Ion Geophysical Corporation

Greetings and welcome to the IONG of Physical Second Quarter Earnings Conference Call. At this time, all participants are in a 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.

Good morning and welcome to ION's second quarter 2021 earnings conference call. We appreciate your joining us today. As indicated on slide two, our hosts today are Chris Fusher, 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, 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. In our prepared remarks today, we'll discuss our financial results, strategy execution progress, and outlook for both the energy and maritime operations market. I will also describe our promising new energy transition, sustainability, and digitalization strategies for today's rapidly evolving market. We delivered a 40% sequential improvement in revenues during the second quarter. Adjusted EBITDA was slightly positive, benefiting from the over $40 million of cost reductions from 2020 that remain intact. The second, significantly larger phase of our North Sea 3D program is proceeding ahead of schedule, and we made great progress on our maritime visualization strategy in new markets during the second quarter. In April, we completed our bond exchange and rights offering, which Mike will describe shortly. Before I get to the operational highlights of the quarter, I'll describe the market dynamic and our strategy for both the energy and maritime operations industry. The global economy is improving, and commodity prices have rebounded nearly 50% this year, above pre-pandemic levels, with Brent crude currently around $70 a barrel. However, our core sizing market is expected to remain challenging in the near term as energy companies' capital discipline remains firmly at play with a priority on cash flow generation. The majority of spending today is tied to legacy projects and existing commitments with very limited discretionary funds. On the positive side, analysts predict minimum downside risk to the current seismic spending level above $50 a barrel. We still believe discretionary spending will eventually return above $50 a barrel, and we are selectively investing where we anticipate that capital will be directed. We expect data purchases to largely be aligned with lower risk, higher return strategies focused on proven basins and infrastructure-led exploration that leverages existing nearby facilities. Encouragingly, even in this uncertain environment, we are seeing early movers start to strategically purchase data again. Our customer mix is also changing as major shifts in investment to renewables, creating opportunities for independent and national oil companies to fill the void. Investment in the energy transition is rapidly approaching that of traditional oil and gas. We are focused on helping companies efficiently find and develop energy resources with lower emissions and environmental impacts whether it's more traditional sources or renewable ones. For example, our data is already being used to help evaluate potential sites for carbon storage to help combat climate change. Even in the most aggressive energy transition scenarios, offshore oil and gas is expected to remain an important part of the energy production mix needed to meet global demand for at least the next few decades. We expect the seismic market will continue gradually improving and that our strategic decision to participate in the 3D new acquisition multi-client market will enable us to capture market share even without an improvement in industry conditions. That said, we are also focused on rapidly diversifying outside of energy into much larger markets where we can increase the stability and share of recurring software revenue in our business. Our strategy is to empower clients to sustainably use marine resources and combat climate change through our technology. We are focused on optimizing port management, energy logistics, and maritime digitalization markets. In these large, capital-intensive industries, there are significant visualization opportunities to enable smarter, safer management of maritime assets and people and reduce environmental impact and greenhouse gas emissions. In our E&P technology and services business, multi-client revenues improved sequentially, primarily due to starting our Mid-North Sea High 3D multi-client program and an increase in 2D data library sales. Importantly, this portfolio pivot towards 3D, which initially commenced through 3D re-imaging, shifts our new product investment closer to the reservoir. Our client spend tends to be more consistent, and programs have larger scale revenue and earnings potential. In the last five years, our 3D data library has grown nearly 10,000% from approximately 4,000 square kilometers to 400,000 square kilometers today, with substantially all of the 3D investment in basins that are well positioned to support the E&P sector in the energy transition, such as the North Sea and offshore Brazil. By comparison, our 2D data library increased 35% during the same timeframe. The UK remains attractive for investment with one of the highest global returns per barrel. Until recently, parts of the Zechstein play in the North Sea had been largely overlooked because 5MEC technology wasn't able to properly resolve this complex variable play. Our Mid-North Sea High 3D program demonstrates how new high-quality data can unlock the potential of promising new acreage. In May, we started the second, significantly larger phase for our mid-north sea high 3D multi-client program. We are pleased to be partnering with Shearwater again on the data acquisition, which, upon completion in late September, will increase the survey area six-fold. We deployed our proprietary digital technologies to collect the data in a more efficient, eco-friendly manner. Prior to the survey start, we evaluated several climate motion analyses in May System Survey to design the survey in the most efficient manner. Then, in the field, ORCA, incorporated impacts from ocean currents into the survey plan to optimally bar the lines in an order that maximizes efficiency while minimizing emissions. In addition, through Marlin, we are collaborating with fisheries to minimize disruptions to both operations by coordinating vessel and equipment movement. The combination resulted in about 25% time savings on the first phase of our Mid-Norsey High program. Our team is actively cultivating additional 3D program opportunities. Almost all our multi-client programs in progress consists of 3D data. In addition to the North Sea, we are continuing to expand the highly successful Pecania 3D re-imaging data set offshore Brazil. Our carbon footprint per dollar of revenue is significantly less than our peers, principally due to our re-imaging emphasis and highly efficient proprietary software infrastructure that maximizes the quality and insights of existing subsurface data. In addition, we continue to benefit commercially from the global 2D data collaboration with CTS, which helps diversify both companies' geographic exposure to opportunities globally and while also increasing sales efficiency. Our innovative Gemini extended frequency source continued to perform extraordinarily well during the quarter as we wrapped up its first proprietary deployment. Shell nearly doubled the initial program size offshore eDIPS and highlighted Gemini's role in enhancing exploration insights in a more eco-friendly manner. The innovative acquisition design paired with Gemini delivered the expected uplift in low-frequency content in this large, long-offset survey. Many attractive geographies for continued investment are in complex geological settings where more accurate imaging of the subsurface is essential for effective resource development. Industry demand for low-frequency data continues to build as clients recognize the value it provides and involve survey designs