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spk04: Thank you. Good morning and good afternoon, ladies and gentlemen. Welcome to this presentation of CDG's first quarter 2022 results. The call today is hosted from Paris, where Mrs. Sophie Zierkia, our chief executive officer, and Mr. Yuri Baidukov, our group CFO, will provide an overview of the quarter results, as well as provide comments on our outlook. Let me remind you that some of the information contains forward-looking statements subject to risk and the uncertainties that may change at any time, and therefore the actual results may differ materially from those that were expected. Following the overview of the quarter, we will be pleased to take your questions, and now I will turn the call over to Sophie.
spk00: Thank you, Christophe, and good morning, good afternoon, ladies and gentlemen, and thank you for participating in this Q1 2022 conference call. We'll move to slide five now. And let me start with some general comments on the evolution of our businesses and market environment during the quarter. Overall, Q1 was a slow start of the year, with significant differences among our three business lines. Geoscience revenue was 75 million, up 36% year-on-year pro forma. Our geoscience perimeter no longer included geosoftware and the physical asset storage business of smart data solutions, which we disposed of last year. and we will present year-on-year pro forma revenue comparisons to best show the underlying business performance. Geoscience performed very well this quarter and continues to see steadily increasing activity. The level of bidding activity is up 51% year-on-year, and the level of commercial bids pending was at 347 million early April compared to 209 million early December 2021. Earth data. which is our renamed multi-client business as we continue to expand the data types that we sell. EARTH data was in line with our expectations and up year-on-year with a typical low Q1 pre-funding revenue, but stable year-on-year with stable CapEx. As you know, the pre-funding ratio is usually low at the beginning of the year and increases through the quarters. We expect to see the same trend in 2022. The positive news is that Q1 after sales increased 56% year-on-year, which confirmed our view of seeing after sales continuing to strengthen as the year progresses. As expected and highlighted during our Q4 conference call, sensing and monitoring, which is the new name of equipment business as we continue to grow into new markets, had a low quarter in a business that tends to be lumpy and is increasingly driven by significant orders. In addition, some sales this quarter shifted to later in the year. Large tenders in Saudi Arabia for land and OBN are positive signals for an active second half of the year and 2023. Overall, our Q1 revenue of 153 million was down 24% year-on-year pro forma, with contrasting dynamics between the business lines. Data, digital, and energy transition was up 34% year-on-year for four months, while SMO, sensing and monitoring, was down 70% year-on-year. Segment EBITDA and adjusted segment EBITDA was 39 million, a 25% margin and up 31% year-on-year. Net cash flow was 68 million, including 19 million positive change in working capital. Our core markets continue to recover, signaled by increasing commercial discussions with our clients and bids. We operate today in a favorable cycle, driven by the need to replace depleting oil and gas reserves, with a focus on short cycle exploration. We're seeing also more consistent requests from energy companies to better understand the subsurface for their energy transition programs. We move to slide seven now. DDE segment revenue was solid this quarter at 119 million, up 34% year-on-year pro forma, with growth in both geoscience and earth data. DDE's business dynamics have historically been strongly correlated with E&P spend, and this is what we're experiencing in Q1 2022. Profitably significantly increased with a fall through at 90% on incremental revenue. Now on slide eight. Geoscience revenue exclude revenue from geosoftware and the physical assets business of smart data solutions that we divested in 2021. Geoscience external revenue was 75 million in Q1, up 36% year-on-year pro forma, with growth mainly coming from North America and EME. Year-on-year backlog was slightly down, which is related to the decreasing average size of the projects and does not reflect yet the rapidly growing commercial activity that we see. Several clients are now concerned about being able to access processing capacity for the upcoming needs, and rightfully so, as it will take some time to recruit people. The total production per head KPI continues to improve as we're achieving the full effect of cost reductions, combined with improving utilization of our resources. And to support our growth perspective in our core businesses and the development of our beyond-the-core businesses, particularly high-performance computing, CDD recently signed a lease to build a new European HPC hub in southeast England that will become operational in the first half of 2023 and increase our cloud HPC capacity by 50 petaflops initially and up to 100 petaflops as required. Going into slide 9. In geoscience, our technology differentiation continues to make significant impact in our market position. We have been recently awarded several large projects where our elastic full