NEWS

Q3 Produced Highest Quarterly Revenue Recorded in Nine Years

Geospace Technologies Corporation (NASDAQ: GEOS) (the “Company”) today announced results for its third quarter ended June 30, 2023.  For the three-months ended June 30, 2023, Geospace reported revenue of $32.7 million, a 58% increase compared to revenue of $20.7 million for the comparable year-ago quarter. Net income for the three-months ended June 30, 2023 was $3.2 million, or $0.24 per diluted share, compared to a net loss of $6.6 million, or ($0.51) per diluted share, for the quarter ended June 30, 2022.

For the nine-months ended June 30, 2023, Geospace reported revenue of $95.2 million, a 50% increase compared to revenue of $63.4 million for the comparable year-ago period.  Net income for the nine-months ended June 30, 2023 was $7.8 million, or $0.59 per diluted share, compared to a net loss of $14.8 million, or ($1.14) per diluted share, for the nine-months ended June 30, 2022.

Management’s Comments

Rick Wheeler, President, and Chief Executive Officer of Geospace Technologies said, “We’re very excited to see our third quarter performance further extend profitability for fiscal year 2023 by $0.24 per share. Moreover, total revenue for the quarter of $32.7 million represents the highest quarterly figure recorded in nine years. These results offer evidence of the intended positive impact our longstanding diversification efforts and recent cost control measures were designed to achieve.

A combination of increased demand for our Oil and Gas segment products and continued growth in our Adjacent Markets segment fueled both third quarter and nine-month results. In the Oil and Gas segment, our rental fleet of OBX ocean bottom nodes is near full utilization, reliably collecting high-resolution seismic data for clients around the globe. This growing demand and our innovation in this product domain were the impetus leading to our recently announced $20 million contract with a major contractor for the rental of our new shallow water Mariner® nodal system. Under current market conditions, we believe demand for our Oil and Gas segment products will remain strong into fiscal year 2024.

Our Adjacent Market segment had a notably great quarter, setting yet another record with the highest quarterly revenue figure ever reported. In just the first nine months of fiscal year 2023, revenue is just short of last year’s full total and beats all other prior fiscal year totals. Compared to last year, both the three-month and nine-month periods ended June 30, 2023, grew by almost 36%. The increase is driven largely by water meter cables and industrial sensor products. Also during the quarter, our Aquana subsidiary announced the release of its Actuator Valve Serial (AVS), a remote shut-off valve designed to reduce the cost of operations and enhance the safety of employees for water utilities. As domestic municipalities continue to update their smart water meter systems, we believe the long-term increase in demand for these Adjacent Markets products will persist.

Our Emerging Markets segment contributed a small portion of revenue during the three- and nine-month periods, primarily related to previously announced government and defense industry contracts. Further efforts remain ongoing to secure additional contracts in perimeter security and energy transition applications such as carbon storage, geothermal and mining. There may be more clarity on some of these endeavors in the near future.

As was noted, from a financial perspective, Geospace delivered its most successful quarter in many years, with quarterly revenue outpacing that of the past nine years. We not only achieved positive net income for the second consecutive quarter, but in addition, we strengthened our balance sheet, garnering approximately $27 million in cash and cash equivalents with approximately $42 million in total liquidity. Also, we recently completed a credit agreement with Woodforest National Bank that will provide borrowings to significantly boost our liquidity. However, we don’t anticipate a need for borrowing in the foreseeable future. We look forward to a continuation of favorable performance throughout fiscal year 2023 and into 2024, even though there may be lulls in some elements of our commerce.”

Oil and Gas Markets Segment

Revenue from the Oil and Gas Markets segment totaled $17.7 million for the three-month ended June 30, 2023.  Revenue from the same period of the prior fiscal year was $9.5 million, an increase of 85.7%.  Revenue for the nine-month period ended June 30, 2023, is $56.2 million, an increase of 63.9% over the equivalent prior year period.  The increase in revenue for both periods was due to higher rental revenue from increased utilization of our marine OBX rental fleet and higher demand for our seismic sensors.  In addition to ocean bottom node revenue, we recorded profitable revenue for our traditional seismic exploration products for the first time in nearly seven years due to the sale of marine streamer products.

