Karen Roan - Dennard Lascar Associates Bill Mitcham - President and CEO Rob Capps - EVP and Chief Financial Officer.

Veny Aleksandrov - FIG Partners Mark Brown - Global Hunter Securities Joel Luton - Westlake Securities.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Mitcham 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 opened for questions. (Operator Instructions). This conference is being recorded.

And at this time, I would now like to turn the conference over to Ms. Karen Roan. Please go ahead..

Thank you, Vickie. Good morning, and welcome to the Mitcham Industries fiscal 2015 first quarter conference call. We appreciate your joining us today. Your hosts are Bill Mitcham, President and Chief Executive Officer; and Rob Capps, Executive Vice President and Chief Financial Officer.

Before I turn 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 will be available for 90 days via webcast by going to the Investor Relations section of the company's website at mitchamindustries.com or by a recorded instant replay until June 18th.

Information on how to access the replay was provided in yesterday's earnings release. Information reported on this call speaks only as of today, Wednesday, June 4, 2014, 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.

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 January 31, 2014.

Furthermore, as we start this call, please also refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday, and please note that the contents of our conference call this morning are covered by these statements. Now I would like to turn over the call to Mitcham’s President and CEO, Bill Mitcham..

Thanks Karen and good morning everyone. I would like to thank you for joining us today for our fiscal 2015 first quarter conference call. I will start by making some general comments about the quarter before turning the call over to Rob who will discuss our financial results in more detail.

I will then conclude with a discussion of our market outlook before opening the call for questions. Our first quarter results largely reflect what we anticipated and discussed in our last quarter conference call.

Our equipment leasing revenue showed strong sequential improvement, mainly driven by seasonal increases in Canada and Russia as well as continuing improvement in Latin American land market.

However, they were below last year’s first quarter, primarily due to Canada’s marked drop in overall seismic exploration activity and ongoing softness in the marine leasing business. Canadian leasing revenues were down about 40% in first quarter as compared to first quarter last year thus land leasing activity continued to be soft.

As you may recall, our results in the fourth quarter last year benefited from a project that was completed by the end of last year. As a result, our U.S. revenues declined sequentially this quarter and were essentially flat for the first quarter last year.

We are still seeing evidence that domestic E&P spending weighted more towards development of drilling activity rather than new seismic programs. And while there haven’t been any clear signs of improvement, there are some upcoming projects that again maybe awarded in the back half of the year.

Outside of North America, the picture is little brighter, Latin America actually is much brighter. In Latin America land leasing continued to improve as we saw excellent revenue growth both on a year-over-year basis and sequential basis. Many of the issues that have been impacting the timing of projects there, seems to be lessening.

We have moved additional equipment into this region to satisfy the increased demand including some of the wireless equipment purchased in the fourth quarter, three-component digital equipment.

Certainly, it's not easy thing that problems we've had in region will disappear completely, but we think market conditions in Latin America will continue to show an improvement over last year's fiscal year, last fiscal year.

Europe showed a seasonally -- sequential tie in as there is limited work there during the winter months and [seeded] last year's results. We are currently seeing more robust activity there, continuing the trend the last few quarters. With the increasing demand for seismic equipment, we expect to move more equipment into that region.

As I mentioned, both Russia and Canada had their usual season increases over the fourth quarter, although the Canadian market was down dramatically from the first quarter a year ago. However, we were able to offset some of this decline by deploying some of the wireless equipment purchased last year to Canada for first quarter work.

We have recently seen increased activity in the Middle East while this did not certainly material impact -- materially impact our first quarter, we currently have one job in progress there and another scheduled to begin very soon.

Equipment demand in the Asia-Pacific region is also picking up a bit and we're beginning to see larger jobs with higher accounts in that region. We're carefully following the political situation in Ukraine as it can impact our business in Russia.

In fact, we very recently had a significant marine rental contract to a Russian contractor cancelled as we were unable to obtain the necessary export permit from the U.S. Department of Commerce. And this is a direct result of the sanctions and caused by the U.S. to follow Russia.