waveform inversion imaging technology was viewed as unique in the industry. In fact, these advanced algorithms contain more accurate physics and provide striking improvements in soft salt imaging. They enable our clients to access a much clearer view and understanding of previously imaged reservoirs. As an example here, the image on the lower right shows much more distinctly the continuity of the various layers below the salt and will substantially improve the interpretation of this area. A client recently mentioned how this technology enabled them to identify an extra 500,000 barrels of oil. Geoscience activity has picked up, starting with North America and more recently Europe, with a few of our imaging centers running at near full capacity already in early May. We are encouraged by the high level of commercial activity, which will drive improvements in other parts of the world. We also continue to develop and promote our Beyond the Core businesses, and this quarter we launched Tailings Pulse, a smart mind monitoring solution for structural integrity. We released new GeoVerse studies, products from our Earth data library for lithium brine, geothermal resource evaluation, and carbon storage identification, all leveraging our geology capabilities and historical geological database. We signed strategic partnerships, including one with Kent, another with Carbon Management Canada, and a third with GCE Ocean Technologies Cluster. Our aim is to be the partner of choice for subsurface understanding and monitoring for the energy transition. Slide 10. We'd like to continue to introduce you to our Beyond the Core businesses, and this quarter we will highlight our Data Hub offerings. During the last few years, building on our digital data management and subsurface expertise, CDG put considerable efforts towards building a unique data ecosystem that enables our clients to effectively ingest, classify, access, visualize, and utilize the diverse data sets they need to optimize their subsurface understandings, both for their oil and gas portfolios and for the energy transition. It is very different from the analytic solutions offered by the hyperscale cloud providers because we use a geologic taxonomy and ontology that we have developed over the last 45 years. This allows clients to digitally associate the diverse data sets geologically, including their own data and data from other vendors, in a meaningful way. This offer is typically provided as a service, and we conservatively see the market to be at a few hundred million dollars per year in the short term, given the amount of subsurface data that our clients manage. For clients that wish to move their data to the cloud, we can also leverage our CDG HPC cloud and data as a service offering. In summary, DataHub offers digitalization services that create robust, integrated, and structured subsurface data sets or models, which enable users to efficiently discover, access, and utilize all their data in order to overcome subsurface challenges and reduce cycle time. We have just been verbally awarded a significant multi-million dollar contract to perform this type of work over a period of 18 to 24 months for a supermajor. We'll move to Earth data now. Earth data sales were 44 million, up 28% year-on-year. Cash capex of 33 million this quarter was stable year-on-year. We started a marine program offshore Brazil that represented a significant portion of our capex. Our pre-funding revenue of 15 million was stable year-on-year, and pre-funding is typically low in the first half of the year and builds throughout the second half. Aftersales was stronger this quarter at 13 million, up 56% year-on-year, sustained by the U.S. NOC. Now in slide 12. In Brazil, After the completion of the vast and successful NEBULA program, we started Antares, located in the South Santos Basin. With good weather and fewer mammal interruptions, the Antares acquisition has been very productive so far. The new data will provide a second azimuth with a longer offset to improve images of the pre-salt. Nebula A processing is now complete. and we have conferred that the dual azimuth data provides significant image improvement. In the U.S. GOM, our re-imaging projects continue to draw pre-funding, and we began the reprocessing of our large stack size II program with solid pre-funding. In the North Sea, we just started our 2022 summer campaign and secured significant pre-funding from different clients for our North Viking-Rabbin East-West program. We're adding 1,800 sparse nodes to this 9,000-square-kilometer streamer program. This will create hybrid node streamer data to better invert for subsurface velocity and thus improve the identification of target structures, supporting the search for short-cycle, near-step-out exploration opportunities. And finally, our GeoVerse geology and well data library is now fully accessible as a service, and we have closed several commercial projects. Now in slide 13. In support of energy transition, we carried out screening studies for geothermal energy and geothermal lithium brine. These data-rich studies capitalize on CDG's wealth of geoscience data, know-how, and data science expertise, and they address a wide spectrum of application from geothermal resource assessment through critical mineral exploration to carbon sequestration. These are just a few examples of the vast amount of geologic and geophysical data available