Ion Geophysical Corporation

Greetings, and welcome to the ION Geophysical Fourth Quarter Earnings Conference Call. At this time, our participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anybody should require assistance during the conference, please press star zero on your telephone. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Rachel White, Vice President, Investor Relations. Thank you. You may begin.

Good morning, and welcome to ION's fourth quarter 2020 earnings conference call. We appreciate your joining us today. As indicated on slide two, our hosts today are Chris Usher, President and Chief Executive Officer, and Mike Morrison, Executive Vice President and Chief Financial Officer. We will be using slides to accompany today's call, which are accessible via a link on our website, iongeo.com. There you will also find a replay of today's call. Before we begin, let me remind you that certain statements made during this call may constitute forward-looking statements. These statements are subject to various risks and uncertainties, including those detailed in our latest 10-K and other SEC filings, including our recent registration statement, which may cause our results or performance to differ materially from those projected in the statement. Our remarks today may also include non-GAAP financial measures. Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our earnings release issued yesterday. I'll now turn the call over to Chris, who will be in on slide four.

Thank you, Rachel. Good morning, everyone, and thanks again for joining us today. Today I'll discuss our fourth quarter and full-year performance, strategy execution progress, and operational highlights. Mike will elaborate on our financial results and bond restructuring support agreement. Then I will wrap up with our outlook and strategic elements for success in a rapidly evolving market that presents exciting new energy transition and digitalization opportunities. Given considerable press coverage in the U.S., I will also touch on what we believe to be the negligible impact on our business of the Biden administration's brief suspension on oil and gas leasing and drilling permits, given ION's diversified global footprint and international offshore focus. We've delivered substantial sequential improvement in our revenue and earnings in the fourth quarter. We continue to benefit from the refined strategy, cost cuts, and digital approach we outlined in early 2020. While our annual revenue decline is consistent with the contraction in E&P spending, our net loss improved, by $11 million year over year, primarily due to the previously mentioned strategic structural changes and associated cost reduction. As expected, the impact of COVID-19 and associated oil price volatility was most pronounced on our new ventures program activity and our offshore services and equipment sales. Given that data sales tend to be disproportionately impacted by budget cuts, and our sector saw a nearly 50% decrease in multi-client data spend in 2020, I am encouraged with our relative performance for the year. I am also pleased with the progress we made executing our refined strategy this year in spite of unprecedented macroeconomic disruptions. We successfully acquired the initial phase of our mid-North Sea High 3D multi-client program and built backlog for the significantly larger second phase this summer. We commercialized our proprietary Gemini source technology, now seen as the key ingredient for unveiling better 3D images, the de-risk drilling, and the complex geological settings where customers continue to invest. The combination of our entry into the 3D new acquisition multi-client market and commercialization of Gemini enabled us to increase our backlog the last two quarters, reversing several consecutive quarters of steady decline. We continued to build out our successful portfolio of low-cost, high-return 3D data re-imaging programs and started benefiting commercially from the global 2D data collaboration we signed with PGS in June 2020. We installed our first Marlin smart port system, demonstrated several new valuable use cases through pilot projects outside of our core market, and won a highly competitive tender for 17 additional ports. A qualified pipeline to optimize port operations and maritime energy logistics is building respectively, and I will provide more details on that shortly. We have also advanced our market testing for new ESV-compliant offerings. ION's digitalization push across our traditional processes continues to benefit the company. For example, we leverage machine learning to accelerate turnaround and improve 3D images on new full waveform inversion workflows, tightening collaboration with key clients. Using artificial intelligence, new automated source and vessel steering technology enabled customers to improve accuracy in 4D reservoir monitoring services. We also leveraged new digital engagement tools to better connect with customers and joined the AWS partner network to accelerate our cloud offerings. Lastly, from a corporate perspective, we settled a decade-long patent litigation with Western Geco and that's the divestiture of ION's non-strategic equity interest in the Innova joint venture and agreed terms to extend our bond maturity four years to 2025. In our E&P technology and services business, while we had anticipated lower new venture activity in 2020 due to the impact of COVID-19, our data library sales were more resilient, declining only modestly compared to prior year. In fact, well over 50% of our multi-client data sales in 2020 were 2D in a very tough year for expiration, highlighting the value of this global asset. This was driven primarily due to shifts in the customer landscape, new data access frameworks, and the increasing need for E&P clients to high-grade their portfolios for better returns as we enter the energy transition. Furthermore, we are