ION reports third quarter 2019 results

HOUSTON, Oct. 30, 2019 /PRNewswire/ -- ION Geophysical Corporation (NYSE: IO) today reported total net revenues of $53.2 million in the third quarter 2019, a 13% increase compared to total net revenues of $47.2 million one year ago.  Both segment revenues increased during the quarter, driven by Imaging Services and Marlin™ projects.  ION's net loss was $3.7 million, or a loss of $0.26 per share, compared to a net loss of $7.5 million, or a loss of $0.54 per share in the third quarter 2018.  Excluding special items in both periods, the Company reported an Adjusted net loss of $3.0 million, or a loss of $0.21 per share, compared to an Adjusted net loss of $7.3 million, or a loss of $0.52 per share in the third quarter 2018.  A reconciliation of special items to the reported financial results can be found in the tables of this press release.

The Company reported Adjusted EBITDA of $15.5 million for the third quarter 2019, an increase from $13.0 million one year ago.  A reconciliation of Adjusted EBITDA to the closest comparable GAAP numbers can be found in the tables of this press release.

Net cash flows from operations were $5.0 million during the third quarter 2019, compared to $(7.1) million in the third quarter 2018.  Total net cash flows, including investing and financing activities, were $(1.7) million, compared to $(14.3) million one year ago.  At September 30, 2019, the Company had total liquidity of $65.5 million, consisting of $27.9 million of cash on hand and $37.6 million of available borrowing capacity under its $50.0 million revolving credit facility.  There were no outstanding amounts under the credit facility at September 30, 2019.

"While our third quarter financial performance was an improvement year-on-year, we haven't launched the scale of new multi-client programs we had originally anticipated," stated Chris Usher, ION's President and Chief Executive Officer.  "This quarter, we sanctioned two new 3D multi-client programs and rolled out an enhanced frequency source offering that will differentiate us in the growing multi-client seabed space.  We see some modest market improvements and believe we are well positioned for our E&P clients' highly targeted exploration investments."

"I am also pleased with our tangible progress on a portfolio of growth initiatives.  We achieved record Marlin revenues, commercialized another 4Sea component for the seabed market, completed a 5-year Marlin SmartPorts™ agreement with our UK launch partner, and successfully demonstrated a port security system with the U.S. Navy."

For the first nine months of 2019, the Company reported total net revenues of $132.0 million, a 25% increase compared to total net revenues of $105.5 million one year ago.  ION's net loss was $33.7 million, or a loss of $2.39 per share, compared to a net loss of $51.8 million, or a loss of $3.81 per share in the first nine months of 2018.  Excluding special items in both periods, the Company reported an Adjusted net loss of $28.2 million, or a loss of $2.00 per share, compared to an Adjusted net loss of $47.8 million, or a loss of $3.52 per share in the first nine months of 2018.  Adjusted EBITDA was $22.7 million for the first nine months of 2019, compared to $5.2 million one year ago.

Net cash flows from operations were $19.3 million, compared to $(7.3) million in the first nine months of 2018.  Total net cash flows, including investing and financing activities, were $(5.7) million in the first nine months of 2019, compared to $(22.0) million one year ago.

THIRD QUARTER 2019

The Company's segment revenues for the third quarter were as follows (in thousands):

Within the E&P Technology & Services segment, multi-client revenues were $33.2 million, an increase of 3%.  Within multi-client, data library revenues increased primarily from sales of the Company's Brazil 3D reimaging programs, and to a lesser extent revenues from data sales in North America.  This increase was mostly offset by a decline in new venture revenues due to the scale and timing of new multi-client programs.  Imaging Services revenues were $7.0 million, an increase of 70%.  As mentioned last quarter, Imaging Services backlog at June 30, 2019 was at its highest level since 2015, which resulted in the significant increase in revenues during the third quarter 2019.  Imaging Services backlog remains near these levels, which should lead to a year-over-year increase in Imaging Services revenues during the fourth quarter 2019.

Within the Operations Optimization segment, Optimization Software & Services revenues were $6.9 million, a 25% increase from the third quarter 2018 due to increased deployments and associated engineering services related to ION's Marlin offshore operations optimization software.  Devices revenues were $6.1 million, a 14% increase from the third quarter 2018, driven by an increase in marine equipment replacement and repairs.

Consolidated gross margin for the quarter was 47%, compared to 35% in the third quarter 2018.  Gross margin in E&P Technology & Services was 46%, compared to 33% one year ago.  The improved E&P Technology & Services gross margin resulted from the increase in Imaging Services revenues and more favorable mix of multi-client revenues.  Operations Optimization gross margin was 54%, compared to 53% one year ago.

