GEOS Geospace Technologies Corporation

Geospace Technologies Corporation (NASDAQ: GEOS) (the “Company”) today announced results for its second quarter ended March 31, 2023. For the three-months ended March 31, 2023, Geospace reported revenue of $31.4 million compared to revenue of $24.7 million for the comparable year-ago quarter. Net income for the three-months ended March 31, 2023 was $4.7 million, or $0.35 per diluted share, compared to a net loss of $1.5 million, or ($0.11) per diluted share, for the quarter ended March 31, 2022.

For the six-months ended March 31, 2023, Geospace reported revenue of $62.5 million compared to revenue of $42.7 million for the comparable year-ago period. Net income for the six-months ended March 31, 2023 was $4.5 million, or $0.35 per diluted share, compared to a net loss of $8.2 million, or ($0.64) per diluted share, for the six-months ended March 31, 2022.

Management’s Comments

Walter R. (“Rick”) Wheeler, President and CEO of the Company said, “We’re delighted with the solid performance reflected in our second quarter results for fiscal year 2023. Revenue of $31.4 million represents the highest quarterly figure in almost 9 years, and the achievement of net income exceeding $4.6 million demonstrates our real commitment to profitability. Although net income includes a $1.3 million gain on the sale of our Langfield facility, most of the income came from profits on operations. The largest single contribution to both revenue and profits for the second quarter and first half of the fiscal year came from rentals of our OBX ocean bottom nodes. Our OBX customers report that projects requiring their ocean bottom seismic services have increased beyond pre-pandemic levels and will remain strong throughout the year. This translates to greater demand and utilization of our OBX rental fleet. We believe these improved market conditions are durable for the foreseeable future and should provide leverage for greater revenue and less volatility from our Oil & Gas segment.

Driven by sales of our water meter cables and connectors, second quarter revenue from our Adjacent Markets segment set yet another quarterly record. Moreover, revenue generated by this segment in the first half of fiscal year 2023 represents the greatest figure ever achieved in any six-month period. It is rewarding to see such firm evidence of the positive impact our strategic diversification efforts are making in this segment, and how its growing strength adds stability to the company’s overall performance. We believe this segment will continue to provide growing and reliable revenue as domestic municipalities update their smart water meter infrastructure. We further anticipate these infrastructure updates to translate into meaningful contracts for our Aquana smart water shut off valves.

Only a small amount of revenue was generated in the second quarter and first half of the fiscal year by Quantum and our Emerging Markets segment. However, current efforts on the previously announced DARPA contract, as well as a smaller contract with an undisclosed major defense contractor, offer potential for significant future contracts utilizing our SADAR acoustic arrays and unique analytics. Ongoing discussions with energy companies and service providers related to carbon capture monitoring also hold promise for the future of this segment. Our efforts to reduce expenses are also bearing fruit. Looking past last year’s non-cash adjustments to earn-out liabilities, operating expenses for the first half of the fiscal year have decreased 5% compared to last year. We believe the company’s path to profitability through conservative management, a strong balance sheet, and market cultivation will continue to yield positive results.

Oil and Gas Markets Segment

Revenue from the Oil and Gas Markets segment totaled $18.4 million for the three-month ended March 31, 2023. Revenue from the same period of the prior fiscal year was $15.1 million, an increase of 21.6%. Revenue for the six-month period ended March 31, 2023, is $38.6 million, an increase of 55.6% over the equivalent prior year period. The increase in revenue for both periods was due to higher rental revenue from higher utilization for our marine OBX rental fleet and higher demand for our seismic sensors. The increase in revenue for the six-month period is partially offset by a decrease in the demand for our wireless exploration products. Strong demand for the Company’s OBX rental fleet has increased utilization to near full capacity. Rental revenue reached pre-pandemic levels and the highest quarter since June 2020.

Adjacent Markets Segment

Revenue from our Adjacent Markets products for the three months ended March 31, 2023, is $12.7 million an increase of $3.5 million, and an increase of $38.1% from the corresponding period of the prior fiscal year. The revenue for the six-month period ended March 31, 2023, was $23.5 million, an increase of 35.4%, from the same period of the prior fiscal year. The increase in revenue for both periods was primarily due to increased demand for our water meter cable and connector products.

