Geospace Technologies (NASDAQ: GEOS) today announced a net loss
of $19.2 million, or $(1.42) per diluted share, on revenue of $87.8
million for its fiscal year ended September 30, 2020. This compares
with a net loss of $146,000, or ($0.01) per diluted share, on
revenue of $95.8 million for the comparable year-ago period.
For the fourth quarter ended September 30, 2020, the company
reported revenue of $21.5 million and a net loss of $3.9 million,
or ($0.29) per diluted share. For the comparable period last year,
the company recorded revenue of $28.9 million and net income of
$8.7 million, or $0.63 per diluted share.
The company noted that both the 2019 fiscal year and the fourth
quarter periods benefited from a $7.0 million gain on the sale of
non-essential real estate. Also noted, fiscal year 2020 operating
income includes a $0.7 million non-cash charge for goodwill
impairment in the company’s oil and gas segment, and a $1.1 million
non-cash charge for changes in contingent consideration whereas
fiscal year 2019 benefited from a $2.1 million reversal.
Walter R. (“Rick”) Wheeler, President and CEO of Geospace
Technologies (the “Company”) said, “The spread of the novel
coronavirus that began in late 2019 and early 2020, continues to
negatively impact economies around the world. In response to this
pandemic, we have continued to maintain our steadfast commitment to
the health and safety measures implemented earlier this year. These
measures are designed to protect our employees, as well as ensure
that we can continue to serve our valued customers in the fashion
to which they are accustomed.
Wheeler continued, “Despite the negative impact that COVID-19
has had on each of our business segments, we are pleased to report
that our fiscal year 2020 total revenue of $87.8 million remained
within 8% of last year’s total, and that we generated over $18
million in cash from operations over the course of the year.
Notably, this reported revenue figure does not include any amounts
from the sale of a GCL land recording system, valued at $12.5
million, to one of our customers in the second quarter. The
purchase included $10 million of financing through a promissory
note, and by the end of September 2020, almost $5.0 million had
been received toward this system, including interest charges.
Principal payment amounts toward this sale are included on our
balance sheet as part of non-current deferred revenue, which we
intend to recognize at a later date when collection of the note is
deemed likely.”
Wheeler further noted, “As was the case throughout the fiscal
year, our fourth quarter results continued to be fueled by demand
for our OBX ocean-bottom recording systems. Moreover, rental
contracts for our OBX marine systems pushed revenue from our
wireless exploration products above last year’s mark. This helped
to partially offset the reduced demand for our other oil and gas
segment products, as well as the lower demand we experienced for
products in our adjacent market businesses. The reduced demand was
largely brought about by the negative impacts of COVID-19. Efforts
to combat this disease have driven down the world’s demand for oil
and gas, which has led to the largest supply and demand imbalance
we’ve experienced. With a majority of seismic exploration
activities currently suspended, demand for our oil and gas products
remains limited. In addition, our adjacent markets graphic imaging
products have seen similar setbacks. These products are used in the
printing processes, merchandizing, and promotions of sports,
entertainment, schools, tourism, and other social gathering events.
Due to COVID-19, many of these activities have been curtailed, thus
lowering demand for these products. In recognition of this lower
products and rental demand and in keeping with our conservative
management approach, we took steps to address our operating costs
with a reduction in force in the third quarter of fiscal year 2020.
Although a return to normalcy from these circumstances seems almost
certain, the timing and extent of such recovery is unclear.”
Oil and Gas Markets Segment
Combined revenue from the Company’s Oil and Gas Markets segment
totaled $14.2 million for the three months ended September 30,
2020. For the full fiscal year, revenue from this segment totaled
$61.7 million. This compares with $20.8 million and $65.0 million
for the equivalent three- and twelve-month periods a year ago,
reflecting respective decreases of 32% and 5%. The decrease for the
three-month period stems from lower demand for the Company’s
wireless and reservoir seismic products and services, and for the
full year period, reduced demand for its traditional and reservoir
seismic products. Given the reduction in demand for oil and gas as
a consequence of COVID-19, the Company’s Oil and Gas Markets
segment will remain challenged as a result of minimal seismic
exploration activity.
Revenue contributions to this segment from the Company’s
traditional exploration products totaled $1.1 million and $6.7
million respectively for the three-month and full year periods
ended September 30, 2020. These reflect an increase of 83% and a
decrease of 30% compared to the same periods a year ago. The
increase for the three-month period arises from comparing to last
year’s historic low figure, while the decrease for the full year
period is attributed to a persistent low overall demand for these
products brought about by stark reductions in seismic exploration
activities for oil and gas.
