HOUSTON--(BUSINESS WIRE)--Geospace Technologies Corporation (NASDAQ: GEOS) (the "Company") today announced results for its first quarter ended December 31, 2023. For the three-months ended December 31, 2023, Geospace reported revenue of $50.0 million, a 60% increase compared to revenue of $31.1 million for the comparable year-ago quarter. Net income for the three-months ended December 31, 2023 was $12.7 million, or $0.94 per diluted share, compared to a net loss of $0.1 million, or ($0.01) per diluted share, for the quarter ended December 31, 2022.
Management's Comments
Walter R. ("Rick") Wheeler, President and CEO of the Company said, "We're gratified to see the first quarter of fiscal year 2024 mark our fourth straight quarter of profitability. In conjunction with an improved industry demand for products in our Oil and Gas Markets segment, our financial discipline and streamlining of operations over the last year have helped carry profitability into the new fiscal year. Recorded revenue of $50 million represents the highest quarterly figure achieved in nearly ten years, and net income exceeding $12.7 million solidly demonstrates the sort of value we strive to deliver to our shareholders. Demand for our newest technology ocean bottom node, known as the Mariner, was paramount in delivering our first quarter performance. As previously announced, a $20 million rental contract for a Mariner system was converted to a $30 million sale in late December. This brought a significant amount of revenue forward in the first quarter that would have otherwise been received from the rental contract over the course of the year. Although we don't anticipate another such sale imminently, this transaction serves as a stark reminder of how commerce in our Oil and Gas Markets segment can be very lumpy from quarter to quarter.
Navigating these ups and downs is familiar territory for Geospace, and we are encouraged by industry reports of major energy companies beginning to invest more broadly in conventional seismic exploration and 4D time-lapse monitoring projects. Each of these benefit from our latest technology offerings such as our Mariner and Aquanaut ocean bottom nodes. This leads us to anticipate healthy utilization of our ocean bottom node fleet during the second half of the fiscal year.
Our Adjacent Markets segment experienced a modest decrease in first quarter revenue compared to last year. We believe the reduction reflects customers working through larger purchases made in earlier quarters to stay ahead of supply chain concerns. Despite the slight reduction in revenue, we expect this segment to see continued overall growth and remain strong into the foreseeable future. We believe our strategy for this segment to deliver stable, predictable, and profitable revenue to our bottom line is working. Moreover, our confidence in this segment's continued improvement increases as the demand for smart infrastructure solutions expands, both domestically and abroad. This is further evidenced by the recent signing of a modest contract for our Aquana smart water valves which should begin contributing to revenue in the next quarter.
Our Emerging Markets segment generated a small amount of revenue in the first quarter through existing contracts between our Quantum subsidiary and the US Federal government. The opportunity for additional contracts with the Customs and Border Protection agency is solid, but those government decisions are not expected until later in the calendar year. Progress toward significant revenue contributions from this segment have developed more slowly than desired. However, quoting activities from energy companies for carbon capture monitoring projects as well as other new and unique applications for Quantum's analytical methods have increased. Despite the high public interest in carbon capture, utilization, and storage, these projects appear to move slowly as country requirements and industry commitments evolve."
Oil and Gas Markets Segment
First quarter revenue from the Company's Oil and Gas Markets segment totaled $39.9 million for the three months ended December 31, 2023. This compares to $20.1 million in revenue for the same period a year ago, an increase of 98%. Revenue of the magnitude achieved in the three months ended December 31, 2023, is not expected to reoccur in the foreseeable future.
Wireless Seismic Exploration Products revenue totaled $38.1 million for the quarterly period, a $20.8 million increase in revenue over the prior year period. The increase in revenue is largely due to the $30 million purchase of the Company's Mariner, a shallow water ocean bottom node. The increase in revenue is partially offset by a decrease in the utilization of our OBX rental fleet as compared to the same prior year period.
Adjacent Markets Segment
Revenue from the Company's Adjacent Markets segment totaled $9.8 million for the three-month period ended December 31, 2023. This compares with $10.8 million from the equivalent year ago period, representing a decrease of 9%. The decrease in revenue is the result of lower demand for the Company's smart water meter cable and connector products.
Emerging Markets Segment
The Company's Emerging Markets segment generated revenue of $0.2 million for the three-month period ended December 31, 2023. This compares with $0.1 million from the equivalent year ago period. The Emerging Market segment has a backlog of approximately $1.8 million that will be recognized during fiscal year 2024.
