Robert Curda; Chief Financial Officer, Vice President; Geospace Technologies Corp
Welcome to the Geospace Technologies fourth quarter and fiscal year 2024 earnings conference call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer; he is joined by Mr. 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 this call. (Operator Instructions)
It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin.
Good morning, and welcome to Geospace Technologies conference call for the fourth quarter of fiscal year 2024. I am Rich Kelley, 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 will first provide an overview of the fourth quarter and Robert will then follow up with more in-depth commentary on our financial performance. I will then give some final comments before opening the line for questions.
Today’s commentary on markets, revenue, planned operations and capital expenditures may be considered forward-looking as defined by 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, which I invite everyone to browse through and learn more about Geospace, our subsidiaries and our products and solutions.
Note that today’s recorded information is time sensitive and may not be accurate at the time of one listens to the replay. Yesterday, after the market closed, we released our financial results for the fourth quarter and full year fiscal year 2024, which ended September 30, 2024.
We closed the year with $135.6 million in revenue. This represents the greatest revenue figure in 10 years. However, due to noncash charges in the fourth quarter totaling $17.3 million, the year ended with a net loss of $6.5 million. These onetime charges are primarily associated with the divestiture of our Russian entity. But excluding these noncash charges, the fiscal year adjusted net income is $10.7 million.
While examining the increasing conflict in Ukraine and potential conflicts complications within Russian sanction entities, management and our Board of Directors determined the most prudent action would be to divest of our Russian entity. This divestment resulted in a loss driven mainly by accrued foreign exchange losses, which had minimal effect on the value of the net assets of the company.
Additionally, our fiscal year financial reporting reflects another onetime charge related to a noncash intangible asset impairment related to our subsidiary, Quantum Technology Sciences. Following our long-standing and unwavering commitment towards sustaining a strong balance sheet, we finished the year with zero debt and holdings of $37.1 million in cash and short-term incentives — investment, excuse me.
While the financials indicated a net loss for the year due to two noncash charges, we are pleased to have 24 months of consecutive adjusted net income, indicating our core business remains profitable. We started the fourth quarter of fiscal year 2024 with significant contributions from our oil and gas market segment with more than $20 million in sales and rental announcements for our OBX Seabed nodes in August.
This follows a trend for the fiscal year of multimillion-dollar contracts for this product line and contributed to an overall increase in revenue from the prior fiscal year. In our adjusted market segment, we enjoyed a record-setting year for our Hydroconn line of smart water cables and our Aquana product line.
The market continues to recognize our leading technology and resulting growth outpaces the industry. We also had our first successful international sale of our Aquana products. The Aquana product line generates further traction in smart water markets for both municipal and multifamily residential applications. We believe that our focus on smart water going forward will continue to drive growth for the organization.
I’ll now turn the call over to Robert to provide more financial detail on our fourth quarter and full year performance.
Robert Curda
Thanks, Rick — Rich, and good morning. Before I begin, I’d like to remind everyone that we will not provide any specific revenue or earnings call — earnings guidance during our call.
In yesterday’s press release for our fourth quarter ended September 30, 2024, we reported revenue of $35.4 million compared to last year’s revenue of $29.3 million. The net loss for the quarter was $12.9 million or $1 per diluted share compared to last year’s net income of $4.4 million or $0.33 per diluted share.
For the 12 months ended September 30, 2024, we reported revenue of $135.6 million compared to revenue of $124.5 million last year. Our net loss for the 12-month period was $6.6 million or $0.50 per diluted share compared to last year’s net income of $12.2 million or $0.92 per diluted share.
In the fourth quarter ended September 30, 2024, we recorded noncash charges totaling $17.3 million. To add additional detail to Rich’s prior comments on this subject, $14.5 million was from the divestiture of our Russian legal entity, while another was a $2.8 million charge from the impairment of tangible assets from Quantum Technology Sciences subsidiary.
It’s important to note that the divestiture of the Russian legal entity has virtually no effect on the company’s net assets as most of the charge came from cumulative unrealized foreign currency translation losses previously recorded within shareholders’ equity.
The Oil and Gas segment produced revenue of $17.5 million for the three months ended September 30, 2024. This compares with revenue of $17.8 million for the same period of the prior fiscal year.
For the 12-month period, the segment contributed revenue of $77.5 million versus $74 million for the same prior year period. The 12-month increase in revenue was due to increased sales of ocean bottom nodal products such as the Mariner and sales of OBX equipment from our rental fleet. This was offset by lower utilization of our rental fleet and lower demand for seismic sensors and marine products.
