Geospace Technologies Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 17, 2023

There are 9 speakers on the call.

Operator

Welcome to

Speaker 1

the Geospace Technologies 4th Quarter and Full Year 2023 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rick Wheeler, President and Chief Executive Officer. He is joined by Robert Curda, the company's Chief Financial Officer. Today's the call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call.

Speaker 1

Since following the

Speaker 2

presentation.

Speaker 1

It is now my pleasure to turn the floor over to Rick Wheeler. Sir, you may begin.

Speaker 3

Thanks, Michael. For today's conference call. Good morning, and welcome to Geospace Technologies' conference call for the Q4 year end of fiscal year 2023. For today's call. As mentioned, I'm Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined by Robert Curta, the company's Chief Financial Officer.

Speaker 3

For today's conference call. In our prepared remarks, I'll first provide an overview of the Q4 year end, and Robert will then follow-up with more in-depth commentary on our financial performance. For questions. Some of today's commentary on markets, revenue recognition, planned operations and capital for the call today. Expenditures may be considered forward looking as defined in the Private Securities Litigation Reform Act of 1995.

Speaker 3

For today's call. These statements are based on our present awareness, but actual outcomes are affected by uncertainties we cannot control or predict. Both known and unknown risks can lead to results that differ from what is said are implied today. Some of these risks and uncertainties are discussed in our SEC Form 10 ks and 10 Q filings. For today's call.

Speaker 3

For convenience, we will link a recording of this call on the Investor Relations page of our geospace.com website, which I hope everyone will visit and browse to to learn a little bit about the company and our products. Note that the information recorded today is time sensitive and may not be accurate at the time one listens to for replay. Yesterday, after the market closed, we released our financial results for the Q4 year end of fiscal year 2023, which ended September 30, 2023. We were incredibly pleased to announce to our shareholders yet another quarter of positive earnings. For the quarter.

Speaker 3

Combined with the successful quarters earlier in the year, fiscal year 2023 closed with an overall net income of $12,200,000 for the call. Moreover, full year revenue of $124,500,000 represents the largest figure the company has recorded since 2014. For today's call. Our improved performance is the result of accelerated efforts by our dedicated employees and reducing costs and streamlining our operations as well as better market conditions for our products in both the oil and gas and adjacent market segments. For the quarter.

Speaker 3

Increases in utilization and rentals of our OBX ocean bottom nodes were the largest revenue driver in fiscal year 2023. From in fact, the company's total revenue for rentals more than doubled from last year's figure. Our conservative financial management The preservation of a strong debt free balance sheet have given us essential tools needed to maintain leadership in technology innovations for the quarter, even in depressed markets. We believe this has strengthened our ability to take advantage of these improving market conditions and will continue to do so in the future. For questions.

Speaker 3

This is strongly evidenced by recent developments in our oil and gas market segment. In the Q4, we announced a $3,000,000 rental agreement for our highly advanced for Mariner product, which is a shallow water seabed seismic data acquisition note. In addition, we announced a $5,700,000 contract was our announcement in June of a $20,000,000 rental contract for our Mariner Ocean Bottom Nodes. We expect the delivery of this system to complete in the next few weeks with the rental term commencing thereafter. While we do expect gaps to occur in some of our OBX rental contracts, for the Q4.

Speaker 3

We anticipate the ocean bottom node market remaining strong over the coming fiscal year. Results from our adjacent market segment proved equally compelling as total revenue for the Q4 and full fiscal year ending September 30, 2023 came in at $10,600,000 $49,000,000 respectively. The full year amount for this segment sets yet another new company record. Our efforts toward revenue diversification have seen some success in the adjacent market from the segment where several new quarterly records were set over the course of fiscal year 2023. The outstanding performance for the year of our industrial for the quarter largely stems from the greater demand for our water meter cables and connectors, which was the primary factor pushing the segment's overall revenue growth 25% for the quarter over last year's results.