Balance Sheet and Liquidity
For the three-month period ended December 31, 2023, the Company generated $2.7 million in cash and cash equivalents from operating activities. The Company used $2.7 million of cash from investing activities that included $2.6 million invested in rental equipment and $0.8 million invested in property, plant and equipment, partially offset by $.6 million in proceeds from the sale of rental equipment. As of December 31, 2023, the Company had $34.0 million in cash, cash equivalents and short-term investments, and maintained an additional borrowing availability of $14.9 million under its bank credit agreement with no borrowings outstanding. The Company additionally owns unencumbered property and real estate in both domestic and international locations. In fiscal year 2024, management anticipates a capital expenditure budget of $7.0 million including $5.0 million earmarked for additions to its rental equipment.
Conference Call Information
The Company will host a conference call to review its first quarter fiscal year 2024 financial results on February 8, 2024, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). Participants can access the call at (800) 267-6316 (US) or (203) 518-9814 (International). Please reference the conference ID: GEOSQ124 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 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.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) | ||||||||
Three Months Ended | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Revenue: | ||||||||
Products | $ | 43,714 | $ | 19,548 | ||||
Rental | 6,318 | 11,561 | ||||||
Total revenue | 50,032 | 31,109 | ||||||
Cost of revenue: | ||||||||
Products | 23,842 | 15,365 | ||||||
Rental | 3,954 | 5,210 | ||||||
Total cost of revenue | 27,796 | 20,575 | ||||||
Gross profit | 22,236 | 10,534 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 5,826 | 6,435 | ||||||
Research and development | 3,602 | 4,258 | ||||||
Provision for credit losses | (29 | ) | 120 | |||||
Total operating expenses | 9,399 | 10,813 | ||||||
Income (loss) from operations | 12,837 | (279 | ) | |||||
Other income (expense): | ||||||||
Interest expense | (56 | ) | (39 | ) | ||||
Interest income | 235 | 156 | ||||||
Foreign currency transaction gains (losses), net | (163 | ) | 107 | |||||
Other, net | (74 | ) | (12 | ) | ||||
Total other income (expense), net | (58 | ) | 212 | |||||
Income (loss) before income taxes | 12,779 | (67 | ) | |||||
Income tax expense | 100 | 30 | ||||||
Net income (loss) | $ | 12,679 | $ | (97 | ) | |||
Income (loss) per common share: | ||||||||
Basic | $ | 0.96 | $ | (0.01 | ) | |||
Diluted | $ | 0.94 | $ | (0.01 | ) | |||
Weighted average common shares outstanding: | ||||||||
Basic | 13,251,360 | 13,067,991 | ||||||
Diluted | 13,460,516 | 13,067,991 | ||||||
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands except share amounts) (unaudited) | ||||||||
December 31, 2023 | September 30, 2023 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 18,907 | $ | 18,803 | ||||
Short-term investments | 15,051 | 14,921 | ||||||
Trade accounts and note receivable, net | 41,969 | 21,373 | ||||||
Inventories, net | 21,839 | 18,430 | ||||||
Prepaid expenses and other current assets | 2,227 | 2,251 | ||||||
Total current assets | 99,993 | 75,778 | ||||||
Non-current inventories, net | 24,888 | 24,888 | ||||||
Rental equipment, net | 15,242 | 21,587 | ||||||
Property, plant and equipment, net | 24,083 | 24,048 | ||||||
Non-current trade accounts receivable | 1,510 | - | ||||||
Operating right-of-use assets | 653 | 714 | ||||||
Goodwill | 736 | 736 | ||||||
Other intangible assets, net | 4,696 | 4,805 | ||||||
Other non-current assets | 438 | 486 | ||||||
Total assets | $ | 167,383 | $ | 153,042 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable trade | $ | 6,190 | $ | 6,659 | ||||
Operating lease liabilities | 261 | 257 | ||||||
Other current liabilities | 14,161 | 12,882 | ||||||
Total current liabilities | 20,612 | 19,798 | ||||||
Non-current operating lease liabilities | 439 | 512 | ||||||
Deferred tax liabilities, net | 25 | 16 | ||||||
Total liabilities | 21,076 | 20,326 | ||||||