to take advantage of new technologies such as Gemini. We have submitted several proposals for additional Gemini deployments on both multi-client and proprietary projects. In the quarter, we were also approached by customers to tender vertical-sided profiling, VSP, production applications of our stores. We continue to commit the majority of ION's imaging capacity to distinguish our multi-client offering while deploying the balance of resources on challenging proprietary projects that help maintain our top-tier capabilities. During the quarter, we secured the first project commitment under the multi-year umbrella contract with an energy major that we mentioned on last quarter's conference call. Operations optimization revenues improved during the quarter, during the second quarter, consistent with offshore seismic activity improving seasonally. Seismic tender activity is increasing primarily for production-focused contract work. The multi-year command and control subscriptions and routine equipment spares and repairs business provide a level of stability for this business segment. Remote services engagements of ION Anywhere continue to enable clients to overcome COVID-19 operational access challenges, a significant departure from what was historically an in-person services-led business for ION. We continue to advance our diversification strategy in new maritime markets across software and devices. In our software group, the Marlin SmartPort deployments across nearly 28 UK ports continue to receive positive client feedback on the value our software delivers, such as enhancing decision-making via simple visual dashboards. Based on the local success in the UK, our business development team recently expanded and increased outreach in North America, Latin America, and Africa. The climate-smart digital infrastructure we are promoting with U.S. Department of Commerce support is garnering significant interest for country-scale digitalization solutions spanning maritime detection, port management, and illegal fishing, with an initial engagement focus on coastal Africa. These multimillion-dollar government projects are well aligned with the qualification criteria for Ex-Im Bank financing, and introductions have already been made to more than 15 countries. Our technology is focused on creating high-value information that drives efficiency and related resource utilization and reductions in HSD exposure and greenhouse gas emissions. For example, in the energy logistics market, our largest development effort is to analyze planned versus actual supply vessel schedules, identifying opportunities for clients to minimize fuel consumption, decrease emissions, and operate with just-in-time efficiency. Based on the range of use cases we've uncovered and magnitude of efficiency and environmental benefits our technology can deliver, We are optimistic about accelerating adoption. Our devices diversification strategy is to develop real-time monitoring solutions that improve the safety and environmental compliance of offshore oil and gas operations, from well abandonment to carbon storage application. Well Alert leverages our core competencies from the CBA advisement world and targets the growing market associated with sustainability and aligns with our strategy to provide decision support data and analytics. Our expectation is that regulators will drive adoption of proactive monitoring systems that provide more frequent, accurate measurements to assure safe operating environments. We are systematically working to understand the challenges and requirements of these systems in various geographies. Well-alert conversations have advanced beyond our initial target market, receiving positive feedback in a number of regulatory environments, and as a result, we started developing a full-scale prototype. 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. Our second quarter revenues of $20 million improved 40% sequentially. Adjusted EBITDA was slightly positive compared to negative $7 million in the first quarter. E&P technology and services segment revenues of $12 million increased by 62% sequentially, primarily due to starting the second phase of our mid-north sea high 3D multi-client program and an increase in 2D data library cells. Operations optimization segment revenues of $8 million improved 18% from the first quarter due to increased production-focused seismic vessel activity offshore. Backlog, which consists of commitments for multi-client programs and proprietary imaging and reservoir services work, was $14 million at quarter end. The sequential decline was driven in part by revenue recognition on our Mid-North Sea High 3D multi-client program as acquisition proceeded ahead of schedule this quarter. As a result of our lower first half revenues, We expected to consume cash during the quarter. Our cash balance was 27 million at quarter end, including 20 million we drew on our revolver last year. Our total liquidity, defined as a combination of our cash balance and our available borrowing capacity under our revolving credit facility, was 33 million. As we reported last call, in April, we successfully completed our bond restructuring and concurrent rights offering. The deal extended our bond maturity four years with a convertible feature that provides a path to convert the debt to equity in coming years. In the rights offering, shareholders exercise subscription rights totaling $42 million, purchasing either new notes or common stock. In total, $116 million in new notes and 11 million shares of common stock were issued that generated $14 million in net proceeds for the company. $7 million of old notes remain outstanding and due in December 2021. While we completed these favorable transactions and revenues improved sequentially, the timing of the market recovery remains uncertain and revenues for the first half of 2021 were lower than expected. These lower than planned revenues will have an impact on second half cash collections necessary to fund our operations and to meet our debt and other obligations, therefore triggering a going concern issue for ION. We continually evaluate conditions in the capital markets and will continue to explore additional funding opportunities through private or public equity transactions, debt financing, or other capital sources, such as the sale of non-strategic assets to meet our ongoing cash needs. In addition, in the third quarter, we are implementing a significant cost reduction program, building on the over $40 million eliminated last year, in an effort to continue to right-size our business while still being able to capitalize on evolving market opportunities. We're targeting approximately 15 to 20 million in annualized savings through a combination of both short-term and long-term initiatives. These efforts continue our focus on supporting and strategically growing our business while maintaining capital discipline. We reinvigorated efforts to close the 12 million cell of our 49% equity stake in the non-strategic Innova joint venture with BGP by bringing additional interested parties to the table to increase competition and accelerate closure. we will continue to evaluate other non-strategic asset sales and pursue additional sources of government relief, such as employee retention credits. During the second quarter, the $7 million PPP loan we received last year was fully forgiven. Our top fiscal focus remains for subserving cash and managing liquidity in the current uncertain macroeconomic environment. In July, we submitted a preliminary S-1 in anticipation of a potential public offering of our common stock. While the S-1 remains on file, there are several variables to consider, such as macro factors in our share price. To date, we have decided not to issue our common stock at these price levels, but will continue to monitor market conditions. With that, I'll turn it back to Chris.

