ION reports third quarter 2020 results

HOUSTON, Nov. 4, 2020 /PRNewswire/ -- ION Geophysical Corporation (NYSE: IO) today reported total net revenues of $16.2 million in the third quarter 2020, a 29% decrease compared to $22.7 million in the second quarter 2020 and a 70% decrease compared to $53.2 million one year ago. At September 30, 2020, backlog, which consists of commitments for multi-client programs and proprietary imaging work, was $17.7 million or 77% higher compared to backlog at June 30, 2020.

Net loss attributable to ION in the third quarter 2020 was $16.6 million, or a loss of $1.16 per share, compared to a net loss attributable to ION of $3.7 million, or a loss of $0.26 per share in the third quarter 2019. The Company reported Adjusted EBITDA of $(6.6) million for the third quarter 2020, a decrease from $15.5 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.

Year-to-date net revenues were $95.4 million, a 28% decrease year-over-year compared to the $132.0 million of net revenues one year ago. While year-to-date revenues were down $36.6 million, the net loss attributable to ION improved by $9.6 million primarily due to the over $38 million of structural changes and associated cost reductions implemented earlier this year.

Net loss attributable to ION was $24.1 million in the first nine months of 2020, or a loss of $1.69 per share, compared to a net loss attributable to ION of $33.7 million, or a loss of $2.39 per share in the first nine months of 2019. Year-to-date Adjusted EBITDA was $16.5 million, a decrease from $22.7 million for the first nine months of 2019.

At quarter close, the Company's total liquidity of $59.4 million consisted of $51.1 million of cash (including net revolver borrowings of $22.5 million) and $8.3 million of remaining available borrowing capacity under the revolving credit facility, slightly below total liquidity of $65.5 million from one year ago. In response to the market uncertainty from the COVID-19 pandemic and lower oil and gas prices, the Company drew under its credit facility during the first quarter 2020, of which $22.5 million remains outstanding and in the Company's cash balances as of September 30, 2020. In addition, the Company continues to work with its banking advisors and largest bondholder to proactively address the $121 million bond ahead of its scheduled maturity in December 2021.

"Our third quarter results were negatively impacted by continued challenging market conditions associated with repercussions of the oil price volatility earlier this year," said Chris Usher, ION's President and Chief Executive Officer. "More specifically, this quarter the impact of E&P clients' reduced budgets and restructuring began to materially impact results as many of our contacts found themselves in new or different positions with uncertain budgets. We partially mitigated this impact by fully benefiting from the over $38 million of structural changes and associated cost reductions we outlined early this year. Currently, we are seeing a number of constructive developments evidenced by more stable oil prices, a settling in of new client roles and clearer definition of E&P budgets to high-grade offshore reserves, and line of sight on specific deals for the fourth quarter. Based on these trends and high levels of client engagement on specific deals, including a number postponed from the third quarter, we expect the fourth quarter to be significantly better than the second quarter with the potential to approach our fourth quarter results from last year.

"Despite the macroeconomic backdrop, we have made significant progress executing our strategy. Backlog increased 77% sequentially, reversing several consecutive quarters of steady decline due to our strategic shift to enter the 3D new acquisition multi-client market. We successfully acquired the initial phase of our Mid North Sea High 3D multi-client program and built backlog for the significantly larger second phase next summer. We also commercialized our proprietary Gemini(TM) extended frequency source technology, a key ingredient for improving 3D subsurface imaging in complex geological settings, where some of the most attractive E&P investment areas reside. In addition, we are seeing increasing traction of our offshore optimization software, Marlin(TM). Our team is engaged in four trials outside of our core market to optimize port operations and maritime energy logistics and, based on the positive response, we believe we are well positioned for several additional trials and multiple tenders. In fact, we just won a highly competitive tender to provide a Port Management System for a series of ports in the United Kingdom. While we don't include recurring contracted Software revenues as backlog, year-to-date we extended seven multi-year command and control deals in our core market worth over $5 million annually.

