NEWS

Geospace Technologies Corporation (NASDAQ: GEOS) (“the “Company”) today announced net income of $12.2 million, or $0.92 per diluted share, on revenue of $124.5 million for its fiscal year ended September 30, 2023.  This compares with a net loss of $22.9 million, or ($1.76) per diluted share, on revenue of $89.3 million for the comparable year-ago period.

For the fourth quarter ended September 30, 2023, Geospace Technologies (the “Company”) reported revenue of $29.3 million and net income of $4.4 million, or $0.33 per diluted share.   For the comparable period last year, the Company recorded revenue of $25.9 million and a net loss of $8.0 million, or ($0.62) per diluted share.

Management’s Comments
Walter R. (“Rick”) Wheeler, President and CEO of the Company said, “We’re incredibly pleased to announce yet another quarter of positive earnings to our shareholders. Combined with the successful quarters earlier in the year, fiscal year 2023 closed with an overall net income of $12.2 million. Moreover, revenue for the full year of $124.5 million represents the largest figure recorded since 2014. Our improved performance is the result of accelerated efforts by our dedicated employees in reducing costs and streamlining operations, as well as better market conditions for our products in both the Oil and Gas and Adjacent Markets segments. Increases in utilization and rentals of our OBX ocean bottom nodes were the largest revenue driver in fiscal year 2023. In fact, the company’s total revenue from rentals more than doubled from last year’s figure. Our conservative management and preservation of a strong balance sheet with zero debt has given us the essential tools necessary to maintain leadership in technology innovations, even in depressed markets. We believe this has strengthened our ability to take advantage of improving market conditions and will continue to do so in the future. This is strongly evidenced by recent developments in our Oil and Gas Markets segment. In the fourth quarter, we announced a $3 million rental agreement for our highly advanced Mariner™ product, a shallow water seabed seismic data acquisition node. In addition, we announced a $5.7 million contract with an international seismic company for specialized geophones designed for use in their proprietary system. Prior to both of these announcements was one in June of a $20 million rental contract for our Mariner ocean bottom nodes. The delivery of this system is expected to complete in the next few weeks with the rental term commencing thereafter. Although gaps are expected to occur in some of our OBX rental contracts, we anticipate the ocean bottom node market will remain strong over the coming fiscal year.

Results from our Adjacent Markets segment proved equally compelling as total revenue for the fourth quarter and full fiscal year ending September 30, 2023, came in at $10.6 and $49.0 million respectively. The full year amount for the segment sets yet another new record. Our efforts toward revenue diversification have seen some success in the Adjacent Markets segment where several new records were set over the course of fiscal year 2023. The outstanding industrial product performance this year stems largely from greater demand for our water meter cables and connectors, which were the largest factor in pushing overall revenue growth of the segment 25% over last year’s result.

The Company’s Emerging Markets segment generated $0.8 million in the fourth quarter and $1.2 million over the full 2023 fiscal year. During the second fiscal quarter, we announced a $1.5 million contract with the Defense Advanced Projects Research Agency, otherwise known as DARPA. The contract is a Phase II Small Business Innovative Research (SBIR) contract to explore a new SADAR capability designed to monitor energy sources of interest on nearby land, water and air environments. Revenue over the course of the fiscal year includes amounts derived from this contract as well as fulfillment of a separate unrelated contract with a major defense contractor. We continue to explore further opportunities for contracts with DARPA and other governmental agencies as well as new private sector applications for SADAR and Quantum’s analytics in the energy transition market.

Complementing our operational success in fiscal year 2023 were substantive gains on the Company’s balance sheet. In addition to increasing stockholder equity by more than $11 million, we ended fiscal 2023, with a total of $33.7 million in cash, cash equivalents and short-term investments. We further maintained an additional borrowing availability of $13.1 million under an unused bank credit agreement with no borrowings outstanding.  As a result, our total liquidity, as of September 30, 2023, was $46.8 million. In addition, we wholly own unencumbered properties and real estate in both domestic and international locations.

As our new fiscal year begins, we’re enthusiastic about the plans we have in motion to continue our profitability. While the variability of our seismic industry contracts may result in uneven quarterly revenue in the coming year, we remain encouraged by the volume of planned exploration activity. Further, we intend to regularly evaluate each business segment where those efforts are focused on driving revenue opportunities while assessing additional areas where costs can be reduced. We believe our strong balance sheet and technological leadership will be pivotal to our success in fiscal year 2024.”

Oil and Gas Markets Segment

Revenue from the Company’s Oil and Gas Markets segment totaled $17.8 million for the three months ended September 30, 2023.  This compares to $14.8 million in revenue, an increase of 20% for the same period a year ago.   For the fiscal year, revenue from this segment totaled $74.0 million versus $49.1 million for the same prior year period.  The increase for the three-month period is due to higher utilization of our ocean bottom node rental fleet, higher demand for our wireless seismic products and increased sales of our marine products.  The twelve-month increase in revenue is due to higher utilization of our ocean bottom node rental fleet and sales of our seismic sensors and marine products.

