Viridien S/Adr

Good day and thank you for standing by. Welcome to the Viridian Fall Year 2024 Financial Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question, during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Viridian team. Please go ahead.

Yes, thank you. Thank you. Good morning and good afternoon, ladies and gentlemen. Welcome to this presentation of the Iridian's full year 2024 results. I'm Jean-Baptiste Roussy, in charge of corporate finance and investor relations. And I'm here today in Paris with Sophie Zurchia, our CEO, and Jerome Serres, our Group CFO. They will provide you an overview of the results, as well as some comments on our outlook. Following this presentation, we'll be pleased to take your questions. And now, I'll leave you with Sophie.

Thank you, Jean-Baptiste, and welcome, everyone, and thank you for joining this presentation. Market environment remained stable in 2024, characterized by a backdrop of continued discipline investment. Despite some volatility in the macro environment during the second half of the year, with oil prices fluctuating due to geopolitical tensions and moderate oversupply, Our clients maintain stable spending patterns within our sector, driven by increased confidence in long-term and longer cycle offshore investments. We are seeing a gradual pickup in the early phases of exploration efforts, particularly among European IOCs, with a continued focus on efficiency, scalability, low carbon and cost disciplines. Let me start with the highlights of 2024, a year marked by successes where we met or exceeded our key targets. Our revenue remained stable, with notable outperformance on profitability and net cash flow generation. It is worth highlighting our commercial successes at Geoscience and Earthdata, as well as the ongoing restructuring at SMO, which is enhancing profitability and flexibility. Overall, we successfully delivered on the key milestones from the financial roadmap that we presented a year ago. Let me move on to slide six. In this presentation, we will mainly highlight four-year performance as it more accurately represents market trends and the company's overall performance. There are several positive signs for our sector. Clients are increasingly prioritizing quality, they're willing to commit to longer timeframes, indicating increased visibility, and the size of projects is growing. Notably, order intake remained solid throughout the year, particularly during the fourth quarter. Over the year, Geoscience confirmed its strength and ability to drive the group's performance with 20% revenue growth for the second consecutive year. Earth data revenue increased by 14%, driven by strong investments. As anticipated, sending and monitoring experienced a decline in revenue due to a high comparison base with the delivery of MegaCruise in 2023. Overall, our four-year revenue was nearly flat at $1.117 billion, aligning with our revenue guidance at the beginning of the year. A four-year adjusted segment EBITDA increased by 14% year-over-year to $455 million, driven by DDE's growth, partially offset by SMO's decline. Net cash flow improved significantly to $56 million from last year, reflecting our focus on cost control and working cap management. Our performance underscores our focus on cash generation, which is particularly satisfying considering the $75 million in contractual fees related to vessel commitments in 2024 that impacted our cash flow. This contract ended on January 8th, marking a significant turning point for our financial trajectory and the final step towards achieving our asset-like business model ambition. Our financial roadmap remains clear, disciplined capital allocation, robust cash flow generation, and continued balance sheet deleveraging. I'm moving on to slide seven. DDE segment revenue grew by 17% to $787 million, with adjusted EBITDA at 25%, $458 million, with both geoscience and earth data contributing positively. On slide eight with geoscience. Geoscience external revenue reached a record high of $404 million, up 20%, surpassing pre-COVID levels. Order intake increased by 90% year over year, driven by best-in-class imaging technology, which the industry requires to solve increasingly complex subsurface challenges, increased activity in the Middle East, with large volumes of land and OBN data acquired, and the renewal of multiple long-term contracts for dedicated HPC processing centers. A constant focus on efficiency, combined with the use of the latest technologies, has continued to yield further improvements in productivity. This performance demonstrates our unique ability to deliver the highest quality imaging results and design, build and operate the most efficient HPC operations for high workload scientific operations. Going on to slide nine. Our commercial successes are driven by sustained client interest in our technology. Clients