Speaker 3

The company's emerging market segment generated $800,000 in the 4th quarter for the Q1 of 2019, and $1,200,000 over the full 2023 fiscal year. During the 2nd fiscal quarter, we announced a $1,500,000 contract for the Defense Advanced Projects Research Agency, otherwise known as DARPA. This contract is a Phase 2 Small Business Innovative Research or SBIR for the BIR contract to explore a new SEDAR capability designed to monitor acoustic energy sources of interest on nearby land, water for Air Environments. Revenue over the course of fiscal year 2023 for this segment includes amounts derived from this contract as well as fulfillment of a separate unrelated contract with a major defense contractor. We continue to explore further opportunities for contracts with DARPA and other governmental agencies as well as new private sector applications for SEDAR and Quantum's unique analytics in the energy transition market.

Speaker 3

For the call. Complementing our operational success in fiscal year 2023 were substantive gains on the company's balance sheet for fiscal 2020. In addition to increasing stockholder equity by more than $11,000,000 we ended fiscal year 2023 with a total of $33,700,000 in cash, for cash equivalents and short term investments. We further maintained an additional borrowing availability of $13,100,000 for the quarter was under an unused bank credit agreement with no borrowings outstanding. As a result, our total liquidity as of September 30, for 2023 was $46,800,000 In addition, we own wholly unencumbered properties and real estate in both domestic from our international locations.

Speaker 3

With that, I'll now turn the call over to Robert to give a little bit more financial detail on the Q4 and year end performance.

Speaker 4

Thanks, Rick, and good morning. Before I begin, I'd like to remind everyone that we will not provide any for specific revenue or earnings guidance during our call this morning. In yesterday's press release for our Q4 ended September 30, 20 for 2023, we reported revenue of $29,300,000 compared to last year's revenue of 25,900,000 for the quarter was $4,400,000 or $0.33 per diluted share compared to last year's net loss of $8,000,000 or $0.62 for diluted share. For the 12 months ended September 30, 2023, we reported revenue of $124,500,000 for the quarter, revenue of $89,300,000 last year. Our net income for the 12 month period was 12,200,000 for the quarter or $0.92 per diluted share compared to last year's net loss of 22,900,000 for $1.76 per diluted share.

Speaker 4

The oil and gas market segment produced revenue of 17 for the 3 months ended September 30, 2023. This compares with revenue of $48,000,000 for the same period of for prior fiscal year, an increase of 20%. For the 12 month period, the segment contributed revenue of $74,000,000 versus for $49,100,000 for the same prior year period. The increase for the 3 month period is due to higher utilization for the quarter of our OBX rental fleet, increased sales of wireless seismic products and higher demand for our marine products. For remarks.

Speaker 4

The 12 month increase in revenue is due to high level utilization of our OBX rental fleet, for increased sales of our seismic sensor and also of our marine products. Our adjacent market segment revenue is as follows: for the Q4 of fiscal year 2023 was $7,600,000 compared for $7,200,000 for the Q4 of 2022. Industrial Products 12 month revenue for fiscal year for 2023 was $36,900,000 an increase over the same period in 2022 of 44%. For both periods revenue increases are due to higher sales of our water meter cable and connector products. For the Q4 was $3,000,000 a decrease of 18% compared to last year's revenue of $3,700,000 The 12 month revenue for Imaging Products for fiscal year 2023 was $12,100,000 versus 13 is $500,000 for the same period in 2022.

Speaker 4

The decrease in revenue for both periods is due to lower demand for our thermal imaging equipment and for Consumable Film Products. Finally, revenue for our emerging market segment for the Q4 was $800,000 compared to 100,000 for the same period in 2022. The 12 month revenue for this segment for fiscal year 2023 was 1,200,000 compared to $700,000 for the same prior year period. This segment has a backlog of approximately for $2,000,000 that will be recognized in fiscal year 2024. Excluding non cash for the quarter.

Speaker 4

Due to the fair value of contingent earn out liabilities and non cash goodwill impairment, for both recorded and fiscal year 2022, our operating expenses modestly increased by $500,000 for the 4th quarter

Speaker 5

from the call today.

