Getech Group plc (GB00B0HZVP95.SG) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Getech Group plc interim results investor presentation. [Operator Instructions]. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Chris Jepps, CEO. Good afternoon, sir.

Thank you, and welcome, everybody, to the Getech Interim Results and Business outlook company presentation. I'm joined today by my colleague, Simon Brown, who's our CFO, and he makes up part of our executive team here at Getech, alongside my colleague, Max Brouwers, our Chief Business Development Officer, who's not joining us today. We've been in place since January this year. We've really set out to be much more efficient and organized with the company. The 3 of us have been with the company a while. We have a very good understanding of the business, Getech's team and our customer base and markets, wide industry experience, and we like to think a reasonably successful track record in each of our various areas. And in January, we set out a new sustainable business strategy, which we've been working on all this year, and I'll be giving an update on later today. So I'll jump into the highlights for the half year of 2025 in terms of the finances. So revenues are broadly flat on last year. GBP 2.1 million versus last year's GBP 2.2 million. Obviously, there's a bit of rounding in here. And we also had a few things kind of outside of our control, which weren't expecting such as adverse movements in foreign exchange and those kind of things, which sort of meant we were a bit lower than we would have hoped to have been. As I say, broadly flat on last year. Our order book was a bit down. We've discussed this before, order that comes and goes depending on how far through our various multiyear contracts we are and obviously order book unwinds over to revenue through the year. So order book was down at GBP 3.8 million but has subsequently increased up to GBP 4.2 million as at the end of August as shown on the slide. So the first half of the year, we said about addressing the Getech cost base. We're on track to reduce our costs for this year by 12%. That's GBP 2.5 million versus last year's GBP 2.8 million. But on an annualized cost base, that would be about a 20% reduction for a full year of that lower cost base. Obviously, implementing cost reductions can cost money. So we have a cash balance of about GBP 400,000, GBP 0.4 million at the end of the period. And obviously, that was after some exceptionals related to the cost reduction program. We completed the sale and leaseback of our final office building, Nicholson House, earlier in the year, February. And that left the group now debt-free as that property was being used as security against some loans. So moving on to what we've done over the half year. Our key focus, as always, is with our Globe platform, and we've delivered a number of contract renewals with our customer cohort, largely a super major energy clients. We've actually given that cohort of customers 2 releases so far this year. And those releases contained enhanced geologic and geophysical content as well as new analytic tools, leveraging the latest technology such as AI and machine learning. You can see a sample of our customers there for the Globe platform, and we're very proud of our customer base for Globe and actually come on to show a bit more of that later. Our second key focus for us this year was our Unconventionals product. This is software tool that's focused is actually the shale oil and gas plays or areas in the world, most of which are currently in North America. And it's an interesting product in that -- it has a kind of a twin market, both operators and financial institutions. So the operators are using the tool to better manage and plan their unconventional developments and the financial institutions are using the tools to allow them to value deals and work through various M&A activities and targets. And that market has seen a lot of M&A this year. So we've added several new clients into that market this year. We have also seen a few clients sort of disappear through M&A. So it's a bit of customer churn in there and a bit of a mix picture but we have also seen several new contracts added post the half year-end as well. So that's been a good push for us this year. Something else we've made good progress on is our natural hydrogen project portfolio. We announced earlier this year a joint venture agreement with Sound Energy, and this is exclusively looking for hydrogen and helium in Morocco, Sound Energy are company focused on various energy resources across Morocco. We've completed a successful geologic screening process for likely sources of hydrogen and helium in the country. And following that project, we set up the company, HyMaroc, which will be a 50-50 joint venture between ourselves and Sound, and that is focused on securing licenses and maturing hydrogen and helium projects within Morocco. And we're hopeful to get more news on this one soon. And yes, there is a slide coming on with a bit more information on that. We've also set up a strategic partnership with an onshore seismic technology company called STRYDE. And this enables us to provide a kind of greater level of service around the kind of work we do with our explorer customers allowing us to get closer to the decisions for where to shoot and acquire seismic, for