Revenue from the Company’s traditional exploration products totaled $2.7 million and $12.2 million respectively for the three-month and twelve-month periods ended September 30, 2023.  This compares to $3.2 million and $6.6 million, respectively to the same periods a year ago.

Revenue from the Company’s wireless seismic products totaled $14.9 million and $61.5 million respectively for the three- and twelve-month periods ended September 30, 2023. This equates to a 33% increase and a 50% increase compared to the corresponding respective year ago periods.

The Company’s reservoir seismic products generated $0.2 million and $1.0 million in total revenue for the three-month and full year periods ended September 30, 2023. This compares with $0.5 million and $1.9 million for the equivalent periods one year earlier.

Adjacent Markets Segment

Revenue from the Company’s Adjacent Markets segment totaled $10.6 million and $49.0 million for the three- and twelve-month periods ended September 30, 2023. This compares with $10.9 million and $39.2 million for the equivalent year ago periods. The slight decrease for the three-month period is due to essentially the same sales of the Company’s smart water meter cable and connector products partially attributable to decreased sales of seismic sensors to industrial customers, lower demand for the Company’s contract manufacturing services and imaging products.  The increase in the 12-months period is the result of increased sales of the Company’s smart water meter cable and connector products, increased sales of seismic sensors to industrial customers, partially offset by lower demand for contract manufacturing services and imaging products.

Emerging Markets Segment

The Company’s Emerging Markets segment generated revenue of $0.8 million and $1.2 million for the three-month and full year periods ended September 30, 2023. This compares with $0.1 million and $0.7 million for the similar three- and twelve-month periods of the previous year. The Emerging Market segment has a backlog of approximately $2.0 million that will be recognized in fiscal year 2024.

Balance Sheet and Liquidity

For the fiscal year ended September 30, 2023, the Company generated $15.6 million in cash and cash equivalents from operating activities. The Company used $11.9 million of cash from investing activities with sources of cash that included $11.5 million in proceeds from the sale of rental equipment, and $4.4 million for net sales of property, plant and equipment.  These sources of cash were partially offset by net disbursements of$13.9 million for purchases of short-term investments, $9.9 million for additions to our rental fleet and $4.0 million in the purchase of property, plant and equipment.   As of September 30, 2023, the Company had $33.7 million in cash, cash equivalents and short-term investments, and maintained an additional borrowing availability of $13.1 million under its bank credit agreement with no borrowings outstanding.  In fiscal year 2024, management anticipates a capital expenditure budget of $13 million including $9 million earmarked for additions to its rental equipment.

Conference Call Information

Geospace Technologies will host a conference call to review its fourth quarter and fiscal year 2023 financial results on November 17, 2023, at 10:00 a.m. Eastern Time (9 a.m. Central).  Participants can access the call at (800) 225-9448 (US) or (203) 518-9848 (International).  Please reference the conference ID:  GEOSQ423 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 our website at 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, potential impact of the ongoing armed conflict between Russia and Ukraine,  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													Year Ended
		September 30, 2023						September 30, 2022							September 30, 2023							September 30, 2022
Revenue:
Products		$	16,357						$	16,049						$	73,333						$	64,109
Rental			12,958							9,822							51,176							25,144
Total revenue			29,315							25,871							124,509							89,253
Cost of revenue:
Products			12,053							14,339							55,136							51,649
Rental			3,047							5,652							17,683							19,561
Total cost of revenue			15,087							19,991							72,819							71,210
Gross profit			14,228							5,880							51,690							18,043
Operating expenses:
Selling, general and administrative			6,475							5,374							25,952							23,482
Research and development			3,766							4,054							15,863							18,104
Goodwill impairment			—							4,336							—							4,336
Change in estimated fair value of contingent consideration			—							7							—							(5,035		)
Bad debt expense (recovery)			(97		)					176							(138		)					292
Total operating expenses			10,144							13,947							41,677							41,179
Gain on disposal of property			—							—							1,315							—
Income (loss) from operations			4,084							(8,067		)					11,328							(23,136		)
Other income (expense):
Interest expense			(34		)					(39		)					(134		)					(65)
Interest income			168							253							539							976
Foreign currency transaction gains (losses), net			401							(168		)					994							(22		)
Other, net			(86		)					(15		)					(158		)					(39		)
Total other income, net			449							30							1,241							453
Income (loss) before income taxes			4,533							(8,037		)					12,569							(22,683		)
Income tax expense			95							3							363							173
Net income (loss)		$	4,438						$	(8,040		)				$	12,206						$	(22,856		)
Income (loss) per common share:
Basic		$	0.34						$	(0.62		)				$	0.93						$	(1.76		)
Diluted		$	0.33						$	(0.62		)				$	0.92						$	(1.76		)
Weighted average common shares outstanding:
Basic			13,188,489							13,020,191							13,146,085							12,987,996
Diluted			13,399,442							13,020,191							13,215,066							12,987,996

