io20210817_8k.htm
false 0000866609 0000866609 2021-11-03 2021-11-03
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report: (Date of earliest event reported): November 3, 2021
 
ION Geophysical Corporation
(Exact name of registrant as specified in charter)
 
Delaware
(State or other jurisdiction of incorporation)
1-12691
(Commission file number)
22-2286646
(I.R.S. Employer Identification No.)
     
2105 CityWest Blvd., Suite 100 Houston, Texas   77042-2855
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (281) 933-3339
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common
IO
New York Stock Exchange (NYSE)
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
 

 
Item 2.02.    Results of Operations and Financial Condition
 
On November 3, 2021, ION Geophysical Corporation (the “Company”) issued a press release containing information regarding the Company’s results of operations for the quarter ended September 30, 2021. A copy of the press release is furnished as Exhibit 99.1 hereto.
 
Item 7.01.    Regulation FD Disclosure
 
In conjunction with the above press release, the Company has scheduled a conference call, which will be broadcast live over the Internet, for Thursday, November 4, at 10:00 a.m. Eastern Time (9:00 a.m. Central). The information for accessing the call is included in the press release. The webcast of the conference call will be accompanied by a slide presentation, which can be accessed from the ION home page in the Investor Relations section of the ION website by 9:00 AM Eastern Time.
 
The information contained in Items 2.02 and 7.01 and the exhibits of this report (i) is not to be considered “filed” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (ii) shall not be incorporated by reference into any previous or future filings made by or to be made by the Company with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended, or the Exchange Act.
 
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; agreements made or adhered to by members of OPEC and other oil producing countries to maintain production levels; the COVID-19 pandemic; the ultimate benefits of our completed restructuring transactions; political, execution, regulatory, and currency risks; the outcome or changes, if any, of our consideration of various strategic alternatives; and the impact to our liquidity in the current uncertain macroeconomic environment. For additional information regarding these various risks and uncertainties, see our Form 10-K for the year ended December 31, 2020, filed on February 12, 2021, and our Forms 10-Q for the quarters ended March 31, 2021, and June 30, 2021, filed on May 6, 2021, and on August 12, 2021, respectively. 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.
 
 

 
Item 9.01.    Financial Statements and Exhibits
 
(a)    Financial statements of businesses acquired.
 
Not applicable.
 
(b)    Pro forma financial information.
 
Not applicable.
 
(c)    Shell company transactions.
 
Not applicable.
 
(d)    Exhibits.
 
Exhibit Number    Description
 
99.1        Press Release dated November 3, 2021.
104        Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Date: November 3, 2021
ION GEOPHYSICAL CORPORATION 
 
By:
/s/ MATTHEW POWERS
 
 
 
Matthew Powers
 
 
Executive Vice President, General Counsel and Corporate Secretary
 
 
 
ex_276649.htm
 

Exhibit 99.1

                                         

ION reports third quarter 2021 revenues of $44 million, an increase of 125% sequentially, driven by successful execution of 3D strategy amid gradual market recovery

 

HOUSTON – November 3, 2021 – ION Geophysical Corporation (NYSE: IO) today reported revenues of $44.4 million in the third quarter 2021, a 125% increase compared to $19.7 million in the second quarter 2021 and a 173% increase compared to $16.2 million one year ago.

 

Net loss attributable to ION in the third quarter 2021 was $0.5 million, or a loss of $0.02 per share, compared to $16.6 million, or a loss of $1.16 per share in the third quarter 2020. Excluding special items in both periods, the Company reported an Adjusted net income (loss) attributable to ION in the third quarter 2021 of $1.5 million, or $0.05 per share, compared to $(16.5) million, or $(1.16) per share in the third quarter 2020. The Company reported Adjusted EBITDA of $22.0 million for the third quarter 2021, compared to $0.1 million in the second quarter 2021 and $(6.6) million one year ago. Reconciliations of special items to the reported financial results and Adjusted EBITDA to the closest comparable GAAP numbers can be found in the tables of this press release.