"Although we expect the market will remain challenging, we see indications for improving offshore E&P industry dynamics and continue to anticipate significant growth in digitalization over the next decade. In addition to the E&P industry, we continue to work to broaden our offerings into other markets. I'm encouraged by the positive client feedback related to the value delivered from our innovative solutions. For example, clients can now identify, quantify and ultimately improve inefficiencies in vessel transit through the use of our Marlin software. Importantly, we intersect the E&P industry's need to high-grade portfolios and bring lower cost barrels online faster, while achieving environmental compliance goals, such as carbon neutrality. Rapid digital transformation has enabled a smarter, data-rich environment from which to identify high impact wells, maximize production, or improve the safety and efficiency of offshore operations. I strongly believe ION's consistent, pragmatic focus to provide data and software that optimizes decision-making in capital intensive industries positions us well for future success."

THIRD QUARTER 2020

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

                        Three Months Ended September 30,



                    2020                                 2019      % Change



     E&P
      Technology                                                                   %
      &
      Services             $
            10,093                     $
        40,241      (75)


      Operations   6,141                                 12,998              (53)
      Optimization                                                            %



     Total                 $
            16,234                     $
        53,239      (70)
                                                                                   %


E&P Technology & Services segment net revenues were $10.1 million for the third quarter 2020 compared to $15.2 million for the second quarter of 2020 and $40.2 million for third quarter 2019. Within the E&P Technology & Services segment, multi-client net revenues were $6.3 million, a decrease of 81% from third quarter 2019, primarily due to lower volume of ION's global data library sales, as well as a decline in new venture revenues due to acquisition completion of a large new program in the prior period compared to revenues from smaller reimaging programs in the current period. Imaging and Reservoir Services net revenues were $3.8 million, a decrease of 46% from third quarter 2019 due to lower proprietary tender activity, and consistent with our strategy to preferentially utilize these resources to generate higher margin multi-client reimaging products.

Operations Optimization segment net revenues were $6.1 million for the third quarter 2020 compared to $7.5 million for the second quarter of 2020 and $13.0 million for third quarter 2019. Within the Operations Optimization segment, Optimization Software & Services net revenues were $3.0 million, a 57% decrease from third quarter 2019 due to reduced seismic activity and associated services demand resulting from COVID-19. Devices net revenues were $3.1 million, a 49% decrease from third quarter 2019 due to lower sales of towed streamer equipment spares and repairs.

Consolidated gross margin for the quarter was 8%, compared to 47% one year ago. Gross margin in E&P Technology & Services was (11)% compared to 46% one year ago, resulting from the decline in net revenues. Operations Optimization gross margin was 39%, compared to 54% one year ago, primarily from the decline in net revenues.

Consolidated operating expenses were $12.5 million, a 42% decrease from $21.4 million in the third quarter 2019. Operating margin was (69)%, compared to 7% one year ago. The decline in operating margin was the result of the decrease in net revenues, partially offset by lower operating expenses from cost reduction measures made earlier in the year.

YEAR-TO-DATE 2020

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

                          Nine Months Ended September 30,



                     2020                                 2019       % Change



     E&P
      Technology
      &                                                                              %
      Services            $
              71,833                      $
        95,867      (25)


      Operations   23,546                                 36,103               (35)
      Optimization
                                                                                %



     Total                $
              95,379                     $
        131,970      (28)

                                                                                     %


Within the E&P Technology & Services segment, multi-client net revenues were $59.4 million, a decrease of 25% from the first nine months of 2019, predominantly driven by decreased new venture net revenues due to reduced new program activity this year. Data Library revenues were comparable with the first nine months of 2019 largely due to increased sales of global 2D data library in the first quarter of 2020. Imaging and Reservoir Services net revenues were $12.4 million, a decrease of 24% from the first nine months of 2019 due to lower proprietary tender activity, and consistent with our strategy to preferentially utilize these resources to generate higher margin multi-client reimaging products.