consistently tell us that our images are the best in the industry, and they can trust our results to make critical investment decisions. Our elastic four-way form imaging technology, now becoming mainstream across all regions, offers significant differentiation. It provides a step change in image quality, enhancing the resolution of fine geological details and reducing investment risks for our clients. In our new businesses, geoscience is showing positive momentum, especially in carbon sequestrations. We are working on several exciting projects in Norway, the US Gulf, and Asia Pacific, indicating broad regional interest. Additionally, minerals and mining is making progress with new programs awarded in Australia and Oman. Going on to slide 10. This is a really good example of the differentiation that we bring into science. Virgin has been imaging the largest OBN survey in the North Sea. Compared to streamer data, OBN data is much richer, offering better low frequencies and longer offsets between sources and receivers. This, combined with the exponential increase in data, makes the imaging work significantly more complex, which is where our expertise truly shines. Our advanced four-way form imaging algorithms are most effective in extracting the maximum information from the data. And in this case, the subsurface rock velocities inferred from the data exhibit unprecedented resolution and geological relevance with an exceptionally accurate match. The final models and images are critical for our clients, enabling them to explore faster and more accurately. Now moving on to Earth data with slide 11. Earthdata segment revenue grew by 14% to $383 million compared to last year. Pre-funding revenue grew 6% to $205 million with a pre-funding rate of 81% of capex in line with our long-term target. After-sales grew to $178 million, up 25% in the flat market, reflecting client interest in our data quality despite limited bid rounds during the year and our client's disciplined approach. On slide 12, our CAPEX was allocated to the Laconia Survey in the US Gulf, the North Viking Rabid Streamer Survey in Norway, and numerous reprocessing projects globally. We also initiated projects in prospective regions, including Australia, Malaysia, Ivory Coast, and Uruguay. In our new businesses, EarthData completed a mining project in Arizona and delivered several carbon sequestration projects in the North Sea, U.S. Gulf, and Asia. We believe our Laconia project will provide the industry with a step change in imaging quality. Despite being at a very early stage, the first images reveal paleogene structures that were previously unseen in legacy data. Pre-funders have been very impressed by the new information we have been able to provide, which will attract additional clients. Looking at slide 13, you can see on this map the position of our project portfolio in 2024, reflecting our strategy to invest in our core basins of the US Gulf, Brazil and Norway, but also position in the future active basins. I am particularly pleased with our projects in Uruguay, Côte d'Ivoire, and Malaysia that are attracting significant client interest. Moving to sensing and monitoring on slide 14. A four-year SMO segment revenue was $313 million, reflecting a 27% decline from the previous year, which benefited from the delivery of mega-crew systems. The four-year adjusted EBITDA was $35 million, a margin of 11%, slightly down from last year. However, I was particularly pleased with the Q4 performance, which achieved an 18% margin. This indicates that our restructuring plan is on track to deliver the expected cost reduction. On slide 15 now, we can qualify 2024 as a transition year. In the absence of Middle East megacrew projects, we achieved a solid level of revenue, sustained by a large install base, and initiated a restructuring plan aimed at reducing SMO's break-even point while increasing operational flexibility. We have already successfully cut our fixed costs by reducing the industrial footprint in Asia and in the U.S. We believe we will reach our 20 to 30 million cost reduction run rate target by end of 2025, as we complete the implementation of the restructuring plan in France. In 2024, we also had notable operational and commercial successes, including the launch of the next generation of land acquisition systems and vibrator electronics, as well as strong deliveries of land nodes in Europe, Asia, and the Americas. In SMO, our new businesses grew by 17% year over year, now accounting for 17% of SMO revenue, up from 10% in 2023, with infrastructure monitoring being the largest contributor. We are also benefiting from wireless node sales to service companies involved in geothermal activities. Looking ahead, SMO should be well positioned for both growth and improved profitability through the cycle. Let me now hand the floor over to Jerome for comments on our financials.

