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 4, 2016

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 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 4, 2016, ION Geophysical Corporation (the “Company”) issued a press release containing information regarding the Company’s results of operations for the quarter ended June 30, 2016. A copy of the press release is furnished as Exhibit 99.1 hereto.

ION Geophysical Corporation (the “Company”), will be presenting new financial reporting segments in the third quarter ending 2016. The following segment disclosures for the 2nd Quarter of 2016 and 2015 are provided for illustrative purposes only.  They present the Company’s performance under the Company’s new financial reporting segments, which will not be implemented until the 3rd Quarter of 2016. These 2nd Quarter segment disclosures are based on information available to management as of today and are subject to change.  The Company’s management will finalize the realignment of its business segments, including the recasting 2015 segment results, in the 3rd Quarter of 2016. The slide presentation is furnished as Exhibit 99.3 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 4, 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 (the “Securities Act”), or the Exchange Act.

2

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 and Section 21E of the Exchange Act. These forward-looking statements may include statements concerning future sales, earnings, revenues and market growth, timing of sales, future liquidity and cash levels and future cash needs and sources of cash, including availability under our revolving line of credit facility, expected outcomes of litigation, future compliance with our debt financial covenants, sales expected to result from backlogs and pipelines, benefits expected to result from OceanGeo and the INOVA Geophysical joint venture and related transactions, 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, including the risk that an unfavorable outcome in the lawsuit brought by WesternGeco could have a materially adverse effect on our financial results and liquidity; 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 operation, prospects and performance of OceanGeo and the INOVA Geophysical joint venture; the Company’s level and terms 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 SEC, 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.

Not applicable.

(b)    Pro forma financial information.

Not applicable.

(c)    Shell company transactions.

Not applicable.

(d)    Exhibits.

3

Exhibit Number	Description
99.1	Press Release dated August 4, 2016.
99.2	August 4, 2016 Conference Call Presentation Slides.
99.3	New Financial Reporting Segment Presentation Slides (Illustrative Only). Conference Call Presentation Slides.

4

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 4, 2016

ION GEOPHYSICAL CORPORATION
By:	/s/ Jamey S. Seely
	Jamey S. Seely
	Executive Vice President, General Counsel and Corporate Secretary

5

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release dated August 4, 2016
99.2	August 4, 2016 Conference Call Presentation Slides.
99.3	New Financial Reporting Segment Presentation Slides (Illustrative Only). Conference Call Presentation Slides.

6

EX-99.1

ION reports second quarter2016 results

Second Quarter Highlights:

• Revenues of $36.2 million, EPS of $(2.22) and Adjusted EPS of $(1.85)

• Debt restructuring, reducing senior notes by $26 million, extending maturities on $121 million out to 2021

• OBS crew and vessels began work on a survey that will extend into the third quarter

• Operating expenses decreased 30% from second quarter 2015, reflecting the impact of cost reduction measures

• Adjusted EBITDA of $(3.3) million compared to $(29.4) million one year ago

• Total liquidity of $64.3 million at June 30

HOUSTON– August 3, 2016 – ION Geophysical Corporation (NYSE: IO) today reported a second quarter2016 net loss of $25.3 million, or $(2.22) per share, on revenues of $36.2 million, compared to a net income of $56.1 million, or $5.11 per diluted share, on revenues of $36.8 million in second quarter2015. Excluding special items related to severance charges and the Company’s debt exchange in the second quarter 2016, the Company‘s adjusted net loss was $21.2 million, or $(1.85) per share, compared to an adjusted net loss of $44.7 million, or $(4.07) per share in second quarter 2015. A reconciliation of special items to the 2016 and 2015 financial results can be found in the financial tables of this press release.

At June 30, 2016, the Company’s total liquidity was $64.3 million, consisting of cash and cash equivalents of $52.4 million and $11.9 million remaining availability on its maximum $40.0 million revolving credit facility. While the Company had borrowings of only $15.0 million under its revolving credit facility at June 30, 2016, the remaining available amount was temporarily reduced due to a decline in the eligible account and unbilled receivables that collateralize the facility.

The Company consumed cash before financing activities of $17.2 million in second quarter 2016, compared to $25.5 million in the prior year period. The Company reported an Adjusted EBITDA for second quarter 2016 of $(3.3) million, compared to $(29.4) million one year ago. During the first half 2016, the Company consumed cash before financing activities of $21.3 million, compared to $53.0 million in first half 2015. First half 2016 Adjusted EBITDA was $(20.5) million, compared to $(67.5) million in first half 2015. A reconciliation of Adjusted EBITDA to the closest comparable GAAP numbers can be found in the financial tables of this press release.

In April, the Company completed its bond exchange offer, retiring $26 million in principal value of its $175 million high yield bonds, using $15 million of cash, before fees. The Company also issued $121 million of new notes, extending the maturity date to December 2021, with the interest rate increasing by 1%, to 9.125%.

