Viridien S/Adr

Good day and thank you for standing by. Welcome to the CGG Q4 and full year 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to CGG. Please go ahead.

Yes, thank you. Good morning and good afternoon, ladies and gentlemen. Welcome to this presentation of CGG's fourth quarter 2022 results. The call today is hosted from Paris, where Mrs. Sophie Giacchia, Chief Executive Officer, and Mr. Yuri Baidukov, From our group CFO, we provide an overview of the quarter results, as well as provide comments on our outlook. Also with us today, Jérôme Servre, our new group CFO succeeding Yuri, who is leaving CDG for family reasons. Let me remind you that some of the information contains forward-looking statements subject to risk and 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.

Thank you, Christophe. Good morning and good afternoon, ladies and gentlemen, and thank you for participating in the Q4 2022 conference call. Before we start, I would like to thank Uri for his time at CGG and for all his contributions. He provided outstanding support to CGG and to me through challenging times, and it's been a pleasure to work with him. Let me also welcome Jérôme Serre to the CFO role. Jérôme has a broad and international background in finance and in the energy sector, and most recently was the CFO of one of the large divisions of Forissia. We look forward to the experience and expertise he will bring to CGG. The overlap will take place during the month of March, and I am confident it will be a smooth transition. Let me move on now to slide two. I would like to start with you for and for your review today with a few comments on ESG to highlight our strong profile. Our company's high-end technology business along with our low carbon intensity footprint and our continued focus and excellence in ESG have been consistently recognized by ESG rating agencies. CGG is very well rated both by MSCI and by sustainability due to a broad range of ESG considerations and in particular our low carbon footprint. In 2022, we further reduced our scope 1 and 2 emissions respectively to 2 kilotons of CO2 and 39 kilotons of CO2 for the full year. But more importantly, our business brings a significant sustainability contribution to our clients, as our high-end technology and earth data in key bases around the world supports the optimization of their drilling and reservoir development plans, which in turn can substantially reduce their CO2 footprint. Now on slide three. Looking at our Q4 and four-year financial performance, while the macro environment remains favorable with high oil and gas prices, our clients have continued to maintain reduced E&P spending levels, prioritizing returns to shareholders. During 2022, IECs, and especially European IECs, focused on the energy transition agenda, not growing E&P capex in line with the macro trends. while independents and NOCs were the first to increase ENP activity to meet worldwide demand and address the tight market. Energy security has risen as a key consideration, and it is becoming clearer that demand for hydrocarbons will remain high for the foreseeable future. These overall macro trends translated into increased off-field service activity, especially those tied to development and production, such as drilling and completion. Offshore and international activities also picked up significantly. However, products and services that were exposed to longer-term return on hydrocarbon investments, such as frontier explorations, have been lagging, mainly based on the lack of clarity at a 10-year horizon from a climate change and regulatory standpoint. For CTD, this resulted in a volatile yet improving overall market in 2022. Looking now at our Q4 and 4-year results, our solid Q4 financial performance provides a good illustration of the high quarterly volatility that our businesses experienced in 2022. Our Q4 revenue came in stronger than expected at $319 million due mainly to higher than anticipated EDA and SMO sales. Adjusted EBITDA was $169 million, given the mix, and net cash flow was $62 million, including $63 million proceeds from the sale of the U.S. land 5-speed multi-plant library. Thanks to our high Q4 results, we returned to a positive net income for 2022. Full-year revenue of $928 million was stable year-on-year despite the significant decrease of our SMO business, which also highlights current market volatility. Our adjusted EBITDA of $395 million landed in line with our full-year expectations and guidance, representing a 43% margin. Net cash flow for the year of minus $3 million was close to break-even. Overall, our 2022 financial performance was solid as we operated in a complex environment while implementing and investing in our portfolio of beyond the core business initiatives that are focused on developing new profitable revenue streams to CDG as we move forward. Moving on to slide four. I would qualify 2022 as the year of transition for PDG, as we address the volatility of our oil and gas businesses and investors in the future. The quarterly volatility that we experienced this year was probably the highest that we have ever seen, with a significant lumpiness in sales in both EGA and SMO. Variations were greater than 50% between some of the quarters. It was a year of transition. First, in our core markets, especially during the second half of the year, we started to see early signs of the projected multi-year all-in-one up cycle. In this environment, we continue to focus on the advance of our technology leadership positions in our core businesses, and we increase investments in our New Beyond the Core businesses, which in 2022 now represents more than 