Speaker 4

And decreased by $200,000 for the 12 month period of 2023. Our 12 month cash investments into our rental fleet was for $9,900,000 in cash investments into property, plant and equipment was $4,000,000 In fiscal year 2024, we anticipate to for approximately $9,000,000 into our rental fleet and $4,000,000 into property, plant and equipment. For the quarter. Our balance sheet at the end of the Q4 reflected $34,000,000 of cash and short term investments, and we have $13,000,000 of additional liquidity from our credit facility. For me.

Speaker 4

In addition, we own numerous real estate holdings in Houston and around the world that are owned free and clear without any leverage. For questions. That concludes my discussion. I'll turn the call back to Rick. Thank you, Robert.

Speaker 3

As we enter the new fiscal year, we're enthusiastic about for the Q4 of 2019, we have set in motion to continue being profitable. As a part of that, we intend to regularly evaluate each business segment with our efforts focused on driving revenue opportunities and assessing additional areas where costs can be reduced. However, it must be noted Despite this expected variability though, we remain encouraged by the volume of planned exploration activity during the year and the resultant demand for our products it for the Q4 of fiscal year for 2024. This concludes our prepared commentary. And now I'll turn the call back over to Michael for any questions from our listeners.

Speaker 1

Thank you. The floor is now open for questions. Provide optimal sound

Speaker 6

quality. For

Speaker 1

questions. And we do have our first question from Martin Lorentzon, for a Private Investor.

Speaker 6

Good morning, Texas.

Speaker 3

Hi. How are you, Martin? For

Speaker 6

I'm fine. Thank you. Can you please elaborate on the significance of your Itron Aquana collaboration you Posted about in, I think, June of this year, to what degree does it drive your revenue volume for the quarter within that water segment?

Speaker 3

Well, that development is very recent. So it really hasn't manifested into for hard revenue as of yet, but we certainly anticipate that it will. It's a great partnership. It puts our for valves into a distribution environment that should be very healthy. So I can't give you exact numbers on that, for a moment, but look forward to it.

Speaker 6

Great. That's good to hear that it hasn't materialized yet in the numbers. For And I guess on the product side, how long would be the lifecycle of for such a water

Speaker 3

meter? Actually, these systems are designed for at least for 20 years of operation typically. There is a component that sometimes needs to be replaced after maybe a decade or so, which is a battery that drives for some of the electronics and these smart meters as it were, but they're designed for quite a long duration.

Speaker 6

For So, would it be safe to assume that the product is relatively sticky and that your customer base won't erode over time once you gain market share there?

Speaker 3

For questions. Well, there are always dynamics in any sort of market as competition comes up, as processes change and approaches change to a technology such as smart water metering. But our belief is that the smart city expansion That we see really throughout the country, actually throughout the world with respect to these types of instruments and for valves as well as outside of the water industry, but we expect this to be an ongoing part of our business for some length of time.

Speaker 6

For Okay. And so you try to roll it out in certain geographies

Speaker 3

Well, it's definitely underpruned and traded. As it turns out in the smart meter industry, the water side of that affair as opposed to electricity and gas has generally been the lagger in that sort of deployment. The way you roll it out is through market penetration as in any other market through your sales efforts, your marketing efforts

Speaker 6

for

Speaker 1

questions. And our next question comes from Bill Dezellem with Tieton Capital.

Speaker 6

For questions.

Speaker 2

Thank you. Just quickly following up on the last question. When does the Itron contract Begin producing meaningful revenue?

Speaker 3

I'm not going to tell you that, Bill, because there are some things in place there that for we're not really privy to reveal as it relates to our partnership with Itron, but we don't anticipate it's going to be some lengthy period of time. Itron is a well known for the organization and certainly has these contracts already in place that will take place shortly in terms of their deployments.

Speaker 2

For Okay. Not to pin you too far into a corner, but fiscal 'twenty four, you would anticipate that to begin?

Speaker 3

For Yes, we do expect to see returns on that in fiscal year 2024, exactly right.

Speaker 2

Okay. That's helpful. For the call. Moving along, if I may. The utilization, for.

Speaker 2

I think, Robert, you'd mentioned that the utilization for your offshore rental fleet was high. For What was the utilization rate in fiscal Q4?

