Geospace Technologies Q4 2024 Earnings Report

Geospace Technologies EPS Results

• Actual EPS: $0.36
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Geospace Technologies Revenue Results

• Actual Revenue: $35.44 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Geospace Technologies Announcement Details

• Quarter: Q4 2024
• Date: 11/21/2024
• Time: After Market Closes
• Conference Call Date: Friday, November 22, 2024
• Conference Call Time: 10:00AM ET

Geospace Technologies (NASDAQ:GEOS) specializes in the design, manufacturing and marketing of geophysical instrumentation for seismic data acquisition. The company’s solutions address the needs of oil and gas exploration and production companies by enabling detailed subsurface imaging through advanced sensor and acquisition systems. Geospace serves both land and marine seismic markets, offering equipment that meets the rigorous demands of contemporary seismic surveys.

In its Land Products segment, Geospace Technologies offers a range of components including geophones, accelerometers, cable and recorder accessories designed to collect high-quality seismic signals in onshore environments. The Marine Products group develops and produces hydrophone streamers, towed cable systems and associated electronics that support 2D, 3D and 4D marine seismic surveys. The company’s products are engineered to withstand harsh field conditions while maintaining precise sensor performance.

Beyond core sensors and streamers, Geospace provides ancillary hardware and software solutions that streamline data acquisition workflows. This includes junction boxes, digitizers, recorder interfaces and acquisition software that integrate with industry-standard processing tools. The company also offers technical support and field services to assist customers with system deployment, calibration and maintenance.

Headquartered in Houston, Texas, Geospace Technologies serves a global customer base spanning North America, Latin America, Europe, Africa and the Asia-Pacific region. The company’s equipment and services are utilized by seismic contractors, independent exploration firms and national oil companies seeking to optimize reservoir characterization and reduce exploration risk. Geospace continues to invest in research and development to address evolving industry requirements for higher resolution imaging and more efficient field operations.

Geospace Technologies Q4 2024 Earnings Call Transcript

Key Takeaways

• Geospace reported $135.6 million in revenue for fiscal 2024, the highest in a decade.
• The company posted a net loss of $6.5 million due to $17.3 million in non-cash charges (Russian divestiture and intangible asset impairment), yet had an adjusted net income of $10.7 million.
• Divestment of the Russian entity generated a $14.5 million currency translation loss but is said to have minimal operational effect.
• With zero debt, $37.1 million in cash and short-term investments, plus $15 million of unused credit and unencumbered real estate, the balance sheet remains strong.
• Smart Water (Hydrakon and Aquana) achieved record cable sales, recorded its first international Aquana sale, and is expected to drive future growth.

Presentation

[Operator]

Welcome to the Geospace Technologies fourth quarter and fiscal year 2024 earnings conference call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following this call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. We ask that you please pick up your headset to allow optimal sound quality. Lastly, if you should require operator assistance, press star zero.

[Operator]

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

[Rich Kelley, President and CEO at Geospace Technologies]

Good morning and welcome to Geospace Technologies conference call for the fourth quarter of fiscal year 2024. I am Rich Kelley, the company's President and Chief Executive Officer, and I am joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will first provide an overview of the fourth quarter, and Robert will then follow up with more in-depth commentary on our financial performance. I will then give some final comments before opening the line for questions. Today's commentary on markets, revenue, planned operations, and capital expenditures may be considered forward-looking, as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on what we know now, but actual outcomes are affected by uncertainties beyond our control or prediction. Both known and unknown risks can lead to results that differ from what is said or implied today.

[Rich Kelley, President and CEO at Geospace Technologies]

Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings. For convenience, we will link a recording of this call on the investor relations page of our geospace.com website, which I invite everyone to browse through and learn more about Geospace, our subsidiaries, and our products and solutions. Note that today's recorded information is time-sensitive and may not be accurate at the time of one listens to the replay. Yesterday, after the market closed, we released our financial results for the fourth quarter and full year fiscal year 2024, which ended September 30th, 2024. We closed the year with $135.6 million in revenue. This represents the greatest revenue figure in 10 years. However, due to non-cash charges in the fourth quarter totaling $17.3 million, the year ended with a net loss of $6.5 million.