Now our adjacent market segment revenue, which includes our industrial products and imaging products. Our industrial product revenue for the fourth quarter of fiscal year 2024 was $14.6 million compared to $7.6 million for the fourth quarter of 2023, an increase of 91%.
Industrial Products 12-month revenue for fiscal year 2024 is $43 million, an increase over the same period in 2023 of 17%. Both periods increases are the result of record high revenue from our hydro con, water meter cables and connector product line. Imaging product revenue for the fourth quarter was $3 million, which is equal to last year’s revenue for the same period.
The 12-month revenue for imaging products for fiscal year 2024 is $12.6 million versus $12.2 million for the same period in 2023. Finally, revenue from our emerging markets segment for the fourth quarter was $200,000 compared to $800,000 for the same period in 2023.
The 12-month revenue for the segment for fiscal year 2024 was $2.2 million compared to $1.2 million for the same prior year period. Our 12-month cash investments into the rental fleet was $8.3 million and cash investments into our property, plant and equipment was $3.9 million.
As of September 30, 2024, we have $37 million of cash and short-term investments and $15 million of additional available liquidity from our credit facility. In addition, we own numerous real estate holdings in Houston and around the world that are owned free and clear without any leverage.
This concludes my discussion. I would like to wish everyone a happy Thanksgiving and now I’ll return the call to Rich closing comments.
Richard Kelley
Thank you, Robert. As we announced in September, this will be the last time we will be reporting earnings with these business segments of oil and gas markets, adjacent markets and emerging markets.
Beginning with our release in early February, we will provide financial information using our three new business segments: Smart Water, Energy Solutions and Intelligent Industrial. Other highlights of note this year include our company’s addition to the Russell Stock Indexes, the Russell 2000, Russell 3000 and Russell Microcap Index.
In a final note, we would like to thank Rick Wheeler, our outgoing CEO. Rick dedicated almost 30 years to Geospace, he led the company through a successful and tumultuous times in the industry. His guidance and foresight provided stability and opportunities for growth through diversification.
His management and leadership allowed Geospace to remain a strong presence in the seismic equipment market while taking advantage of their engineering and manufacturing capabilities to explore new opportunities in adjacent markets. Rick will remain as a member of the Board of Directors, and we wish him all the best in his retirement.
This concludes our prepared commentary, and I will now turn the call back to the moderator for any questions for our listeners.
Operator
(Operator Instructions) [Martin Lorentzon], Private Investor.
Martin Lorentzon
I’ll start with what should be the primary focus of every public company, which is capital allocation. Given your strong balance sheet, what’s your time frame to increase the buyback program?
Richard Kelley
At this time, we don’t have any intention in the short term of doing any more stock buybacks.
Martin Lorentzon
Got it. And on the energy segment, several public companies noted an uptick in exploration, particularly land explanation now. I guess it has to do with administrative changes that are about to be done. And when do you expect to capitalize on that? I know you had a product launch, but no sales yet.
Richard Kelley
Yes. I would say that while there’s maybe excitement in the industry, we’ve not actually seen that translated into actual orders for equipment or rental contracts for equipment. We’re well positioned for that with the launch of our Pioneer product, which is now in manufacturing and with our OBN products with Mariner and Mariner Deep.
So we’re well suited and we’ll welcome any orders that come in the door. But as it stands right now, we are not seeing the excitement translating into orders for our equipment or services.
Martin Lorentzon
Got it. And now that the Russian segment is gone, what’s the cost savings associated with that?
Robert Curda
The Russian entity was pretty much self-sustaining. They generated enough cash flow to support themselves. In the end, the cost from them was very insignificant to us as a whole.
Martin Lorentzon
And on the OBX rental fleet, could you update us on how many nodes you currently own?
Robert Curda
We don’t normally give that information.
Martin Lorentzon
And would it be fair to say that you’re currently utilized your fleet at around 40%.
Robert Curda
We also don’t provide that information. Sorry, Martin.
Martin Lorentzon
And on the carbon capture, that sector seems to be already industrially scaled. I think the US Department of Energy just approved a $2.4 billion commitment to apply CCUS to Indiana coal mine. I think just recently, just yesterday, BP greenlighted the $7 billion Indonesian greenfield gas project that also includes carbon capture and storage. Do you expect to be involved there given your ongoing relationship with BP?
Richard Kelley
I mean we’ve had ongoing conversations with several different contractors, several different entities. But as it stands right now, we don’t have anything specific to report or comment on.
Martin Lorentzon
And is the margin profile within the carbon capture and storage application comparable to the reservoir monitoring business?