Within the Operations Optimization segment, Optimization Software & Services net revenues were $10.8 million, a 39% decrease from the first nine months of 2019 due to COVID-19 related reduced seismic activity and associated services demand. Devices net revenues were $12.7 million, a 31% decrease from the first nine months of 2019 due to decreased sales of towed streamer equipment spares and repairs.

Consolidated gross margin for the period was 36%, compared to 42% one year ago. Gross margin in E&P Technology & Services was 35% compared to 38% one year ago. The decline in E&P Technology & Services gross margin resulted from the decrease in new venture revenues, as well as the $1.2 million impairment of the multi-client data library in the first nine months of 2020. Operations Optimization gross margin was 40%, a decrease compared to 52% one year ago, primarily resulting from the decline in net revenues.

Consolidated operating expenses were $44.5 million, a 36% decrease from $69.4 million in the first nine months of 2019 and operating margin remained consistent at (11)% for both periods. Excluding special items, consolidated operating expenses, as adjusted, were $38.2 million, compared to $63.9 million in the first nine months of 2019, and operating margin, as adjusted, was (3)%, compared to (7)% one year ago. The improvement in operating margin, as adjusted, was primarily due to lower operating expenses from cost reductions made earlier in the year. A reconciliation of special items to the reported financial results can be found in the tables to this press release.

Income tax expense was $10.0 million, compared to $7.9 million in the first nine months of 2019. The income tax expense includes a $2.2 million valuation allowance established against our recognized deferred tax assets in our non-U.S. businesses. The Company's income tax expense 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 5, 2020, 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 19, 2020. To access the replay, dial (877) 660-6853 and use pass code 13698483#.

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

Leveraging innovative technologies, ION delivers powerful data-driven decision-making to offshore energy, ports and defense industries, enabling clients to optimize operations and deliver superior returns. 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; political, execution, regulatory, and currency risks; the COVID-19 pandemic; and agreements made or adhered to by members of OPEC and other oil producing countries to maintain production levels. For additional information regarding these various risks and uncertainties, see our Form 10-K for the year ended December 31, 2019, filed on February 6, 2020. 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

                                                               
              
                ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

                                                                  
              
                CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                  
              
                (In thousands, except per share data)

                                                                               
              
                (Unaudited)




                                                         Three Months Ended September 30,                                        Nine Months Ended September 30,

                                                                                                                       ---

                                               2020                              2019                                         2020                    2019

                                                                                                                                                 ---


     Service revenues                                $
        10,202                                      $
              41,990                                        $
         73,234      $
         100,525



     Product revenues                        6,032                              11,249                                         22,145                                    31,445



      Total net revenues                     16,234                              53,239                                         95,379                                   131,970




     Cost of services                       11,491                              22,690                                         47,033                                    61,931



     Cost of products                        3,454                               5,261                                         12,962                                    15,256


      Impairment of multi-client
       data library                               -                                                                            1,167




     Gross profit                            1,289                              25,288                                         34,217                                    54,783




     Operating expenses:


      Research, development and
       engineering                            2,899                               4,878                                          9,943                                    15,421


      Marketing and sales                     2,811                               5,591                                          8,888                                    17,444


      General, administrative and
       other operating expenses               6,743                              10,961                                         21,546                                    36,550


      Impairment of goodwill                      -                                                                            4,150



      Total operating expenses               12,453                              21,430                                         44,527                                    69,415



      Income (loss) from
       operations                          (11,164)                              3,858                                       (10,310)                                  (14,632)


      Interest expense, net                 (3,669)                            (3,155)                                       (10,304)                                   (9,378)


      Other income (expense), net             (525)                              (242)                                         6,675                                     (938)



      Income (loss) before income
       taxes                               (15,358)                                461                                       (13,939)                                  (24,948)


      Income tax expense                      1,056                               3,790                                          9,982                                     7,916




     Net loss                             (16,414)                            (3,329)                                       (23,921)                                  (32,864)