 

Year-to-date revenues were $78.1 million, an 18% decrease compared to $95.4 million one year ago. While the revenues generated in the third quarter 2021 significantly increased compared to the third quarter 2020, the increase was not enough to offset a one-time significant data library sale during the first quarter 2020. Net loss attributable to ION was $31.2 million in the first nine months of 2021, or a loss of $1.33 per share, compared to $24.1 million, or a loss of $1.69 per share in the first nine months of 2020. Excluding special items in both periods, Adjusted net loss attributable to ION in the first nine months of 2021 was $24.6 million, or a loss of $1.04 per share, compared to $23.9 million, or a loss of $1.68 per share in the first nine months of 2020The Company reported Adjusted EBITDA of $15.5 million in the first nine months of 2021 compared to $16.5 million in the first nine months of 2020.

 

At September 30, 2021, our backlog was $12.0 million. The sequential decline in our backlog resulted from revenues recognized as the second phase of our Mid North Sea High 3D multi-client program in the North Sea wrapped up this quarter. We anticipate that most of our backlog will be recognized as revenue during the next two quarters, providing momentum heading into the fourth quarter of 2021.

 

“Our third quarter results improved considerably, largely due to the successful execution of our 3D strategy,” said Chris Usher, ION’s President and CEO. “Even in a challenging environment, our multi-client market share increased by approximately 50% primarily by launching new 3D programs. Through exposure to larger scale 3D earnings potential, we delivered a 125% sequential increase in revenue and $22 million of Adjusted EBITDA. Our team successfully completed the second, much larger phase of Mid North Sea High and launched a third extension that is expected to conclude mid-November. In addition, we experienced strong sales of our newly reimaged 3D Picanha data offshore Brazil.

 

“In Operations Optimization, revenues continued improving during the third quarter. Our diversification strategy into ports and offshore logistics is gaining momentum with an increasing pipeline. We submitted our first multi-million-dollar country-scale digitalization proposals for the climate-smart digital infrastructure we are promoting with US government support for maritime detection, port management and illegal fishing. Regarding platform development, two new valuable, client-driven Marlin SmartPort™ modules were launched that drive automation and efficiency and we received a grant to advance port decarbonization.

 

“We continue diligent efforts to strengthen our financial position and right size the business. Our strategic alternatives process with Tudor Pickering, Holt & Co. is ongoing as we evaluate all options to improve liquidity and address our balance sheet. Our team has made great progress towards the approximately $16 million of annualized savings identified, executing nearly $9 million in short-term savings while progressing the remaining longer-term initiatives. Although some savings will be realized in the fourth quarter, we expect the majority of the short-term savings will take effect starting in early 2022." 

 

“While the seismic market recovery remains uncertain, we expect momentum to continue into the fourth quarter due to conversion of existing backlog and a robust sales pipeline. In addition, demand for our offshore data and digitalization technologies is growing, empowering clients to operate more efficiently and sustainably. Our team continues to improve efficiency while focusing on strategic initiatives that have the potential to transform the business, and we're seeing significant traction and customer validation in both the 3D new acquisition multi-client opportunities and large-scale maritime digitalization solutions.”  

 
At quarter close, the Company’s total liquidity of $35.0 million consisted of $24.1 million of cash (including net revolver borrowings of $19.4 million) and $10.9 million of remaining available borrowing capacity under the revolving credit facility, an increase compared to $32.8 million as of June 30, 2021. Whilst the strategic alternatives process continues, and total liquidity improved, the combination of weak first half revenues along with the near-term debt and other obligations has not ameliorated the going concern disclosed last quarter.
 