We’ve experienced no other difficulties with the movement and equipment our funds in Russia but it is something we’re watching.

The marine leasing market is still being impacted by excess equipment due to the industry consolidation that we’ve mentioned in prior calls, while there are signs of gradual improvement in marine leasing, we don’t expect substantial progress in our marine leasing results until the excess supply, excuse me (inaudible).

We continue to believe this consolidation is healthy for the market longer-term. Our downhole seismic business is healthy, is a focus on developmental activity that we’ve been discussing, it’s been helping demand for these tools as all companies focus on enhancing for elections for their existing reservoirs.

This activity is wide spread geographically with projects and bids for projects, North America, Latin America, Europe and the Middle East. Sales of hydrographic and oceanographic equipment in the first quarter continue to be brisk although down slightly from last year’s first quarter.

Most of the incoming orders are from places like Indonesia, the Philippines and China. Seamap sales were up significantly from a year ago due to delivery of one source controller system and one BuoyLink system during the quarter. We expect to deliver additional systems over the course of this year.

I’d also like to take a moment to highlight Seamap’s recent acquisition of the marine energy source product lines on ION Geophysical. We’re very excited about this transaction.

The product lines acquired including the Digishot energy source controller and the Sleeve Gun energy source and include related inventories, trade-marks, patents and intellectual property rights.

Transaction will expand Seamap’s product offerings and the acquired intellectual property will add future product development as well as broader Seamap scope into new geographic markets and with new customers. In support of this transaction, we plan to establish, Seamap sales and support office in Beijing in the not too distant future.

In fact two of our executives had just returned from meeting the new customers in China and I can tell you our presence was very well received.

And with that, I'll turn the call over to Rob, our Chief Financial Officer, who will give you a more detailed review of our financial results and then after Rob's discussion, I will return with some final comments..

Okay. Thanks Bill and good morning everybody. I will begin as usual with discussing the top-line of each of our two segments which are equipment leasing and Seamap. Then, I will follow with a discussion of the profitability of each of the segments and conclude with the discussion of our consolidated results and financial position.

First let me review the equipment leasing segment, which includes not only our core leasing business but also non-Seamap equipment sales such as occasional sales of our lease pool equipment, new seismic equipment that we acquired from third parties, sales of heli-transport equipment and sales of new hydrographic and oceanographic equipment from our Australian subsidiaries, SAP or SAP as we call it.

Our leasing revenues in the first quarter were approximately $16.2 million, down about 20% from last year's first quarter and up more than 31% from last year's fourth quarter. The year-over-year decline is primarily due to (inaudible) land leasing activity in Canada our revenues were down more than 40% as Bill discussed.

Also contributing to the year-over-year decline in leasing revenues were weaker marine leasing activity and some temporary job interruptions in the Asia Pacific region. The lease declines are partially offset by higher revenues from Latin America and Europe. Land activity in the U.S.

continued to be soft with revenues relatively flat year-over-year but down quite a bit sequentially due to the completion of large contract in the fourth quarter that we discussed.

Our marine leasing business was down both year-over-year and sequentially as the industry continued to be impacted by an abundance of equipment due to industry consolidation. But this will likely continue to [put] some pressure on a marine leasing revenues in the near future.

Available seismic tool business continues to perform well as demand for this equipment has been relatively healthy and proof in the first quarter of last year. As Bill, mentioned particularly this business is benefiting from the oil company’s focus on production and development reservoir exploration.

Sales of lease pool equipment were $1.1 million this quarter compared to about $900,000 in the same quarter last year. Other equipment sales which exclude [hydrographic] as well as sales from SAP were $2.4 million which is roughly flat with the first quarter a year ago. Now let me turn to our manufacturing business Seamap.

Revenues were $6.3 million this quarter compared to $3.9 million in the first quarter of last year. As Bill, mentioned we’ve delivered one large source controller system and one BuoyLink system in the quarter. The quarter also included ongoing sales by the product such as linkhaulers and aftermarket business such as support, repairs and spare parts.