Emerging Markets

For the three-and six-month periods ended March 31, 2023, the Company’s Emerging Market’s segment generated revenue of $0.2 million and $0.3 million respectively. For the similar periods from fiscal year 2022, the Emerging Market’s segment produced revenue of $0.3 million and $0.4 million, respectively. The revenue from this segment primarily consisted of on-going service and maintenance related to our completed contract with the U.S. Customs and Border Protection. Currently, the Emerging Markets segment has a backlog of $2.1 million, of which the Company expects to begin recognizing a portion of this revenue in the third quarter of fiscal year 2023.

Balance Sheet and Liquidity

For the six-month period ended March 31, 2023, the Company used $5.1 million in cash and cash equivalents from operating activities. The Company generated $12.2 million of cash from investing activities that included $8.8 million in proceeds from the sale of rental equipment and $4.2 million in proceeds from the sale of a property and equipment offset by cash used to invest in additional property, plant, rental and other equipment of $1.8 million. As of March 31, 2023, the Company had $22.8 million in cash, cash equivalents and short-term investments, and maintained an additional borrowing availability of $5.5 million under its credit agreement with no borrowings outstanding. Thus, as of March 31, 2023, the Company’s total liquidity stood at $28.3 million. The Company is currently in discussions with one of its lenders on a new larger credit facility. The Company additionally owns unencumbered property and real estate in both domestic and international locations.

Conference Call Information

The Company will host a conference call to review its second quarter fiscal year 2023 financial results on May 11, 2023, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). Participants can access the call at (800) 225-9448 (US) or (203) 518-9848 (International). Please reference the conference ID: GEOSQ223 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 the Company’s website at www.geospace.com.

About Geospace Technologies

Geospace Technologies is a global technology and instrumentation manufacturer specializing in vibration sensing and highly ruggedized products which serve energy, industrial, government and commercial customers worldwide. The Company’s products blend engineering expertise with advanced analytic software to optimize energy exploration, enhance national and homeland security, empower water utility and property managers, and streamline electronic printing solutions. With more than four decades of excellence, the Company’s more than 600 employees across the world are dedicated to engineering and technical quality. Geospace is traded on the U.S. NASDAQ stock exchange as GEOS. For more information, visit www.geospace.com.

Forward Looking Statements

This news 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”, “could”, “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 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, statements regarding our expected operating results, expected demand for our products in various segments, and ability to secure a new credit facility. These forward-looking statements reflect our current judgment about future events and trends based on currently available information. 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, the 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, 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, , inability to secure a new credit facility, 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, except as required by applicable securities laws and regulations.

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

 

March 31, 2023

 

 

March 31, 2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

17,701

 

 

$

21,565

 

 

$

37,249

 

 

$

34,597

 

Rental

 

 

13,669

 

 

 

3,135

 

 

 

25,230

 

 

 

8,094

 

Total revenue

 

 

31,370

 

 

 

24,700

 

 

 

62,479

 

 

 

42,691

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

13,196

 

 

 

13,500

 

 

 

28,561

 

 

 

24,850

 

Rental

 

 

5,225

 

 

 

4,390

 

 

 

10,435

 

 

 

9,329

 

Total cost of revenue

 

 

18,421

 

 

 

17,890

 

 

 

38,996

 

 

 

34,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

12,949

 

 

 

6,810

 

 

 

23,483

 

 

 

8,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

6,387

 

 

 

5,991

 

 

 

12,822

 

 

 

11,735

 

Research and development

 

 

3,483

 

 

 

4,673

 

 

 

7,741

 

 

 

9,942

 

Change in estimated fair value of contingent consideration

 

 

—

 

 

 

(2,218

)

 

 

—

 

 

 

(4,658

)

Bad debt expense

 

 

17

 

 

 

13

 

 

 

137

 

 

 

28

 

Total operating expenses

 

 

9,887

 

 

 

8,459

 

 

 

20,700

 

 

 

17,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on disposal of property

 

 

1,315

 

 

 

—

 

 

 

1,315

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

4,377

 

 

 

(1,649

)

 

 

4,098

 

 

 

(8,535

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(39

)

 

 

—

 

 

 

(78

)

 

 

—

 

Interest income

 

 

127

 

 

 

126

 

 

 

283

 

 

 

320

 

Foreign exchange gains, net

 

 

185

 

 

 

93

 

 

 

292

 

 

 

111

 

Other, net

 

 

6

 

 

 

(19

)

 

 

(6

)

 

 

(36

)

