Seismic surveyor Dawson Geophysical (NASDAQ:DWSN) reported Q2 2007 earnings yesterday. As expected, it was a litany of bad news. Quoting verbatim: "... [T]he Company's second quarter reflects... adverse weather conditions, particularly in January and March, and the inability to secure land access permits in a timely manner on several projects in February negatively affected the Company's second quarter results ... inclement weather conditions continued to have a negative effect on operations into April."

Ready for the punch line? None of that mattered.

Macro beats micro
Less speed bump on the highway to success than a dusting of gravel across the road, the obstacles named above didn't so much as slow Dawson down last quarter. On the contrary, in the process of blowing past analyst estimates for both sales and profits, the firm reported:

  • 50% revenue growth to $59.9 million
  • 180 basis points' worth of operating margin improvement
  • Earnings per share up 22% to $0.71
  • Apparent free cash flow

I say "apparent" because Dawson neglected to provide investors with a cash flow statement as part of its earnings release, and has not yet filed this document with the SEC as part of its quarterly 10-Q filing. That said, when you see cash on hand of $16.3 million, which is several hundred thousand dollars more than was in the kitty last time it reported earnings and up $2 million from this time last year, it stands to reason that cash profits were generated.

The bad news
It wasn't all oil and caviar, however. The bad news this quarter came in the form of net margins slipping nearly 200 basis points year over year to 9%. Reviewing the firm's income statement, I blame Uncle Sam for this. The reason net margins fell, despite operating margins climbing, is that the quarter's income tax bite rose 46% in comparison to last year's Q2.

Business-wise, though, management described customer demand as "at an all-time high with an order book reflecting commitments through the end of calendar 2007 for all fourteen crews and into calendar 2008 on several crews." And peering into the future, CEO Stephen Jumper sees more of the same, predicting further "strong demand in the 3-D seismic data acquisition markets we serve." So it looks like we can almost add "more good news from Dawson" to our list of such future certainties as death and taxes.

Dawson is a Hidden Gems pick. For more details on how the quarter went, don't forget to check out the Hidden Gems team's analysis on Hidden Gems Weekly, due out later today (if you're not a paying member yet, you can still read all about it for the price of a free trial).

Fool contributor Rich Smith does not own shares of any company named above. The Fool certainly does have a disclosure policy.