Geospace Technologies Corporation (NASDAQ:GEOS) Q3 2023 Earnings Call Transcript
Geospace Technologies Corporation (NASDAQ:GEOS) Q3 2023 Earnings Call Transcript August 11, 2023
Operator: Good day, and welcome to the Geospace Technologies Third Quarter 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 call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. [Operator Instructions]. It is now my pleasure to turn the call over to Rick Wheeler. Sir, you may begin.
Rick Wheeler: Thanks, Todd. Good morning, and again, welcome to Geospace Technologies conference call for the third quarter of fiscal year 2023. I'm Rick Wheeler, the company's President and Chief Executive Officer, and I'm joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I'll first provide an overview of the third quarter, then Robert will provide more in-depth commentary on our financial performance. After final comments, we'll open the line for questions. Some of today's commentary on markets, revenue recognition, planned operations and capital expenditures may be considered forward-looking as defined in the Private Securities Litigation Reform Act of 1995. 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 or implied today. 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 hope everyone will visit and browse to learn a little bit more about Geospace and our products. Note that the information recorded today is time sensitive and may not be accurate at the time one listens to the replay. Yesterday, after the market closed, we released our financial results for the third quarter of fiscal year 2023, spanning April 1 through June 30, 2023. It was very rewarding to see our third quarter performance further extend profitability for fiscal year 2023 by an additional $0.24 per share.
In fact, total quarterly revenue of $32.7 million represents the highest figure recorded in nine years. These results serve as strong evidence of the intended positive impact our long-standing diversification efforts and recent cost control measures were designed to achieve. Increased demand for our Oil and Gas segment products, combined with continued growth in our Adjacent Markets segment fueled both our third quarter and nine month results. In the Oil and Gas segment, our rental fleet of OBX ocean bottom nodes is at near full utilization, reliably collecting high-resolution seismic data for a variety of clients around the globe. This growing demand and our innovations in this product domain were the impetus that led to the recently announced $20 million contract for the rental of our new shallow water Mariner nodal system.
Photo by Geospace Technologies Corp
In today's market environment, we expect demand for our Oil and Gas segment products to remain strong well into fiscal year 2024 with an occasional up and down typical of the industry. On another high note, our Adjacent Market segment had a great quarter, setting yet another record with the highest quarterly revenue figure ever reported. In the first nine months of fiscal year 2023, revenue from this segment was just short of last year's entire full total and beat all other prior fiscal year totals. Both the three month and nine month periods ended June 30, 2023, grew by almost 36% compared to this time last year. The increase is driven largely by water meter cables and industrial sensor products. Also during the quarter, our Aquana subsidiary announced the release of its Actuator Valve Serial, AVS, a remote shut-off valve designed to reduce the cost of operations and enhance the safety of employees for water utilities.
With the continued adoption and updates of smart water meter systems by domestic municipalities, we believe the long-term increase in demand for these adjacent market products will persist. Our emerging markets segment contributed a small but strategic portion of revenue during the three and nine month periods, primarily related to previously announced government and defense industry contracts. Further efforts are underway to secure additional contracts for perimeter security as well as the pursuit of new energy transition applications such as carbon storage, geothermal and mining. There may be more clarity on some of these endeavors in the near future. With that, I'll now turn the call over to Robert to give a little more financial detail on our third quarter performance.
Robert Curda: Thanks, Rick. 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 this morning. In yesterday's press release for our third quarter ended June 30, 2023, we reported revenue of $32.7 million, compared to last year's revenue of $20.7 million. The net income for the quarter was $3.2 million or $0.24 per diluted share, compared to last year's net loss of $6.6 million or $0.51 per diluted share. For the nine months ended June 30, 2023, we reported revenue of $95.2 million, compared to revenue of $63.4 million last year. Our net income for the nine month period was $7.8 million or $0.59 per diluted share, compared to last year's net loss of $14.8 million or $1.14 per diluted share.
Our Oil and Gas market segment produced revenue of $17.7 million for the three months ended June 30, 2023, this compares with revenue of $9.5 million for the same period of the prior fiscal year, an increase of 86%. For the nine month period, the segment contributed revenue of $56.2 million versus $34.3 million for the same period last year, an increase of 64%. The increase in revenue for the three month and nine month periods are due to higher utilization of our OBX rental fleet and higher demand for our marine equipment and seismic sensors. The nine month period increase in revenue was partially offset by a decrease in demand for our wireless exploration products. Our adjacent markets segment revenue is as follows: our industrial product revenue for the third quarter of fiscal year 2023 was $11.7 million, an increase of 56% over the third quarter of 2022.
The industrial products nine month revenue is $29.3 million, an increase over the same period in 2022 of 58%. Both periods revenue increases are due to higher sales of our water meter cable and connector products and higher demand for our industrial sensor products. Imaging product revenue for the third quarter was $3.2 million compared to last year's revenue of $3.5 million. The nine month revenue for imaging products is $9.1 million versus $9.8 million compared to the same period in 2022. Finally, revenue for our Emerging Markets segment for the third quarter was $109,000 compared to $135,000 for the same prior year period. The nine month revenue for this segment for the fiscal year was $393,000 compared to $571,000 for the same period in 2022.
Our Emerging Markets segment continues to perform on contracts with DARPA, which was announced earlier this fiscal year and other governmental agencies or contractors. Excluding non-cash decreases to the fair value of contingent earn-out liabilities recorded in fiscal year 2022, our operating expenses modestly increased by $300,000 for the third quarter of 2023 and increased by $700,000 for the nine month period. The increase in operating expenses for the three month period is due to increased sales expense and research and development costs. The slight increase in operating expenses for the nine month period is due to higher selling expenditures slightly offset by lower research and development expense. Our nine month net cash investments into our rental fleet is $6.2 million and investments into property, plant and equipment are $1.9 million.
Our balance sheet at the end of the third quarter reflected $27.3 million of cash and cash equivalents. We are also happy to report we entered into a new credit facility on July 26, which will provide an additional $15 million in liquidity. Lastly, we own real estate holdings in Houston and around the world that are owned free and clear without any leverage. That concludes my discussion, and I'll return the call to Rick.
Rick Wheeler: Thank you, Robert. In conclusion, Geospace delivered one of its most financially successful quarters in many years with quarterly revenue outpacing that of the past 9 years. Not only was positive net income achieved for the second consecutive quarter, but we also garnered over $27 million in cash and cash equivalents, further strengthening our balance sheet. We also boosted liquidity to approximately $42 million through a completed credit agreement that Robert mentioned with Woodforest National Bank. However, we don't anticipate a need for borrowing in the foreseeable future. Looking forward, we expect to see favorable performance throughout fiscal year 2023 and into 2024, even though lulls and some elements of our commerce may occur. This concludes our prepared commentary, and so I'll now turn the call back over to Todd for any questions from our listeners.
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