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; 14,159,082 and 14,030,481 shares issued, respectively; and 13,317,090 and 13,188,489 shares outstanding, respectively | 142 | 140 | ||||||
Additional paid-in capital | 96,444 | 96,040 | ||||||
Retained earnings | 74,539 | 61,860 | ||||||
Accumulated other comprehensive loss | (17,318 | ) | (17,824 | ) | ||||
Treasury stock, at cost, 841,992 shares | (7,500 | ) | (7,500 | ) | ||||
Total stockholders' equity | 146,307 | 132,716 | ||||||
Total liabilities and stockholders' equity | $ | 167,383 | $ | 153,042 | ||||
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | ||||||||
| Three Months Ended | |||||||
December 31, 2023 | December 31, 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 12,679 | $ | (97 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Deferred income tax expense (benefit) | 8 | (6 | ) | |||||
Rental equipment depreciation | 3,313 | 3,247 | ||||||
Property, plant and equipment depreciation | 822 | 1,017 | ||||||
Amortization of intangible assets | 109 | 238 | ||||||
Amortization of premiums (accretion of discounts) on short-term investments | (115 | ) | 5 | |||||
Stock-based compensation expense | 406 | 370 | ||||||
Provision for credit losses | (29 | ) | 120 | |||||
Inventory obsolescence expense | 20 | 1,380 | ||||||
Gross profit from sale of rental equipment | (19,350 | ) | (3,092 | ) | ||||
Gain on disposal of property, plant and equipment | - | (47 | ) | |||||
Effects of changes in operating assets and liabilities: | ||||||||
Trade accounts and note receivable | 8,001 | (6,846 | ) | |||||
Inventories | (4,059 | ) | (5,188 | ) | ||||
Other assets | 179 | 886 | ||||||
Accounts payable trade | (478 | ) | 1,924 | |||||
Other liabilities | 1,146 | 1,225 | ||||||
Net cash provided by (used in) operating activities | 2,652 | (4,864 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchase of property, plant and equipment | (779 | ) | (265 | ) | ||||
Proceeds from the sale of property, plant and equipment | - | 47 | ||||||
Investment in rental equipment | (2,558 | ) | (162 | ) | ||||
Proceeds from the sale of rental equipment | 597 | 622 | ||||||
Net cash provided by (used in) investing activities | (2,740 | ) | 242 | |||||
Cash flows from financing activities: | ||||||||
Payments on contingent consideration | - | (175 | ) | |||||
Net cash used in financing activities | - | (175 | ) | |||||
Effect of exchange rate changes on cash | 192 | 43 | ||||||
Increase (decrease) in cash and cash equivalents | 104 | (4,754 | ) | |||||
Cash and cash equivalents, beginning of fiscal year | 18,803 | 16,109 | ||||||
Cash and cash equivalents, end of fiscal period | $ | 18,907 | $ | 11,355 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Accounts receivable related to the sale of rental equipment | $ | 30,048 | $ | 4,505 | ||||
Inventory transferred to rental equipment | 593 | 7 | ||||||
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES SUMMARY OF SEGMENT REVENUE AND OPERATING INCOME (LOSS) (in thousands) (unaudited) | ||||||
Three Months Ended | ||||||
December 31, 2023 | December 31, 2022 | |||||
Oil and Gas Markets segment revenue: | ||||||
Traditional seismic exploration product revenue | $ | 1,763 | $ | 2,755 | ||
Wireless seismic exploration product revenue | 38,073 | 17,238 | ||||
Reservoir product revenue | 73 | 155 | ||||
39,909 | 20,148 | |||||
Adjacent Markets segment revenue: | ||||||
Industrial product revenue | 6,443 | 7,930 | ||||
Imaging product revenue | 3,372 | 2,892 | ||||
9,815 | 10,822 | |||||
Emerging Markets segment revenue: | ||||||
Border and perimeter security product revenue | 234 | 93 | ||||
Corporate | 74 | 46 | ||||
Total revenue | $ | 50,032 | $ | 31,109 | ||
Three Months Ended | ||||||||
December 31, 2023 | December 31, 2022 | |||||||
Operating income (loss): | ||||||||
Oil and Gas Markets segment | $ | 14,563 | $ | 2,406 | ||||
Adjacent Markets segment | 2,034 | 1,747 | ||||||
Emerging Markets segment | (625 | ) | (1,213 | ) | ||||
Corporate | (3,135 | ) | (3,219 | ) | ||||
Total operating income (loss) | $ | 12,837 | $ | (279 | ) | |||
Contacts
Caroline Kempf, ckempf@geospace.com, 321.341.9305