8% of our revenue. As part of our BTC strategy, we acquired Geocom to establish a stronger infrastructure monitoring market position in North America. and acquired the Ion Software business to strengthen both the differentiation of our core SMO business by accelerating our value-add cloud-based services and to further advance our BTC initiative by extending our expertise and giving us a position in the software as a services market, as an example, port management. We also updated our deal fund organization to move our most mature BGC initiatives into the geography to focus on commercial expansion and created a new HPC and cloud solutions organization to strengthen our strategy in a digital area. It was a year of investment looking ahead of the cycle as we're preparing for improving market conditions in oil and gas and accelerating our BGC businesses. We invested in technology with the construction of the new HPC Centre in the UK, which will be operational later this year and significantly increase our compute capacity. We invested in significant multi-client projects in key basins where we are well positioned for the future. And we continue to advance our market positions and technology leadership in our geoscience and SMO core businesses, while developing a robust portfolio of beyond the core growth opportunities. Now on slide five. Our BDC business initiatives are focused around three main markets, digital, energy transition, and infrastructure monitoring. We made concrete progress in 2022 in all areas. In digital, the creation of our HPTN Cloud Solutions business line was a major step in strengthening our processes and organization as we invested and prepared for growth in this specialized area. In our data hub business, which focuses on data transformation, delivery, and visualization, we successfully completed several pilot projects and secured and are currently doing a full-scale project for BP. In energy transition, We increased our participation in CCUS and minerals and mining, and generated around $20 million of EDA sales, mainly focused on CCUS in Australia, Norway, and the US. We successfully demonstrated our structural health monitoring solutions in various settings within this rapidly growing market, resulting in our first sales in the US, where we are leveraging our position of Lyft Geocom. The new technology profile of CDD is developing in line with our expectations of our BTC businesses reaching the target of 20% of company revenue by 2025. Now on slide 6. A year ago, we were anticipating 18% revenue growth in our DVD segment. We delivered 21% revenue growth in 2022, consistent with offshore E&P spending increases. Our activity particularly strengthened in North America, but we also saw improvements in the North Sea, while Asia remained relatively flat. Overall, the profitability of the DBE segment significantly improved in 2022, with adjusted EBITDA increasing by 23% to $406,406, a high 62% margin. This was driven by efficiency gains, better utilization of resources, a strengthening pricing environment, and a much higher level of mass decline after sales. Now going into each of the business lines on slide seven, geoscience. While the market was solid in North America in 2022, it was still slow in the rest of the world, though we see now clear signs of increased activity looking forward. Geoscience revenue was sequentially stable this quarter due to delayed start of key projects, which in general continue to be driven by strong demand for high-end technology. The revenue reduction compared to 2021 was in relation to a large one-off software sale that we realized in Q4 of 2021. 2022 ended with a moderate 1% growth pro forma in the geoscience production, which includes external plus internal revenues, and a 6% pro forma growth in external revenues, as we utilized less of our services for multi-client. With a 16% backlog increase year on year, we ended 2022 in a better position to start the new year. Profitability of the Geoscience business continued to improve year-on-year, as we did our production per head ratio. Now for operational highlights on slide 8. At the end of 2022, Geoscience commercial activity was increasing worldwide, and we saw a high level of bridge submissions, up 18% year-on-year, driven by a 58% increase in OBN processing bids. This business continues to be driven by a strong demand for high-end technology, and Geoscience should continue to benefit from the accelerated use of advanced acquisition technologies such as ocean bottom nodes or hybrid surveys that require more advanced imaging algorithms. At the end of 2022, order intake in geoscience was up 26% year on year. And as mentioned earlier, we started 2023 with a back up of $231 million, up 16% year on year. In 2022, our computing power was further extended by more than 20% as we added 61 petaflops. We continue to make significant upgrades to our data center infrastructure to support our increasingly advanced algorithms and to further expand our differentiation and support the development of our new HPC and cloud solutions business. We increased our beyond the core revenue in 2022 in geoscience by almost 50%. And we expect continued strong growth in general and in digital specifically as industries are looking to gain efficiency and extract more insights from the data. Now on slide nine. The success of CDD is built on technology differentiation. A unique elastic four-way foam inversion, which was developed by our scientists for complex geology and challenging reservoir development, is the most recent example of this differentiation and the commercial success it drives. CDG's full waveform inversion