Now let me discuss the profitability of each of the segments. Gross profit in our equipment leasing segment the first quarter was $7.7 million compared to $4.3 million in the first quarter of fiscal 2014. The decrease is due primarily to lower leasing revenues which we’ve discussed and higher depreciation expense.

The increase in depreciation expense reflects the additions made to our lease pool last year including about $35 million we added in the fourth quarter of last year. The first quarter gross profit margin in leasing segment was 39% compared to 53% in the first quarter of last year.

Gross profit in the first quarter of our Seamap segment is $3.5 million compared to $2.2 million a year ago. Seamap’s gross profit margin was 57% in both quarters this year and last year.

Our general and administrative expenses were approximately $6.1 million in first quarter of fiscal 2015, up only slightly from the $6 million in last year’s first quarter.

Our overall operating income in the first quarter of this year was approximately $4.8 million or 19% of revenues which compares with approximately $8.2 million or 30% of revenues in the first quarter of fiscal 2014. The tax provision for the quarter was $1.1 million which is an effective rate of about 23%.

And our effective tax rate is lower than the U.S. statutory rate, primarily due to the effect of lower taxes in foreign earnings. Our first quarter EBITDA was $14 million or 55% of revenues compared to $15.8 million or 58% of revenues in last year’s first quarter.

Now please keep in mind that EBITDA is a non-GAAP measure as reconciled to reported net income and cash provided by operating activities in financial tables in yesterday’s press release. We reported net income in the first quarter of $3.7 million or $0.29 per diluted share.

This compares to net income of $6.3 million or $0.48 per diluted share in the first quarter a year ago. I’ll make just a couple of comments about our financial position before I turn the call back over to Bill. Now during the first quarter, we purchased about $2.8 million in new lease pool equipment.

We continue to expect our lease pool additions for this year for all of this year to range between $15 million and $20 million. Of course that’s contingent of our customer demand developing as anticipated. We will continue to rationalize and rebalance our lease pool to better position ourselves for the current and future market demand.

We’ll selectively purchase new equipment as demand warrants and deferred purchases are going develop as we expect. As a part of our share repurchase program, we bought 158,400 shares of our common stock in the first quarter at average price of about $13.72.

Thus far under our $1 million program authorized in April 2013, we have purchased 306,300 shares and we expect to continue this program and future purchases will be based on market conditions and other financial considerations. Mitcham’s financial position overall remains very strong.

At the end of the first quarter, we had over $50 million of working capital, which includes cash and cash equivalents of about $11.7 million and there was about $15 million outstanding under our revolving credit facility.

Our cash flow provided by operations for the first quarter was over $14 million; our first quarter adjusted EBITDA was $14.4 million. And with that, I'll turn it back to Bill..

Thanks Rob. Well given the way the first quarter transpired, my closing remarks are going to sound the whole lot like those on last quarter's call.

We continue to expect growth in our core leasing business to come mainly from our international markets this year due to greater levels of activity coming from Latin America and Europe along with steady demand in the Asia-Pacific region.

With about 90% of our revenues coming from outside the U.S., this gives us optimism for a better year as compared to fiscal '14. Latin America is clearly improving after a long period of sporadic activity. We currently have jobs continuing in the region and more on horizon.

Colombia, Bolivia and Peru are countries in which we see good activity and prospects. Some of the wireless equipment we bought last year and other equipment that we have repositioned into that region have allowed us to take advantage of the number of opportunities. We're also seeing early signs of activity beginning to develop in Brazil and Argentina.

Of each countries these can be difficult countries in which to operate. So, we are approaching these opportunities cautiously. The recent constitution and political changes in Mexico are contributing the new activity in that country which is very interesting.

But I think like most of the industry participants, we agree that not much will occur there until after calendar 2015. All-in-all, Latin America continues to be a very exciting market for us. Europe is also showing improvement with greater equipment demand and indications of more activity to come in terms of very healthy bidding opportunities.

