8-K

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 7, 2012

ION Geophysical Corporation

(Exact name of registrant as specified in its charter)

Delaware	1-12691	22-2286646
(State or other jurisdiction of incorporation)	(Commission file number)	(I.R.S. Employer Identification No.)

2105 CityWest Blvd, Suite 400

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))

Item 2.02. Results of Operations and Financial Condition

On August 7, 2012, ION Geophysical Corporation (the “Company”) issued a press release containing information regarding the Company’s results of operations for the quarter ended June 30, 2012. 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 Wednesday, August 8 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, a copy of which is furnished as Exhibit 99.2 hereto.

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, or the Exchange Act.

The information contained in this report and the attached exhibits 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 statements concerning future sales and market growth, future cash needs and future sources of cash, including availability under our revolving line of credit facility, future compliance with our debt financial covenants, sales expected to result from backlogs and pipelines, benefits expected to result from the INOVA Geophysical Equipment Limited joint venture, estimates regarding future commodity prices, future investments 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 risks associated with pending and future litigation; audit adjustments and other modifications to the Company’s financial statements not currently foreseen; the timing and development of the Company’s products and services and market acceptance of the Company’s new and revised product offerings; economic downturns and volatile credit environments; international political and economic events and turmoil, the performance of INOVA; the Company’s level of indebtedness, including compliance with debt covenants; competitors’ product offerings and pricing pressures resulting therefrom; risks that sources of capital may not prove adequate; collection of receivables; and technological and marketplace changes affecting the Company’s product line. Additional risk factors, which could affect actual results, are disclosed by the Company from time to time in its filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.

Item 9.01. Financial Statements and Exhibits

(a) Financial statements of businesses acquired.

2

Not applicable.

(b) Pro forma financial information.

Not applicable.

(c) Shell company transactions.

Not applicable.

(d) Exhibits.

Exhibit Number	Description
99.1	PressRelease dated August 7, 2012.
99.2	August 8, 2012 Conference Call Presentation Slides.

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 7, 2012	ION GEOPHYSICAL CORPORATION
	By:	/s/ DAVID L. ROLAND
		David L. Roland
		Senior Vice President, General Counsel and
		Corporate Secretary

4

EXHIBIT INDEX

Exhibit Number
99.1	Press Release dated August 7, 2012.
99.2	August 8, 2012 Conference Call Presentation Slides.

5

EX-99.1

Exhibit 99.1

ION Reports Strong Second Quarter Results

Revenue increased 19% to $105 million, with gross margin reaching 44%

Second quarter EPS of $0.08

HOUSTON – August 7, 2012 – ION Geophysical Corporation (NYSE: IO) today reported second quarter 2012 revenues of $105.2 million, a 19% increase from revenues of $88.5 million in second quarter 2011. Gross margin reached 44% compared to 38% in second quarter 2011. Second quarter net income increased to $12.0 million, or $0.08 per diluted share, compared to net income of $2.6 million, or $0.02 per diluted share, in second quarter 2011. Adjusted EBITDA increased 30% to $33.9 million compared to $26.1 million in second quarter 2011 due to improved overall results of operations.

Brian Hanson, ION’s Chief Executive Officer, commented, “We are pleased with our second quarter and year-to-date results. We achieved significant growth in both revenue and earnings as compared to last year, with exceptional performance in our multi-client business this quarter, where revenues increased by more than 50% compared to second quarter 2011. As anticipated, we saw strong customer interest in our Arctic, Africa, Australia, and Latin America multi-client programs.

“Our data processing revenues and profitability continue to improve as the Gulf of Mexico recovers and we grow this business more internationally. In the second quarter, we experienced a broad increase in customer activity worldwide, with nearly 75% of second quarter tender activity generated outside of the Gulf of Mexico region. Additionally, we achieved a record backlog level for the data processing business and also introduced our new broadband solution, WiBand^TM. This new data processing technology delivers broadband results for conventional “flat” streamer data and has great potential to fulfill an unmet market demand. We have seen tremendous interest in our new WiBand offering since launching at the European Association of Geoscientists & Engineers (EAGE) show in June.

“Our GeoVentures^TM division had an outstanding quarter with solid performance in new ventures and data library revenues and operating profits. We initiated acquisition of several strategically significant programs, including a ResSCAN^TM program in the Marcellus shale, a new 3D gravity gradiometry program in Greenland, and another 2D program offshore Brazil.