Thank you, Sophie. Good morning and good afternoon, ladies and gentlemen. As Sophie already mentioned, 2024 was a very solid year for Verilion in terms of financials performance by achieving 1.1 billion of revenues, 455 million of EBITDA, and more than 50 million of net cash flow. Let's start with the P&L on slide 17. Our 2024 revenues were stable versus last year, at slightly above $1.1 billion, but with a different mix. Geoscience has continued to grow strongly, plus 20% year on year, reaching above $400 million of revenues. EDA revenues were at around $380 million, plus $45 million versus last year, thanks to solid after sales and good pre-funding on the back of Laconia. As expected, after a 2023 year marked by the delivery of MegaCruise in Saudi, SMO revenues were lower in 2024 at 330 million. This business mix was clearly positive for segment EBITDA and OPINC, which were respectively at $455 million and $173 million in 2024 on an adjusted basis. Note that those adjustments do not relate to penalty fees from our vessel commitments. To be clear, the 455 million EBITDA still includes 54 million of penalties in 2024. Actually, most of those non-recurring items are related to SMO, transformation plan, such as the restructuring provision associated to the social planning plans approved in December 2024, or non-cash impairment linked to the rationalization of their sales for the clients. Finally, regarding group net income, we're posting a strong result in 2024 with $51 million versus $16 million in 2023. Moving on to the group cash flow on slide 18. Our net cash flow for the year reached $56 million, which was above our 2024 initial guidance. This is a result of a strong focus on operational efficiency, both on cost and working capital. Compared to 2023, we benefited in 2024 from the settlement of the legal action in India, with a net positive impact of circa $35 million. But we use this one-off gain to see the opportunity of the Laconia-Orient project in the US Gulf and significantly increase our EDI CAPEX project. Looking at 2025, our Q1 cash will still be impacted by the CAPEX required for Laconia acquisition. as well as a Q4 earlier client collection mentioned in our January trading statement. However, we remain confident in reaching our net cash flow target of $100 million for the year 2035. Regarding our balance sheet now, on slide 18. As of December 24, our IFRS net debt stood at $921 million. down from $974 million last year, mainly coming from our cash flow generation in the year and some positive forex impact. This led to a ratio net debt over EBITDA of two times compared to 2.4 times in December 23, demonstrating that our deleveraging trajectory has really started. Indeed, back to the 2024-25 financial roadmap we did set out last year, and that way we include it in slide 19, a lot of progress has been made already in 2024. First, we got a credit upgrade from S&P, exiting the uncontrollable T-zone. We reduced our growth debt, buying back 60 million of our bonds, versus an initial indication of 30 million. Dabbling this buyback envelope was another strong signal of our deleveraging ambitions. Plus, we benefited from an appreciable discount on the value of this debt. which is always nice to get. We also worked on the structure of our liquidity by reducing the minimum operating cash to 100 million and by extending the maturity of our FCF. And since the beginning of the year, we are actively preparing the actual refinancing of our bonds and get ready to grab the best market window. I'm now handing back the floor to Sophie for the conclusion of this presentation.

Thank you, Jérôme. In summary, we delivered a strong performance in 2024 within a stable market environment. I am particularly impressed by the momentum in our geoscience business, which continues to expand thanks to our people, service quality, and differentiated imaging and HPC technology. Our data delivered a growth in a flat market and continue to develop positions that will drive future after sales. Sensing and monitoring has repositioned itself for increased profitability and cash generation. Looking ahead to 2025, within current market conditions, we expect a strong yet stable E&P CAPEX environment. Geoscience should deliver moderate growth on the back of its robust backlog. We believe the performance of Earth data is better measured by EBITDA minus CAPEX, which serves as a proxy for cash generation, as we continue to focus on project quality. This KPI will improve based on the end of vessel commitments earlier this year. Sensing and monitoring should benefit from restructuring and equipment renewals driven by the aging of the installed base and improve its profitability. Also, 2025 is an important year for the Group. The end of our Vessel Capacity Agreement is a significant turning point for our financial trajectory and the final step towards achieving an asset-light business model. A financial roadmap is clear, disciplined capital allocation, robust cash flow generation, and continued deleveraging. Based on the clearly identified sources of improvement, including the solid performance of our three business lines, the conclusion of the vessel utilization contract, and the positive impact of the SMO restructuring, we anticipate generating approximately 100 million in net cash flow in 2025. Finally, as Jerome mentioned, we anticipate completing our bond refinancing in 2025. Thank you for your attention and we look forward to your questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to your first question. One moment, please. And your first question comes from the line of Kevin Roger from Kepler Chevro. Please go ahead.