1

 

third quarter 2021

 

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

 

 

   

Three Months Ended

 
   

September 30, 2021

   

June 30, 2021

   

% Change

   

September 30, 2020

   

% Change

 

E&P Technology & Services

  $ 35,820     $ 11,704       206 %   $ 10,093       255 %

Operations Optimization

    8,571       8,010       7 %     6,141       40 %

Total

  $ 44,391     $ 19,714       125 %   $ 16,234       173 %

 

E&P Technology & Services segment revenues were $35.8 million for the third quarter 2021, compared to $11.7 million for the second quarter 2021 and $10.1 million for the third quarter 2020. Within E&P Technology & Services, multi-client revenues were $32.5 million, an increase of approximately 250% from second quarter 2021 and an increase of over 400% from third quarter 2020. The increase in multi-client revenues reflects sales of newly reimaged 3D data offshore Brazil and our 3D programs in the North Sea. Imaging and Reservoir Services revenues were $3.3 million, an increase of 36% from the second quarter 2021 and a decrease of 13% from the third quarter 2020. The sequential increase resulted from working through existing backlog. The third quarter 2021 decrease compared to third quarter 2020 is due to lower proprietary activity.

 

Operations Optimization segment revenues were $8.6 million for the third quarter 2021, compared to $8.0 million for the second quarter 2021 and $6.1 million for third quarter 2020. Within Operations Optimization, Optimization Software & Services revenues were $3.8 million, a 13% increase from second quarter 2021 primarily due to timing of software maintenance renewal and a 27% increase from third quarter 2020 due to increased seismic vessel activity offshore. Devices revenues were $4.8 million, a 3% increase from second quarter 2021 and a 55% increase from third quarter 2020 due to higher sales of towed streamer equipment spares.

 

Consolidated gross margin for the quarter was 50%, compared to 18% for the second quarter 2021 and 8% one year ago. Gross margin in E&P Technology & Services was 50% compared to 9% for the second quarter 2021 and (11)% one year ago, consistent with the increase in revenues during the period. Operations Optimization gross margin was 50%, compared to 33% for the second quarter 2021 and 39% one year ago. The increase in gross margin was due to increase in revenues.

 

Consolidated operating expenses were $15.5 million, an increase from $11.0 million in the second quarter 2021 and $12.5 million in the third quarter 2020 resulting from an increase in severance expense as well as higher professional fees related to the evaluation of strategic alternatives and, to a lesser extent, increase in commission expense

 

Income tax expense was $3.6 million for the third quarter 2021 compared to $8.8 million for the second quarter 2021 and $1.1 million for the third quarter 2020. The sequential decrease is due to establishment of a non-cash valuation allowance of $7.7 million resulting from the Company’s going concern conclusion during the second quarter 2021 that was not repeated in the third quarter 2021. Excluding the valuation allowance, the Company’s income tax expense primarily relates to results generated by its non-U.S. businesses in Latin America. 

YEAR-TO-DATE 2021

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

 

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

% Change

 

E&P Technology & Services

  $ 54,760     $ 71,833       (24 )%

Operations Optimization

    23,381       23,546       (1 )%

Total

  $ 78,141     $ 95,379       (18 )%

 

E&P Technology & Services segment revenues were $54.8 million for the first nine months of 2021, compared to $71.8 million for first nine months of 2020. Within E&P Technology & Services, multi-client revenues were $45.4 million, a decrease of 24% from the first nine months of 2020While the revenues generated during the third quarter 2021 significantly increased compared to the third quarter 2020, the increase was not enough to offset a one-time significant data library sale during the first quarter of 2020. Imaging and Reservoir Services revenues were $9.4 million, a decrease of 24% from first nine months of 2020, due to lower proprietary activity.

 

Operations Optimization segment revenues were $23.4 million for the first nine months of 2021 compared to $23.5 million for the first nine months of 2020. Within Operations Optimization, Optimization Software & Services revenues were $10.0 million, a decrease of 7% from the first nine months of 2020 primarily due to new sales and leases of our Gator command and control system that did not repeat during the first nine months of 2021. Devices revenues were $13.4 million, a 6% increase from first nine months of 2020 due to higher sales of towed streamer equipment spares.

 

Consolidated gross margin for the first nine months of 2021 was 34%, compared to 36% for the first nine months of 2020. Gross margin in E&P Technology & Services was 32% compared to 35% one year ago resulting from a significant 2D data library deal that closed during the first quarter of 2020 that was not repeated during the first nine months of 2021. Operations Optimization gross margin was 40% which is flat to one year ago.

