Ion Geophysical Corporation

your conference call begin momentarily once again ladies and gentlemen please stay on the line so Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. THE END Greetings and welcome to the ION Geophysical First Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require assistance during the conference, please press star then 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. Thank you.

Good morning and welcome to ION's first quarter 2021 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'll be using slides to accompany today's call, which are accessible via 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, which may cause our results or performance to differ materially from those projected in these statements. 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 begin on slide four.

Thank you, Rachel. Good morning, everyone, and thanks again for joining us today. During today's call, I'll discuss our first quarter performance, market outlook, and strategy execution progress. Mike will then review our financial results and successful bond restructuring, after which I will close with our roadmap for long-term profitable growth, including promising new energy transition, sustainability, and digitalization strategies for today's rapidly changing market. While we expected the E&P market would remain challenging in the near term, our first quarter results were weaker than expected due to lower multi-client data sales. Many of our clients were restructuring their organizations and finalizing their budgets late into the quarter, which delayed commercial discussions and negatively impacted data sales. This hiatus exacerbated the typical low sales and EBITDA seasonality associated with our first quarter and increased the gap from last year's unusually strong first quarter results where we booked a large 2019 year-end carryover deal. Looking forward, we are encouraged that backlog grew for the third consecutive quarter to levels nearly 50% higher than a year ago, benefiting from our strategic decision to participate in the new 3D acquisition multi-client market. I am extremely pleased with the successful transformation of our capital structure, the result of creativity, alignment, and support across our stakeholder groups. Our restructured balance sheet strengthens our platform for strategy execution to reshape our core data business accelerate our software growth, and diversify our offerings. Mike will elaborate on these transactions shortly. Shifting to the market outlook, analyst projections and client activity continue to suggest increasing EMP spend and demand for seismic data in the second half of the year. Spurred by increasing global demand and ongoing crude oil production limits, Brent pricing, which is most relevant to ION's internationally focused business, has rebounded to pre-pandemic levels. E&P spending is now expected to recover some stability over the next couple of years linked to higher sustained oil prices in the range of $55 to $65 a barrel. In addition, we have seen positive momentum across a number of leading indicators for our business, such as license rounds, tender activity, services engagements, and backlog. We remain cautiously optimistic that market conditions will improve through the back half of 2021. In our E&P technology and services business, our multi-client revenues were significantly lower sequentially, primarily due to reduced volume of data library sales. A silver lining is that the majority of deals in our pipeline remain active, following an increasing pace of customer data reviews of available products and work in progress through the quarter. Disappointingly, the pace of the procurement process did not catch up with the end user interest by quarter end. Backlog, a leading indicator of the trajectory of our business, continued to grow with our entry into the 3D new acquisition multi-client market. We are looking forward to starting the second major phase of our Mid-North Sea High 3D survey later this month. At six times the size of 2020's first phase, this season's second phase will be significantly more accretive to earnings. During the last quarter, we garnered additional industry support for the program and signed a contract with Shearwater for the data acquisition. The field campaign is expected to occur from late May to October with final products scheduled for mid-2022. Based on our phase one fast track results, we expect to provide around 11,000 square kilometers of unprecedented subsurface image quality that provides new insights over a promising underexplored section of the UK continental shelf. Infrastructure-led exploration can deliver faster time to first oil and higher returns, and our mid-north sea high program is close to shore-based infrastructure where the relatively low cost of development makes it attractive for existing players and new entrants. During a challenging period of uncertainty, our team has remained focused on our change in product mix, earned industry credibility, and cultivated a robust pipeline of new 3D program opportunities. This quarter's exclusive agreement we announced for 3D development rights offshore Kenya is just one example. Importantly, this portfolio pivot towards 3D, which initially commenced through 3D 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. Since commercializing GemIIni in September, E&P companies have specified our innovative extended frequency source in a number of tenders. During the first quarter, GemIIni was deployed on its first proprietary survey, a 90-day project for a super major operating in the Middle East. GemIIni performed extraordinarily well. As exhibited by the extension we received that nearly doubled the duration and area of the The survey extension is a significant vote of confidence by the supermajor, validating the technology's commercial