Yes, hi, good evening. Thanks for taking the question. I will have three, if I may. The first one, can you comment a bit on your expected vessel cost? Because basically you don't have anymore the partnership with Shearwater that should massively support your EBDA and cash. So, what have you seen recently on your site for securing the VESA, the day rate, and what is basically the strategy that you are implementing right now? That would be the first one, please. The second one is on multi-client CapEx. If you can comment a bit here, how do you consider yourself on 25 for investment? And the last one, just on the accounting, can you come back, please, on the difference between the adjusted EBIT and the reported one, please? Thanks a lot.

Thank you. Good evening, Kevin. I'll address the first two questions and then Jerome will take the third one. We looked at the market starting a year ago and tried to assess what life would look like after we exit or after that contract that we had ended. Our view is that the vessel market is still oversupplied. And the proof of it is that the utilization of the vessel is remained below 70%. And so far, we consider it will be relatively easy to get access to vessels and we don't see movement in the pricing either. So pretty much we expect to have similar conditions as we enjoyed in the last few years moving forward. Of course, we constantly monitor the situation and if we felt we needed to go into some kind of a preferred partnership, we would. But at this point in time, we feel comfortable to just go on the market on an as-needed basis. The second question on the EDA CapEx, as you've noticed, we've avoided the guiding on that, and we like better the EBDA minus CapEx. And the reason for that is that we look at the quality of the project. So if we spend more CapEx, we look at the pre-funding that goes with it. But generally speaking, with the perspective that we have as of today, there's a certain level of uncertainty in the permitting side. We have actually a number of projects in the pipe that we would like to be working on, but it depends a little bit on the permitting side. But I would say with the view we have today, it would be lower, much lower than last year. So probably back to the more normal level, that $180 to $200 million. But it could change if opportunities arise again. and there's good pre-funding, we might go for it. Jérôme, you want to take the third question?

Yes, regarding the adjustment at the EBIT level, they're kind of similar to the one I mentioned during the presentation. So you already have the provision for the social plan within South-South France. FTE that will leave the payroll in the course of H1. And on top we have the rationalization of our product line which has triggered some write-off of assets intangible but also stocks in our balance sheet. So that explains the about 60 million as you can see in this adjustment. But we consider them definitely as non-recurring.

Okay. Diane, thanks for the time.

Thank you. Thank you. Your next question comes from the line of Jean-Luc Romain from CIC Market Solutions. Please go ahead.

Good afternoon. BP announced a Step-up investment in exploration yesterday at the Capital Markets Day. Did it already show up in your order intake, or is it still something to come? And what do you see among other supermajors in terms of exploration effort going forward?

Thank you. Good evening, Jean-Luc. We all saw the announcement from BP who went from projecting a decrease in production to actually projecting an increase in production. As you know, to increase the production requires quite a lot of work because you have to fight the natural decline plus add extra production. That will certainly require extra exploration beyond the step-out exploration that has been very much the focus for the IOCs in the last number of years. I think I mentioned through 2024 the increased appetite from the IOCs towards more frontier area. They're not going to the, let's call it the very frontier area, but certainly a larger interest. You've got equatorial margin, interest in places like in Brazil, in the north and the south of Brazil, Uruguay, Suriname, Angola is actually picking up, Nigeria, East Med, Malaysia. So there's a larger number of countries that are attracting interest, and BP particularly are interested in the Gulf of Mexico, which they consider their core basin, and they have existing production, so there definitely has been a focus on step-outs. But there are areas in the Gulf of Mexico that are still considered frontier. And I do expect not just BP, but a larger client base will be looking at that. Thank you.

Thank you. Your next question comes from the line of Guillaume Delaby from Bernstein. Please go ahead.

yes uh good afternoon maybe a question on your backlog so the geoscience backlog was 245 million dollar at the end of q3 it is now 351 million at the end of q4 so my first question is what has happened in q4 to get such eye to get such an increase in backlog first question second question how is backlog geoscience backlog trending in january and february 2025 and third question sophie you mentioned modest growth in geoscience for 2025. How do you reconcile modest revenue growth in geoscience in 2025 with such a high backlog? Thank you.