“As expected, our marine division experienced soft revenues attributable to a lack of new vessel introductions during the quarter. This business continues to benefit from healthy repair and replacement sales, and while we delivered a large ocean bottom cable system in the second quarter, the revenues will be recognized over an extended period under a multi-year arrangement.

“Our Software segment continues to grow, led by demand for Orca^® and solid growth in our on-board services business, which grew 67% in the first half of 2012 as compared to the first half of 2011.

“INOVA achieved revenues of $56.8 million in their first quarter results, driven by strong vibrator sales, the delivery of 15,000 channels of G3i^TM (INOVA’s new cable-based recording system) to BGP, and delivery of their first three UniVib^TM units (INOVA’s newest peak force small vibrator), contributing $3.8 million of equity income to ION’s second quarter results.”

SECOND QUARTER 2012

The 19% increase in total revenues over second quarter 2011 was led by strong growth in the Company’s Solutions business, partially offset by declines in the Systems business.

Solutions segment revenues increased 47% to $72.0 million compared to $49.0 million in second quarter 2011, driven by continued growth in the data processing business, heavy demand for ION’s multi-client programs offshore Africa, Latin America, Australia, and the Arctic, and continued interest in ION’s ResSCAN shale programs.

Software segment sales were $10.4 million compared to $10.1 million in second quarter 2011. Excluding foreign currency effects, Software segment revenues increased 6% due to demand for the Company’s Orca and Gator^® software.

Systems segment sales decreased 23% to $22.8 million compared to $29.5 million in second quarter 2011, due to decreased sales of marine positioning products as compared to the same period last year, slightly offset by growth in ION’s ocean-bottom cable product line, as the Company began delivering and recognizing revenue on a multi-year OBC equipment sale.

Consolidated gross margins during the second quarter increased to 44% from 38% in second quarter 2011. The improvement was driven by the Solutions segment, which increased margins to 40% from 23%, led by data processing revenue growth and improved sales from a more profitable mix of data libraries.

Second quarter consolidated operating margins increased to 12% compared to 10% in second quarter 2011, benefitting from higher gross margins offset by continued investment in R&D and legal expenses. Solutions operating margins improved to 24% from 6% due to expansion in domestic and international data processing business and multi-client profitability improvement. Software segment operating margins increased to 66% from 64%, while Systems operating margins decreased from 31% to 4% in second quarter due to decreased revenue in combination with higher R&D spend, primarily attributable to costs around Calypso^TM, ION’s next-generation redeployable seabed acquisition system.

ION’s effective tax rate during the second quarter was 25.7% compared to 27.6% in second quarter 2011. The decrease in the effective tax rate was due to changes in the distribution of earnings between U.S. and foreign jurisdictions.

ION accounts for its 49% interest in INOVA Geophysical as an equity method investment on a one fiscal quarter-lag basis. As a result, ION’s share of INOVA Geophysical’s first quarter 2012 financial results is included in ION’s second quarter results. For first quarter 2012, INOVA Geophysical reported revenues of $56.8 million, up 75% from $32.5 million in first quarter 2011. INOVA Geophysical reported net income of $8.7 million for first quarter 2012, compared to a net loss of $8.1 million in first quarter 2011. For second quarter 2012, ION recognized earnings on its equity investment of approximately $3.8 million compared to a loss of $4.2 million for the prior year period.

ION’s total cash and cash equivalents were $83.3 million as of June 30, 2012. Additionally, under its amended $175 million credit facility, ION had $77.8 million of unused capacity as of June 30, 2012.

YEAR-TO-DATE 2012

Total revenues for the first six months of 2012 increased 21% to $216.9 million compared to $179.1 million for the same period in 2011, with year-to-date growth across all business segments.

Solutions segment revenues for the first six months of 2012 increased 29% to $138.1 million primarily as a result of data processing expansion and strong growth in new venture revenue in various international offshore programs as well as in ION’s ResSCAN offerings in North America. System and Software segment revenues during the period increased by 11% and 3%, respectively.

Consolidated gross margins for the period increased to 40% compared to 36% in the same period of 2011 due to data processing profitability improvements and the mix of multi-client sales in the Solutions segment.