 

Consolidated operating expenses were $37.6 million, decrease from $44.5 million in the first nine months of 2020 partially resulting from the goodwill impairment recognized in the first nine months of 2020 that was not repeated in 2021 and the reduction in compensation expense implemented during 2020. Excluding the impact of special items from both periods, the first nine months of 2021 adjusted operating expenses declined by 7%, or $35.6 million, compared to the adjusted operating expenses of $38.2 million one year ago. Operating margin was (14)%, compared to (11)% one year ago. The decline in operating margin was the result of the decline in revenues. 

 

Income tax expense was $5.6 million for the first nine months of 2021, compared to $10.0 million for the first nine months of 2020. The income tax expense for the first nine months of 2021 and 2020 primarily relates to results generated by our non-U.S. businesses in Latin America. 

 

CONFERENCE CALL

 

The Company has scheduled a conference call for Thursday, November 4, 2021, 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 (833) 362-0195 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 18, 2021. To access the replay, dial (855) 859-2056 and use pass code 1139057.

 

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

 

About ION

 

Leveraging innovative technologies, ION delivers powerful data-driven decision-making to offshore energy and maritime operations markets, enabling clients to optimize investments and results through access to our data, software and distinctive analytics. Learn more at iongeo.com.

 

Contact

Mike Morrison

Executive Vice President and Chief Financial Officer

+1.281.879.3615

 

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; agreements made or adhered to by members of OPEC and other oil producing countries to maintain production levels; the COVID-19 pandemic; the ultimate benefits of our completed restructuring transactions; political, execution, regulatory, and currency risks; the outcome or changes, if any, of our consideration of various strategic alternatives; and the impact to our liquidity in the current uncertain macroeconomic environment. For additional information regarding these various risks and uncertainties, see our Form 10-K for the year ended December 31, 2020, filed on February 12, 2021. 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

 

2

 

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) 

 

 

   

Three Months Ended

   

Nine Months Ended September 30,

 
   

September 30, 2021

   

June 30, 2021

   

September 30, 2020

   

2021

   

2020

 
   

(In thousands, except per share data)

 

Service revenues

  $ 36,455       12,366     $ 10,202     $ 56,285     $ 73,234  

Product revenues

    7,936       7,348       6,032       21,856       22,145  

Total net revenues

    44,391       19,714       16,234       78,141       95,379  

Cost of services

    18,349       11,223       11,491       38,842       47,033  

Cost of products

    3,812       4,853       3,454       12,572       12,962  

Impairment of multi-client data library

                            1,167  

Gross profit

    22,230       3,638       1,289       26,727       34,217  

Operating expenses:

                                       

Research, development and engineering

    3,156       3,382       2,899       9,485       9,943  

Marketing and sales

    3,142       3,179       2,811       9,080       8,888  

General, administrative and other operating expenses

    9,158       4,458       6,743       19,003       21,546  

Impairment of goodwill

                            4,150  

Total operating expenses

    15,456       11,019       12,453       37,568       44,527  

Income (loss) from operations

    6,774       (7,381 )     (11,164 )     (10,841 )     (10,310 )

Interest expense, net

    (2,736 )     (3,299 )     (3,669 )     (9,297 )     (10,304 )

Other income (expense), net

    (855 )     (4,070 )     (525 )     (5,532 )     6,675  

Income (loss) before income taxes

    3,183       (14,750 )     (15,358 )     (25,670 )     (13,939 )

Income tax expense

    3,623       8,776       1,056       5,550       9,982  

Net loss

    (440 )     (23,526 )     (16,414 )     (31,220 )     (23,921 )

Less: Net income (loss) attributable to noncontrolling interests

    (13 )     (60 )     (193 )     18       (168 )

Net loss attributable to ION

  $ (453 )   $ (23,586 )   $ (16,607 )   $ (31,202 )   $ (24,089 )