example. And again, I have a more detailed slide on this coming up. And of course, the other thing we do is we continue to work on innovation projects and build up our IP and Getech has built IP up over many decades, while it's been in existence. And our focus continues to be on Globe and our Earth Systems model product, which is our Palaeoclimate data set, which is very unique to Getech. But also our gravity and magnetic database. We have the world's largest commercially available database of gravity and magnetic data. We have data for every country in the world, which allows us to do the kind of projects that we've done in Morocco, for example. And we've continued to innovate on our natural hydrogen location workflow and, of course, our Unconventionals tool, as I previously mentioned. So the markets we work in. This year, we set out to try and focus a bit more. So the 3 on the left are -- have kind of been our main focus for the year. And the 2 on the right, we sort of turned the dial down a little bit. Carbon storage has sort of been making slow progress more generally. And we see probably it's going to be a sector that's more covered by the existing super majors in the first instance, at least. Geothermal is also sort of struggling to attract serious amounts of investment, although it has done a little bit better this year. We have won work in that sector. But in general, our focus is on oil and gas, mining and minerals and natural hydrogen. Certainly, we see oil and gas has an important role to play in the global energy market for several decades to come. And there are lots of studies that back that up, and I'll come on to some recent announcements by various energy bodies saying that we still need to be doing more around oil and gas a little bit later. But it's been a bit of a mixed picture this year with the new U.S. administration sort of signifying that there was going to be a lot of deregulation but also trying to drive oil prices down. So it's been a bit of a complex picture on that front. Demand for critical minerals continues across the board and the drive for electrification and the push towards Net Zero. Although, again, we've seen the pendulum swing perhaps a little bit away from low carbon in the last 12 months or so. And since the Russian invasion of Ukraine. However, there remains a good market for Getech and 1 that is well positioned to use Getech's products and services. And natural hydrogen, it turns out that our global holdings of gravity and magnetic data and our team's expertise is actually really well suited to natural hydrogen, and we've continued to make strides within that sector. Most of the work we do is focused on our Globe product. Globe is a digital twin of our Earth's history, goes back about 400 million years, and it includes a huge database of geoscience data. But it's also underpinned by gravity and magnetics holdings and also complemented by our software products and of course, our expert services. And we're constantly innovating around Globe in order to enhance the product for its customers and also to bring in new clients as well. So this is a key IP for Getech, certainly has a real strategic value for us. And you can see on the screen, there are a number of areas where we're continuing to innovate. Obviously, there's lots of buzz around AI, machine learning at the moment. We've certainly been looking at that over the past few years. But we don't forget our kind of core geoscience innovations as well, such as around Palaeoclimate, which is past primate essentially. Plate tectonics, if you know way the plates have moved over time and affected what's been formed, where and when and also new types of processing our gravity and magnetic data based on new satellite information that's received from new satellites. So for example, our Multi-Sat product from a few years ago. So I mentioned our clients earlier. We help those clients. We kind of call them big energy. We help those clients reduce their exploration risk and uncertainty is essentially what we do as a company across the board. We have a whole cohort of sort of household name super major customers, which many have been with us a very long time, sort of 15 years plus on the Globe platform and on others of our -- other parts of our technology stack. And I can tell you that 2 of the companies shown in their logos, they have renewed their globe contracts with us this year. Another one is ongoing and about to renew. And these are generally multiyear deals. And these are really important deals for Getech to keep renewing. And of course, each time we renew, we try and push our ARR a bit, if we can. And also it keeps us engaged with those clients in order to offer them different products and services as well. And Global really sits in the middle of a kind of workflow, if you like, where you take sort of fundamental data like gravity and magnetic, seismic and wells, satellite imagery perhaps, you process it all up. Obviously, we've spent years building Globe, which we have there, and then you can push that data into various analytics, ask experts to process it in particular ways and ultimately come up with an answer. And that answer is all really about helping our clients make better decisions in order to reduce their risk and better understand their uncertainties in their projects. So really, Globe helps these clients