Consolidated operating margins for the first six months of 2012 increased to 11% from 8% in the same period of 2011. Solutions operating margins increased to 20% from 8% due to growth of data processing revenues as well as profitability improvements in the multi-client business. While Software segment operating margins increased slightly, Systems operating margins decreased from 28% to 16% in the first six months of 2012 as compared to the same period of 2011 due to soft marine positioning sales in second quarter 2012. Overall consolidated gross margins have improved, while operating expenses as a percent of revenues have increased as we continue to invest in R&D for our next generation seabed and towed streamer technologies.

ION’s effective tax rate during the first six months of 2012 was 27.1%, relatively flat compared to 2011.

For the first six months of 2012, net income was $20.3 million, or $0.13 per diluted share, compared to net income of $2.7 million, or $0.02 per diluted share, in the first six months of 2011.

OUTLOOK

Greg Heinlein, ION’s Chief Financial Officer commented, “As expected, we had a good first half, in spite of broad macro-economic uncertainties. In particular, our multi-client revenue was robust, and our data processing results posted another solid quarter.

“We anticipated that our marine division would have a soft quarter, but we expect it to strengthen each quarter for the remainder of 2012. In particular, we experienced strong customer interest in our new Calypso seabed system launched at EAGE in June. We continue to anticipate commercial orders in the fourth quarter.

“INOVA had a great first quarter, as reflected in our second quarter results. We expect them to have a decent second quarter, which will reflect a slight loss in our third quarter results. We continue to expect INOVA to be modestly profitable for the full year.

“Based on our market outlook and robust pipeline of order activity, we are confidently investing in each of our businesses and remain positioned to achieve year-over-year improvement in both revenue and profitability in the back half of 2012 as compared to the same period last year.”

CONFERENCE CALL

The Company has scheduled a conference call for Wednesday, August 8, 2012, at 10:00 a.m. Eastern Time that will include a slide presentation. To participate in the conference call, dial 480-629-9866 at least 10 minutes before the call begins and ask for the ION conference call. Click here to access the earnings presentation slides.

A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until August 22, 2012. To access the replay, dial 303-590-3030 and use pass code 4553682#.

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. Also, an archive of the webcast will be available shortly after the call on the Company’s website.

About ION

ION Geophysical Corporation is a leading provider of geophysical technology, services, and solutions for the global oil & gas industry. ION’s offerings are designed to allow E&P operators to obtain higher resolution images of the subsurface to reduce the risk of exploration and reservoir development, and to enable seismic contractors to acquire geophysical data safely and efficiently. Additional information about ION is available at www.iongeo.com.

Contacts

Greg Heinlein

Chief Financial Officer

+1.281.552.3011

Jack Lascar

DRG&L

+1.713.529.6600

The information included 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 future sales and market growth, timing of sales, future liquidity and cash levels, future estimated revenues and earnings, sales expected to result from backlog, benefits expected to result from the INOVA Geophysical joint venture and related transactions 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 risks associated with litigation; the timing and development of the Company’s products and services and market acceptance of the Company’s new and revised product offerings; the operation of the INOVA Geophysical joint venture; the Company’s level and

terms of indebtedness; competitors’ product offerings and pricing pressures resulting therefrom; the relatively small number of customers that the Company currently relies upon; the fact that a significant portion of the Company’s revenues is derived from foreign sales; that sources of capital may not prove adequate; the Company’s inability to produce products to preserve and increase market share; collection of receivables; and technological and marketplace changes affecting the Company’s product lines. Additional risk factors, which could affect actual results, are disclosed by the Company from time to time in its filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2011 and its Quarterly Reports on Form 10-Q filed during 2012.

Tables to follow

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,
	2012			2011			2012			2011
Product revenues	$	32,370		$	39,016		$	77,446		$	71,403
Service revenues		72,844			49,516			139,478			107,681
Total net revenues		105,214			88,532			216,924			179,084
Cost of products		15,950			17,624			39,098			32,263
Cost of services		43,321			37,277			90,727			82,051
Gross profit		45,943			33,631			87,099			64,770
Operating expenses:
Research, development and engineering		10,306			5,906			18,032			11,745
Marketing and sales		8,654			7,838			16,071			14,880
General and administrative		14,011			11,087			28,381			23,274
Total operating expenses		32,971			24,831			62,484			49,899
Income from operations		12,972			8,800			24,615			14,871
Interest expense, net		(1,364	)		(1,187	)		(2,882	)		(2,802	)
Equity in earnings (losses) of INOVA Geophysical		3,777			(4,173	)		6,245			(5,033	)
Other income (expense)		895			497			209			(2,502	)
Income before income taxes		16,280			3,937			28,187			4,534
Income tax expense		4,184			1,085			7,629			1,232
Net income		12,096			2,852			20,558			3,302
Net income attributable to noncontrolling interest		281			44			394			69
Net income attributable to ION		12,377			2,896			20,952			3,371
Preferred stock dividends		338			338			676			676
Net income applicable to common shares	$	12,039		$	2,558		$	20,276		$	2,695
Net income per share:
Basic	$	0.08		$	0.02		$	0.13		$	0.02
Diluted	$	0.08		$	0.02		$	0.13		$	0.02
Weighted average number of common shares outstanding:
Basic		155,631			155,096			155,587			154,385
Diluted		162,575			156,553			162,594			156,058

