Geospace Technologies Reports Fiscal Year 2018 First Quarter Results

HOUSTON--()--Geospace Technologies (NASDAQ: GEOS) today announced a net loss of $9.5 million, or $0.72 per diluted share, on revenue of $14.6 million for its first quarter ended December 31, 2017. This compares with a net loss of $11.7 million, or $0.89 per diluted share, on revenue of $15.3 million for the prior year.

Walter R. ("Rick") Wheeler, President and CEO of Geospace Technologies, said, "Our first quarter revenue of $14.6 million represents a decrease of 4% from last year’s first quarter. Notwithstanding a $3.8 million reduction in rental revenue and a $0.3 million portion of termination costs included in our cost of goods sold, we experienced an improvement in our first quarter gross profit margins. The improvement over last year primarily resulted from the sale of 14,000 single-channel GSX stations from our rental fleet to an international seismic contractor and a $2.7 million reduction in inventory obsolescence expense. Demand for product sales and rental continues to be inconsistent from quarter to quarter, and we expect this trend to continue while worldwide oil and gas exploration efforts remain subdued.

“Setting aside bad debt expense for comparison purposes, operating expenses for the first quarter were $8.3 million, down from $8.5 million last year. Operating expenses in the current quarter would have been even lower were it not for the remaining $0.4 million portion of one-time termination costs associated with our recent workforce reduction. Going forward, we expect that the workforce reductions implemented will generate an annualized cash savings of approximately $6 million, impacting both cost of goods sold and operating expenses. Despite the loss for the quarter, our balance sheet as of December 31, 2017 remains debt free and includes $46 million of cash, cash equivalents, and short term investments. Together with a borrowing availability of $26.3 million, our total liquidity at the end of the quarter was $72.3 million.”

“In the first quarter ended December 31, 2017, revenue from our traditional seismic products totaled $3.8 million, reflecting an increase of $1.2 million or 47% when compared to the first quarter of last year. The increased revenue is a direct result of the sale of geophone sensors from our rental fleet. If we begin to see seismic exploration activities increase in response to higher crude oil prices and if existing oversupplies of traditional seismic equipment are consumed, we can expect an overall improvement in revenue from our traditional products, albeit lumpy as sales in recent quarters have demonstrated.”

“Our wireless seismic products generated revenue of $3.6 million in the first quarter. This is a decrease of $2.7 million, or 43% from the corresponding period a year ago. In last year’s first quarter, revenue was boosted by a performing rental contract for our marine OBX products, whereas the first quarter of this fiscal year did not have any significant OBX rentals. However, the difference was partially offset by the sale in this quarter of 14,000 single-channel GSX stations. We believe that the recent sales of our wireless products in an otherwise tough seismic market are a testament to the optimum utility they can provide to our customers.”

“Total revenue from our reservoir seismic products in the first quarter was $0.6 million compared with $0.5 million for the same three month period last year. Revenue for both periods was primarily driven by the sale, repair, and rental of our borehole seismic tools. The differences in revenue across these periods are within typical variances of an overall flat demand for these products. Revenue from this segment is expected to remain essentially unchanged absent any revenue from PRM systems, which is not expected in the foreseeable future.”

“Our non-seismic business segment produced $6.5 million of revenue in the three months ended December 31, 2017. This is an increase of 13% compared to last year’s first quarter. Within this segment, the largest increase in revenue over last year came from our industrial products, which grew 19% to $3.7 million. Year-over-year revenue from our imaging products in the first quarter also increased a modest 5% to $2.8 million. Compared to last year’s fourth quarter, revenue from our non-seismic segment decreased by 9%, which can be partially attributed to a certain level of seasonality impacting our industrial product revenue. However, we continue to expect revenue from these products to incrementally grow as their use within the industry expands.”

“Oil prices have come a long way since their $30 low point two years ago and much of the volatility seen in the past has abated for now. As a result, many oil companies have reported at least an intention to increase capital spending, although rather conservatively in most cases. While certainly encouraging, examination shows that a majority of these increases are earmarked for production related expenditures and not directed toward new exploration efforts. Because of this, the seismic industry will continue to face struggles because the amount of services and equipment available in the marketplace to acquire seismic data far exceeds the amount that current levels of exploration work can sustain. In most respects, this further translates to an existing oversupply of seismic equipment and instrumentation, which in effect reduces demand for many of our products. We believe that the current low level of exploration being funded by oil and gas companies is insufficient to provide them with a sustainable future of production opportunities. The implication is that exploration efforts will eventually need to increase, even though there is no real clarity regarding the timeline of improvement. We believe that our genuine commitment to our customers and our dedication to embed quality, innovation, and efficiency into our products help cement a position of leadership and preference in our industry. This, in conjunction with our strong balance sheet and conservative cost conscious management, gives us a sound footing to both endure the current market conditions and to benefit in their recovery.”

Conference Call Information

Geospace Technologies will host a conference call to review its fiscal year 2018 first quarter financial results on February 7, 2018, at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can access the call at (203) 518-9797 (US) or (866) 518-6930 (International). Please reference the conference ID: GEOSQ118 prior to the start of the conference call. A replay will be available for approximately 60 days and may be accessed through the Investor tab of our website at www.geospace.com.

About Geospace Technologies

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The company also designs and manufactures non-seismic products, including industrial products, offshore cables, thermal printing equipment and film.

