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Geospace Technologies Reports Fiscal Year 2022 Third Quarter Results

Adjacent Market Business Segment Marks Quarterly Revenue Record

Geospace Technologies (NASDAQ: GEOS) today announced results for the third quarter and nine-month period ended June 30, 2022. For the three-months ended June 30, 2022, Geospace Technologies (the “Company”) reported revenue of $20.7 million versus $23.1 million for the comparable year-ago quarter. Net loss for the three-months ended June 30, 2022 was $6.6 million, or $(0.51) per diluted share, compared to a net loss of $0.8 million, or ($0.06) per diluted share, for the quarter ended June 30, 2021.

For the nine-months ended June 30, 2022, the Company recorded revenue of $63.4 million compared to revenue of $75.4 million during the prior year period. Net loss for the nine-months ended June 30, 2022 was $14.8 million, or $(1.14) per diluted share, compared to a net loss of $9.0 million, or $(0.67) per diluted share for the prior year period.

Walter R. (“Rick”) Wheeler, President and CEO of the Company said, “Although the three- and nine-month periods ended June 30, 2022, experienced decreases in Oil and Gas Markets segment revenue from prior periods, we are nonetheless pleased that demand for our OBX ocean bottom nodes continued to climb. This led to the highest quarterly figure for rental revenue this fiscal year. Further evidence of this growing OBX demand came in our two recent news announcements of separate OBX rental contracts, valued at $4 million and $12 million. Moreover, the base value of signed OBX rental contracts so far in fiscal year 2022 now exceeds $24 million, compared to $8.2 million in fiscal year 2021. Our discussions and ongoing quoting activities with valued customers give us an increased level of confidence that demand for the OBX will remain strong.”

Wheeler continued, “Another noteworthy highlight of the quarter is the strong performance of our Adjacent Markets segment. Quarterly revenue from this collection of products reached an all-time high in the third quarter, setting a new segment record. Revenue growth in this segment has benefited from growing demand for our U.S.-manufactured water meter cables and connectors, driven by increased domestic infrastructure spending on smart city projects. Our presence in this market is poised to penetrate even deeper with the roll out to customers of our Aquana smart water valves and cloud control software, expected to occur before the end of the fiscal year. Additional factors contributing to solid Adjacent Markets segment revenue include our Exile electronic pre-press solutions. These computer-to-screen printers bring increased automation and time savings to the graphic arts screen print industry, helping these customers reduce labor and increase efficiencies. Our specialty contract manufacturing business is also seeing positive results, where more customers want increased domestic control of their manufacturing.”

“The past two years have been plagued by COVID-19, supply-chain issues, and geopolitical turmoil. While many derivative challenges of these issues remain, we are encouraged by the improved market conditions in both our Oil and Gas and Adjacent Market segments. Continued improvement in each of these divisions should lead to better performance in future quarters as well as overall improved liquidity. In closing, I would like to thank all our hard-working employees, valued clients, and trusted shareholders for their continued support.”

Adjacent Markets Segment

Revenue for the three-month period ending June 30, 2022 was $10.9 million, an increase of 16.7% when compared to the same three-month period of the prior fiscal year. Revenue for the nine-month period ended June 30, 2022 was $28.3 million an increase of 18.6% from the same prior year period. The increase in revenue for both periods is due to higher demand for the Company’s water meter connector and cable products, industrial sensor products, contract manufacturing, thermal imaging equipment and consumable film products. The Adjacent Markets segment contributed 52.9% of the Company’s total revenue for the three-month period ending June 30, 2022.

Oil and Gas Markets Segment

The Oil and Gas Markets segment produced revenue of $9.5 million for the three-months ended June 30, 2022. This compares with revenue of $12.6 million for the same period of the prior fiscal year, a decrease of 24.8%. For the nine-month period ended June 30, 2022, the segment contributed revenue of $34.3 million, a decrease 17.4% from the comparable prior period. The decrease in revenue for both periods is due to lower wireless product sales partially offset by higher utilization of the Company’s OBX rental fleet. The Company’s OBX rental fleet has been experiencing higher levels of quoting activities as well as additional contracts. The Company expects higher levels of utilization of the OBX rental fleet throughout the rest of fiscal year 2022.