Brian Hanson, ION’s President and Chief Executive Officer, commented, “The year is unfolding as we initially expected. We’ve had a slow start but anticipate revenues increasing as the year progresses. We’re beginning to see early signs of a recovery, indicating the down cycle may have reached its bottom.

“Looking to the second half of the year, we anticipate our revenues will increase in part from the completion of our OBS survey offshore Nigeria, our continued work on our industry-funded new venture programs in the southern Gulf of Mexico, and traditional behavior of spending on data libraries in the fourth quarter.

1

“During the second quarter, we mobilized our ocean bottom crew and vessels and began acquisition on a survey offshore Nigeria. We expect completion of the data acquisition in the third quarter and are very pleased with the production and data quality we and our customer are seeing. We continue to work on two tenders with other customers in the region and hope to mobilize to these projects toward the end of the year. Although we expect a short gap in timing between projects, we have demonstrated our ability to quickly ramp down and up our crew and vessels, minimizing our cash burn between projects.

“Our total cash consumption for the first half of the year was in line with our expectations given our slow start, the ramp up of our OBS crew and vessels and our use of cash to complete the debt exchange in late April. We expect that with the anticipated increase in revenues during the third and fourth quarters, we will generate positive cash flows in the second half of the year, and we expect our revolving credit facility availability to increase based on higher levels of accounts receivables.

“Despite our first half financial results, we are pleased to have our OBS crew back at work and to have completed our financial restructurings. We expect our second half to be stronger than the first, and we believe our current liquidity, coupled with our operational and financial restructurings, will enable us to maintain our core capabilities as we continue to weather this deep industry downturn.”

SECOND QUARTER2016

The Company’s segment revenues for the second quarter were as follows (in thousands):

	Three Months Ended June 30,
	2016		2015		% Change
Solutions	$	18,618	$	22,350	(17	)%
Systems	6,626		7,674		(14	)%
Software	4,475		6,771		(34	)%
Ocean Bottom Services	6,433		—		—	%
Total	$	36,152	$	36,795	(2	)%

Within the Solutions segment, new venture revenues were $4.6 million, a 26%increase from second quarter2015; data library revenues were $6.3 million, a 16% decrease; and data processing revenues were $7.8 million, a 31%decrease. All businesses within the Solutions segment continue to be impacted by the slowdown in exploration spending. The new venture revenues in the current quarter primarily relate to activities on industry-funded programs in the southern Gulf of Mexico.

Systems segment revenues reflected only repair and replacement revenues, as there were no new system sales during the second quarter 2016. Systems segment revenues continue to be impacted by reduced activity by seismic contractors, as numerous vessels have been taken out of service.

The decrease in Software segment revenues was primarily due to lower Orca^® licensing revenues and a decline in service revenues. While Software segment revenues were down 34% year over year, the segment generated positive gross and operating margins of 62% and 20%, respectively, during the quarter.

2

In the Ocean Bottom Services (OBS) segment, the Company’s OBS crew ramped up for a survey offshore Nigeria. A majority of the revenues on this project will be recognized in the third quarter, as acquisition on this project did not begin until late June. The OBS segment’s gross margin of 66% in the second quarter was favorably impacted by lease amendments executed with the vessel owners, which reduced a portion of idle vessel expenses previously accrued.

Consolidated operating expenses were $21.4 million, down 30% from $30.6 million in second quarter 2015. Operating margin was (46)%, compared to (111)% in the prior year quarter. While total second quarter revenues were down only 2% versus second quarter 2015, the decrease in operating expenses and improvement in operating margins resulted from the Company’s ongoing cost reduction efforts.

YEAR-TO-DATE 2016

The Company’s segment revenues for the first six months of the year were as follows (in thousands):

	Six Months Ended June 30,
	2016		2015		% Change
Solutions	$	31,636	$	41,349	(23	)%
Systems	11,985		20,443		(41	)%
Software	8,763		15,581		(44	)%
Ocean Bottom Services	6,433		—		—	%
Total	$	58,817	$	77,373	(24	)%

Within the Solutions segment, new venture revenues were $7.9 million, a 9% decrease from the first six months of 2015; data library revenues were $10.5 million, a 9% increase; and data processing revenues were $13.2 million, a 43% decrease. All businesses within the Solutions segment were impacted by the slowdown in exploration spending.

The decrease in Systems segment revenues resulted from a reduction in new marine positioning system sales and repair and replacement revenues, attributable to reduced activity by seismic contractors, as they have taken vessels out of service.

Software segment revenues were down primarily due to lower Orca licensing revenues and a decline in service revenues. While Software segment revenues were down 44% year over year, the segment generated positive gross and operating margins of 60% and 22%, respectively, during the first six months of 2016.