As a result, we’re moving more equipment there to serve this increased demand and expect the region to be much improved in fiscal 2015. Leasing activity in Asia Pacific is steady and we’re allocating more channels to that region as channel count for jobs there has been increasing.

There is a potential for some additional business there particularly in Australia and Indonesia and then we’ve recently quoted some new inquiry from India. As I mentioned at the beginning of the call, our renewed marketing efforts in Middle East are producing positive results.

We have a couple of small jobs there, one in progress and one about to begin. In contrast with our international markets, North America continues to be affected by uncertainty. The U.S.

land market is not showing any real signs of improvement as E&P companies are still restraining exploration activity and they are increasing production for their existing assets. While there are some large U.S. projects coming up for bid, any potential awards would probably not benefit our results until late in the second half of the year.

This past winter season in Canada was very disappointing and today the question is whether or not the depressed level of activity will persist into the next winter. I can tell you in my 35 years of supplying seismic equipment to the Canadian winter, we’ve had a lot or seen a lot of up and down years but we’ve never seen two consecutive down years.

Now having said that, it doesn’t mean that it can’t happen but we clearly expect an improvement in Canada next year. At this point, there is no clear visibility into how the next Canadian winter season will unfold, we're certainly keeping an eye on developments there staying in very close contact with all of our customers.

We expect marine leasing to remain soft for the rest of the year with some gradual improvement maybe towards the end. The loss of the contract in Russia due to the transaction composed by the United States is disappointing and would have been a significant revenue contributor later this year. Our outlook for Seamap remains bullish for fiscal 2015.

We have additional delivery source controller systems schedule this year including PGS SourceLink and GunLink 4,000 systems and we're seeing additional customer interest in our next generation BuoyLink 4DX and we expect further deliveries of this product later this year.

We also believe that our recent acquisition of the Digishot and Sleeve Gun products will begin to contribute very soon. We do anticipate sales of additional Digishot systems and ongoing aftermarket support of the Digishot and Sleeve Gun install base.

And keep in mind that delivery schedules can cause quarter to quarter volatility in Seamap’s results, but based on our current pipeline and business in the level of interest we're seeing from our customer base, we expect Seamap to deliver improved results in 2015.

Vickie, that concludes our formal remarks, we'll be happy to take any questions at this time..

Operator:.

:.

Good morning..

Good morning, Veny..

Good morning, Veny..

My first question is on the acquisition that you just did and you talked about it, and mentioned the press release.

But can you give us a little bit more details, how Digishot and the Sleeve Gun products fall together with the product that you are already producing from the Seamap side?.

Sure, Veny, I mean. Digishot is a source controller or gun controller just as GunLink is. So it’s a competitor at some ways, but we think there is some market penetration that that product has that we not have. So we think it will allow us to penetrate the digital markets, primarily China as we said.

It’s also -- with the transaction although not necessarily in the product today but there is some IP, some patents particularly that we think are valuable and allowing us to do some things in our future product developments on the gun controller side.

So it’s very complimentary and that it’s the technology that we understand, we know that product, so it’s a very low risk acquisition for us and sees for us to fall that in.

Sleeve Guns, that’s probably not a growing market but certainly is a, it’s one of the three flavors of energy sources in the market today that we think there is a large installed base, we think there is certainly some market penetration there as well as just the ongoing support of that installed base that gives us some cash flow.

So we think it’s very strategic acquisition for us, not just for the cash flow that comes that called out us to do (inaudible)..

Thank you, and my second question.

Latin America, a (inaudible) market for you and how many channels do you currently have there and how many of those are wireless, is it primarily wireless equipment out there?.

No it’s both; there is definitely both, 35, maybe more than that, three-component equipment there. So, if you count that it’s three channels, so it’s probably closer to 75,000 or so net ballpark..

Okay.

And how much of that is wireless?.

A third of it..

One third is wireless, okay..

Yes, roughly..

Okay. And then the last question and I will turn it back. On the downhole seismic activity, the size of it, you are seeing improved activity there.

