UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 2, 2018
GEOSPACE TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number: 001-13601
Texas | 76-0447780 | |
(State or other jurisdiction of incorporation) |
(IRS Employer Identification No.) |
7007 Pinemont Drive, Houston, TX 77040
(Address of principal executive offices, including zip code)
(713) 986-4444
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On August 2, 2018, the Company issued a press release regarding its operating results for its fiscal year 2018 third quarter and nine months results. The press release is attached as Exhibit 99.1. The foregoing description of the press release is qualified by reference to such exhibit.
Item 9.01. Financial Statements and Exhibits
Exhibit 99.1 | Press Release dated August 2, 2018. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GEOSPACE TECHNOLOGIES CORPORATION | ||||||
Date: August 3, 2018 | By: | /s/ Thomas T. McEntire | ||||
Thomas T. McEntire | ||||||
Vice President, Chief Financial Officer & Secretary |
Exhibit 99.1
NEWS RELEASE
7007 Pinemont Drive
Houston, TX 77040 USA
Contact: Rick Wheeler
President and CEO
TEL: | 713.986.4444 |
FAX: | 713.986.4445 |
FOR IMMEDIATE RELEASE
GEOSPACE TECHNOLOGIES REPORTS FISCAL YEAR 2018 THIRD
QUARTER AND NINE MONTH RESULTS
Houston, Texas August 2, 2018 Geospace Technologies (NASDAQ: GEOS) today announced that it narrowed its net loss to $4.8 million, or $0.36 per diluted share, on revenue of $21.3 million for its third quarter ended June 30, 2018 compared to a net loss of $14.4 million, or $1.09 per diluted share, on revenue of $14.2 million for the third quarter of the prior year.
For the nine months ended June 30, 2018, the company recorded revenue of $55.2 million compared to revenue of $50.0 million during the prior year period. The company reported a net loss of $19.0 million, or $1.43 per diluted share compared to a net loss of $37.6 million, or $2.86 per diluted share for the year ago period.
Walter R. (Rick) Wheeler, President and CEO of Geospace Technologies said, We are very pleased to see another sequential increase in our quarterly revenue, with our third quarter revenue setting the high-mark so far for fiscal year 2018. For the quarter ended June 30, 2018 we generated a 50% increase in revenue from last years third quarter. For the nine-month period ended June 30, 2018, our revenue increased 10% over last years comparable period. The consecutive revenue growth has also resulted in our second consecutive quarter of generating a positive gross profit. This brings our year-to-date gross profit for the nine months ended June 30, 2018 to $5.7 million. In conjunction with our overall cost reduction efforts, lower inventory obsolescence charges helped to drive our positive improvements in gross profits.
Wheeler continued, Unfortunately, a significant portion of our third quarter and year-to-date financial results were negatively impacted by a $2.7 million bad debt charge reported in the third quarter. Virtually all of this charge is in association with the recently filed bankruptcy of one of our customers. Excluding the impact of bad debt charges, our operating expenses in the third quarter and nine months of this fiscal year declined by 18% and 12%, respectively.
Traditional Seismic Products
The companys traditional seismic products generated revenue of $2.6 million in the third quarter, and for the nine months ended June 30, 2018 generated revenue of $9.6 million. For the quarter, this represents a reduction of 28% from last year, and a much narrower decline of less than 3% for this years nine month period when compared to last year. The decline in both periods can be largely attributed to lower demand for the companys specialty sensor products as well as traditional products used in the marine seismic industry.
Wireless Seismic Products
Revenue from wireless seismic products totaled $7.9 million in the third quarter, almost tripling the amount reported last year. This revenue increase was almost entirely driven by an increase in OBX rentals. Despite this quarterly increase, wireless product revenue for the first nine months of the current fiscal year declined by almost 6% when compared with last years equivalent nine-month period. In examining the comparison to the prior year periods, these varied current year results reflect increasing rental income from OBX rental contracts, but are offset somewhat by lower wireless product sales. The OBX nodal marine system continues to gain expanded use in the ocean bottom seismic market, and based on existing rental contracts and quoting activity, the company expects this to continue.