delighted with how that global 2D data collaboration agreement we announced with PGS has progressed. There has been enthusiastic engagement to jointly market the aggregate of nearly 1 million kilometers of data, and both companies are commercially benefiting from more diversified exposure to shared deals globally. In the spirit of the agreement, we are also collaborating on several license-round data packages and reviewing new joint 2D programs. More strategically, as mentioned last quarter, we achieved a top 2020 ION objective to enter the 3D new acquisition multi-client segment with our Mid-North Sea High project, tapping a larger addressable market for us. Our historical focus on 2D exploration data products has constrained us to only 3% of the expansive $2 billion to $3 billion global offshore multi-client market, which is now dominated by 3D data. Importantly, this portfolio pivot towards 3D, which we commenced initially through 3D digital remastering and re-imaging, will shift our new product investment closer to the reservoir, where customer spend tends to be more consistent and programs have larger scale revenue and earnings potential. We believe we can materially increase our market share, even without significant improvement in the industry. This is premised on our combination of 3D multi-client data re-imaging success, our Tier 1 imaging credentials, in our new Gemini seismic source technology. Clients have now had significant exposure to the quality of the ion offering through our nearly 350,000 square kilometers of 3D re-imaging program. Our experience and relationships creating 2D programs translates very well to the 3D program generation. To put the scale into perspective, typical new 3D towed streamer surveys cost between $20 to $40 million, with about five times the revenue and earnings potential of a new 2D program, and at least twice the revenue and earnings potential of a 3D re-imaging program. Our mid-north state high 3D survey will soon provide needed data coverage over more than 14,000 square kilometers of one of the few underexplored sections of the UK continental shelf. Phase 1 data was collected in Q3 of 2020. Play opening drilling and our Phase 1 fast-track imaging results are rallying support for Phase 2, where we have secured permits and underwriting for the main seismic campaign this summer. we will deliver final 3D data by mid-2022. Since our program launched, the UK has awarded additional acreage within the survey area, increasing the potential client base for this new data asset. The multi-client project pipeline reflects our shift, which began a year ago, towards new 3D programs. Approximately two-thirds of the leads are now 3D, evidence of our credibility as an emerging 3D multi-client player, and is stuck with an established seat at the table moving forward. Since commercializing Gemini in September, E&P companies have specified our innovative extended frequency source in a number of tenders. Gemini has been deployed on its first proprietary 90-day project for Supermajor operating in the Middle East. In this long-offset 3D code streamer survey, Gemini's unique source spectrum will efficiently improve subsurface characterization with considerably less environmental impact. Our innovative energy source significantly extends low frequencies while limiting higher frequencies to a more ecologically friendly range. In order to meet market demand, we are building Gemini capacity and seeking regulatory approval in additional jurisdictions. This new ingredient for improving subsurface information differentiates ION as we expand into the larger 3D multi-client market while maintaining our asset-light approach. We continue to commit the majority of ION's imaging capacity to distinguish our multi-client offerings and deploy the balance of resources on challenging proprietary projects that keep ION's Tier 1 imaging tools sharp and relevant. This year, we had high praise from our clients for outstanding results in complex geology spanning the Middle East, Brazil, and West Africa. We earned accolades and repeat work for imaging improvements achieved using ION's proprietary toolkit, including full waveform inversion and least-worth RTM on 3D and 4D streamer and seabed nodal projects where our virtual teams managed very tight exploration or development timelines. Despite radically shifted work methods in 2020, I've been really impressed by our advances in cutting-edge algorithms and the use of artificial intelligence to enhance subsurface imaging, ultimately improving client decision-making. This success led to several umbrella contracts with key customers, which will help de-risk our 2021 revenue plan. Our operations optimization group, which primarily caters to acquisition contractors, has been impacted by the approximately 40% reduction in offshore seismic activity this year. During industry downturns, Most of our software revenue stems from large multi-year command and control subscription. In spite of the distressed market, we secured seven such contracts this year. Although we don't treat these long-term contracts as backlog, this recurring revenue lease model provides stability for our software business. While we have been focused on diversifying our offerings outside our core market for some time, it has become increasingly important given the slowdown in seismic activity. We are leveraging our technologies and core competencies across software and devices to to optimize decision-making in new maritime markets such as port operations, energy logistics, and real-time infrastructure monitoring. In our software group, we continue to gain traction around our Marlin platform through trials and tenders. We cannot disclose details of the competitive tender we initially announced on our third quarter earnings call in November. Our Marlin SmartPort software will supply port management services to 17 of CalMAX harbors over