The Ocean Bottom Services segment was impacted by the Company’s OBS crew going back to work in second quarter 2016 on a survey offshore Nigeria, whereas the crew was idle throughout all of 2015.

Consolidated operating expenses were $42.6 million, down 31% from the $61.5 million in the first half 2015. Operating margin was (79)%, compared to (113)% in the prior year period. The decrease in operating expenses was the result of the Company’s ongoing cost reduction efforts, which had a positive impact on operating margin, more than offsetting the impact from the decline in revenues.

3

For the first six months of 2016, the Company reported a net loss of $60.4 million, or $(5.48) per share, compared to net income of $0.8 million, or $0.07 per diluted share, in the first six months of 2015. Excluding special items in both periods, the Company reported an adjusted net loss of $56.2 million, or $(5.10) per share, compared to an adjusted net loss of $96.2 million, or $(8.77) per share, in the prior year period.

CONFERENCE CALL

The Company has scheduled a conference call for Thursday, August 4, 2016, 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 18, 2016. To access the replay, dial (877) 660-6853 and use pass code 13640095#.

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 is a leading provider of technology-driven solutions to the global oil & gas industry. ION’s offerings are designed to help companies reduce risk and optimize assets throughout the E&P lifecycle. For more information, visit www.iongeo.com.

Contact

Steve Bate

Executive Vice President and Chief Financial Officer

+1.281.552.3011

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, earnings 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 OceanGeo, expected outcome of litigation 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, including the risk that the Company does not prevail in its appeal of the judgment in the lawsuit with WesternGeco and that the ultimate outcome of the lawsuit could have a material adverse effect on the Company’s financial results and liquidity; the timing and development of the Company’s products and services and market acceptance of the Company’s new and revised product offerings; the performance of OceanGeo; 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, 2015 and its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed during 2016.

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,
	2016			2015			2016			2015
Service revenues	$	25,430		$	23,323		$	38,586		$	43,403
Product revenues	10,722			13,472			20,231			33,970
Total net revenues	36,152			36,795			58,817			77,373
Cost of services	27,175			38,817			53,012			84,351
Cost of products	4,124			8,113			9,882			18,945
Gross profit (loss)	4,853			(10,135		)	(4,077		)	(25,923		)
Operating expenses:
Research, development and engineering	4,761			7,239			10,370			14,959
Marketing and sales	4,684			8,638			8,694			16,471
General, administrative and other operating expenses	11,996			14,677			23,576			30,025
Total operating expenses	21,441			30,554			42,640			61,455
Loss from operations	(16,588		)	(40,689		)	(46,717		)	(87,378		)
Interest expense, net	(4,702		)	(4,607		)	(9,436		)	(9,232		)
Other income (expense), net	(1,717		)	101,600			(1,597		)	98,381
Income (loss) before income taxes	(23,007		)	56,304			(57,750		)	1,771
Income tax expense, net	2,256			532			2,549			1,515
Net income (loss)	(25,263		)	55,772			(60,299		)	256
Net (income) loss attributable to noncontrolling interests	(79		)	297			(57		)	549
Net income (loss) attributable to ION	$	(25,342	)	$	56,069		$	(60,356	)	$	805
Net income (loss) per share:
Basic	$	(2.22	)	$	5.11		$	(5.48	)	$	0.07
Diluted	$	(2.22	)	$	5.11		$	(5.48	)	$	0.07
Weighted average number of common shares outstanding:
Basic	11,415			10,979			11,008			10,975
Diluted	11,415			10,980			11,008			10,977

5

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited) 

ASSETS	June 30, 2016			December 31, 2015
Current assets:
Cash and cash equivalents	$	52,433		$	84,933
Accounts receivable, net	20,094			44,365
Unbilled receivables	22,011			19,937
Inventories	34,377			32,721
Prepaid expenses and other current assets	17,461			14,807
Total current assets	146,376			196,763
Property, plant, equipment and seismic rental equipment, net	58,412			72,027
Multi-client data library, net	118,547			132,237
Goodwill	24,025			26,274
Intangible assets, net	3,947			4,810
Other assets	2,514			2,977
Total assets	$	353,821		$	435,088
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	20,371		$	7,912
Accounts payable	26,969			29,799
Accrued expenses	27,284			34,287
Accrued multi-client data library royalties	23,473			25,045
Deferred revenue	7,666			6,560
Total current liabilities	105,763			103,603
Long-term debt, net of current maturities	145,130			175,080
Other long-term liabilities	44,051			44,365
Total liabilities	294,944			323,048
Equity:
Common stock	118			107
Additional paid-in capital	897,476			894,715
Accumulated deficit	(819,887		)	(759,531		)
Accumulated other comprehensive loss	(18,980		)	(14,781		)
Treasury stock	—			(8,551		)
Total stockholders’ equity	58,727			111,959
Noncontrolling interest	150			81
Total equity	58,877			112,040
Total liabilities and equity	$	353,821		$	435,088