Reservoir Seismic Products
For the quarter ended June 30, 2018, revenue from the companys reservoir seismic products increased 83% in comparison to last years third quarter. For the nine month period, reservoir product revenue more than doubled compared to last year. In both periods, higher service revenues along with stronger sales of borehole systems, including downhole tools from the companys rental fleet, contributed to the increases. The companys customers use these products to perform frac monitoring and borehole reservoir characterization services for oil and gas companies. While an increase in these activities has driven higher borehole product sales in recent periods, the company does not expect revenue contributions to reach the levels seen in years past unless the company receives a contract to manufacture and deliver a permanent reservoir monitoring (PRM) system. Based on managements ongoing industry discussions, an opportunity to be awarded such a contract is unlikely to occur in the next six months to a year.
Non-Seismic Products
The companys non-seismic products generated revenue totaling $8.8 million in the third quarter. This is the highest level of revenue from this segment in the companys history, and represents an increase of over 30% compared to last years third quarter. For the first nine months of the fiscal year, revenue from these products increased by almost 22% compared to the same period a year ago, reaching $23.1 million. Increasing demand for the companys water meter products was particularly strong during the three and nine-month periods with modest revenue gains also coming from the companys imaging products.
Wheeler continued, We are encouraged by the consecutive quarterly growth in our revenues. These recent contributions have resulted from increased commerce in both our seismic and non-seismic business segments. Despite these recent quarterly improvements, the modest year-to-date revenue decline we realized in our traditional and wireless seismic product lines is an indicator that there is still a lot of ground yet to be gained in the oil and gas seismic industry recovery. Revenue from these two product lines in particular is expected to remain low until depletion of existing reserves prompts additional focus on seismic exploration activities. Despite this concern, we continue to be encouraged by our overall seismic revenue growth that such an industry recovery is underway.
As we very recently announced, our acquisition of Quantum Technology Sciences represents a strategic effort to further expand Geospaces core seismic engineering and manufacturing competencies into the border, critical infrastructure and perimeter security markets. We believe Quantums highly unique seismic analytic software technology and existing products are rapidly gaining recognition in these important industries. In future course, our planned efforts include the blending of our technologies to incorporate Quantums innovative analytic solutions with our ruggedized large channel count PRM data acquisition system designs. In this accomplishment, we expect to provide new products of incomparable functionality for markets focused on homeland security and the protection of borders and critical infrastructure.
Wheeler concluded, Our balance sheet as of June 30, 2018 remained debt free and included $39.6 million in cash and short-term securities as well as $21.9 million of borrowings available under our credit facility. After the $4.4 million cash down payment related to the acquisition of Quantum, we believe our remaining liquidity and debt free status continue to reflect an extremely strong financial position. We also believe that this financial strength in conjunction with a calculated exploitation of broader markets for our seismic technologies provides significant opportunities for the companys growth and diversification in the coming years.
Conference Call Information
Geospace Technologies will host a conference call to review its fiscal year 2018 third quarter and nine month financial results on August 3, 2018, at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can access the call at (866) 831-8713 (US) or (203) 518-9713 (International). Please reference the conference ID: GEOSQ318 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. Through its acquisition of Quantum Technology Sciences, the company designs and manufactures instruments, equipment and analytical software used in the border and perimeter security industry for the protection of borders and critical infrastructure. The company also designs and manufactures non-seismic products, including industrial products, offshore cables and imaging equipment.