through our GeoVerse platform that can be used to explore for oil and gas, explore for the various minerals necessary for the energy transition, and may even be used to search for geothermal opportunities by looking for favorable gradients and anomalies. The data includes over 550,000 quality control data points, and viewing and selection of the data is made easy in the GeoVerse platform. We'll now move to sensing and monitoring. Slide 14. Our sensing and monitoring segment revenue was low this quarter at 34 million, down 70% year-on-year. While the SMO business is lumpy in nature based on large acquisition programs globally, and we had a strong Q1 in 2021 based on year-end 2020 mega-cruise sales, revenue was lower than expected this quarter as some sales of land equipment shifted to later in the year. Marine sales continue to be limited to repair and maintenance. And this year, Beyond the Core activities are supported by a very active defense sector, and will increase through the year. At this level of sales, the EBITDA of the sensing and monitoring business was negative at minus $12 million, a limited loss for such a low level of revenue. We have evaluated the full impact of the Russia sanctions to be around $35 million for the four-year, which could be partially offset depending on the timing of large mega-cruises in the Middle East. Based on the growing visibility of these opportunities in the second half of the year, we remain confident in the four-year SMO performance. Now moving on to slide 16. During the quarter in land, we delivered equipment to Brazil and India. Marine was particularly slow, but we see significant potential for our GPR 300 node, marine node, in the second half of the year, and are preparing for these opportunities. In summary, following the slow Q1, We anticipate an acceleration of the sensing and monitoring business in the second half of the year, driven notably by the confirmation of several tenders for large land seismic megacruise and OBN megacruise in Saudi Arabia, with equipment deliveries at the end of 2022 and early 2023. I'll now give the floor to Yuri for more financial highlights.
spk03: Thank you, Sophie. Good morning and good afternoon, ladies and gentlemen. I will comment with Q1 2022 financial results. Starting with slide 17, Q1 2022 income statement. Let me first comment on the overall Q1 activity, which was different across our businesses. Segment revenue was $153 million, down 24% per former, excluding geosoftware and physical data storage businesses that we sold in 2021, and down 28% year-on-year. It was a low quarter, as anticipated, with lower than expected revenue in sensing and monitoring, ex-equipment. However, revenue in digital data and energy transition, ex-GGR, was up 34% per forma and up 19% year-on-year. The respective contributions from the group's businesses were 49% from geoscience, 29% from earth data, 78% for the DDE segment, and 22% from sensing and monitoring segment. We anticipate 2022 quarterly sales pattern with sequential acceleration, especially in the second half of the year. Segmented EBITDA and adjusted segmented EBITDA was $39 million, up 19% year-on-year at 25% margin. Segment operating loss was $5 million and adjusted segment operating loss was $4 million. IFRS 15 adjustment at operating income level was plus $16 million And IFRS operating income after IFRS 15 adjustment was $11 million. After cost of debt of $26 million, other financial income of $7 million, taxes of $9 million, and net loss from discontinuing operations of $2 million, group net loss was $19 million this quarter. Looking at the simplified cash flow on slide 18. Q1 2022 segment free cash flow was $86 million after $90 million positive change in working capital on high collections of strong Q4 revenues, partially offset by growing inventories and sensing and monitoring, and $42 million CAPEX. Q1 2022 CAPEX was flat year-on-year and included industrial CAPEX of $4 million, research and development CAPEX of $5 million, Earth data cash capex of $33 million. Q1 2022 net cash flow was $68 million after $13 million lease repayments, zero paid cost of debt, $7 million CEG 2021 plan cash costs, and $2 million positive free cash flow from discontinued operations. In April, we completed the sale and leaseback of the Galileo Headquarters building, for a total amount of 59.25 million euros. And after the repayment of the remaining capital list balance, the net proceeds were around $32 million. Moving to slide 19, group balances and capital structure. At the end of March 2022, group liquidity amounted to 488 million, including $388 million of cash liquidity, and $100 million of undrawn RCF. Group growth debt before FRS 16 was $1.2 billion and net debt was $807 million. Group growth debt after FRS 16 was $1.3 billion and net debt was $925 million. Our growth debt included $1.15 billion senior secured notes during 2027, $2 million bank loans, 44 million other items mainly accrued interest, and 118 million lease liabilities. Capital employed was $1.92 billion, down $79 million from the end of December 2021. Net working capital after FRS 15 was at $145 million, down from $229 million at the end of December 2021, primarily driven by significant reduction in net accounts receivable, on strong collections, lower deferred revenue liability from IFRS 15, and reduction in personnel liabilities, partially offset by growing inventories