0000866609-19-000074.txt : 20190801 0000866609-19-000074.hdr.sgml : 20190801 20190801090106 ACCESSION NUMBER: 0000866609-19-000074 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20190731 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190801 DATE AS OF CHANGE: 20190801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ION GEOPHYSICAL CORP CENTRAL INDEX KEY: 0000866609 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 222286646 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12691 FILM NUMBER: 19991219 BUSINESS ADDRESS: STREET 1: 2105 CITYWEST BLVD STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 770422855 BUSINESS PHONE: 2819333339 MAIL ADDRESS: STREET 1: 2105 CITYWEST BLVD STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 770422855 FORMER COMPANY: FORMER CONFORMED NAME: INPUT OUTPUT INC DATE OF NAME CHANGE: 19930328 8-K 1 a8k-2019xq2xearnings.htm 8-K Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): July 31, 2019

ION Geophysical Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-12691
(Commission file number)
22-2286646
(I.R.S. Employer Identification No.)

2105 CityWest Blvd, Suite 100
Houston, Texas 77042-2839
(Address of principal executive offices, including Zip Code)

(281) 933-3339
(Registrant’s telephone number, including area code)

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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
IO
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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 July 31, 2019, ION Geophysical Corporation (the “Company”) issued a press release containing information regarding the Company’s results of operations for the quarter ended June 30, 2019. A copy of the press release is furnished as Exhibit 99.1 hereto.
    
Item 7.01.    Regulation FD Disclosure
In conjunction with the above press release, the Company has scheduled a conference call, which will be broadcast live over the Internet, for Thursday, August 1, at 10:00 a.m. Eastern Time (9:00 a.m. Central). The information for accessing the conference call is included in the press release. The webcast of the conference call will be accompanied by a slide presentation, which can be accessed from the ION home page in the Investor Relations section of the ION website by 9:00 a.m eastern time.
The information contained in Items 2.02, and 7.01 and the exhibits of this report (i) is not to be considered “filed” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (ii) shall not be incorporated by reference into any previous or future filings made by or to be made by the Company with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
The information herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include information and other statements that are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the risks associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased demand; changes in oil prices; and political, execution, regulatory, and currency risks. These risks and uncertainties also include risks associated with the WesternGeco litigation and other related proceedings. We cannot predict the outcome of this litigation or the related proceedings.  For additional information regarding these various risks and uncertainties, including the WesternGeco litigation, see our Form 10-K for the year ended December 31, 2018, filed on February 7, 2019. Additional risk factors, which could affect actual results, are disclosed by the Company in its filings with the Securities and Exchange Commission ("SEC"), including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.



2
 
 
 


Item 9.01.    Financial Statements and Exhibits
(a)    Financial statements of businesses acquired.
Not applicable.
(b)    Pro forma financial information.
Not applicable.
(c)    Shell company transactions.
Not applicable.
(d)    Exhibit.
Exhibit Number
 
Description
 
 
 
99.1
 


3
 
 
 


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.



Date: August 1, 2019
 
 
ION GEOPHYSICAL CORPORATION
 
 
 
 
 
 
 
 
 
 
By:
/s/ Matthew Powers
 
 
 
Matthew Powers
 
 
 
Executive Vice President, General Counsel and Corporate Secretary
 
 
 
 
 
 
 
 

4
 
 
 