      Less: Net income
       attributable to
       noncontrolling interest                (193)                              (394)                                         (168)                                    (841)



      Net loss attributable to
       ION                                          $
        (16,607)                                    $
              (3,723)                                     $
         (24,089)    $
         (33,705)




     Net loss per share:



     Basic                                           $
        (1.16)                                     $
              (0.26)                                       $
         (1.69)      $
         (2.39)



     Diluted                                         $
        (1.16)                                     $
              (0.26)                                       $
         (1.69)      $
         (2.39)


      Weighted average number of common shares
       outstanding:



     Basic                                  14,278                              14,181                                         14,255                                    14,104



     Diluted                                14,278                              14,181                                         14,255                                    14,104

                                              
              
            ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

                                                      
             
             CONSOLIDATED BALANCE SHEETS

                                                             
          
                (In thousands)

                                                              
          
                (Unaudited)




                 
              ASSETS                                              September 30,                                  December 31,
                                                                                         2020                           2019

                                                                                                                        ---


     Current assets:



     Cash and cash equivalents                                                                  $
              51,056                         $
       33,065



     Accounts receivable, net                                                          8,288                           29,548



     Unbilled receivables                                                              9,629                           11,815



     Inventories, net                                                                 11,873                           12,187


      Prepaid expenses and other current assets                                         5,861                            6,012




     Total current assets                                                             86,707                           92,627



     Deferred income tax asset, net                                                    8,092                            8,734



     Property, plant and equipment, net                                               11,227                           13,188



     Multi-client data library, net                                                   53,289                           60,384



     Goodwill                                                                         18,684                           23,585



     Right-of-use assets                                                              37,730                           32,546



     Other assets                                                                      2,136                            2,130




     Total assets                                                                              $
              217,865                        $
       233,194



                            
              LIABILITIES AND DEFICIT



     Current liabilities:


      Current maturities of long-term debt                                                       $
              23,527                          $
       2,107



     Accounts payable                                                                 35,107                           49,316



     Accrued expenses                                                                 29,197                           30,328


      Accrued multi-client data library royalties                                      20,534                           18,831



     Deferred revenue                                                                  2,156                            4,551


      Current maturities of operating lease
       liabilities                                                                      6,727                           11,055




     Total current liabilities                                                       117,248                          116,188


      Long-term debt, net of current maturities                                       119,349                          119,352


      Operating lease liabilities, net of current
       maturities                                                                      40,380                           30,833



     Other long-term liabilities                                                         412                            1,453




     Total liabilities                                                               277,389                          267,826



     Deficit:



     Common stock                                                                        144                              142



     Additional paid-in capital                                                      958,189                          956,647



     Accumulated deficit                                                           (998,380)                       (974,291)


      Accumulated other comprehensive loss                                           (21,012)                        (19,318)



     Total stockholders' deficit                                                    (61,059)                        (36,820)



     Noncontrolling interest                                                           1,535                            2,188




     Total deficit                                                                  (59,524)                        (34,632)




     Total liabilities and deficit                                                             $
              217,865                        $
       233,194


                                                                  
              
                ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

                                                                     
              
                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                 
              
                (In thousands)

                                                                                  
              
                (Unaudited)




                                                               Three Months Ended September 30,                                        Nine Months Ended September 30,

                                                                                                                              ---

                                                     2020                               2019                                         2020                    2019

                                                                                                                                                        ---


     Cash flows from operating activities:



     Net loss                                            $
        (16,414)                                     $
              (3,329)                                     $
        (23,921)    $
        (32,864)


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


      Depreciation and amortization
       (other than multi-client data
       library)                                     1,088                                  805                                          2,936                                    2,903


      Amortization of multi-client
       data library                                 3,973                               10,391                                         16,674                                   29,787


      Stock-based compensation expense                543                                  905                                          1,637                                    3,736


      Impairment of multi-client data
       library                                          -                                                                             1,167



     Impairment of goodwill                            -                                                                             4,150