in sensing and monitoring. Goodwill was stable at 1.1 billion, corresponding to 56% of total capital employed. Multi-client library netbook values after IFRS 15 was up at $407 million, including $374 million of marine and $33 million of land net book value. Non-current assets were at $378 million, with $204 million of property, plant, and equipment, down $8 million from year-end 2021, and including $115 million of IFRS 16 right-of-use assets, and $90 million of other intangible assets, stable, from year-end 2021. Non-current liabilities were at 95 million, down 5 million from year-end 2021. And shareholders' equity was at 992 million, including 43 million of minority interests, mainly related to Yunfeng GE. Now I hand the floor back to Sophie for an outlook for 2022 market environment and presentation of CEG and new Beyond the Core businesses, business perspectives, and 2022.
spk00: Thank you, Yuri. Now we're on slide 21. I believe we're entering a multi-year cycle of increasing investments in exploration and production, driven by the forecasted strong demand for energy, the natural depletion of reservoirs, and the lack of past reserve replacement investments. The recent focus on energy security and possible reduction of supply from Russia are additional factors that will further drive and accelerate investments. In this context, energy companies will be required to replenish their exploration portfolios and accelerate time to production, all of which require high-quality equipment, data, and imaging of subsurface. We expect local regulators to push for more exploration activities as confirmed by recent resumptions of these rounds in the UK, Brazil, and the USA, and also expect national oil companies to accelerate their development and production plans particularly in the Middle East, Norway, and Brazil, among other areas. We believe that CDG's clear technology differentiation will remain key and will drive and sustain our business growth. We also believe that our high technology will be needed in the context of carbon sequestration and storage to de-risk these activities. Ocean bottom nodes are accelerating their market penetration and are becoming mainstream based on their ability to acquire the data needed for advanced processing to better image complex reservoirs. This will drive demand for our processing services as well as our CESEL marine nodes. In this context, we expect to see an acceleration across all our activity in the second half of the year and into 2023. We should also see a strengthening of our beyond the core businesses supported by the focus on digital and high performance cloud computing. Based on the strengthening market throughout the year and the visibility we have at current or new opportunities, we expect to compensate the full impact of Russia on our sensing and monitoring business and reiterate and confirm our full 2022 four-year financial objectives. Thank you for your interest, and we're now ready to take your questions.
spk02: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the hash key. Please stand by while we compile the Q&A roster. And your first question comes from the line of Jean-Luc Romain from CIC Market Solutions. Please ask your question. Jean-Luc Romain, CIC Market Solutions Good evening.
spk08: I have a question on pricing. You mentioned that your just had centers or interpretation centers are quite loaded for this year. Do you see an increase in pricing coming? That's the first question. And the second is about the potential that you see for CCUS. I understand ExxonMobil has mentioned a market of $1,000 billion in the distant future. What would be the slice of that market for Geoscience?
spk00: Okay. Well, thank you. Bonsoir, Jean-Luc, and thanks for your question. You read my comments right. I mean, we're at that point that we think we'll be able to start increasing prices. As we're starting to be full, we're seeing more work coming our way than maybe perhaps we'll be able to handle. So we're at that point. that we think we can start increasing prices. Now, the question will be testing the market to how much the market can absorb. And it varies a little bit depending on regions, and we're definitely more full in the U.S. Europe follows, and Asia is still a bit slow. The second question on CCUS, I guess the first order of magnitude, I would go for a similar percentage as the E&P CapEx. If you remember exploration and production CapEx, seismic altogether represented somewhere around 5% of the whole. I think as a first guesstimate, you could take a similar percentage. Eventually, we'll need to do similar activities. We'll need to be doing analysis of the subsurface, analysis of the integrity of these reservoirs, and there will be a component of monitoring as well over time, which perhaps that component will even be more important than traditionally with our seismic methods. So yeah, I mean, we're all trying to figure out what the right number is, but I would say if you take just a similar proportion as you would take for ENP CAPEX, and make sure you take the same slice of it in the sense that in CCUS, you'll have all the elements around the carbon capture itself, which I would exclude. Really, it's about the whole identification of the reservoirs, you know, the drilling of the wells, and the exploitation, and then the monitoring would be somewhat similar, equivalent, and equivalent to the ENP CAPEX.