Net loss per share:

                                       

Basic and Diluted

  $ (0.02 )   $ (0.90 )   $ (1.16 )   $ (1.33 )   $ (1.69 )

Weighted average number of common shares outstanding:

                                       

Basic and Diluted

    28,590       26,198       14,278       23,546       14,255  

 

3

 

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) 

 

   

September 30,

   

December 31,

 
   

2021

   

2020

 
   

(In thousands, except share data)

 

ASSETS

 

Current assets:

               

Cash and cash equivalents

  $ 24,143     $ 37,486  

Accounts receivable, net

    15,890       8,045  

Unbilled receivables

    17,541       11,262  

Inventories, net

    10,673       11,267  

Prepaid expenses and other current assets

    5,808       7,116  

Total current assets

    74,055       75,176  

Property, plant and equipment, net

    9,067       9,511  

Multi-client data library, net

    56,513       50,914  

Goodwill

    19,449       19,565  

Right-of-use assets

    29,896       35,501  

Other assets

    1,928       2,926  

Total assets

  $ 190,908     $ 193,593  

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

Current liabilities:

               

Current maturities of long-term debt

  $ 26,447     $ 143,731  

Accounts payable

    28,061       33,418  

Accrued expenses

    30,402       16,363  

Accrued multi-client data library royalties

    20,003       21,359  

Deferred revenue

    3,009       3,648  

Current maturities of operating lease liabilities

    8,263       7,570  

Total current liabilities

    116,185       226,089  

Long-term debt, net of current maturities

    107,379        

Operating lease and other long-term liabilities, net of current maturities

    32,509       38,594  

Total liabilities

    256,073       264,683  

Commitment and contingencies

               

Deficit:

               

Common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 28,627,268 and 14,333,101 shares at September 30, 2021 and December 31, 2020, respectively.

    285       143  

Preferred stock

           

Additional paid-in capital

    995,821       958,584  

Accumulated deficit

    (1,042,718 )     (1,011,516 )

Accumulated other comprehensive loss

    (19,772 )     (19,913 )

Total stockholders’ deficit

    (66,384 )     (72,702 )

Noncontrolling interests

    1,219       1,612  

Total deficit

    (65,165 )     (71,090 )

Total liabilities and deficit

  $ 190,908     $ 193,593  

 

4

 

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited) 

 

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

     

2020

   

2021

     

2020

 

Cash flows from operating activities:

                                   

Net loss

  $ (440 )     $ (16,414 )   $ (31,220 )     $ (23,921 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

                                   

Depreciation and amortization (other than multi-client library)

    897         1,088       3,277         2,936  

Amortization of multi-client data library

    13,251         3,973       21,970         16,674  

Impairment of multi-client data library

                          1,167  

Impairment of goodwill

                          4,150  

Stock-based compensation expense

    527         543       1,306         1,637  

Amortization of government relief funding

                          (6,923 )

Loss on restructuring transactions

                  4,696          

Deferred income taxes

            (101 )             237  

Change in operating assets and liabilities:

                                   

Accounts receivable

    (5,423 )       2,387       (7,880 )       21,065  

Unbilled receivables

    (10,442 )       3,261       (6,291 )       1,181  

Inventories

    58         (102 )     397         77  

Accounts payable, accrued expenses and accrued royalties

    5,104         501       (2,787 )       (6,429 )

Deferred revenue

    1,194         (1,780 )     (619 )       (2,246 )

Other assets and liabilities

    4,626         3,461       7,195         3,563  

Net cash provided by (used in) operating activities

    9,352         (3,183 )     (9,956 )       13,168  

Cash flows from investing activities:

                                   

Investment in multi-client data library

    (9,664 )       (5,245 )     (22,307 )       (19,841 )

Purchase of property, plant and equipment

    (1,271 )       (168 )     (2,038 )       (865 )

Net cash used in investing activities

    (10,935 )       (5,413 )     (24,345 )       (20,706 )

Cash flows from financing activities:

                                   

