Geospace Technologies Corp (GEOS) 2017 Q4 法說會逐字稿

Good day, and welcome to the Geospace Technologies' Fourth Quarter and Full Year 2017 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rick Wheeler, President and Chief Executive Officer. He is joined by Tom McEntire, the company's Vice President and Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies' Investor Relations website following the call. (Operator Instructions)

It's now my pleasure to turn the floor over to Mr. Rick Wheeler. Please go ahead.

Good morning, and welcome to Geospace Technologies' conference call for the fourth quarter of fiscal year 2017. I'm Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined here with Tom McEntire, the company's Vice President and Chief Financial Officer.

I'll start the call with a prepared overview of the quarter and Tom will then follow with an in-depth commentary of our financial performance. Next, I'll close the prepared portion of the call with some final remarks, and we'll open the line for questions.

For everyone's convenience, we'll link a recording of this call in the Investor Relations section of our website at www.geospace.com. Be aware that the information we discuss this morning is time-sensitive and might not be accurate on the day one listens to that replay.

Also, many statements made today can be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. This includes comments about the market for our products, revenue recognition, planned operations and capital expenditures. All such statements are based on our present knowledge and perception, while actual outcomes are influenced by uncertainties and other factors that we are unable to predict or control. Related risks, both known and unknown, can lead to undesirable results or cause our performance to materially differ from what we may express or imply. These risks and uncertainties include those discussed in our SEC Form 10-K and Form 10-Q filings.

Yesterday, after the market closed, the company released its financial results for the fourth quarter and 2017 fiscal year, which ended September 30, 2017. As noted, revenue generated in the fourth quarter totaled $23.7 million, an increase of 45% over last year's fourth quarter. This represents the largest quarterly revenue received since the second quarter of fiscal year 2015. A large portion of this revenue is associated with the sale to a prominent customer, of 15,000 3-channel GSX recording stations and 3-component geophone sensors from our rental fleet.

In combination with the first 3 quarters, revenue for the full 2017 fiscal year showed an increase of almost 19% over last year, reaching $73.7 million. Despite the higher revenue in the fourth quarter and fiscal year, earnings for the year reflected a net loss of $56.8 million or $4.32 per diluted share. Contributing to this loss were large noncash amounts of 56 -- I'm sorry, of $5.3 million in impairment charges levied in the fourth quarter against certain factory equipment used in the manufacture of permanent reservoir monitoring, or PRM, systems, as well as $21.5 million of inventory obsolescence reserves, of which $5.1 million occurred in the fourth quarter related to our PRM products. Together, these noncash adjustments amounted to $26.8 million over the fiscal year or a loss of $2.04 per diluted share. The adjustments relating to PRM manufacturing equipment and related PRM products inventories occurred in response to news we received in September 2017 from one of our PRM customers. We were informed that 2 offshore fields we had been discussing would now limit the tender submissions to only specified fiber-optic sensors, which our products do not use. In conjunction with this notice and the recognition that there have been no PRM orders placed since November of 2012, irrespective of sensor technology type, we concluded that the additional inventory obsolescence reserves and impairment charges were warranted.

Our traditional seismic exploration products produced revenue of $14.8 million in fiscal year 2017. This is an increase of 11% over last year and is largely derived from the sale in the fourth quarter of 3-component geophone sensors in connection with the large GSX system sale mentioned earlier. The previous 2016 fiscal year represented a historic low for our traditional seismic product revenue. And the increase experienced in fiscal year 2017 is an encouragement of potential market improvement. But despite the increased revenue, demand for our traditional seismic products has remained relatively flat and slow to recover. In general, we expect demand for our traditional products to expand and diminish in parallel with future increases or decreases in seismic exploration activity.

Wireless product revenue for fiscal year 2017 grew by 61% compared to last year, totaling $29.7 million. More than $11 million of this revenue came in the fourth quarter, with the largest portion derived from the previously mentioned sale of a large number of GSX stations. During fiscal year 2017, we sold almost 67,000 channels of our GSX wireless recording system, compared with only 4,600 channels last year. Although down from last year, rentals of our OBX marine nodal systems were also a significant contributor to our wireless revenues and continued to make up the majority of our rental revenue for fiscal year 2017.