Segment contributions from the Company’s wireless seismic
products totaled $13.0 million and $54.1 million respectively for
the three- and twelve-month periods ended September 30, 2020. This
equates to a 35% decrease and a 2% increase compared to the
corresponding respective year ago periods. The fourth quarter
decrease from last year is due to lower sales and rentals of the
Company’s wireless products over the narrow three-month period. The
full year comparative increase is a result of greater rental
revenue during the year from the Company’s OBX marine nodal
recording systems, partially offset by lower sales and rentals of
its wireless land products. Demand for the Company’s OBX systems is
driven by the desire of many oil and gas companies to find new
resources near producing fields and to leverage existing offshore
assets for their recovery to achieve lower cost. The Company’s
rental of OBX systems is not immune from the reduced global demand
for oil and gas, as such the Company expects reduced revenue from
the rental of OBX systems in fiscal year 2021. Not recognized in
the Company’s fiscal year 2020 revenue is the sale of a 30,000
channel GCL wireless land recording system, valued at $12.5
million. Payments received toward the system purchase are included
in non-current deferred revenue on the Company’s balance sheet and
are intended to be recognized as revenue at a future date when
payment of a promissory note on the sale is likely.
The Company’s reservoir seismic products contributed $0.1
million and $0.9 million in total revenue for the three-month and
full year periods ended September 30, 2020. This compares with $0.3
million and $2.7 million for the equivalent periods one year
earlier, reflecting respective decreases of 56% and 65%. Reductions
in engineering services and lower demand for the sale, rental, and
repair of the Company’s borehole tools are responsible for the
decreases in both periods. Management believes that contracts for
the manufacture and deployment of permanent reservoir monitoring
(PRM) systems offer the greatest opportunity for meaningful revenue
from this product category. The Company has the largest installed
base of PRM systems in the world, and offers configurations
utilizing high-resolution electromagnetic motion sensors or
OptoSeis® fiber optic sensor technology. In the fourth quarter of
fiscal year 2020, the Company received a request from a major oil
and gas producer to propose on the manufacture and installation of
a large-scale seabed PRM system. In the event of a provided
response, the potential customer is expected to award a contract in
the second or third quarter of fiscal year 2021. If the Company
were awarded the contract, revenue from the contract would not
likely be recognized until the latter part of fiscal year 2021 and
beyond. The Company is also continuing its ongoing discussions with
other major oil and gas producers for possible PRM systems.
Adjacent Markets Segment
Combined revenue from the Company’s Adjacent Markets segment
totaled $7.1 million and $25.4 million for the three- and
twelve-month periods ended September 30, 2020. This compares with
$8.0 million and $30.1 million for the equivalent year ago periods,
representing decreases of 11% and 16% respectively. Lower sales of
the Company’s sensors, cables, and connectors used in non-oil and
gas industrial markets, and lower demand for its contract
manufacturing services contributed to the decreases in both
periods. In addition, reduced sales of the Company’s graphic
imaging products further contributed to the comparative decrease
over the full year period. In all cases, negative impacts of the
COVID-19 pandemic are believed to be the primary cause of lower
demand for the Company’s various adjacent markets products. As the
effects of COVID-19 are abated, demand for the Company’s adjacent
markets products will likely improve, but the extent and timing of
possible recovery cannot be determined.
Emerging Markets Segment
The Company’s Emerging Markets segment generated revenue of
$177,000 and $734,000 for the three-month and full year periods
ended September 30, 2020. This compares with $14,000 and $159,000
for the similar three- and twelve-month periods of the previous
year. For both periods, increased revenue is attributed to (i) the
sale of border and perimeter security products to a commercial
customer and (ii) initial site preparation and engineering related
to a U.S. Customs and Border Protection, U.S. Border Patrol
contract. Revenue from this $10 million contract, secured in April
2020, is expected to be recognized in the Company’s 2021 fiscal
year. The contract is evidence of the Company’s successful
execution of strategic diversification. Through its Quantum
acquisition and analytics integration, the Company has leveraged
its core engineering and manufacturing competencies to create novel
products incorporating seismic acoustic technology and advanced
analytics. These products provide unique technology solutions to
government and commercial customers in the security, industrial,
oil and gas, and other markets.