Thanks, Mike. In today's rapidly evolving landscape, we are focused on empowering clients to operate more efficiently and sustainably. Our offshore data and digitalization technologies are key ingredients for enabling the sustainable use of marine resources and combating climate change, and optimizing traditional energy development while supporting the transition to renewable resources. Both business segments are making progress penetrating much larger addressable markets. Our 3D strategy shifts our offerings closer to the reservoir where capital is flowing and programs have greater earning potential. The second phase of our Mid-North Sea High program is a hallmark of our 3D new acquisition multi-client market entry strategy, and we look forward to launching additional programs as funding coalesces. We described increasing traction around our maturing Marlin platform through trials, tenders, and broader government initiatives. We continue to increase brand awareness and new target markets, refine new customer acquisition strategies, and expand sales coverage to overcome crossing the cap and challenges. We are laser-focused on strategy execution, prioritizing deals that front-load cash and projects with scale, such as the African Government Maritime Digitalization Outreach. We are looking to accelerate speed-to-market end-to-end offerings through strategic partnerships, For instance, the Global 2D Data Library deal with PPS. Our radical sequencing culture is focused on doing fewer things better and minimizing distraction. We expect momentum to continue building as the year unfolds and are committed to continuing to right-size the business to provide sufficient runway for successful diversification efforts while the seismic market continues to recover. With that, we'll turn it back to the operator for Q&A.