an initial four-year term. CalMAX Ferries is the UK's largest ferry operator, managing 29 routes to over 50 destinations across 200 miles of Scotland's west coast. Marlin Smartport will support CalMac's modernization program to enhance efficiency, improve the customer experience, and reduce environmental impact. This award validates the competitiveness of our offering and demonstrates Marlin Smartport's breadth to support a wide range of applications, including port and ferry management. Several Marlin trials were underway this quarter for both ports and port-to-platform logistics. We are optimistic about accelerating adoption given the range of valuable use cases uncovered through these deployments. Our team is laser-focused on identifying and optimizing the most expensive aspects of offshore operations to maximize client value. Marlin is the only system that links vessel plans and schedules to live offshore activities, providing greater control and transparency in the management of offshore operations. By monitoring plans and providing feedback in real time, Clients can minimize fuel consumption, decrease emissions, and operate with just-in-time efficiency. In a large port-to-platform logistics trial, we completed a highly successful proof-of-concept with an E&P major and are now entering into discussions for what we hope will be a long-term contract. The offshore costs of transporting cargo can be 10 times higher than onshore costs, which Marlin can help reduce by identifying operational efficiency gains. The largest variable expense associated with offshore transit is fuel. When vessel route plans prescribed slower steaming to destination, a 10% reduction in speed can yield up to a 19% reduction in fuel burn, which can significantly reduce costs and emissions. Based on initial results, we see our clients' investment in the Marlin platform yielding a rapid payback and multi-sold return on their investment, making it attractive for near-term implementation. This multi-month project also helped us clarify valuable development requirements for vessel scheduling, planning, and activity tracking common across a number of Marlin opportunities. Between trials and tenders, we are building a robust pipeline of prospects across maritime energy logistics and port operations and believe we are now in position to convert a healthy portion of these opportunities to revenue in 2021. We are expanding our revenue potential in the space through two primary avenues. First, We work through direct outreach for partners to launch pilot projects, quickly demonstrate value, and then progress to pay subscriptions for near-term revenue. Secondly, we are responding directly to tenders for port and logistic software or providing the software SimOps component within much larger offshore infrastructure tenders. In 2020, ION joined the AWS Partner Network as a collaborative effort to accelerate development of our cloud solutions and provide faster adoption of our cloud-enabled products. AWS helps partner companies to build, market, and sell their offerings by leveraging the immense AWS ecosystem. Access to this broad partner network allows us to connect with other companies within the ecosystem to explore relevant business opportunities, such as extending Marlin's functionality with new capabilities or data streams. Last quarter, our devices engineers enhanced our sailing system to include artificial intelligence-based automated source and vessel steering technology that improves 4D repeatability. To accurately image changes in reservoir fluid, seismic surveys need to be repeated as closely as possible in a dynamic marine environment. Based on achieving a 50% closer match to the desired positions during the sea trial, we secured backlog for one of our sailing systems for most of 2021. Our devices group is also progressing to promising adjacent market initiatives that are synergistic with our software business and have the potential to accelerate our diversification efforts across operations optimization. Our initial focus is to develop real-time monitoring solutions to address the challenge of increasingly aged offshore infrastructure and new decommissioning initiatives. We are directly addressing the E&P industry's focus on improving the safety and environmental compliance of offshore oil and gas operations, which aligns with our focus to provide data and analytics to enhance decision-making. Most regulators require subsea infrastructure to be inspected periodically, the frequency of which can vary from months to years. Typically, it's an expensive cursory inspection with high levels of uncertainty. Clients are seeking advancements in technology to cost-effectively shift from reactive to proactive systems that provide more frequent, accurate measurements to assure safe operating environments. We have advanced a promising concept with our new Well Alert branding to monitor wells. Our technology integrates subsea sensing and communications technologies to monitor temporarily plugged and abandoned wells. Well Alert provides on-demand sensor readings, system health and status checks without the need for costly ROV operations. Our prototype has been in development for a year and has attracted strong E&P interest. We are focused on securing funding for sea trials in 2021. We continue to develop defense and commercial interest in our demonstrated capabilities for managing potential waterside security threat. It's a longer wavelength business development cycle with defense customers. Following a successful initial demo at Antics 2019, we were invited back by the U.S. Navy to participate in a second pilot, which was canceled due to COVID-19 in 2020. We are now scheduled to participate in Coastal Trident 21 this summer, where we plan to showcase our progress. With that, I'll turn it over to Mike to walk us through the financials, and then I'll wrap up before taking questions.

