Geospace Technologies : Reports Fiscal Year 2014 Third Quarter Results

Geospace Technologies (NASDAQ:GEOS) today announced net income of $3.8 million, or $0.29 per diluted share, on revenues of $40.7 million for its fiscal quarter ended June 30, 2014. This compares with a net income of $17.0 million, or $1.31 per diluted share, on revenues of $78.1 million for the comparable quarter last year.

For the nine months ended June 30, 2014, the company recorded revenues of $210.6 million and net income of $38.7 million, or $2.95 per diluted share. For the comparable period last year, the company recorded revenues of $232.3 million and net income of $55.9 million, or $4.32 per diluted share.

Walter R. (“Rick”) Wheeler, Geospace Technologies’ President and CEO, said, “In the third quarter of fiscal year 2014, revenues and net income were down by 48% and 78% respectively from last year’s third quarter. This reduction in revenue is attributed to lower demand for our products across all our product segments. In particular, our seismic reservoir products segment exhibited the largest decrease of $31.2 million. This was caused by the completion of the Statoil order in April, wherein only $6.7 million of revenues from the contract appeared in the third quarter. As previously reported, the manufacturing portion of our Statoil contract has come to an end, and we have no permanent reservoir monitoring (PRM) contracts in hand at this time; however, we remain optimistic that our PRM products will contribute significantly to our results of operations in the future. While we have no such contracts at this time, we are aware of a number of operators around the world who are considering PRM systems for their fields. We believe we are the world leader in the design and construction of such systems.”

“Sales of our traditional and wireless products saw respective declines of roughly 8% and 24% compared to the third quarter last year. Lower demand in both of these product segments is a direct reflection of reduced exploration activity experienced by the seismic industry during the first half of calendar year 2014, especially in North America. As seismic acquisition contractors consolidate and stack their crews in response to diminished backlog, their needs for our equipment drop. And while some of our customers forecast improved activity in the second half of 2014, we expect demand for these products to remain soft through the end of the fiscal year, as demands for new equipment often lag such activity improvements. We are nonetheless well positioned for sales and rental opportunities in this reduced market when contractors look to reduce costs and gain the efficiencies that our equipment provides over legacy cabled systems. For the third quarter, we sold almost 8,000 GSX channels comprised mostly of used channels from our rental fleet. We also sold 200 OBX stations to a Russian customer. Customer interest, quote inquiries, and in-field testing and utilization of our cableless OBX ocean bottom system continue to rise. Currently, we have 3,300 OBX stations rented and utilized on a job in Alaska.”

“Despite the impact of industry softness on sales of our seismic products, our rental business continued to gain traction with our customers as third quarter rental revenues were $7.3 million compared to $1.4 million last year. For the nine months ended June 30, 2014, rental revenues were $20.5 million compared to $10.8 million for the corresponding period last year. The majority of these revenues were derived from our GSX and OBX cableless products although we also rent our borehole and traditional products.”

“Seafloor Geophysical Solutions has been unabated in their effort to secure new backing and financing to proceed with their business plan to deploy our deep-water OBX system. We remain encouraged by their efforts, but have no specific knowledge about when or if a successful completion might occur. Irrespective of the outcome, we believe this matter will be concluded by the end of the fiscal year.”

“Because of our optimism about the future of our PRM products, our plans for construction of a new building at our Pinemont facilities continue to progress and unfold. Final aspects of the base structural and architectural designs are being made now and are targeted for completion in a few weeks. Applying a realistic view toward the timing of approval and permitting processes, it is unlikely that any significant construction will take place on the new building in this fiscal year. Current cost estimates for the new building range from $20 to $25 million with most of this investment expected to fall into fiscal year 2015. Construction efforts to refurbish and remodel a smaller peripheral building on the property, which we intend to permanently utilize, are in final stages. To that end, we are on track for moving operations from one of our rented satellite facilities into this building near the end of September 2014.”

Conference Call Information

Geospace Technologies will host a conference call to review its fiscal year 2014 third quarter financial results on August 7, 2014, at 10:00 a.m. Eastern Time (9 a.m. Central). Participants can access the call at (866) 952-1906 (US) or (785) 424-1825 (International). Please reference the conference ID: GEOSQ314 prior to the start of the conference call. A replay will be available for approximately 60 days and may be accessed through the Investor tab of our website at www.geospace.com.

About Geospace Technologies

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The company also designs and manufactures non-seismic products, including industrial products, offshore cables, thermal printing equipment and film.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included herein including statements regarding potential future products and markets, our potential future revenues, future financial position, business strategy, future expectations and estimates and other plans and objectives for future operations, are forward-looking statements. We believe our forward-looking statements are reasonable. However, they are based on certain assumptions about our industry and our business that may in the future prove to be inaccurate. Important factors that could cause actual results to differ materially from our expectations include the level of seismic exploration worldwide, which is influenced primarily by prevailing prices for oil and gas, the extent to which our new products are accepted in the market, the availability of competitive products that may be more technologically advanced or otherwise preferable to our products, tensions in the Middle East and other factors disclosed under the heading “Risk Factors” and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are on file with the Securities and Exchange Commission. Further, all written and verbal forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.