Emerging Markets Segment

For the three- and nine-month periods ended June 30, 2022, the Company’s Emerging Market’s segment generated revenue of $0.1 million and $0.6 million respectively. For the similar periods from fiscal year 2021, the Emerging Market’s segment produced revenue of $1.1 million and $10 million, respectively. The decrease in revenue for the three months ended June 30, 2022 was primarily due to lower service revenue.

Balance Sheet and Liquidity

At June 30, 2022, Geospace had $9.1 million in cash, cash equivalents, and short-term investments. Additionally, the Company has additional liquidity from its credit facility with $8.5 million in available borrowing. The Company also owns unencumbered property and real estate in both domestic and international locations. The Company used $6.6 million of cash during the nine-month period ended June 30, 2022. Notable sources of cash included (i) $7.8 million in net proceeds from the sale of short-term investments and (ii) $5.9 million from the sale of used rental equipment. Notable uses of cash included $13.3 million used in operating activities and $4.1 million of investments for additions to the Company’s rental fleet.

Conference Call Information

Geospace Technologies will host a conference call to review its third quarter fiscal year 2022 financial results on August 10, 2022, at 10:00 a.m. Eastern Time (9 a.m. Central Time). Participants can access the call at 866-342-8591 (US) or 203-518-9713 (International). Please reference the conference ID: GEOSQ322 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 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, offshore cables, remote shutoff water valves and Internet of Things (IoT) platform and provide contract manufacturing services.

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, the timing, adoption, results and success of our rollout of Aquana smart water valves and cloud based control platform, future demand for Quantum security solutions the adoption and sale of products in various geographic regions, potential tenders for permanent reservoir monitoring (PRM) systems, future demand for OBX systems, the adoption of Quantum’s SADAR® product monitoring of subsurface reservoirs, 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, the impact of the current armed conflict between Russia and Ukraine, 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 currently available information. However, there will likely be events in the future that we aren’t 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, 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.

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, 2022

 

 

June 30, 2021

 

 

June 30, 2022

 

 

June 30, 2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

13,463

 

 

$

17,679

 

 

$

48,060

 

 

$

66,005

 

Rental

 

 

7,228

 

 

 

5,404

 

 

 

15,322

 

 

 

9,430

 

Total revenue

 

 

20,691

 

 

 

23,083

 

 

 

63,382

 

 

 

75,435

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

12,460

 

 

 

12,907

 

 

 

37,310

 

 

 

47,492

 

Rental

 

 

4,580

 

 

 

4,549

 

 

 

13,909

 

 

 

14,744

 

Total cost of revenue

 

 

17,040

 

 

 

17,456

 

 

 

51,219

 

 

 

62,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

3,651

 

 

 

5,627

 

 

 

12,163

 

 

 

13,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

6,373

 

 

 

5,243

 

 

 

18,108

 

 

 

16,075

 

Research and development

 

 

4,108

 

 

 

3,658

 

 

 

14,050

 

 

 

10,943

 

Change in estimated fair value of contingent consideration

 

 

(384

)

 

 

(795

)

 

 

(5,042

)

 

 

(1,713

)

Bad debt expense (recovery)

 

 

88

 

 

 

(40

)

 

 

116

 

 

 

(32

)

Total operating expenses

 

 

10,185

 

 

 

8,066

 

 

 

27,232

 

 

 

25,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(6,534

)

 

 

(2,439

)

 

 

(15,069

)

 

 

(12,074

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(26

)

 

 

 

 

 

(26

)

 

 

 

Interest income

 

 

402

 

 

 

151

 

 

 

722

 

 

 

1,284

 

Gain (loss) on investments, net

 

 

(4

)

 

 

1,727

 

 

 

(22

)

 

 

1,996

 

Foreign exchange gains (losses), net

 

 

(341

)

 

 

(49

)

 

 

(230

)

 

 

64

 

Other, net

 

 

(3

)

 

 

(8

)

 

 

(21

)

 

 

(3

)

Total other income, net

 

 

28

 

 

 

1,821

 

 

 

423

 

 

 

3,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(6,506

)

 

 

(618

)

 

 

(14,646

)

 

 

(8,733

)

Income tax expense

 

 

68

 

 

 

169

 

 

 

170

 

 

 

288

 

Net loss

 

$

(6,574

)

 