technology and expertise provides the most advanced solution in the market today to assist our clients in reducing geologic uncertainty and accelerating interpretation of the subsurface as we continuously extract more and more information and insights with our unique geoscience and data science technology. In this example, you can see clearly how our SWI technology provides an enhanced understanding of the compact metallization and delineation of the reservoir. Moving on to Earth data on slide 10. In 2022, EDA revenues were up 36% sustained by a significant increase of after-sales, which were up 90% year-on-year on the back of strong transfer fees in Q2 and strong sales in Q4. Pre-funding caught up in Q4 to land at 66% for the year. 2022 was still driven mainly by demand for near-field exploration. Exploration is active, but focused on new oil and gas that is low cost, low risk, and low carbon. So near-field infrastructure-led exploration is a natural choice, but towards the end of the year, we have seen plants gaining interest in more frontier basins. In 2022, aligned with our strategy, CDG multi-plant projects were mainly in our core regions and basins where government policies are stable and pituring systems are proven. Beyond the core, the CCUS industry is in its early stages and we have seen growing commercial interest for our EDA data, mainly to support both the finding and assessing of the appropriate subsurface container storing carbon. We continue to gain experience by participating in various projects and have seen good opportunities to repurpose public and partner data in shallow water and land together with our geologic data to CCUSD. With this, our current focus remains on building our expertise, licensing our existing data, packaging new datasets for screening and getting closer to our clients and potential clients in this rapidly growing business. On slide 11 now. In November of 2022, we completed the entire acquisition of Shoal Reveal. Processing of this data is ongoing. In Q4 2022, we also commenced preparation for a new multi-client program in the cultural margin, including transferring a vessel in mid-December. The acquisition is expected to take around 200 days, and processing should be complete in Q3 2024. In Q4, we divested our non-core U.S. land multi-client data library for a total amount of $63 million. Looking forward, two new sales have been confirmed in 2023 in the Gulf of Mexico, one at the end of March and another in September. Both should drive increasing activity. I mentioned during our Q2 conference call that we continue to expand our data offering to address energy transition, especially for CCUS and mining. This Arizona project is the first multi-client project in the company for the mining industry, and we already have one client commitment. The project has started as we compile information, and airborne acquisition is planned for the March-April timeframe. Acquisition is expected to take approximately 12 months. The purple outline shows the full project area which will be covered by multidisciplinary data including multi-physics, satellite imagery, multi-spectral, well and geological data. The blue outline highlights where we will acquire airborne multi-physics data. This is a new business model for the minerals and mining industry and it will allow operators to access larger integrated datasets to better identify and characterize deposits. Now on slide 13 with sensing and monitoring. In 2022, our sensing and monitoring segment saw a significant reduction in sales, down 24% year-on-year. This was linked to commercial restrictions in Russia and to the lumpiness of its business. Multiple large projects in the Middle East, in particular, were delayed from 2022 to 2023. At $269 million of sales for the year, the SMO segment generated 16 million EBITDA, a 6% margin. In 2022, the SMO business acquired Geocom and Concept, the IAM software business. The top line contribution of these two businesses was around $18 million. We are very pleased with these acquisitions. They're already a critique to SMO, and the level of business synergy is more than we anticipated. Now on slide 14. Q4 SMO sales came in at $104 million, up 10% and above expectations, with sales materializing in the last days of December. Land equipment sales represented 60% of total sales. Overall activity has been picking up this quarter, mainly in North Africa, and with our wind land nodal technology, sales are also gaining momentum. Marine equipment sales represented 22% of total Q4 sales. OBM market for shallow water application remained active, especially in the mid-east. Marine market for streamers is still mostly limited to equipment upgrades and spread stream section delivery. Sales from beyond the core businesses were $14 million in Q4, significantly up year on year, supported mainly by an active defense sector. Our new infrastructure monitoring business is progressing well. We continue to pilot excellent technology and solutions on several bridges, including a bridge in the New York area, and we secured an order to perform baseline analysis on two bridges in Georgia. We won a debt and tables measurement job in Texas as well. And we performed several demonstrations of our earthworks monitoring solution, ESCAN, in both Massachusetts and New York, and won a short-term monitoring job in the Paris suburbs. Overall, the BTC areas were focused around SMO, benefited in 2022 from increased interest from the defense sector, and the addition of GEOCOM structural health monitoring business, especially in the second half of the year. I will now give the floor to Yuri for more financial highlights.

