Oceaneering International, Inc.

Q3 2020 Earnings Conference Call


spk_0: i mean if want the and i will be your conference operator i would like to welcome for everyone to oceaneering a third quarter twenty twenty earnings conference call all minds have been placed on you to prevent any background noise after the village and that there will be a question and answer period let's that i will not turn the call over to mark peterson oceaneering vice president of corporate development and investor relations
spk_1: we're going slim very a good morning and welcome the everyone for ocean urged a quarter twenty twenty results problems called today these college big webcast in a replay will be available on oceans website with me on the call today are was wash him closer than and chief executive officer who will be providing of prepared comments and allen kurdish senior vice president and chief financial officer before we begin our would just like to remind participants that statements were night during the course of this call regarding of you your financial performance business drowsy plans for future operations and industry conditions are forward looking statements made pursuant to the safe harbor provisions of the private securities litigation reform act at nineteen ninety five or comments today are also not gap also include bug get an inch or measures national details and reconciliations to the most directly comparable gap financial measures can be found in our third quarter press release welcome your questions after the prepared statements i will now turn to call over to was
spk_2: good morning things work and thanks everyone for junior college
spk_1: he already the details or third quarter results
spk_2: provide you with our commentary and guidance for the fourth quarter twenty twenty four year twenty twenty one after my causing a march will only offer questions so to start with i'm pleased to report their third quarter twenty twenty results reflect the benefit of previously disclosed cost proven initiatives and the recently announced realign our that despite continuing energy and entertainment market headwinds regenerated free cash flow and both adjusted earnings before interest taxes depreciation and amortization or even on and adjusted operating income improved as compared to the second quarter twenty twenty i'm proud of our our employees have stepped up to the challenge on my the global pandemic offering model changes and cost improvement initiatives all the while continuing to deliver quality services and products to our customers safely and with minimal logistical little delays now looking at our third quarter twenty twenty financial results or adjusted operating results exceeded our initial expectations and consolidated adjusted even a a forty five point one million dollars exceeded published consensus overall we were encouraged by the performance of our energy businesses and the stable contribution from her ears paid aerospace and defense technology a segment or antic compared to are adjusted second quarter twenty twenty results consolidated adjusted operating income for the third quarter twenty twenty improved by five point one million dollars as efficiency gains from our cast on efforts or meaningfully enhancing are bottom line results each operating segment reported positive adjusted operating income and adjusted ebitda sequentially the adjusted operating results for each of our segments except subzero biotics improved as compared to our second quarter twenty twenty for cash position of three hundred and fifty nine million dollars in september thirtieth twenty twenty increased by twenty five point three million dollars from june thirtieth twenty twenty as we generated ninety million dollars of free cash flow largely driven by positive contributions from operations and working capital and ongoing capital contribution now let's look at our business operations by segment for the third quarter of twenty twenty some see robotics adjusted operating income declined by one point three million dollars on flat revenue as compared to the second quarter twenty twenty or merely due to lower contributions from or tooling and survey businesses do this lower contribution socio robotics adjusted even a margin decline and the third quarter twenty twenty as compared to thirty two percent in the second quarter twenty twenty or the third quarter twenty twenty the revenue split between are remotely operated or rb business and are combined tooling and survey businesses as a percentage of are some see robotics revenue was eighty three percent and seventeen percent respectively the same as a prior quarter or third quarter rb performance was comparable with the second quarter twenty twenty as of september thirtieth twenty twenty or rv flee count was two hundred fifty systems the same as june thirtieth twenty twenty our fleet utilization during the third quarter twenty twenty was fifty nine percent the same as the prior quarter eight on higher were thirteen thousand six hundred and one in the third quarter as compared to thirteen thousand five hundred one in the second quarter average hourly revenue per day on higher was marginally lower declining one percent sequentially primarily due to the changes in geographic next or early for use next during the quarter was fifty six percent and real support and forty four percent in vessel based activity as compared to sixty four percent and thirty six percent respectively in the prior quarter the average number of working putting rigs during the third quarter twenty twenty was eighty five as compared to ninety six during the park or order which would a few days on higher federal support services however this decrease was offset by an increase in days on higher for vessel a services during the