spk04: Thank you.
spk00: Sure.
spk02: Thank you. Your next question comes from the line of Mick Pickett from Barclays. Please ask your question.
spk01: Good evening, Emily. I wonder if you could just Give me a bit more on the change in attitude of your clients. I know you mentioned step-out exploration and production focus. I think another seismic player mentioned frontiers even coming back into the mix. So how quick is this change from your clients and how keen are they to get going? What is the magnitude of step change they're trying to get to?
spk00: So clearly, I mean, there are different kinds of clients, and that's why I always sort of discriminate. So first of all, hi, Mike. Thanks for your question. And yeah, we always discriminate between the types of clients because they behave a little bit different. So we started with the super majors that are all announcing their fantastic results in Q1. They're all pretty much saying they're keeping the course, meaning they're keeping the capital discipline. But what you might have heard them say, too, is that they're going to be going towards the higher end of their guidance for E&P CapEx. So some of them have small brackets, and some others have larger brackets. So that's one element. So you're starting to see them lean on the higher side. Supermajors are clearly driven first by anything that increases production in the short term. It could be production enhancement, identifying backpass reserves, or step-out exploration. So anything that's short cycle is definitely the priority. Yet, some of them are clearly looking at frontier exploration. Not all of them, but some. And a good example, a good data point for that are the results of TGS, right? They had a really good quarter, and a lot of it was driven by frontier data. So that's that. For the national oil companies, clearly they're focused on – they probably have a longer-term view, so you see them more heavily going into large seismic projects to understand the subsurface and develop their resources in the long run. So they're not as much into that short cycle, but taking a longer-term view. And in the middle, you have a – a wide range of more independent or private company. And it's a bit of a mixed bag. Some of them are behaving more like the super majors, you know, kind of first prioritizing the short cycles. But others are more, I would say, you know, looking at exploration. They're looking at longer-term developments. So it's definitely, we're starting to see a shift in the market. I think when the whole realization of energy security, that the oil price was going to stay high, that it's becoming a reality, has happened too late after the budget cycles. And so we'll see really sort of the increases start to translate into next year. Although I would think supermajors will continue with the capital discipline.
spk01: Okay. And secondly, you mentioned the Middle East in the equipment sector and saying that Middle East opportunities will offset some of the Russian impact. Are they incremental Middle East opportunities that have arisen since you last spoke to us? I think you remember the equipment outlook was stabilized this year as a starting point. So you think the Middle East has got better than you thought it was going to be? Is that what you're trying to say?
spk00: Absolutely. Absolutely. Absolutely. I didn't mention, I did say at the time we did the budget and at the time we guided for the year, we didn't have visibility on any significant large mega crew or sail. And we knew something could come in Saudi Arabia because they really are running at the low run rate of seismic acquisition if you look at historical data. So we knew there might be something coming, but we did not know the magnitude. And right now what we've heard, and it changes at the margin, is two land mega crews and then two or three OBN crews. The difference thing is that there's clearly a focus as well on the offshore side of Middle East. And that's just... the Saudi Arabia side, but we're definitely, Algeria is picking up. We're having positive signal in Libya. And I wouldn't be surprised that we have other positive signals from other countries in the GCC areas. So definitely it's been an improvement. Now, the timing of that is the bids are supposed to be out for Saudi any time now. And what our understanding is that they want the cruise to start as early as possible in 2023, which would mean delivery sort of backloaded in 2022 and early 2023. So similar situation in a way as we experienced in 2020.