6

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited) 

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Cash flows from operating activities:
Net income (loss)	$	(25,263	)	$	55,772		$	(60,299	)	$	256
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization (other than multi-client data library)	5,744			6,490			11,416			13,015
Amortization of multi-client data library	7,105			5,151			14,244			10,440
Stock-based compensation expense	867			1,567			1,610			3,047
Loss on extinguishment of debt	2,182			—			2,182			—
Reduction of accrual for loss contingency related to legal proceedings	—			(101,978		)	—			(101,978		)
Deferred income taxes	327			(12		)	381			(24		)
Change in operating assets and liabilities:
Accounts receivable	(5,231		)	13,408			23,980			87,796
Unbilled receivables	(4,254		)	10,721			(2,042		)	9,198
Inventories	979			(271		)	1,329			(739		)
Accounts payable, accrued expenses and accrued royalties	5,040			(1,505		)	(5,518		)	(40,649		)
Deferred revenue	1,678			(732		)	1,151			2,405
Other assets and liabilities	(3,992		)	(4,400		)	(773		)	(5,262		)
Net cash used in operating activities	(14,818		)	(15,789		)	(12,339		)	(22,495		)
Cash flows from investing activities:
Cash invested in multi-client data library	(2,321		)	(4,510		)	(8,648		)	(13,598		)
Purchase of property, plant, equipment and seismic rental assets	(74		)	(5,219		)	(340		)	(17,213		)
Other investing activities	—			—			—			257
Net cash used in investing activities	(2,395		)	(9,729		)	(8,988		)	(30,554		)
Cash flows from financing activities:
Borrowings under revolving line of credit	15,000			—			15,000			—
Repurchase of common stock	—			—			(964		)	—
Payments on notes payable and long-term debt	(2,574		)	(1,494		)	(4,786		)	(3,560		)
Costs associated with issuance of debt	(4,859		)	—			(6,174		)	—
Payment to repurchase bonds	(15,000		)	—			(15,000		)	—
Other financing activities	—			(9		)	13			22
Net cash used in financing activities	(7,433		)	(1,503		)	(11,911		)	(3,538		)
Effect of change in foreign currency exchange rates on cash and cash equivalents	409			(357		)	738			39
Net decrease in cash and cash equivalents	(24,237		)	(27,378		)	(32,500		)	(56,548		)
Cash and cash equivalents at beginning of period	76,670			144,438			84,933			173,608
Cash and cash equivalents at end of period	$	52,433		$	117,060		$	52,433		$	117,060

7

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT INFORMATION

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net revenues:
Solutions:
New Venture	$	4,579		$	3,636		$	7,885		$	8,665
Data Library	6,275			7,509			10,547			9,646
Total multi-client revenues	10,854			11,145			18,432			18,311
Data Processing	7,764			11,205			13,204			23,038
Total	18,618			22,350			31,636			41,349
Systems	6,626			7,674			11,985			20,443
Software:
Software Systems	4,096			5,798			8,246			13,527
Services	379			973			517			2,054
Total	4,475			6,771			8,763			15,581
Ocean Bottom Services	6,433			—			6,433			—
Total	$	36,152		$	36,795		$	58,817		$	77,373
Gross profit (loss):
Solutions	$	(3,533	)	$	(7,856	)	$	(13,306	)	$	(18,248	)
Systems	1,358			1,500			2,721			6,059
Software	2,761			4,208			5,287			9,798
Ocean Bottom Services	4,267			(7,987		)	1,221			(23,532		)
Total	$	4,853		$	(10,135	)	$	(4,077	)	$	(25,923	)
Gross margin:
Solutions	(19		)%	(35		)%	(42		)%	(44		)%
Systems	20		%	20		%	23		%	30		%
Software	62		%	62		%	60		%	63		%
Ocean Bottom Services	66		%	—		%	19		%	—		%
Total	13		%	(28		)%	(7		)%	(34		)%
Income (loss) from operations:
Solutions	$	(8,649	)	$	(19,756	)	$	(24,126	)	$	(41,534	)
Systems	(1,843		)	(2,379		)	(4,352		)	(1,365		)
Software	899			2,095			1,895			5,430
Ocean Bottom Services	2,884			(10,008		)	(1,330		)	(27,567		)
Corporate and other	(9,879		)	(10,641		)	(18,804		)	(22,342		)
Total	$	(16,588	)	$	(40,689	)	$	(46,717	)	$	(87,378	)
Operating margin:
Solutions	(46		)%	(88		)%	(76		)%	(100		)%
Systems	(28		)%	(31		)%	(36		)%	(7		)%
Software	20		%	31		%	22		%	35		%
Ocean Bottom Services	45		%	—		%	(21		)%	—		%
Corporate and other	(27		)%	(29		)%	(32		)%	(29		)%
Total	(46		)%	(111		)%	(79		)%	(113		)%