 EX-99.1 2 ex991earningsrelease2019-q2.htm EXHIBIT 99.1 Exhibit


ION reports second quarter 2019 results
Revenue growth of 69%, driven by data library, marine equipment and Marlin sales
HOUSTON – July 31, 2019 – ION Geophysical Corporation (NYSE: IO) today reported total net revenues of $41.8 million in the second quarter 2019, a 69% increase compared to total net revenues of $24.7 million one year ago, driven primarily by a significant increase in data library sales, an increase in marine equipment replacement and repair revenues, and continued increases in Marlin™ deployments. ION’s net loss was $8.6 million, or a loss of $0.61 per share, compared to a net loss of $25.9 million, or a loss of $1.86 per share in the second quarter 2018. Excluding special items in both periods, the Company reported an Adjusted net loss of $8.3 million, or a loss of $0.59 per share, compared to an Adjusted net loss of $23.4 million, or a loss of $1.68 per share in the second quarter 2018. A reconciliation of special items to the reported financial results can be found in the tables of this press release.
The Company reported Adjusted EBITDA of $7.3 million for the second quarter 2019, an increase from the Adjusted EBITDA of $(7.9) million one year ago. A reconciliation of Adjusted EBITDA to the closest comparable GAAP numbers can be found in the tables of this press release.
Net cash flows from operations were $(1.1) million during the second quarter 2019, compared to $(0.8) million in the second quarter 2018. Total net cash flows, including investing and financing activities, were $(8.9) million, compared to $(6.4) million one year ago. At June 30, 2019, the Company had total liquidity of $67.6 million, consisting of $29.6 million of cash on hand and $38.0 million of available borrowing capacity under its $50.0 million revolving credit facility, of which nothing was drawn during the first six months of 2019.
“We had a strong quarter, especially given the continued fiscal discipline among E&P operators,” stated Chris Usher, ION’s President and Chief Executive Officer.  “Our revenues and earnings were up significantly both year-on-year and sequentially.  As expected, we had very focused engagement from our E&P clients on targeted exploration programs primarily in North and South America. While 2019 E&P spending levels are projected to be up slightly, it continues to be unclear how robust exploration activity and funding will be this year.  However, we remain cautiously optimistic given the uptick in backlog since the end of last year and the new venture interest we’re seeing. Indications from our customers are that the towed streamer space is experiencing modest improvement, while the ocean bottom segment is continuing to expand with strong double digit growth.
“I’m also pleased with our management transition. We are well aligned and committed to accelerate progress executing our strategy.  We sanctioned six new multi-client programs so far this year. We also made significant headway on the commercialization of 4Sea™ and SailWing™, which target one of the real growth segments in our industry. We signed a memorandum of understanding with iSEISMIC to deploy the complete 4Sea next generation ocean bottom system.  In addition, we leased our first SailWing system and new rechargeable battery technology under recurring revenue business models.  We are also continuing to expand and enhance our Marlin offshore operations optimization software for both E&P and adjacent markets.  Our Optimization Services revenues were at an all-time high, driven by Marlin deployments. The Marlin SmartPort™ pilot in the UK is progressing nicely.  It’s a major digital transformation effort that will take the client from paper, radio and physical whiteboard operations management to a holistic digital capability

1


that will give them a competitive edge over other ports.  The opportunity for ION, with thousands of ports worldwide, is quite exciting.”
For the first half of 2019, the Company reported total net revenues of $78.7 million, a 35% increase compared to total net revenues of $58.3 million one year ago. ION’s net loss was $30.0 million, or a loss of $2.13 per share, compared to a net loss of $44.3 million, or a loss of $3.31 per share in the first half of 2018. Excluding special items in both periods, the Company reported an Adjusted net loss of $25.2 million, or a loss of $1.79 per share, compared to an Adjusted net loss of $40.6 million, or a loss of $3.03 per share in the first half of 2018. Adjusted EBITDA was $7.1 million in the first half of 2019, compared to $(7.8) million one year ago.
Net cash flows from operations were $14.3 million, compared to $(0.2) million in the first half of 2018. Total net cash flows, including investing and financing activities, were $(4.0) million in the first half of 2019, compared to $(7.7) million one year ago.
SECOND QUARTER 2019
The Company’s segment revenues for the second quarter were as follows (in thousands):
 
 
Three Months Ended June 30,
 
 
 
 
2019
 
2018
 
% Change
E&P Technology & Services
 
$
28,523

 
$
15,188

 
88
%
Operations Optimization
 
13,252

 
9,555

 
39
%
Total
 
$
41,775

 
$
24,743

 
69
%
Within the E&P Technology & Services segment, multi-client revenues were $22.8 million, an increase of 132%. Data library revenues increased 932% and new venture revenues declined by 38% compared to the second quarter 2018. The increase in data library revenues came from diverse geographic areas in North and South America. The decrease in new venture revenue was primarily due to the timing of new programs. Imaging Services revenues were $5.7 million, an increase of 7%. While Imaging Services revenues modestly increased, a significant number of new projects closed during the quarter, further increasing Imaging Services backlog to its highest level since 2015. This increase in backlog should lead to an increase in Imaging Services revenues during the remainder of 2019.
Within the Operations Optimization segment, Optimization Software & Services revenues were $5.7 million, a 19% increase from the second quarter 2018 due to an increase in deployments and associated engineering services of ION’s Marlin offshore operations optimization software. Devices revenues were $7.5 million, a 58% increase from the second quarter 2018, driven by an increase in marine equipment replacement and repairs.
Consolidated gross margin for the quarter was 47%, compared to (6)% in the second quarter 2018. Gross margin in E&P Technology & Services was 43%, compared to (32)% one year ago. The improved E&P Technology & Services gross margin was a result of both an increase in and more favorable mix of data library revenues. Operations Optimization gross margin was 55%, compared to 52% one year ago. The increase in Operations Optimization gross margin was due to the increase in revenues.

