Dawson Geophysical Co (DWSN) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the TGC Industries' fourth-quarter earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions) This conference is being recorded today, Monday, February 27th of 2012.

I'd now like to turn the conference over to Ms. Karen Roan of DRG&L. Please go ahead, ma'am.

Thank you, Elisa. Good morning and welcome to the TGC Industries' fourth-quarter and year-end 2011 conference call. We appreciate your joining us today. Your hosts are Wayne Whitener, President and Chief Executive Officer; and Jim Brata, Chief Financial Officer.

Before I turn over the call to management, I have a few items to cover. If you would like to listen to a replay of today's call, it is available via webcast by going to the Investor Relations section of the Company's website at www.tgcseismic.com or by a recorded instant replay until March the 12th. Information on how to access the replay was provided in this morning's earnings release. Information reported on this call speaks only as of today, Monday, February 27, 2012, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay.

Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding the Company's future performance are forward-looking statements. These forward-looking statements are based on management's current expectations, and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause the Company's actual results -- actual future results or performance to materially differ from any future results or performance expressed or implied by those statements.

These risks and uncertainties include the risk factors disclosed by the Company from time to time in its filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2010. Furthermore, as we start this call, please refer to the statement regarding forward-looking statements incorporated in the press release issued this morning. Please note that the contents of our conference call this morning are covered by these statements.

Now I will turn over the call to Wayne Whitener.

Thank you, Karen, and good morning, everyone. Thank you for joining us for our fourth quarter, year-end 2011 earnings call. I will make some brief comments on the quarter and the year, and Jim Brata will provide you with financial details. Then I will conclude with some final remarks about our market and outlook.

We are extremely pleased with our fourth-quarter results, which reached a record in terms of both revenues and earnings. We saw further improvement in the North American land seismic market, primarily driven by higher capacity utilization, improved margins, and a strong Canadian winter season. We operated 8 seismic acquisition crews in the US during the fourth quarter, and we are operating in several of the key domestic shale areas. In Canada, we added 2 crews following the end of the third quarter, operating 4 crews there during the fourth quarter for a total of 12 crews operating in North America.

We generated solid year-over-year revenue growth, with fourth-quarter revenues up 21% and full-year revenues up 39%. We ended the fourth quarter with $118 million in total backlog, up 42% from our third quarter backlog level of $83 million. The increase was driven by growth in the US and a significant increase in Canadian backlog, due to the ramp-up of the winter season. Our fourth-quarter EBITDA almost doubled from a year ago to $11 million and our full-year EBITDA increased 141% to $37 million.

Overall, we had an outstanding 2011 as we generated record revenues, and record EBITDA and record earnings. We added additional state-of-the-art equipment to our operations, and our cost structure remains low, both of which allows us to continue to adapt quickly and give us an advantage in the marketplace.

I will now turn the call over to Jim Brata, who will give you a detailed report of our financial results. Then I will return with some final remarks.

Thank you, Wayne, and good morning. Revenues for the fourth quarter of 2011 increased 21% to $39.6 million from $32.7 million in the fourth quarter of 2010, reflecting higher capacity utilization, improved margins, and a strong winter season in Canada. We operated 8 crews in the US during the 2011 fourth quarter compared to 7 crews in the fourth quarter of 2010. In Canada, we operated 4 crews during the fourth quarter, the same as in last year's fourth quarter.

Cost of services in the fourth quarter of 2011 was $26.1 million compared to $25.1 million in the same quarter a year ago, a 4% increase. Due to the solid year-over-year revenue increase, improved pricing, and less shothole work, cost of services as a percentage of revenues in the fourth quarter declined 66% from 76.7% in last year's fourth quarter. As a result, gross profit increased 77% to $13.5 million from $7.6 million in the fourth quarter a year ago. Gross profit margin increased to 34% from 23% a year ago.

Selling, general and administrative expenses were $2.4 million in the fourth quarter of 2011 compared to $1.9 million in the fourth quarter a year ago. As a percentage of revenues, SG&A expenses were 6.1% compared to 5.8% a year ago. Depreciation and amortization rose 31% to $5.0 million compared to $3.8 million in the 2010 fourth quarter, reflecting depreciation on the new equipment we have purchased over the year to meet the increased demand of our client base. As a percentage of revenues, depreciation and amortization was 12.7% compared to 11.7% in the fourth quarter a year ago.