quarter or drill sport marketshare decrease to fifty seven percent with our of the contract on seventy six with the one hundred and thirty three floating rate under contract at the end of september this compares to see a sixty two percent drill support market share with our the contract on giddy six of the one hundred and thirty nine floating rig country right at the end of june subject to quarterly variances we continue to expect girls or marketshare to generally remained in the sixty percent range turning to manufacture products to quench lee third quarter twenty twenty adjusted operating income improved slightly on a ten percent increase in revenue much of the revenue increase was attributed to percentage of completion revenue recognition uncertain lower margin project components in our umbilical manufacturing business are you a third quarter voted nineteen have limited impact on our energy manufacturing business but continue to adversely affect me factory timing in our non energy entertainment business overall for year to date twenty twenty reduced ordering taken our energy related manufacturing business is primarily attributable to significant decrease in final investment decisions undertaken by our oil and gas customers to the local oil demand and pricing and manufactured products backlog of september thirtieth twenty twenty was three hundred and eighty million dollars compared to our recast june thirtieth twenty twenty backlog of three hundred and eighty million dollars during the third quarter or intake was forty nine million dollars or book to bill ratio year to date was point four and for the past twelve months was point five to quench lee article products group adjusted operating results improved on flat revenues call at work during the third quarter was relatively consistent with the second quarter twenty twenty with improve results benefiting from the cast out and operating synergies implemented in connection with our new operating model the impact of kill the nineteen continue to delay the angola light well intervention project but we're optimistic that this work will begin to move forward either late in the fourth quarter twenty twenty or early in the first quarter twenty twenty one or integrity management and digital solutions adjusted operating results improved sequentially on flat revenue these results were largely due to improve execution as second quarter adjusted results were impacted by nonrecurring cost uncertain completed projects or aerospace and defense technology segment purported slightly higher sequential adjusted operating results for the third quarter twenty twenty i'm slightly higher revenue attack represented approximately nineteen percent of our consolidate revenue for the third quarter and we appreciate the relative stability that these businesses can have on these businesses considering the challenge is currently face and or energy businesses as previously announced we were awarded to meaningful contracts during the quarter one in our space systems busy this where we will be teaming with dynamics in support of developing a human lunar landing system for nasa and one in our defense of see technologies business where we will be operating and maintaining the us navy's submarine rescue systems for up to five years assuming annual contract renewal unallocated expenses for the third quarter twenty twenty were lower than the second quarter twenty twenty due primarily to lower rules for instead of based compensation capital expenditures for the third quarter twenty twenty total eight million dollars as we continue to exercise strict capital discipline the nine months ended september thirtieth twenty twenty we generated thirty two point four million dollars in cash flow from operating activities and spent forty five point eight million dollars on capital expenditures resulting in a net use a casual thirteen point five million dollars at the end of the third quarter with three hundred and fifty nine million dollars in cash and and under on five hundred million dollar unsecured revolving credit facility providing us with strong liquidity now all address the outlook for the fourth quarter of twenty twenty with the onset of lower seasonal off your activity and cause for budget exhaustion negatively affecting our energy businesses we believe our fourth quarter twenty twenty results will decline sequentially we're expecting lower operating results in each for segments except manufactured products an get expenses are expected to approximate thirty million dollars during the fourth quarter we expect to generate positive free cash flow which will benefit from positive changes in working capital and care that tax returns
spk_3: i segment
spk_2: or such a robotic segment were expecting or revenue and operating results do to fuel utilization days in connection with were do seasonal demand for castle based rb services tooling services and survey services we believe that the working out for floating drilling rigs has largely stabilize over the past few months and world and we will not see a marked decline in work encountering countering the fourth quarter we are forecasting our overall or of the fleet utilization for the quarter will decline to the low picky percent range but we project even a margins will decline to the hi twenty percent rate a manufactured products we expect higher revenue and operating results due to increased report on certain percentage of completion projects and our local manufacturing business the project operating margins to remain in the mid single digit range order intake is expected to remain at subdued levels in our energy manufacture products an entertainment businesses rational products group we expect to decline in revenue and operating results from early attributable to