Welcome to the Geospace Technologies First Quarter 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. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions]. It is now my pleasure to turn the floor over to Rick Wheeler. Sir, you may begin.

Good morning, and welcome again to Geospace Technologies conference call for the first quarter of fiscal year 2017 and thanks for listening. I am Rick Wheeler, the Company's President and Chief Executive Officer and I'm here with Tom McEntire, the Company's Vice President and Chief Financial Officer. I will start the call today with a prepared overview of the quarter, then Tom will follow that with an in-depth review and commentary of our financial performance. I'll then close out the prepared portion of the call with some final remarks and we will open the line for questions. As a convenience mentioned, we will place a replay of this conference call in the Investor Relations section of our website at www.geospace.com. As a standard caution the information we will discuss this morning is time-sensitive and might not be accurate on the date one listens to the replay. Also, many of the statements we make today can be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. This includes statements about the market for our products, revenue recognition, planned operations, and capital expenditures. Such statements are based on our present knowledge and perceptions while actual outcomes are influenced by uncertainties and other factors that we are unable to control or predict. 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 first quarter of fiscal year 2017 which ended December 31, 2016. As reported revenue in the first quarter was $15.3 million, this is a decline of 6% sequentially from last quarter although…

Thanks Rick and good morning everyone. Before I begin I would like to remind everyone that we will not be providing any specific revenue or earnings guidance during this call. In yesterday's press release our first quarter -- for our first quarter ended December 31, 2016 we reported revenue of $15 million compared to last year's revenue of $13 million. Our net loss for the quarter was 11.7 million or $0.89 per diluted share compared to last year's net loss of $11 million or $0.85 per diluted share. We were unable to recognize any tax benefits related to our first quarter of pretax loss which somewhat distorts the comparison to last year's results. A breakdown of our seismic product revenue is as follows; traditional product revenue for the first quarter was 2.6 million, a decrease of 48% compared to revenue of $5 million last year. The revenue decline reflects ongoing subdued levels of seismic exploration activities suppressing the need of replacement equipment. Our GSX and OBX wireless product revenue for the quarter was 6.3 million, an increase of 235% compared to revenue of 1.9 million last year. The increase primarily resulted from a large OBX rental contract which began in February of last year which generated rental revenue of $4.3 million for the first quarter. As this contract comes to an end and in the absence of any execution of any new contracts we expect lower revenues of wireless product rental income in future quarters. Reservoir product revenue for the first quarter was 513,000, a decline of 26% compared to revenue of 697,000 last year. The revenue decline resulted from lower product rentals reflecting moderated seismic borehole activities in the marketplace. We believe for seismic reservoir products on this segment will continue to contribute insignificant levels of revenue until we…

Thanks Tom. During our first quarter ended December 31, 2016 we were certainly encouraged by the agreement among OPEC and other producing nations to reduce oil production. This has helped stabilize crude oil prices in recent weeks above $50. However large amounts of crude oil remain in storage worldwide and this overhang is predicted by some to persist for a year or longer. This excess crude storage and other factors could further suppress any meaningful increases in crude oil prices. Oil company exploration expenditures have dropped precipitously in recent years. And while some have raised capital spending forecasts for 2017 many others have announced further cost reductions. So long as seismic exploration activity stay sluggish and permanent reservoir imaging projects are deferred, demand for our seismic equipment will remain depressed, and revenue growth from these products will remain challenged. However, in order to sustain viable global energy market the eventual resumption of these activities is inevitable even though the timing is unpredictable and seemingly gradual. In the interim we will continue to conservatively manage cost and improve our operations while simultaneously delivering best in class services and product technologies to our customers. As a demonstration of our efforts our balance sheet as Tom said remains debt free with 37.5 million of cash in short-term investments. And in conjunction with a $30 million credit line our total liquidity is greater than 67 million. This places us in an enviably strong position to endure the current market conditions and emerge as an undiminished industry leader in its recovery. This now concludes our prepared remarks and I'll turn the call back over to Tanisha for questions.

Thank you. [Operator Instructions]. Thank you. And we'll take our first question comes from Bill Dezellem with Tieton Capital. Please go ahead, your line is open.

Thank you. A couple of questions, first of all could you provide a little more detail behind your comment that the number of customers interested in OBX continues to grow? And then secondarily inventory obsolescence was roughly flat in the Q1 versus the September quarter a little over a $4 million. Is that now what you feel is a go forward rate at your current sales level or should we expect that to change somewhat dramatically one way or another?

Hi Bill. Well I can answer the first question. I mean it's actually very simple, if you count on your hands the number of customers that have rented or are planning to rent OBX equipment it continues to grow and there are new companies out there that we've done business with in other regards that are using some of our OBX products that haven’t before. So the list is a composite of existing customers and new customers or customers of other products that are getting into that market. I'll let Tom answer the second question.