2


Consolidated operating expenses were $22.1 million, compared to $21.0 million, and operating margin was (6)%, compared to (91)% in the second quarter 2018. Excluding special items, consolidated operating expenses, as adjusted, were $21.8 million, compared to $18.5 million, and operating margin, as adjusted, was (5)%, compared to (81)% in the second quarter 2018. The increase in operating expenses, as adjusted, was due in part to an increase in research and development and compensation expenses. The improvement in operating margin, as adjusted, was due to the increase in revenues, partially offset by the increase in operating expenses, as adjusted.
YEAR-TO-DATE 2019
The Company’s segment revenues for the first six months of the year were as follows (in thousands):
 
 
Six Months Ended June 30,
 
 
 
 
2019
 
2018
 
% Change
E&P Technology & Services
 
$
55,626

 
$
39,756

 
40
%
Operations Optimization
 
23,105

 
18,495

 
25
%
Total
 
$
78,731

 
$
58,251

 
35
%
Within the E&P Technology & Services segment, multi-client revenues were $46.2 million, an increase of 57%. Data library revenues increased 262% and new venture revenues declined 15% compared to the first half of 2018. Imaging Services revenues were $9.4 million, a decrease of 8%. The change in revenues during the first six months is fairly consistent with the changes described in the foregoing section.
Within the Operations Optimization segment, Optimization Software & Services revenues were $10.8 million, a 12% increase from the first half of 2018. Devices revenues were $12.4 million, a 38% increase from the first half of 2018. The change in revenues during the first six months is fairly consistent with the changes described in the foregoing section.
Consolidated gross margin for the six months was 37%, compared to 9% in the first half of 2018. Gross margin in E&P Technology & Services was 32%, compared to (1)% one year ago. The improved E&P Technology & Services gross margin was a result of both an increase in and more favorable mix of data library revenues. Operations Optimization gross margin was 51%, compared to 50% one year ago.
Consolidated operating expenses were $48.0 million, compared to $40.5 million, and operating margin was (23)%, compared to (60)% in the first half of 2018. Excluding special items, consolidated operating expenses, as adjusted, were $43.2 million, compared to $36.8 million, and operating margin, as adjusted, was (17)%, compared to (54)% in the first half of 2018. The improvement in operating margin, as adjusted, was primarily due to the significant increase in second quarter revenues, partially offset by an increase in operating expenses, as adjusted, related to increased research and development and compensation expenses.

3


CONFERENCE CALL
The Company has scheduled a conference call for Thursday, August 1, 2019, at 10:00 a.m. Eastern Time that will include a slide presentation to be posted in the Investor Relations section of the ION website by 9:00 a.m. Eastern Time. To participate in the conference call, dial (877) 407-0672 at least 10 minutes before the call begins and ask for the ION conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until August 15, 2019. To access the replay, dial (877) 660-6853 and use pass code 13691773#.
Investors, analysts and the general public will also have the opportunity to listen to the conference call live over the Internet by visiting www.iongeo.com. An archive of the webcast will be available shortly after the call on the Company’s website.
About ION
ION develops and leverages innovative technologies, creating value through data capture, analysis and optimization to enhance critical decision-making, enabling superior returns. For more information, visit iongeo.com.
Contact
Steve Bate
Executive Vice President and Chief Financial Officer
+1.281.552.3011

The information herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include information and other statements that are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the risks associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased demand; changes in oil prices; and political, execution, regulatory, and currency risks. These risks and uncertainties also include risks associated with the WesternGeco litigation and other related proceedings. We cannot predict the outcome of this litigation or the related proceedings. For additional information regarding these various risks and uncertainties, including the WesternGeco litigation, see our Form 10-K for the year ended December 31, 2018, filed on February 7, 2019. Additional risk factors, which could affect actual results, are disclosed by the Company in its filings with the Securities and Exchange Commission ("SEC"), including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.