[Rich Kelley, President and CEO at Geospace Technologies]

These one-time charges are primarily associated with a divestiture of our Russian entity, but excluding these non-cash charges, the fiscal year adjusted net income is $10.7 million. While examining the increasing conflict in Ukraine and potential conflicts, complications within Russian-sanctioned entities, management and our board of directors determined the most prudent action would be to divest of our Russian entity. This divestment resulted in a loss driven mainly by accrued foreign exchange losses, which had minimal effect on the value of the net assets of the company. Additionally, our fiscal year financial reporting reflects another one-time charge related to a non-cash intangible asset impairment related to our subsidiary, Quantum Technology Sciences. Following our long-standing and unwavering commitment towards sustaining a strong balance sheet, we finished the year with zero debt and holdings of $37.1 million in cash and short-term investments, excuse me.

[Rich Kelley, President and CEO at Geospace Technologies]

While the financials indicate a net loss for the year due to two non-cash charges, we are pleased to have 24 months of consecutive adjusted net income indicating our core business remains profitable. We started the fourth quarter of fiscal year 2024 with significant contributions from our oil and gas market segment, with more than $20 million in sales and rental announcements for our OBX seabed nodes in August. This follows a trend for the fiscal year of multi-million dollar contracts for this product line and contributed to an overall increase in revenue from the prior fiscal year. In our adjusted market segment, we enjoyed a record-setting year for our HydroCon line of smart water meter cables and our Aquana product line. The market continues to recognize our leading technology, and resulting growth outpaces the industry. We also had our first successful international sale of our Aquana products.

[Rich Kelley, President and CEO at Geospace Technologies]

The Aquana product line generates further traction in smart water markets for both municipal and multi-family residential applications. We believe that our focus on smart water going forward will continue to drive growth for the organization. I now turn the call over to Robert to provide more financial detail on our fourth quarter and full year performance.

[Robert Curda, CFO at Geospace Technologies]

Thanks, Rick, Rich, and good morning. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during our call. In yesterday's press release for our fourth quarter ended September 30th, 2024, we reported revenue of $35.4 million compared to last year's revenue of $29.3 million. The net loss for the quarter was $12.9 million, or $1 per diluted share, compared to last year's net income of $4.4 million, or $0.33 per diluted share. For the 12 months ended September 30th, 2024, we reported revenue of $135.6 million compared to revenue of $124.5 million last year. Our net loss for the 12-month period was $6.6 million, or $0.50 per diluted share, compared to last year's net income of $12.2 million, or $0.92 per diluted share.

[Robert Curda, CFO at Geospace Technologies]

In the fourth quarter ended September 30th, 2024, we recorded non-cash charges totaling $17.3 million. To add additional detail to Rich's prior comments on this subject, $14.5 million was from the divestiture of our Russian legal entity, while another was a $2.8 million charge from the impairment of tangible assets from our Quantum Technology Sciences subsidiary. It's important to note that the divestiture of the Russian legal entity has virtually no effect on the company's net assets, as most of the charge came from cumulative unrealized foreign currency translation losses previously recorded within shareholders' equity. The oil and gas segment produced revenue of $17.5 million for the three months ended September 30th, 2024. This compares with revenue of $17.8 million for the same period of the prior fiscal year. For the 12-month period, the segment contributed revenue of $77.5 million versus $74 million for the same prior year period.

[Robert Curda, CFO at Geospace Technologies]

The 12-month increase in revenue is due to increased sales of ocean-bottom nodal products such as the Mariner and sales of OBX equipment from our rental fleet. This was offset by lower utilization of our rental fleet and lower demand for seismic sensors and marine products. Now, our adjacent market segment revenue, which includes our industrial products and imaging products. Our industrial product revenue for the fourth quarter of fiscal year 2024 was $14.6 million compared to $7.6 million for the fourth quarter of 2023, an increase of 91%. Industrial products' 12-month revenue for fiscal year 2024 is $43 million, an increase over the same period in 2023 of 17%. Both periods' increases are the result of record-high revenue from our HydroCon water meter cables and connector product line. Imaging product revenue for the fourth quarter was $3 million, which is equal to last year's revenue for the same period.