lower anticipated levels of collar work in performed in the us gulf of mexico or i integrity management and digital solutions we expect modestly lower revenue and operating results bring forth course or aerospace and defense technologies we expect operating income to be flat to slightly down on high revenue the revenue increases primarily attributable to the start up of several new projects across our and tech businesses with the implied lower operating margins resulting from start up costs and change and project next the four year of twenty twenty we expect to generate adjusted ebitda in the range of one hundred and sixty five to one hundred and seventy five million dollars we are nearing are guidance range for capital expenditures to fifty million to sixty million dollars we affirm guidance on cash tax payments in the range of thirty million for thirty five million dollars and our expectation of cares act and other tax refunds in the range of sixteen to thirty four million dollars would continue to expect generating positive free cash flow for the full year of twenty twenty we announced a plan at the end of first quarter twenty twenty to reduce analyze expenses in the range and one hundred and twenty five to one hundred and sixty million dollars by the end of twenty twenty inclusive of thirty five to forty million dollars of reduced depreciation expense we estimate that since launching this plan approximately one hundred million dollars of annualized cost reductions have been initiated exclusive of depreciation with additional savings expected to be cheated fourth quarter of twenty twenty the continued estimated the cash costs associated with actions to approximate fifty million dollars for twenty one and now looking ahead to twenty twenty one we anticipate the oil sector will face continually headwinds and twenty twenty one dude uncertainties around them and recovery and the resulting softness in energy commodity prices despite this backdrop we currently expect are consolidated activity levels and even a performance and twenty twenty one who closely resembled twenty twenty we also expect to generate significant free cash flow and twenty twenty one which will also benefit from a working capital release associated with final product milestones in are manufactured products statement we will continue to review our forecast as we developed a definitive operating plan for twenty twenty one and will update our expectations during the year and a boarding process and in conclusion this has been a challenging year for all of us oceaneering is responded to these challenges by instituting significant structural contradictions and reorganizing our business segments to capture operating synergies and operate profitably in a lower activity market thanks to the hard work are dedicated team these actions are showing quantifiable result as evidenced by our expectation to meet or exceed twenty nine teams adjusted ebitda performance and twenty twenty and maintaining or improving his performance and twenty twenty one despite continuing energy market headwinds
spk_1: we remain focused on generating free cash flow preserving improving our liquidity and balance sheet remains a high priority
spk_2: the for and capital discipline policy we adopted and twenty twenty is delivering results which we expect will provide meaningful free cash flow in the future and gives us the flexibility to address or revolving credit facility maturity and january twenty twenty three and or five hundred million dollar senior notes maturity in november twenty twenty four we appreciate everyone's continued interest in oceaneering it will now be happy to take any questions you may
spk_0: at this time if he with i can ask a question seemed faster than the number one on your telephone he and i think question comes from the line of ian pearson with him and energy your line is open to night
spk_4: moynihan
spk_2: hey rod good morning thanks for the overview always
spk_5: very helpful and
spk_2: well organized and i mean what really strikes me as bm year the called for flattish results next year critically robotic the mean you're you're witnessing a down swiping year from que one the coupon of twenty twenty and and in the red contracting friends had been obvious been very indian accent you see this business yeah much more quickly than the outsiders like i do that so what gives you covered on that and then also on products as well you add you know oh boy five foot the bill you to date for have had you'd be that big lies in the next year as well be that those in the two big seasons and said like to get they gets some more pain on the power that you can provide it and it you know what i'm i'm i'm really glad you asked the and because you know we've talked to who we talked ourselves about it i'm trying to give a little at least a little better under danny when we talk about the consolidated results are you know these the puzzle pieces order to be different so you know what we see for robotics and i'll talk a little bit about those big that i want everybody think about and strengthen our advocating that we've talked about and some of the other parts for business that are that are flying a little bit separate from energy and that's of that that far that until it helps us and twenty twenty one but but specifically to robotics on you know this do we know it's not it's not a a mirror image where you say the first quarter looks good like he didn't want to yeah we we modeled the others it gets really is about you know a a stepping up point it's a it's a very believe of a lot from from cube read a keyboard acted in the twenty twenty one so we we don't see any huge am spring backs in in and working rigs but we do think that you can close the gap between contracting work your eggs