Thanks, Chris. Good morning, everyone. We had some positive momentum in the fourth quarter with sequential revenue and earnings growth. Our fourth quarter revenues of $27 million improved 68% sequentially. Revenues in our E&P technology and services and operations optimization segments increased 98% and 20% on a sequential basis, respectively. Both increases are the result of proving market conditions and year-end spending. We also generated positive adjusted EBITDA in the fourth quarter. Importantly, our backlog, the majority of which we expect to recognize as revenue over the next year, increased for the second consecutive quarter due to both our strategic entry into the 3D new acquisition multi-client market and commercialization of our Gemini source. Backlogs, which consist of commitments for multi-client programs and proprietary imaging and reservoir services work, was $20 million, or an 11% higher sequentially and 4% higher versus last year. Moving to the full year, our revenues of $123 million were down 30% compared to the prior year, consistent with a reduction in EMP spending. While full year 2020 revenues declined by over $50 million, Our net loss improved by $11 million, primarily due to the over $38 million of structural changes and associated cost reductions implemented during the first half of 2020. Our full year adjusted EBITDA with $18 million compared to $32 million last year. E&P technology and service segment revenues of $92 million decreased 27% for the full year, primarily due to delays in new program activity, as well as reduced E&P spending levels. The COVID-19 travel and border restrictions impacted the timing and availability of crews for new acquisition programs and delayed access to existing data for new re-imaging programs. Operations optimization segment revenues of $31 million declined 37% versus the prior year due to the COVID-19 related slowdown in offshore seismic activity and associated demand for our services and equipment. As a result of lower revenues, we expected to consume cash during the quarter. Our cash balance was $38 million at the end of the year, including the $23 million we drew on our revolver last March. Our total liquidity, defined as a combination of our cash balance and the available borrowing capacity under our credit facility, was $45 million. We still expect to close the $12 million sale of our 49% equity stake in the non-strategic Innova joint venture. However, the regulatory review is taking longer than anticipated, and we now expect to close during 2021. To address the up and coming maturity of our 120 million second lien notes, we executed a restructuring agreement in late December supported by the majority of our bondholders. Once complete, the bill will extend the bond maturity by four years to December 2025 with a lower 8% interest rate and have the conversion feature to reduce our financial leverage as we execute our strategy over the next couple of years. In addition, shareholders have the opportunity to participate in concurrent rights offerings to minimize dilution from the transaction, which provides us with additional liquidity for increased flexibility to operate the business through the tail end of the pandemic and to support our diversification strategy as markets recover. Based on the 20 trading day VWAP since the initial announcement, the equity price was set at $2.57, and the conversion price was set at the high end of the collar at $3, protecting shareholder equities. While it has been worth the extra time to reach this mutually beneficial conclusion, because we are now within 12 months of the maturity date, the debt became current on our balance sheet, triggering a going concern issue. We are working diligently to complete the restructuring transactions and anticipate doing so by the end of March. We are holding a special meeting February 23rd to request shareholder approval on three proposals. The first is to approve the bond restructuring transactions. The second is to increase the number of shares available for issuance required to execute the deal. The third is to allocate a small portion of those shares to provide appropriate stock-based incentives to retain key employees, which I'll speak to in a moment. We expect to execute the exchange offer and the rights offering as soon as practical thereafter. For additional details regarding the transactions, please refer to our press release issued on December 23rd. Before I wrap up, I'd like to discuss the rationale of our long-term incentive plan, or LTIP for short. Following the restructuring and recapitalization of the company, it'll be critical to re-incentivize our key employees. We have to be able to compete to attract and retain the best and brightest, especially in our industry, which is cyclical by nature. To keep costs down since the protracted downturn began in 2014, we froze merit increases for five years and reduced salaries for four of the last seven years, making equity-based awards an especially useful tool during these tough times to provide value to our shareholders by allowing us to attract and retain first-rate talent while tying our employees' financial compensation to the performance of the company. We're asking shareholders to approve adding 3.5 million shares to our LTIP. Once approved, the shares available in our LTIP will approximate 7% to 9% of the shares outstanding on a diluted basis, post-restructuring and post-conversion, and will enable us to continue providing employees appropriate stock-based incentives over the next five years. We ask that you support this initiative and would like to extend an open invitation to call us to discuss in more detail. With that, I'll turn it back to Chris.