[Robert Curda, CFO at Geospace Technologies]

The 12-month revenue for imaging products for fiscal year 2024 is $12.6 million versus $12.2 million for the same period in 2023. Finally, revenue from our emerging market segment for the fourth quarter was $200,000 compared to $800,000 for the same period in 2023. The 12-month revenue for the segment for fiscal year 2024 was $2.2 million compared to $1.2 million for the same prior year period. Our 12-month cash investments into the rental fleet was $8.3 million, and cash investments into our property plant and equipment was $3.9 million. As of September 30th, 2024, we have $37 million of cash and short-term investments and $15 million of additional available liquidity from our credit facility. In addition, we own numerous real estate holdings in Houston and around the world that are owned free and clear without any leverage. This concludes my discussion.

[Robert Curda, CFO at Geospace Technologies]

I would like to wish everyone a happy Thanksgiving, and now I'll return the call to Rich for his closing comments.

[Rich Kelley, President and CEO at Geospace Technologies]

Thank you, Robert. As we announced in September, this will be the last time we will be reporting earnings with these business segments of oil and gas markets, adjacent markets, and emerging markets. Beginning with our release in early February, we will provide financial information using our three new business segments: smart water, energy solutions, and intelligent industrial. Other highlights of note this year included our company's addition to the Russell Stock Indexes, the Russell 2000, Russell 3000, and Russell Microcap Index. In a final note, we would like to thank Rick Wheeler, our outgoing CEO. Rick dedicated almost 30 years to Geospace. He led the company through successful and tumultuous times in the industry. His guidance and foresight provided stability and opportunities for growth through diversification.

[Rich Kelley, President and CEO at Geospace Technologies]

His management and leadership allowed Geospace to remain a strong presence in the seismic equipment market while taking advantage of their engineering and manufacturing capabilities to explore new opportunities in adjacent markets. Rick will remain as a member of the board of directors, and we wish him all the best in his retirement. This concludes our prepared commentary, and I will now turn the call back to the moderator for any questions for our listeners.

[Operator]

At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one to ask a question. We will pause for a moment to allow questions to queue, and we'll take our first question from Martin Lorenzen with Private Investor.

[Martin Lorenzen, Analyst at Private Investor]

Hello, Texas.

[Rich Kelley, President and CEO at Geospace Technologies]

Hello, Martin.

[Martin Lorenzen, Analyst at Private Investor]

I'll start with what should be the primary focus of every public company, which is capital allocation. Given your strong balance sheet, what's your time frame to increase the buyback program?

[Rich Kelley, President and CEO at Geospace Technologies]

At this time, we don't have any intention in the short term of doing any more stock buybacks.

[Martin Lorenzen, Analyst at Private Investor]

Got it. And on the energy segment, several public companies note an uptick in exploration, particularly land exploration. Now, I guess that has to do with administrative changes that are about to be done. And when do you expect to capitalize on that? I know you had a product launch, but no sales yet.

[Rich Kelley, President and CEO at Geospace Technologies]

Yeah, I would say that while there's maybe excitement in the industry, we've not actually seen that translated into actual orders for equipment or rental contracts for equipment. We're well positioned for that with the launch of our Pioneer product, which is now in manufacturing, and with our OBN products with Mariner and Mariner Deep. So we're well suited and will welcome any orders that come in the door. But as it stands right now, we are not seeing the excitement translating into orders for our equipment or services.

[Martin Lorenzen, Analyst at Private Investor]

Got it. And now that the Russian segment is gone, what's the cost savings associated with that?

[Robert Curda, CFO at Geospace Technologies]

The Russian entity was pretty much self-sustaining. They generated enough cash flow to support themselves. In the end, the cost from them was very insignificant to us as a whole.