Speaker 4

It's very similar to fiscal year, for? Very similar to Q3. It's not at full capacity, very close to full capacity.

Speaker 2

For And so that may then explain my next question, which for the fleet and yet you've talked about, I think, 9,000,000 additions to the rental fleet. So would you talk to for the Q1. What you are seeing in terms of demand that is leading to that?

Speaker 4

Well, those additions are specifically related to for the Mariner's for the contracts we've received this fiscal year. So as you know, those are that's a new type of node we introduced To the market and to fulfill those contracts, we have to add those units to our fleet.

Speaker 2

For And speaking of Mariner, your $20,000,000 contract that you're going to have delivered here shortly, That rental last how long for the initial period? The year long rental. For And would it be correct to simply take $20,000,000 divided by 4 quarters And it's going to be roughly $5,000,000 a quarter or are there some meaningful nuances that make that math completely off base?

Speaker 4

There's some slight nuances that makes that math not work exactly that way.

Speaker 2

For Does it

Speaker 4

We're going to complete delivery of the units during this quarter, for As Rick said, so we're not going to have an entire quarter of rent from that contract. It doesn't really begin until Within our Q1 of 'twenty four.

Speaker 2

And then at that point, it's roughly $5,000,000 per quarter going forward?

Speaker 4

Yes. For? I would think so, yes.

Speaker 2

Yes. Okay. Thank you. And then the $9,000,000 CapEx, How much of that is tied to this contract versus additional business that you anticipate Anticipate Building.

Speaker 4

The majority of it is for this contract.

Speaker 2

So If over the course of the next year, you end up with additional business that for questions. Then you would need to build additional units.

Speaker 4

That's exactly right. We continue our diligence for the Q1 of 2019, we're going to support the additional notes before we just go and build them. We don't want to build something that's just going to gather to us.

Speaker 3

I mean to add some color to what you are asking, for Bill and what Robert really has answered, we're always very cautious about making these capital investments. And so the numbers as we reported them or from a static view of where we are now and forthcoming of exactly where things are. That does not mean that if business does not come to us in the future, for the Q1, we will limit ourselves to that investment and miss the opportunity. But this is A correct snapshot of where we are today.

Speaker 2

Great. Okay. That's helpful. So for Kind of using that phrase because you're hitting what I'm looking for, kind of a snapshot. Correct me if I'm not summarizing this correctly.

Speaker 2

For the Q3 and Q4 And Mariner will have full utilization starting in March. So my question then, for If those two statements are accurate, do you anticipate that OBX will maintain full utilization roughly for the quarter with the standard disclaimers that go in with contract gaps, etcetera. Here In the December quarter and moving forward into the foreseeable future?

Speaker 3

No, we do not. That is exactly the reason we mentioned that with respect to for some of the OBX equipment that's currently in service, there will be some gaps and those will be notable and they will change revenue from the line of John. And we do see the overall market is remaining strong even though those gaps will occur The OBXs will go back into service on those or other contracts that are being booked as we speak. For

Speaker 2

Okay. That is helpful. And then if I may, I'd like to jump to a couple of quantum questions. The first one is for me. The $2,000,000 backlog with the emerging markets, is that DARPA business or is that something else?

Speaker 4

For It's a combination of DARPA business and something else.

Speaker 2

For questions. Would you like to elaborate on the something else?

Speaker 4

I don't think we've announced the something else. It's related to maintenance and assistance, technical assistance

Speaker 6

for the Q and A session.

Speaker 2

And then for Qantum. What opportunities, if any, do you see developing for Quantum with the situation in Gaza?

Speaker 3

For Well, that's yet to be seen. Clearly, there were already some track records with respect to how Israel approached for some of its parameter monitoring and all that. It didn't necessarily work as we now understand and partly for the Q1 is an element of this intelligence failure that has been pronounced in some of that activity. So we'll have to It will remain to be seen whether that will have an impact on Quantum in the future.

Speaker 2

For And Rick, that was part of my question. Was it the equipment itself that they had did not work or was it That the intelligence services did not respond quickly enough. Yes, it's an equipment versus a human for a question. That's an

Speaker 3

excellent question, but unfortunately it's one I have no answer for.