Thanks, Mike. In summary, I'm proud of the strategic achievements we've made this year in spite of the challenging market backdrop combined with the 30% reduction in our cost structure. As described, both business segments are singularly focused on diversifying into larger markets, We entered the 3D new acquisition multi-client market and demonstrated traction with our Marlin software business. We ended the year with a sequential improvement in revenue, earnings and backlog, positioning us well entering 2021. Looking ahead, while we expect the market will remain challenging in the near term, we have seen a number of positive developments. Oil prices have rebounded to their highest levels in a year, and the energy industry has started to recover. There's consensus around increasing oil price stability for 2021 and the consistency of which is as important for investment as the price itself. While clients are still setting budgets, analysts expect the offshore E&P market to modestly improve as the year unfolds and digitalization to continue growing at a rapid pace. Oil and gas exploration on a point-forward cost basis remains competitive with the development of existing opportunities and assets, reporting the case for investment. We are starting to see license round activity return in key ion geographies, such as the recently announced Brazil Round 17 taking place later this year. However, our near-term visibility on seismic activity remains limited due to the uncertainty related to COVID-19 and the NP budget. With regard to the administration's recent review order that temporarily suspends new exploration activities on public land, we do not expect a material negative impact on ION's business. Our global footprint and diversified portfolio helps minimize the impact of any regional or country-specific slowdown. We are primarily focused internationally offshore, and unlike our peers, We have a fairly modest exposure to the U.S. Gulf of Mexico. Furthermore, our 2D data library there is mature, an exploration-focused offering which has been well-subscribed by incumbent blockholders. Our small 3D data library assets onshore North America cover private, not public, acreage. Should the moratorium result in longer-term change, this could drive large-scale EMP company portfolio investment more towards international offshore, which would be well-aligned with our offerings. The EMP industry is participating in the energy transition at an increasing pace, and the pandemic has only accelerated these changes. With wide-ranging views of the shape of change, companies are assessing impacts on their E&P portfolios and carving out distinct energy strategies. Within oil and gas, E&P companies will seek to rebalance their portfolios to geographies with lower cost barrels, better fiscal regimes, and lower carbon footprint. These trends, along with associated M&A activity, will create opportunities for new players and for ION to license data to a new set of customers. There is also a clear focus on reducing costs across the sector, augmented by real benefits from digitalization initiatives. We believe long-term oil and gas fundamentals are strong and that exploration and development will continue to be a salient requirement to meet the world's energy needs for some time. The energy industry will remain important to ION, but we are also diversifying into attractive new markets where our technology and capability have the potential to create value. We have recrafted ION's platform for growth, including recent realignments within our executive team to more effectively map our strengths to the evolving industry dynamics. We are highly attuned to the industry's driving themes and rapid pace of change and are developing new offerings that capitalize on our strengths and address key industry needs associated with the energy transition, such as portfolio rebalancing, environmental compliance, sustainability, and digitalization. With that, we'll turn it back to the operator for Q&A.