we get a couple more contract and we'll see some lift and that and that comes directly from our customers and their confidence to know budgets around osher activity so i mean we we reviewed with all that just in the past few weeks ago and we feel comfortable with that it's not and one he may think we baked in some some a cliche recovery because that's not what's in there and in the same for same for manufactured products and in we think that we can keep collecting some orders and doing some things but again we don't spit expect that a huge bring back and have id in in not in twenty twenty one so it's it's ah some good work that were finishing in the first half of year and then you know collect and some of the the smaller bits and pieces tie back and things like that for the back half the that we can get in that we get into the plants but it's not it's not the dramatic it's nothing that would would run ah i would say in contrast to other people are sam yeah right enough edges dad could calm is it also twenty one benefit from the full year or via cost improvement initiatives that we've executed on during twenty twenty so that that also factors into the overall decision with our guides exactly thanks out
spk_1: yeah thank you on earth and and on exactly that is that more than likely grower for you twenty one that's on the the contract when them are you expected to garner billing and yeah we we see those we see those i'm a couple of wins in the bucket already in some other opportunities so we do think that were again not dramatic growth by but steady delivery so
spk_2: and and less susceptible to in some of them some of the and concerns are very as about the offshore market a get tax right the and
spk_0: and the next question comes tomorrow of shunting team from working your line is often
spk_1: orange on thanking morning so the start yeah me kudos for your willingness to provide an expectation for next year muslim not been willing or able to have you in addition to build on that discussion can we talk about the continent's around free cash flow in the next year and working cabling a big piece of it so if we could and in any from allen and right have you thought to be nice to hear your expectations for free cash for may be operating cash flow and how i turn it into free cash twenty and twenty one at working capital and or one time items like the care act so here cause a lot of those people out which know dahlia think the cash were beaten at this point the cycle more do we stand on an operating cash flow normalize basis for twenty twenty one running sense
spk_2: yeah little the you start here and rod connection gallery he wants some he offered the guidance and we were getting with say significant free cash flow next year that's not include any money coming in from the care stature so he had that expectations built in that we would have muster that we're seeing this year and twenty twenty on you could it bleed over and twenty one years but that's that's not a component the were using to to drive significant free cash flow and twenty one the prevailing items that will help us with travis it can free cash for one the expectation we can keep are you the dot you know in the same ballpark that that were at this year it that a primary contributor as well as the released from wow we're see bowls also as working capital what milestone related advance on the two projects that we have in the umbilical business right now so ah the timing of those payments you know how it's been a little bit of a a cash negative force this year it's or so positive next year so now that can be the prevailing other item that the office drug free cash flow and the only thing i do that i just i like the broad simple math right if you if you say that we identify these hundred million dollars a cost out over the period of twenty twenty and and just figure it was all straight line started at the beginning you know gotten a lot the only relied on on this year single map with failure good how did we did we probably didn't get half for those that they contributed results this year
spk_1: think about a full year those those results on for next year so that it's a year over year ago that cause got stuck as a lot more impact in next year that into this year right okay fair enough i appreciate that and then to them walk through the decision making around the catholics guide for this year's nine one quarter laugh or curious i thought maybe that we just now around the midpoint but didn't if they take it down i just thoughts around where you'll end up the now i understand the thirty nine dollar number four out on allocated for forcier much of the bases in l a to that what's the proper runway for unallocated and and thoughts around cat back
spk_2: as we stand here for next year
spk_6: yeah i would look at first thought the unallocated think thirty million is probably a reasonable run wait until we get a definitive plan in place
spk_2: looking at twenty one when i look at the cap x guide and certainly we have looked at yale growth vs maintenance gap acts what we see that yeah we've had some growth cap action twenty twenty as we had the drill pipe roger contract that we were completing a oh we could go a bit lower obviously if he just took off the girl catholics are we had in two thousand and twenty from where we are at this point in time
spk_1: i would say no here we do still see reason for investment in our digital solutions within our entire tiger the management digital solutions we see opportunity there we see opportunity he was some of the his first time vehicles would then the hard part of each base as well as what we're doing with our freedom vehicle so that they will continue to be some element of a cap x required as we move forward
spk_0: i fair enough appreciate that