Thank you, Sophia. Good afternoon and good evening, ladies and gentlemen. I will comment on the Q4 2022 financial results. Slide 15, Q4 2022 P&L. Let me comment on the overall Q4 activity. Q4 segments revenue was $319 million, up 6% and up 7% per former year-on-year. The respective contributions from the group's businesses were 22% from geoscience, 46% from earth data, with 67% for the DGE segment, and 33% from sensing and monitoring. Segmented debt was $193 million, up 25% year-on-year, a 60% margin. And adjusted segmented debt, excluding $34 million gain on the sale of the U.S. land multi-client library, was $159 million, a high 50% margin. DDE segmented bid value was $180 million, an 84% margin, and adjusted segmented bid value was $147 million, a high 60% margin. SMO segmented bid value was $20 million, a 19% margin, and adjusted segmented bid value was also $20 million, a 20% margin. Segment operating income was $94 million at 29% margin, and adjusted segment operating income was $66 million at 21% margin. IFRS 15 adjustment at operating income level was negative $10 million, and IFRS operating income after IFRS 15 adjustment was $84 million. Cost of financial debt was $24 million. The total amount of interest paid during the quarter was $45 million. Taxes were at plus 9 million, and net income from continuum operations was 49 million. Group net income this quarter was 47 million, significantly up from a net loss of 28 million in Q4 2021. After minority interest, Q4 2022 group net income attributable to CDG shareholders was 46 million dollars and 46 million euro. Overall, in 2022, CEG has significantly improved its financial performance. CEG's segment revenue of $928 million was down 1% and up 3% performance compared to 2021. Adjusted segment to bid that was 395 million, up 17% year-on-year with 43% margin. In 2022, CEG returned to profitability with group net income of 43 million, which was a significant improvement from a net loss of 180 million in 2021. Moving to slide 16 and looking at the simplified cash flow, Q4 2022 segment operating cash flow was $103 million, including $61 million negative change in working capital and provisions, mainly related to the SMO business. Total capex was $50 million, including industrial capex of $18 million, research and development capitalized costs at $6 million, and our data cash capex at $25 million. Segment-free cash flow was $115 million, including $63 million proceeds from the sale of the U.S. Land and Seismic Library. After 2 million net lease repayments, 45 million cash costs of debt, 3 million of CEG 2021 planned cash costs, and 2 million free cash flow from discontinued operations, Q4 net cash flow was positive 62 million. Overall, in 2022, CEG group net cash flow was negative 3 million. Moving to slide 19 and looking at group balance sheet and capital structure. Group liquidity amounted to $398 million at the end of December 2022 and included cash liquidity of $298 million and $100 million of ungrown RCF. Group growth debt before FY16 was $1.16 billion and net debt was $859 million. And group net debt after FY16 was $1.25 billion and net debt was $951 million. Our debt structure included 1.12 billion of high-earned bonds due in 2027, 93 million lease liabilities, 20 million accrued interest, and 12 million bank loans. Segment leverage ratio of net debt to adjusted segmented debt was 2.4 times at the end of December 2022, down from 2.9 times at the end of 2021. Capital employed was $2 billion, slightly up from the end of December 2021. Networking capital after FRS 15 was at $225 million, stable year-on-year. Goodwill was also stable at $1.1 billion, corresponding to 54% of total capital employed. Multi-client library net book value after FRS 15 was up at $419 million. Non-current assets were at $340 million, with $167 million of property, plant, and equipment down from year-end 2021, mainly due to the Galileo sale and Riesbach transaction, and $84 million of capitalized development costs. Non-card liability is worth $31 million, slightly down from year-end 2021. Shareholders' equity was up at $1.06 billion, including $39 million of minority interest, mainly related to income GV. Before I hand the floor back to Sophie for conclusion, I would like to thank her for the kind assessment of my work at CEG. It was a privilege to contribute to CEG's transformation and work with CEG's team and all of you, our analysts, shareholders, investors, and all the stakeholders over the last four and a half years. Thank you all for your support.