$

(787

)

 

$

(14,816

)

 

$

(9,021

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.51

)

 

$

(0.06

)

 

$

(1.14

)

 

$

(0.67

)

Diluted

 

$

(0.51

)

 

$

(0.06

)

 

$

(1.14

)

 

$

(0.67

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,013,616

 

 

 

13,353,254

 

 

 

12,977,146

 

 

 

13,464,177

 

Diluted

 

 

13,013,616

 

 

 

13,353,254

 

 

 

12,977,146

 

 

 

13,464,177

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

June 30, 2022

 

 

September 30, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,468

 

 

$

14,066

 

Short-term investments

 

 

1,598

 

 

 

9,496

 

Trade accounts and financing receivables, net

 

 

26,400

 

 

 

17,159

 

Unbilled receivables

 

 

 

 

 

1,051

 

Inventories, net

 

 

18,868

 

 

 

16,196

 

Prepaid expenses and other current assets

 

 

2,614

 

 

 

2,062

 

Total current assets

 

 

56,948

 

 

 

60,030

 

 

 

 

 

 

 

Non-current financing receivables

 

 

306

 

 

 

2,938

 

Non-current inventories, net

 

 

13,992

 

 

 

18,103

 

Rental equipment, net

 

 

30,910

 

 

 

38,905

 

Property, plant and equipment, net

 

 

27,835

 

 

 

29,983

 

Operating right-of-use assets

 

 

1,011

 

 

 

1,191

 

Goodwill

 

 

5,072

 

 

 

5,072

 

Other intangible assets, net

 

 

5,911

 

 

 

7,250

 

Other assets

 

 

411

 

 

 

457

 

Total assets

 

$

142,396

 

 

$

163,929

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable trade

 

$

4,163

 

 

$

6,391

 

Contingent consideration

 

 

168

 

 

 

807

 

Operating lease liabilities

 

 

237

 

 

 

225

 

Other current liabilities

 

 

7,744

 

 

 

7,799

 

Total current liabilities

 

 

12,312

 

 

 

15,222

 

 

 

 

 

 

 

Non-current contingent consideration

 

 

 

 

 

5,210

 

Non-current operating lease liabilities

 

 

836

 

 

 

1,009

 

Non-current other liabilities

 

 

16

 

 

 

31

 

Total liabilities

 

 

13,164

 

 

 

21,472

 

 

 

 

 

 

 

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; 13,861,233 and 13,738,971 shares issued, respectively; and 13,019,241 and 12,969,542 shares outstanding, respectively

 

 

139

 

 

 

137

 

Additional paid-in capital

 

 

94,276

 

 

 

92,935

 

Retained earnings

 

 

57,694

 

 

 

72,510

 

Accumulated other comprehensive loss

 

 

(15,377

)

 

 

(16,320

)

Treasury stock, at cost, 841,992 and 769,429 shares, respectively

 

 

(7,500

)

 

 

(6,805

)

Total stockholders’ equity

 

 

129,232

 

 

 

142,457

 

Total liabilities and stockholders’ equity

 

$

142,396

 

 

$

163,929

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

June 30, 2022

 

 

June 30, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(14,816

)

 

$

(9,021

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Deferred income tax benefit

 

 

(12

)

 

 

(3

)

Rental equipment depreciation

 

 

10,500

 

 

 

11,332

 

Property, plant and equipment depreciation

 

 

3,112

 

 

 

2,956

 

Amortization

 

 

1,365

 

 

 

1,299

 

Accretion of discounts on short-term investments

 

 

89

 

 

 

45

 

Stock-based compensation expense

 

 

1,342

 

 

 

1,510

 

Bad debt expense (recovery)

 

 

116

 

 

 

(32

)

Inventory obsolescence expense

 

 

2,310

 

 

 

1,702

 

Change in estimated fair value of contingent consideration

 

 

(5,042

)

 

 

(1,713

)

Gross profit from sale of used rental equipment

 

 

(10,801

)

 

 

(6,546

)

(Gain) loss on disposal of property, plant and equipment

 

 

(9

)

 

 

6

 

Realized loss (gain) on sale of investments, net

 

 

22

 

 

 

(1,996

)

Effects of changes in operating assets and liabilities:

 

 

 

 

 

 

Trade accounts and notes receivables

 