Speaker 6

Okay. Thank

Speaker 2

you both for the time.

Speaker 6

For

Speaker 1

questions. And we have our next question from Dennis Scannell with Rutabaga Capital.

Operator

For me. Yes. Good morning, gentlemen. Just a couple of quick things for me. So following on for some questions about the rental business, which has really been a standout performer for the year.

Operator

So one of the things I did notice was that, boy, a real nice improvement in gross margins, for the Q1 of 2019, really on a sequential basis, looking at it quarter by quarter, starting your fiscal year at like 54.9%, exiting at 76.5%. And so I'm just kind of curious, was that because of different utilizations? Was it because of pricing action taken through for the course of the year, yes, if you could just shed some light on that.

Speaker 4

I think a lot of it is has a lot to do with utilization. Units that are out in the customers' hands Don't require us to repair them, keep them charged or do other activities that drag down our unit, Drag down the gross profit for items that are out on rent when we have things sitting here on the shelf. For Yes. So that's part of it. We also had across the company as a whole, a higher utilization of the factory Because we're building these Mariners that are going out into this customer's hands.

Speaker 4

So as a result of that, we have Higher utilization out on the factory floor, higher absorption of fixed costs, which improves gross profit also.

Speaker 3

I think for the quarter. The move that we made of bringing our Langfield facility over into our Pinemont location certainly was a cost reducing from Mannerism as well, which is going to contribute to gross margin. Excellent point.

Operator

Okay. But the overhead absorption from the production and the plant consolidation, wouldn't that be captured in the product gross margin as opposed to the rental for gross margin,

Speaker 3

just just a little bit. From a maintenance point of view, as Robert pointed out, when those units are here, then they require maintenance for the Q1, in terms of keeping charge, touching them, there are various things that go on when they're in our hands and not in the hands of the customers. Those costs We're being absorbed by what went on at Langfield. Now they're going on here and so that gives a little bit better control of them.

Operator

Okay. Okay. So, and again, looking at just the rental gross margins, for exiting the year at 76%. Is that something that we can look for going forward or was that kind of an extraordinary performance in the Q4 and now mid-60s, 60% to 65% is more for a normal level on a go forward basis?

Speaker 4

There's going to be factors that affect that. For you. Obviously, utilization is going to affect that. We have these new units coming into the fleet that are going to Have fresh depreciation that's going to affect that also. So I think this last for the quarter just has the benefit of just really favorable things happening, and I wouldn't expect that going forward.

Speaker 4

For

Speaker 3

I think as well, we mentioned that there will be some gaps in some of the OBX Rentals. That means they're going to be back here. And so we're going to have some higher expenses for that. So there's going to be some ebb and flow to that, that makes it a little bit unpredictable. Absolutely.

Operator

Okay. Yes. No, that's fair. So and Do you see the Mariner nodes is kind of cannibalizing OBX potential?

Speaker 4

Well, the market

Speaker 3

is for you. Yes, good question. The market is in an expansive mode at this point. I mean, the ocean bottom node in the marine seismic industry for the Q1 is really where most of the activity and any sort of growth seems to be at this point. There is improvements overall in the marine industry, including for some of the towed streamer operations.

Speaker 3

So I don't want to imply that there's nothing going on there. But I do think that for the Q1. The extreme data quality that the library houses and the well companies have grown now accustomed to from this ocean bottom data for cannibalization, I wouldn't really call it that. I think there is an expansion going on in the market. Clearly, the Mariner will serve in the same functional role as the OBX, so it has that capability of displacing it, but it's new technology as well.

Speaker 3

It has for features that the OBX doesn't have and that should extend its acceptance further into the market.

Operator

For Yes. Okay, fair enough. And then just maybe to push you a little bit on capital allocation. You finished a great year for the Q and A. Relative to the recent past, you look like a real company.