And thank you. Thank you, ladies and gentlemen. At this time, we will be conducting a question and answer session. If you have a question, please press star then the one key on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. And our first question comes from Jeffrey Campbell from Alliance Global Partners. Your line is now open.

Good morning. Good morning. My first question is, could you provide some color on where you're seeking the further cost reductions that you made reference to that would be helpful if you could?

Sure, Jeff. Thanks for asking the question. So one of the biggest things we're going to be looking at is our real estate footprint. You know, the pandemic has, of course, totally changed the way most companies and certainly ourselves think about investing. on-premises office space. We have quite a lot in Houston and also in other parts of the world. So we've been in motion on a process to reduce substantially our footprint, move to more hybrid with people coming part-time to the office, part-time remote. Remote working has worked extremely well for us during the pandemic and continues to do so. And we will be shifting that as fast as we can. We're working with brokers to find ways to do that. certainly in our headquarters in Houston, where we have a lot of space, but other parts of the world as well. And then other things will be, you know, looking at consolidating supply chain, looking at, you know, human resources elements will be part of that as well. We need to look at all aspects of the business. Okay.

No, that's very helpful. Appreciate the color on the remote.

And just a little more piece of that. I mean, we did mention investments, you know, Some of that's cash generation, divesting, you know, potentially parts of our technology stack or legacy stack as well as IP that's non-strategic. We have quite a lot of patent and technology in the background. So I think that would be one, but that doesn't necessarily reduce costs, but some divestment of businesses obviously takes costs away with those businesses as well. So that's the other side of it.

Okay. You noted that well-alerted advanced beyond your initial target market. So I was wondering if you could remind us again, what that first market was and what sort of regulatory goals or actions are expanding the well alert horizon?

Yes. So the initial focus of well alert was unplugged and abandoned wells where in certain geographies there's regulatory requirements to monitor those. So that was our target, really driven by a major oil and gas company that wants to have a solution in their operating regimes. But we thought to go in parallel with that to get to sea trials faster, we would look at other, you know, geographies that will probably have emerging regulatory requirements like the UK, the US, and perhaps Australia and New Zealand areas. So we have done outreach there. There's definitely, you know, other lines of interest. And the other piece that came there is also just CCUS, you know, CO2 monitoring as CO2 is reinjected. So physical monitoring with seabed-type systems is will make sense. So that's really just a changing out of a methane sniffer for a CO2 sniffer on the device.

OK. And I'll ask one last one, then turn it over to others. I just want to ask you about slide 8. I think that was probably referring to the government acting as a chaperone in Africa that we've talked about before. If I'm wrong, you'll correct me. But I was wondering if the 15 country introductions that you referenced A, was that within or did it exceed your expectations? Any sense at this point of how many of those introductions might continue on to next levels of discussion? And finally, do you have any sense that this government assistance effort might extend beyond Africa at some point?

Yeah, great question. This is one of the bigger shifts in our strategy for 2021. I mean, we really just started – I mentioned it briefly on the earnings call – Last time we had really just started it, and it has exceeded expectations. We have worked with the U.S. Department of Commerce, their trade attaches in the embassies, the U.S. ambassadors to these countries, and we have had, you know, I've personally been on multiple calls where the U.S. government has introduced us to the ministries involved, whether that's the port ministries, the Department of Interior, the fisheries department, and we have generated follow-on discussions with those ministries from those ministries those sponsored engagements and introductions. And we are working towards – we're making proposals to several of those countries now. So, yes, with a view that, you know, we would hope to get a funded pilot done before the end of the year, kind of on the $1 million to $2 million scale, to basically determine, you know, the relevance of our solutions for their challenges, which are broad and significant. So we're having excellent minister-level discussions about our solution and how we can help them and how we would back that for them with Ex-Im Bank funding or other sources of funding for those countries for the products. So it's been pretty exciting, and it really is a shift to a much larger scale, more like we've done with our data library business in Africa and other areas in the past. And secondly, your other question about other areas, we are also looking at the U.S., Department of Commerce supports these initiatives also in other parts of the world. So we are thinking about South America as well, some initial inroads there. But we're really focusing on converting something before the end of the year in Africa with a view that 2022 would be when solutions get rolled out at larger scale.