Thank you. Ladies and gentlemen, at this time, we'll be conducting a question-answer session. If you have a question, please press the star and then the 1 key on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, that's star 1 for questions. Our first question comes from the line of Carly and Rush from Oppenheimer. You may begin.

Thanks so much, guys. Can you give us a sense of how much of your OPEX spend is going towards exploring the adjacent markets and building? out those opportunities for the platform.

Yes, hi, this is Chris. Thanks for joining, Colin. Yeah, so right at the moment on the adjacent market stuff or new market stuff, I would say about a just fixed cost with developers predominantly and business development teams within our software unit in Edinburgh. So it would be about probably currently growing up to about 25% of the cost base in Edinburgh. So that's, you know, it's not a huge number relative to the cost base we have in the company, but it's a significant focus. We have a dedicated team for Marlin and all the Marlin web apps that cover all the use cases for ports and EMP logistics, et cetera. So if you think of the revenues of the operations optimization unit, half of those being software. You know, if you think about, you know, the cost base of that being about 25%, let's say.

Okay. That's helpful. And then as we go through this recovery and coming out of COVID, can you talk a little bit about your expectations around, you know, normal seasonality for the revenue for this year? Do you guys have a sense of that at all at this point?

Yeah, I would say, you know, sticking with the premise that we've said before and others have said, too, that we think it's a broad U-shaped recovery. for the EMP space and probably seismic as well. So our premise has been really, you know, we started the year strong in 2019 and then hit hard by the pandemic and oil and gas geopolitics. And obviously got some momentum in Q4 there that you're seeing. And, you know, I think there's a seasonality element there. And we think that, you know, the first half of 21 will be, you know, a rebuilding and restabilization period with the second half being stronger and being the back end of that broader U-shaped recovery. So I don't think Q4 is the beginning of the U-shaped recovery. I think that's a seasonality piece pretty much. So I think we still have an overprinted on our business and our peers do too is the kind of the Q4 effect on data library buying. But going forward, I think as we get more into the 3D acquisition, which It can be taking place at any time. It has underwriting. You get away from just that data library buying at the end of the year. So our EPTS business will also be, you know, more stable and probably steady through the year rather than back-end loaded. And then the software and devices business will be pretty steady state.

Okay. And then the last one is this really around kind of customer activity and what you're saying. I'm assuming that a lot of folks have gone through kind of restructuring for the customers and are now potentially getting more focused on how they're going to carry forward from a strategic perspective. But can you just talk about levels of activity and quality of activity with those customers?

Yeah, so the customer landscape is very interesting, and I'm sure you've seen all the highlights out in the market with the big oil shifting some of their portfolio into energy transition, things like wind and solar, wind predominantly. If we look at our customer base that is normally the buyers of our data library, it's all over the map. You have some that have finished some of their cost cuts that came out of last year and finished their reorganizations and have announced budgets, and some of them are up slightly year on year, which is good. You have others that have actually, ironically, have actually cut some of their D&G people but announced larger budgets. You have others that are still finishing their cost cuts. Some of the big majors are still kind of doing that. Um, but you've got smaller companies who are, you know, have budgets and are buying. So it is, there is a varied number of strategies, uh, that you're seeing between the large oil companies, the national, the national oil companies and smaller independent. Generally speaking though, I would say that the sentiment is better. We're having a lot more dialogues than we were, you know, middle of last year. T4 was really the marker where the dialogue started, uh, increasing. And, uh, And really in just the last few weeks we've seen coming out of the kind of quiet, you know, New Year period, some of the major companies that had delayed really almost no projects last year are starting to discuss projects. And you also see that with some of our acquisition customers. You know, they're starting to get backlog in bookings that they were mainly projects delayed from last year that have now moved to the right into 2021. So as expected, that's just starting to happen. And we're seeing a knockoff, you know, benefits there with that customer base. And we're also seeing that. with the end customers who support that also for our data library buyers and underwriters of new programs. Okay. That's the program.