Adjacent Markets Segment

Revenue from our Adjacent Markets products for the three months ended June 30, 2023, is $14.9 million an increase of $3.9 million, representing an increase of 35.9% from the corresponding period of the prior fiscal year.  The revenue for the nine-month period ended June 30, 2023, was $38.4 million, an increase of 35.6%, from the same period of the prior fiscal year.  The increase in revenue is attributable in part to a recent decision to increase manufacturing capacity to meet demand for our water meter cable and connector products. Revenue remains stable in our imaging product line where efforts are underway to introduce new products to market at strategically affordable price points for the multi-billion-dollar screen print industry.

Emerging Markets

For the three-and nine-month periods ended June 30, 2023, the Company’s Emerging Markets segment generated revenue of $0.1 million and $0.4 million respectively. For the similar periods from fiscal year 2022, the Emerging Markets segment produced revenue of $0.1 million and $0.6 million, respectively. Revenue from this segment consists of on-going service and maintenance related to our completed U.S. Customs and Border Protection contract as well as other government contracts.

Balance Sheet and Liquidity

For the nine-month period ended June 30, 2023, the Company generated $3.1 million in cash and cash equivalents from operating activities. The Company generated $8.3 million of cash from investing activities that included $11.1 million in proceeds from the sale of rental equipment and $4.4 million in proceeds from the sale of property and equipment.  These increases in cash are offset by $6.2 million invested in rental equipment and $1.9 million invested in property, plant and equipment.  The majority of additions to the Company’s rental equipment come as a result of the recently announced Mariner® rental agreement. As of June 30, 2023, the Company had $27.3 million in cash and cash equivalents with no borrowings outstanding.  Additionally, the Company recently completed a credit agreement with Woodforest National Bank that will provide borrowings of up to $15 million.   Effective July 26, 2023, the total liquidity was approximately $42 million. 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 third quarter fiscal year 2023 financial results on August 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: GEOSQ323 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.

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

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 and expected demand for our products in various segments.  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, 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.

 

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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, 2023				June 30, 2022				June 30, 2023				June 30, 2022
Revenue:
Products		$	19,727			$	13,463			$	56,976			$	48,060
Rental			12,988				7,228				38,218				15,322
Total revenue			32,715				20,691				95,194				63,382
Cost of revenue:
Products			14,522				12,460				43,083				37,310
Rental			4,214				4,580				14,649				13,909
Total cost of revenue			18,736				17,040				57,732				51,219
Gross profit			13,979				3,651				37,462				12,163
Operating expenses:
Selling, general and administrative			6,655				6,373				19,477				18,108
Research and development			4,356				4,108				12,097				14,050
Change in estimated fair value of contingent consideration			—				(384	)			—				(5,042	)
Bad debt expense (recovery)			(178	)			88				(41	)			116
Total operating expenses			10,833				10,185				31,533				27,232
Gain on disposal of property			—				—				1,315				—
Income (loss) from operations			3,146				(6,534	)			7,244				(15,069	)
Other income (expense):
Interest expense			(22	)			(26	)			(100	)			(26	)
Interest income			88				402				371				722
Foreign exchange gains (losses), net			301				(341	)			593				(230	)
Other, net			(66	)			(7	)			(72	)			(43	)
Total other income, net			301				28				792				423
Income (loss) before income taxes			3,447				(6,506	)			8,036				(14,646	)
Income tax expense			219				68				268				170
Net income (loss)		$	3,228			$	(6,574	)		$	7,768			$	(14,816	)
Income (loss) per common share:
Basic		$	0.25			$	(0.51	)		$	0.59			$	(1.14	)
Diluted		$	0.24			$	(0.51	)		$	0.59			$	(1.14	)
Weighted average common shares outstanding:
Basic			13,171,654				13,013,616				13,131,795				12,977,146
Diluted			13,320,881				13,013,616				13,157,919				12,977,146

 

 

 GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share amounts)

(unaudited)