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 30, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	83,282		$	42,402
Short-term investments		—			20,000
Accounts receivable, net		68,693			130,612
Unbilled receivables		57,928			25,628
Inventories		69,502			70,145
Prepaid expenses and other current assets		19,655			13,460
Total current assets		299,060			302,247
Deferred income tax asset		19,722			17,645
Property, plant, equipment and seismic rental equipment, net		34,823			24,771
Multi-client data library, net		187,431			175,768
Investment in INOVA Geophysical		79,587			72,626
Goodwill		54,399			53,963
Intangible assets, net		16,795			17,716
Other assets		10,237			9,322
Total assets	$	702,054		$	674,058
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	2,817		$	5,770
Accounts payable		25,842			22,296
Accrued expenses		67,723			61,384
Accrued multi-client data library royalties		15,602			15,318
Deferred revenue		27,626			33,802
Total current liabilities		139,610			138,570
Long-term debt, net of current maturities		102,166			99,342
Other long-term liabilities		7,574			7,719
Total liabilities		249,350			245,631
Redeemable noncontrolling interest		2,204			2,615
Equity:
Cumulative convertible preferred stock		27,000			27,000
Common stock		1,558			1,555
Additional paid-in capital		845,477			843,271
Accumulated deficit		(402,660	)		(423,612	)
Accumulated other comprehensive loss		(14,776	)		(16,193	)
Treasury stock		(6,565	)		(6,565	)
Total stockholders’ equity		450,034			425,456
Noncontrolling interests		466			356
Total equity		450,500			425,812
Total liabilities and equity	$	702,054		$	674,058

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2012			2011
Cash flows from operating activities:
Net income	$	20,558		$	3,302
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (other than multi-client library)		6,825			7,476
Amortization of multi-client library		38,918			36,748
Stock-based compensation expense		2,992			3,134
Equity in (earnings) losses of INOVA Geophysical		(6,245	)		5,033
Deferred income taxes		(2,225	)		(8,192	)
Change in operating assets and liabilities:
Accounts receivable		61,701			11,422
Unbilled receivables		(32,300	)		25,284
Inventories		(5,447	)		(22,051	)
Accounts payable, accrued expenses and accrued royalties		9,041			(15,847	)
Deferred revenue		(6,176	)		16,630
Other assets and liabilities		(1,912	)		(2,127	)
Net cash provided by operating activities		85,730			60,812
Cash flows from investing activities:
Investment in multi-client data library		(52,581	)		(46,102	)
Purchase of property, plant and equipment		(4,890	)		(7,240	)
Investment in seismic rental equipment		(1,384	)		—
Maturity (net purchases) of short-term investments		20,000			(39,000	)
Investment in convertible notes		(1,000	)		(6,500	)
Other investing activities		—			50
Net cash used in investing activities		(39,855	)		(98,792	)
Cash flows from financing activities:
Payments on long-term debt		(2,081	)		(3,388	)
Repayment of term loan		(98,250	)		—
Borrowings under amended revolving line of credit		98,250			—
Payments under amended revolving line of credit		(1,000	)		—
Cost associated with debt amendment		(1,313	)		—
Payment of preferred dividends		(676	)		(676	)
Proceeds from exercise of stock options		317			12,931
Other financing activities		(101	)		267
Net cash (used in) provided by financing activities		(4,854	)		9,134
Effect of change in foreign currency exchange rates on cash and cash equivalents		(141	)		380
Net increase (decrease) in cash and cash equivalents		40,880			(28,466	)
Cash and cash equivalents at beginning of period		42,402			84,419
Cash and cash equivalents at end of period	$	83,282		$	55,953