We are very appreciative that in today's significantly depressed seismic exploration environment, our wireless land and marine recording systems remain especially relevant to contractors as the premier tools for their operational efficiency and reliability.

Our reservoir seismic products generated $2.7 million of revenue in fiscal year 2017. This represents an increase of 27% over the last year, yet it is still approximately half of what was received in fiscal year 2015. Just as in fiscal years 2015 and 2016, revenue from this product line in fiscal year 2017 was primarily associated with the sale, rental and repair of our high-definition seismic borehole tools. Absent any contracts to manufacture PRM systems, revenue from this segment is not expected to increase in any appreciable way. Moreover, with the recent news from an existing PRM customer that bids for 2 fields previously under discussion would now be constrained to use fiber-optic sensors, we believe that fiscal year 2018 is also unlikely to see any revenue from PRM system contracts.

Our PRM system long-term functionality -- designs, which utilize electrical sensor technology, are proven to provide the best performance and long-term functionality of any PRM system ever deployed or made available. And we remain committed to pursuing PRM contract opportunities with discerning oil companies managing their reserves through high-resolution seismic monitoring. Nonetheless, while we are still engaged in ongoing discussions regarding other fields and other customers for PRM systems, we do not expect these endeavors to result in any PRM contracts producing revenue in fiscal year 2018.

Revenue from our non-seismic products totaled $26 million in fiscal year 2017. This reflects a decrease of about 6% from last year's performance, but is still almost 10% higher than the amount produced 2 years ago. The decrease from last year is largely attributed to a temporary lull in demand for certain industrial products, while some of our customers worked through large inventories of our products that were purchased a year before. Despite the overall decrease in revenue compared to last year, we were notably encouraged to see revenue from our non-seismic products sequentially increased in our second, third and fourth quarters of fiscal year 2017.

Furthermore, we noted that operating income associated with our non-seismic products has increased each year over the last 3 consecutive years. We believe our ongoing efforts to design and introduce new products in our various non-seismic businesses and business lines will continue to open up opportunities for new revenue and growth.

In other matters, in a recent Form 8-K filed, we reported an accounting error in our financial statements for the fiscal years ended September 30, 2015 and 2016, as well as the first 3 quarters of fiscal year 2017. Specifically, the accounting error relates to the classification of inventories on the balance sheet. We had previously classified our entire inventories in each of those periods as a current asset on our balance sheets. We've since determined that not all our inventories at those times were reasonably expected to be sold or consumed during the next operating cycle, and therefore a portion of these inventories should have been classified as noncurrent.

The error had no effect on the results of operations, net loss, total assets, total liabilities, stockholders' equity or cash flows previously reported for any of the affected periods. All of our inventory is available for sale at any time and is often sold on unanticipated short notice. However, in light of the rapid onset of depressed seismic market conditions that occurred in 2015 and 2016, and the recognition that our forecasted expectations of sales in the current industry environment would not consume our large inventory balances, we realized that portions of our inventory should have been classified as noncurrent, meaning these inventories were unlikely to be sold or consumed within a 1-year period. Going forward, we will continue to categorize portions of our inventories as noncurrent based on estimates of when it might be sold, even though such estimates are highly subjective and likely to change from one period to another.

As a second item, we recently amended our loan agreement with Frost Bank. This amendment extends the maturity of the loan agreement to April of 2019, modifies the borrowing base to include new assets, while restricting the inclusion of others and requires us to maintain $10 million of unencumbered liquid assets. We are very pleased with the outcome of this negotiation with our bankers. At this time, I'll turn the call over to the company's CFO, Tom McEntire, to provide additional detailed commentary and insight on the company's fourth quarter and fiscal year financial performance.