Operating income was $6.0 million compared to $1.9 million in the fourth quarter a year ago. Operating profit margin improved to 15.3% from 5.8% a year ago. Interest expense in the fourth quarter was $209,000 compared to $173,000 a year ago. Net income was $3.4 million or $0.18 per diluted share compared to $0.7 million or $0.04 per diluted share in last year's fourth quarter.

We recorded income tax expense of $2.4 million for the fourth quarter, and effective tax rate of 41%. This compares to $1.0 million in the same quarter a year ago. EBITDA for the fourth quarter almost doubled to $11.1 million, and EBITDA margin of 27.9% compared to $5.7 million, an EBITDA margin of 17.5% in the fourth quarter a year ago. An EBITDA reconciliation table is provided in our earnings release issued this morning.

Now I will briefly review our annual results. Revenues for 2011 grew more than 39% to $151 million from $108 million in 2010. Cost of services for 2011 increased 21% to $104 million from $85.9 million in 2010. Due to strong revenue growth, cost of services as a percentage of revenues decreased to 68.9% in 2011 from 79.3% in 2010. Gross profit for 2011 more than doubled to $47 million, a 31% gross profit margin, compared to $22.4 million, a 21% gross profit margin in 2010.

SG&A expenses in 2011 were $9.6 million compared to $6.9 million last year. As a percentage of revenues, both years were approximately 6.4%. Net income in 2011 was $10.8 million or $0.55 per diluted share, compared to a net loss of $1.2 million or $0.06 loss per share last year. 2011 EBITDA increased more than 141% to $37.4 million or 24.7% of revenues, compared to $15.5 million or 14.3% of revenues in 2010.

Now I will highlight some balance sheet items. At the end of the fourth quarter, we had long-term debt of approximately $7.0 million, cash and cash equivalents of almost $16 million. Our current ratio was roughly 2-to-1. Working capital was approximately $19.9 million. And finally, for the full year of 2011, we generated more than $34 million in cash from operations.

With that, I'll turn the call back to Wayne for some closing comments.

Thank you, Jim. Before we go to your questions, I would like to briefly summarize where we are today.

We believe that demand for our services remain positive. As anticipated, the winter season in Canada has turned out to be very strong, and should continue to drive our top-line and earnings growth through the first part of the year. In the US, our low-cost structure, along with our latest technology embedded with our crews, has given us the capabilities to enter new shale plays.

We remain very close to our clients in order to respond quickly to their needs. As activity in the US has moved away from dry gas areas to more liquid-rich basins, we continue to mobilize our resources accordingly. In response to greater demand from our clients, we have already increased our crew count from fourth-quarter levels. We have added 3 crews in Canada for a total of 15 crews now operating in North America.

In summary, while we may see some capital relocation within the US as a result of the weakness in gas prices, we continue to expect positive results, driven by our backlog, cost position, and increased crew capabilities.

This concludes my formal remarks and we'll now take any questions.

Veny Aleksandrov, Pritchard Capital Partners.

Congratulations, impressive quarter.

Thank you, Veny, and good morning.

My first question relates to your prepared comments. Can you tell us where are the 8 US crews working right now? And then if you look at the backlog, how much of it comes from work from liquids-rich basins and how much comes from the shales?

Well, right now, our crews are pretty spread out. We're in the Niobrara; we're in the -- we have 3 crews in Kansas right now doing shallow oil. We have a couple of crews in West Texas and the Permian Basin. We have crews working in Oklahoma. So we're pretty well spread out throughout the US.

Most of our crews right now are working on either oil plays or natural gas liquid plays. We do have some work coming up, backlog. That's going to be in the Marcellus, which will be second/third-quarter type work. So we have a broad spectrum of where our crews are working, and the backlog pretty much reflects where we're presently working at this time.

And then if we look at Canada, you have 7 crews working right now. How long do you expect the winter to be? Until the end of March or even further? And then what's your view on Canada? How is the number of crews going to go from there?

Well, as I mentioned, we're operating 7 crews in Canada right now. We expect to operate those crews through -- into March. We'll keep operating until the breakup of the season, which is typically anywhere from mid-March, the end of March. We do have some summer work booked for some crews for the second and third quarter. So we feel like that Canada is going to be very good for us this year.

Thank you. I will re-queue for more questions. Thanks.

(Operator instructions) I'm showing no further questions in queue at this time. Please continue.

We'd like to thank everybody for joining us for our fourth quarter of 2011 conference call, year-end conference call for 2011, and look forward to our next call, for 2012. Thank you.

Ladies and gentlemen, that concludes our call for today. If you'd like to listen to a replay of today's conference, you may dial 303-590-3030 and enter the access code of 4510395. Thank you very much for your participation. You may now disconnect.