[Martin Lorenzen, Analyst at Private Investor]

On the OBX rental fleet, could you update us on how many nodes you currently own?

[Robert Curda, CFO at Geospace Technologies]

We don't normally give that information.

[Martin Lorenzen, Analyst at Private Investor]

Would it be fair to say that you currently utilize your fleet at around 40%?

[Robert Curda, CFO at Geospace Technologies]

We also don't provide that information. Sorry, Martin.

[Martin Lorenzen, Analyst at Private Investor]

On the carbon capture, that sector seems to be already industrially scaled. I think the U.S. Department of Energy just approved a $2.4 billion commitment to apply CCUS to an Indiana coal mine. I think just recently, just yesterday, BP greenlighted the $7 billion Indonesian greenfield gas project that also includes carbon capture and storage. Do you expect to be involved there, given your ongoing relationship with BP?

[Rich Kelley, President and CEO at Geospace Technologies]

I mean, we've had ongoing conversations with several different contractors, several different entities, but as it stands right now, we don't have anything specific to report or comment on.

[Martin Lorenzen, Analyst at Private Investor]

Is the margin profile within the carbon capture and storage application comparable to the reservoir monitoring business?

[Rich Kelley, President and CEO at Geospace Technologies]

It's hard to say. I mean, there's not enough historical business there to say if you can really do a comparison between the two.

[Martin Lorenzen, Analyst at Private Investor]

On anything water-related, could you give us a rough sense of how many customers you currently serve?

[Rich Kelley, President and CEO at Geospace Technologies]

On the HydroCon water meter connector, we have, within our customer base, the majority of the major water meter manufacturer OEMs that we do business with, and on the Aquana side, as you know, that product just launched this year, but we are in communications with a number of the suppliers in that industry, or customers in the industry, I should say.

[Martin Lorenzen, Analyst at Private Investor]

Okay. And on the expense side, anything tangible you're working on currently?

[Rich Kelley, President and CEO at Geospace Technologies]

Nothing of note.

[Martin Lorenzen, Analyst at Private Investor]

Okay, then good luck.

[Rich Kelley, President and CEO at Geospace Technologies]

Thank you, Martin.

[Robert Curda, CFO at Geospace Technologies]

Thank you.

[Operator]

Thank you, and once again, to ask a question, please press star one. We'll take our next question from Jeffrey Feldman with Primary Succession Capital. Your line is open.

[Jeffrey Feldman, Analyst at Primary Succession Capital]

Hi, gentlemen, and thanks for taking the call for the question. You actually had a reasonably good outcome in the quarter, so good luck with that, and looking forward to the future here. My question was really simple, had to do with the changes with the Russian facility, let's say, and I wondered why the last few years you hadn't taken that action sooner. I was interested on the operating impact. Did you have any capability issues or anything there that you'd want to share, given that you don't have access to that resource any longer?

[Rich Kelley, President and CEO at Geospace Technologies]

Sure, Jeffrey. I'll start with why the action wasn't taken sooner. The reality is that we were still able to operate in Russia for the last several years, even with the sanctions, but what's happened recently is several of the large Russian oil seismic contractors ended up on the sanctions list, which means that our Russian entity would not have been able to do business with them, but the Russian government could have forced our hand, and then we would have been in violation of the U.S. sanctions, so it was a difficult decision, but one more politically driven than anything else, and so we decided the best thing to do was just to divest ourselves of the entity.

[Rich Kelley, President and CEO at Geospace Technologies]

From an operations standpoint, we had already been working, knowing that that potential could happen, in standing up a manufacturing facility in Malaysia with a third-party contractor, as well as improving our operations here in Houston. So I think we're well suited to continue to meet the needs of the market for our equipment, even with that change in ownership. That's not to say that we cannot still have some sort of relationship through a third party going forward.

[Jeffrey Feldman, Analyst at Primary Succession Capital]

Okay. So just to clarify, there's minimal operational impact from that change?

[Rich Kelley, President and CEO at Geospace Technologies]

Very minimal impact.