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 and sale of our products in various geographic regions, anticipated levels of capital expenditures and the sources of funding therefore, 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” and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are on file with the Securities and Exchange Commission, 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, decreases in commodity price levels, 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, and any negative impact from our restatement of our financial statements regarding current assets. The occurrence of the events described in these risk factors and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q 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
December 31, 2017   December 31, 2016
Revenue:
Products $ 13,425 $ 10,297
Rental equipment   1,219   4,988
Total revenue   14,644   15,285
Cost of revenue:
Products 13,243 14,836
Rental equipment   2,369   3,776
Total cost of revenue   15,612   18,612
 
Gross profit (loss) (968 ) (3,327 )
Operating expenses:
Selling, general and administrative 5,129 5,094
Research and development 3,158 3,372
Bad debt expense (recovery)   350   (482 )
Total operating expenses   8,637   7,984
 
Loss from operations   (9,605 )   (11,311 )
 
Other income (expense):
Interest expense (64 ) (8 )
Interest income 263 130
Foreign exchange losses, net (43 ) (65 )
Other, net   (25 )   (17 )
Total other income, net   131   40
 
Loss before income taxes (9,474 ) (11,271 )
Income tax expense   6   434
Net loss $ (9,480 ) $ (11,705 )
 
Loss per common share:
Basic $ (0.72 ) $ (0.89 )
Diluted $ (0.72 ) $ (0.89 )
 
Weighted average common shares outstanding:
Basic   13,202,384   13,094,809
Diluted   13,202,384   13,094,809
   

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 
December 31, 2017 September 30, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 13,923 $ 15,092
Short-term investments 32,085 36,137
Trade accounts receivable, net 7,011 9,435
Financing receivables 5,793 3,055
Income tax receivable 263 273
Inventories 19,994 20,752
Prepaid expenses and other current assets   1,939   1,623
Total current assets 81,008 86,367
 
Rental equipment, net 15,542 16,462
Property, plant and equipment, net 36,475 37,399
Non-current inventories 56,184 55,935
Deferred income tax assets, net 305 259
Non-current financing receivables, net 7,032 8,195
Prepaid income taxes 56 450
Other assets   619   629
Total assets $ 197,221 $ 205,696
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade $ 3,322 $ 2,599
Accrued expenses and other current liabilities 6,516 6,338
Deferred revenue   1,461   1,568
Total current liabilities 11,299 10,505
 
Deferred income tax liabilities   29   37
Total liabilities   11,328   10,542
 
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, 13,560,291 and 13,438,316 shares issued and outstanding 136 134
Additional paid-in capital 84,557 83,733
Retained earnings 115,686 125,517
Accumulated other comprehensive loss   (14,486 )   (14,230 )
Total stockholders’ equity   185,893   195,154
Total liabilities and stockholders’ equity $ 197,221 $ 205,696
 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
Three Months Ended
December 31, 2017   December 31, 2016
Cash flows from operating activities:
Net loss $ (9,480 ) $ (11,705 )
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income tax expense (benefit) (55 ) 34
Rental equipment depreciation 2,247 3,308
Property, plant and equipment depreciation 1,095 1,313
Accretion of discounts on short-term investments 13 16
Stock-based compensation expense 826 1,375
Bad debt expense (recovery) 350 (482 )
Inventory obsolescence expense 1,434 4,147
Gross profit from sale of used rental equipment (2,566 ) (1,201 )
Realized loss on short-term investments 1
Effects of changes in operating assets and liabilities:
Trade accounts receivable 2,562 2,312
Income tax receivable 10
Inventories (2,865 ) (1,507 )
Prepaid expenses and other current assets (329 ) (39 )
Prepaid income taxes 41 393
Accounts payable trade 723 (348 )
Accrued expenses and other 267 (257 )
Deferred revenue (65 ) 771
Income tax payable     (31 )
Net cash used in operating activities   (5,792 )   (1,900 )
 
Cash flows from investing activities:
Purchase of property, plant and equipment (218 ) (106 )
Proceeds from the sale of used rental equipment 997 1,915
Purchases of short-term investments (1,905 )
Proceeds from the sale of short-term investments   5,898   2,674
Net cash provided by investing activities   4,772   4,483
 
Cash flows from financing activities:
Proceeds from the exercise of stock options     50
Net cash provided by financing activities     50
 
Effect of exchange rate changes on cash   (149 )   (101 )
Increase (decrease) in cash and cash equivalents (1,169 ) 2,532
Cash and cash equivalents, beginning of fiscal year   15,092   10,262
Cash and cash equivalents, end of fiscal period $ 13,923 $ 12,794
       

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

 

SUMMARY OF SEGMENT REVENUE AND OPERATING LOSS

(in thousands)

(unaudited)

 
Three Months Ended
December 31, 2017   December 31, 2016
Seismic segment revenue:    
Traditional exploration products $ 3,790 $ 2,570
Wireless exploration products 3,631 6,323
Reservoir products   618     513  
  8,039     9,406  
 
Non-Seismic segment revenue:
Industrial product revenue 3,676 3,079
Imaging product revenue   2,778     2,657  
  6,454     5,736  
 
Corporate   151     143  
Total revenue $ 14,644   $ 15,285  
 
 
Three Months Ended
December 31, 2017 December 31, 2016
Operating income (loss):
Seismic segment $ (7,673 ) $ (9,453 )
Non-seismic segment 1,029 1,052
Corporate   (2,961 )   (2,910 )
Total operating loss $ (9,605 ) $ (11,311 )

Contacts

Geospace Technologies Corporation
Rick Wheeler, 713.986.4444
President and CEO

Contacts

Geospace Technologies Corporation
Rick Wheeler, 713.986.4444
President and CEO