Tables to follow

4


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited) 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Service revenues
$
30,407

 
$
15,752

 
$
58,535

 
$
40,838

Product revenues
11,368

 
8,991

 
20,196

 
17,413

Total net revenues
41,775

 
24,743

 
78,731

 
58,251

Cost of services
16,795

 
22,033

 
39,241

 
44,362

Cost of products
5,397

 
4,227

 
9,995

 
8,553

Gross profit (loss)
19,583

 
(1,517
)
 
29,495

 
5,336

Operating expenses:
 
 
 
 
 
 
 
Research, development and engineering
5,186

 
4,259

 
10,543

 
8,514

Marketing and sales
6,060

 
6,007

 
11,853

 
11,105

General, administrative and other operating expenses
10,890

 
10,736

 
25,589

 
20,876

Total operating expenses
22,136

 
21,002

 
47,985

 
40,495

Loss from operations
(2,553
)
 
(22,519
)
 
(18,490
)
 
(35,159
)
Interest expense, net
(3,111
)
 
(2,911
)
 
(6,223
)
 
(6,747
)
Other income (expense), net
96

 
84

 
(696
)
 
(707
)
Loss before income taxes
(5,568
)
 
(25,346
)
 
(25,409
)
 
(42,613
)
Income tax expense
2,719

 
154

 
4,126

 
1,226

Net loss
(8,287
)
 
(25,500
)
 
(29,535
)
 
(43,839
)
Less: Net income attributable to noncontrolling interest
(335
)
 
(366
)
 
(447
)
 
(453
)
Net loss attributable to ION
$
(8,622
)
 
$
(25,866
)
 
$
(29,982
)
 
$
(44,292
)
Net loss per share:
 
 
 
 
 
 
 
Basic
$
(0.61
)
 
$
(1.86
)
 
$
(2.13
)
 
$
(3.31
)
Diluted
$
(0.61
)
 
$
(1.86
)
 
$
(2.13
)
 
$
(3.31
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
14,098

 
13,928

 
14,065

 
13,374

Diluted
14,098

 
13,928

 
14,065

 
13,374


 

5


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 
ASSETS
June 30,
2019
 
December 31,
2018
Current assets:
 
 
 
Cash and cash equivalents
$
29,563

 
$
33,551

Accounts receivable, net
17,603

 
26,128

Unbilled receivables
22,524

 
44,032

Inventories, net
13,393

 
14,130

Prepaid expenses and other current assets
7,754

 
7,782

Total current assets
90,837

 
125,623

Deferred income tax asset, net
7,659

 
7,191

Property, plant and equipment, net
13,114

 
13,041

Multi-client data library, net
66,461

 
73,544

Goodwill
22,907

 
22,915

Right-of-use assets
39,926

 
47,803

Other assets
1,517

 
2,435

Total assets
$
242,421

 
$
292,552

LIABILITIES AND (DEFICIT) EQUITY
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
1,376

 
$
2,228

Accounts payable
36,399

 
34,913

Accrued expenses
32,243

 
31,411

Accrued multi-client data library royalties
16,469

 
29,256

Deferred revenue
4,386

 
7,710

Current maturities of operating lease liabilities
11,820

 
12,214

Total current liabilities
102,693

 
117,732

Long-term debt, net of current maturities
119,445

 
119,513

Operating lease liabilities, net of current maturities
38,063

 
45,592

Other long-term liabilities
1,601

 
1,891

Total liabilities
261,802

 
284,728

(Deficit) Equity:
 
 
 
Common stock
142

 
140

Additional paid-in capital
954,904

 
952,626

Accumulated deficit
(956,074
)
 
(926,092
)
Accumulated other comprehensive loss
(20,412
)
 
(20,442
)
Total stockholders’ (deficit) equity
(21,440
)
 
6,232

Noncontrolling interest
2,059

 
1,592

Total (deficit) equity
(19,381
)
 
7,824

Total liabilities and (deficit) equity
$
242,421

 
$
292,552


6


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
 
 
 
Net loss
$
(8,287
)
 
$
(25,500
)
 
$
(29,535
)
 
$
(43,839
)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization (other than multi-client data library)
1,063