Operator

We've got GAAP net income, really nice cash flow generation, for a very attractive multiple. You're trading above book value now, but you're sitting there with $33,000,000 in cash. And if we're looking for strong market demand and some spending that we're doing on our rental fleet. Is it time to think about for repurchasing stock or just kind of thinking about if you could help us think about for your capital allocation strategy going forward?

Speaker 3

No, that's certainly something that our Board considers on a regular basis. We do want to make sure in our conservative management, which we mentioned before, is something that keeps us where we are, to be debt free and to be able to fund our operational components as we go forward. For the Q1. So that doesn't preclude the possibility of a stock buyback again similar to what we did before. But we will be very cautious for questions about that, but the Board will be considering that as it always does over the course of time.

Speaker 6

Okay.

Operator

Okay, fair enough. Good luck. Thanks again. For

Speaker 1

questions. And we have our next question from Scott Mundy with Morgan Caput.

Speaker 2

Good morning, guys.

Operator

For a couple of

Speaker 5

questions. Good morning. Are there minimum volume associated with the contract with Itron? For

Speaker 3

Minimum volumes, I don't think we have anything any terms or conditions or anything along that line in these business arrangements.

Speaker 5

Okay. And Robert, non current inventories jumped a bunch. For you. Can you explain what non current inventories are?

Speaker 4

It's inventory that We don't expect to consume within the next 12 months using our historical usage as an indicator of what we for what could happen in the past. And to be frank, what a lot of that increase in inventory is related to components for the Q1 of 2019. To build items that are going to go into our rental fleet, which is a non current asset to begin with. So We're placing those components that are likely going to end up as a non current asset in the non current inventory.

Speaker 5

So that would be Mariner, for example?

Speaker 4

For For example, yes, sir.

Speaker 5

Okay. Got it. So Rick, last quarter for Q1, regarding Quantum, you made reference to the fact that there may be more clarity on some of the endeavors in the near future for Related to perimeter security, energy transition, carbon, geothermal mining, etcetera. So what's fascinating to me from Are the job openings at Quantum? Can you give us no Board allows for the kind of job openings that you guys are having without some visibility, can you give us some idea of what's going on there?

Speaker 3

Well, I mean these contracts that we're already working on have certain requirements to it and we've actually had for the call. So there are some definite technical skills that we need to for re assess and put back in place. So I think that's where these are with with respect to these technical matters that we need those scientists for.

Speaker 5

And the more clarity part, for the Q and A. Do we have more clarity about some of these areas?

Speaker 3

We do, but it's not something we can yet for the Q1 of 2019, I mean, the 3 months between then and now is just not enough to have that manifest. But the pipeline of those discussions that we're having for for some of these things is definitely deepening. And I know that sounds frustrating, but it's just the way it is. We can't really talk about some of these things at this point.

Speaker 5

PRM, do we hear anything regarding the outlook regarding PRM?

Speaker 3

For questions? We do. Those discussions are very active and in fact, we're even having some more discussions. For the call. But the thing is, none of those are going to generate any revenue in fiscal year 2024 and so that's not anything anyone should anticipate to be the case.

Speaker 3

For the Q1. There is likely to be some tenders that come out in fiscal year 2024. They're not going to generate any revenue within that year though. They will be for future deployments, but you likely will hear about some tenders coming out in the next year.

Speaker 5

And are we talking for the call?

Speaker 3

Multiple tenders? That is certainly the possibility, and we are evaluating our for capacities as it relates to that, we feel comfortable at this point in time with the timing of when we think some of those tenders might come out.

Speaker 5

So regarding a tender where a contract was made, I think one of the issues with you guys was you weren't for comfortable with the risks associated with that particular contract and decided not to play, for the Q and A session. Are we feeling more comfortable about how we can address some of the issues that may be going forward like the one that was outstanding?

Speaker 6

For today?

Speaker 3

I think so. I think that really there is sort of movement on both sides of that equation. There is, I I think better comprehension of what we were presenting as unacceptable risks there and then I think on top of that for the quarter, we've sort of evaluated some other business approaches to how we might accommodate that.

Speaker 5

I'm sorry, I do have one more. So in the event that There was a contract, which is let's call it up to 2025. Would we have the current capacity to handle it?