accelerate their subsurface exploration projects, helps them do a lot of modeling upfront before they do things like drilling expensive wells or shooting expensive seismic surveys. Within Getech, we see we have a number of strategic value drivers. We talk about our ARR, I mentioned it at the start of the session. And really one of our key strategies for the year is to really push our ARR as much as we can and increase our number of subscriptions. Obviously, we've had a bit of a mixed picture this year so far, but the year is not done. And really, we'd like to get our ARR up really up to our cost base ultimately so that on the 1st of January every year, our cost base is covered. And how do we do that? We do that by selling Globe and by selling software. In general, our data and our projects and our expert services, those things are kind of one-off sales but it's our Globe and our software that drives our ARR. So selling Globe to new clients is a key ambition. And we have a number of sales opportunities for that, both in the super major but also in smaller and in sort of national oil company settings, and we feel there's a good market to go after for new Globe clients. We can also upsell existing clients with our other products, and that helps drive ARR. And then of course, with software, it's about driving new logos and also kind of making sure that our existing clients maybe are aware of our other software products and that they license those to if they're suitable for them. So that's how we intend to push our ARR and our subscriptions up. These things are typically, I would say, a kind of 6- to 18-month sales cycle for a new client. So it's not something that you can sell many of every month. So it's about doing the marketing, doing the good work, getting the conversations going, building the relationships and then ultimately landing the sale down the line. Another part of our strategic value is our unique capabilities in locating geologic, hydrogen or natural hydrogen. And recall this our natural hydrogen project origination. So natural hydrogen, as we've seen in previous updates, it's a very new and nascent market. It's sort of unproven but hydrogen could be an incredible transformational clean energy source for the future. And there's a lot of hydrogen about, if you know where to find it. So there's huge upside potential here for Getech to really tap into this new market. And what we do with natural hydrogen is we offer services to customers and clients looking to locate hydrogen and also helium. We often find helium co-located with hydrogen. Helium has a bit more of a proven market and it could potentially be a resource that makes some of these hydrogen projects ultimately commercial as well, the 2 of them in tandem. So yes, we can sell our services and our data to those companies but we could also explore for these resources ourselves, and this plays into our sort of project origination portfolio where we are building up a small portfolio of natural hydrogen projects with a number of options to monetize in the future, which I'll come on to. And then another key part of our strategic value, which we don't feel is fairly reflected in our share price, frankly, is our unique IP and innovation. Getech has over 30 years of data collection history behind it, global data sets, the life which you can't find elsewhere. Next-generation products such as our Multi-Sat product, Globe, our Earth digital twin as well as our software and all the other things we do around machine learning as well. So there's a huge amount of value there, which we work hard every day to sell to our various customer bases. So here's a bit more information on our STRYDE relationship, which we started this year. So STRYDE is, as I said, it's an onshore seismic acquisition company. They sell and they make and use and then sell the data of these little revolutionary sort of sensors that help companies image what's under the ground through seismic energy -- seismic waves. So the company has essentially allows you to acquire high-definition onshore seismic data. So this could be useful for things like hydrogen projects, onshore oil and gas potentially mining and also geothermal. And our partnership with them allows us to leverage their sales channels and also for them to leverage our sales channels where we can offer a more end-to-end workflow where we start with our kind of regional screening and go right down the line into seismic planning or highlighting a kind of prospective area planning a survey, shooting the survey, interpreting the data. So it's a bit more of an end-to-end services solution than the customer coming to us for the screening and then thinking, what do we have to do next? So we can kind of guide them through the whole process. And we've already deployed this successfully on a few projects, and it's really enabled our clients to optimize their new seismic surveys and also help them identify new prospects and manage their subsurface resources. Quick update on our Moroccan joint venture. As I said, this is with Sound Energy. Earlier this year, we established the joint venture company called HyMaroc, which you can jump on the website for there. So as I said earlier, this is focused on locating hydrogen and helium in Morocco. We are having done a regional study, as I said earlier, we're currently looking at where we might be