 
2,255

 
2,098

 
4,778

Amortization of multi-client data library
8,296

 
9,764

 
19,396

 
19,557

Stock-based compensation expense
1,538

 
1,231

 
2,831

 
2,043

Deferred income taxes
931

 
(1,749
)
 
(467
)
 
(1,866
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
11,604

 
13,980

 
8,734

 
3,896

Unbilled receivables
(7,923
)
 
3,094

 
21,575

 
24,013

Inventories
654

 
(281
)
 
735

 
(445
)
Accounts payable, accrued expenses and accrued royalties
(4,041
)
 
(474
)
 
(6,054
)
 
(10,629
)
Deferred revenue
(3,004
)
 
(2,826
)
 
(3,337
)
 
(445
)
Other assets and liabilities
(1,964
)
 
(306
)
 
(1,711
)
 
2,733

Net cash provided by (used in) operating activities
(1,133
)
 
(812
)
 
14,265

 
(204
)
Cash flows from investing activities:
 
 
 
 
 
 
 
Investment in multi-client data library
(6,015
)
 
(4,542
)
 
(14,782
)
 
(13,782
)
Purchase of property, plant and equipment
(605
)
 
(363
)
 
(1,412
)
 
(424
)
Net cash used in investing activities
(6,620
)
 
(4,905
)
 
(16,194
)
 
(14,206
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Payments under revolving line of credit
—

 
—

 
—

 
(10,000
)
Payments on notes payable and long-term debt
(691
)
 
(555
)
 
(1,406
)
 
(29,699
)
Net proceeds from issuance of stock
—

 
—

 
—

 
47,219

Dividend payment to noncontrolling interest
—

 
(200
)
 
—

 
(200
)
Other financing activities
(312
)
 
(306
)
 
(551
)
 
(881
)
Net cash (used in) provided by financing activities
(1,003
)
 
(1,061
)
 
(1,957
)
 
6,439

Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash
(183
)
 
377

 
(102
)
 
264

Net decrease in cash, cash equivalents and restricted cash
(8,939
)
 
(6,401
)
 
(3,988
)
 
(7,707
)
Cash, cash equivalents and restricted cash at beginning of period
38,805

 
51,113

 
33,854

 
52,419

Cash, cash equivalents and restricted cash at end of period
$
29,866

 
$
44,712

 
$
29,866

 
$
44,712

The following table is a reconciliation of cash and cash equivalents to total cash, cash equivalents and restricted cash:
 
June 30,
 
2019
 
2018
Cash and cash equivalents
$
29,563

 
$
44,349

Restricted cash included in prepaid expenses and other current assets
303

 
60

Restricted cash included in other long-term assets
—

 
303

Total cash, cash equivalents and restricted cash shown in statements of cash flows
$
29,866

 
$
44,712


7


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT INFORMATION
(In thousands)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
Net revenues:
 
 
 
 
 
 
 
 
E&P Technology & Services:
 
 
 
 
 
 
 
 
New Venture
$
5,018

 
$
8,125

 
$
18,489

 
$
21,851

 
Data Library
17,794

 
1,725

 
27,742

 
7,673

 
Total multi-client revenues
22,812

 
9,850

 
46,231

 
29,524

 
Imaging Services
5,711

 
5,338

 
9,395

 
10,232

 
Total
28,523

 
15,188

 
55,626

 
39,756

 
Operations Optimization:
 
 
 
 
 
 
 
 
Devices
7,532

 
4,761

 
12,352

 
8,919

 
Optimization Software & Services
5,720

 
4,794

 
10,753

 
9,576

 
Total
13,252

 
9,555

 
23,105

 
18,495

 
Total net revenues
$
41,775

 
$
24,743

 
$
78,731

 
$
58,251

 
Gross profit (loss):
 
 
 
 
 
 
 
 
E&P Technology & Services
$
12,357

 
$
(4,856
)
 
$
17,797

 
$
(513
)
 
Operations Optimization
7,226

 
4,933

 
11,698

 
9,244

 
Segment gross profit
19,583

 
77

 
29,495

 
8,731

 
Other (a)
—

 
(1,594
)
(a)
—

 
(3,395
)
(a)
Total gross profit (loss)
$
19,583

 
$
(1,517
)
 
$
29,495

 
$
5,336

 
Gross margin:
 
 
 
 
 
 
 