Speaker 3

I believe so. Yes.

Speaker 5

For questions. Thanks,

Speaker 6

guys. Thank

Speaker 4

you. You bet, Scott.

Speaker 1

And we have our next question from Donald Collins with Ironwood. For

Speaker 7

questions. The past few years have been challenging ones for you as the oil and gas industry experienced a downturn, for questions. But you persevered, preserved capital, invested in new technologies. Now that the markets have recovered, for the Q1 of 2019, you're seeing some good profitable results. So congratulations are due to you and the entire GEOS team.

Speaker 1

For questions. And our next question comes from Michael Melby with Gate City Capital.

Speaker 8

Hi, gentlemen. Yes, congrats on the good year and the good quarter. Could you comment, do you plan on being free cash flow positive in fiscal 2024?

Speaker 4

Yes.

Speaker 8

For Adam, maybe you could expand a little bit if that's the case on what you need to see to return capital to shareholders. Looks like you have excess cash now and plan on generating more this year.

Speaker 3

Well, we just mentioned there may be some PRM tenders coming out. From We want to make sure that we have operational wherewithal to accommodate any of these sorts of things that come up. Plus there are some other aspects for the Q1 of 2019, we are now ready to take questions. Our next question comes from the line of for customers, but those will require some additional effort in the way of cash as well. So it's really a business evaluation.

Speaker 3

So I can't give you an equation that tells you when that will occur and there might be a stock buyback.

Speaker 8

For Okay. Yes, it feels like with the cash balance that it should be sufficient. For So I think going forward, if you could provide some more color in terms of what criteria you need to do that, it'd will be helpful, so we understand kind of the trade offs between investing in the business or potentially and returning for That's more of a comment than a question. But going forward, Do you expect Aquana in fiscal 2024 to generate a meaningful amount of revenues for the company?

Speaker 3

We think so. We absolutely think so.

Speaker 8

For Got it. And any thought on timing if that's kind of the next for quarter or in general when we could expect to see a contribution from that?

Speaker 3

I don't think it's going to be late in the year. I don't know if it will be in the Q1 from As far as when we see some of that some of those initial first fruits, but I think it will come relatively soon.

Speaker 6

For questions.

Speaker 1

And we have a follow-up are from Bill Dezellem with Tieton Capital.

Speaker 2

Thank you. I actually want to pick up on the Aquana question, first of all. For You did in the industrial products revenue a total of $37,000,000 of revenue. For the call. And just want to use the language that was just used as significant increase for the Q1.

Speaker 2

In revenue, is that what you're referring to is relative to the $37,000,000 you would expect a Significant increase in that revenue?

Speaker 3

I'm not going to compare it to that because there's such a mixture of products It went into that number, Bill. The industrial products certainly were the driver. Aquana was very little of any contribution to that.

Speaker 1

It wasn't 0, but it

Speaker 3

wasn't what you would call attribution to that it wasn't 0, but it wasn't what you would call meaningful and significant. But there is a mixture of products that went into the overall adjacent markets for the quarter, it pushed it up to be the 25% growth that it was. But we do Quantum will be notable in our estimation for what we see in this coming year.

Speaker 2

All right. Thank you. And then a follow-up relative to reservoir monitoring. For the call. I think this is the first time in many, many years that we have heard that there may be multiple tenders or more than one tender within a year.

Speaker 2

Would you talk to what you think may be changing within the market space Or if it's just pure random coincidence that there are a couple that might be coming at the same time?

Speaker 3

For I don't think it's random. I think that there's comprehension within the oil companies that for the call. Despite some of the ill words shoved in their direction that oil and gas for the call, when properly managed, is going to be a viable energy source and a required energy source for decades for the Q1 of 2019. So that being said, I think that some of the fields that they have discovered, They know they can better manage with lower carbon footprints if They have a complete assessment of how those reservoirs are changing as they exploit them. So I think largely that Just the mindset of the stability of what the market is going to be has made that more tractable for them to for me.