spk_7: thanks question comes from the line of calories are terrific to not sitting at home your line themselves and are you morning and thanks for all the collar on cue for and and twenty twenty one as well as the first question that is not on the coffee our programming you've really needed a quite of their progress their year to date think including the video now you're you're right in the middle that original hundred twenty five hundred sixty million copies on target range you provide an earlier this year and i you have a target as to where you expect to be exiting the year on that cost now program and as we continue to the new for him the you're finding it incremental wasted to draw the targeted a bit higher at least favorite a bit faster than the previous anticipated so for and any thoughts on on were that that
spk_2: total annual cost out number could could end up as we enter twenty twenty one i think we're to get a big part of the remaining twenty on cuba or on which has got which a lot of work go on and in a huge you hit it right i mean whenever you to work like this it's that could sort of that feeling the onion long been as as you find things and you take our moms number one you find other things but number two you also he also get better at and so even you see it better so i think god the possibilities increases ago it's it it sort of a logarithmic decline obviously you take your the big things first and but you see that that tail runs for a long time and i would say that like a lot i think we can also twenty and air and not just into
spk_7: any luxury a peculiar this year and then then we're going to be keep you're still looking for things and twenty twenty one so it's a it's it's a gift that keeps giving if you gotta teams get up and you and you keep drive in that that sort of mentality inside the company
spk_2: understanding and then hurt for twenty twenty one it doesn't sound like your gear or catherine
spk_7: much later v shaped recovery and on of the robotic that i think and one of the previous question did you said you'd have caught up with a number of your customers
spk_2: i'm wondering if you could just characterized that the town of those conversations or is it a bit mac for or summer are getting back to work and another there are still a down for or coven or or whatever other reason other the navy down but that was the general tone your your hair from your customers right now and perspective and offshore activity and spending plans of i phone month to it so i would say kind of just general town and very little very little lot being shoot off as a as in oak as coated in a they all our global operators right they they go through a lot of things going on in the world generally not all at the same time like right now but that they know how to operate top condition so they're they're backed work largely as far as a see that there's under nasa going on before that here there's there's a know fairmont economic recovery happening around the world so they believe that your that under that's when and recovery could support prices and can certainly a point that supports into get off your work but they're also be angry they're also being very focused on where they work it's a they not a lot of not on of like wildcat type exploration originated in i chased leveraged oil as they speak in all things close the infrastructure that allow them to get maximum will benefit from the infrastructure that's already installed and so they're they're they're very focused but they believe that it's a good time to make investment and and for us we like that because that kind of work you know single old imax things like that i'm near field imax that's that's good worker oceaneering so our encouraged by what they're saying
spk_0: gotta walk around the corner and thanks for responsive thank you
spk_8: my next question comes from the line of my for battle over the bank of america or hormonal so often
spk_1: a my morning i want was kind of wondered if we could talk or live bit about or the outlook for maintenance spending cuts mermaid next year
spk_5: a lot a lot of all you're from your got there there's still bit of has been and seat
spk_1: that i'd step into the big month ago projects
spk_9: neil seen that in maintaining production with a little capitals possible
spk_1: is he
spk_2: it can you stop us but i think mean spending kind of as all trends over the next year a commodity prices on her name your inbound your carnival so let me let me divine made been spending new a couple things production maintenance vs just just integrity management i think integrity management is is something that's very key because number one just just a licensed operate with everything has gone on a a few you just can't afford mistakes again afford a lot from ghana oh entirety so so they will continue to invest that will be something that they wanted to smarter and and at it that are costs point because if it's not revenue generating necessarily it cost loins so they well that worked really hard thing to look for good solutions and not a bad thing for us because we believe we can we can be are that got i wouldn't call it up skill going in and getting better at that so i see that as as a as a fairly positive trend in added integrity man's report and then in the production management where we're we're trying it again that the cheapest girls are you i'm i'm in there are connected to add to the flow line so we want to make sure that we can do all we with like well intervention with flow route outflow remediation it's on the other work that we do with with that some he get and i think that i think that's going to be strong especially we see some some price support and you know how to make the most your budget those are good spans generally like he said you don't have to commit to long cycle projects so i think you hit it i think those are going to be fairly decent are