Thanks, Rick, and good morning, everyone. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during this call. In yesterday's press release for our fourth quarter ended September 30, 2017, we reported revenue of $23.7 million compared to last year's revenue of $16.3 million. Our net loss for the quarter was $19.2 million or $1.46 per share compared to last year's net loss of $12.3 million or $0.94 per diluted share. For the year ended September 30, 2017, we reported revenue of $73.7 million compared to revenue of $62 million last year. Our net loss for the year was $56.8 million or a loss of $4.32 per diluted share compared to last year's net loss of $46 million or a loss of $3.52 per diluted share. For each of the current year periods, we were not able to recognize any income tax benefits related to our pretax losses in the U.S. and Canada, which affects the comparability of the fiscal year 2017 results with those of last year.

The breakdown of our seismic product revenue is as follows: our GSX and OBX wireless product revenue for the quarter was $11.1 million, an increase of 112% compared to revenue of $5.2 million last year. Revenue for the year was $29.7 million, an increase of 61% compared to $18.4 million last year. This increase for both the current year -- for both of the current year periods, primarily resulted from the sale of 45,000 channels of our GSX wireless recording stations -- I'm sorry, recording system from our rental fleet in our fourth quarter. The increase was partially offset by declining OBX rental revenues during each period of fiscal year 2017.

Our traditional product revenue for the fourth quarter was $4.9 million, an increase of 91% compared to revenue of $2.6 million last year. Revenue for the year was $14.8 million, an increase of 11% compared to $13.3 million last year. These revenue increases primarily reflect the sale of 3-component geophones from our rental fleet in the fourth quarter in connection with the sale of the GSX wireless data acquisition system.

Reservoir product revenue for the fourth quarter was $421,000, an increase of 23% compared to revenue of $343,000 last year. Revenue for the year was $2.7 million, an increase of 27% compared to $2.1 million last year. The increase for both periods was primarily due to higher demand for borehole products and reservoir monitoring services. And we reiterate that this segment will continue to contribute insignificant levels of revenue until we are engaged in a contract with the delivery of our PRM systems.

Moving on to our non-seismic products segment. Our industrial product revenue for the fourth quarter was $4.2 million, a decrease of 18% compared to revenue of $5.1 million last year. Industrial product revenue for the year was $14.4 million, a decrease of 11% compared to $16.2 million last year. Last year's revenue for the third and fourth quarter benefited from large orders of our water meter products due to a surge in their market acceptance. We are now in a less volatile phase of replenishment sales, and as Rick just indicated, since our first quarter of fiscal year 2017, we've seen consecutive quarterly revenue increases in our second, third and fourth quarters of fiscal year 2017.

Imaging product revenue for the fourth quarter was $2.9 million, essentially flat compared to revenue of $2.9 million last year. Revenue for the year was $11.6 million, an increase of 1% compared to $11.5 million last year. We believe these changes relate mostly to the timing of customer orders and do not reflect any particular trend in our customers' demand of these products.

During our fourth quarter, we were informed by PRM customer that 2 of their offshore fields would limit PRM tender submissions to systems utilizing fiber-optic sensor technology. And since our PRM technology utilizes electrical sensor technology, we will not be participating with the quotation for the design and manufacture of these PRM systems. We continue to believe there are PRM system designs, which utilize electrical sensor technology provide the best long-term functionality and performance of any PR system -- PRM system available. And we continue to aggressively market our PRM systems to major oil and gas companies. However, the occurrence of this notice in our fourth quarter combined with the absence of any new PRM orders of any technology type since November 2012 caused us to provide $5.1 million of additional obsolescence reserves against our PRM inventories and $5.3 million of impairment expenses against certain heavy equipment used to manufacture our PRM systems. Together, these PRM-related charges increased our fourth quarter cost of revenue by $10.4 million.

As a result, our seismic segment gross profit margins were significantly impacted in the fourth quarter and continue to be under significant pressure due to expenses for underutilized factory capacity and noncash charges were obsolescence impairments and underutilized rental equipment depreciation. Until we see significantly improving seismic industry market conditions result in an increased factory utilization, we expect our seismic product gross profit margins to be challenged.