able to secure acreage or licenses, which would then be further worked up for drilling down the line. And as I mentioned earlier, we've got a number of options to monetize this position before any material capital would be required from Getech, which is certainly our strategy. So just coming to our final slide here. So the outlook for the business. We've made solid progression in 2025 towards our 2025 turnaround plan. Post period of the interims, we finalized the Board positions for Simon and Max. And I was brought in initially in January as interim CEO. So I've subsequently been made permanent CEO. So post period, we feel that we've really strengthened the Board and really tightened up on our governance. We feel like there's a bit of a swing in the pendulum back to oil and gas. As I said earlier, the U.S. initiatives to kind of push down regulation would have been well received by the sector. But obviously, there's been sort of global uncertainty with trade tariffs and the push to kind of get lower oil prices in some parts of the market. However, we think the fundamentals of the sector remains strong. Various reports from the IEA, IEF and S&P Global have suggested that an awful lot of investment in upstream oil and gas is going to be required even over the next 5 years in order to meet demand for oil and gas but also to offset production declines, which a recent study have said are actually even more notable than previously estimated. And what this means is this could require the industry to start making annual discoveries of up to 10 billion barrels and 1,000 bcm of natural gas globally each year just to maintain current supply levels in future years. And that plays very well to the kind of work and the kind of product Getech has. So we understand these markets. We feel, as a result, we're very well positioned to navigate them and identify the best opportunities. We have a really strong pipeline of renewals and also new business opportunities for the second half of the year. We have this year onboarded a new sales director. And we've worked through a number of big changes to the way our sales team is being managed and tracked. And we're seeing now that, that's really starting to impact our pipeline, which I like to think has improved both in size but also in terms of quality as well this year. As I say, again, with sometimes sort of long-ish sales cycles of 6 months plus, this will take a little while to be through our numbers, but I feel we're making good progress there. And with that, we're focusing on the targets we set out at the start of the year, which is to get to EBITDA positive, which this business hasn't done for 5 or 6 years. But also to deliver somewhat -- some revenue growth from just our base business. And then on top of that, we have the added sort of value creation opportunity of our project portfolio of natural hydrogen endeavors, as I've described. So with that, I'm going to draw the meeting to a close.

Fantastic. Chris, thank you very much indeed. [Operator Instructions] I would just like to remind you, a recording of the presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Chris, Simon, as you can see we've had a number of questions throughout today's presentation. Thank you investors for submitting those. If I may just ask you, just a click on that Q&A tab, where appropriate to do so just read out the question, give your response and I'll pick up from you at the end.

Perfect. Thanks. I'll just go through a few here that we've seen sent in. And what traction are you seeing in the U.S. following the expansion of the team there? So yes, that's referring to our expansion of the sales team. We expanded our sales team in the U.S. to focus purely on our software sales. And that's where we're seeing the traction. So we have an office in Houston. If you've ever been Houston, you'll see it's a very big market with a lot of companies, and we're starting to see now making sales in and around the Houston area and nearby area from oil and gas operators, but also from financial institutions, primarily with our unconventional software. You have multiple JVs in play. How are you managing the team's focus and resources to maximize these opportunities? Also, how are you managing the cost base and visibility or revenues and visibility of revenues maybe, how should we look at the revenue profile of the business? Well, you have multiple JVs in play, how you're managing the team's focus. So, we have a project office team internally within Getech and we're ISO 9001 certified. So we're very organized the way we run our business. We do obviously have multiple projects ongoing, and we're quite used to kind of moving the team around and juggling them. The reality is on these JVs once you've done the original bit of technical work, it's kind of not an ongoing project. It almost becomes a sort of a BD project at that point where you're managing relationships and you're no longer really doing any technical work. So we talked in January, I think, about sort of scaling back our ambition on the JV portfolio. Previously, as we mentioned, maybe getting up to 10. We kind of feel like 3 or 4 is about the right level, and we're quite comfortable managing our resources sort of on an ongoing basis. I don't quite understand the second part of the question, how you're managing the cost base and visibility of revenues. I