Dawson Geophysical Co (DWSN) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the TGC Industries first-quarter earnings call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

This conference is being recorded today, Monday, April 30, of 2012, and I would now like to turn the conference over to Mr. Jack Lascar of DRG&L. Please go ahead.

Thank you, Alisa. Good morning and welcome to the TGC Industries first-quarter 2012 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 turned 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 website at www.TGCseismic.com or via a recorded instant replay until May 14. 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, April 30, 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 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 in its annual report on Form 10-K for the year ended December 31, 2011. Furthermore, as we start this call please also refer to the statements regarding forward-looking statements incorporated in our press release issued this morning, and please note that the contents of our conference call this morning are covered by those statements.

I will now turn the call over to Wayne Whitener.

Thank you, Jack, and good morning, everyone. Thank you for joining us today for our first-quarter 2012 earnings call. I will make some brief comments on the quarter, and Jim Brata will provide you with the financial details; then I will conclude with some final remarks about our market outlook.

We generated another record quarter in terms of revenue, earnings, and EBITDA, surpassing the record we have achieved in 2011 first-quarter. Our strong first-quarter results were driven by seasonal strength in Canada and continued solid demand for land seismic services in the US, which resulted in higher capacity utilization of our equipment, increased productivity of our crews, and better profitability.

We operated eight seismic acquisition crews in the US during the first quarter, the same as in the fourth quarter; and we continue to operate in several of the key domestic shale areas. We added three crews in Canada at the beginning of the first quarter, operating seven crews there for the entire quarter, for a total of 15 crews operating in North America in the first quarter.

The Canadian season was strong through the first quarter. But due to the spring breakup, crews were shut down in Canada by mid-April.

We generated strong year-over-year growth of 33%. Earnings per share more than doubled from a year ago, reaching $0.60. EBITDA rose 94% to $26 million.

We achieved another first-quarter record with $96 million in backlog, mainly comprised of US business. We added additional TSR wireless equipment during the first quarter, as we continue to respond to our clients' preferences for the latest and most advanced geophysical equipment.

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

Thank you, Wayne, and good morning. Revenues for the first quarter of 2012 increased 33% to $67 million from $50.2 million in the first quarter of 2011, due to strong seasonal demand in Canada and continued improvement in the US land seismic market, which led to higher capacity utilization and better margins.

We operated eight crews in the US during the 2012 first quarter, compared to seven crews in the first quarter of 2011. In Canada we operated seven crews compared to six in last year's first quarter.

Cost of services in the first quarter of 2012 was $38.5 million, compared to $34.3 million in the same quarter a year ago, a 12% increase. Due to this quarter's strong year-over-year revenue growth, cost of services as a percentage of revenues in the first quarter declined to 58% from 68% a year ago.

As a result, gross profit increased 78% to $28.5 million from $16 million in the first quarter of 2011. Gross profit margin increased 43% from 32% a year ago.

Selling, general, and administrative expenses were $2.3 million in the first-quarter 2012 compared to $2.5 million in the first quarter a year ago. As a percentage of revenues, SG&A expenses declined to 3.4% from 5.0% in the first quarter a year ago. We continue to maintain very tight control of our cost structure.

Depreciation and amortization rose 28% to $5.7 million compared to $4.5 million in the 2011 first quarter, reflecting depreciation on the new equipment we have purchased over the year to meet the increased demands of our client base. As a percentage of revenues, depreciation and amortization expense was 8.5% compared to 8.9% in the first quarter a year ago.

Operating income was $20.5 million compared to $9.0 million in the first quarter a year ago. Operating profit margin improved to 31% from 18% a year ago.

Interest expense in the first quarter was $242,000 compared to $191,000 a year ago. Net income was $12.4 million or $0.60 per diluted share, compared to $5.8 million or $0.28 per diluted share in last year's first quarter.

We recorded income tax expense of $7.8 million for the first quarter, an effective tax rate of 39%. This compares to $3.1 million, an effective tax rate of 35%, in the same quarter a year ago.

EBITDA for the first quarter almost doubled, to $26.2 million, which is an EBITDA margin of 39.1%, compared to $13.5 million, an EBITDA of margin of 26.8% in the first quarter a year ago. An EBITDA reconciliation table is provided in our earnings release issued this morning.

Now I will highlight some balance sheet items. As of the end of the first quarter we had long-term debt of $11.8 million, cash and cash equivalents of approximately $11 million. Our current ratio was roughly 1.6-to-1. And finally, working capital is approximately $25 million.

And with that, I will turn the call back to Wayne for some closing comments.

Thank you, Jim. Before we go to questions I would like to briefly summarize where we stand today and what we see for the remainder of 2012.

As anticipated, the winter season in Canada turned out to be very strong, and our first-quarter record results reflect that strength. From a seasonal standpoint, our second quarter is typically the slowest quarter of the year as the Canadian winter season winds down.

