Geospace Technologies (NASDAQ: GEOS) today announced a net loss
of $0.8 million, or $(0.06) per diluted share, on revenue of $23.1
million for its third quarter ended June 30, 2021. This compares
with a net loss of $2.3 million, or ($0.17) per diluted share, on
revenue of $22.7 million for the third quarter of the prior year
period.
For the nine-months ended June 30, 2021, the Company recorded
revenue of $75.4 million compared to revenue of $66.3 million
during the prior year period. The Company reported a net loss of
$9.0 million, or $(0.67) per diluted share compared to a net loss
of $15.4 million, or $(1.14) per diluted share for the prior year
period.
Walter R. (“Rick”) Wheeler, President and CEO of Geospace
Technologies (the “Company”) said, “With all aspirations and best
efforts directed toward a global economic recovery from the
COVID-19 pandemic, it is encouraging to see that revenue in our
third fiscal quarter, ended June 30, 2021, slightly exceeded last
year’s third quarter. Even more encouraging, in these first nine
months of fiscal year 2021, our combined revenue reflects an
increase of almost 14% over last year's similar period. The
increases come despite a significant reduction in both periods of
revenue received from rentals of our OBX marine nodal recording
systems. As previously reported, certain follow-on surveys that
intended to utilize our OBX systems were delayed or canceled due to
COVID-19 restrictions and lockdowns, leaving these systems
underutilized. Notably however, rental revenue in this third
quarter more than doubled in comparison to the preceding quarter,
providing some indication of OBX demand improving as new projects
go forward.”
Wheeler continued, “In opposition to lower revenue from our Oil
and Gas Markets segment, revenue from our Adjacent Markets segment
represents major year-over-year increases for both the three- and
nine-month periods ended June 30, 2021. The respective increases of
84% and 30% for the three- and nine-month periods can be attributed
in both periods to a variety of factors, including stronger sales
of our smart water meter cables and connectors, higher utilization
of our contract manufacturing services, and greater demand for our
graphic imaging products. When recovery from the COVID-19 pandemic
gains traction, we believe demand for these products will maintain
an upward climb. We believe, the steady overall growth exhibited in
our Adjacent Markets segment is evidence that our deep-rooted
expertise in innovative engineering and manufacturing continues to
bring ever-increasing technological value to an expanding market.
Our recently announced acquisition of Aquana, LLC further bolsters
our commitment to deliver state-of-the-art IoT technology solutions
to the diversified, yet highly aligned industry of ‘smart-city’
initiatives. The cloud-based control and data management provided
by the Aquana platform helps both water utilities and property
managers conserve critical water resources and reduce their costs.
Our Quantum Technology Sciences subsidiary, which forms our
Emerging Markets segment, contributed $1.1 million to third quarter
revenue, bringing the nine-month year-to-date total to $10.0
million. The majority of revenue for both periods is from
completion efforts toward the contract awarded to Quantum by the
Department of Homeland Security in April of 2020. The contract
called for providing the U.S. Border Patrol with a highly effective
border and perimeter security solution utilizing our sophisticated
sensor-based systems in conjunction with ultra-advanced analytics.
Taken together, our Adjacent and Emerging Markets segments combined
to generate 45% of revenue in both the three- and nine-month
periods ended June 30, 2021.”
Oil and Gas Markets Segment
The Company’s Oil and Gas Markets segment generated $12.6
million in revenue for the three-months ended June 30, 2021,
compared to $17.5 million during the equivalent year ago period, a
decrease of 27.8%. For the nine-month period ended June 30, 2021,
revenue from this segment totaled $41.5 million compared to $47.5
million during the equivalent year-ago period, a decrease of 12.5%.
The decreases for both periods are the result of reduced rentals of
the Company’s wireless OBX nodal marine systems and reduced demand
for our traditional marine products. The three-month period
decrease of revenue is partially offset by a $2.9 million sale of
the Company’s land-based wireless seismic products. The nine-month
period’s decrease is partially offset by the recognition of revenue
from the sale of a $12.5 million land-based wireless recording
system, delivered to a customer one year ago, a $9.9 million sale
of used OBX rental equipment to the former lessee of the equipment
and a $2.9 million third quarter sale of the Company’s land-based
wireless seismic products.
For the three- and nine-month periods ended June 30, 2021, the
Company’s traditional seismic products generated $2.0 million and
$3.7 million respectively, reflecting a 66.8% increase for the
three-month period and a 32.7% decrease for the nine-month period
one year ago. The Company does not believe the increase in revenue
for the three-months period ending June 30, 2021, is necessarily a
sign of recovery of demand for these products. Demand for the
Company’s traditional seismic products for the nine-month period
declined due to reductions in seismic exploration by oil and gas
companies. The reduction of demand for oil and gas is a consequence
of the impacts from COVID-19 on travel and overall economic
activity that continues to negatively affect demand for these
products.