Okay, great. I appreciate the comment.

Yeah.

Thank you. And our next question comes from Colin Rush from Oppenheimer. Your line is now open. Thanks so much, guys.

You know, given these new technology efforts that you're looking at, I want to get a sense of, you know, kind of ongoing R&D spend and any sort of incremental increases and what that cadence might look like as we get through the balance of this year and into next year.

Yeah, so that's a good question, Colin. Thanks for joining. You know, so we've typically, if you've watched this over the last, you know, probably five, six years with revenues down and up and down, we've – We've been about 10% R&D, 10% of revenue. We continue to be around that even with the COVID, you know, impact on substantial impact on revenues over the last three, four quarters. And we did scale R&D down, and certainly outside spend on technology has been curtailed. We've contained the headcount in our R&D group, but we have felt it's been essential to stay differentiated in the selected areas we're focusing on. And most of our R&D is deployed to the business lines, whether that's imaging, whether that's data library, whether that's software. And we have a very small centralized team of subject matter experts that look at things that add on to those. You know, what we've said really at the beginning of the year is we're not going to increase R&D spend from the baseline. It's been also stressed that we need to have R&D funding from customers. that they need to vote with their wallet, that they want these technologies given the nature of our industry. And we're not going to repeat mistakes in the past where we build things that, you know, and they will come. It's going to be we want them to ask for things and we will build what they ask for and pay for. So, yeah, we've had, you know, an overlay now of customer funding. We had funding for the Gemini source that we rolled out very successfully yesterday. at the end of last year and early this year into Q2, and we also had funding for some very small new things that we're looking at, and we anticipate before we scale up well alert that we would also have customer funding for that.

Okay, that's super helpful. And then just on the revolver, sorry for the detail here, but I just want to understand how much incremental capacity you still have left on that as you exit at the quarter from a cash perspective.

Yeah, Mike, why don't you jump in on that one?

Thanks, Colin. You know, the capacity, you know, it's bar and base calculated, so the capacity is, you know, dependent upon, you know, receivables, inventory, and our data library is a significant piece of that. What I would say, with the low first half revenues, even in the Q2, receivables are not a big piece of that. So, you know, when things improve and receivables are bigger, it will naturally increase that underlying level of capacity. What I'd say at Q2 and today with where we're at, essentially we borrowed about to the amount that we can. So it's really looking to improvement, feeding the collateral, increasing the collateral would give us more availability.

Perfect. That's incredible, guys. Thanks so much.

Okay. Thank you.

Thank you. And our next question comes from Amit Dial from HC Weinreich. Your line is now open.

Thank you. Good morning, everyone. Chris, in terms of the seismic challenges you've highlighted in the seismic challenges in the seismic market, are these more longer term, given all of these regulatory pressures in the legacy energy markets? How do you see you guys coming through or overcoming some of these challenges? Any color on that would be helpful. Thank you.

