Geospace Technologies Corporation (NASDAQ:GEOS) Q1 2024 Earnings Call Transcript
Geospace Technologies Corporation (NASDAQ:GEOS) Q1 2024 Earnings Call Transcript February 8, 2024
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Operator: Welcome to the Geospace ‘24 Earnings Conference Call [Technical Difficulty]. Today’s call [Technical Difficulty]. [Operator Instructions] It is now my pleasure to turn the floor over to Rick Wheeler. Sir, you may begin.
Rick Wheeler: Alright. Thanks, Natalie. Good morning and welcome to Geospace Technologies conference call for the first quarter of fiscal year 2024. I am 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 first quarter and Robert will then follow up with more in-depth commentary on our financial performance. After some final comments, we will then open the line for questions. Today’s commentary on markets, revenue, planned operations and capital expenditures maybe considered forward-looking as defined in 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. 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 and I encourage everyone to visit and browse the site to learn more about Geospace and our products. Note that today’s recorded information is time sensitive and may not be accurate at the time one does listen to the replay. Yesterday, after the market closed, we released our financial results for the first quarter of fiscal year 2024, which ended December 31, 2023. We were gratified to start the new fiscal year with our fourth straight quarter of profitability.
Along with improved industry demand for products in our oil and gas market segment, we believe our streamlining of operations over the last year and our attention to financial discipline were instrumental in carrying over profitability to the new fiscal year. First quarter revenue of $50 million represents the highest quarterly figure achieved in nearly 10 years. And net income exceeding $12.7 million solidly demonstrates the type of value we strive to deliver to our shareholders. The sale and delivery of our newest technology ocean bottom node known as the Mariner was the pinnacle element in delivering our first quarter performance. As we previously announced, a $20 million rental contract for the Mariner system was converted to a $30 million sale in late December.
This brought a significant amount of revenue forward into the first quarter that would have otherwise been received from incremental rental payments over the course of the year. Given that we don’t anticipate another such sale in the imminent future, this transaction serves as a stark reminder of how commerce in our oil and gas market segment can be very lumpy from quarter-to-quarter. Navigating these ups and downs is familiar territory for Geospace. And despite the volatility, we are encouraged by industry reports of major energy companies investing more broadly in conventional seismic exploration and 40 time lapse monitoring. Those endeavors are known to benefit from our latest technology offerings such as our Mariner and our Aquanaut ocean bottom nodes.
This leads us to anticipate healthy utilization of our ocean bottom node rental fleet during the second half of the fiscal year. The first quarter reflected a modest decrease in revenue from our adjacent markets segment compared to last year. We believe that reduction is the result of customers working through inventory purchases made earlier in quarters before to stay ahead of their supply chain concerns. Despite the slightly lower revenue, we expect continued growth overall from this segment to remain strong into the foreseeable future. We believe our strategy of cultivating and delivering stable, predictable and profitable revenue from this segment is working. Our confidence for continued improvement is supported by an ever-expanding commercial demand for smart infrastructure solutions, both domestically and abroad.
This is further evidenced by the recent signing of a modest contract in the international market for our Aquanaut smart water valves, which should begin contributing to revenue in the second quarter. Revenue in the first quarter from our emerging markets segment was generated through existing contracts between Aquanaut subsidiary and the U.S. federal government. Note that the opportunity for future contracts with the Customs and Border Protection Agency is solid, but those government decisions are not expected until later in the calendar year. Progress toward meaningful revenue contributions from this segment has developed more slowly than desired. However, quoting inquiries from energy companies for carbon capture monitoring projects as well as other new and unique applications for Aquanaut’s analytical methods are increasing.
But despite high public interest in carbon capture utilization and storage, these projects seem to move slowly as country requirements and industry commitments still evolve. With that, I’ll turn the call over to Robert to give a little bit more financial detail on our first quarter of 2024.
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 first quarter ended December 31, 2023, we reported revenue of $15 million compared to last year’s revenue of $31.1 million. Net income for the quarter was $12.7 million or $0.94 per diluted share compared to the first quarter of last year’s net loss of $100,000 or $0.01 per diluted share. Now our oil and gas product revenue. Traditional product revenue for the 3-month period ending December 31, 2023, was $1.8 million compared to revenue of $2.8 million last year. The decrease in revenue is due to lower demand for seismic sensors.
Our wireless product revenue for the quarter was $38.1 million, an increase of 121% compared to revenue of $17.2 million last year. The increase in revenue is due to the sale of our newest ocean bottom node called the Mariner. The increased revenue is partially offset by lower utilization of our OBX rental fleet. We do not expect this level of revenue to continue in the remaining quarters of this fiscal year. Moving to the adjacent markets product segment. Our industrial product revenue for the first quarter was $6.4 million, a decrease of 19% compared to last year’s revenue of $7.9 million. The decrease in revenue was due to lower demand for our smart water meter connectors and cables. Imaging product revenue for the 3 months ending December 31, 2023, was $3.4 million, an increase of 17% when compared to $2.9 million from the same prior year period.
The increase in revenue is due to higher demand for our thermal film products and imaging equipment. Revenue from our emerging market segments for the first quarter of fiscal year 2024 is $234,000 compared to $93,000 from the first quarter of fiscal year 2023. The emerging markets segment has a backlog of approximately $1.8 million, which is expected to be recognized during the current first fiscal year. Our consolidated gross profit for the first quarter of the fiscal year 2024 was $22.8 million compared to $10.5 million last year. The increase in gross profit is a result of the gross profit from the sale of the Mariner Ocean bottom nodes, which was partially offset by lower utilization of our OBX rental fleet and lower demand for our water meter cables and connectors.
The first quarter’s operating expenses were $9.4 million. This is a decrease of 13% when compared to $10.8 million for the first 3 months of fiscal year 2023. The decrease is due primarily to lower personnel costs attributable to our workforce reduction in the first quarter of the prior fiscal year. Fiscal year 2024 cash investments into our property, plant and equipment was $779,000, and cash investments into our rental fleet is $2.6 million. We expect fiscal year 2024 capital investments into our rental fleet to be $5 million. Investments in property, plant and equipment could be as much as $2 million for the fiscal year. Our balance sheet at the end of the first quarter reflected $34 million of cash and short-term investments and we maintained additional borrowing availability of $15 million under our bank credit agreement.
Thus, as of December 31, 2023, the company’s total liquidity was $49 million. We currently have no debt and own numerous 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 turn the call back to Rick.
Rick Wheeler: Thank you, Robert. Our first quarter represents a great start to the new fiscal year. And although gaps in rental contracts for ocean bottom nodes will likely cause unevenness in our oil and gas markets revenue in the near term we believe greater demand for these products will rebound later this fiscal year. Meanwhile, we intend to continue nurturing the growth of our adjacent and emerging markets as well as build on our successes and operational efficiencies. Combining our leadership in technology innovation with our strong balance sheet and financial discipline, we believe we have the necessary tools to meet these challenges. This concludes our prepared remarks, and I’ll now turn the call back over to Natalie for any questions from our listeners.
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