8

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

Reconciliation of Adjusted EBITDA to Net Income (Loss)

(Non-GAAP Measure)

(In thousands)

(Unaudited)

The term Adjusted EBITDA represents net income (loss) before interest expense, interest income, income taxes, depreciation and amortization charges, and other non-cash charges including a reduction for loss contingency related to legal proceedings and loss on extinguishment of debt. Adjusted EBITDA is not a measure 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, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Adjusted EBITDA as a supplemental disclosure because its management believes that Adjusted EBITDA provides useful information regarding our ability to service debt and to fund capital expenditures and 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,
	2016			2015			2016			2015
Net income (loss)	$	(25,263	)	$	55,772		$	(60,299	)	$	256
Interest expense, net	4,702			4,607			9,436			9,232
Income tax expense, net	2,256			532			2,549			1,515
Depreciation and amortization expense	12,849			11,641			25,660			23,455
Reduction of accrual for loss contingency related to legal proceedings	—			(101,978		)	—			(101,978		)
Loss on extinguishment of debt	2,182			—			2,182			—
Adjusted EBITDA	$	(3,274	)	$	(29,426	)	$	(20,472	)	$	(67,520	)

9

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

Reconciliation of Special Items to Diluted Income (Loss) per Share

(Non-GAAP Measure)

(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 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 loss from operations, net income (loss) or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016										Three Months Ended June 30, 2015
	As Reported			Special Items				As Adjusted			As Reported			Special Items				As Adjusted
Net revenues	$	36,152		$	—			$	36,152		$	36,795		$	—			$	36,795
Cost of sales	31,299			(1,077		)		30,222			46,930			—				46,930
Gross profit (loss)	4,853			1,077				5,930			(10,135		)	—				(10,135		)
Operating expenses	21,441			(932		)		20,509			30,554			(1,324		)		29,230
Loss from operations	(16,588		)	2,009			(1)	(14,579		)	(40,689		)	1,324			(3)	(39,365		)
Interest expense, net	(4,702		)	—				(4,702		)	(4,607		)	—				(4,607		)
Other income (expense), net	(1,717		)	2,182			(2)	465			101,600			(101,978		)	(4)	(378		)
Income tax expense	2,256			—				2,256			532			150				682
Net income (loss)	(25,263		)	4,191				(21,072		)	55,772			(100,804		)		(45,032		)
Net (income) loss attributable to noncontrolling interest	(79		)	—				(79		)	297			—				297
Net income (loss) attributable to ION	$	(25,342	)	$	4,191			$	(21,151	)	$	56,069		$	(100,804	)		$	(44,735	)
Net income (loss) per share:
Basic	$	(2.22	)					$	(1.85	)	$	5.11						$	(4.07	)
Diluted	$	(2.22	)					$	(1.85	)	$	5.11						$	(4.07	)
Weighted average number of common shares outstanding:
Basic	11,415							11,415			10,979							10,980
Diluted	11,415							11,415			10,980							10,980

10

	Six Months Ended June 30, 2016										Six Months Ended June 30, 2015
	As Reported			Special Items				As Adjusted			As Reported			Special Items(5)			As Adjusted
Net revenues	$	58,817		$	—			$	58,817		$	77,373		$	—		$	77,373
Cost of sales	62,894			(1,077		)		61,817			103,296			(1,813		)	101,483
Gross loss	(4,077		)	1,077				(3,000		)	(25,923		)	1,813			(24,110		)
Operating expenses	42,640			(932		)		41,708			61,455			(1,522		)	59,933
Loss from operations	(46,717		)	2,009			(1)	(44,708		)	(87,378		)	3,335			(84,043		)
Interest expense, net	(9,436		)	—				(9,436		)	(9,232		)	—			(9,232		)
Other income (expense), net	(1,597		)	2,182			(2)	585			98,381			(100,065		)	(1,684		)
Income tax expense	2,549			—				2,549			1,515			150			1,665
Net income (loss)	(60,299		)	4,191				(56,108		)	256			(96,880		)	(96,624		)
Net (income) loss attributable to noncontrolling interest	(57		)	—				(57		)	549			(172		)	377
Net income (loss) attributable to ION	$	(60,356	)	$	4,191			$	(56,165	)	$	805		$	(97,052	)	$	(96,247	)
Net income (loss) per share:
Basic	$	(5.48	)					$	(5.10	)	$	0.07					$	(8.77	)
Diluted	$	(5.48	)					$	(5.10	)	$	0.07					$	(8.77	)
Weighted average number of common shares outstanding:
Basic	11,008							11,008			10,975						10,977
Diluted	11,008							11,008			10,977						10,977

⁽¹⁾  Represents severance charges during the second quarter 2016.

