have that the to all partner the beneficial a so out on our where we've risk So share definitely a support in space of commented we the side, core by in going done as really our objectives data PGS to the that's increasing there risk. and provider figure forth. And shift and We lot. with drilling of that on Interestingly the customers And and that do our is also large-scale take enough, which less might commercially end costs library, the community a going acreage that haven't and around need having we they who's partnership And and share maybe then balance XD to some year. data that's the us much is seeing XD, library. looking as customers, of enter we're as their where XD We're partnered brand help that our strong beyond more projects, together recognition work the we sheet.

So we're and with others, dialogues we partner there. looking have active to

a So company. and collegiality, there's let's discussion more say, within lot our peer

the keep that Now whether not, of if might I a mean, don't and that you But anything if that fit leads M&A you open your what probably happen be consolidation, who's understand doors did partnership and start a those going. in how - way that's to good know. at I things terms or not together, some of

That just It's one makes I sense. and Yes. guess Thanks color. helpful very more.

but of on give during thinking prepared the touched for on an XX your refinancing it bit the converts. those a maybe on plans You update more just remarks,

Sort what looking be where are in you are milestones should process? at some of for? we the And

that on definitely making that. I'll Mike. to progress over Yes. we're hand I mean

Thanks, it, Noah. Chris, Yes. Yes. and appreciate

pretty bond our is I'll So you, concentrated. tell

who definitely with to, and them. know talk we that in those we're to So conversations

but the is look So what everything kind to thinking we're through what of go the I'm of and on like, table. it not could going details

- have our say its So to well is is with one to objectives it would maturity. dealt what of I we prior key

executed this still it the So really that. and on place in of we're end think to to have year. by We track for looking the plan

we So say announcing it we But and I then, more just would is hope and between announcing now, I'd is remain it now in will something right expect to progressing, - and sometime optimistic. be - be detail.

Great.

guys. So, much we'll appreciate Thanks and so update. stay tune the

Thank you, Noah.

proceed Thank Instructions] H.C. with your question the question. you with comes [Operator Amit line Wainwright. next from Please Our of Dayal

you. Chris. morning, Thank Good

morning. Good

now, right going do So with how respect total Mauritania and win many on? North the project, Sea to including the the total programs have like you programs

How do quite How you. many other going other that have programs Is - we hear on? what said? many you I didn't

many programs How currently? total

Yes.

We have programs multiple underway.

we've multiclient large jobs are sanctioned beginning We have new that XXXX since reprocessing XD underway. - about reprocessing the of - multiclient

So another. we've and got we've Uruguay got Brazil,

So to data continue [ph] our to Brazil. - add and Batania set we large in

have in other So one those banked phase been of the well. projects, next is Brazil which have year of we the as last program. ongoing, And

projects we the that And for backing X we time, all XD. or it's so, as new hasn't North whether So the do in going we reprocessing the yet or large X XD Sea, commenced have that XD mentioned the said.

have We other of several line also XD. a on sight large

focus really rather but than XD of So looking we probably We're larger less new have shifted start programs to scale. pushing new our them and XD programs.

dramatically this time So we have year. could than last sight line which of things, more start this of kind year of some those on

ability so attributed energy lines, The pressure the to those the just versus rebounded operate to from the now much along right somewhat to market energy seems the markets? in So have how work, sort order and volatility revenue a of lows out the revenue and normally of year, you activity would and can't do projects little new be you But pressured bit? of remain up. picking to the seems adding is go if are

Right.

on it. the So two this demand there's is reduced budgets from to earlier the One aspects year. impact

projects to of living are get more where objective And reduced obviously happening past. have in of there's situation framework. is, we're in course, a within company that new than but the So budget oil do projects, budget pie that we less our to

that. on and and - are still world making already So before making it's on progress changed, the we're that progress we

other sanction people quarantines good land thing. them them you once moving is you them, But to geographic constraints related offshore. or execute can around yes, So the and that's thing a the given

But report from to with we lot on our data. shore things two vessel obviously, a capabilities. have We're operations can mitigating umbrella of that remote support So that ION go under some things AnyWare does of physical that. with own a the

extremely around do of do partners worked work that having to their suppliers vessels work. or our All and have quarantines the ready who well

protocols. orders closed people up been have the as country Some understand or opening they're

other thing but U.S. understand industry is vessel say the industry providers for hard very only have worked is with that I'd around. move trade world. And open worldwide, The the our help kind helping to and of working in not in IADC, governments, the a to association, up orders the them our that has COVID-XX and people preparedness

a pressures So I of some think there, but that real hit quarter, on last the in there the that was a beginning of bit. quarter, the up be

now So get think to ability done our improving. some of I stuff that is

I think [Indiscernible] of it things down I did on for But improving those both slow would fronts. QX. it's in say

last closing I are fourth potentially And just this appreciate you to respect sale, the one me. maybe it in that looks Understood. With from INOVA color. just the like quarter.

completed than so Just and why just taking to is diligence the is that be it's much process is needs longer else there taking Just in the it coronavirus time? expected? - wondering Or anything issue?

Yes.

to probably coming we So was to is the going be of some requirements the just one second antitrust that to in knew - the into year issues. due it clear this half

perky, been coronavirus other things. slowed that's So been that and by down and has

shares box and we're potential our of dialogue So that's having that before that, is going the ticked to have has regulatory track. of proceed. Other can I things acquirer one that the nothing to than the regular with

really and through process that it's they how So well get that.

Chris. Thank you, Understood.

much. Know. Thank so you

concludes comments. for Mr. That final I'll back gentlemen. turn the question-and-answer and session. any ladies Usher you, Thank our floor Instructions] to [Operator

on morning. progressing on participating highlighted. for you third you, how our and quarter look to we're everyone, backlog continuing our the progress Yes. key updates to and much. you We this we speaking areas call the initiative improve so further that conference forward Thank on you giving Thank with on

you. This concludes today's conference. Thank

You your may for time. Thank you at disconnect your this lines participation.