spk01: Thank you very much.
spk02: Thank you. Your next question comes from the line of Kevin Roger from Kepler. Please ask your question.
spk07: Yeah, good evening. Very sorry for the noise around. I hope you can hear me at least a bit. Very sorry for that. Just coming back on what you said on Tercel and the Saudi opportunities, Sophie, you just said two mega cruise and three OBN. And if I understand that could be by the end of the year. Do we agree that the mega cruise is something like 50 to 60 million dollars opportunity? And what would be the contract value of an OBN mega cruise also, if you can mention that? It would be great to understand the magnitude that you could see just in Saudi Arabia for the second half of the year. The second question is related to the, let's say, multi-client activity and the current discussion that you have with the clients in terms of late sales. It seems that you mentioned that there is more and more interest, commercial discussion with the clients, etc., Can you give us a bit of magnitude of what you see, notably for the Q2, for example, what you expect, what could be potentially reached, considering the level of discussion that you have right now and the fact that it seems that you are a bit more confident than two months ago? And the first one will be related to the cash position, maybe for Yuri. So Q1 performance is quite good in terms of net cash flow, Q2. will be helped by the disposal of the offices in Massey. So can you also give us a bit of color of what we should expect in terms of net cash flow generation for the full year, please? And again, sorry for the nose around.
spk00: Okay, merci. Bonsoir. Good evening, Kevin. I'll try to address all your questions. So you know very well the opportunities for megacrew and the size is the orders of magnitude that you're talking about. Let's say $50-ish million for a land megacrew, and then $30 to $50 million for an OBN crew. Now, keep in mind, this is one size is the commercial. Now, the second one is the ability to deliver. Now we live in a world that, I mean, supply chain disruptions and long cycles of manufacturing. So basically the manufacturing plan we have, we launched at the end of the year. We've procured everything. So in that sense, we will not have any disruption. We'll be able to deliver what we plan to deliver. But if all of a sudden something shows up that of very high magnitude, we can't just turn around and manufacture for it. So we'll be somewhat limited in what we can deliver this year and recognize in terms of revenue this year by our manufacturing plant and what we have in the pipeline. So we can clearly deliver, I would say, one OBN crew and probably one land mega crew, but not a whole lot more than that. The rest would have to be coming into next year.
spk07: But so it will mean that basically it's at least $80 million of revenue from Saudi Arabia this year, and for next year it's more than that, basically.
spk00: Which, you know, it's not, I mean, I need to temper your calculation. Some of it was already sort of, even though we didn't have it identified specifically as, you know, Saudi mega crew, there were some things that we were planning to sell already. So it's not all additional from our plan. so that's one that's one the second one on the multi-client actually the comment i was making on the very active commercial interaction was more related to the geoscience side so clearly very very active on that side and there's a logic for it because it's very related to production development and production and immediate returns where multi-client still has of course we've have a lot more of our surveys positioned in those mature areas, and that activity continues there, actually very much driven in the North Sea by those newer or smaller companies. But I would say the late sale, we have a little bit more visibility in some of the M&A driven and transfer fee conversations, but I'd say we have a slightly more positive view than when we gave our guidance a couple months ago, but it's not so significantly improved. At this point in time, I would call it a moderate improved view on the after sales. Yeah, and maybe in terms of timing, we're thinking the transfer fee that's associated with the Woodside BHP probably could materialize earlier than we planned in the second quarter, and that's just because the closing of the deal has been pushed forward by one month. So if they actually do close the deal in the 1st of June instead of 1st of July, that could trigger that conversation earlier. But that's just... Q2 to Q3 shift. And I'll let Yuri talk about the cash flow.
spk03: So, Karen, on the cash position, basically, as you see, Q1 revenue is obviously lower than Q4. Therefore, collections or the level of collections mechanically, if you want, in Q2 will be naturally lower than that in Q1. You're right that Q2 will be helped, of course, by the net proceeds from the Galileo sale is back. It's about $32 million. But also, the new schedule of payment of semi-annual coupon on the bonds is now different. So we pay interest twice a year. So we pay on the 15th of April and the 15th of October. And therefore, Q2 and Q4 have this additional element of roughly $48 to $50 million of interest payments in terms of cash outflow. So basically this is kind of the QQ elements, if you want to.
