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Edited Transcript of DWSN earnings conference call or presentation 27-Feb-20 3:00pm GMT

Q4 2019 Dawson Geophysical Co Earnings Call

PLANO Mar 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Dawson Geophysical Co earnings conference call or presentation Thursday, February 27, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James K. Brata

Dawson Geophysical Company - CFO, Executive VP, Secretary & Treasurer

* Stephen C. Jumper

Dawson Geophysical Company - Chairman of the Board, President & CEO

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Presentation

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Operator [1]

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Statements made by management during this call with respect to forecasts, estimates or other expectations regarding future events or which provide any information other than historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the company is unable to predict or control that may cause the company's actual future results or performance to materially differ from any other future results or performance expressed or implied by those statements.

These risks and uncertainties include risk factors disclosed by the company from time to time in its filings with the SEC, including in the company's annual report on Form 10-K filed with the SEC on March 6, 2019. Furthermore, as we start this call, please also refer to the statements regarding forward-looking statements incorporated in the company's press release issued this morning, and please note that the contents of the company's conference call this morning is covered by those statements.

During this conference call, management will make references to the EBITDA, which is a non-GAAP financial measure, and a reconciliation of the non-GAAP measure to the applicable GAAP measure can be found in the company's current earnings release, a copy of which is located on the company's website, www.dawson3d.com. The call is scheduled for 30 minutes and the company will provide -- will not provide any guidance.

I would now like to turn the call over to Stephen Jumper, Chairman, President and CEO of Dawson Geophysical Company. Please go ahead, sir.

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Stephen C. Jumper, Dawson Geophysical Company - Chairman of the Board, President & CEO [2]

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Well, thank you, Ashley. Good morning. And welcome to Dawson Geophysical Company's Fourth Quarter and Year-End 2019 Earnings and Operations Conference Call. As Ashley said, my name is Steve Jumper, Chairman, President and CEO of the company. Joining me on the call is Jim Brata, Executive Vice President and Chief Financial Officer.

Before we get started, just a few things to cover. If you would like to listen to a replay of today's call, it will be available via webcast by going to the Investor Relations section of the company's website at www.dawson3d.com. Information reported on this call speaks only of today, Thursday, February 27, 2020, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening.

Turning to our preliminary fourth quarter and 12 months ended December 31, 2019, financial results. For the fourth quarter ended December 31, the company reported revenues of $33.6 million, an increase of approximately 21% compared to $27.7 million for the quarter ended December 31, 2018. For the fourth quarter of 2019, the company narrowed its net loss to $5.8 million or $0.25 loss per common share from a net loss of $11.8 million or a $0.51 loss per common share for the quarter ended December 31, 2018. The company reported negative EBITDA of $788,000 for the quarter ended December 31, '19, compared to negative EBITDA of $5.4 million for the quarter ended December 31, 2018.

For the year ended December 31, 2019, the company reported revenues of $145.8 million, a decrease of approximately 5% compared to $154.2 million for the year ended December 31, 2018. For the full year of 2019, the company narrowed its net loss to $15.2 million or $0.66 loss per common share compared to a net loss of $24.4 million or $1.07 loss per common share for the year ended December 31, '18. The company reported EBITDA of $6.3 million for the year ended December 31, '19, an increase of approximately 31% for the year ended December 31, 2019, compared to $4.8 million for the year ended December 31, 2018.

During the early part of the fourth quarter of 2019, the company operated a peak of 4 crews in the United States, primarily in the Permian Basin region, including 3 large channel count crews. Crew activity in Canada was minimal during the fourth quarter of '19. The fourth quarter and early part of the first quarter in the U.S. historically has been challenging due to shorter days -- fewer work days and the holiday season. The winter season in Canada concludes at the end of the first quarter of 2020. Upon completion of the Canadian season, equipment will redeploy to the Lower 48 in the second quarter of 2020. As in recent quarters, the majority of the company's projects are on behalf of multiclient companies in the U.S. with some activity directly for exploration and production companies.

I will now turn control of the call over to Jim Brata, who will review the financial results, then I will return with some final remarks and our outlook in the first half of 2020. Jim?

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James K. Brata, Dawson Geophysical Company - CFO, Executive VP, Secretary & Treasurer [3]

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Thank you, Steve. And good morning. Revenues for the fourth quarter of 2019 were $33.6 million, an increase of 21% compared to $27.7 million for the quarter ended December 31, 2018. As stated in our earnings release issued this morning, during the fourth quarter of 2019, the company operated a peak of 4 crews in the U.S., primarily in the Permian Basin region, including 3 large channel count crews. Crew activity in Canada was minimal during the fourth quarter of 2019. Fourth quarter and early part of the first quarter in the U.S. historically has been challenging due to shorter work days and the holiday season. The winter season in Canada concludes at the end of the first quarter of 2020. Upon completion of the Canadian season, equipment will redeploy to the Lower 48 in the second quarter of 2020. As in recent quarters, the majority of the company's projects are on behalf of multiclient companies in the U.S. with some activity directly for exploration and production companies.