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 results and success of our transactions with Quantum, 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, the failure of the Quantum transaction to yield positive operating results, 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, lack of further orders for our OBX systems, failure of our non-seismic products to be adopted by the border and security perimeter market, infringement or failure to protect intellectual property, 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 | Nine Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Revenue: |
||||||||||||||||
Products |
$ | 13,417 | $ | 12,888 | $ | 40,886 | $ | 37,960 | ||||||||
Rental equipment |
7,853 | 1,307 | 14,275 | 12,078 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
21,270 | 14,195 | 55,161 | 50,038 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of revenue: |
||||||||||||||||
Products |
13,011 | 15,489 | 40,459 | 49,124 | ||||||||||||
Rental equipment |
3,582 | 3,818 | 8,994 | 11,911 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cost of revenue |
16,593 | 19,307 | 49,453 | 61,035 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit (loss) |
4,677 | (5,112 | ) | 5,708 | (10,997 | ) | ||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative |
4,551 | 4,972 | 14,465 | 15,092 | ||||||||||||
Research and development |
2,537 | 3,674 | 8,125 | 10,458 | ||||||||||||
Bad debt expense (recovery) |
2,725 | 16 | 3,081 | (402 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
9,813 | 8,662 | 25,671 | 25,148 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(5,136 | ) | (13,774 | ) | (19,963 | ) | (36,145 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other income (expense): |
||||||||||||||||
Interest expense |
(94 | ) | (8 | ) | (285 | ) | (24 | ) | ||||||||
Interest income |
257 | 185 | 799 | 453 | ||||||||||||
Foreign exchange gains (losses), net |
264 | (120 | ) | (85 | ) | (401 | ) | |||||||||
Other, net |
(34 | ) | (11 | ) | (88 | ) | (44 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expense, net |
393 | 46 | 341 | (16 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
(4,743 | ) | (13,728 | ) | (19,622 | ) | (36,161 | ) | ||||||||
Income tax expense (benefit) |
53 | 648 | (617 | ) | 1,423 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (4,796 | ) | $ | (14,376 | ) | $ | (19,005 | ) | $ | (37,584 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Loss per common share: |
||||||||||||||||
Basic |
$ | (0.36 | ) | $ | (1.09 | ) | $ | (1.43 | ) | $ | (2.86 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | (0.36 | ) | $ | (1.09 | ) | $ | (1.43 | ) | $ | (2.86 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
13,266,316 | 13,147,016 | 13,244,242 | 13,129,196 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
13,266,316 | 13,147,016 | 13,244,242 | 13,129,196 | ||||||||||||
|
|
|
|
|
|
|
|
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
June 30, 2018 |
September 30, 2017 |
|||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 12,550 | $ | 15,092 | ||||
Short-term investments |
27,014 | 36,137 | ||||||
Trade accounts receivable, net |
11,150 | 9,435 | ||||||
Financing receivables |
5,031 | 3,055 | ||||||
Income tax receivable |
9 | 273 | ||||||
Inventories |
18,959 | 20,752 | ||||||
Prepaid expenses and other current assets |
3,014 | 1,623 | ||||||
|
|
|
|
|||||
Total current assets |
77,727 | 86,367 | ||||||
Rental equipment, net |
34,345 | 16,462 | ||||||
Property, plant and equipment, net |
34,173 | 37,399 | ||||||
Non-current inventories |
35,355 | 55,935 | ||||||
Deferred income tax assets, net |
287 | 259 | ||||||
Non-current financing receivables, net |
5,513 | 8,195 | ||||||
Prepaid income taxes |
57 | 450 | ||||||
Other assets |
213 | 629 | ||||||
|
|
|
|
|||||
Total assets |
$ | 187,670 | $ | 205,696 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable trade |
$ | 4,033 | $ | 2,599 | ||||
Accrued expenses and other current liabilities |
5,359 | 6,338 | ||||||
Deferred revenue |
982 | 1,568 | ||||||
Income tax payable |
8 | | ||||||
|
|
|
|
|||||
Total current liabilities |
10,382 | 10,505 | ||||||
Deferred income tax liabilities |
45 | 37 | ||||||
|
|
|
|
|||||
Total liabilities |
10,427 | 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, 13,576,041 and 13,438,316 shares issued and outstanding |
136 | 134 | ||||||
Additional paid-in capital |
85,593 | 83,733 | ||||||
Retained earnings |
106,161 | 125,517 | ||||||