mean these are a key focus for us. Our cost base is relatively flat, to be honest with you. It's mostly salaries, so that's quite easy to manage once you've gotten to comment on that you're kind of happy with. And revenues, we have a team that is chasing clients for renewals and doing all that, all that good stuff and managing our cash flow. So that's kind of business as usual for the company. As a shareholder, there's lots to be positive about Getech except the cash balance. Are you expecting this to increase the new contract wins? Or will you need to raise money? So we set out this year absolutely not to need to raise money, especially at the current share price. We kind of had a plan this year where we knew we'd be into a bit of a negative working capital cycle in the first part of the year, which is what we've seen. And we are entering our kind of traditionally stronger last 4 months of the year or last 3 months of the year now. So Q4 and Q1 tends to be when we top up our cash balance. So that's when we're expecting it to increase. And we also expect to see new contract wins during that period. Just to be clear, your strategy is to build the SaaS revenue with significant upside in the JVs. How does that work? And what are you seeing from an ARR versus cost base profile, how much R&D is needed? Yes. The reality is our cost base is pretty fixed and flat. So if we can drive subscriptions, that pretty much becomes our margin, it all goes down to the bottom line. So that's how that works. In order to drive SaaS revenue, we don't need to take on new staff. We have the start to be able to do that. We just need to sell those products and bring those contract wins in. And obviously, we have increased our sales team already this year to do that. So we're kind of comfortable with the level of investment that we have in our sales team. How much R&D is needed? Again, we don't have a requirement for huge amounts of R&D with a big team to come in and do something. We have -- our software team, for example, is constantly working on the software and is able to advance that software and keep the clients happy and add new features that will bring in new clients and the same with Globe and the other things we work on. We have a managed internal innovation program, and we're able to put people into projects as and when we need them out of the standard cost base. And again, it's not something we would have to at this time. The number of new contracts suggest that each one is very small, is that scope to upsell? Or is the contract purely based on the size of each company number of users, et cetera? Yes, some of our contracts can be quite small. Some of our software sells -- we have an entry-level software sells called data system, which is quite cheap. That's kind of a data management tool. It's more of a kind of commodity for these -- for the clients but it's also a kind of gateway and an entrance to our other products. So it's important to kind of have that lower price point, we feel because it helps us connect to the market. Not all our contracts are very small. Obviously, there's a -- there are a smaller number of very large ones. There's obviously a profile there. Is there scope to upsell? Absolutely. If you comment on one of our smaller products, we can certainly use that to promote and push some of our other analytics. And is the contract purely based on the size of each company number of users? Yes, we have customer segmentation pricing model, which I won't go into too much but if you're -- let's pick a specious company name in. If you're a Shell, the price might be one thing. And if you're viewing oil much smaller, then the price would be lower, that tends to be the way most organizations work. So yes, hopefully, that answers that question. So I think that was the last question.

Thank you. Yes, thanks very much, indeed, Chris. That was indeed. And of course, any further questions that do come through, the team will have the ability to review those and we publish responses on the Investor Meet Company platform. Just before redirecting investors to provide you the feedback, which I know is particularly important to you and the team. Chris, can I just ask you for a few closing comments, please?

Sure. Thanks. Yes. Well, first of all, thanks, everyone, for joining us today. We've set out the start of the year to turn this Getech business around. It's what we're still working on. It's been hard work through the year. I know there's an appetite to get much more news, see much more news flow from us. We will announce things as they come in. And we're hopeful that there'll be much many more announcements between now and the end of the year and interesting things to announce beyond that as well. So watch this space. And for us, it's all about focusing on, making our way through the rest of the year and delivering on those targets that we set at the start of the year.

Fantastic. Chris, thank you very much indeed. Could I please ask investors not to close the session as you will now automatically be redirected to provide your feedback in order the team can better understand your views and expectations. It's going to take a few moments to complete,, and I'm sure it'll be greatly valued by the company. On behalf of the management team, Getech Group plc, I would like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.