Balance Sheet and Liquidity
For the fiscal year ended September 30, 2020, the Company
generated $18.1 million in cash and cash equivalents from operating
activities. The Company used $4.1 million of cash for investment
activities that included (i) $5.5 million invested in its rental
equipment primarily to expand its OBX rental fleet, and (ii) $2.9
million for additions to property, plant, and equipment. These uses
were partially offset by (i) $4.1 million of proceeds for the sale
of rental equipment, and (ii) $0.2 million of proceeds from the
sale of equipment. As of September 30, 2020, the Company had $32.7
million in cash and cash equivalents, and maintained an additional
borrowing availability of $17.7 million under its bank credit
agreement with no borrowings outstanding. Thus, as of September 30,
2020, the Company’s total liquidity stood at $50.4 million. The
Company additionally owns unencumbered property and real estate in
both domestic and international locations.
Wheeler concluded, “COVID-19 continues to exert a tight grip on
the economies of countries around the world, and until there is a
successful vaccine and infection rates consistently decline, there
is no way to predict what a recovery will look like. Although the
impact of the pandemic on some of our business segments was
initially delayed, the negative effects have largely caught up.
Seismic exploration activity will remain at a minimum as long as
oil and gas supplies outstrip demand, and the lower energy demands
brought about in reaction to COVID-19 reinforce this condition. As
the businesses of some of our customers suffer from the pandemic’s
effects, some of our adjacent market products will see reduced
demand. However, much of our current efforts are focused on longer
term strategic goals and projects of major customers looking
further into the future. This includes oil and gas companies eager
to find new reserves near existing assets using our OBX systems, as
well as those intending to maximize recoveries of existing fields
using our PRM systems. Transcending the pandemic is the critical
mission of the U.S. Customs and Border Protection, U.S. Border
Patrol, as we fulfill our contract to provide the Department of
Homeland Security with a technology solution to protect our borders
and society at large. We believe our strong balance sheet with no
debt and ample liquidity gives us the fundamental strength to
weather this pandemic and emerge on good footing. As such, we
believe we are well positioned to leverage our comprehensive
engineering and significant manufacturing operation in pursuit of
new specialized industrial manufacturing customers and in support
of national and homeland security missions. By maintaining our own
manufacturing operation, we’ve de-risked our supply chain and
enabled rapid time to market for new products, all of which make us
highly attractive for partnership and fulfillment of commercial and
government contracts. In other matters, I’d like to highlight the
recent additions to our Board of Directors of Margaret “Sid”
Ashworth, former Vice President of Government Relations for
Northrop Grumman, and Kenneth Asbury, former President and CEO of
CACI International. The experience each of them bring from such
remarkable careers and accomplishments will bring fresh and diverse
perspectives to our board and future strategies, creating new value
for our shareholders.”
Stock Repurchase Program
The Company also announced that its Board of Directors has
authorized a stock repurchase program under which the Company may
purchase up to $5 million of its outstanding common stock. Under
the repurchase program, the Company may purchase shares of common
stock on a discretionary basis from time to time through open
market transactions. The timing and number of shares repurchased
will depend on a variety of factors, including stock price, trading
volume, and general business and market conditions. The repurchase
program has no time limit, does not obligate the Company to acquire
a specified number of shares and may be modified, suspended or
discontinued at any time at the Company’s discretion. The
repurchase plan will be funded using existing cash or future cash
flow.
Conference Call
Information
Geospace Technologies will host a conference call to review its
fiscal year 2020 full year financial results on November 20, 2020
at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can
access the call at (866) 518-6930 (US) or (203) 518-9797
(International). Please reference the conference ID: GEOSQ420 prior
to the start of the conference call. A replay will be available for
approximately 60 days and may be accessed through the Investor tab
of our website at www.geospace.com.
About Geospace
Technologies
Geospace principally designs and manufactures seismic
instruments and equipment. We market our seismic products to the
oil and gas industry to locate, characterize and monitor
hydrocarbon-producing reservoirs. We also market our seismic
products to other industries for vibration monitoring, border and
perimeter security and various geotechnical applications. We design
and manufacture other products of a non-seismic nature, including
water meter products, imaging equipment and offshore cables.
Forward Looking
Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements can be identified by
terminology such as “may”, “will”, “should”, “intend”, “expect”,
“plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”,
“predict”, “potential”, “continue”, “evaluating” or similar words.