Total other income, net

 

 

279

 

 

 

200

 

 

 

491

 

 

 

395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

4,656

 

 

 

(1,449

)

 

 

4,589

 

 

 

(8,140

)

Income tax expense

 

 

19

 

 

 

25

 

 

 

49

 

 

 

102

 

Net income (loss)

 

$

4,637

 

 

$

(1,474

)

 

$

4,540

 

 

$

(8,242

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.35

 

 

$

(0.11

)

 

$

0.35

 

 

$

(0.64

)

Diluted

 

$

0.35

 

 

$

(0.11

)

 

$

0.35

 

 

$

(0.64

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,156,715

 

 

 

12,999,022

 

 

 

13,111,866

 

 

 

12,958,911

 

Diluted

 

 

13,156,715

 

 

 

12,999,022

 

 

 

13,111,866

 

 

 

12,958,911

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share amounts)

(unaudited)

 

 

 

March 31, 2023

 

 

September 30, 2022

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,805

 

 

$

16,109

 

Short-term investments

 

 

—

 

 

 

894

 

Trade accounts and notes receivable, net

 

 

25,908

 

 

 

20,886

 

Inventories, net

 

 

20,477

 

 

 

19,995

 

Prepaid expenses and other current assets

 

 

1,404

 

 

 

2,077

 

Total current assets

 

 

70,594

 

 

 

59,961

 

 

 

 

 

 

 

 

 

 

Non-current inventories, net

 

 

17,508

 

 

 

12,526

 

Rental equipment, net

 

 

20,579

 

 

 

28,199

 

Property, plant and equipment, net

 

 

22,690

 

 

 

26,598

 

Operating right-of-use assets

 

 

836

 

 

 

957

 

Goodwill

 

 

736

 

 

 

736

 

Other intangible assets, net

 

 

5,143

 

 

 

5,573

 

Other non-current assets

 

 

356

 

 

 

506

 

Total assets

 

$

138,442

 

 

$

135,056

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable trade

 

$

5,021

 

 

$

5,595

 

Contingent consideration

 

 

—

 

 

 

175

 

Operating lease liabilities

 

 

248

 

 

 

241

 

Other current liabilities

 

 

6,967

 

 

 

6,616

 

Total current liabilities

 

 

12,236

 

 

 

12,627

 

 

 

 

 

 

 

 

 

 

Non-current operating lease liabilities

 

 

654

 

 

 

769

 

Deferred tax liabilities, net

 

 

15

 

 

 

13

 

Total liabilities

 

 

12,905

 

 

 

13,409

 

 

 

 

 

 

 

 

 

 

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; 14,013,481 and 13,863,233 shares issued, respectively; and 13,171,489 and 13,021,241 shares outstanding, respectively

 

 

140

 

 

 

139

 

Additional paid-in capital

 

 

95,343

 

 

 

94,667

 

Retained earnings

 

 

54,194

 

 

 

49,654

 

Accumulated other comprehensive loss

 

 

(16,640

)

 

 

(15,313

)

Treasury stock, at cost, 841,992 shares

 

 

(7,500

)

 

 

(7,500

)

Total stockholders’ equity

 

 

125,537

 

 

 

121,647

 

Total liabilities and stockholders’ equity

 

$

138,442

 

 

$

135,056

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

4,540

 

 

$

(8,242

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Deferred income tax expense (benefit)

 

 

—

 

 

 

(7

)

Rental equipment depreciation

 

 

6,442

 

 

 

7,205

 

Property, plant and equipment depreciation

 

 

1,896

 

 

 

2,071

 

Amortization of intangible assets

 

 

430

 

 

 

893

 

Accretion of discounts on short-term investments

 

 

1

 

 

 

76

 

Stock-based compensation expense

 

 

676

 

 

 

954

 

Bad debt expense

 

 

137

 

 

 

28

 

Inventory obsolescence expense

 

 

1,836

 

 

 

1,106

 

Change in estimated fair value of contingent consideration

 

 

—

 

 

 

(4,658

)

Gross profit from sale of used rental equipment

 

 

(3,925

)

 

 

(10,741

)

Gain on disposal of property

 

 

(1,315

)

 

 

—

 

Gain on disposal of equipment

 

 

(464

)

 

 

—

 

Realized loss on short-term investments

 

 

—

 

 

 

18

 

Effects of changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts and notes receivable

