Slide 1: Geospace Investor Presentation September 30, 2017
GEOSPACE e September 30, 2017 ((, SoREERSE
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. All statements other than statements of historical facts included herein,
Slide 3: Management Team
Management Team Walter R. Wheeler Thomas T. McEntire President & Chief Executive Officer VP & Chief Financial Officer – 33 years in the seismic industry – 20 years in the seismic industry – 13 years with Input/Output, Inc. (now ION – 7 years with APS Holding Corp. Geophysical Corp.) – 8 years with C
Slide 4: Business Overview
Business Overview Leading designer and LTM September 30, 2017 manufacturer of seismic equipment for oil & gas Seismic exploration and exploitation 36% Wireless and reservoir monitoring systems drivers of 64% historical revenue growth Incubator of products for other Non-Seismic LTM Revenue: $74 milli
Slide 5: Company Highlights
Company Highlights Proven Track Record of Technology Leadership Differentiated technology innovation Earnings Generated Over Time Annualized growth in retained earnings of 11% since 1997 IPO Growth Potential through Product Innovation Leading edge wireless (GSX/OBX) systems and permanent reservoir m
Slide 6: Impact of Technology Innovation
Impact of Technology Innovation 1950s 1960s 1970s 1980s 1990s 2000s 2010+ - 24 channels - 24 channels - 120 channels - 192 channels - 4,000 channels - 40,000+ channels - Higher channel counts - Pre-digital revolution - Early digital system - Analog inputs only - 1st telemetry system - 1st multi-line
Slide 7: Product Development Driven Growth
Product Development Driven Growth Industry Organic growth Expertise Marketing Engineering – Creating value for our customers Improvements and investors by developing new products Engineering expertise – 69 member engineering team located in Houston with an average of 25 years of product design exper
Slide 8: Differentiated Manufacturing Capabilities
Differentiated Manufacturing Capabilities Manufacturing expertise & capacity – Electronic assembly, sensor shop, cable shop, machine shop, molding shop, printhead clean room – 417k sq. ft. in Houston – 120k sq. ft. in Ufa, Bashkortostan, Russia – 45k sq. ft. in Calgary 700 employees worldwide We lev
Slide 9: Strategic Focus Within Seismic Market
Strategic Focus Within Seismic Market Processing Equipment Data Multi-Client Data Processing & Company Manufacturing Leasing Acquisition Data Library Interpretation Geospace Technologies BGP (Inova) Multi-Service CGG (Sercel) ION Geophysical WesternGeco (Schlumberger)
Slide 10: Seismic Segment
GEOSPACE ‘Technologies
Slide 11: Traditional Seismic Exploration Products
Traditional Seismic Exploration Products Land & Marine Applications LTM¹ Revenue Contribution Sensor Products – Geophones Seismic - Traditional – Hydrophones 20% – Multi-component packages Seismic - Wireless Cable Products 36% Seismic - Reservoir – Leader wire (geophone string application) – Acquisi
Slide 12: Wireless Products Providing Significant Growth
Wireless Products Providing Significant Growth Geospace Seismic Recorder (GSX) LTM¹ Revenue Contribution Wireless seismic data acquisition system – Introduced leading land-based wireless data acquisition system in 2008 Seismic - Traditional 20% – Permits new multi-source acquisition techniques 36% –
Slide 13: The GSX Wireless Advantage
The GSX Wireless Advantage Conventional Technology → Cabled Our Technology → Wireless Deployment is time-consuming Increases crew productivity and decreases crew footprint Maintenance is constant Lightweight and easy to deploy Cables are heavy, raising HSE issues Significantly reduces maintenance Ro
Slide 14: GSX Market Opportunity
GSX Market Opportunity Cumulative Wireless Channels Sold more wireless channels than any other competitor Sold / Available for Rent Opportunity to capture market share as cabled systems are replaced due to aging and 500 473 inefficiency 459 461 463 – 4-5 million estimated channel market opportunity
Slide 15: The OBX Wireless Advantage
The OBX Wireless Advantage Conventional Technology → Cabled Our Technology → Wireless Deployment and retrieval is time -consuming Increases crew productivity Maintenance is constant and downtime is Much more reliable thus reduces maintenance expensive costs Cables take-up deck space thus requiring M
Slide 16: Leader in Reservoir Characterization Products
Leader in Reservoir Characterization Products Pioneered and market leader in permanent seismic reservoir monitoring (PRM) systems LTM¹ Revenue Contribution PRM contracts provided substantial revenue growth in 2013-2014 – $18 Million Shell contract for BC-10 field in Brazil (FY 2013) Seismic - Tradit
Slide 17: Non-Seismic Segment
GEOSPACE ‘Technologies
Slide 18: Non-Seismic Markets
Non-Seismic Markets LTM¹ Revenue Contribution Utilizes existing engineering and manufacturing resources to broaden product lines and markets Seismic - Traditional 20% 36% Seismic - Wireless Strategy focuses on thermal imaging, electronics, cabling, molding and machining capabilities Seismic - Reserv
Slide 19: Financials
GEOSPACE ‘Technologies
Slide 20: Profitability and Return on Equity
Profitability and Return on Equity Pre-Tax Return on Shareholders’ Equity 47% 33% 29% 19% -15% -19% -23% FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Strong earnings during periods of oil price growth and stability 11% annualized growth in retained earnings since IPO in 1997 despite recen
Slide 21: Potential for Growth When Seismic Market Returns
Potential for Growth When Seismic Market Returns Revenue ($ in millions) Business Overview $85 Wireless Market – Market Leader $74 – Funded by E&P exploration budgets $25 – Primary growth driver since 2008 introduction $62 – Rental business popular with customers $30 $5 Reservoir Products – Market L
Slide 22: Review of Q4 2017 Results
Review of Q4 2017 Results Revenue of $23.7 million – Seismic segment continues to be impacted by decline in exploration spending – Profit margins impacted by high fixed cost structure, low factory utilization, rental fleet depreciation, inventory obsolescence and asset impairments. Net loss of $19.2
Slide 23: Strong Balance Sheet & Liquidity
Strong Balance Sheet & Liquidity ($ in millions, as of September 30, 2017) Cash and Short-Term Investments $ 51 Available Borrowings Under Revolver 1 24 Financial stability and Total Liquidity $ 75 staying power Working Capital $ 76 Current Ratio 7X – No long-term debt outstanding Debt / Total Book
Slide 24: Company Highlights
Company Highlights Proven Track Record of Technology Leadership Differentiated technology innovation Earnings Generated Over Time Annualized growth in retained earnings of 11% since 1997 IPO Growth Potential through Product Innovation Leading edge wireless (GSX / OBX) systems and permanent reservoir