⁽²⁾  Represents a loss on extinguishment of debt associated with the Company’s second quarter 2016 bond exchange.

⁽³⁾  Represents vacated facility charges related to the second quarter 2015.

⁽⁴⁾  Represents a partial reduction in the WesternGeco legal contingency in the second quarter 2015.

⁽⁵⁾  In addition to notes ⁽³⁾ and ⁽⁴⁾, the six months ended June 30, 2015 includes severance and facility charges related to the first quarter 2015.

11

EX-99.2

ION Earnings Call – Q2 2016 Earnings Call Presentation August 4, 2016

Corporate Participants and Contact Information CONTACT INFORMATION If you have technical problems during the call, please contact DENNARD–LASCAR Associates at 713 529 6600. If you would like to view a replay of today's call, it will be available via webcast in the Investor Relations section of the Company's website at www.iongeo.com for approximately 12 months. BRIAN HANSON President and Chief Executive Officer STEVE BATE Executive Vice President and Chief Financial Officer 2

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

Revenues $M 4 • Revenues of $36M Q2-16: • down 2% compared to Q2-15 • up 60% sequentially to Q1-16 • Q2-16 adjusted net loss of $(21)M compared to $(45)M in Q2-15 • 1H-16 adjusted loss of $(56)M compared to $(96)M in 1H-15 • Excluding financing activities, consumed $17M of cash in Q2-16 versus $26M in Q2-15 • Expect to generate moderate level of cash flows in 2H-16 ION Q2-16 Financial Highlights (4.07) (1.85) $(5.00) $(4.00) $(3.00) $(2.00) $(1.00) $- Q2 Adjusted EPS Q2-15 Q2-16 (45) (21) $(50) $(40) $(30) $(20) $(10) $- Q2 Adjusted Net Loss Q2-15 Q2-16 (26) (17) $(30) $(20) $(10) $- Q2 Cash Consumption $M (Excluding Financing) Q2-15 Q2-16 37 23 36 $- $10 $20 $30 $40 Q2-15 Q1-16 Q2-16

ION Q2-16 Highlights  Strong Q3 client commitments – over $60M Q3-16 committed revenues (exceeds 1H-16 total revenues)  General industry consensus down cycle has hit bottom – early signs of recovery  Seeing increasing client value for data 5 Overall Software Segment Solutions Segment  License rounds represent opportunity for ION’s multi-client, imaging and advisory services  Slight resurgence of interest in NA land  Dedicated imaging services capacity to large 3D reprocessing projects in GoM  Solidified ION’s position as leader in 4D project optimization  ION awarded all five 4D optimization jobs in Norwegian Continental Shelf, UK Continental Shelf and Danish sector  Marlin gaining traction – deployed in 17 locations Ocean Bottom Segment  Uptick in project awards  OceanGeo survey offshore Nigeria underway  Solid production and data quality  Working on additional tenders for work in the region

(4.07) (1.85) $(5.00) $(4.00) $(3.00) $(2.00) $(1.00) $- Adjusted EPS Q2-15 6 ION Financial Overview Q2-16 Summary $- $10 $20 $30 $40 Q2-15 Q2-16 Software Systems Solutions Revenue $M • Revenues down 2% vs Q2-15 • Solutions down 17% • Software down 34% • Systems down 14% • Ocean Bottom $6M in revenues • Revenues up 60% vs Q1-16 • Loss from operations of $(15)M compared to $(39)M in Q2-15 • Margin improvement driven by positive impact of cost savings initiatives • Adjusted EPS of $(1.85) compared to $(4.07) in Q2-15 • Adjusted EBITDA of $(3)M compared to $(29)M in Q2-15 Ocean Bottom Q2-16 $(39) $(15) $(50) $(40) $(30) $(20) $(10) $- Q2-16 Adjusted Operating Loss $M Q2-15 $(29) $(3) $(30) $(25) $(20) $(15) $(10) $(5) $- Q2-15 Q2-16 Adjusted EBITDA $M