spk07: But for the full year, Jory, would you say that considering the performance that you had in Q1 and the outlook that you have, would you say that it's very likely that you will be net cash flow for 2022 full year?
spk03: Well, like always, it will depend on what will be the level of receivables in December. So basically, yeah, in other words, the timing of the sequence of revenue, because, again, looking at the equipment business, as Sophia already mentioned, It's shaping up similar to 2020, right? So, in other words, with the year which is back-loaded, with mega-crew deliveries starting in late Q4, and then, of course, basically, yes, collections of that, but also additional revenue in Q1 of the following year. So, basically, in other words, again, the usual elements.
spk00: Perhaps, Yuri, you can comment on outside working cap?
spk03: Yes. The working capital, of course, the change in working capital was quite positive this quarter at $90 million. So again, it will depend again on where we land at the end of the year.
spk00: But my point was, Kevin, is I think the working capital is the part in the equation that's difficult to gauge. But certainly, if we don't have outside of significant effects of working cap, yeah, we should be fine. And yeah, that break-even point. But where the difference can come from is a change in working cap. And if we end up being very, very back-loaded in terms of revenue and having the inventory and sales at year-end, we could find ourselves in a similar situation as in 2020.
spk03: But that being said, of course, you know the guidance for EBITDA and the guidance for our CAPEX. In other words, of course, EBITDA minus CAPEX... will be quite positive here this year.
spk07: Okay. Okay. Understood. Thanks a lot for that. Thanks.
spk03: Thank you. And also obviously a much lower level of kind of cash out flow from discontinued operations, right? Which is down to roughly about 20 million versus higher numbers a year before.
spk07: Okay. Okay. Perfect. Thanks a lot for that. Thanks.
spk02: Sure. Thank you.
spk07: Thank you.
spk02: Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from the line of Guillaume de la Belle from Societe Generale. Please ask your question.
spk06: Yes, good afternoon. Two questions, if I may. An easy one and a very, very tough one, but it will be the second, so you will have time to prepare yourself. So the first one, basically, is that I would like to relate what you said, Sophie, regarding lead cells. Basically, so you are quite optimistic but less optimistic than for geoscience, and also In the free cash flow equation for 2022, of course, lead cells could play a significant role probably in Q4. So if I can have some more comment on that is that, of course, you do not want to commit yourself, and this is absolutely normal. Given what is happening now, a good surprise for lead cells beyond Q2, Q3 and in Q4 is possible. So what would you say? Any observation or whatever?
spk00: Merci. Thanks. Good evening, Guillaume. So let me maybe qualify my comments on after cells, right? I'm very convinced we'll do better than last year, but last year was a fairly low point and a disappointment. So definitely I know that this year will be a lot stronger. Now the question, will it be a lot more than what we had guided or what we thought two months ago, is the question I was answering to Kevin. And I think my view is a little bit better, maybe a slight improvement from a couple months ago, But definitely a strong improvement from a year ago. And now Q4 is similar, I would say, as usual. We'll have a view when we enter Q4. It's difficult to know. But of course, if you look at macro elements, they're all there to have a strong Q4. Because, of course, oil price is high. Our clients are generating strong cash flows. The perspectives are good. And I would say one of the issues where... of the kind of not seeing the ENP capex or the spending increase significantly, you know, a strong reactivity, I would say, in the ENP changes is one, what I mentioned, that this is all happening way after the budget cycle. But I think it's the question mark of whether we are indeed entering a long cycle, right? Because if you think this is short-lived, the oil prices is 100 plus just for a short period of time, that's not going to drive significant exploration and exploration investments. And still, multi-client is exposed to that exploration part of the budget. But I think that level of confidence that, yes, indeed, we're entering a multi-year cycle, the energy prices, oil and gas prices will remain high for a significant future, that the governments are sort of turning around and actually pushing companies now to explore again, all those are favorable elements that should be conducive for a strong Q4 in preparation, post-budget of our clients, in preparation of 2023. So we did say that we always saw the acceleration being 2023, and that still is the case. It's kind of going to be a strong acceleration, and I'm just afraid that everybody will want everything in 2023. And then us as a service company, and not just CDG, but the whole ecosystem will have a hard time delivering what the clients want. So I think it will be next year, a bit of a problem of supply, supply of services in our sector.