Borrowings under revolving line of credit

                          27,000  

Repayments under revolving line of credit

    (400 )             (3,150 )       (4,500 )

Proceeds from the rights offering

                  41,836  

(a)

     

Payments on notes payable and long-term debt

    (128 )       (287 )     (18,704 )

(b)

    (1,814 )

Costs associated with debt issuance

    (489 )

(c)

          (8,185 )

(c)

     

Net proceeds from the registered direct offering

                  9,802          

Receipt of Paycheck Protection Program loan

                          6,923  

Other financing activities

    (28 )       (313 )     (603 )       (308 )

Net cash provided by (used in) financing activities

    (1,045 )       (600 )     20,996         27,301  

Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash

    13         (37 )     (65 )       501  

Net increase (decrease) in cash, cash equivalents and restricted cash

    (2,615 )       (9,233 )     (13,370 )       20,264  

Cash, cash equivalents and restricted cash at beginning of period

    29,058         62,615       39,813         33,118  

Cash, cash equivalents and restricted cash at end of period

  $ 26,443       $ 53,382     $ 26,443       $ 53,382  

 

(a) Represents $30.1 million in New Notes and $11.7 million of ION's common stock issued in connection with the Rights Offering.

(b) Consists primarily of $17.1 million payment for the Old Notes resulting from the Exchange Offer.

(c) Represents transaction costs incurred in connection with the Restructuring Transactions.

 

The following table is a reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:

 

   

September 30,

 
   

2021

   

2020

 
   

(In thousands)

 

Cash and cash equivalents

  $ 24,143     $ 51,056  

Restricted cash included in prepaid expenses and other current assets

    2,300       2,326  

Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows

  $ 26,443     $ 53,382  

 

5

 

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

SUMMARY OF SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended September 30,

   
   

September 30, 2021

     

June 30, 2021

   

September 30, 2020

   

2021

     

2020

   

Net revenues:

                                             

E&P Technology & Services:

                                             

New Venture

  $ 26,287       $ 3,882     $ 1,213     $ 31,256       $ 7,340    

Data Library

    6,225         5,393       5,085       14,102         52,083    

Total multi-client revenues

    32,512         9,275       6,298       45,358         59,423    

Imaging and Reservoir Services

    3,308         2,429       3,795       9,402         12,410    

Total

    35,820         11,704       10,093       54,760         71,833    

Operations Optimization:

                                             

Optimization Software & Services

    3,814         3,370       3,007       10,028         10,811    

Devices

    4,757         4,640       3,134       13,353         12,735    

Total

    8,571         8,010       6,141       23,381         23,546    

Total net revenues

  $ 44,391       $ 19,714     $ 16,234     $ 78,141       $ 95,379    

Gross profit (loss):

                                             

E&P Technology & Services

  $ 17,925       $ 1,018     $ (1,092 )   $ 17,336       $ 24,902  

(c)

Operations Optimization

    4,305         2,620       2,381       9,391         9,315    

Total gross profit

  $ 22,230       $ 3,638     $ 1,289     $ 26,727       $ 34,217    

Gross margin:

                                             

E&P Technology & Services

    50 %       9 %     (11 )%     32 %       35 %  

Operations Optimization

    50 %       33 %     39 %     40 %       40 %  

Total gross margin

    50 %       18 %     8 %     34 %       36 %  

Income (loss) from operations:

                                             

E&P Technology & Services

  $ 13,973       $ (2,691 )   $ (4,591 )   $ 6,429       $ 13,803  

(c)

Operations Optimization

    624         244       (232 )     48         (3,965 )

(d)

Support and other

    (7,823 )

(a)

    (4,934 )     (6,341 )     (17,318 )

(a)

    (20,148 )  

Income (loss) from operations

    6,774         (7,381 )     (11,164 )     (10,841 )       (10,310 )  

Interest expense, net

    (2,736 )       (3,299 )     (3,669 )     (9,297 )       (10,304 )  

Other income (expense), net

    (855 )       (4,070 )     (525 )     (5,532 )

(b)

    6,675  

(e)

Income (loss) before income taxes

  $ 3,183       $ (14,750 )   $ (15,358 )   $ (25,670 )     $ (13,939 )  

 

(a) Includes severance expense of $1.9 million for the three and nine months ended September 30, 2021.