      Amortization of government relief
       funding expected to be forgiven                  -                                                                           (6,923)



     Deferred income taxes                         (101)                               (781)                                           237                                  (1,248)


      Changes in operating assets and liabilities:



     Accounts receivable                           2,387                              (6,619)                                        21,065                                    2,115



     Unbilled receivables                          3,261                              (8,803)                                         1,181                                   12,772



     Inventories                                   (102)                                 (6)                                            77                                      729


      Accounts payable, accrued
       expenses and accrued royalties                 501                                7,582                                        (6,429)                                   1,528



     Deferred revenue                            (1,780)                                 939                                        (2,246)                                 (2,398)


      Other assets and liabilities                  3,461                                3,955                                          3,563                                    2,244



      Net cash provided by (used in)
       operating activities                       (3,183)                               5,039                                         13,168                                   19,304




     Cash flows from investing activities:


      Investment in multi-client data
       library                                    (5,245)                             (6,443)                                      (19,841)                                 (21,225)


      Purchase of property, plant and
       equipment                                    (168)                                 140                                          (865)                                 (1,272)


      Net cash used in investing
       activities                                 (5,413)                             (6,303)                                      (20,706)                                 (22,497)




     Cash flows from financing activities:


      Borrowings under revolving line
       of credit                                        -                              15,000                                         27,000                                   15,000


      Payments under revolving line of
       credit                                           -                            (15,000)                                        (4,500)                                (15,000)


      Proceeds from government relief
       funding                                          -                                                                             6,923


      Payments on notes payable and
       long-term debt                               (287)                               (554)                                       (1,814)                                 (1,960)


      Dividend payment to
       noncontrolling interest                      (217)                                                                             (217)


      Other financing activities                     (96)                               (104)                                          (91)                                   (655)



      Net cash provided by (used in)
       financing activities                         (600)                               (658)                                        27,301                                  (2,615)



      Effect of change in foreign
       currency exchange rates on cash,
       cash equivalents and restricted
       cash                                          (37)                                 253                                            501                                      151



      Net increase (decrease) in cash,
       cash equivalents and restricted
       cash                                       (9,233)                             (1,669)                                        20,264                                  (5,657)


      Cash, cash equivalents and
       restricted cash at beginning of
       period                                      62,615                               29,866                                         33,118                                   33,854



      Cash, cash equivalents and
       restricted cash at end of period                     $
        53,382                                       $
              28,197                                       $
         53,382     $
          28,197


                                                                            
              
             ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

                                                                                   
              
             SUMMARY OF SEGMENT INFORMATION

                                                                                           
           
                (In thousands)

                                                                                             
           
                (Unaudited)




                                                        Three Months Ended September 30,                                       Nine Months Ended September 30,



                                             2020                            2019                      2020                                 2019




     Net revenues:



     E&P Technology & Services:



     New Venture                                    $
           1,213                                           $
              5,905                                        $
              7,340          $
         24,394



     Data Library                          5,085                                         27,288                                         52,083                                    55,030



      Total multi-client revenues           6,298                                         33,193                                         59,423                                    79,424


      Imaging and Reservoir Services        3,795                                          7,048                                         12,410                                    16,443




     Total                                10,093                                         40,241                                         71,833                                    95,867




     Operations Optimization:


      Optimization Software &
       Services                             3,007                                          6,895                                         10,811                                    17,648



     Devices                                        $
           3,134                                           $
              6,103                                       $
              12,735          $
         18,455




     Total                                 6,141                                         12,998                                         23,546                                    36,103




     Total net revenues                            $
           16,234                                          $
              53,239                                       $
              95,379         $
         131,970




     Gross profit (loss):


      E&P Technology & Services                    $
           (1,092)                                         $
              18,316                                       $
              24,902   (1)    $
         36,113


      Operations Optimization               2,381                                          6,972                                          9,315                                    18,670



     Total gross profit                             $
           1,289                                          $
              25,288                                       $
              34,217          $
         54,783