spk_8: come out for the next year
spk_1: perfect and npr when we kind of big application from here
spk_2: for brunch nearing the of them into you build cash is there anything you at point that you maybe help improve the capital efficiency that the efficiency in the capital structure you there any way to gonna put but that alec extra work during the return of never i'll let on answer little bit and i'll just jump in with you know we're we're looking at a lot of things i mean obviously i'm a you look at what's going on if if the dead start trading at a discount it what things can you do out there in the market so yeah in in it'll like like we said pretty obviously we're that is a lot of that cash is sitting there with the expectation it's can be used to retire a significant portion of our of our twenty form debt maturities so it's it's not it's still a goal still something or watching so i think i think that's where as
spk_10: we're we're looking right now
spk_11: spot on lot to me
spk_12: it clearly
spk_13: and think that
spk_0: a cute
spk_1: my next question comes line of current hang with hadn't seen your line is now open
spk_14: and a your morning or incurred or and appreciate creepy guy go out on the land the thing at that point one kudos
spk_1: thank you i you up in i just as i know you either you know a guy can get the high level dynamic than that about porton yeah element as we gotta look out and twenty point why they'd yell always get a beg the question around the only looking your different segments you know which ones
spk_2: yeah were you thinking about flat on a year on your basic oh well keep a diary bench in some other gale wings for out for at tech looks like a positive tell went to manufacture products to gotta take that information on attacking manufactured products could be up on a year on your basis and that many guitar and the other ones could be maybe flat slightly down his back and about a good way to least start to think about the individual pieces for next year the current we're going to wait for the the details on on where it goes but eat copy the ad tech flavor certainly correctly from rod vienna we we do see that he a year on year that could be on your element that outside energy sector with the recent contract awards it could be beneficial harm your menu actually products i think what i was hearing was more of a guild he had contracted gonna you will be working through their backlog the first half a year in the back after years polygon be more challenged so i don't think we were trying to guide any one up on manufacture products for next year having is more the time when some that realm you could come through have been out you look at the other parts of the business within then the hot your projects group here with hollywood have anticipated executing on the air by well intervention project and twenty twenty
spk_1: looks like more than by moving into twenty one so the idea that could be a level of the the tell when ah as we go in and the next year so there can be very various moving pieces and we still need work through the the details the to give you better clarity
spk_2: okay apply appreciate that though are in the context of the yell incremental free cash flow expected and quite funny why he reconnect address the prior question to a certain extent but a as you think it through and you build cash on the balance you know can you give us some insight as to the you looking at this at the potential reply opportunity for the day or you actually looking at the prospect of reducing some of that debt load you know as you work through twenty twenty one
spk_1: i think all the above i think a it is going to be ah
spk_2: be a the flexible in optionality that the casual providers you know
spk_1: we we will look at the markets and in what they my brain does and what would be right to do at the time though we actively review that
spk_2: get mad and finally the contact you guys have exposure to the renewable energy segment i think you guys are very well aware of how much attention that had gone from investors likely yeah unfortunately expensive oil field service and other traditional energy plays but you do have exposure to the offshore wind market through a cause i just wonder if you might yellow give us updated that maybe some your updated thought on on how you see your exposure to the were noble market ball at least i think we were still very excited about it he the we'd like you said we've got exposure we're already doing a lot of work tom a lot of people i don't think most people realized it while we have cause and in that in the road clearance the came with it or biggest participation is still in their traditional businesses the survey in the army and
spk_1: some of the work and we're doing with tooling so that that stuff is is there and it's a it's alive and well and and we built in we build more more relationships with ah with the others dollars and and come visit service that business so we're excited about it i think we're all kind of hoping that it it grows like it is it is expected but it's always been a little bit further out than we thought so it's gonna it's gonna be big and it's in it's in hopefully it happens it happens sooner now with some of the emphasis it's been put on energy transition
spk_2: they don't like can you give us some caltech to meet you what the what the retina expose your current years no for for maybe that renewal of pizza each the business
spk_1: we we haven't broken it out because it's why i try not to the ourselves a little bit good still i'm still fairly small part of our business because it only affects us in certain places right and it's a it's a it's a it's actually decent portion of our north sea business on but but overall across the globe it it doesn't