Can you elaborate a little bit, is it only in North America, do you have enough equipment, is this something that you are going to be pursuing from now on, or is it just going to be part of the business which is now the seismic..

I guess it’s going to be part of the business. I don’t see us at least as we sit today, grow that add equipments to that part of the business right now..

I think we’re in pretty good shape moving that equipment we have right now, and we’ve got several jobs in South America, one particularly big job, we got a couple of jobs in the Middle East and we’re in the process of shipping equipment to and move some equipment around and then we still have quite a few shorter term jobs probably here in Canada.

So I think right now, we are in pretty good shape for the equipment we have (inaudible)..

Thank you so much..

Next, we will hear from Mark Brown with Global Hunter Securities..

Hi..

Good morning..

Just wanted to ask about, you said you expect some additional sales of the BuoyLink and GunLink and just wanted to see if you can provide any color in terms of quarter-to-quarter, which if there is a number out there in terms of what you expect to add or and maybe also just if you could talk a little bit about the 4DX product and what you think the opportunity is for that?.

Well as far as GunLink covered deliveries, I mean we do have other schedules and forecast for the year. So it's, I don’t have in my head exactly what the schedule is that one or so a quarter sort of then in that area. We could make a couple in sometimes especially if some of the new products start to kick in a bit.

As far as 4DX is -- it is a new product, although it's similar to functionality to older version EX, it does a lot more -- and provides a lot more functionality. So it's just now starting to be deployed and accepted I think in the market, so we think there is a big opportunity for that..

Okay, great. I just wanted to ask about the Ukraine situation. You mentioned that that’s something you're monitoring and that one of the marine rental contracts to the Russian contractor cancelled.

And wanted to understand maybe what percent of your revenue is you expect out of Russia and how should we think about modeling that given obviously a lot of uncertainty?.

Well last year, our Russian revenue, if I could do this on top of my head, was probably 5% of our total revenues something that ballpark? To be clear, I mean as we sit here today, our land rental business in Russia, we’re seeing no impact whatsoever from this. We’re continuing on without interruption and just no impact at all.

We did have this one marine contract and it’s because the particular type of equipment, not all equipment requires an export permit, this particular equipment did, the [streamer] equipment did require that. And historically, it’s just been matter of course, they’ve been very routine; that’s never been an issue.

But what’s happened is all new as winter [started] at least, new export permits to Russia are going to hold right now, they’re just not processing them. So I mean that was the significant project, maybe a couple million dollars over the course of the several months. So that kind of not [certain] thing, those things come only in a while.

But for us base business in Russia, so far no impact..

Okay, great. And then just last question, you mentioned that you had purchased the wireless equipment in the fourth quarter in anticipation of the project that you completed in this past quarter in Canada.

Do you expect to continue to be able to put that equipment to use going forward given your comments around the soft condition generally in the Canadian market?.

Well not necessarily in the Canadian market, but I mean it’s easily redeployed in other markets, we have to add equipment [quarterly] and in fact in three different countries, we expect to sign a contract for the end of this month on the most..

So, we expect it to go on one if not two more contracts before the Canadian winter starts..

Okay, great. Well thank you..

Thank you..

(Operator Instructions). Next we’ll hear from Joel Luton with Westlake Securities..

Yes. Good morning guys.

With respect to the acquiring the equipment from ION, when did that close and then also how did you all finance to just draw on your revolver or did you finance it with cash?.

We closed a couple of weeks ago, the day we announced the deal closed, a week before that. So, it's done deal. And it was financed with the combination of cash on hand and draw under the revolver..

Okay. Thank you..

(Operator Instructions). And there are no questions at this time. I'd like to turn things back over to management for any additional or closing comments..

Thank you, Vickie. And we’d like to thank all of you again for joining us on this call and for your interest in Mitcham Industries. And we look forward to talking you again after the completion of our second quarter. Thank you again..

And that does conclude today's teleconference. Thank you all for joining..