 

1,455

 

 

 

(4,621

)

Unbilled receivables

 

 

1,051

 

 

 

(1,561

)

Inventories

 

 

(1,705

)

 

 

(4,920

)

Other assets

 

 

(250

)

 

 

6,756

 

Accounts payable trade

 

 

(2,223

)

 

 

1,372

 

Other liabilities

 

 

215

 

 

 

(4,080

)

Net cash used in operating activities

 

 

(13,281

)

 

 

(7,515

)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(913

)

 

 

(2,451

)

Proceeds from the sale of property, plant and equipment

 

 

9

 

 

 

3

 

Investment in rental equipment

 

 

(4,121

)

 

 

(1,528

)

Proceeds from the sale of used rental equipment

 

 

5,929

 

 

 

9,994

 

Purchases of short-term investments

 

 

(450

)

 

 

(10,844

)

Proceeds from the sale of short-term investments

 

 

8,224

 

 

 

1,100

 

Proceeds from sale of investment in debt security

 

 

 

 

 

2,069

 

Net cash provided by (used in) investing activities

 

 

8,678

 

 

 

(1,657

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Payments on contingent consideration

 

 

(807

)

 

 

 

Debt issuance costs

 

 

(211

)

 

 

 

Purchase of treasury stock

 

 

(695

)

 

 

(3,588

)

Net cash used in financing activities

 

 

(1,713

)

 

 

(3,588

)

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(282

)

 

 

144

 

Decrease in cash, cash equivalents and restricted cash

 

 

(6,598

)

 

 

(12,616

)

Cash and cash equivalents, beginning of fiscal year

 

 

14,066

 

 

 

32,686

 

Cash, cash equivalents and restricted cash, end of fiscal period

 

$

7,468

 

 

$

20,070

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for income taxes

 

$

168

 

 

$

284

 

Issuance of notes receivable in connection with sale of used rental equipment

 

 

11,745

 

 

 

 

Inventory transferred to rental equipment

 

 

1,194

 

 

 

3,777

 

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, 2022

 

June 30, 2021

 

June 30, 2022

June 30, 2021

Oil and Gas Markets segment revenue:

 

 

 

 

 

 

 

Traditional seismic exploration product revenue

 

$

1,592

 

 

$

1,950

 

 

$

3,428

 

$

3,736

 

Wireless seismic exploration product revenue

 

 

7,233

 

 

 

9,628

 

 

 

29,467

 

 

36,137

 

Reservoir product revenue

 

 

692

 

 

 

1,071

 

 

 

1,422

 

 

1,671

 

 

 

 

9,517

 

 

 

12,649

 

 

 

34,317

 

 

41,544

 

 

 

 

 

 

 

 

 

Adjacent Markets segment revenue:

 

 

 

 

 

 

 

Industrial product revenue

 

 

7,465

 

 

 

6,451

 

 

 

18,471

 

 

15,835

 

Imaging product revenue

 

 

3,473

 

 

 

2,922

 

 

 

9,841

 

 

8,033

 

 

 

 

10,938

 

 

 

9,373

 

 

 

28,312

 

 

23,868

 

Emerging Markets segment revenue:

 

 

 

 

 

 

 

Border and perimeter security product revenue

 

 

135

 

 

 

1,061

 

 

 

571

 

 

10,023

 

 

 

 

 

 

 

 

 

Corporate

 

 

101

 

 

 

 

 

 

182

 

 

 

Total revenue

 

$

20,691

 

 

$

23,083

 

 

$

63,382

 

$

75,435

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

June 30, 2021

Operating income (loss):

 

 

 

 

 

 

 

Oil and Gas Markets segment

 

$

(3,695

)

 

$

(1,807

)

 

$

(6,209

)

$

(13,258

)

Adjacent Markets segment

 

 

1,841

 

 

 

1,997

 

 

 

4,341

 

 

4,819

 

Emerging Markets segment

 

 

(1,405

)

 

 

(4

)

 

 

(3,609

)

 

5,286

 

Corporate

 

 

(3,275

)

 

 

(2,625

)

 

 

(9,592

)

 

(8,921

)

Total operating loss

 

$

(6,534

)

 

$

(2,439

)

 

$

(15,069

)

$

(12,074

)

 

 

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