Please ensure Javascript is enabled for purposes of website accessibility

Geospace Technologies Reverts Back to Lower Revenue

By Tyler Crowe - Feb 8, 2018 at 12:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Hopefully investors didn't get their hopes up after last quarter's revenue bump.

After showing a glimmer of hope in the prior quarter's results with higher sales, Geospace Technologies (GEOS 1.39%) posted another quarter of declining sales and little sign of turning a profitable quarter any time soon.

Here's a look at the company's most recent results and what management thinks 2018 will look like (hint, it doesn't look good).

Geospace Technologies earnings: The raw numbers

Metric Fiscal Q1 2018 Fiscal Q4 2017 Fiscal Q1 2017
Revenue $14.6 million $23.6 million $15.3 million
Operating income ($9.60 million) ($18.19 million) ($11.31 million)
Net income from continuing operations ($9.48 million) ($19.21 million) ($11.70 million)
EPS ($0.72) ($1.46) ($0.89)

Data source: Geospace Technologies earnings release. EPS = earnings per share.

This quarter was a continuation of the same trends that have impacted Geospace's earnings for a while. Sales of seismic monitoring products continue to slide as oil and gas producers aren't spending money on exploration. The one part of the business that is seeing growth is its non-seismic products that aren't tied to oil and gas. Non-seismic sales now represent 44% of total revenue and management expects this is the only segment that will grow in the shorter term.

At the end of the quarter, the company still had $46 million in cash and short-term investments and no debt on the balance sheet. That continues to be the one thing that keeps this company going through several years of losses.

Offshore oil rig and support ship at sea.

Image source: Getty Images.

What management had to say

For investors looking for some encouragement heading into 2018, CEO Rick Wheeler didn't provide a whole lot of hope for the rest of the year.

Oil prices have come a long way since their $30 low point two years ago and much of the volatility seen in the past has abated for now. As a result, many oil companies have reported at least an intention to increase capital spending, although rather conservatively in most cases. While certainly encouraging, examination shows that a majority of these increases are earmarked for production related expenditures and not directed toward new exploration efforts. Because of this, the seismic industry will continue to face struggles because the amount of services and equipment available in the marketplace to acquire seismic data far exceeds the amount that current levels of exploration work can sustain. In most respects, this further translates to an existing oversupply of seismic equipment and instrumentation, which in effect reduces demand for many of our products.  

Even though this was an extremely dour outlook, Wheeler did also offer some hope that the business will rebound further down the road.

We believe that the current low level of exploration being funded by oil and gas companies is insufficient to provide them with a sustainable future of production opportunities. The implication is that exploration efforts will eventually need to increase, even though there is no real clarity regarding the timeline of improvement. We believe that our genuine commitment to our customers and our dedication to embed quality, innovation, and efficiency into our products help cement a position of leadership and preference in our industry. This, in conjunction with our strong balance sheet and conservative cost conscious management, gives us a sound footing to both endure the current market conditions and to benefit in their recovery.

GEOS Chart

GEOS data by YCharts

10-second takeaway

Fiscal year 2017 was certainly a year worth forgetting for Geospace investors, and this first-quarter 2018 result isn't looking much better. Fortunately, the company runs such a cash-light business that it can sustain taking paper losses without eating into its cash pile. Based on management's outlook for the rest of the year, it will have to lean on that cash pile again in 2018 because there is little sign of an uptick in exploration spending that would boost revenue.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Geospace Technologies Corporation Stock Quote
Geospace Technologies Corporation
$5.10 (1.39%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.