 

 

(8,352

)

 

 

4,666

 

Unbilled receivables

 

 

—

 

 

 

1,051

 

Inventories

 

 

(7,882

)

 

 

(1,313

)

Other assets

 

 

1,702

 

 

 

1,027

 

Accounts payable trade

 

 

(574

)

 

 

(1,746

)

Other liabilities

 

 

(226

)

 

 

(2,720

)

Net cash used in operating activities

 

 

(5,078

)

 

 

(10,332

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(1,126

)

 

 

(509

)

Proceeds from the sale of equipment

 

 

539

 

 

 

—

 

Proceeds from the sale of property

 

 

3,682

 

 

 

—

 

Investment in rental equipment

 

 

(635

)

 

 

(2,368

)

Proceeds from the sale of used rental equipment

 

 

8,794

 

 

 

3,000

 

Purchases of short-term investments

 

 

—

 

 

 

(450

)

Proceeds from the sale of short-term investments

 

 

900

 

 

 

6,174

 

Net cash provided by investing activities

 

 

12,154

 

 

 

5,847

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments on contingent consideration

 

 

(175

)

 

 

(807

)

Purchase of treasury stock

 

 

-

 

 

 

(695

)

Net cash used in financing activities

 

 

(175

)

 

 

(1,502

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(205

)

 

 

132

 

Increase (decrease) in cash and cash equivalents

 

 

6,696

 

 

 

(5,855

)

Cash and cash equivalents, beginning of fiscal year

 

 

16,109

 

 

 

14,066

 

Cash and cash equivalents, end of fiscal period

 

$

22,805

 

 

$

8,211

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

26

 

 

$

81

 

Issuance of note receivable related to sale of used rental equipment

 

 

—

 

 

 

11,745

 

Inventory transferred to rental equipment

 

 

82

 

 

 

814

 

Inventory transferred to property, plant and equipment

 

 

—

 

 

 

172

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT REVENUE AND OPERATING INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

March 31, 2023

 

March 31, 2022

 

March 31, 2023

 

March 31, 2022

Oil and Gas Markets

 

 

 

 

 

 

 

 

 

 

 

 

Traditional seismic exploration product revenue

 

 

$

3,391

 

 

$

1,245

 

 

$

6,146

 

 

$

1,836

Wireless seismic exploration product revenue

 

 

 

14,896

 

 

 

13,507

 

 

 

32,134

 

 

 

22,234

Reservoir product revenue

 

 

 

132

 

 

 

394

 

 

 

287

 

 

 

730

 

 

 

 

18,419

 

 

 

15,146

 

 

 

38,567

 

 

 

24,800

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjacent Markets segment revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Industrial product revenue

 

 

 

9,642

 

 

 

5,993

 

 

 

17,572

 

 

 

11,006

Imaging product revenue

 

 

 

3,066

 

 

 

3,210

 

 

 

5,958

 

 

 

6,368

 

 

 

 

12,708

 

 

 

9,203

 

 

 

23,530

 

 

 

17,374

Emerging Markets segment revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Border and perimeter security product revenue

 

 

 

191

 

 

 

299

 

 

 

284

 

 

 

436

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

52

 

 

 

52

 

 

 

98

 

 

 

81

Total revenue

 

 

$

31,370

 

 

$

24,700

 

 

$

62,479

 

 

$

42,691

 

 

Three Months Ended

 

Six Months Ended

 

 

March 31, 2023

 

March 31, 2022

 

March 31, 2023

 

March 31, 2022

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Oil and Gas Markets segment

 

 

$

4,176

 

 

 

$

1,656

 

 

 

$

6,582

 

 

 

$

(2,514

)

Adjacent Markets segment

 

 

 

3,055

 

 

 

 

1,292

 

 

 

 

4,802

 

 

 

 

2,500

 

Emerging Markets segment

 

 

 

(1,007

)

 

 

 

(1,384

)

 

 

 

(2,220

)

 

 

 

(2,204

)

Corporate

 

 

 

(1,847

)

 

 

 

(3,213

)

 

 

 

(5,066

)

 

 

 

(6,317

)

Total operating income (loss)

 

 

$

4,377

 

 

 

$

(1,649

)

 

 

$

4,098

 

 

 

$

(8,535

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230511005908/en/

Media Contact: Caroline Kempf, ckempf@geospace.com, 321.341.9305