Geospace Technologies (GEOS) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Geospace Technologies Corporation's unaudited consolidated financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements This section presents Geospace Technologies Corporation's unaudited consolidated financial statements for the period ended June 30, 2021, including balance sheets, income statements, and cash flows Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $68,239 | $64,937 | | Total Assets | $172,711 | $186,845 | | Total Current Liabilities | $14,277 | $10,346 | | Total Liabilities | $22,308 | $25,875 | | Total Stockholders' Equity | $150,403 | $160,970 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | | Total Revenue | $75,435 | $66,315 | | Gross Profit | $13,199 | $18,466 | | Loss from Operations | $(12,074) | $(13,876) | | Net Loss | $(9,021) | $(15,378) | | Diluted Loss Per Share | $(0.67) | $(1.14) | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(7,515) | $12,443 | | Net cash used in investing activities | $(1,657) | $(4,545) | | Net cash used in financing activities | $(3,588) | $— | | Increase (decrease) in cash and cash equivalents | $(12,616) | $7,744 | Notes to Consolidated Financial Statements This section details accounting policies, revenue recognition, investments, segment performance, contingent consideration, and the acquisition of Aquana, LLC - In Q2 2021, the company recognized $12.5 million in revenue from a fiscal year 2020 product sale after the customer's ability to satisfy a $10.0 million promissory note became probable[38] - The company was awarded a $10.5 million contract with U.S. Customs and Border Protection (CBP) in fiscal year 2020, recognizing $9.9 million of revenue under this contract for the nine months ended June 30, 2021[36] - A senior secured bond with a face value of $13.0 million was transferred to a third party, ultimately receiving $2.1 million in cash and recognizing a gain of approximately $2.0 million during fiscal year 2021[45][47][48] - On July 2, 2021, the company acquired Aquana, LLC, a wireless water monitoring and control system provider, for an initial cash payment of approximately $1.4 million plus future contingent payments[89][90] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial condition and operational results, highlighting impacts of COVID-19 and oil prices, and strong performance in Adjacent and Emerging Markets Consolidated Results of Operations Consolidated revenue increased 13.8% to $75.4 million, driven by product sales and a government contract, despite a significant decline in rental revenue Consolidated Revenue by Segment (Nine Months Ended June 30, in thousands) | Segment | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Oil and Gas Markets | $41,544 | $47,452 | (12.5%) | | Adjacent Markets | $23,868 | $18,306 | 30.4% | | Emerging Markets | $10,023 | $557 | 1700.0% | | Total Revenue | $75,435 | $66,315 | 13.8% | - The 13.8% increase in revenue for the nine months ended June 30, 2021, was primarily driven by $12.5 million from a prior-year land-based wireless product delivery, a $9.9 million sale of used OBX rental equipment, and $9.9 million in revenue from the CBP contract[120] - These revenue gains were significantly offset by a $31.3 million decrease in rental revenue, primarily from the OBX marine nodal products, due to equipment sales and lower utilization caused by the COVID-19 pandemic[120] Segment Results of Operations Oil and Gas Markets revenue declined, while Adjacent Markets and Emerging Markets, boosted by a CBP contract, showed strong growth and improved operating income - Oil and Gas Markets: Revenue from wireless exploration products for the nine months decreased by $4.9 million (12.0%), primarily due to lower OBX rental revenue, which was partially offset by a $12.5 million land-based product sale recognition and a $9.9 million sale of used OBX equipment[126] - Adjacent Markets: Revenue for the nine months grew by $5.6 million (30.4%), driven by higher demand for water meter products, contract manufacturing services, and imaging products[128][132] - Emerging Markets: Revenue for the nine months increased to $10.0 million from $0.6 million in the prior year, almost entirely due to revenue recognition from the contract with the U.S. Customs and Border Protection (CBP)[130] Liquidity and Capital Resources The company maintains a strong liquidity position with $30.0 million in cash and investments, no debt, and a $20.0 million available credit facility - The company's cash, cash equivalents, and short-term investments totaled $30.0 million at June 30, 2021[134][140] - A stock buy-back program is in place, under which the company used $3.6 million to purchase treasury stock during the nine months ended June 30, 2021, with approximately $1.4 million remaining available for repurchases[136] - The company maintains a credit agreement with Frost Bank for up to $20.0 million, with $17.7 million available as of June 30, 2021, and no outstanding borrowings[141][142] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Geospace Technologies is exempt from providing market risk disclosures - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item[151] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[154] - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[155] PART II. OTHER INFORMATION This section covers unregistered sales of equity securities and the list of exhibits filed with the Form 10-Q Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 148,811 shares of common stock for approximately $1.25 million during Q3 FY2021, as part of a $5 million buy-back program Common Stock Purchases (Q3 FY2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 2021 | 43,294 | $8.21 | | June 2021 | 105,517 | $8.51 | - The board of directors authorized a stock buy-back program on November 19, 2020, for up to $5 million of its common stock, with approximately $1.4 million remaining available under the program as of June 30, 2021[157] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and financial statements in Inline XBRL format - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[159] - Financial data from the report is provided in Inline Extensible Business Reporting Language (iXBRL) format (Exhibit 101)[159]