Geospace Technologies (NASDAQ: GEOS) today announced its highest
first quarter earnings in seven years, narrowing its net loss to
$1.1 million, or $(0.08) per diluted share, on revenue of $28.5
million for its first quarter ended December 31, 2020. This
compares with a net loss of $9.3 million, or ($0.69) per diluted
share, on revenue of $17.7 million for the first quarter of the
prior year.
Walter R. (“Rick”) Wheeler, President and CEO of Geospace
Technologies (the “Company”) said, “Despite the negative impacts
that the COVID-19 worldwide pandemic continues to have on our
business segments, we are pleased to report that we generated
revenue totaling $28.5 million during the first three months of
fiscal year 2021. This quarterly figure exceeds each of the
previously reported quarterly figures in fiscal year 2020, and
moreover represents the Company’s highest recorded first quarter
revenue in seven years. Additionally, several notable first-time
events occurred in the quarter. These include our first sale of a
large OBX nodal marine system. The system was purchased by a large
international seismic contractor for $9.9 million which included
7,500 OBX ocean-bottom marine nodes from our rental fleet along
with all necessary central electronics. The quarter also marks the
first occurrence of meaningful revenue from our Quantum Technology
Sciences subsidiary in our Emerging Markets segment. The revenue is
in partial fulfillment of a $10.5 million contract secured in April
2020 with the U.S. Customs and Border Protection, U.S. Border
Patrol for a high technology border security solution. Our Emerging
Markets products provide customers in a variety of markets with
actionable real-time information by utilizing proprietary seismic
acoustics and data analytics.”
Wheeler continued, “In another company 'first', combined revenue
generated from our Emerging Markets and Adjacent Markets segments
reached its highest amount ever, exceeding total revenue generated
in our Oil and Gas Markets segment. This accomplishment is a
tangible demonstration of true value derived entirely from our
disciplined diversification strategy. With clear and focused
objectives of deepening our technologies and advancing our core
engineering and manufacturing competencies into broader markets, we
believe this strategy will continue to create new value.”
Oil and Gas Markets Segment
Combined revenue from the Company’s Oil and Gas Markets segment
totaled $12.8 million for the three months ended December 31, 2020.
This compares with $11.5 million for the equivalent three-month
period a year ago, reflecting an increase of 11%. The increase for
the three-month period is the result of increased sales of the
Company’s wireless seismic products, partially offset by lower
rental revenue from these products as well as lower demand for its
traditional and reservoir seismic products and services. The
Company believes that the worldwide reduction in demand for oil and
gas, arising from COVID-19 and the actions taken to prevent its
spread, will continue to impair demand for products and services in
its Oil and Gas Markets segment for the foreseeable future.
Revenue contributions from the Company’s traditional exploration
products totaled $1.0 million for the three-month period ended
December 31, 2020. This reflects a decrease of 58% compared to $2.4
million for the same period a year ago. The decrease for the
compared three-month period is the result of lower demand for the
Company’s marine seismic products and lower amounts of customer
product repair and support services. Greatly reduced demand for
these products is expected to remain unchanged so long as industry
wide seismic exploration activity remains at its current historic
lows.
Segment contributions from the Company’s wireless seismic
products totaled $11.7 million for the three-months ended December
31, 2020. This compares with $8.9 million for the equivalent three
months last year, reflecting an increase of 31%. The increase is
attributed to the sale of a large marine nodal recording system for
$9.9 million comprised of 7,500 OBX ocean bottom nodes from the
Company’s rental fleet. The increase was partially offset by
reduced rental revenue due to lower utilization of the Company’s
GSX land and OBX marine rental equipment and the conversion of an
OBX rental contract to the aforementioned sale. Based on current
rental contracts and requested quotes for future contracts, the
Company expects lower utilization of its GSX and OBX rental
equipment to continue until later in the fiscal year. Not yet
included in reported revenue is the sale of a 30,000 channel GCL
wireless land recording system, valued at $12.5 million and
delivered in the second quarter of fiscal year 2020. The sale was
partially financed by a $10.0 million promissory note. Due to
concerns of collectability of the promissory note, the Company only
intends to recognize revenue from the sale in the future, when and
if it is likely that all payments will be made on the promissory
note. To date, all payments toward the purchase have been received
in a timely manner and are included in non-current deferred revenue
on the Company’s balance sheet.