Richard Kelley
It’s hard to say. I mean there’s not enough historical business there to say if that’s really — if you can really do a comparison between the two.
Martin Lorentzon
And on anything water-related, could you give us a rough sense of how many customers you currently serve?
Richard Kelley
On the Hydroconn water meter connector, we have within our customer base, the majority of the major water meter manufacturer OEMs that we do business with. And on the Aquana side, as you know, that product just launched this year, but we are in communications with a number of the suppliers in that industry or customers in the industry, I should say.
Martin Lorentzon
Okay. And on the expense side, anything tangible you’re working on currently?
Richard Kelley
Nothing of note.
Operator
(Operator Instructions) Jeffrey Feldman, Primary Succession Capital.
Jeffrey Feldman
I see a reasonably good outcome in the quarter. So so good luck with that, and looking forward to the future here. My question was really simple, had to do with the changes with the Russian facility, let’s say.
And I wondered why the last few years, you haven’t taken that action sooner. I was interested on the operating impact. Did you have any capability issues or anything here that you want to share, given that you don’t have access to that resource any longer?
Richard Kelley
Sure, Jeffrey. I’ll start with why the action wasn’t taken sooner. The reality is that we were still able to operate in Russia for the last several years, even with the sanctions. But what’s happened recently is several of the large Russian oil seismic contractors ended up on the sanctioned list, which means that we would not — our Russian entity would not have been able to do business with them.
But the Russian government could have forced our hand and then we would have been in violation of the US sanctions. So it was a difficult decision but one more politically driven than anything else. And so we decided it was the best thing to do was just to divest ourselves of the entity.
From an operations standpoint, we had already been working knowing that, that potential could happen in standing up a manufacturing facility in Malaysia with a third-party contractor as well as improving our operations here in Houston.
So I think we’re well suited to continue to meet the needs of the market for our equipment even with that change in ownership. That’s not to say that we cannot still have some relationship through a third party going forward.
Jeffrey Feldman
Okay. So just to clarify, there’s minimal operational impact from that change?
Richard Kelley
Very minimal impact.
Operator
Scott Bundy, Moors & Cabot.
Scott Bundy
Just a question regarding the Russian subsidiary. We had cash over there. Is that cash retrievable or is it lost?
Robert Curda
We’ve retrieved some of that cash, but we’re not going to be able to get all of it.
Scott Bundy
So Robert, with the 17 acres for sale next to the plants, what’s the status of that?
Robert Curda
We’re still working through that contractor — contract with the buyer, but we expect we’ll see that to the end.
Richard Kelley
Expected impact is early next year, Scott.
Scott Bundy
So first quarter — first calendar quarter, correct?
Robert Curda
Yes sir.
Richard Kelley
Yes, somewhere in that time frame.
Scott Bundy
And there are — on your reports here, you’ve got assets for sale, something in the vicinity of about $1.8 million. What is that?
Robert Curda
It’s a facility we have in Colombia.
Scott Bundy
(technical difficulty) that we — that’s been for sale for some time, correct?
Robert Curda
Yes, it was for sale in the past, and then we leased it out to someone who could use the warehouse and now we’ve decided to put it up for sale again.
Scott Bundy
And are we reasonably optimistic of the sale within six months?
Robert Curda
We’re just beginning the process. I don’t see why that’s going to be a problem, but this is early in that search for a buyer.
Richard Kelley
We’re still waiting on our broker to give us an opinion what’s going to happen with the Colombian market.
Scott Bundy
Okay. And so Rich, just seasonality associated with the water business, the run rate in the fourth quarter was really good. Aquana, are you willing to tell us how much revenues Aquana or some percentage of revenues Aquana contributed?
Richard Kelley
I mean as you know, Scott, we don’t provide that guidance. So unfortunately, I won’t be able to share that. But as far as seasonality in general for the Hydroconn water meter connector, we do see a slight slowdown in the calendar fourth quarter, and we are seeing that. But we still expect to have — and we do have strong backlog in that for calendar year 2025. So we expect them to be on track for another strong year in the water space.
Scott Bundy
And finally, Robert, I assume because you didn’t put anything in the release that there were zero shares bought back in the current quarter.
Richard Kelley
That’s correct.
Operator
And it appears that we have no further questions at this time, I will now turn the program back over to our presenters for any additional or closing remarks.
Richard Kelley
Thank you, Shelby, and thanks to all of you who joined our call today. We look forward to speaking to you again on our conference call for the first quarter of fiscal year 2025 in February. Goodbye, and have a good day.
Operator
That concludes today’s teleconference. Thank you for your participation. You may now disconnect.