(b) Includes the loss on restructuring transaction of $4.7 million for the nine months ended September 30, 2021 resulting from the exchange of our Old Notes for New Notes.

(c) Includes impairment of multi-client data library of $1.2 million for the nine months ended September 30, 2020.

(d) Includes impairment of goodwill of $4.2 million for the nine months ended September 30, 2020.

(e) Includes amortization of government relief funding of $6.9 million for the nine months ended September 30, 2020.

 

6

 

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

Summary of Net Revenues by Geographic Area

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended September 30,

 
   

September 30, 2021

   

June 30, 2021

   

September 30, 2020

   

2021

   

2020

 

Latin America

  $ 24,808     $ 1,072     $ 7,925     $ 29,383     $ 35,978  

Europe

    11,557       6,599       3,257       22,522       15,413  

Middle East

    2,867       704       474       3,404       7,585  

Asia Pacific

    1,801       3,437       2,332       10,051       16,719  

Africa

    1,800       6,479       361       7,439       12,725  

North America

    1,262       934       1,493       4,298       2,370  

Other

    296       489       392       1,044       4,589  

Total net revenues

  $ 44,391     $ 19,714     $ 16,234     $ 78,141     $ 95,379  

 

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 impairment charges, severance expenses, government relief and loss on restructuring transactions. 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.

 

 

   

Three Months Ended

   

Nine Months Ended September 30,

 
   

September 30, 2021

   

June 30, 2021

     

September 30, 2020

   

2021

     

2020

 

Net loss

  $ (440 )   $ (23,526 )     $ (16,414 )   $ (31,220 )     $ (23,921 )

Interest expense, net

    2,736       3,299         3,669       9,297         10,304  

Income tax expense (benefit)

    3,623       8,776  

 

    1,056       5,550  

 

    9,982  

Depreciation and amortization expense

    14,148       6,855         5,061       25,247         19,610  

Impairment of multi-client data library

                                1,167  

Impairment of goodwill

                                4,150  

Severance expense

    1,930                     1,930         3,102  

Amortization of government relief funding

                                (6,923 )

Loss on restructuring transactions

          4,696               4,696          

EBITDA excluding non-recurring items

    21,997       100         (6,628 )     15,500         17,471  

Stock appreciation rights (credit) expense

                  58       7         (952 )

Adjusted EBITDA

  $ 21,997     $ 100       $ (6,570 )   $ 15,507       $ 16,519  

 

7

 

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, 2021 and 2020 and three months ended June 30, 2021:

 

   

Three Months Ended September 30, 2021

   

Three Months Ended June 30, 2021

   

Three Months Ended September 30, 2020

 
   

As Reported

   

Special Items

     

As Adjusted

   

As Reported

   

Special Items

     

As Adjusted

   

As Reported

   

Special Items

     

As Adjusted

 

Net revenues

  $ 44,391     $       $ 44,391     $ 19,714     $       $ 19,714     $ 16,234     $       $ 16,234  

Cost of sales

    22,161               22,161       16,076               16,076       14,945               14,945  

Gross profit

    22,230               22,230       3,638               3,638       1,289               1,289  

Operating expenses

    15,456       (1,930 )

(a)

    13,526       11,019               11,019       12,453       (58 )

(d)

    12,395  

Income (loss) from operations

    6,774       1,930         8,704       (7,381 )             (7,381 )     (11,164 )     58         (11,106 )

Interest expense, net

    (2,736 )             (2,736 )     (3,299 )             (3,299 )     (3,669 )             (3,669 )

Other income (expense), net

    (855 )             (855 )     (4,070 )     4,696  

(b)

    626       (525 )             (525 )

