Earnings call transcript: Argeo Q1 2025 sees stock drop as losses widen

Argeo AS reported its financial results for Q1 2025, revealing a significant increase in revenue but a notable net loss compared to the previous year. Despite a 21% year-over-year increase in revenue, the company’s stock fell sharply by 18.15% following the announcement. The decline was driven by a broader net loss and the company’s ongoing strategic transitions. According to InvestingPro data, the company has demonstrated impressive revenue growth of 428% over the last twelve months, though it currently operates with significant debt burden and faces cash flow challenges.

Key Takeaways

• Revenue grew by 21% year-over-year, reaching $11.5 million.
• The company reported a net loss of $4.2 million, reversing a net profit from the previous year.
• Stock price fell by 18.15% following the earnings release.
• Argeo is expanding its service offerings in the oil and gas sector.
• The company is undergoing a CEO transition and organizational changes.

Company Performance

Argeo’s performance in Q1 2025 highlighted a mixed financial picture. While the company achieved a significant revenue increase, driven primarily by its contract with Total Energies in Libya, its profitability metrics deteriorated. The net loss of $4.2 million stands in stark contrast to the $1.9 million profit recorded in Q1 2024, largely influenced by negative EBITDA of $200,000 compared to a positive $2.9 million in the previous year. These results underscore the challenges Argeo faces amid its strategic realignment and market expansion efforts. InvestingPro analysis reveals a concerning current ratio of 0.69, indicating potential liquidity challenges, though analysts expect the company to return to profitability this year.

Financial Highlights

• Revenue: $11.5 million, up 21% year-over-year from $9.5 million.
• EBITDA: -$200,000, down from $2.9 million in Q1 2024.
• Net Loss: $4.2 million, compared to a net profit of $1.9 million in Q1 2024.
• Cash Position: $4 million at the end of the quarter.

Market Reaction

Following the earnings announcement, Argeo’s stock experienced a steep decline, dropping 18.15% to $3.13. This movement places the stock near its 52-week low of $2.97, reflecting investor concerns over the company’s widening losses and uncertain future amid ongoing strategic changes. The stock’s performance contrasts with broader market trends, indicating specific investor apprehensions regarding Argeo’s financial health and strategic direction. InvestingPro analysis indicates the stock is currently undervalued, with 15 additional ProTips available to subscribers covering crucial metrics like debt structure, growth prospects, and valuation multiples.

Outlook & Guidance

Argeo’s forward guidance indicates a continued focus on expanding its oil and gas services, with a backlog of $40 million that could potentially grow to $164 million. The company is also negotiating contracts worth approximately $150 million and has secured a four-year IMR contract in South America. Despite these positive developments, the company is cautious about its prospects, given the delays in marine minerals and wind energy sectors.

Executive Commentary

Jan Grimnus, Executive Chair, emphasized the company’s strategic shift, stating, "Oil and gas will be our primary revenue stream." He also highlighted the company’s readiness to enter a new phase, pointing to the development of combined AUV and ROV services. These strategic initiatives are intended to strengthen Argeo’s market position and drive future growth.

Risks and Challenges

• The company’s transition to new leadership could affect strategic continuity and execution.
• Delays in the marine minerals and wind energy sectors may impact revenue diversification efforts.
• The ongoing net losses raise concerns about long-term financial sustainability.
• Market volatility and investor sentiment could further pressure the stock price.
• Execution risks associated with expanding service offerings and entering new markets.

Q&A

During the earnings call, analysts inquired about the Suriname MultiClient project, with management expressing optimism about data quality and expected sales in 2025. Discussions also focused on the ongoing negotiations for the South America contract and organizational changes, which are anticipated to be completed in the first half of 2025.

Full transcript - Argeo AS (ARGEO) Q1 2025:

Oderik Ryczek, CFO, Interim CEO, RNGO: Welcome to this presentation of Adios results for the first quarter of twenty twenty five. My name is Oderik Ryczek. I am CFO in RNGO. I’m currently also interim CEO. Together with me today, I have Jan Grimnus, who is executive chair in the company.

We will start with the financials and some key figures from first quarter, and note that all these numbers are in US dollars. Revenue in q one was 11,500,000.0, up from 9,500,000.0 in the same quarter last year and up from 5,400,000.0 in q four twenty four. This revenue in the quarter came mainly from the contract we have with the Total energies in non Libya, which completed in the March. EBITDA in q one was minus $200,000, compared to plus 2,900,000.0 in q one twenty four. But, we had a significant improvement from q four last year when it was minus, 5,700,000.0.

We had a net loss of 4,200,000.0 in the quarter compared to a profit in Q1 last year of $1,900,000 But Q1 was an improvement from Q4 when it was minus 8,500,000.0 Backlog at the end of q one was $14,000,000, but we expect this to increase to hundred and 64,000,000 when we, formalize, this contract in South America. We move over to the balance sheet. I will start out with the asset side. IFRS 16 right of use assets were $25,000,000 in the end of the quarter. This includes the leases for two Hugin superiors, bareboat charter for a geoserture and office leases.