Okay, well thank you and good evening Guillaume. Those are good questions because these are things we look at. So the geoscience increase in backlog, it's a mix of different things. Some of it is is a project like the normal projects that we get in backlog and some of it is long-term dedicated centers so some of these include three to five years contracts so it's a mix of different things yet it is a definitely an increase compared to to the year before One thing we see is that longer term projects. So in a way, probably you remember, I used to say the backlog would cover six months worth of work. Then we had a smaller size of projects, so it was covering a little bit less. Now we're going back to larger projects that will deliver over a longer period of time. So perhaps that explains a little bit that modest growth on the back of a very high backlog. So combination of multi-year contracts and longer-term contracts in the sense that they're large contracts. Larger data that take longer to deliver. So how does January and February look like? It looks like normal. So I would say it was a bit of an exceptionally high where a lot of things came together in December. And January, February is good, and it's a level that we need to deliver what we said, that modest growth.

So maybe I'm going to... So when you say it's back to normal, does it mean that geoscience backlog, I'm sorry to push you a little bit, Sophie, but does it mean that backlog at the end of February is a little bit higher than backlog at the end of 2024? I'll just try.

I actually probably will avoid answering that question. It's not relevant, to be honest. You don't It used to be actually 10 years ago with the backlog or the order intake was very steady in a way that every month we would get a number that was quite similar and it meant something to look at the monthly numbers. I want to say that since 15, 16, it's not the case anymore and it becomes a bit more lumpy. So I don't look at monthly trends. I really start looking more at quarterly trends. to be able to make sense of it. Generally speaking, the trend is good. It's trending up. At this point in time, you cannot make a translation of that increased backlog into an increased revenue. For exactly what I was saying, the size of the project is getting bigger. It will take longer to deliver, which is good. It gives us a longer perspective where during COVID, it became a shorter perspective.

That's very clear. I turn it over. Merci Sophie.

Thank you. Your next question comes from the line of Baptiste Lebac from OdoBHS. Please go ahead.

Yes, good evening everybody. Two questions from my side. The first one is regarding 225. Can we expect some transfer fees? And your guidance, I imagine, does not take into account transfer fees. Just a clarification. And second question is regarding, let's say, industrial capex, which were down close to 50% for 2024 at $33 million. Is it a good proxy to start the year to put it in a model? Thank you.

Thank you, and good evening. In terms of transfer fee, it is part of the model for Earth data, and so there is always in the budget a certain level of Earth data which we'd consider normal. In a way, we've considered a normal, usual, whatever the number is, level of transfer fees. Actually, there's one that I could talk about because it's public. It's the HESS Chevron. but there's uncertainty around it. So whether it is this one or maybe another, we do expect that there will be some level of transfer fee. Some years are higher than others. And it depends as well whether we have data in the place where that transfer happens. You want to take the industrial capex, which was lower last year from the past? I think it's the data center effect, probably.

Okay, so that's your... Okay, so it was a big concern.

It's the data center effect and what's the basis, yeah.

In 2023, you had the end of the investment for our UK data center. That's why the industrial cap was much higher. The 24 is, we are back to a more normal level around 30, 35 million, which from a model standpoint, you can reflect for the coming years, yeah. It basically covers our maintenance in our data center, maintenance in our SMO plants, and some L&D costs for both Fertile and Geoscience, which are capitalized. So 30-35 million is a normal number.

Thank you very much.

Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone keypad. We will now take your next question. And the question comes from the line of Daniel Thompson from BNP Paribas. Please go ahead.

Hi, good evening. Just two questions. So firstly, in multi-clients, Viridian's always had problems three very core positions in Brazil, the Gulf of Mexico, America, and the North Sea. And like you said, with the majors coming back to exploration here, there is some frontier exploration going on. Are there any geographies you feel you need to sort of add to these three core areas or establish a similar kind of area of coverage and that you have plans to sort of invest more in going forward. And then secondly, just on late sales, I saw on the release, it was quite a strong number relative to consensus, but the line item said late sales and other. I just wondered if there was anything besides late sales driving the VTA versus expectations. Thank you.