Statements that contain these words should be read carefully
because they discuss our future expectations, contain projections
of our future results of operations or of our financial position or
state other forward-looking information. Examples of
forward-looking statements include, among others, statements that
we make regarding our expected operating results, the results and
success of our transactions with Quantum and the OptoSeis®
technology, the adoption and sale of our products in various
geographic regions, potential tenders for PRM systems, future
demand for OBX systems, the completion of new orders for our
channels of our GCL system, the fulfillment of customer payment
obligations, the impact of the coronavirus (COVID-19) pandemic, the
Company’s ability to manage changes and the continued health or
availability of management personnel, volatility and development,
market position, financial results and the provision of accounting
reserves. These forward-looking statements reflect our best
judgment about future events and trends based on the information
currently available to us. However, there will likely be events in
the future that we are not able to predict or control. The factors
listed under the caption “Risk Factors” and elsewhere in our most
recent Annual Report on Form 10-K which is on file with the
Securities and Exchange Commission, as well as other cautionary
language in such Annual Report, any subsequent Quarterly Report on
the Form 10-Q, or in our other periodic reports, provide examples
of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in
our forward-looking statements. Such examples include, but are not
limited to, the failure of the Quantum or OptoSeis® technology
transactions to yield positive operating results, decreases in
commodity price levels, which could reduce demand for our products,
the failure of our products to achieve market acceptance, despite
substantial investment by us, our sensitivity to short term
backlog, delayed or cancelled customer orders, product obsolescence
resulting from poor industry conditions or new technologies, bad
debt write-offs associated with customer accounts, lack of further
orders for our OBX systems, failure of our Quantum products to be
adopted by the border and security perimeter market, and
infringement or failure to protect intellectual property. The
occurrence of the events described in these risk factors and
elsewhere in our most recent Annual Report on Form 10-K or in our
other periodic reports could have a material adverse effect on our
business, results of operations and financial position, and actual
events and results of operations may vary materially from our
current expectations. We assume no obligation to revise or update
any forward-looking statement, whether written or oral, that we may
make from time to time, whether as a result of new information,
future developments or otherwise.
Geospace Technologies
Corporation and Subsidiaries
Consolidated Statements of
Operations
(In thousands, except share
and per share amounts)
(unaudited)
Three Months Ended
Year Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Revenue:
Products
$
8,561
$
11,390
$
34,136
$
45,847
Rental equipment
12,959
17,549
53,699
49,962
Total revenue
21,520
28,938
87,835
95,809
Cost of revenue:
Products
11,685
13,092
39,970
46,059
Rental equipment
4,869
5,450
24,433
18,322
Total cost of revenue
16,554
18,541
64,403
64,381
Gross profit
4,966
10,397
23,432
31,428
Operating expenses:
Selling, general and administrative
5,301
6,133
23,068
23,626
Research and development
4,034
4,180
16,569
15,495
Goodwill impairment
671
—
671
—
Change in estimated fair value of
contingent consideration
(534
)
(2,115
)
1,100
(2,115
)
Bad debt expense (recovery)
(343
)
(163
)
63
436
Total operating expenses
9,129
8,035
41,471
37,442
Gain on disposal of property
—
7,047
—
7,047
Income (loss) from operations
(4,163
)
9,409
(18,039
)
1,033
Other income (expense):
Interest expense
(7
)
(14
)
(38
)
(99
)
Interest income
178
410
1,102
1,308
Foreign exchange gains, net
208
56
491
241
Other, net
(31
)
(29
)
(109
)
(212
)
Total other income, net
348
423
1,446
1,238
Income (loss) before income taxes
(3,815
)
9,832
(16,593
)
2,271
Income tax expense
49
1,160
2,649
2,417
Net income (loss)
$
(3,864
)
$
8,672
$
(19,242
)
$
(146
)
Income (loss) per common share:
Basic
$
(0.29
)
$
0.64
$
(1.42
)
$
(0.01
)
Diluted
$
(0.29
)
$
0.63
$
(1.42
)
$
(0.01
)
Weighted average common shares
outstanding:
Basic
13,548,644
13,408,912
13,525,179
13,388,626
Diluted
13,548,644
13,569,951
13,525,179
13,388,626
Geospace Technologies
Corporation and Subsidiaries
Consolidated Balance
Sheets
(In thousands, except share
amounts)
(unaudited)
AS OF SEPTEMBER 30,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
32,686
$
18,925
Trade accounts and financing receivables,
net of allowance of $496 and $951
13,778