For the three- and nine-month periods ended June 30, 2021, the
Company’s wireless seismic products generated revenue of $9.6
million and $36.1 million respectively. These figures represent a
respective decrease of 40.1% and 12.0% when compared to $16.1
million and $41.1 million for the equivalent three- and nine-month
periods a year ago. Reduction in revenue for the recent three- and
nine-month periods are both due to lower utilization of our OBX
rental fleet caused by effects from the COVID-19 pandemic.
Offsetting the reduction for the three-month period is a $2.9
million sale of land-based wireless seismic products. The reduction
in revenue for the nine-month period is largely offset by the
recognition of $12.5 million of revenue related to land-based
wireless seismic products delivered to a customer in the prior
year, a $9.9 million sale of used OBX rental equipment to the
former lessee of the equipment and the $2.9 million third quarter
sale of land-based wireless seismic products. The Company believes
as worldwide COVID-19 related lockdowns and travel restrictions
come to an end, higher levels of utilization of the Company’s OBX
rental equipment will be achieved, as planned projects will be
resumed or commenced.
For the three- and nine-month periods ended June 30, 2021, the
Company’s reservoir seismic products generated revenue of $1.1
million and $1.7 million respectively. This reflects increases of
$0.8 million for both periods when compared to the three- and
nine-month periods last year. The increase in both periods is due
to a higher level of performed engineering services. The Company
believes the foremost opportunity for meaningful revenue from these
products resides in future contracts for the design, manufacture,
and deployment of permanent reservoir monitoring (PRM) systems. The
Company is engaged in several discussions at various stages with
multiple oil and gas producers regarding PRM systems. The Company
believes that increased energy demands, brought on by a global
recovery from the COVID-19 pandemic, will help increase demand for
oil and gas, and that its PRM systems provide the preeminent tool
for oil and gas companies to maximize production from existing
assets at lower costs and reduced carbon footprint.
Adjacent Markets Segment
For the three- and nine-month periods ended June 30, 2021,
revenue from the Company’s Adjacent Markets segment totaled $9.4
million and $23.9 million respectively. These figures represent an
increase of 83.6% and 30.4% respectively when compared with $5.1
million and $18.3 million for the three- and nine-month periods one
year ago. The increase in both periods is largely the result of
increased sales of the Company’s smart water meter cable and
connector products, higher demand for its contract manufacturing
services, and increased demand in imaging products. The Company is
encouraged by the increased demand for our products but cannot
reasonably determine if this marks the beginning of a recovery from
the impact of the COVID-19 pandemic for this operating segment.
Emerging Markets Segment
For the three- and nine-month periods ended June 30, 2021, the
Company’s Emerging Markets segment generated revenue of $1.1
million and $10.0 million respectively. This compares with $88,000
and $557,000 in the equivalent three- and nine-month periods a year
ago. The increase in revenue in both periods with respect to last
year is the result of fulfilling much of the contract with the
Customs and Border Protection, U.S. Border Patrol. The contract,
awarded in April 2020 to the Company’s Quantum subsidiary, provides
an advanced technology border and perimeter security solution to
the Department of Homeland Security. The Company believes
additional contracts will follow as the efficacy and value of its
unique seismic acoustic technologies and innovative data analytics
are fully deployed and demonstrated. Management further believes
its systems are fully aligned and complimentary to the U.S.
government’s stated intentions of deploying high technology means
and methods to protect U.S. borders.
Balance Sheet and Liquidity
For the nine months ended June 30, 2021, the Company used $7.5
million in cash and cash equivalents from operating activities. The
Company used $1.7 million of cash for investment activities that
included $10.0 million in proceeds from the sale of used rental
equipment and $2.1 million in proceeds from the sale of an
investment in a debt security, which were offset by $9.7 million,
net, used for the purchase of short-term investments and $4.0
million used for investments to property, plant, and equipment and
rental equipment. The Company used $3.6 million in financing
activities for purchases of treasury stock pursuant to a stock
buyback program authorized by the Company’s Board of Directors. The
stock buyback program authorizes the Company to repurchase up to
$5.0 million of its common shares in the open market. As of August
4, 2021, the Company has repurchased a total of 553,588 shares for
approximately $4.7 million since the adoption of the program. The
Company has authorized an additional $2.5 million for the stock
buyback program. On June 30, 2021, Geospace had $30.0 million in
cash, cash equivalents, and short-term investments compared with
$32.7 million on September 30, 2020. In addition, on June 30, 2021,
the Company had $17.7 million in available borrowing from its
credit agreement with Frost Bank, of which no borrowed amounts were
outstanding. Thus, the Company’s total liquidity as of June 30,
2021, was $47.7 million. The Company additionally owns unencumbered
property and real estate in both domestic and international
locations.