Our fourth quarter and year-to-date operating expenses declined 9% and 7%, respectively, from last year. These declines primarily reflect reduced bad debt expenses and the impact of cost-reduction initiatives.

Cash investments in our property, plant and equipment and rental equipment were $1.2 million and $455,000, respectively, for fiscal year 2017. Looking forward, we expect fiscal year 2018 cash investments in our rental fleet to be approximately $6 million and noncash transfers from our inventory account of approximately $15 million pending demand for OBX and GSX systems. We estimate fiscal year 2018 cash investments in property, plant and equipment will be approximately $3 million.

In our recent 8-K filing, we reported an accounting error related to the classification of inventories in our balance sheets of our past Form 10-K and 10-Q filings. In order to be classified as a current asset, these inventories must be reasonably expected to be sold or consumed during the next 12-month period. As Rick just mentioned, we believe it is important to note that all of our inventories are available for sale and large product orders are often received on unanticipated short notice. However, we do recognize that our internal forecast and projections do not anticipate the consumption of our large inventory balances in the next 12 months. Therefore, we have calculated the proper noncurrent components of our inventories, and we're filing a Form 10-K later this morning containing the corrected balance sheets for each of the restated periods. These restatements do not impact our reported results of operations, revenues, net loss, total assets, total liabilities, stockholders' equity or cash flows for any of the affected periods.

Regarding our banking agreement, we expressed uncertainty in our third quarter conference call about our ability to extend the agreement beyond May 2018. However, we are pleased to say that the agreement was recently extended to April 2019. At September 30, 2017, our balance sheet reflected $51.2 million of cash and short-term investments. We had no long-term debt outstanding and borrowings available under our credit agreement. We're almost $24 million. Primarily, as a result of a $12.8 million income tax refund we received in our second quarter, we reported positive cash flows for fiscal year 2017. In addition, all of our various real estate holdings in Houston and around the world are owned free and clear and without any leverage.

That concludes my prepared remarks. And I'll turn the call back over to Rick.

Thank you, Tom. When we began fiscal year 2017, all indicators pointed to a persistence of similar depressed conditions for the seismic equipment market that had been experienced in the previous fiscal year. Throughout the year, this assessment proved to be essentially accurate as a consequence of continued low seismic exploration funding by oil and gas companies. As the 2017 fiscal year has now come to a close, we are encouraged that total revenue increased over last year and that quoting activity, as reported by our customers, is also increasing. However, our optimism remains guarded in that we believe recovery in the seismic industry will be gradual and that demand for our seismic products will lag behind initial market improvements. Our latest product offerings are currently under evaluation and testing by both existing as well as new potential customers and are being recognized for the utility and efficiencies their new features can provide. These products and our repetition for customer support provide an abounding opportunity for us to take advantage of an improved seismic exploration and reservoir characterization industry where both technical and operational performance is important. Our strong balance sheet includes $51.2 million in cash, cash equivalents and short-term investments and is further highlighted by the lack of any long-term debt. Combined with our borrowing availability of $23.8 million from our credit agreement, our total liquidity at September 30, 2017, was $75 million. In concert with our ongoing cost management efforts, this strong financial position and our technical competence leave us well prepared, we believe, for the future.

This concludes our prepared remarks, and now I'll turn the call back over to Keith for questions.

(Operator Instructions) We'll take our first question from Hamed Khorsand with BWS Financial.

So first off, I just want to ask you, this historical seasonality that your business has seen, is that out of the way as far as given the world levels of the business overall? Or is the seasonality still an issue?

Yes, Hamed. There is still a seasonal aspect of some of our business up in Canada and even in Russia. There is a winter seismic season that's very busy. And so to the extent that those businesses are active that's typically the time of year that they make their hay and the rest of the year, they're pretty slow.

Okay. And given the market activity you're talking about from customers, is that -- in those regions, are you seeing in offshore areas within the U.S.?

Well, offshore, I guess, our intersection with offshore is with the PRM systems. And certainly, we haven't seen much in the way of PRM system investments, as we said. The 2012 was the last contract globally that was entered into in that regard. Marine products that we have, which are part of our traditional product line are, in fact, still depressed overall and to the extent that offshore work relies on marine seismic acquisition, that market is still not what it used to be.