Amit, thank you so much. Great question. Obviously, the largest percentage of our revenues do come from the seismic data market in the oil and gas sector, and it's been challenging. The rest of oil and gas has become frothy with the commodity price coming back in the first half of the year. Seismic has not participated particularly in that yet. Usually, it would have started by now with correlation with the energy price. oil and gas price. So, we do anticipate that we'll come back. I will say, obviously, that we did have a sequential improvement, which relates to customers underwriting our new program in the North Sea. I think it's about having those assets, as we said in the script, in the right places to serve the new needs of our customers during the energy transition, and I think we're well-placed for that in Brazil and the UK. And so we did see that sequential improvement, perhaps not shown by some of our other peers, but I do think they all expect to see kind of a linear increase through the end of the year and think we have line of sight on things improving in that regard, not leaps and bounds, but improving nonetheless. And some of that is the IOCs that, you know, have been really working under a changed remit with the energy transition from their C-suite, are starting to realign and get engaged, and we're having discussions in select areas where, again, the purchase of data fits their overarching goals. And we do have a major supporting our Mid-North Sea High program as well as independents. The other sector is emerging independents who, as IOCs, divest some of their traditional assets. as they progress their energy transition strategy. Other people pick those up and develop them and need data. And independents are moving into the fray, and we're having independents support seismic data libraries spend with us, again, on Midnorth Sea High and others. And the third is NSDs. NSDs are progressing ahead. They have a slow pace generally. They're not the rapid responders to data needs, perhaps, that we've seen in the past with IOCs. But They are expanding out around the world of their home countries. They are investing in data in a thoughtful manner as they support asset sales and license rounds, etc. And deals that we see coming in the pipe are predominantly driven by NOCs in the areas where we have large data sets such as Brazil, which is all our reprocessing and remastering program. So So that's kind of the flavor we see now, and I think all of that together supports, you know, a modest but sequential increase in data library sales. For us, you can say what we see in our pipeline, but I think probably also our peers will see some of that as well.

Okay. Thank you for that. The background pickup, you know, may be potentially expected over the course of the year. Is that coming from 2D or 3D contracts, you think?

Yeah, almost all the backlog is coming from both on the – the place we have backlog is basically from our underwritten new seismic 3D programs, and that's where backlog will, you know, turn back up. We have some things coming soon, we believe. And then the rest is the, you know, 3D processing also, both on the multi-client side, gets late underwriting as we get close to finalizing those products in Brazil, for example. And then – And then we get backlogged based on the 3D services, the umbrella contract I mentioned, for example. So all of our proprietary imaging is 3D. And lastly, the Gemini deployment is when we book services contracts with that, as we did in the first half with Shell and jointly with PGS. That was also 3D.

OK. Thank you. You know, earlier in the year you had highlighted securing a proof of concept for report to platform logistics application with an EMP major. Has that moved forward in any way?

Yes, it has. I mentioned that last time. So we do have the proof of concept has led to tendering, and we're in the final discussions. There are a couple other participants in that tender. It has been kind of reshaped, but it's due in the next couple weeks. We're going to hear one way or the other. on that one, on the large-scale supply vessel management.

Okay. That's all I have, guys, for now. Thank you so much. Thank you so much.

And thank you. And I am showing no further questions. I would now like to turn the – I'd like to turn the call back to Chris Usher for closing remarks.

Yes, thank you so much. I appreciate it. Yes, I just would close.

Pardon me, Mr. Usher. We have one person, Will Crawley from Gates Capital.

Got it. Okay. Hi, Will.

Hey, Chris. This is Jeff. So why the magic number 15 to 20 on cost cutting? Why is it not more than that? And the question is, Is 15 to 20 enough to get you to cash flow break even for the balance of the year, or are you content to continue burning cash here?

No, we're not content to continue burning cash for sure. It's been painful for all of us, all stakeholders to watch that with the unprecedented drop in revenues despite the cuts we had already made. So, you know, 15 to 20 seems to be when we look at the things we can control. and move on in the current market, the next steps. And looking at, you know, obviously where we think revenues are going to go in our most conservative revenue models and what costs we can take out across the spectrum of real estate, asset divestments and the costs that go with them, and then, you know, vendor control, you know, contractor and employee costs and all those things. That's what we think we can get to whilst also retaining the agility, and responsiveness of our kind of basically organization to respond to a very modest recovery and a market share grab that we have underway in the 3D space. So we believe it's enough. I mean, if we need to do more, we would. And it becomes harder and harder to do that given the costs we've taken out already. So it's a great question. I'm not surprised you asked it. I'm glad someone did. Mike, do you want to add anything else to that?

Chris, I think you added the appropriate level of color, and I answered it.