Wheeler concluded, “Recoveries from the effects of the COVID-19
pandemic have made great progress in many parts of the world.
However, the emergence of the Delta variant and increasing case
numbers in many areas pose some caution to hard optimism.
Nonetheless, we are encouraged by the results achieved in the first
nine months of the fiscal year. Demand for our OBX systems shows
incremental improvement, even though some project opportunities
have moved further out in time. In addition, progress has been made
in our discussions with major oil and gas producers for Permanent
Reservoir Monitoring (PRM) systems, and we believe a tender for a
PRM system could be released before the end of our fiscal year. The
growing interest of oil and gas producers in using our PRM systems
to better manage their fields has never been higher, and the depth
of investigative inquiry brought about in these discussions
reflects serious opportunities over the next several years.
Meanwhile, we continue to expand the growing profile of advanced
products and services offered in our Adjacent Markets segment. We
believe the integration of Aquana’s innovations with our existing
technology catalog creates multiple opportunities for future growth
in this segment. And in our Emerging Markets segment, we believe
additional contracts will follow for our Quantum subsidiary as the
deployed systems for the U.S. Border Patrol begin to demonstrate
their profound value. In light of these opportunities, in
conjunction with our strong debt-free balance sheet, our outlook on
the future remains positive and optimistic.”
Conference Call
Information
Geospace Technologies will host a conference call to review its
fiscal year 2021 third quarter financial results on August 6, 2021,
at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can
access the call at (877) 876-9176 (US) or (785) 424-1670
(International). Please reference the conference ID: GEOSQ321 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 transaction with Aquana, LLC, future
demand for our Quantum security solutions 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 channels of our GCL system, the fulfillment of customer
payment obligations, the impact of and the recovery from 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® or Aquana technology
transactions to yield positive operating results, decreases in
commodity price levels and continued adverse impact of COVID-19,
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
Nine Months Ended
June 30, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Revenue:
Products
$
17,679
$
6,975
$
66,005
$
25,575
Rental
5,404
15,728
9,430
40,740
Total revenue
23,083
22,703
75,435
66,315
Cost of revenue:
Products
12,907
8,660
47,492
28,285
Rental
4,549
5,979
14,744
19,564
Total cost of revenue
17,456
14,639
62,236
47,849
Gross profit
5,627
8,064
13,199
18,466
Operating expenses:
Selling, general and administrative
5,243
5,704
16,075
17,767
Research and development
3,658
4,014
10,943
12,535
Change in estimated fair value of
contingent consideration
(795
)
662
(1,713
)
1,634
Bad debt expense
(40
)
248
(32
)
406
Total operating expenses
8,066
10,628
25,273
32,342
Loss from operations
(2,439
)
(2,564
)
(12,074
)
(13,876
)
Other income (expense):
Interest expense
—
(8
)
—
(31
)
Interest income
151
574
1,284
924
Gain on investments, net
1,727
—
1,996
—
Foreign exchange gains (losses), net
(49
)
307
64
283
Other, net
(8
)
(21
)
(3
)
(78
)
Total other income, net
1,821
852
3,341
1,098
Loss before income taxes
(618
)
(1,712
)
(8,733
)
(12,778
)
Income tax expense
169
573
288
2,600
Net loss
$
(787
)
$
(2,285
)
$
(9,021
)
$
(15,378
)
Loss per common share:
Basic
$
(0.06
)
$
(0.17
)
$
(0.67
)
$
(1.14
)
Diluted
$
(0.06
)
$
(0.17
)
$
(0.67
)
$
(1.14
)
Weighted average common shares
outstanding:
Basic
13,353,254
13,545,340
13,464,177
13,517,387
Diluted
13,353,254
13,545,340
13,464,177
13,517,387
GEOSPACE TECHNOLOGIES
CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands except share
amounts)
(unaudited)
June 30, 2021
September 30,
2020
Current assets:
Cash and cash equivalents
$
20,070
$
32,686
Short-term investments
9,900
—
Trade accounts and financing receivables,
net
18,981
13,778
Unbilled receivables
1,561
—
Inventories, net
15,170
16,933
Asset held for sale
606
587
Prepaid expenses and other current
assets
1,951
953
Total current assets
68,239
64,937
Non-current financing receivables
2,154
—
Non-current inventories, net
18,151
16,930
Rental equipment, net
41,862
54,317
Property, plant and equipment, net
29,449
29,874
Operating right-of-use assets
1,249
—
Goodwill
4,337
4,337
Other intangible assets, net
7,032
8,331
Deferred cost of revenue and other