 
E&P Technology & Services
43
%
 
(32
)%
 
32
%
 
(1
)%
 
Operations Optimization
55
%
 
52
 %
 
51
%
 
50
 %
 
Segment gross margin
47
%
 
—
 %
 
37
%
 
15
 %
 
Other
—
%
 
(6
)%
 
—
%
 
(6
)%
 
Total gross margin
47
%
 
(6
)%
 
37
%
 
9
 %
 
Income (loss) from operations:
 
 
 
 
 
 
 
 
E&P Technology & Services
$
5,237

 
$
(10,206
)
 
$
3,622

 
$
(11,000
)
 
Operations Optimization
2,644

 
1,243

 
2,814

 
2,029

 
Support and other
(10,434
)
(b)
(13,556
)
(b)
(24,926
)
(c)
(26,188
)
(c)
Loss from operations
(2,553
)
 
(22,519
)
 
(18,490
)
 
(35,159
)
 
Interest expense, net
(3,111
)
 
(2,911
)
 
(6,223
)
 
(6,747
)
 
Other income (expense), net
96

 
84

 
(696
)
 
(707
)
 
Loss before income taxes
$
(5,568
)
 
$
(25,346
)
 
$
(25,409
)
 
$
(42,613
)
 

(a) Relates to gross loss of previously reported Ocean Bottom Integrated Technologies segment.
(b) Includes loss from operations of previously reported Ocean Bottom Integrated Technologies segment of $0.7 million and $2.9 million for the three months ended June 30, 2019 and 2018, respectively, which includes item (a) above and operating expenses of $0.7 million and $1.3 million for the three months ended June 30, 2019 and 2018, respectively.
(c) Includes loss from operations of previously reported Ocean Bottom Integrated Technologies segment of $1.6 million and $5.8 million for the six months ended June 30, 2019 and 2018, respectively, which includes item (a) above and operating expenses of $1.6 million and $2.4 million for the six months ended June 30, 2019 and 2018, respectively.




8


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Summary of Net Revenues by Geographic Area
(In thousands)
(Unaudited)
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Latin America
$
14,321

 
$
7,594

 
$
27,852

 
$
17,446

North America
13,645

 
4,309

 
20,802

 
12,357

Europe
6,123

 
6,060

 
16,515

 
11,609

Asia Pacific
3,676

 
3,929

 
5,543

 
7,863

Africa
2,278

 
2,222

 
4,667

 
7,241

Middle East
1,106

 
441

 
2,465

 
1,190

Commonwealth of Independent States
626

 
188

 
887

 
545

Total net revenues
$
41,775

 
$
24,743

 
$
78,731

 
$
58,251


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Reconciliation of Adjusted EBITDA to Net Loss
(Non-GAAP Measure)
(In thousands)
(Unaudited)
The term EBITDA (excluding non-recurring items) represents net loss before interest expense, interest income, income taxes, depreciation and amortization and other non-recurring charges such as severance expenses. The term Adjusted EBITDA is EBITDA (excluding non-recurring items) but also excludes the impact of fair value adjustments related to the Company’s outstanding stock appreciation awards. EBITDA (excluding non-recurring items) and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA (excluding non-recurring items) and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA (excluding non-recurring items) and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA (excluding non-recurring items) and Adjusted EBITDA provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net loss
$
(8,287
)
 
$
(25,500
)
 
$
(29,535
)
 
$
(43,839
)
Interest expense, net
3,111

 
2,911

 
6,223

 
6,747

Income tax expense
2,719

 
154

 
4,126

 
1,226

Depreciation and amortization expense
9,359

 
12,019

 
21,494

 
24,335

Severance expense
2,810

 
—

 
2,810

 
—

EBITDA excluding non-recurring items
9,712

 
(10,416
)
 
5,118

 
(11,531
)
Stock appreciation rights expense (credit)
(2,450
)
 
2,495

 
2,010

 
3,738

Adjusted EBITDA
$
7,262

 
$
(7,921
)
 
$
7,128

 
$
(7,793
)


9


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Description of Special Items and Reconciliation of GAAP (As Reported) to Non-GAAP (As Adjusted) Measures
(In thousands, except per share data)
(Unaudited)
The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information, additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is adjusted income (loss) from operations or adjusted net income (loss), which excludes certain charges or amounts. This adjusted income (loss) amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) from operations, net income (loss) or other income data prepared in accordance with GAAP. See the tables below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
As Reported
 