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT INFORMATION

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Net revenues:
Solutions:
Data Processing	$	28,190		$	20,634		$	55,055		$	40,933
New Venture		21,544			9,772			50,538			32,222
Data Library		22,235			18,552			32,503			33,696
Total	$	71,969		$	48,958		$	138,096		$	106,851
Systems:
Towed Streamer	$	13,727		$	20,234		$	29,531		$	37,781
Ocean Bottom		1,616			507			5,135			509
Other		7,476			8,734			24,859			15,145
Total	$	22,819		$	29,475		$	59,525		$	53,435
Software:
Software Systems	$	9,551		$	9,541		$	17,921		$	17,968
Services		875			558			1,382			830
Total	$	10,426		$	10,099		$	19,303		$	18,798
Total	$	105,214		$	88,532		$	216,924		$	179,084
Gross profit:
Solutions	$	28,904		$	11,190		$	47,889		$	24,506
Systems		9,234			15,110			25,046			27,355
Software		7,805			7,331			14,164			12,909
Total	$	45,943		$	33,631		$	87,099		$	64,770
Gross margin:
Solutions		40	%		23	%		35	%		23	%
Systems		40	%		51	%		42	%		51	%
Software		75	%		73	%		73	%		69	%
Total		44	%		38	%		40	%		36	%
Income from operations:
Solutions	$	17,434		$	3,042		$	27,040		$	8,854
Systems		995			9,057			9,735			15,137
Software		6,879			6,439			12,361			11,292
Corporate and other		(12,336	)		(9,738	)		(24,521	)		(20,412	)
Income from operations	$	12,972		$	8,800		$	24,615		$	14,871
Operating margin:
Solutions		24	%		6	%		20	%		8	%
Systems		4	%		31	%		16	%		28	%
Software		66	%		64	%		64	%		60	%
Corporate and other		(12	%)		(11	%)		(11	%)		(11	%)
Total		12	%		10	%		11	%		8	%

Reconciliation of Adjusted EBITDA to Net Income

(Non-GAAP Measure)

(In thousands)

(Unaudited)

Adjusted EBITDA is a non-GAAP measurement that is presented as an additional indicator of operating performance and is not a substitute for net income or net income per share calculated under generally accepted accounting principles (GAAP). Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to service our debt. The calculation of Adjusted EBITDA shown below is based upon amounts derived from the Company’s financial statements prepared in conformity with GAAP.

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Net income	$	12,096		$	2,852	$	20,558		$	3,302
Interest expense, net		1,364			1,187		2,882			2,802
Income tax expense		4,184			1,085		7,629			1,232
Depreciation and amortization expense		20,033			16,828		45,743			44,224
Equity in (earnings) losses of INOVA Geophysical		(3,777	)		4,173		(6,245	)		5,033
Adjusted EBITDA	$	33,900		$	26,125	$	70,567		$	56,593

#####

EX-99.2

ION Earnings Call –

Q2 2012

Earnings Call Presentation

August 8, 2012

Exhibit 99.2

Earnings Call Introduction

Corporate Participants & Contact Information

CONTACT INFORMATION

If you have technical problems during the call, please contact DRG&L at 713 529 6600.

If

you

would

like

to

listen

to

a

replay

of

today's

call,

it

will

be

available

via

webcast

in

the

Investor

Relations

section

of

the

Company's

website

-

www.iongeo.com

for

approximately

12

months. 

BRIAN HANSON

Chief Executive Officer

GREG HEINLEIN

Chief Financial Officer

2

Earnings Call Introduction

FORWARD-LOOKING STATEMENTS

The information included herein contains 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.

Actual results may vary fundamentally 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 risk factors that are disclosed by ION

from time to time in its filings with the Securities and Exchange Commission.

3

ION Q2 2012 Highlights

Continued Momentum –

Solid Q2

4

Revenues

($ Thousands)

Q2 11

Q2 12

Gross Profit

Q2 11

Q2 12

Up 19%

Diluted EPS

Q2 11

Q2 12

Net Income

($ Thousands)

Q2 11

Q2 12

•

Strong revenue

growth

•

Good gross margins

•

EPS up 300%

Up 300%

80,000

85,000

90,000

95,000

100,000

105,000

110,000

Market Observations

International Data Processing Picking Up

Fifth sequential quarterly improvement in

ION DP revenues

International demand

up

--

Europe, Africa,

Middle East

Continued rebalancing of our portfolio

beyond Gulf of Mexico

Ended Q2 with record data processing

backlog

Introduced new broadband processing

technology,

WiBand    ,

with

20+

projects

underway

5

Conventional Image

WiBand Image

WiBand Projects

TM 

Market Observations

Continued Growth in Marine Seismic Activity

6

Towed Streamer market tightening

Good growth in Seabed market

Launched Calypso

TM

seabed

acquisition system in Q2 at EAGE

Growing demand for ION’s Acquisition

Optimization Services

7

Solid performance --

revenues, operating profits, margins.