assets
238
8,119
Total assets
$
172,711
$
186,845
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable trade
$
2,973
$
1,593
Contingent consideration
2,317
—
Operating lease liabilities
221
—
Deferred revenue and other current
liabilities
8,766
8,753
Total current liabilities
14,277
10,346
Non-current contingent consideration
6,932
10,962
Non-current operating lease
liabilities
1,073
—
Non-current deferred revenue and other
liabilities
26
4,567
Total liabilities
22,308
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; 13,739,096 and 13,670,639 shares issued,
respectively; and 13,315,097 and 13,670,639 shares
outstanding, respectively
137
137
Additional paid-in capital
92,475
90,965
Retained earnings
77,545
86,566
Accumulated other comprehensive loss
(16,166
)
(16,698
)
Treasury stock, at cost, 423,999 shares at
June 30, 2021
(3,588
)
—
Total stockholders’ equity
150,403
160,970
Total liabilities and stockholders’
equity
$
172,711
$
186,845
GEOSPACE TECHNOLOGIES
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
June 30, 2021
June 30, 2020
Cash flows from operating activities:
Net loss
$
(9,021
)
$
(15,378
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Deferred income tax expense (benefit)
(3
)
195
Rental equipment depreciation
11,332
13,643
Property, plant and equipment
depreciation
2,956
3,029
Amortization of intangible assets
1,299
1,299
Accretion of discounts on short-term
investments
45
—
Stock-based compensation expense
1,510
1,682
Bad debt expense (recovery)
(32
)
406
Inventory obsolescence expense
1,702
2,853
Change in estimate of collectability of
rental revenue
—
7,993
Change in estimated fair value of
contingent consideration
(1,713
)
1,634
Gross profit from sale of used rental
equipment
(6,546
)
(698
)
Loss (gain) on disposal of property, plant
and equipment
6
(151
)
Realized gain on sale of investments,
net
(1,996
)
—
Effects of changes in operating assets and
liabilities:
Trade accounts and notes receivables
(4,621
)
2,059
Unbilled receivables
(1,561
)
—
Inventories
(4,920
)
898
Deferred cost of revenue and other
assets
6,756
(8,178
)
Accounts payable trade
1,372
(1,654
)
Deferred revenue and other liabilities
(4,080
)
2,811
Net cash provided by (used in) operating
activities
(7,515
)
12,443
Cash flows from investing activities:
Purchase of property, plant and
equipment
(2,451
)
(2,559
)
Proceeds from the sale of property, plant
and equipment
3
204
Investment in rental equipment
(1,528
)
(5,448
)
Proceeds from the sale of used rental
equipment
9,994
3,258
Purchases of short-term investments
(10,844
)
—
Proceeds from the sale of short-term
investments
1,100
—
Proceeds from sale of investment in debt
security
2,069
—
Net cash used in investing activities
(1,657
)
(4,545
)
Cash flows from financing activities:
Purchase of treasury stock
(3,588
)
—
Net cash used in financing activities
(3,588
)
—
Effect of exchange rate changes on
cash
144
(154
)
Decrease in cash and cash equivalents
(12,616
)
7,744
Cash and cash equivalents, beginning of
fiscal year
32,686
18,925
Cash and cash equivalents, end of fiscal
period
$
20,070
$
26,669
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash paid for interest
$
—
$
31
Cash paid for income taxes
284
2,454
Inventory transferred to rental
equipment
3,777
6,220
GEOSPACE TECHNOLOGIES
CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT REVENUE AND
OPERATING INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended
Nine Months Ended
June 30, 2021
June 30, 202
June 30, 2021
June 30, 2020
Oil and Gas Markets
Traditional seismic exploration product
revenue
$
1,950
$
1,169
$
3,736
$
5,553
Wireless seismic exploration product
revenue
9,628
16,069
36,137
41,073
Reservoir product revenue
1,071
271
1,671
826
12,649
17,509
41,544
47,452
Adjacent Markets segment revenue:
Industrial product revenue
6,451
3,403
15,835
11,185
Imaging product revenue
2,922
1,703
8,033
7,121
9,373
5,106
23,868
18,306
Emerging Markets segment revenue:
Border and perimeter security product
revenue
1,061
88
10,023
557
Corporate
—
—
—
—
Total revenue
$
23,083
$
22,703
$
75,435
$
66,315
Three Months Ended
Nine Months Ended
June 30, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Operating income (loss):
Oil and Gas Markets segment
$
(1,807
)
$
1,496
$
(13,258
)
$
(1,088
)
Adjacent Markets segment
1,997
605
4,819
2,670
Emerging Markets segment
(4
)
(1,170
)
5,286
(5,035
)
Corporate
(2,625
)
(3,495
)
(8,921
)
(10,423
)
Total operating loss
$
(2,439
)
$
(2,564
)
$
(12,074
)
$
(13,876
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210805006171/en/
Rick Wheeler President and CEO TEL: 713.986.4444 FAX:
713.986.4445
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