Yeah, hi Bill. As we've discussed before, this calculation for inventory obsolescence is very dynamic and is constantly moving based upon our movements in our inventories. And as we see new quotes come in for products that creates a demand or as we move products in our factory into work orders and sell them, all that changes. So it's very hard for me to predict what it's going to be in future quarters. Until I know all that other information and we typically don't finalize that adjustment till after the quarter ends.

Okay, thanks and Rick I'm going to come back to the count on one -- on your hand, the number that was -- let me try to get you to provide a little more detail behind the commentary which you're having with those conversations in parallel that would be somewhere different?

Well you will need more than one hand if you're counting but no, I really can't reveal the customers. I mean many of them would prefer it that way and there's -- it's not a large industry. The ocean-bottom market, but nonetheless those that are playing in that market that don't already have their needs filled are coming to us for utilizing these products. And we are seeing new customers that are using the OBX in situations where the channel -- the station counts may not be the 5000 that were recently rented. But in smaller quantities they're also using these products of course in some cases non-exploratory services that they're providing.

Okay, thank you. And then let's circle back to GSX where you actually had an okay showing this quarter. Would you talk a little around what you're seeing on that front with the rig count going up a little bit and oil prices up a little bit and just generally a little better feeling in the industry as to whether just to talk around that if you could?

Sure, well I mean in general we see through the eyes of our customers in that regard. And so long as rig counts go up unless that translates to more seismic imaging that they need performed and those services are solicited then we're not going to see new demands on our equipment. The contractors have had to tighten their belts significantly because they're just not been in the amount of seismic survey projects out there that there have been. And they in many cases just have more than enough equipment to take care of those projects that they can get their hands on. As that changes there maybe pockets of need and that certainly was the case here. There's no way to predict exactly what that is going to look like going forward as a function of rig count or those sorts of things

And maybe one last one in that same regard before I turn it back. At this stage in the cycle, how would you characterize the interest in additional seismic shoots relative to prior cycles?

I’m not quite sure I understand what you're really asking. I mean there is clearly some additional shooting that goes on or has gone on. It's enough to where that some of these additional channels were required. But I can't give you a trend on where that's going or anything.

Great, thank you both.

Thank you. [Operator Instructions]. Our next question comes from Mark Brown with Seaport Global. Please go ahead, your line is open.

Hi, I just wanted to ask about the OBX marine equipment contract, when is that expected to be completed, you referenced that in the press release I just wanted to clarify?

Yeah the large contract that you're referring to should be wrapping up this quarter.

Okay, got it and also interested on the GSX sold a nice number of channels in the quarter. I'm just curious what type of customers are buying those and maybe in what geographies you're seeing some of this activity?

What type of customers, well these are land surveys that use that equipment. It's -– we’re seeing the GSX used both internationally and in North America. So we sell across the Board but I'm not going to reveal enough to where you can determine who those customers might be.

Okay, got it. And I’m curious just we're hearing from many of the oilfield service companies the use of data analytics and looking at even potentially artificial intelligence, are those technologies in any way beneficial to you in terms of prompting them perhaps to reimage certain acreage or use seismic as part of a solution that involves the data analytics?

Well I think seismic always provides valuable information about what's going on in a reservoir. I mean, data analytics get better every year. So to what extent seismic data is reshot that's exactly why you see it reshot often times because, the technical parameters that were used to shoot it before either the targeted depths and/or the special sampling and time sampling might be inadequate for some of the data analytics algorithms to use. So certainly if there are improvements in that regard there is the likelihood that there will be some seismic data that needs to be reshot. Although you can’t preprocess or reprocess certain older seismic data to gain some improvements.

Alright, well thanks guys appreciate it.

Thank you. [Operator Instructions]. Our next question comes from David [indiscernible]. Please go ahead, your line is open.

Good morning guys. Wanted to note that on a modest $300,000 increase in quarterly revenues in the non-seismic segment of your business you nonetheless managed to improve operating income by 500,000, you almost doubled it. Any comment that you could share with us about how you did that?

Yes, David good point. We didn't make too much about that in the press release because it's kind of smothered by the rest of the losses from our seismic segment. But you're absolutely right, it’s gross margin improvement and its cost kind of containment if you will. And so we're starting to leverage off of the additional volume in a good way.

Well, that was nice work. Thank you and congratulations. Also good to hear that pretty soon you'll be getting that $13 million tax refund that you envisioned even in an environment where it's impossible to forecast when the core business will come back. You nonetheless are maintaining a very strong balance sheet and living to see in other day and to experience another rebound.

Well we appreciate that. Thank you David.

Thank you, guys.

Thank you. [Operator Instructions]. And it does appear we have no further questions at this time. I will now hand the floor back over to Rick Wheeler for any additional or closing remarks.

Alright, well thank you Tanisha. And we would like to thank everyone for joining us on our call today. We look forward to speaking with you during our second quarter conference call sometime in May. Thanks and goodbye.

Thank you all. This does conclude today's conference call. Please disconnect your lines at this time and have a wonderful day.