Property, plant, and equipment and other noncurrent assets were 57,000,000. So this is mainly our vessel, GeoVenture, one Hugin six thousand AUV, the Articus USV, our multi client library, and some intangible assets. Current assets were 18,000,000, in the end of the quarter, and this includes $4,000,000 in in cash. On the equity and liability side, lease liabilities related to the right of use assets were 23,000,000. So this is both current and long term leases.

We had 20,000,000 in interest bearing liabilities, also both current and long term, and 14,000,000 in other current liabilities. Equity was $42,000,000, in the end of the quarter. We move over to the cash flow for the quarter. So we started the quarter with $1,000,000 in cash. Cash from operation was minus 1,000,000.

Then we had 10,000,000 from financing activities, and this includes 13,300,000.0 in proceeds from the share issue we did in q o. We repaid 1,800,000.0 in long term debt and leases, and we paid $1,000,000 in interest on this debt. Investments in the quarter was $5,000,000. So this is mainly investment we did in this multiclient program in Suriname. So this left us with $4,000,000 in cash in the end of the quarter.

So I will now give the word to Jan, who will give an operational and commercial update.

Jan Grimnus, Executive Chair, RNGO: Thank you, Derek. And I’ll go quickly through the main events. As you heard, we have, completed operations for for searcher in the quarter. But most important event is that we have been selected as a preferred supplier for combined RV, AUV support vessel on a four year contract in South America. This will give us a good long term activity, in this area.

We also completed the the Total Energies Venus project in Namibia, and the customer is very sick and very happy with the data that they received. We have signed contracts both for our GEO Searcher and our GEO Venture in the quarter, one operating in South America and one operating in East Africa. The the Suriname MultiClient project was completed, this quarter. After q n ’1, the board and, the CEO had some discussions about the the way forward, and we agreed that, Trunkrans stepped down as CEO. For the time being, Oded Erik Rutschev, our CEO, is our interim CEO, and I’m more involved in day to day operations than, before.

The company is now ready to go into a new phase. So far, we have entered into three different verticals. We have commercialized hardware. We have, developed our internal procedures and our own organization. And we now cover AUVs.

We have developed good deployment systems. We have two vessels that we operate, and we’re also moving into geotechnical services. Additionally, we have expanded our capabilities and are going out to integrate AUVs and ROVs in this future project in South America. So looking ahead, what we are going to do is that we will offer combined AUV and ROV services, measuring the seabed, and it will also include geotechnical services since most of our customers want to have samples from the seabed when the when we measure it. We have, for a long time, been developing EM systems to have a new measurement to offer to the companies.

This development will continue, and we will also start to commercialize and sell the tools that we are developing. Our Geoscope, which is our data processing and presentation platform, will go forward, and we will focus on, make it in into a state of art presentation platform for our data and a a tool that our customers can use to, both view and operate on the data to make sure that, we can grow faster and mitigate our risk. We will collaborate with other companies in our industries and make sure that, we can position our products and software as industry leader in this field. Both vessels have been operating, this quarter. Searcher is has now completed its its project, and Venture is still working East Of Africa and is expected to to end this project sometime, in June.

What’s very good to be able to present is that our HSEQ is very, very good. This is an area that all our customers are very concerned about. Everybody in all our verticals are very aware of mishaps, and then we have had nothing happening in q one. Then to backlog and tender activity, we have a 40,000,000 backlog. We are actively negotiating a hundred and 50,000,000 contracts, which brings us to a hundred and 64.

The tender activity is quite good. We are now chasing, projects with a combined combined value of roughly a hundred and 97,000,000. So to summarize, our geo q one, operational performance is very good. The company is actively bidding, and discussing new projects for the remainder of the year. We do see a delay in marine minerals and wind energy, because of the political climate right now, which means that in 2025, oil and gas will be our primary revenue stream.

And we see a steady pipeline going into ’26. And also important to remember, we’re well positioned for a four year IMR contract in South America, which will give you a good entry into this market. We’re also working on securing other long term contracts and frame agreements with, recognized oil companies. So thank you very much for listening in. I would then like to go to q and a, and we are open for questions.

Thank you very much. We have some questions that have come in. The first one is about the multi client project in Suriname. And we we are now processing the data. What we have seen so far is that the quality is very good, and we expect to begin sales, and have sales in ’25.

We have a question about backlog. As you have seen in the past, the time between assigned contract and project starts are very short in this market, and we are negotiating contracts currently. And that’s why we use the wording possible backlog. When will the contract in South America be signed? That’s a question which is difficult to answer.

We don’t think it will take that long, but, the oil company we’re negotiating with has set up all contracts, and, we have start up quite late in, in their batch. So we we are not or most probably not the first contract that they will sign. We also have a question about organization. We after our CEO stepped down, we are doing some modifications to the organization, and you will see results of that during first half of this year. We are actively searching for a new CEO and well into that process.

We let’s see. Searcher is now undergoing some work in in the yard. There was a question about Searcher, and she’s ready for projects after that. See if there are any more questions. Yeah.

I I think that concludes. We had some questions questions here that are very forward looking, and unfortunately, we don’t give that kind of information. So thank you very much for the questions, and see you after q two.

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