		June 30, 2023				September 30, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	27,264			$	16,109
Short-term investments			—				894
Trade accounts and notes receivable, net			26,309				20,886
Inventories, net			19,603				19,995
Prepaid expenses and other current assets			3,200				2,077
Total current assets			76,376				59,961
Non-current inventories, net			22,311				12,526
Rental equipment, net			18,381				28,199
Property, plant and equipment, net			21,919				26,598
Operating right-of-use assets			776				957
Goodwill			736				736
Other intangible assets, net			4,951				5,573
Other non-current assets			233				506
Total assets		$	145,683			$	135,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade		$	6,884			$	5,595
Contingent consideration			—				175
Operating lease liabilities			253				241
Other current liabilities			8,990				6,616
Total current liabilities			16,127				12,627
Non-current operating lease liabilities			583				769
Deferred tax liabilities, net			16				13
Total liabilities			16,726				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; 14,028,481 and 13,863,233 shares issued, respectively; and 13,186,489 and 13,021,241 shares outstanding, respectively			140				139
Additional paid-in capital			95,741				94,667
Retained earnings			57,422				49,654
Accumulated other comprehensive loss			(16,846	)			(15,313	)
Treasury stock, at cost, 841,992 shares			(7,500	)			(7,500	)
Total stockholders’ equity			128,957				121,647
Total liabilities and stockholders’ equity		$	145,683			$	135,056

  

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

		Nine Months Ended
		June 30, 2023				June 30, 2022
Cash flows from operating activities:
Net income (loss)		$	7,768			$	(14,816	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred income tax expense (benefit)			1				(12	)
Rental equipment depreciation			9,204				10,500
Property, plant and equipment depreciation			2,785				3,112
Amortization of intangible assets			622				1,365
Amortization of premiums (accretion of discounts) on short-term investments			(50	)			89
Stock-based compensation expense			1,074				1,342
Bad debt expense (recovery)			(41	)			116
Inventory obsolescence expense			2,131				2,310
Change in estimated fair value of contingent consideration			—				(5,042	)
Gross profit from sale of used rental equipment			(4,318	)			(10,801	)
Gain on disposal of property			(1,315	)			—
Gain on disposal of equipment			(432	)			(9	)
Realized loss on short-term investments			—				22
Realized foreign currency translation loss from dissolution of foreign subsidiary			38				—
Effects of changes in operating assets and liabilities:
Trade accounts and notes receivable			(10,561	)			1,455
Unbilled receivables			—				1,051
Inventories			(7,175	)			(1,705	)
Other assets			453				(250	)
Accounts payable trade			1,290				(2,223	)
Other liabilities			1,654				215
Net cash provided by (used in) operating activities			3,128				(13,281	)
Cash flows from investing activities:
Purchase of property, plant and equipment			(1,862	)			(913	)
Proceeds from the sale of equipment			724				9
Proceeds from the sale of property			3,682				—
Investment in rental equipment			(6,213	)			(4,121	)
Proceeds from the sale of used rental equipment			11,095				5,929
Purchases of short-term investments			—				(450	)
Proceeds from the sale of short-term investments			900				8,224
Net cash provided by investing activities			8,326				8,678
Cash flows from financing activities:
Payments on contingent consideration			(175	)			(807	)
Debt issuance costs			—				(211	)
Purchase of treasury stock			—				(695	)
Net cash used in financing activities			(175	)			(1,713	)
Effect of exchange rate changes on cash			(97	)			(282	)
Increase (decrease) in cash and cash equivalents			11,155				(6,598	)
Cash and cash equivalents, beginning of fiscal year			16,109				14,066
Cash and cash equivalents, end of fiscal period		$	27,264			$	7,468
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes		$	111			$	168
Issuance of note receivable related to sale of used rental equipment			—				11,745
Inventory transferred to rental equipment			117				1,194
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						Nine Months Ended
		June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Oil and Gas Markets
Traditional seismic exploration product revenue			$           3,363			$            1,592			$       9,509			$       3,428
Wireless seismic exploration product revenue			13,786			7,233			45,920			29,467
Reservoir product revenue			523			692			810			1,422
			17,672			9,517			56,239			34,317
Adjacent Markets segment revenue:
Industrial product revenue			11,678			7,465			29,250			18,471
Imaging product revenue			3,184			3,473			9,142			9,841
			14,862			10,938			38,392			28,312
Emerging Markets segment revenue:
Border and perimeter security product revenue			109			135			393			571
Corporate			72			101			170			182
Total revenue			$        32,715			$         20,691			$    95,194			$     63,382

 

 

 

		Three Months Ended						Nine Months Ended
		June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Operating income (loss):
Oil and Gas Markets segment			$        3,238			$       (3,695)			$       9,820			$    (6,209)
Adjacent Markets segment			4,346			1,841			9,148			4,341
Emerging Markets segment			(1,047)			(1,405)			(3,267)			(3,609)
Corporate			(3,391)			(3,275)			(8,457)			(9,592)
Total operating income (loss)			$        3,146			$       (6,534)			$      7,244			$  (15,069)