27,426
Inventories, net
16,933
23,855
Property held for sale
587
—
Prepaid expenses and other current
assets
953
1,008
Total current assets
64,937
71,214
Non-current financing receivables
—
184
Non-current inventories, net
16,930
21,524
Rental equipment, net
54,317
62,062
Property, plant and equipment, net
29,874
31,474
Goodwill
4,337
5,008
Other intangible assets, net
8,331
10,063
Deferred cost of revenue and other
assets
8,119
479
Total assets
$
186,845
$
202,008
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable trade
$
1,593
$
4,051
Deferred revenue and other liabilities
8,753
9,119
Total current liabilities
10,346
13,170
Contingent consideration
10,962
9,940
Non-current deferred revenue and other
liabilities
4,567
51
Total liabilities
25,875
23,161
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 1,000,000 shares
authorized, no shares issued and outstanding
—
—
Common stock, $.01 par value, 20,000,000
shares authorized, 13,670,639 and 13,630,666 shares issued and
outstanding
137
136
Additional paid-in capital
90,965
88,660
Retained earnings
86,566
105,808
Accumulated other comprehensive loss
(16,698
)
(15,757
)
Total stockholders’ equity
160,970
178,847
Total liabilities and stockholders’
equity
$
186,845
$
202,008
Geospace Technologies
Corporation and Subsidiaries
Consolidated Statements of
Cash Flows
(In thousands)
(unaudited)
YEAR ENDED SEPTEMBER
30,
2020
2019
Cash flows from operating activities:
Net loss
$
(19,242
)
$
(146
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred income tax expense
181
16
Rental equipment depreciation
17,945
13,713
Property, plant and equipment
depreciation
4,016
3,965
Amortization of other intangible
assets
1,732
1,661
Goodwill impairment expense
671
—
Amortization of premiums on short-term
investments
—
(9
)
Stock-based compensation expense
2,305
2,329
Bad debt expense
63
436
Inventory obsolescence expense
4,726
4,614
Change in estimate of collectability of
rental revenue
7,993
—
Change in estimated fair value of
contingent consideration
1,100
(2,115
)
Gross profit from sale of used rental
equipment
(743
)
(652
)
Gain on disposal of property
—
(7,047
)
Gain on disposal of equipment
(116
)
(100
)
Realized loss on short-term
investments
—
66
Effects of changes in operating assets and
liabilities:
Trade accounts and other receivables
2,482
(9,159
)
Inventories
5
(1,865
)
Deferred cost of revenue and other
assets
(7,786
)
343
Accounts payable trade
(2,453
)
(44
)
Deferred revenue and other liabilities
5,243
(377
)
Net cash provided by operating
activities
18,122
5,629
Cash flows from investing activities:
Purchase of property, plant and
equipment
(2,916
)
(1,936
)
Investment in rental equipment
(5,487
)
(34,070
)
Proceeds from the sale of property
—
8,265
Proceeds from the sale of equipment
204
142
Proceeds from the sale of used rental
equipment
4,149
4,856
Proceeds from the sale of short-term
investments
—
25,606
Business acquisition, net of acquired
cash
—
(1,819
)
Payments for damages related to insurance
claim
—
(650
)
Proceeds from insurance claim
—
1,166
Net cash (used in) provided by investing
activities
(4,050
)
1,560
Cash flows from financing activities:
Payments on contingent consideration
(78
)
—
Proceeds from exercise of stock options
and other
—
215
Net cash provided by (used in) financing
activities
(78
)
215
Effect of exchange rate changes on
cash
(233
)
(413
)
Increase in cash and cash equivalents
13,761
6,991
Cash and cash equivalents, beginning of
fiscal year
18,925
11,934
Cash and cash equivalents, end of fiscal
year
$
32,686
$ 18,925
Geospace Technologies
Corporation and Subsidiaries
Summary of Segment Revenue and
Operating Income (Loss)
(in thousands)
(unaudited)
Three Months Ended
Year Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Oil and Gas Markets
Traditional seismic exploration product
revenue
$
1,100
$
600
$
6,653
$
9,504
Wireless seismic exploration product
revenue
12,999
19,992
54,072
52,770
Reservoir product revenue
110
252
936
2,692
14,209
20,844
61,661
64,966
Adjacent Markets
Industrial product revenue
4,437
5,278
15,622
18,324
Imaging product revenue
2,697
2,750
9,818
11,832
7,134
8,028
25,440
30,156
Emerging Markets
Border and perimeter security product
revenue
177
14
734
159
Corporate
—
52
—
528
Total revenue
$
21,520
$
28,938
$
87,835
$
95,809
Three Months Ended
Year Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Operating income (loss):
Oil and Gas Markets segment
$
(1,051
)
$
2,644
$
(2,139
)
$
3,095
Adjacent Markets segment
1,347
1,884
4,017
6,234
Emerging Markets segment
(1,029
)
1,454
(6,064
)
(2,306
)
Corporate
(3,430
)
3,427
(13,853
)
(5,990
)
Total operating income (loss)
$
(4,163
)
$
9,409
$
(18,039
)
$
1,033
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201119006276/en/
Rick Wheeler President and CEO TEL: 713.986.4444 FAX:
713.986.4445
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