spk06: Okay, that's really helpful. So now the very nasty question, of course, and the very nasty question is for 2023. So let's assume which is probably the more likely scenario that basically we are at the beginning of the multi-year cycle. So basically by 2023, in order basically to Reimagine the CDG equity story. What is your view regarding your balance sheet? Do you want to keep, I would say, on a statu quo believing that organic free cash flow will be enough to deliver at your company or at least partially? Do you intend to dispose some assets? What is the rationale for keeping equipment, sorry, SMO? Or would it make sense also maybe to make a rights issue, a share price, which is above the current share? So this is my nasty question. How can you help me?
spk00: Good. All right, thank you. That's as not as nasty as that. But I would say we need to, ourselves, gain confidence into the recovery of our core businesses, which we're gradually definitely seeing. So first of all, I want to see the core businesses pick up. Then we also want to see before we... First of all, we're looking at all the options, right? But I want the core business to go into that growth mode again. Uh, we need to put a bit more, uh, results under our belt on the beyond the core. Uh, we're starting to see, I mentioned this verbal award for significant, uh, digital contracts. So that's good. And, and, uh, we'll make an announcement fairly shortly. You'll see more announcement come into other directions. So I want to see a bit more there, you know, and make sure I can bring confidence to the market in the fact that we'll be delivering in the beyond the core as well. And then in parallel, in the back end, we're looking at different options. What do we want to do? What do we want CDG to look like in the future? And those are all bold conversations, but we'll tell you the answer when the time comes. And of course, nothing's out of question, including possible divestitures. But divestitures can come, have to be at the right time and the right price. So we're looking at different options. But it's way too early to consider and talk about them. Oh, the rights issue, sorry. It was a question. So for now, we're not considering that as an option.
spk06: OK. Merci, Sophie. A bientot.
spk02: A bientot. Thank you. Your next question comes from the line of Mr. Labax in Society. Please ask your question.
spk05: Yes, good evening. Thanks for taking my question. A question dedicated to sensing and monitoring business and deliveries which are scheduled during the next quarters. Is recent roadmap price increase or also tensions on the supply chain but also on, let's say, shipping could put some pressure on your margins? And when you are bidding now, Do you have some clauses or index clauses on the pricing? Thank you.
spk00: Yes, thank you for your question, and good evening. In terms of the revenue sequence for SMO, as I mentioned, it will be building through the year. So we really started low, and we're going to gradually increase the revenues. But I mentioned also that the manufacturing plan that we are doing, we're delivering right now, has been launched way last year. And we're pretty much confident that we'll be able to deliver everything that's in our manufacturing plan. So we don't expect to see any disturbances from our ability to deliver. In terms of price of escalation cost, it's not that significant because pretty much everything we have in our manufacturing plan this year has been locked down, locked in terms of price a year ago. So we'll see some, a bit of inflation, but very, very minor. And we are definitely starting to increase prices to be able to pass. So it's not like there is an escalation clause or whatever. We have a price and then we... As we see cost increase, when we're bidding on proposals, we're just increasing prices. So we're definitely monitoring the situation in terms of the cost and passing it on. Now, I think we'll see a little bit more inflation into next year as we're starting to secure our supplies for 2023. We're seeing some level of inflation. But keep in mind also that the... You know, some parts of it is increasing a lot, like, for example, steel and some raw materials are increasing a lot, but others not so much. And so when it becomes all in the mix, it's not that much of a significant cost increase in the end of the day. So this is something we believe we can manage.
spk05: Thank you very much.
spk00: Sure.
spk02: That's a good question. There seems to be no further questions at this time. Please continue.
spk00: Great. Well, I think we're done for tonight. Thank you very much. Appreciate the great questions and the easy and the difficult ones. So I wish you all a great evening and hope to talk to you soon. Thank you.
spk03: Thank you, everybody. Goodbye.
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