spk_0: large and can we been been pretty good at capturing some of the work happening here in these girls united states but that's been it's just not a ton of activity yet
spk_1: okay great project that colored at you
spk_2: i know constant comes from like can with mostly search your line is now often yeah thanks good morning i want a circle back on the had fake business am i in just try to get a split for government revenue vs commercial i think the old i take business was not two dogs government arm and then within that government is how much it either space vs on other aerospace and defense spending
spk_15: on a contractor side yeah the just a the upon plan on there seems to be some i worry about just us government spending goalie auburn twenty twenty two and beyond that's obviously i twenty twenty one problem we'll see what happened to the election am but i guess the to get a better feel for how much space exposure vs you know broader anybody would be will be held
spk_2: four foot so let me let allen talked to split the then i'll talk about contracting okay yeah no show actively one hundred percent of the aerospace and defense is government related mean there there are the out a few small commercial application made for space but it's it's a small component so at the it's better they get it is one hundred percent is his government related on new we we had not broken out the space component by itself but it tends to be a smaller component of the overall ad tech segment itself so the lion's line of what we see in areas is more the traditional all defense technologies that we provide and i have as far as contract and goes you know a lot of on a lot of work we do is his rollover contract stuff it's it's been continuing work it's make it as grown but it's it's not new work and so when we look at that and a change of administration or or as you know things that could that could go wrong i'm a lot of what we do are mostly what it it would be under continuing resolution so we don't see a lot of risk it to that work on as far as new were coming up i think it'd of the work it's going on at nasa seems to have really good at bipartisan support of especially return to the mood in the things that we talk about today
spk_1: so i just met with a group of college yesterday and and at were very close to to support for the space program on because it's what they live and breathe every day and they felt they feel comfortable that as well so i don't think there's a lot of risk and that government business but you know that it's a there can always be some knee jerk reactions but it would it would have to
spk_2: dig deep you do after disrupt work it's already going on that's out of totally fair on it and i don't want to focus too much on on the small party your business but or integrity and digital solutions is wanna be more excited and directional some of the changes you made internally and and maybe began a loaded more commercially intense their i'm so i appreciate the growth capital potentially could go to that same and i appreciate the one down the prior question as to the various opportunity that guess i'm just wondering what opportunities would you consider incremental for that segment and then if you were to pursue these opportunities would you anticipate any modest margin for action until you got critical scale in in those applications or are you to focus on be more commercially and penske in the services that you for by currently a so not great question i'm excited internet a review it is a it is a great book is area for arson and it's something and of an ashen out acid about a while because i think that especially the integrity management piece has been very pans on mechanical work for a long time and and all of our customers say you know i want to be able to inspect the pipeline pressure vessel a thought having to open it up and put a man inside and and things like this so so they're directly they really want to go this way some in and when we talk about what can we do have some it is predictive analytics on that is you know big data processing some of it is embedded censor some of his use of drones and crawlers to get men of way so there's has opportunity number one are more data safely and and we feel like we're well positioned to do that because we've got subject matter expertise we had the guys hanging from ropes underneath the underneath the platforms so we know how were what inspection gets done and how it gets done today but we've also got the robotic side that in this is something we did once before we took divers out of a water and replace them with machines we believe we can take men off the ropes and replace them with machines so there's there's that data gathering part that that i think is really good and and generally speaking it's that that whole business and been local lore capital intensity or we do see the need to invest in in some of that some of the robotics and some of this
spk_1: software to drive his vision ahead and your software has some like you said some for ignore facts you invest early in l a big robotics you do after your best early but but they're they're very scaled and so while you go through some of that it's not a huge capital investment like like building vessels
spk_2: and and the scale ability the investment is it is much much better once you get the product develop so i i think it's a it's a great space to watch if you will because it there's there's market poll for it and i think that the the bang for the buck is pretty hi there
spk_1: understood and and if i get to squeeze one more end and i've been double world in which erode that a and you're looking to do some emanate