Cost of services in the fourth quarter of 2018 was $30.8 million, an increase of 8%, compared to $28.5 million in the same quarter of 2018. General and administrative expenses were $3.8 million in the fourth quarter of 2019 compared to $4.2 million in the fourth quarter of 2018. Depreciation and amortization expense in the fourth quarter of 2019 was $5.2 million, a decrease of 23% compared to $6.8 million in the same quarter of 2018.

Net loss for the fourth quarter of 2019 was $5.8 million or $0.25 loss per share compared to a net loss of $11.8 million or $0.51 loss per share in the fourth quarter of 2018. We recorded an income tax benefit of $93,000 in the fourth quarter of 2019 compared to an income tax benefit of $409,000 in the same quarter of 2018.

EBITDA in the fourth quarter of 2019 was negative $788,000 compared to negative EBITDA of $5.4 million in the same quarter of 2018. An EBITDA reconciliation was provided in our earnings release issued this morning.

Now I'll highlight some results for the year ended December 31, 2019. Revenues for the year ended December 31, 2019, were $145.8 million, a decrease of 5% compared to $154.2 million for the year ended December 31, 2018. Cost of services for the year of 2019 was $123 million, a decrease of 7% compared to $132.9 million for the year ended December 31, 2018. General and administrative expenses were $17.2 million for the year ended December 31, 2019, compared to $16.3 million for the year ended December 31, 2018.

Depreciation and amortization expense for the year ended December 31, 2019, was $21.8 million, a decrease of 27% compared with $30 million for the year ended December 31, 2018. Net loss for the year ended December 31, 2019, was $15.2 million or $0.66 loss per share compared to a net loss of $24.4 million or $1.07 loss per share for the year ended December 31, 2018. EBITDA for the year of 2019 was $6.3 million, which is an increase of 31% compared to EBITDA of $4.8 million for the year of 2018. An EBITDA reconciliation was provided in our earnings release issued this morning.

And now I'll highlight some balance sheet items. Our balance sheet continues to remain strong. As of December 31, 2019, we had debt, including obligations under financing leases, of approximately $4.2 million; cash and short-term investments of $33.6 million. Our current ratio was 3.6:1, and working capital was approximately $47.4 million.

And with that, I'll turn the call back to Steve for some comments on our operations.

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Stephen C. Jumper, Dawson Geophysical Company - Chairman of the Board, President & CEO [4]

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Thank you, Jim. As stated in our earnings release issued this morning, our fourth quarter and year-end results for 2019 improved compared to the comparable periods in 2018. While the company reported a decrease in revenues for the year ended December 31, 2019, our net loss was substantially reduced, and EBITDA increased by more than 31% compared to the year ended December 31, '18.

Gross margins for the year ended 2019 improved by approximately 2% as a result of improved crew efficiencies, increased utilization of recording channels and energy source units as well as continuing success with our cost-control initiatives.

While fourth quarter 2019 results were below those of the company's third quarter, our fourth quarter results showed significant improvement compared to the fourth quarter of 2018. Management believes that the company's ability to successfully field large-scale deployments is a contributing factor to Dawson Geophysical's success as the industry continued to transition toward channel and energy source business model and away from the traditional crew count model. Despite this improvement, the company's fourth quarter 2019 results were negatively impacted by the completion of several large projects early in the quarter, client delay that moved the start of new projects into the first quarter of 2020 and lower utilization of recording channels and energy source units. Utilization was suppressed into the early part of the first quarter of 2020.

Capital expenditures for the fourth quarter were $748,000 and totaled approximately $3.6 million for the 12 months ended December 31, 2019, primarily for maintenance capital items. The company's Board of Directors has approved an initial capital budget of $5 million for 2020. As Jim stated earlier, our balance sheet remained strong with $33.6 million of cash, restricted cash and short-term investments and $47.4 million of working capital as of December 31, 2019. The company has notes payable and finance leases of $4.2 million as of December 31, 2019.

The oil service markets remain challenging as the capital spending levels of exploration and production companies remained somewhat constrained and unpredictable. Utilization visibility in the second half of 2020 remains unclear. As of the middle part of the first quarter, the company is near full utilization with 3 large crews operating in the U.S., primarily the Permian Basin region, and 3 crews operating in Canada. Based on currently available information, the company anticipates the same level of activity through the end of the first quarter of 2020 with the 3 large crews in the U.S. operating well into the second quarter of 2020.

While the seismic market remains challenging, conversations with our clients, primarily providers of multiclient data libraries, are positive for continued levels of recent activity through 2020.

And with that, Ashley, I believe we are ready to open the call up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We now have a question from John Potratz of Researched Investments. (Operator Instructions) There are no questions at this time.

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Stephen C. Jumper, Dawson Geophysical Company - Chairman of the Board, President & CEO [2]

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Okay. I appreciate that. Thank you, Ashley. And I want to thank everybody for listening in to the call. We look forward to speaking with you again in 90 days, and hope everybody has a great day. Thank you.

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Operator [3]

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Ladies and gentlemen, that concludes the call. Thank you for your participation. You may now disconnect.