Income (loss) before income taxes

    3,183       1,930         5,113       (14,750 )     (4,696 )       (10,054 )     (15,358 )     58         (15,300 )

Income tax expense (benefit)

    3,623               3,623       8,776       (7,743 )

(c)

    1,033       1,056               1,056  

Net income (loss)

    (440 )     1,930         1,490       (23,526 )     3,047         (11,087 )     (16,414 )     58         (16,356 )

Net income attributable to noncontrolling interests

    (13 )             (13 )     (60 )             (60 )     (193 )             (193 )

Net income (loss) attributable to ION

  $ (453 )   $ 1,930       $ 1,477     $ (23,586 )   $ 3,047       $ (11,147 )   $ (16,607 )   $ 58       $ (16,549 )

Net income (loss) per share:

                                                                             

Basic and Diluted

  $ (0.02 )             $ 0.05     $ (0.90 )             $ (0.43 )   $ (1.16 )             $ (1.16 )

Weighted average number of common shares outstanding:

                                                                             

Basic and Diluted

    28,590                 28,590       26,198                 26,198       14,278                 14,278  

 

(a) Represents severance expense for the three months ended September 30, 2021.

(b) Represents loss on restructuring transaction of $4.7 million for the three months ended June 30, 2021 resulting from the exchange of Old Notes for New Notes.

(c) Represents a full valuation allowance on net deferred tax assets of $7.7 million resulting from the going concern conclusion for the three months ended June 30, 2021.

(d) Represents stock appreciation rights awards expense for the three months ended September 30, 2020.

 

8

 

 

   

For the Nine Months Ended September 30, 2021

   

For the Nine Months Ended September 30, 2020

 
   

As Reported

   

Special Items

     

As Adjusted

   

As Reported

   

Special Items

     

As Adjusted

 

Net revenues

  $ 78,141     $       $ 78,141     $ 95,379     $       $ 95,379  

Cost of sales

    51,414               51,414       61,162       (1,167 )

(c)

    59,995  

Gross profit (loss)

    26,727               26,727       34,217       (1,167 )       35,384  

Operating expenses

    37,568       (1,937 )

(a)

    35,631       44,527       (6,301 )

(d)

    38,226  

Income (loss) from operations

    (10,841 )     1,937         (8,904 )     (10,310 )     7,468         (2,842 )

Interest expense, net

    (9,297 )             (9,297 )     (10,304 )             (10,304 )

Other income (expense), net

    (5,532 )     4,696  

(b)

    (836 )     6,675       (6,923 )

(e)

    (248 )

Income (loss) before income taxes

    (25,670 )     6,633         (19,037 )     (13,939 )     545         (13,394 )

Income tax expense

    5,550               5,550       9,982       350  

(c)

    10,332  

Net income (loss)

    (31,220 )     6,633         (24,587 )     (23,921 )     195         (23,726 )

Net loss (income) attributable to noncontrolling interests

    18               18       (168 )             (168 )

Net income (loss) attributable to ION

  $ (31,202 )   $ 6,633       $ (24,569 )   $ (24,089 )   $ 195       $ (23,894 )

Net loss per share:

                                                   

Basic and Diluted

  $ (1.33 )             $ (1.04 )   $ (1.69 )             $ (1.68 )

Weighted average number of common shares outstanding:

                                                   

Basic and Diluted

    23,546                 23,546       14,255                 14,255  

 

(a) Represents severance expense and stock appreciation rights awards expense for the nine months ended September 30, 2021.

(b) Represents loss on restructuring transaction of $4.7 million for the nine months ended September 30, 2021 resulting from the exchange of Old Notes for New Notes.

(c) Represents the impairment of multi-client data library of $1.2 million and the related tax impact of $0.4 million for the nine months ended September 30, 2020.

(d) Represents impairment of goodwill of $4.2 million and severance expense of $3.1 million, partially offset by stock appreciation right awards credit of $1.0 million for the nine months ended September 30, 2020.

(e) Represents the amortization of government relief funding of $6.9 million for the nine months ended September 30, 2020.

 

9