The Company’s reservoir seismic products contributed $29,000 to
revenue in the first fiscal quarter ended December 31, 2020,
reflecting a decrease of 87% compared to $218,000 for the same year
ago period. The decrease stems from fewer performed services and
lower sales of borehole tool parts and repairs. Management believes
contracts for the manufacture and deployment of permanent reservoir
monitoring (PRM) systems represent the greatest opportunities for
meaningful revenue from this product category. The Company has not
received an order for a large-scale seabed PRM system since
November 2012, although it has the largest installed base of PRM
systems in the world, utilizing either high-resolution
electromagnetic motion sensors or OptoSeis® fiber optic sensor
technology. In September 2020, the Company received a request from
a major oil and gas producer for a proposal to manufacture and
install a large-scale seabed PRM system. The Company decided not to
provide a bid on the project under the offered terms and conditions
initially presented by the customer. Discussions are ongoing with
this customer to try and resolve the issues necessary to provide a
PRM system. Management does not know exactly when, or if these
discussions will lead to a resolution or the award of a proposal.
The Company also has ongoing discussions with other major oil and
gas producers for possible PRM systems.
Adjacent Markets Segment
For the three-month period ended December 31, 2020, combined
revenue from the Company’s Adjacent Markets segment totaled $6.9
million, a comparative increase of 13% from $6.1 million recorded
in the equivalent period one year-ago. The increase is largely the
result of increased sales of the Company’s smart water meter cable
and connector products, augmented by higher demand for its contract
manufacturing services. The increase is partially offset by lower
demand for the Company’s industrial sensors and cables in
conjunction with a slight decrease in sales of its graphic imaging
products. Demand has been negatively impacted by the economic
effects of COVID-19 for many of the products in this market
segment, and the Company expects such decreased demand to continue
until there is greater recovery from the pandemic. Management does
not believe the improvement over the same period last year is a
convincing sign of recovery from the many issues presented by the
COVID-19 pandemic, but is more likely a part of normal variations
in demand for these products.
Emerging Markets Segment
The Company’s Emerging Markets segment generated revenue of $8.8
million for the three months ended December 31, 2020. This compares
with $0.1 million for the similar period last year. The large
increase in revenue is the result of the Company’s fulfillment of
the majority of equipment and installation obligations in its
contract with the U.S. Customs and Border Protection, U.S. Border
Patrol, secured in April 2020 through its Quantum Technology
Sciences subsidiary. The contract provides the U.S. Department of
Homeland Security with a border and perimeter security solution
using the Company’s advanced seismic acoustic technologies and
innovative data analytics developed by its Quantum subsidiary.
Although the Company currently has no other significant contracts
for its border and perimeter security systems, management believes
the unique features and capabilities of these systems have no
industry equivalent, and that the actionable information they
provide to government and commercial customers will lead to
additional contracts.
Balance Sheet and Liquidity
For the three months ended December 31, 2020, the Company
generated $2.3 million in cash and cash equivalents from operating
activities. The Company used $0.5 million of cash for investment
activities that included $0.6 million invested in additions to
property, plant, and equipment, which were partially offset by $0.1
million of proceeds from the sale of rental equipment. As of
December 31, 2020, the Company had $33.7 million in cash and cash
equivalents, and maintained an additional borrowing availability of
$14.7 million under its bank credit agreement with no borrowings
outstanding. As of December 31, 2020, the Company’s total liquidity
stood at $48.4 million. The Company also owns unencumbered property
and real estate in both domestic and international locations.
In November 2020, the Company announced the authorization of a
stock repurchase program by its Board of Directors, pursuant to
which, the Company could repurchase up to $5 million worth of
shares of its common stock in open market transactions. Purchases
under the program are determined on a discretionary basis depending
on various factors, including stock price, trading volume, and
general business and market conditions. As of December 31, 2020,
the Company had purchased a total of 117,637 of its shares on the
open market for an aggregate amount of $828,000.