[Jeffrey Feldman, Analyst at Primary Succession Capital]

Excellent. That's great. Thank you.

[Rich Kelley, President and CEO at Geospace Technologies]

You're welcome, Jeffrey. Thank you.

[Jeffrey Feldman, Analyst at Primary Succession Capital]

Thank you. Okay. Do well.

[Operator]

Thank you. We'll take our next question from Scott Bundy with Moors & Cabot. Your line is open.

[Scott Bundy, Analyst at Moors & Cabot]

Good morning, guys. Just a question regarding the Russian subsidiary. We had cash over there. Is that cash retrievable, or is it lost?

[Robert Curda, CFO at Geospace Technologies]

We've retrieved some of that cash, but we're not going to be able to get all of it.

[Scott Bundy, Analyst at Moors & Cabot]

So Robert, with the 17 acres for sale next to the plant, what's the status of that?

[Robert Curda, CFO at Geospace Technologies]

We're still working through that contract with the buyer, but we expect we'll see that to the end.

[Rich Kelley, President and CEO at Geospace Technologies]

The expected impact is early next year, Scott.

[Scott Bundy, Analyst at Moors & Cabot]

So first calendar quarter, correct?

[Robert Curda, CFO at Geospace Technologies]

Yes, sir.

[Rich Kelley, President and CEO at Geospace Technologies]

Yeah, somewhere in that time frame.

[Scott Bundy, Analyst at Moors & Cabot]

On your report here, you've got assets for sale, something in the vicinity of about $1.8 million. What is that?

[Robert Curda, CFO at Geospace Technologies]

It's a facility we have in Colombia.

[Scott Bundy, Analyst at Moors & Cabot]

That's been for sale for some time, correct?

[Robert Curda, CFO at Geospace Technologies]

Yeah. It was for sale in the past, and then we leased it out to someone who could use the warehouse, and now we've decided to put it up for sale again.

[Scott Bundy, Analyst at Moors & Cabot]

Are we reasonably optimistic of a sale within six months?

[Robert Curda, CFO at Geospace Technologies]

We're just beginning the process. I don't see why that's going to be a problem, but this is early in that search for a buyer.

[Rich Kelley, President and CEO at Geospace Technologies]

We're still waiting on our broker to give us an opinion on what's going to happen with the Colombian market.

[Scott Bundy, Analyst at Moors & Cabot]

Okay. And so, Rich, just seasonality associated with the water business, the run rate in the fourth quarter was really good. Aquana, are you willing to tell us how much revenues, Aquana, or some percentage of revenues Aquana contributed?

[Rich Kelley, President and CEO at Geospace Technologies]

I mean, as you know, Scott, we don't provide that kind of guidance. So unfortunately, I won't be able to share that. But as far as seasonality in general for the HydroCon water meter connector, we do see a slight slowdown in the calendar fourth quarter, and we are seeing that. But we still expect to have, and we do have strong backlog in that for calendar year 2025. So we expect them to be on track for another strong year in the water space.

[Scott Bundy, Analyst at Moors & Cabot]

Finally, Robert, I assume because you didn't put anything in the release that there were zero shares bought back in the current quarter?

[Rich Kelley, President and CEO at Geospace Technologies]

That's correct.

[Scott Bundy, Analyst at Moors & Cabot]

Okay. Thanks, guys.

[Rich Kelley, President and CEO at Geospace Technologies]

Thank you, Scott.

[Operator]

Thank you. It appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

[Rich Kelley, President and CEO at Geospace Technologies]

Thank you, Shelby, and thanks to all of you who joined our call today. We look forward to speaking to you again on our conference call for the first quarter of fiscal year 2025 in February. Goodbye and have a good day.

[Operator]

That concludes today's teleconference. Thank you for your participation. You may now disconnect.

Participants

Executives

• Robert Curda, CFO
• Rich Kelley, President and CEO

Analysts

• Scott Bundy, Analyst at Moors & Cabot
• Martin Lorenzen, Analyst at Private Investor
• Jeffrey Feldman, Analyst at Primary Succession Capital