readiness, data quality, and operational and environmental benefits. In response to the industry demand, we are quadrupling Gemini's current capacity for programs we're targeting this summer and seeking regulatory approval in additional jurisdictions. This cost-effective yet important ingredient for improving subsurface characterization differentiates ION as we expand into the 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, such as the eight library programs underway during the quarter, and while deploying the balance of resources on challenging proprietary projects that help maintain our top-tier capabilities. Last quarter, I described how algorithmic advances and artificial intelligence enhanced client decision-making and led to several umbrella contracts that helped de-risk our 2021 revenue plan. With an eye to increasing backlog, we are pleased to have landed another multi-year umbrella contract with an EMP major. we are now in discussions on specific project commitments under this umbrella, which is another leading indicator of improving market conditions. Our operations optimizations group, which primarily caters to acquisition contractors, had relatively consistent revenue sequentially. The multi-year command and control subscriptions and routine equipment spares and repairs business provides a level of stability for this business segment. Encouragingly, seismic tender activity is increasing and postponed 2020 projects are resuming. During the quarter, We had three remote services engagements of Ion Anywhere, a sign of increasing client endorsement of this new business model. Our market diversification strategy to optimize decision-making in new maritime markets across software and devices is progressing well. In our software group, we continue to gain traction around our Marlin platform through trials and tenders. Marlin links vessel plans and schedules to live offshore activities, providing greater control and transparency in the management of offshore operations. Following on from the tender award we announced last earnings call, we collaborated with CalMac to successfully deploy Marlin SmartPort across their port and ferry terminals in Q1. CalMac Ferries is the UK's largest ferry operator, managing 29 routes to over 50 destinations across 200 miles of Scotland's west coast. We now add their very positive feedback to the growing client consensus around our port digitalization value proposition. During the second half of 2020, we gained significant insights from the proof-of-concept trials across both ports and port-to-platform logistics segments. Our teams focused on identifying and optimizing the most costly aspects of our clients' offshore operations and have added these valuable new requirements common across a number of Marlin opportunities to our product roadmap. For example, this quarter we deployed advanced dashboard analytics that enhanced decision-making processes. Our largest development effort is to analyze planned versus actual vessel schedules, identifying opportunities for clients to minimize fuel consumption, decrease emissions, and operate with just-in-time efficiency. We are optimistic about accelerating adoption, given the range of valuable use cases uncovered through these deployments. Between trials and tenders, we are building a robust pipeline of prospects across maritime energy logistics and port operations, and believe we can convert a healthy portion of these opportunities to revenue in 2021. As part of our Crossing the Chasm efforts, we added regional business development coverage in North America with the addition of a seasoned port logistics resource and have leveraged U.S. Department of Commerce support for Marlin in emerging markets. This is being touted as climate-smart digital infrastructure for the recently announced U.S. Trade and Development Agency efforts around the world. Over the years, the geophysical industry has made numerous advances in sensing technologies and field deployment methods that have significantly improved data acquisition. However, until recently, seismic source technologies evolved more slowly. ION's industry-leading source capabilities now address increasingly important industry requirements such as environmental considerations, enhanced low-frequency content, flexible tow configurations, and improved positioning accuracy. In addition to the Gemini source extension I mentioned earlier, our devices group received a sail wing lease extension for smart and efficient source towing. Recent automated source and vessel steering enhancements using artificial intelligence further increased 4D repeatability. Due to strong infield performance and oil company interest, the system will be in use throughout the summer. We are in discussions for continued engagement with the aforementioned sale and client for deployment through 2022. The current wave of our device's diversification strategy is to develop real-time monitoring solutions that improve the safety and environmental compliance of offshore oil and gas operations. Well Alert leverages our core competencies, targets a growing market associated with sustainability, and aligns with our strategy to provide decision support data and analytics. Subsea infrastructure is typically inspected only periodically via costly ROV operations. 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. Our solution integrates sensing and communications technologies to monitor temporarily plugged and abandoned wells. Through our energy company commercial outreach seeking funding for sea trials, we captured a range of further use cases for Well Alert, including carbon capture and monitoring. During the quarter, we also continued to make advancements in both the hardware and software of our prototype. With that, I'll turn it over to Mike to walk us through the financials, and then I will wrap up before taking questions.