Thank you, Yuri. Now we're on slide 18. We are entering 2023 with improved visibility thanks to steadily increasing client activity and our high impact log. Geoscience will continue to be driven by advanced technology and by large projects in North America, mainly in the Gulf of Mexico, increasing activity in the North Sea and more generally the broader utilization of marine nodes for imaging. As pressure on our clients increases to meet global demands for energy, address the high oil price environment, lower their carbon footprint, and effectively transition to renewable energy, all in the shortest timeframe possible, the use of our advanced imaging technologies has become a key enabler and has never been more important to support that decision. Today's CDGs technologies, including our four-way form inversion, are unique to us, and this drives a large portion of the high-end activity to CDGs. In Earth data, confirmed by a solid Q4, we anticipate an increasing appetite towards exploration and OVN acquisition, which is now being used in a larger number of basins globally, including for exploration purposes. Earth data is linked to exploration CAPEX, ILX and Frontier, as well as global mid-terrain activity, all of which are expected to increase in 2023. The SMO market is also expected to grow significantly in 2023, from a low in 2022. The key driver will be large land-type recruits in the Middle East and North Africa that require new land and OVN equipment. The development of our BTC businesses will remain a 2023 priority, with digital science, CCUS, defense, and infrastructure monitoring being the most immediate opportunities. Beyond the Core businesses will benefit from the continued drive towards digitalization, including within the infrastructure monitoring sector, along with an increasing focus on energy transition and security. We expect another year of significant growth in our BTC activities. After years of underinvestment, now on slide 19. After years of underinvestment, exploration focus is expected to increase in 2023, particularly offshore, but also in the mid-week. The macro environment continues to strengthen, but is expected to remain volatile for us, as our EV and SMO businesses rely on large contracts that can move quarter to quarter. Technology pays off for CDD and we will continue to invest in advancing our leadership. Digital, energy transition, infrastructure monitoring and defense BTC markets will continue to mature and should see steady increasing demand moving forward. In this context, CDD has the following outlook and financial objectives for 2023. 2023 segment revenue is expected to increase in the range of 15% to 20%. with growth mostly coming from SMO. I want to point out that we expect to see a continued high level of quarterly volatility in revenue, driven mainly by the timing of SMO equipment delivery and the usual EDA seasonality. Q1 should be similar to last year, and we expect to see a much higher revenue entry too, especially for SMO. 2023 adjusted EBITDA segment EBITDA margin is expected to be in the range of 39 to 41% given the business mix. 2023 EBA cash capped is expected to be around 200 million with pre-funding above 75%. A backlog coming into 2023 is healthy and stronger compared to the last two years. 2023 Industrial and R&D CapEx is expected to be up at around $17 million, primarily driven by our planned increase in high performance and treating capacity. And finally, we're anticipating a positive net cash flow before changing working capital in 2023. Going forward, our focus is to build on the growth that this upcycle brings to CDG, while further advancing our B2C businesses. We expect to see improvements across our businesses in all of our businesses in 2023 and beyond, and we'll continue to focus on cash management and cash generation to pursue our path to deleveraging. Thank you for your interest, and we are now ready to take your questions.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 if you wish to ask a question. We will now take the first question. It comes from the line of Kevin Roger from Kepler-Chevreux. Please go ahead. Your line is open.