It's improving.

It's broadly, you know, I characterize that as, you know, you've seen comments that E&P spending offshore could be up, you know, single digits in 2021 versus 20. And, you know, we're seeing that level of dialogue occurring.

Okay. Awesome. Thanks, guys. Thank you.

And once again, that's star one for questions, star one. Our next question will come from the line of Amit Duan from H.C. Wainwright. You may begin.

Good morning, Chris. Hi, Mike. I have a lot of strategy on my line, so if you guys can hear me clearly, I'm happy to follow up on the line. But you can go ahead and ask questions.

Hey, Amit, your line's breaking up a little bit. I didn't catch that. I don't know if Mike did.

I'm getting a lot of static on my ring, guys. Maybe I'll just follow up offline. Sorry about this.

Yeah, it's a little bit better now if you want to try it again.

Okay. So with sort of a diversified set of opportunities now and the energy market beginning to stabilize, do you anticipate backlogs? continuing to grow sequentially for you and potentially 2021 being a revenue growth year for you compared to 2020?

Yeah. So, I mean, I did catch that. So, yes. So, two questions is with the energy transition and also the increasing of backlog we've talked about and the customer activity I just described, do we see 2021 being a growth year and backlog increasing? So, yes, we do see 2021 being a growth year over 2020. So, yes. And then, secondly, yes, we do see we're happy with the backlog growth we've had sequentially. We do anticipate we will see that growing. You know, right now the backlog is comprised of underwriting for the Mid-North Sea High 3D program this summer and also backlog around our proprietary services, both data processing, imaging, and processing. and the Gemini source on a proprietary basis. So that's all good, and I think we will consume some of that, obviously, but we'll see it also – I think we'll see it growing as well.

Thank you. And then does the backlog right now have any software revenues in it, you know, like Merlin, et cetera, as well?

Yeah, so I did mention that in the script. Basically, and we've said it before, that we actually don't count the – The long-term software contracts has backlog. We could, I suppose, but we just traditionally have not. So for apples to apples, we keep it simple. But we have actually seven contracts, long-term contracts for software that really provide the bulk of the revenue stability in the software business. Of 2020 software revenues, well over two-thirds of that came from software long-term contract subscriptions for the core software, which includes Marlin in it. And then we also have two long-term contracts now with Ports and Harbors. So that takes us to nine long-term contracts, and we have one software-as-a-service Marlin contract with one of the largest oil and gas companies on the planet. So that takes us to about ten long-term contracts in software. So that provides essentially backlog for the software business.

Let me see. Let me give you that.

I'm going to say, you know, something like $12 million annually kind of thing. That's backlog let's say.

In terms of the Innova, is it anything particular from a regulatory perspective that's building the transaction up or is it just bureaucracy?

Yeah, it's a little bit of everything. I think it's COVID-19 pandemic slowdown on pretty much everything. It's also some bureaucracy. you know, between, between, uh, the buyer and the filing requirements they believe they, they have and the, uh, and the, uh, and the provision of that information from kind of the, you know, the Chinese side of our joint venture, this delicate issues there. So I think that's what's taken the time, you know, still, still good interest from the buyer, uh, good, you know, general support as well from, uh, from BGP, who's our co, you know, coach, our partner in the JV. So, uh, I think we'll get there. We're not forecasting it for Q1. Let's put it that way.

Understood. That's all I have to say.

Thank you. Thank you so much for joining.

Thank you. And I'm not showing any further questions in the queue. I'd like to turn the call back over to Chris Usher for any closing remarks.

Yes, thank you, operator. Yeah, thank you, everyone, for joining the call today. I answered an interesting inflection point with coming out of the pandemic period and building backlog and identifying growth for the future, both in our core business and in our new businesses. And we're pretty excited about that. We look forward to having you back on the Q1 call to see how we're progressing that and progressing the closure of our bond restructuring as well. Thanks so much.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.