In addition to what Rick was saying, we have another marine product, that's a wireless product, that has been fairly popular here even during this downturn. And so it's a rental product, mostly. And we have large handful of customers that rent those units and deploy them around the world and return them back to us on a rental basis.

Okay. Got it. And then talking about inventories, would you have the offhand amount of what the value of inventory is actually really sellable versus what is on the books?

Well, we take reserves on that and list them separately so that you can really see how that works. What we believe is our -- we believe all our inventory is available for sale and is very sellable by any metrics that you want to use. But nonetheless, when it's in a situation as these most recent times where it's not being sold, you have to put some sort of reserve against it, so that you're transparent about that.

No, I understand that. What I'm trying to get to is, I think a few years ago, while the downturn was happening, you were carrying inventory about 120-or-so and now you're carrying inventory of less than half that. And I know you've taken lot of charges against that. So what I'm trying to understand is, how much of it is actually sellable versus very much obsolete that it's basically been thrown away.

I think it's a very fair question, but I think quite honestly, it's representative of -- it's sellable at this point in time. We don't have that.

Yes, Hamed, all the inventory that we're holding, even the inventory that has reserves against it, we're holding it because we believe it is sellable. So we believe all of our inventory is sellable, otherwise we would throw it away.

Got you. And then, how much pricing power do you have in the market? Is it still inundated with lot of inventory that it -- there's just no pricing power at all?

Well, there is certainly an oversupply of equipment out there. So there is certain pressure on price that's unavoidable in that environment. I think that our equipment has earned a very good name for itself and we intend to keep that in the new equipment that we're offering and making available too. But you bet, there is significant price pressure out there because of the oversupply that is existing right now.

My last question is, can you basically summarize the state of the market as far as -- I know you're talking about -- you're seeing quote activity, but is it -- since oil has been now hovering around $50 to $60 for a long time, is it -- people are getting used to it and finally starting to plan out with their CapEx based around this level. Is that what you're finally getting to see?

Well, as we said and actually, it's demonstrated in the performance this year was certainly improvement over the last year. And in our estimation, those improvements are likely to continue. Most what you've seen in the oil industry so far has been a withholding of funding for exploration activities and mostly, any monies for CapEx at all have been involved in the production side of things. That's not a sustainable condition, and so you have to come to terms with that at some point and provide exploration. If you examine some of the filings and other discussions that the oil companies, some of them are having themselves, they're admitting the fact that they have depleted much of what they've had in the way of reserves as a function of not exploring for new things.

We'll take our next question from [Michael Cox] with [Ivy Investments].

Just quickly on the conversation with the PRM customer who chose to go with only fiber-optic. Was this a customer who had previously purchased PRM systems from Geospace and is opting to switch technologies or someone who is relatively new to PRM has just made a decision to go fiber-optic over electrical sensor?

This was one of our existing customers. So certainly, they were customers that we had sold product into. So it was a choice of a different technology. And there are many reasons for those choices, but most of them have nothing to do with technical merits or anything. So to that extent, all I can say is it was a customer that we've done business with.

Okay. I mean, can you -- what -- do you maybe elaborate just a little bit on what you think might have been their motivation to switch from your technology to something else? And what -- was it price? Is it -- has -- was there anything about your product that's underperformed expectations? What might have been their motivation?

Well, to be quite honest, in much of our discussions, we're not privy to some of that information because they are in a tender process and they are not really allowed to speak to us in any large extent. But I can reiterate from a technology point of view, I mean, there is no question that our technology has the largest track record. There are some fiber-optic PRM systems out there. But without doubt, the highest performance systems in existence are ours.

Okay. Switching gears slightly. I want to make sure I got these numbers correct, but I think I heard you guys say that, in terms of 2018 expectations, $6 million of cash investment in the rental equipment and $3 million of PP&E, is that correct on the CapEx side?

That's right.