     Gross margin:


      E&P Technology & Services              (11)
                                                %                                  46
            %                                  35
            %                             38
            %


      Operations Optimization        39
            %                                  54
            %                                  40
            %                             52
            %



     Total gross margin              8
            %                                  47
            %                                  36
            %                             42
            %




     Income (loss) from operations:


      E&P Technology & Services                    $
           (4,591)                                         $
              11,878                                       $
              13,803   (1)    $
         15,500


      Operations Optimization               (232)                                         2,994                                        (3,965)                 (2)                5,808



     Support and other                   (6,341)                                      (11,014)                                      (20,148)                                 (35,940)



      Income (loss) from operations      (11,164)                                         3,858                                       (10,310)                                 (14,632)


      Interest expense, net               (3,669)                                       (3,155)                                      (10,304)                                  (9,378)


      Other income (expense), net           (525)                                         (242)                                         6,675                  (3)                (938)



      Income (loss) before income
       taxes                                      $
           (15,358)                                            $
              461                                     $
              (13,939)       $
         (24,948)





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



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



              
                (3)              Includes amortization of the
                                               government relief funding
                                               expected to be forgiven of
                                               $6.9 million for the nine
                                               months ended September 30,
                                               2020.

                                    
              
                ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES

                                     
              
                Summary of Net Revenues by Geographic Area

                                                   
              
                (In thousands)

                                                    
              
                (Unaudited)




                                Three Months Ended September 30,                                       Nine Months Ended September 30,

                                                                                        ---

                     2020                            2019                              2020                2019

                                                                                                         ---

      North America          $
        479                                    $
              12,182                                   $
          37,920   $
      32,984


      Latin America 7,925                            22,720                                      22,695                                 50,572


      Asia Pacific  3,777                             2,744                                      15,696                                  8,287


      Europe        3,011                             8,335                                      12,997                                 24,850


      Middle East     306                             3,899                                       2,202                                  6,364


      Africa          344                             2,874                                       1,939                                  7,541



     Other           392                               485                                       1,930                                  1,372



      Total net
       revenues           $
        16,234                                    $
              53,239                                   $
          95,379  $
      131,970


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 and government relief. 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,



                          2020                                   2019                    2020            2019



     Net loss                  $
              (16,414)                     $
        (3,329)                         $
        (23,921)    $
        (32,864)


     Interest expense,
      net                3,669                                    3,155                    10,304                         9,378


     Income tax
      expense            1,056                                    3,790                     9,982                         7,916


     Depreciation and
      amortization
      expense            5,061                                   11,196                    19,610                        32,690


     Impairment of
      multi-client
      data library                                                                        1,167


     Impairment of
      goodwill                                                                            4,150


     Severance expense                                                                    3,102                         2,810


     Amortization of
      government
      relief funding
      expected to be
      forgiven                                                                          (6,923)


     EBITDA excluding
      non-recurring
      items            (6,628)                                  14,812                    17,471                        19,930


     Stock
      appreciation
      rights expense
      (credit)              58                                      732                     (952)                        2,742



     Adjusted EBITDA            $
              (6,570)                      $
        15,544                            $
        16,519      $
         22,672


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, 2020 and 2019:

                                                     Three Months Ended September 30, 2020                                                      Three Months Ended September 30, 2019



                           As Reported                                        Special             As Adjusted            As Reported                                      Special                        As Adjusted
                                                                          Items                                                                                       Items



      Net revenues                       $
       16,234                                              
              $                                                                         $
            16,234                                $
         53,239                         
     $                $
       53,239


      Cost of sales             14,945                                                                                         14,945                                                             27,951                                                              27,951



      Gross profit               1,289                                                                                          1,289                                                             25,288                                                              25,288


      Gross margin         8
            %                                                          %                        8
            %                                                      47
            %                                    %                   47
           %


      Operating expenses        12,453                                                     (58)                      (1)       12,395                                                             21,430                       (732)                       (1)        20,698