ION Financial Overview Cash Flow $M 7 • Consumed cash before financing activities of $17M, compared to $26M Q2-15 • Total liquidity of $64M at June 2016 • $52M of cash, including $15M of revolver borrowings • $12M additional availability on revolver • Cash balances as expected given slow start to the year • Revolving credit availability to increase with expected revenues increase in 2H-16 Q2-15 Q2-16 1H-15 1H-16 Net income (loss) 55.8$ (25.3)$ 0.3$ (60.3)$ Non-cash adjustments (88.8) 16.2 (75.5) 29.8 Working capital 17.2 (5.8) 52.7 18.2 Cash from operations (15.8) (14.8) (22.5) (12.3) Multi-client investment (4.5) (2.3) (13.6) (8.6) PP&E capital expenditures (5.2) (0.1) (17.2) (0.3) Other investing activities - - 0.3 - Net cash from investing activities (9.7) (2.4) (30.6) (9.0) Payment to repurchase bonds - (15.0) - (15.0) Costs associated with issuance of debt - (4.9) - (6.2) Repurchase of common stock - - - (1.0) Borrowings under revolving credit facility - 15.0 - 15.0 ther financing activities (1.5) (2.6) (3.5) (4.8) Net cash fro financing activities (1.5) (7.4) (3.5) (11.9) Effect of change n f/x (0.4) 0.4 - 0.7 Net Change i Cash (27.3) (24.2) (56.5) (32.5) Cash & cash equiv. (beg. of period) 144.4 76.7 173.6 84.9 Cash & cash equiv. (end of period) 117.1$ 52.4$ 117.1$ 52.4$

Summary  Expect continued sequential improvement in 2H-16 – Completion of OBS Nigeria survey in Q3 – Repair & replacement and software recurring revenue streams – Industry-funded new venture programs in southern GoM – Traditional year-end spending on data library programs  Strong Q3 commitments  Expect to generate net cash flows in second half of 2016  Expect positive working capital second half of 2016, providing liquidity into 2017 and restoring borrowing base of revolver 8

FRONTIER EXPLORATION EXPLORATION APPRAISAL & DEVELOPMENT PRODUCTION E&P Operations Optimization OPTIMIZATION SOFTWARE AND SERVICES ION sof tware and serv ices for des ign, execut ion and opt im izat ion o f complex operat ions ac ross a wide range o f mar i t ime ac t iv i t ies SEISMIC DATA ACQUISITION DEVICES St reamer pos i t ion ing and cont ro l sys tems for o f f shore se ism ic data acqu is i t ion IMAGING SERVICES One of the mos t technolog ica l l y advanced se ism ic data process ing & imaging teams in the indus t ry FULL-SCOPE OBS SERVICES S urvey p l ann ing & des i gn , da ta acqu i s i t i on t h rough OceanG eo , and im ag ing and i n te rp r e ta t i on de l i ve r supe r i o r OB S da ta t o he l p o i l & gas com pan ies ga i n i ns i gh t s f o r rese rvo i r deve lopm en t dec i s i ons MULTI-CLIENT PROGRAMS / DATA LIBRARY 2D and 3D m u l t i - c l i en t and p rop r i e ta r y p rog ram s . G loba l Bas inSPAN™ l i b ra ry o f ~500 ,000 km o f bas i n -w ide , deep , geo log i ca l l y - d r i v e n 2D m u l t i - c l i en t se i sm i c da ta E&P ADVISORS Extens ive g loba l exper ience to de l i ver fu l l -va lue-cha in commerc ia l and techn ica l so lu t ions to the o i l & gas indus t ry wor ldwide E&P Technology & Services Ocean Bottom Services New Financial Reporting Segments Starting Q3-16 9

10 Q&A

EX-99.3

New Financial Reporting Segments (Illustrative Only) August 4, 2016

FRONTIER EXPLORATION EXPLORATION APPRAISAL & DEVELOPMENT PRODUCTION E&P Operations Optimization OPTIMIZATION SOFTWARE AND SERVICES ION sof tware and serv ices for des ign, execut ion and opt im izat ion o f complex operat ions ac ross a wide range o f mar i t ime ac t iv i t ies SEISMIC DATA ACQUISITION DEVICES St reamer pos i t ion ing and cont ro l sys tems for o f f shore se ism ic data acqu is i t ion IMAGING SERVICES One of the mos t technolog ica l l y advanced se ism ic data process ing & imaging teams in the indus t ry FULL-SCOPE OBS SERVICES S urvey p l ann ing & des i gn , da ta acqu i s i t i on t h rough OceanG eo , and im ag ing and i n te rp r e ta t i on de l i ve r supe r i o r OB S da ta t o he l p o i l & gas com pan ies ga i n i ns i gh t s f o r rese rvo i r deve lopm en t dec i s i ons MULTI-CLIENT PROGRAMS / DATA LIBRARY 2D and 3D m u l t i - c l i en t and p rop r i e ta r y p rog ram s . G loba l Bas inSPAN™ l i b ra ry o f ~500 ,000 km o f bas i n -w ide , deep , geo log i ca l l y - d r i v e n 2D m u l t i - c l i en t se i sm i c da ta E&P ADVISORS Extens ive g loba l exper ience to de l i ver fu l l -va lue-cha in commerc ia l and techn ica l so lu t ions to the o i l & gas indus t ry wor ldwide E&P Technology & Services Ocean Bottom Services New Financial Reporting Segments Starting Q3-16 2