Accumulated other comprehensive loss |
(14,647 | ) | (14,230 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
177,243 | 195,154 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 187,670 | $ | 205,696 | ||||
|
|
|
|
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended | ||||||||
June 30, 2018 |
June 30, 2017 |
|||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (19,005 | ) | $ | (37,584 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Deferred income tax benefit |
(37 | ) | (25 | ) | ||||
Rental equipment depreciation |
7,475 | 9,858 | ||||||
Property, plant and equipment depreciation |
3,105 | 3,930 | ||||||
Impairment of long-lived assets |
488 | | ||||||
Accretion of discounts on short-term investments |
31 | 45 | ||||||
Stock-based compensation expense |
1,833 | 4,289 | ||||||
Bad debt expense (recovery) |
3,081 | (402 | ) | |||||
Inventory obsolescence expense |
4,001 | 12,111 | ||||||
Gross profit from sale of used rental equipment |
(4,966 | ) | (2,650 | ) | ||||
Gain on disposal of property, plant and equipment |
(25 | ) | | |||||
Realized loss on short-term investments |
1 | 2 | ||||||
Effects of changes in operating assets and liabilities: |
||||||||
Trade accounts receivable |
(3,932 | ) | 8,871 | |||||
Income tax receivable |
262 | 12,847 | ||||||
Inventories |
(5,702 | ) | 1,208 | |||||
Prepaid expenses and other current assets |
(1,186 | ) | 459 | |||||
Prepaid income taxes |
41 | 1,156 | ||||||
Accounts payable trade |
1,437 | (77 | ) | |||||
Accrued expenses and other |
505 | (2,033 | ) | |||||
Deferred revenue |
512 | 119 | ||||||
Income tax payable |
8 | (117 | ) | |||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
(12,073 | ) | 12,007 | |||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchase of property, plant and equipment |
(1,005 | ) | (588 | ) | ||||
Proceeds from sale of property and equipment |
200 | | ||||||
Investment in rental equipment |
(2,511 | ) | (299 | ) | ||||
Proceeds from the sale of used rental equipment |
4,333 | 4,424 | ||||||
Purchases of short-term investments |
(11,162 | ) | (16,042 | ) | ||||
Proceeds from the sale of short-term investments |
20,163 | 6,991 | ||||||
Payments for damages related to insurance claim |
(1,970 | ) | | |||||
Proceeds from insurance claim |
900 | | ||||||
Increase in insurance claim receivable |
849 | | ||||||
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
9,797 | (5,514 | ) | |||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from the exercise of stock options |
19 | 50 | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
19 | 50 | ||||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
(285 | ) | 272 | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(2,542 | ) | 6,815 | |||||
Cash and cash equivalents, beginning of fiscal year |
15,092 | 10,262 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of fiscal period |
$ | 12,550 | $ | 17,077 | ||||
|
|
|
|
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT REVENUE AND OPERATING LOSS
(in thousands)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, 2018 |
June 30, 2017 |
June 30, 2018 |
June 30, 2017 |
|||||||||||||
Seismic segment revenue: |
||||||||||||||||
Traditional exploration products |
$ | 2,582 | $ | 3,604 | $ | 9,559 | $ | 9,811 | ||||||||
Wireless exploration products |
7,890 | 2,681 | 17,560 | 18,605 | ||||||||||||
Reservoir products |
1,873 | 1,023 | 4,552 | 2,242 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
12,345 | 7,308 | 31,671 | 30,658 | |||||||||||||
Non-Seismic segment revenue: |
||||||||||||||||
Industrial product revenue |
5,674 | 3,873 | 14,061 | 10,253 | ||||||||||||
Imaging product revenue |
3,104 | 2,868 | 8,997 | 8,692 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
8,778 | 6,741 | 23,058 | 18,945 | |||||||||||||
Corporate |
147 | 146 | 432 | 435 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
$ | 21,270 | $ | 14,195 | $ | 55,161 | $ | 50,038 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
June 30, 2018 |
June 30, 2017 |
June 30, 2018 |
June 30, 2017 |
|||||||||||||
Operating income (loss): |
||||||||||||||||
Seismic segment |
$ | (4,122 | ) | $ | (11,972 | ) | $ | (15,552 | ) | $ | (30,581 | ) | ||||
Non-seismic segment |
1,428 | 1,004 | 3,841 | 3,108 | ||||||||||||
Corporate |
(2,442 | ) | (2,806 | ) | (8,252 | ) | (8,672 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating loss |
$ | (5,136 | ) | $ | (13,774 | ) | $ | (19,963 | ) | $ | (36,145 | ) | ||||
|
|
|
|
|
|
|
|