Consolidated operating expenses were $21.4 million, compared to $18.9 million, and operating margin was 7%, compared to (5)% in the third quarter 2018.  Excluding special items, consolidated operating expenses, as adjusted, were $20.7 million, compared to $18.7 million in the third quarter 2018, and operating margin, as adjusted, was 9%, compared to (5)% in the third quarter 2018.  The improvement in operating margin, as adjusted, was primarily due to the increase in revenues, partially offset by the increase in operating expenses, as adjusted, primarily related to compensation expenses.

YEAR-TO-DATE 2019

The Company's segment revenues for the first nine months of the year were as follows (in thousands):

Within the E&P Technology & Services segment, multi-client revenues were $79.4 million, an increase of 29%.  Within multi-client, data library revenues significantly increased primarily due to sales of North and South American data.  This increase was partially offset by a decline in new venture revenues due to the scale and timing of new multi-client programs.  Imaging Services revenues were $16.4 million, an increase of 14%, associated with the increased revenues in the third quarter.

Within the Operations Optimization segment, Optimization Software & Services revenues were $17.6 million, a 17% increase from the first nine months of 2018.  Devices revenues were $18.5 million, a 29% increase from the first nine months of 2018.  The change in revenues during the first nine months is fairly consistent with the changes described in the prior section.

Consolidated gross margin for the first nine months was 42%, compared to 21% in the first nine months of 2018.  Gross margin in E&P Technology & Services was 38%, compared to 15% one year ago.  The improved E&P Technology & Services gross margin was a result of both an increase in and more favorable mix of multi-client revenues.  Operations Optimization gross margin was 52%, compared to 51% one year ago.

Consolidated operating expenses were $69.4 million, compared to $59.4 million, and operating margin was (11)%, compared to (36)% in the first nine months of 2018.  Excluding special items, consolidated operating expenses, as adjusted, were $63.9 million, compared to $55.4 million, and operating margin, as adjusted, was (7)%, compared to (32)% in the first nine months of 2018.  The improvement in operating margin, as adjusted, was primarily due to the increase in revenues, partially offset by an increase in operating expenses, as adjusted, related to increased research and development and compensation expenses.

CONFERENCE CALL

The Company has scheduled a conference call for Thursday, October 31, 2019, at 10:00 a.m. Eastern Time that will include a slide presentation to be posted in the Investor Relations section of the ION website by 9:00 a.m. Eastern Time.  To participate in the conference call, dial (877) 407-0672 at least 10 minutes before the call begins and ask for the ION conference call.  A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until November 14, 2019.  To access the replay, dial (877) 660-6853 and use pass code 13694672#.

Investors, analysts and the general public will also have the opportunity to listen to the conference call live over the Internet by visiting iongeo.com.  An archive of the webcast will be available shortly after the call on the Company's website.

About ION

ION develops and leverages innovative technologies, creating value through data capture, analysis and optimization to enhance critical decision-making, enabling superior returns.  For more information, visit iongeo.com.

Contact
Steve Bate
Executive Vice President and Chief Financial Officer
+1.281.552.3011

The information herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include information and other statements that are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the risks associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased demand; changes in oil prices; and political, execution, regulatory, and currency risks. These risks and uncertainties also include risks associated with the WesternGeco litigation and other related proceedings. We cannot predict the outcome of this litigation or the related proceedings. For additional information regarding these various risks and uncertainties, including the WesternGeco litigation, see our Form 10-K for the year ended December 31, 2018, filed on February 7, 2019. Additional risk factors, which could affect actual results, are disclosed by the Company in its filings with the Securities and Exchange Commission ("SEC"), including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.

Tables to follow

The following table is a reconciliation of cash and cash equivalents to total cash, cash equivalents and restricted cash:

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Reconciliation of Adjusted EBITDA to Net Loss
(Non-GAAP Measure)
(In thousands)
(Unaudited)

The term EBITDA (excluding non-recurring items) represents net loss before net interest expense, income taxes, depreciation and amortization and other non-recurring charges such as severance expenses.  The term Adjusted EBITDA is EBITDA (excluding non-recurring items) but also excludes the impact of fair value adjustments related to the Company's outstanding stock appreciation awards.  EBITDA (excluding non-recurring items) and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity.  Additionally, EBITDA (excluding non-recurring items) and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA (excluding non-recurring items) and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA (excluding non-recurring items) and Adjusted EBITDA provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates.

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Description of Special Items and Reconciliation of GAAP (As Reported) to Non-GAAP (As Adjusted) Measures
(In thousands, except per share data)
(Unaudited)

The financial results are reported in accordance with GAAP.  However, management believes that certain non-GAAP performance measures may provide users of this financial information, additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is adjusted income (loss) from operations or adjusted net income (loss), which excludes certain charges or amounts.  This adjusted income (loss) amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) from operations, net income (loss) or other income data prepared in accordance with GAAP.  See the tables below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and nine months ended September 30, 2019 and 2018:

SOURCE ION Geophysical Corporation