Those are obviously big, big increases over the last 3 years on both fronts. Is that simply a reflection of your optimism? And then have you think about sort of balancing the need to preserve cash in sort of the bunker mentality that you -- if I just -- the year just, indeed, you spent roughly $1.5 million combined in those 2 things in cash and now you're talking about spending $9 million. So cash is sort of king in this world. So how do you think about the trade-off between preserving cash and making those up from cash investments?

Yes, the first thing is, is that there has to be demand for the rental equipment before we will spend that cash. And so some of that cash will be spent because we do have demand. And in fact, we are working to replenish some of the equipment that we sold last year. And so -- and we expect those investments to generate cash. So to the extent that we are going to put cash into the rental fleet, we're expecting to get it out. And on the PP&E side, that's just what our budget is, that almost mirrors what our budget was in the previous year. And if we need to spend it, we will, and if we don't, we won't.

Okay. Okay. One more sort of geeky balance sheet thing. The increase in the noncurrent finance receivable, the year-over-year, is that related to the sale of the rental equipment? Or what sort of driven that $1.8 million to $8.2 million increase and obviously coming with a doubling on the allowance? Just asking about that.

Yes, that's exactly right. We gave a 3-year financing term on the equipment sale at the end of the year, and so that will be collected over a 3-year period.

Okay. Okay. And then the increase in allowance, is that related to the same customer or is that just -- is that separate?

That's separate.

Okay. Okay. Okay. And then lastly, just -- you -- obviously, you expressed some guarded optimism with regard to the coming year. On the PRM side, it's specifically, obviously, not expecting revenues necessarily in 2018, but how would you characterize the remaining conversations that you are having in terms of interest level on the part of your customers?

Very encouraging. I mean, we are still in discussions on other fields and other customers that are very promising. But, these things take time before they manifest into a contract that produces revenue. And so therefore, that's why we're saying that we don't think that's likely to make its way into revenue in 2018.

Our next question comes from Bill Dezellem with Tieton Capital.

A couple of questions. First of all, as you think about this winter, you had mentioned that this is a seasonally stronger period where you're seeing it as the opportunities now that the winter is upon us in the northern hemisphere?

Well, we do see some improvements there. Fundamentally though, it's still not what it has been in prior years, but certainly, demand through the quoting process as well as the rental activity in this sale that was -- that transpired in the fourth quarter were certainly indicators that there is improvement.

So that sale was specifically for some winter tender-type work?

Well, it's getting to be wintertime. So...

Understood. And then the other opportunities that you are seeing for the colder markets. How would you characterize that versus last year specifically?

Really, I couldn't say. Bill, I'm sorry...

Let me switch, if I may. As you look at the various opportunities that you see over the coming 12 months or the next fiscal year, where is the biggest opportunity for revenue growth you see?

I don't know if we could -- I mean, I wouldn't want to make up something for you, Bill. I think that we believe our OBX product has a lot of traction and has potential for more traction and use in the coming years. Certainly, the indicators are that, that's the case. The landside is always hard to predict. You know as well as anyone else that, that is an extremely lumpy business in terms of how that manifests. But I can tell you that the quoting activity, as we see through the eyes of our customers, is an improved state from what it has been.

(Operator Instructions) We'll go next to David Nierenberg with Nierenberg Investment Management.

Congratulations on the very nice sequential jump in revenues. Also want to note in connection with that, that the magnitude of the various noncash charges not only the ones you mentioned, but also the compensation-related noncash charges suggests to me that the operating cash loss for the September quarter was probably only in the vicinity of about $1 million. I may be wrong, but that looks very different, of course, from the $18 million or $19 million that you posted. And it suggests that if the increase in quoting activity that you say is improved -- persists into fiscal '18 that your operating activities from a cash point of view could be breakeven or even cash flow positive?