New Financial Reporting Segments - Q2 & 1H 16 3 The following segment disclosures for the 2nd Quarter of 2016 are provided for illustrative purposes only. They present the Company’s performance under the Company’s new financial reporting segments, which will not be implemented until the 3rd Quarter of 2016. These 2nd Quarter segment disclosures are based on information available to management as of today and are subject to change. The Company’s management will finalize the realignment of its business segments, including the recasting 2015 segment results, in the 3rd Quarter of 2016. Q2 2016 YTD 2016 Q2 2016 YTD 2016 Net revenues: Net revenues: Solutions: E&P Technology & Services: New Venture 4,579$ 7,885$ New Venture 4,579$ 7,885$ Data Library 6,275 10,547 Data Library 6,275 10,547 Data Processing 7,764 13,204 Data Processing 7,764 13,204 Total 18,618 31,636 Total 18,618 31,636 Systems 6,626 11,985 E&P Operations Optimization: Software 4,475 8,763 Devices 6,626 11,985 Ocean Bottom Services 6,433 6,433 Software 4,475 8,763 Total 36,152$ 58,817$ Total 11,101 20,748 Ocean Bottom Services 6,433 6,433 Total 36,152$ 58,817$ Gross profit: Gross profit: Solutions (3,533)$ (13,306)$ E&P Technology & Services (3,533)$ (13,306)$ Systems(1) 1,358 2,721 E&P Operations Optimization(1) 4,948 9,781 Software 2,761 5,287 Ocean Bottom Services(1) 4,267 1,221 Ocean Bottom Services(1) 3,438 (552) Total 4,853$ (4,077)$ Total 4,853$ (4,077)$ Income (loss) from operations: Income (loss) from operations: Solutions (8,649)$ (24,126)$ E&P Technology & Services (8,649)$ (24,126)$ Systems(1) (1,843) (4,352) E&P Operations Optimization(1) 1,580 3,480 Software 899 1,895 Ocean Bottom Services(1) 2,884 (1,330) Ocean Bottom Services(1) 360 (7,267) Corporate and Other (9,879) (18,804) Support and Other (9,879) (18,804) T l (16,588)$ (46,717)$ Total (16,588)$ (46,717)$ Old Segments New Segments (1) reflects the recasting of manufacturing, engineering, research and development of ocean bottom systems from Systems (now part of E&P Operations Optimization), down to Ocean Bottom Services. Q2 and YTD operating income impact of $2.5m and $5.9m, respectively.

New Financial Reporting Segments - Q2 & IH 15 4 The following segment disclosures for the 2nd Quarter of 2015 are provided for illustrative purposes only. They present the Company’s performance under the Company’s new financial reporting segments, which will not be implemented until the 3rd Quarter of 2016. These 2nd Quarter segment disclosures are based on information available to management as of today and are subject to change. The Company’s management will finalize the realignment of its business segments, including the recasting 2015 segment results, in the 3rd Quarter of 2016. Q2 2015 YTD 2015 Q2 2015 YTD 2015 Net revenues: Net revenues: Solutions: E&P Technology & Services: New Venture 3,636$ 8,665$ New Venture 3,636$ 8,665$ Data Library 7,509 9,646 Data Library 7,509 9,646 Data Processing 11,205 23,038 Data Processing 11,205 23,038 Total 22,350 41,349 Total 22,350 41,349 Systems 7,674 20,443 E&P Operations Optimization: Software 6,771 15,581 Devices 7,674 20,443 Ocean Bottom Services - - Software 6,771 15,581 Total 36,795$ 77,373$ Total 14,445 36,024 Ocean Bottom Services - - Total 36,795$ 77,373$ Gross profit: Gross profit: Solutions (7,856)$ (18,248)$ E&P Technology & Services (7,856)$ (18,248)$ Systems(1) 1,500 6,059 E&P Operations Optimization(1) 7,084 18,932 Software 4,208 9,798 Ocean Bottom Services(1) (7,987) (23,532) Ocean Bottom Services(1) (9,363) (26,607) Total (10,135)$ (25,923)$ Total (10,135)$ (25,923)$ Income (loss) from operations: Income (loss) from operations: Solutions (19,756)$ (41,534)$ E&P Technology & Services (18,583)$ (39,043)$ Systems(1) (2,379) (1,365) E&P Operations Optimization(1) 3,351 11,870 Software 2,095 5,430 Ocean Bottom Services(1) (10,008) (27,567) Ocean Bottom Services(1) (13,940) (36,170) Corporate and Other (10,641) (22,342) Support and Other (11,517) (24,035) Total (40,689)$ (87,378)$ Total (40,689)$ (87,378)$ Old Segments New Segments (1) reflects the recasting of manufacturing, engineering, research and development of ocean bottom systems from Systems (now part of E&P Operations Optimization), down to Ocean Bottom Services. Q2 and YTD operating income impact of $3.9m and $8.6m, respectively.