Special
Items
 
As Adjusted
 
As Reported
 
Special
Items
 
As Adjusted
Net revenues
$
41,775

 
$
—

 
$
41,775

 
$
24,743

 
$
—

 
$
24,743

Cost of sales
22,192

 
—

 
22,192

 
19,407

 
—

 
19,407

Gross profit
19,583

 
—

 
19,583

 
5,336

 
—

 
5,336

Operating expenses
22,136

 
(360
)
(1) 
21,776

 
21,002

 
(2,495
)
(2) 
18,507

Loss from operations
(2,553
)
 
360

 
(2,193
)
 
(22,519
)
 
2,495

 
(20,024
)
Interest expense, net
(3,111
)
 
—

 
(3,111
)
 
(2,911
)
 
—

 
(2,911
)
Other income (expense), net
96

 
—

 
96

 
84

 
—

 
84

Loss before income taxes
(5,568
)
 
360

 
(5,208
)
 
(25,346
)
 
2,495

 
(22,851
)
Income tax expense
2,719

 
—

 
2,719

 
154

 
—

 
154

Net loss
(8,287
)
 
360

 
(7,927
)
 
(25,500
)
 
2,495

 
(23,005
)
Less: Net income attributable to noncontrolling interest
(335
)
 
—

 
(335
)
 
(366
)
 
—

 
(366
)
Net loss attributable to ION
$
(8,622
)
 
$
360

 
$
(8,262
)
 
$
(25,866
)
 
$
2,495

 
$
(23,371
)
Net loss per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(0.61
)
 
 
 
$
(0.59
)
 
$
(1.86
)
 
 
 
$
(1.68
)
Diluted
$
(0.61
)
 
 
 
$
(0.59
)
 
$
(1.86
)
 
 
 
$
(1.68
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
14,098

 
 
 
14,098

 
13,928

 
 
 
13,928

Diluted
14,098

 
 
 
14,098

 
13,928

 
 
 
13,928




10


 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
 
As Reported
 
Special
Items
 
As Adjusted
 
As Reported
 
Special
Items
 
As Adjusted
Net revenues
$
78,731

 
$
—

 
$
78,731

 
$
58,251

 
$
—

 
$
58,251

Cost of sales
49,236

 
—

 
49,236

 
52,915

 
—

 
52,915

Gross profit
29,495

 
—

 
29,495

 
5,336

 
—

 
5,336

Operating expenses
47,985

 
(4,820
)
(3) 
43,165

 
40,495

 
(3,738
)
(4) 
36,757

Loss from operations
(18,490
)
 
4,820

 
(13,670
)
 
(35,159
)
 
3,738

 
(31,421
)
Interest expense, net
(6,223
)
 
—

 
(6,223
)
 
(6,747
)
 
—

 
(6,747
)
Other income (expense), net
(696
)
 
—

 
(696
)
 
(707
)
 
—

 
(707
)
Loss before income taxes
(25,409
)
 
4,820

 
(20,589
)
 
(42,613
)
 
3,738

 
(38,875
)
Income tax expense
4,126

 
—

 
4,126

 
1,226

 


 
1,226

Net loss
(29,535
)
 
4,820

 
(24,715
)
 
(43,839
)
 
3,738

 
(40,101
)
Less: Net income attributable to noncontrolling interest
(447
)
 
—

 
(447
)
 
(453
)
 
—

 
(453
)
Net loss attributable to ION
$
(29,982
)
 
$
4,820

 
$
(25,162
)
 
$
(44,292
)
 
$
3,738

 
$
(40,554
)
Net loss per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(2.13
)
 
 
 
$
(1.79
)
 
$
(3.31
)
 
 
 
$
(3.03
)
Diluted
$
(2.13
)
 
 
 
$
(1.79
)
 
$
(3.31
)
 
 
 
$
(3.03
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
14,065

 
 
 
14,065

 
13,374

 
 
 
13,374

Diluted
14,065

 
 
 
14,065

 
13,374

 
 
 
13,374


(1) Represents severance expense of $2.8 million partly offset by stock appreciation right awards credit of $2.4 million.
(2) Represents stock appreciation right awards and related expenses in the second quarter of 2018.
(3) Represents severance expense of $2.8 million and stock appreciation right awards expense of $2.0 million.
(4) Represents stock appreciation right awards and related expenses in the first half of 2018.




11