Yes, good evening. Thanks for taking my question. I will limit myself to two. The first one is maybe for you, Sophie. Several companies in the sector have already reported, and in the offshore, I think if there is one conclusion, it's that it appears that everyone is accelerating in terms of final investment decision with a commercial pipeline that continues to increase, etc., On your side, do you see the same kind of acceleration for appetite for late sales? Because usually you are correlated to CapEx in offshore, but with the things that are accelerating strongly. Did you turn a bit more optimistic, basically, on your late sales expectation over the past few weeks? And the second question is maybe more for Yuri. An important element for investors would be the net cash flow. So you guide for positive net cash flow before working cap for 23. But what should we expect in terms of working cap for 23? Because 22 was negative. So should we expect a reversal, so positive net, positive working cap in 23? Or we should assume another deterioration, please?

Well, thank you. Good evening, Kevin. Thanks for your question. So in terms of what's going on in sort of the offshore market, the main, what we've seen last year, as I was mentioning, it's been more around accelerating, the clients have been accelerating basically decisions around getting production. So it's been a lot around field development and production. And we've seen more through our geophonic business around node attribution, around high-end and understanding the reservoir. So a lot of the FITs that have happened have been associated to a pretty high-end cyclic attribution, and we've done a lot of those processing jobs. Now, the link between the increasing activity in October and the late term is not exactly that one. I think we might see more of that in 2023. because, specifically, the offshore exploration cafes are increasing, which I don't think is so much the case. Last year, what has been accelerating is the exploration and production cafes, so the combination of the two, mostly targeted at development and production, and I think now starting to move into exploration, which should then translate in probably more solid aftersales. But keep in mind that in 2022, we benefited from a large transfer fee, which was somewhat exceptional. So if you're correct to that, we should see an increase this year. And maybe another data point that could be interesting for you, if I look at the mix of design data in the aftersales, in 2022, very similar to 2021, the IUC portion is still low in the mix. It's probably half of what it used to be pre-2019, meaning that we haven't seen this group of clients come back in a meaningful way in the buying data.

So, Kevin, good evening. To answer your second question regarding working capital, we actually don't expect any deterioration or further deterioration of working capital in 2023. And, of course, the main reason for that, as you see it in our guidance, that we expect growth of optimal sales in 2023 versus 2022 which means that the inventories that were increasing throughout last year in manufacturing the equipment for the deliveries of 2023 will be coming down now the element which as you all know is always kind of variable right or unknown unknown is the level of after sales at the end of the year, right? So again, obviously, good after sales, good news about collections in the following few months. And also, this sequence of SMO deliveries might be impacting some of the receivables as well. But fundamentally, again, we expect a release of working capital or slightly positive working capital next year.

Okay, perfect.

Thanks a lot.

Thank you. We will now take the next question. It comes from the line of Haris Papadopoulos from Bank of America. Please go ahead. Your line is open.

Hello. Hi. Thanks for taking my questions. I have three, if I may. The first one is with respect to the delays we saw last year. Could you give us an update of the stage of the tenders for the mega cruise in Saudi Arabia? When should we expect an announcement? And then what about the stage of the multi-client project in Brazil, which was shifted from last year to 2023? I believe that's with Petrobras. So that's my first question, please.

Yes, hi. Thank you for your question. Good evening. So in terms of the tenders to the mega-cruise, they've been out. The service companies have responded, and now they're in the award stage. So we're expecting, I would say, there are two sets of tenders. There are tenders for land crews, so two land crews. and three OVN crews in Saudi Arabia. And the land crews, I think, should be awarded fairly soon. At least we know they're in the final stages of negotiation with the service company. Now, the OVN standards It's a bit unclear. I think it could be delayed another one month or two. I don't have as much visibility on those. They should be coming after basically the one on the land side. In terms of the multi client data, We're planning to see some level of catch-up or pre-funding on projects that we did last year. Now I don't want to name, I can't name clients that we've staged, but we have built in our budget some level of catch-up on those projects.

Okay, thank you very much for this. Then my second question is with respect to M&A, is it fair to assume that we shouldn't see any major M&A activity this year and then what about any potential disposals? I remember the stake in the Saudi Arabia land data acquisition business was mentioned at some point. Is there an intention to seek a buyer for this asset?

So in terms of M&A, we're always on the lookout for what I would call the small bottom opportunities, which is exactly the kind that we did last year. So that kind of 20 million range, 20 to 30 million range. So right now, as it is today, there isn't one in the pipe, but it doesn't say that perhaps there will be one that appears during the year. So we want to be ready for that and take that opportunity if it appears. especially if it helps us accelerate beyond the core initiative. Now, in terms of disposals, it is very clear that we're still looking for divesting that participation in our gas. I think the environment hasn't been conducive to doing that, but we always are looking for opportunities to do so.