Wheeler concluded, “It has been a year since COVID-19 began to
wreak havoc on the Earth, jeopardizing the health of mankind and
disrupting whole national economies in attempts to prevent its
spread. The world is anxious, yet hopeful, that the vaccines
emerging today will provide a path to normalcy. A successful
recovery will take some time though, and a true rendering of
society’s new normal after COVID-19 is still un-defined. Therefore,
many challenges remain ahead of us in fiscal year 2021, as they do
for many other companies, including our customers. The reduced
demand for energy that we’ve seen over the past year is a direct
consequence of the reactions to COVID-19, and we believe it is
unrealistic that this reduced demand will persist once the pandemic
is contained. Renewable energy will be able to assist with some
fraction of these near-term needs. However, servicing a full return
and subsequent growth in primary energy demand will require better
recovery from existing oil and gas reservoirs and renewed
exploration for new resources. The products and services we offer
in our Oil and Gas Markets segment are ideally suited for these
tasks, especially where the required fidelity of seismic imaging
demands the highest quality data. As economic recovery takes place
and a new normalcy evolves, we fully expect our Adjacent Markets
segment to resume the trending growth it experienced prior to the
COVID-19 pandemic. In its very essence, Geospace is a technology
company, and our Adjacent Markets products embody innovative
solutions created from our extensive engineering accomplishments in
a broad range of industries. Our deep manufacturing skills give us
the means to rapidly bring these products to market with controlled
quality and cost. This is very convincingly illustrated by the
novel technologies incorporated in the border and perimeter
security solution we are providing to the U.S. Border Patrol, the
features and capabilities of which have never existed before. While
many challenges remain ahead in our 2021 fiscal year, our technical
focus, conservative management, and strong balance sheet comprising
no debt and ample liquidity, keep us steadily aligned on the path
toward success.”
Conference Call
Information
Geospace Technologies will host a conference call to review its
fiscal year 2021 first quarter financial results on February 4,
2021 at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can
access the call at (877) 876-9173 (US) or (785) 424-1667
(International). Please reference the conference ID: GEOSQ121 prior
to the start of the conference call. A replay will be available for
approximately 60 days and may be accessed through the Investor
Relations 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 adoption,
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, our
ability to manage changes and the continued health or availability
of management personnel, volatility and direction of oil prices,
anticipated levels of capital expenditures and the sources of
funding therefor, and our strategy for growth, product development,
market position, financial results and the provision of accounting
reserves. These forward-looking statements reflect our current
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” 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 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, inability to
collect on promissory notes, inability to realize value from bonds,
lack of further orders for our OBX systems, failure of our Quantum
products to be adopted by the border and security perimeter market
or a decrease in such market due to governmental changes, 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
December 31, 2020
December 31, 2019
Revenue:
Products
$
26,722
$
9,083
Rental
1,738
8,622
Total revenue
28,460
17,705
Cost of revenue:
Products
16,830
9,903
Rental
4,905
5,305
Total cost of revenue
21,735
15,208
Gross profit
6,725
2,497
Operating expenses:
Selling, general and administrative
5,354
5,997
Research and development
3,520
4,296
Change in estimated fair value of
contingent consideration
(697
)
—
Bad debt expense
7
27
Total operating expenses
8,184
10,320
Loss from operations
(1,459
)
(7,823
)
Other income (expense):
Interest expense
—
(12
)
Interest income
321
134
Foreign exchange gains (losses), net
149
(132
)
Other, net
(3
)
(29
)
Total other income (loss), net
467
(39
)
Loss before income taxes
(992
)
(7,862
)
Income tax expense
58
1,420
Net loss
$
(1,050
)
$
(9,282
)
Loss per common share:
Basic
$
(0.08
)
$
(0.69
)
Diluted
$
(0.08
)
$
(0.69
)
Weighted average common shares
outstanding:
Basic
13,571,510
13,454,254
Diluted
13,571,510
13,454,254
GEOSPACE TECHNOLOGIES
CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
amounts)
(unaudited)
December 31, 2020
September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
33,719
$
32,686
Trade accounts and notes receivable,
net
18,370
13,778
Unbilled receivables
4,263
—
Inventories, net
14,057
16,933
Asset held for sale
662
587
Prepaid expenses and other current
assets
2,386
953
Total current assets
73,457
64,937
Non-current notes receivable
140
—
Non-current inventories, net
21,882
16,930
Rental equipment, net
44,167
54,317
Property, plant and equipment, net
29,493
29,874
Goodwill
4,337
4,337
Other intangible assets, net
7,898
8,331
Deferred cost of revenue and other
assets
8,094
8,119
Total assets
$
189,468
$
186,845
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable trade
$
5,653
$
1,593
Contingent consideration
2,310
—
Deferred revenue and other current
liabilities
8,350
8,753
Total current liabilities
16,313
10,346
Non-current contingent consideration
7,955
10,962
Non-current deferred revenue and other
liabilities
5,363
4,567
Total liabilities
29,631
25,875
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; 13,727,971 and 13,670,639 shares
issued, respectively; and 13,610,334 and
13,670,639 shares outstanding, respectively
137
137
Additional paid-in capital
91,513
90,965
Retained earnings
85,516
86,566
Accumulated other comprehensive loss
(16,501
)
(16,698
)
Treasury stock, at cost, 117,637 shares at
December 31, 2020
(828
)
—
Total stockholders’ equity
159,837
160,970
Total liabilities and stockholders’
equity
$
189,468
$
186,845
GEOSPACE TECHNOLOGIES
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
December 31, 2020
December 31, 2019
Cash flows from operating activities:
Net loss
$
(1,050
)
$
(9,282
)
Adjustments to reconcile net loss to net
cash provided (used in) by operating activities:
Deferred income tax expense (benefit)
6
(25
)
Rental equipment depreciation
3,831
4,443
Property, plant and equipment
depreciation
985
930
Amortization of intangible assets
433
433
Stock-based compensation expense
548
590
Bad debt expense
7
27
Inventory obsolescence expense
617
1,436
Change in estimate of collectability of
rental revenue
—
7,993
Change in estimated fair value of
contingent consideration
(697
)
—
Gross profit from sale of used rental
equipment
(4,127
)
(284
)
Gain on disposal of property, plant and
equipment
—
(14
)
Effects of changes in operating assets and
liabilities:
Trade accounts and other receivables
5,143
(8,460
)
Unbilled receivables
(4,263
)
—
Inventories
(2,065
)
(3,126
)
Deferred cost of revenue and other
assets
(1,422
)
(954
)
Accounts payable trade
4,053
2,284
Deferred revenue and other liabilities
311
651
Net cash provided by (used in) operating
activities
2,310
(3,358
)
Cash flows from investing activities:
Purchase of property, plant and
equipment
(597
)
(1,670
)
Proceeds from the sale of property, plant
and equipment
—
40
Investment in rental equipment
(13
)
(5,152
)
Proceeds from the sale of used rental
equipment
112
1,146
Net cash used in investing activities
(498
)
(5,636
)
Cash flows from financing activities:
Purchase of treasury stock
(828
)
—
Net cash used in financing activities
(828
)
—
Effect of exchange rate changes on
cash
49
210
Increase (decrease) in cash and cash
equivalents
1,033
(8,784
)
Cash and cash equivalents, beginning of
fiscal year
32,686
18,925
Cash and cash equivalents, end of fiscal
period
$
33,719
$
10,141
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash paid for interest
$
—
$
12
Cash paid for income taxes
40
1,440
Note receivable in connection with sale of
used rental equipment
9,868
—
Inventory transferred to (from) rental
equipment
(667
)
4,070
GEOSPACE TECHNOLOGIES
CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT REVENUE AND
OPERATING INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended
December 31, 2020
December 31, 2019
Oil and Gas Markets
Traditional seismic exploration product
revenue
$
997
$
2,354
Wireless seismic exploration product
revenue
11,737
8,937
Reservoir product revenue
29
218
12,763
11,509
Adjacent Markets
Industrial product revenue
4,407
3,596
Imaging product revenue
2,493
2,503
6,900
6,099
Emerging Markets
Border and perimeter security product
revenue
8,797
97
Total revenue
$
28,460
$
17,705
Three Months Ended
December 31, 2020
December 31, 2019
Operating income (loss):
Oil and Gas Markets segment
$
(5,986
)
$
(3,894
)
Adjacent Markets segment
1,260
851
Emerging Markets segment
6,479
(1,365
)
Corporate
(3,212
)
(3,415
)
Total operating income (loss)
$
(1,459
)
$
(7,823
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210203005979/en/
Rick Wheeler President and CEO TEL: 713.986.4444 FAX:
713.986.4445
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