Following the spring breakup that ends the winter season there, we anticipate having two crews going back into the field and operating in Canada beginning late in this current quarter. We expect to be operating a total of 10 crews in North America by the end of the second quarter -- eight crews in the US and two crews in Canada.

We remain in constant contact with our clients in order to respond quickly to their needs. As activity in the US has moved away from dry gas into liquid-rich areas and oil basins, we continue to mobilize our resources accordingly. We continue to see demand for large channel counts and seismic surveys, and have purchased additional equipment to be deployed to key market areas in the US.

Also, over the last past two quarters, due to client demand for wireless technology, we have purchased additional GSR data acquisition units, enabling us to field the largest fleet of single-channel GSR wireless data acquisition units in North America.

We clearly find ourselves in a very desirable position, with a strong backlog of $96 million, consisting mostly of US business, where prices remain competitive. This backlog is essentially twice the size of our backlog at the end of the first quarter of 2011. Based on this backlog and our outlook for the remainder of 2012, we anticipate adding a ninth crew in the US sometime during mid-summer.

Overall, there are several encouraging signs that cause us to be cautiously optimistic about the outlook in the seismic market in North America. We are seeing major global companies continue to work in the US shale plays, and our backlog keeps us involved in several of those areas. We are seeing many new opportunities in oil plays. Also, the addition of the new wireless technology strengthens our position among the strongest seismic data acquisition companies in the North American market.

With that, that concludes my remarks and we will take any questions.

(Operator Instructions) Veny Aleksandrov, Pritchard Capital Partners.

Good morning, Wayne, Jim. Needless to say, congratulations.

Thank you, Veny.

Thank you.

My first question is on the margins. You commented that you had better utilization. But was this combined with probably better pricing and better efficiencies? I mean, margins were impressive this quarter.

Well, as mentioned, the margins in Canada have been a very good. We had a very good Canadian season. Margins in the US have been at a reasonable level.

So margins have been pretty much what we expected; and probably if there had been a little bit of surprise, this is the margins in Canada. They have been very good.

Okay, thank you. So let's talk a little bit about the US. How much work -- if you think about your backlog which is multi-US, how many months of backlog do you have for the eight crews that you are operating right now?

Well, we expect that backlog to take our eight crews pretty much through the remainder of the year. We are adding additional, of course, backlog at this time as well. And that is why we are anticipating probably putting out a ninth crew here sometime mid-summer.

And the ninth crew, can you staff this crew? Do you have enough people?

Yes. We are constantly adding people, and we have people in training, so we expect that to come together for us.

And based on the new equipment that you just bought, I guess you have enough equipment to provide for this crew.

Yes, as you know, we just purchased an additional 13,000-channel complete GSR crew. We're taking delivery starting -- delivery of that mid-May and expect to have that in service basically June 1.

Right. And back to Canada, I mean it was so much better than what your Q1 -- and I know that this is your strongest quarter. But was it only the market was so strong? Or it was probably your market penetration and reputation, as this is the second year over there?

Well, I think our division in Canada, Eagle Canada, has always had a very strong reputation and is operated very, very efficiently, by Rob Wood up there. They have done an excellent job.

As you saw, we were able to add an additional crew in the first quarter here to meet the clients' demand for services up there, and they did extremely well job this year. We had some cooperation with the weather. It wasn't as much snow and ice as usual, so that helped our situation as well.

But yes, they did a great job up there this year and operated seven crews.

Okay, so if we think about Q2, you said that you worked until mid-April. You probably didn't have all the seven crews working through mid-April, right?

We started shutting down crews roughly the first of April, and all the crews were shut down in Canada by mid-April.

Okay. So, then in May you won't have any crews; and probably sometime in June two will start working?

We anticipate possibly getting one crew out in Canada maybe mid-May, and then a second crew out sometime in June/July type time frame.

Okay, okay. My last question, great control on the SG&A, even if you had Canada going on. Is this how we should model going forward? Or we should go back to the percentage of revenue type modeling?

I think you should go back to the percentage of revenue that you were using previous.

Okay. Okay, well, this answers my questions -- oh, one more, I am sorry. You talked about the gas shales and your backlog, and you said that you are still working in some shales. How much of your backlog is exposed to the shales, and how much is all in liquids?

Right now we have three crews working in Texas oil plays. We have three crews working in the shallow oil plays; and two crews working in the shales, one in the Utica Shale and one in the Mississippian Lime shale.

Okay. Thank you so much. This answers all my questions. Thanks.

(Operator Instructions) Gentlemen, there are no further questions in queue at this time. Please continue.

We would like to thank all of you for joining us for this first-quarter conference call, and we look forward to the conference call for the next quarter. Thank you.

Ladies and gentlemen, that concludes our call for today. Thank you very much for your participation. You may now disconnect.