Thank you. And then my last question is, you know, your liquidity is quite strong now, and especially compared to your minimum cash level of 150. So I was thinking perhaps, like, is that intention perhaps to consider using your 10% special redemption call for the bonds, given how high the coupon is versus the call premium? I mean, like, it kind of makes sense. Is it something that you're considering right now?

Yeah, good evening. So we're always considering those opportunities, as you all know, or as we discussed previously. But again, at this particular point in time, we're still waiting on kind of de-risking of our business plan for S&O. So in other words, again, on the salary around the world of mega-cruises and things like that. So in other words, again, once we get some greater visibility, then That option is on the table.

Okay, thank you very much. That's all on my side. Thank you, Aris.

Thank you. Once again, as a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone. We will now take the next question. It comes from the line of Vikram Lopez from LGIM. Please go ahead, your line is open.

Hello, can you all hear me? Yes. I just want to clarify, firstly, thanks for taking the question and congratulations on the results. I just want to clarify something that you said earlier. So just on this issue of net cash flow for 2023, So you said positive net cash flow before change in working capital, but you expect working capital to not be a drain on cash flow. Have I understood that correctly?

Well, we're guiding that net cash flow will be positive before change in working capital, but what I was commenting is that most likely we'll see some positive change in working capital as well. However, and again, within the working capital components, definitely inventories will be coming down because we're expecting significant growth in S&O sales and therefore deliveries of equipment, which was built in 2022. However, there is an element that is kind of variable and difficult to predict is what will be the level of equipment deliveries, but more so third data after sales at the end of the year. So basically, as you might recall, that is a significant element that can create significant swing. But again, the more data we sell, the more we collect in QI. So basically, that's the usual story.

Okay, but I mean... At worst, you'd be expecting to be kind of breakeven net cash flow. Would that be right?

Yeah, breakeven to slightly positive.

Okay. Okay. I mean, and the next question, I mean, you know, if I'm reading the numbers right, so you're talking about kind of 15% to 20% revenue growth, EBITDA margins range of 40%. So that kind of implies a kind of flat EBITDA year-on-year.

No. No. It implies flat EBITDA margin year-on-year, but it doesn't mathematically imply flat EBITDA dollars.

Well, if you're going up by 17.5%, then you'd have revenue of $1.91 billion. Multiply that by 40%, and you'd have $437 billion, which is pretty much what you did.

No, we're talking about adjusted segmented EBITDAs, in other words, which doesn't include non-recurring items. The adjusted segmented EBITDA in 2022 was 395 million.

Sure, but from a cash perspective, you did get that cash, you were paid that amount of money, so you You can say that it wasn't a recurring part of the business, but you've got a cash inflow of 430 odd million from businesses plus the disposal. Next, you'll have a cash inflow of 430 odd million. You won't have to have any disposals. So it's still kind of 430 million coming in, 270 million going on cash, working capital, and then your interest costs. Okay, so the wider point is at what point do we start to see substantial cash regeneration internally? Not just flat to slightly positive, but kind of looking at, I don't know, just like 3% to 4% cash delivery. Do we need to wait for revenue to be hitting the 1,200, 1,300 mark? How achievable is that?

Well, first of all, we always were explaining that... For us, the net cash flow break-even point in terms of revenue is roughly 1.1 billion, right? Now, so we were growing next year, sorry, this year, but obviously we expect to continue growth and recovery in 2024 as well. And this is one element. Now, the other element is that we'll be Yes, it depends also on the business mix, in other words, on the revenue mix, because with significant increase in S&O sales, S&O EBITDA margins are lower than the EBITDA margins of geoscience and earth data combined. And there is another element to keep in mind is that the end of our agreement with Sharewater will be basically at the beginning of January 2025. And with that, the scope line, which is about $22 million, will disappear as well. In addition to, of course, us recovering full freedom when it comes to our EDA business, and therefore no longer having the capacity utilization agreement and commitment to use shared water vessels.

I think the flight problem with the line doesn't quite follow, but maybe we could take this offline just to go over those points in a little bit more detail. Thank you very much. Sure.

Thank you. There are no further questions at this time. I would like to hand back over to CJG for final remarks.

Thank you very much. Thank you for attending. Thank you for the great questions. And we'll certainly follow up offline if you have any other follow-up questions. Thank you very much. Have a great evening. And we'll be in touch.

Thank you all. Have a good evening. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may all disconnect.