Well, going back to 2017, if you go and subtract the $12.8 million tax refund from the operating cash flows, I think you come out with a $1 million to $2 million operating use of cash from operations. Going forward, we're a little hesitant to predict what the cash flows will be. Although I would say that without income tax refund in the current 2018 year, it's unlikely that we're going to generate cash. However, with that being said, it depends a lot on our rental revenues, especially the OBX rental revenues. And so to the extent that we have a better year in OBX rental revenues that could change. Also keep in mind that we're planning to spend more cash this year on capital equipment, some of which should come back to us in cash, but it's hard to read David, so with all that thrown around, I'll let you figure out what you want to take and leave.

And I would like to ask you for a little bit of explanation, please, about one word that you used to talk about potential customers for the PRM systems. You used the word discerning in the press release about those who you think could be prospective customers and we're interested in better understanding why you said that? What you meant by that? Like to hear that kind of color, please?

Sure. Well, I mean, fundamentally in the offshore world, reservoir monitoring is a given for the most part, you have to do it. But in many cases, it's performed from an operating expense point of view and just temporal surveys are brought in to try to image those reserves on a periodic basis. But there's a lot more return when one examines the broader aspect of the financial side in having a permanent system. Wherein that you get a reap of those capital expenses now versus operating expenses, but require an investment that you'll then get your return in anywhere from 5 to 7 years or so. So there is a certain amount of discerning need with respect to those operators to examine the financials and the benefits that they can reap in a longer term.

And was there any coincidence that you used that word in connection with the distinction between fiber-optic and electrical systems? Or was that just a random?

No. I think that -- I mean, discerning should be on the technical side too as that relates, but fiber-optic systems just do not provide the resolution that our systems do. One may be tempted to examine them in any case, but if you want higher performance, then you will need something else.

Got it. Last question is about the 3-year accounts receivable, really a question for Tom about how comfortable you are bearing that credit risk associated with that customer.

We are very comfortable. This is the customer that has a strong balance sheet, and we've never had a problem with them in the past, and so yes, I feel very good about this one.

(Operator Instructions) We do have a follow-up from Bill Dezellem.

I'm going to expose my ignorance here, if I may. And you just mentioned, Rick, that the fiber-optic does not have as good of image quality as your system. And as I think about other areas where fiber optics is used versus other options, and it's specifically phone lines, crypto mining or data lines, for example. They tend to be preferred or thought of as better at least in my mind. Would you please kind of walk us through why fiber-optic, from a technical standpoint, is not as good as your system or for others that might be available also for those of us who are neophytes in this area?

Sure. And one distinction that one needs to make based on what your comment was there is that fiber optics, as it is used in the form of communications is an entirely different application of fiber optics than using it for acoustic sensing. So fiber optics with respect to data, as you mentioned, is a communications aspect and is a -- it's a great digital means of transferring digital data of one form or another over long distances and likely preferred over electrical. But it's an entirely different manifestation of the technology to try to use fiber optics in order to sense acoustics or other seismic-type events. So there is really not a direct relationship between those two.

It's -- that's helpful. And so for those who choose to use fiber optics, and I'm not thinking about the customers as much as I am the equipment suppliers, what would make them go down in that path versus another path if it's technically straightforward that fiber-optic is not as good of an image?

It may be availability or just a lack of full understanding in some cases. And other cases, it may be how it might tie into other aspects of a contract that might be taking place, unrelated to the technology.

And taking it a step further, how about the cost, not the sales cost, but just the manufacturing cost, if one were to have a fiber-optic system versus an electric -- electrical-base system, how will the cost compare between those two?

I'm not really sure to be honest. We don't -- we've not involved ourselves in the manufacture of fiber optics sensing technology. We certainly use fiber optics in our data transmissions and our other components within our system for that purpose. But not with respect to the sensing. I wouldn't anticipate there is vast cost differences one way or other because the methodologies one has to use to build either one of them, but I don't have an accurate answer on that for you.

And it appears we have no further questions at this time. I'll return the floor to Rick Wheeler for additional or closing remarks.

All right, well, thanks, Keith, and thanks to everyone who joined our call today. So we look forward to speaking with you on our first quarter conference call sometime in February. So thanks, and goodbye.

And this will conclude today's program. Thanks for your participation. You may now disconnect.