Ended Q2 with record backlog.

Continued rise in international exploration –

Africa, Latin America, Australia

and the Arctic.

GeoVentures

TM

Acquisition and Data Library Programs –

1H 2012

Summary

Industry remains robust

International activity is strong

Well positioned to grow

Remain confident in our ability to

deliver against plan

8

Software

Systems

Solutions

9

Solutions

revenues of $72 million,

up

47% Y/Y

Software

revenues

of

$10

million,

up

6% in local currency Y/Y

Systems

revenues of $23 million, 

down

23% Y/Y

Q2 revenue growth led by strong growth in

Solutions segment

Financial Overview

Revenues by Segment

-

20

40

60

80

100

120

Q2 11

Q2 12

Solutions Segment

Financial Overview

Revenue by Type

Multi-client Investments

Solutions Backlog

Q4 11                                               $134 M

Data

Processing

Data

Libraries

New

Ventures

Q2 11                                 $117 M

10

Q3 11                         $106 M

Q1 12                                          $129 M

$150 M

$130 M

Data Processing and New Ventures activity strong.

Backlog growing well.

Q2 12                                                           

$153 M

Software Segment

Financial Overview

Revenue by Type (GBP)

Services

Software Systems

% of Seismic Vessels with Orca

®

Orca-Permanent

Spectra/Pre-Orca

ION versions

11

Continued steady growth in Q2.

Added two Orca vessels.

Growing demand for on-board services.

-

1

2

3

4

5

6

7

Q2 11

Q2 12

41%

59%

Systems Segment

Financial Overview

Revenue by Type

Towed Streamer Equipment

OBC

Other

12

Q2 soft as expected –

timing of revenue recognition.

Good reception for Calypso at EAGE.

-

5

10

15

20

25

30

35

Q2 11

Q2 12

INOVA Geophysical

Financial Overview

Revenues

13

*Forecast

Revenues

**ION

to

share

in

49%

of

these

results.

2012

estimates

are

unaudited.

Q1 2012

•

Revenues of $56.8 million with operating 

income of $8.9 million**

•

Delivered 15,000 channels of G3i™

•

Delivered first 3 UniVib™ units

•

Significant number of Vibrator sales

Q2 2012

•

Estimated revenues of $45 to $49 million 

with an operating loss of ($3) to ($4) million**

•

Delivered an additional 9,000 channels of G3i

•

First sale of new wireless Hawk™ system

Financial Overview

Cash Flow

Three Months Ended

June 31,

SUMMARIZED CASH FLOW

2012

2011

Cash from operations

$

38,556

$

20,349

Working capital

(5,023)

(11,283)

Multi-client investment

(28,054)

(34,195)

PP&E Capital Expenditures

(3,122)

(3,566)

Free Cash Flow

2,357

(28,695)

Other Investing & Financing

(6,171)

(7,186)

Cash flow, including ST investments

(3,814)

(35,881)

Cash, Cash Equivalents & ST Investments (Beginning of Period)

87,096

130,834

Cash, Cash Equivalents & ST Investments (End of Period)

$

83,282

$

94,953

Good free cash flow and strong cash position

14

Financial Overview

Balance Sheet as of June 30, 2012

Capital Employed*

Capital Book Value

Cash

Net Fixed Assets

Multi-Client Data Library

Goodwill & Equity in INOVA

Equity

Debt

** Net Debt = Debt less Cash

Other Working Capital

15

*Assets less Current Liabilities

Net Debt of $22M**

0

100

200

300

400

500

600

0

100

200

300

400

500

600

$187M

$83M

$177M

$87M

Q2

Q1

$105M

$105M

Q1

Q2

Continued Momentum in Q2

16

•

Strong first half 2012

•

Expect solid Y/Y growth

throughout 2012

•

Continue to anticipate

2012

multi-client

investment

in

$130

-

$150

range

•

Remain positive on outlook to

achieve Y/Y quarterly

improvement for balance of 2012

17