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

		AS OF SEPTEMBER 30,
		2023				2022
ASSETS
Current assets:
Cash and cash equivalents		$	18,803			$	16,109
Short-term investments			14,921				894
Trade accounts and notes receivable, net			21,373				20,886
Inventories, net			18,430				19,995
Prepaid expenses and other current assets			2,251				2,077
Total current assets			75,778				59,961
Non-current inventories, net			24,888				12,526
Rental equipment, net			21,587				28,199
Property, plant and equipment, net			24,048				26,598
Operating right-of-use assets			714				957
Goodwill			736				736
Other intangible assets, net			4,805				5,573
Other non-current assets			486				506
Total assets		$	153,042			$	135,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade		$	6,659			$	5,595
Contingent consideration			—				175
Operating lease liabilities			257				241
Other current liabilities			12,882				6,616
Total current liabilities			19,798				12,627
Non-current operating lease liabilities			512				769
Deferred tax liabilities, net			16				13
Total liabilities			20,326				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, 14,030,481 and 13,863,233 shares issued, respectively; and 13,188,489 and 13,021,241 shares outstanding, respectively			140				139
Additional paid-in capital			96,040				94,667
Retained earnings			61,860				49,654
Accumulated other comprehensive loss			(17,824	)			(15,313	)
Treasury stock, at cost, 841,992 shares			(7,500	)			(7,500	)
Total stockholders’ equity			132,716				121,647
Total liabilities and stockholders’ equity		$	153,042			$	135,056

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

		YEAR ENDED SEPTEMBER 30,
		2023				2022
Cash flows from operating activities:
Net income (loss)		$	12,206			$	(22,856	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred income tax expense (benefit)			3				(17	)
Rental equipment depreciation			11,766				13,740
Property, plant and equipment depreciation			3,704				4,143
Amortization of intangible assets			768				1,677
Goodwill impairment expense			—				4,336
Property, plant and equipment impairment expense			—				401
Amortization of premiums (accretion of discounts) on short-term investments			(144	)			96
Stock-based compensation expense			1,374				1,734
Bad debt expense (recovery)			(138	)			292
Inventory obsolescence expense			2,229				3,222
Change in estimated fair value of contingent consideration			—				(5,035	)
Gross profit from sale of used rental equipment			(4,424	)			(11,061	)
Loss (gain) on disposal of equipment			244				(54	)
Gain on disposal of property			(1,315	)			—
Realized loss on short-term investments			—				—
Realized foreign currency translation loss from dissolution of foreign subsidiary			38				22
Effects of changes in operating assets and liabilities:
Trade accounts and notes receivable			(5,561	)			1,751
Unbilled receivables			—				1,051
Inventories			(11,026	)			(2,357	)
Other assets			442				349
Accounts payable trade			41				(786	)
Other liabilities			5,351				(683	)
Net cash used provided by (used in) operating activities			15,558				(10,035	)
Cash flows from investing activities:
Purchase of property, plant and equipment			(3,964	)			(1,130	)
Investment in rental equipment			(9,920	)			(4,832	)
Proceeds from the sale of equipment			724				54
Proceeds from the sale of property			3,682				—
Proceeds from the sale of used rental equipment			11,478				11,583
Purchase of short-term investments			(24,782	)			(450	)
Proceeds from the sale of short-term investments			10,900				8,924
Net cash provided by (used in) investing activities			(11,882	)			14,149
Cash flows from financing activities:
Payments of contingent consideration			(175	)			(807	)
Debt issuance costs			(350	)			(211	)
Purchase of treasury stock			—				(695	)
Net cash used in financing activities			(525	)			(1,713	)
Effect of exchange rate changes on cash			(457	)			(358	)
Increase in cash and cash equivalents			2,694				2,043
Cash and cash equivalents, beginning of fiscal year			16,109				14,066
Cash and cash equivalents, end of fiscal year		$	18,803			$	16,109

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT REVENUE AND OPERATING INCOME (LOSS)

(in thousands)

(unaudited)

 

		Three Months Ended						Year Ended
		September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Oil and Gas Markets
Traditional seismic exploration product revenue			$            2,674			$            3,169			$        12,183			$        6,597
Wireless seismic exploration product revenue			14,928			11,200			60,848			40,667
Reservoir product revenue			152			455			962			1,877
			17,754			14,824			73,993			49,141
Adjacent Markets segment revenue:
Industrial product revenue			7,609			7,169			36,859			25,640
Imaging product revenue			3,038			3,690			12,180			13,531
			10,647			10,859			49,039			39,171
Emerging Markets segment revenue:
Border and perimeter security product revenue			841			140			1,234			711
Corporate			73			48			243			230
Total revenue			$       29,315			$       25,871			$     124,509			$     89,253

 

 

 

		Three Months Ended						Nine Months Ended
		September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Operating income (loss):
Oil and Gas Markets segment			$        5,939			$       (1,330)			$    15,759			$     (7,539)
Adjacent Markets segment			2,342			1,680			11,490			6,021
Emerging Markets segment			(736)			(5,519)			(4,003)			(9,128)
Corporate			(3,461)			(2,898)			(11,918)			(12,490)
Total operating income (loss)			$        4,084			$       (8,067)			$    11,328			$   (23,136)