spk_2: which segments in particular would you have to do either because it's the attractive opportunities or because you think it's a space it from a technological perspective good could benefit from the both on of a various disparate technologies from from different markets i think i think there's bolt ons in most of our businesses and and i would say though that when we talk about what i just mentioned with robotics him and special the robotics i think of a lot of ways to leverage our our knowledge of on how to deploy how to maintain out of service on how to how to navigate not rate and train people to run robotics that we can always take a a unique robotic application and put it in our in our arsenal and be able to deploy that quickly whereas somebody who who had a really great idea but doesn't know how to get it out the market get an operating on those partnerships be really powerful for us arms i think there's that against software development you know maybe adding capabilities former marine logistics those are opportunities for a so
spk_16: it's pretty broad across the business if we look for large scale large bolt ons for scale on those are little more challenging because he just we just have to say you know how healthy or those businesses and is it something it's getting the a creative in the near term
spk_0: even if it is maybe longer term that's very interesting thanks guys and you
spk_1: i don't even wanna was nothing to ask a constant a star one on your telephone he can one constant comes from on i even smoke the titan and energy advances
spk_17: one is now open
spk_1: i did my in the morning thank you of weird what what and of another in on the data that that when he when guidance
spk_2: and third of on appreciated i i didn't wanna act and with the segment realignment we we got a better view them at the product and service lines and i was a little to buy that without any of them at all the pollution margins work in the first guy and and i understand there's uncertainty around the cupboard outlook and and one that doesn't affect guy bad but i like ask about yeah your approach live in a lot that's not that's like my dad and and butter it's possible to get those margins of to break even without in parks in the back to normal so it's it's that's an interesting it's a it's a little bit a lot of it really cool sided coin i'm most of our business in their mobility solutions his as been in the entertainment business that been live that's been that the big part of it and course entertainment even talk about a business has been challenged out that the theme parks had been extremely challenged the first half of the year so they slam on the brakes on almost everything they were doing and i had a lot of our work was actually was in china the for the first half of this year so that was very challenge debugging back to china were actually there in a small way right now but god but that that's the that's the biggest challenge there so we did we shifted i was shifted down a lot and we made some pretty significant cost cuts in that business where we could without losing capability so that was at that was a big i'm a big reaction they're if you look at the other half though if the other out with the business is one
spk_17: it is smaller in it's and in we been more project based on to date for been working on more standardized project products but but he think about reducing the number of people in a plant by adding mobility solutions to our manufacturing plant keen interest in that because now after a global pandemic a lot of the customer
spk_1: reds are saying any time that we get it we could reduce on the interaction of people to to nature these plants can keep up running in a situation like we've experienced as here i'm definitely renewed interest and and whether to manufacturing plant we've we've done some work for hospitals as well the interest in that product this is definitely going up so in a trying to feel those those i interest to make sure which ones are real and which ones are looky loos so to speak you know that just are curious about what that would mean has been and been kind of that the challenge there is to make sure that we are chasing things that won't ever did
spk_2: lm but it is it's it's a it's a two sided business and i'm in we we knew that exactly yeah i think we believe that some people had maybe higher expectations or i or understanding those businesses and we expected we get some questions when that was in when you get when you can get a little more visibility to that going forward percent the color and and the the other one our own question it looks like your your database or the activity was higher and you to me than a any the and twenty for thing i'm just wondering if you could give any color or brown that they got them and whether anything in your twenty one outlook includes i about to be attacked the are the activity can go into that one
spk_17: i would just say that relationships keep getting better ah with the vessel operators and you know for a while it it's a little bit challenging sometimes for us because we we were vettel operators in a big way and and that the toss as a competitor and so it was a little bit difficult to to reconcile
spk_0: no real friend or enemy
spk_2: but now that number one were doing more of our vessel operations on on spot higher and in sharpie own church or charters well i think we started resolve those relationships in we just we just picked up a significant that contract with a vessel operator so the relationship are getting better or placement on board on that alone
spk_0: my others is getting better and i think that's that's just a sign of of how our building that that part the market or for customers

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