All right. Well, thank you, Daniel. So, yes, as you pointed, we make the larger bulk of the investment in those three core basins of the U.S. Gulf, the Brazil, and Norway. I did mention a number of hotspots or places that are of interest. We don't quite know yet which ones will be the future, our future core basins, or the future mature basins. But we are... investing a moderate amount of our cash into testing those places. So one of them was Suriname, which there is a development ongoing, which I think will drive probably more investment. And that one was a trial-apartheid investment, and so that allowed us to play in Suriname at a minimum investment. In other places, like in Uruguay, for example, we've invested in reprocessing, We do a lot of reprocessing as well in Brazil. So Brazil is a hot place in the north side on the Foz do Amazonas and on the Pelotas Basin in the south. So I suspect we'll be investing there. Now, yes, we have permits in the north and south. I think we'll try to do this in partnership. So probably there will be some acquisition to leverage our existing footprint to go into those more frontier areas in Brazil. Malaysia is another place that we're looking at. We invested there in 2D, so it was again modest investment. If we see interest building up, then we might consider, depending on the pre-funding and the quality of the project, going into maybe 3D and more. Norway isn't really a frontier area. It's more of a mature basin, but it continues to be very active and going up in technology level. So I guess to your question, we are more cautious when it comes to investing into frontier areas because one place could be very hot if you look at the case of Namibia. And then it could be disappointing. So we just are a bit more cautious partnering more, trying to do reprocessing instead of doing full-blown acquisition. Then if we get our confidence level up, then we might consider an acquisition.

So, and then you had another question on the... So, you're right that the number that we published in 1978 combined both clay sands and other types of cells. This other type of cell basically is using our shear water vessels for a proprietary acquisition. that do not qualify either as pre-funding and late-seance, and so we have combined it with a later. But it's pretty small. It's in the range of 10 million.

Thank you very much.

Thank you. Your next question is a follow-up from Kevin Roger from Kepler Showroom. Please go ahead.

Yes, maybe one follow-up on my side. I maybe missed something. Sorry for that if it's my fault. But when you published the pre-result, you were expecting an EBITDA to be quite below what you announced at the end for the full year. So can you come back, please, on the driver for the bid compared to what you announced in January, please?

Yeah, we were maybe a bit conservative when we published the trading statement, which I think was at 430. And here we ended up on an adjusted basis at 455. I think, I don't know about you, but I much prefer to be in this position to beat my my guidance and then the other way. So maybe a bit of conservatism. I don't remember exactly which wording we used. We said above 430, if I'm correct. So yes, we are above. I mean, you have the breakdown You have the breakdown by division. The conservatism was also on some of the adjustments that I mentioned, which I was not 100% sure if they would be all classified as non-referenced.

So that's why we can't say in general.

OK. So it's more the fact that you were presenting the guidance rather than something exceptional that happened at the very end of the year? No. No. Okay. Okay. Thanks a lot.

Thank you. Your next question comes from the line of Braesbrier Groven from Clarkson Securities. Please go ahead.

Good evening. I was wondering if you can provide some color on the plans for the Laconia Phase III project is to my understanding that you have received a letter of award or a green light from US authorities to do the project.

Thank you. Okay, thank you and good evening. I guess you're monitoring the permitting. It's one thing to submit a permitting and it's another thing to approve a project. So we're in the early stages and by the way our competitors do the same. So there's a lot of permits being submitted. And so it's about positioning and giving ourselves the option. It doesn't mean that there is a project that is being approved. So it's, yes, we are looking at the subsequent phases of Konya. And we're in this process of really engaging with our various clients to see if we can land a good project. So very early on, nothing is committed or decided as being discussed with clients. But it's a good thing we have the permit because then if things accelerate, you know, we have the options to go. Assuming we have acquisition, right? Because you have to land everything together, the clients, the acquisition, and before you can move forward. But the permit is becoming more and more of an important element to secure.

Perfect. Thank you.

Thank you. Thank you. There are currently no further questions. I will hand the call back to the Viridian team.

Well, thank you very much for taking the time. I know there's a lot of competing calls, so I appreciate that we had more than 30 people on the call, your presence, and we look forward to interacting with you in the coming days and weeks. Thank you very much again for your attention.

Thank you indeed. Have a good night. Thank you.

Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.