Speaker 2

Thanks, Rick. And then finally, this may be for

Speaker 6

Q and

Speaker 2

A Silly question or it may be insightful for us, but your contract manufacturing revenues were down. For you. Was that because you intentionally reduced that business because you needed space for higher value activities or was that just simply a function of your customers having lower revenue? For

Speaker 3

I think that it's a timing issue. There's been supply chain issues and inflation issues that have affected for our customers in many respects and so that has been an impact. There has been a certain amount of capacity issue In a few of our areas in manufacturing, we're working on that by the way. So it does in fact have some components of it that are related to exactly what you referred to there. But I think that going forward, we're going to have mitigated most of those for circumstances.

Speaker 2

So it would be fair to say that you are for minimizing the contract manufacturing activities in some cases Because you need the capacity for the base business?

Speaker 3

Only in a strategic way because those customers that we service in our contract manufacturing are important to us as well. So we don't freeze them out as far as that goes, but there there are definitely some capacity issues and constraints that sometimes get in the way, but we address.

Speaker 2

For And Rick, I don't think I've ever asked, but do are those customers tending to be In the oil and gas arena and so that their revenues will move up the same time for That your energy revenues will move up? Or do they tend to be in completely unrelated industrial businesses?

Speaker 3

They tend to be completely unrelated. That's circumstantial. We're more than happy to do contract work for anyone in the oil and gas industry and there are some. For you. But just to be forthcoming, I think that the primary customer base that flows through our contract manufacturing pads

Speaker 6

for questions.

Speaker 1

And we have another follow-up from Scott Bundy with Moores and Cabot.

Speaker 5

Hey, guys. Is the AVS valve beyond pilot programs for questions. And that's why Itron was interested in what you guys are doing?

Speaker 3

I don't think there's a causal relationship there, Scott, although one might try to draw one. It is commercially available and it is still in programs with other municipalities as far as that goes. So those kind of act independently. I think Itron sees the value

Speaker 5

for And so far, the programs that are out there using this valve have for the call today. Done everything that you guys wanted or have there been any setbacks? And last question on that is There have been a component problem in the past for this product, are there any component problems?

Speaker 3

There are not at this point in for the time. I mean, we've solved that problem by redesigning some of those impossible to get components out. For the Q and A So now the technology just falls into the standard issue of ensuring things work and refining for any manufacturing processes and that sort of thing.

Speaker 5

So we're really just seeing small amounts of the AVS valve in the marketplace, for Colette pilot programs. Is that correct?

Speaker 3

To date, that is exactly true.

Speaker 6

For questions.

Speaker 1

And at this time, I'm currently showing no further questions in the queue. I will turn the call back over to Rick Grill for any additional closing remarks.

Speaker 3

All right. Well, thank you, Michael. And thanks to everybody for listening to the call today and all the great questions you guys have asked. Hopefully, we've given you for some good answers. At this point, we look forward to speaking with you again on our conference call for the Q1 of fiscal year 2024, which will occur in February.

Speaker 3

For you. So thanks again and goodbye.

Speaker 1

Thank you. This does conclude today's Geospace is Q4 and Full Year 2023 Earnings Conference Call. Please disconnect your lines at this time and have a wonderful day.

Powered by Quartr

Key Takeaways

  • Geospace closed fiscal 2023 with $12.2 million net income and $124.5 million in revenue, the highest annual top line since 2014.
  • The oil & gas segment led growth as OBX ocean-bottom node rentals more than doubled year-over-year, including new Mariner contracts worth $3 million and $20 million.
  • Adjacent markets hit record highs with $10.6 million in Q4 and $49 million for the year, driven by a 25% quarterly increase in industrial products, while emerging markets delivered $800 K in Q4 via DARPA SBIR work.
  • Balance sheet remains debt-free with $33.7 million in cash and equivalents, $13.1 million undrawn on its credit facility, and total liquidity of $46.8 million.
  • For FY 2024 the company plans $9 million in rental-fleet CapEx and $4 million in property, plant & equipment, and the board is evaluating potential share repurchases.
A.I. generated. May contain errors.
Earnings Conference Call
Geospace Technologies Q4 2023
00:00 / 00:00