Yeah, and then the other side of that, Jeff, is not just reducing the cost. We basically need to take out the structural costs that will handle the uncertainty of the times we're in. We need to be cash flow break-even or better in the first half of next year in a sustainable way, and we believe 2022 will be a better year than 2021 has played out to be. even in the seismic space and the other areas where we believe we're going to get some scale in. And then the other side of that is cash beyond just cash freed up from cost cutting. We have a real commitment to looking at the assets we have that are not core to our strategy. We publicly, of course, talked about the ANOVA thing, which has been frustratingly long to materialize, hence our reopening of that process. which is encouraging. And secondly, other things. You know, we can't say what they are at this point, but I think there's interest in other things ION has built up as a technology company over the years in business lines that probably, you know, may not be as core to the strategy we have going forward. So, again, fewer things better and generate some cash from that as part of that bridge to, you know, a sustainable marketplace to participate in with a sustainable platform.

And can you, secondly, can you talk about the level of multi-client investment has been greater than the new venture revenue for several quarters now? And I'm wondering, so the net investment in the library seems to be going up, and I'm just kind of wondering what the, is there less underwriting? Are you doing more with less underwriting? And then also, can you talk about the late sale revenue environment and the prospects for, do you expect to catch up in late sales in the second half of the year, or do you expect those budgets just not to be used by the oil companies?

Yeah, so good question, and I'm going to let Mike jump on in a little bit too, but I'll start. So if you look at it, we've done about 12 million of multi-client spend in the first half, which Some of that is stuff really catching up from things that were done in our accounts payable that were done several years ago. So it's not new investment, and we are working that out of the system. So the real investment in the first half is about $8 million, and that does outstrip, as you note, the pre-funded revenues that we've noted in the numbers. So we are seeing – so it's not 100% pre-funded. It's at the level that we – You know, it's probably about the level we've seen for a while. I think going forward, the thing we're going to see through the rest of the year, which may not take us to the high end of that range we discussed, but the range is such because we're doing fewer projects, but they're 3D. I think any new one you see will be, you know, pretty much 100% pre-funded on the new acquisition side, just, you know, for the cash issues and working capital side of things, obviously. So that's what you would see there. And the only other area that's not necessarily pre-funded up front is the 3D reposting, where we're in areas where we are creeping on to our Pecania 3D program that has delivered four to six times returns on the very low investments due to getting public tapes from governments and re-imaging with our fixed cost infrastructure. So those tend to be late underwriting, but as you get closer to the lease sales and others that basically the clients come in, you will see in the second half that in that $8 million number that outstrips the five or so that we have funded so far, you will see that the sales that will come from that commitment up from ION on those reprocessing projects will outstrip the cost in the second half in a material way. Mike, do you have anything else to add on that?

Yeah, the only other color I'd add, and you gave the numbers, but in the 10Q we filed this morning, you'll see of that spend, we disclosed about $5 million of that was related to past work and previous years that were catching up to it. So, Jeff, yeah, to your question of numbers, it's about $8 million of first-half spend on a pretty low $5 million revenue number. Most of that had been the internal work that Chris had mentioned on the 3D reprocessing that is more typical to a, when it's closer to being finished, is when that you know, late underwriting comes in, and that's what we're seeing and is looking to transpire in the back half of this year like we've seen in past years other than, you know, kind of excluding last year's activity.

Okay. Thank you. That's helpful.

Thank you.

Thank you. There are no further questions in queue. I'd like to hand the call back to Chris Usher for closing remarks.

Yeah, so actually Jeff's very timely question kind of covered the kind of the summary topics I was going to make around the structural costs and the way we see things improving, you know, through the rest of the year in terms of the library, new acquisition and reposting projects. So that's fine. I guess all I'd just say is watching the trend in our market seismic in general is we're suffering from the same things as the others, perhaps with the exception of PGS. And we need to figure out the best way to navigate out of there. And I think being smaller and nimble, we're working very hard to do that and have the right structural level to do that and take some market share out of a modest market. I think the other thing I would say around that is that the Western GCO is organization used to be one of the largest players out there and definitely with Schlumberger's overall refocus which is good for them I think the western GCO side has perhaps changed focus and we noted their low level of multi-client investment in Q2 and I think it gives market share potential for all of us to address so I think that's kind of the macro for Seismic in the multi-client space with regards to our strategy So, yeah, so basically very focused on our strategy execution in a tough space and definitely addressing structural issues to address the cash flow side of things. We'll leave you with that. And thank you so much for everyone joining and asking some really relevant questions.

Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for participating. You may disconnect your lines at this time and have a wonderful day.