      Income (loss) from
       operations             (11,164)                                                      58                               (11,106)                                                             3,858                         732                                    4,590


      Operating margin            (69)                                                       1                                   (68)                                                       7
            %                          2
                                     %                                                       %                                     %                                                                                            %                              9
           %


      Interest expense,
       net                     (3,669)                                                                                       (3,669)                                                           (3,155)                                                            (3,155)


      Other income
       (expense), net            (525)                                                                            (525)                                                     (242)                                                                     (242)



      Income (loss) before
       income taxes           (15,358)                                                      58                               (15,300)                                                               461                         732                                    1,193


      Income tax expense         1,056                                                                                          1,056                                                              3,790                                                               3,790



      Net income (loss)       (16,414)                                                      58                               (16,356)                                                           (3,329)                        732                                  (2,597)


      Less: Net income
       attributable to
       noncontrolling
       interest                  (193)                                                                                         (193)                                                             (394)                                                              (394)



      Net income (loss)
       attributable to ION             $
       (16,607)                                                           $
        58                                                              $
            (16,549)                              $
         (3,723)                                $
         732 $
       (2,991)



      Net loss per share:



     Basic                              $
       (1.16)                                                                                  $
     (1.16)                                                                      $
     (0.26)                                                  $
        (0.21)



     Diluted                            $
       (1.16)                                                                                  $
     (1.16)                                                                      $
     (0.26)                                                  $
        (0.21)


      Weighted average
       number of common
       shares outstanding:



     Basic                     14,278                                                                            14,278                                                     14,181                                                            14,181



     Diluted                   14,278                                                                            14,278                                                     14,181                                                            14,181




              
                (1)              Represents stock appreciation
                                               rights awards expense for the
                                               three months ended September
                                               30, 2020 and 2019.

                                                      Nine Months Ended September 30, 2020                                
              
            Nine Months Ended September 30, 2019



                            As Reported                                        Special            As Adjusted                As Reported                                            Special                            As Adjusted
                                                                           Items                                                                                                Items



      Net revenues                        $
       95,379                                             
              $                                                                                  $
             95,379                             $
         131,970                       
     $                $
       131,970


      Cost of sales              61,162                                                   (1,167)                     (1)           59,995                                                                   77,187                                                         77,187



      Gross profit               34,217                                                     1,167                                   35,384                                                                   54,783                                                         54,783


      Gross margin         36
            %                                                        1
                                                                                               %                            37
            %                                                             42
           %                                 %                 42
           %


      Operating expenses         44,527                                                   (6,301)                     (2)           38,226                                                                   69,415                  (5,552)                    (4)         63,863



      Income (loss) from
       operations              (10,310)                                                    7,468                                  (2,842)                                                                (14,632)                   5,552                                (9,080)


      Operating margin             (11)                                                        8
                                      %                                                        %                           (3)
            %                                                           (11)
           %                 4
        %                          (7)
           %


      Interest expense,
       net                     (10,304)                                                                                         (10,304)                                                                 (9,378)                                                       (9,378)


      Other income
       (expense), net             6,675                                                   (6,923)                     (3)            (248)                                                                   (938)                                                         (938)



      Income (loss) before
       income taxes            (13,939)                                                      545                                 (13,394)                                                                (24,948)                   5,552                               (19,396)


      Income tax expense          9,982                                                       350                     (1)           10,332                                                                    7,916                                           7,916




     Net loss                 (23,921)                                                      195                                 (23,726)                                                                (32,864)                   5,552                               (27,312)


      Less: Net income
       attributable to
       noncontrolling
       interest                   (168)                                                                                            (168)                                                                   (841)                                                         (841)



      Net loss
       attributable to ION              $
       (24,089)                                                          $
       195                                                                       $
             (23,894)                           $
         (33,705)                              $
       5,552 $
       (28,153)



      Net loss per share:



     Basic                               $
       (1.69)                                                                                      $
          (1.68)                                                           $
      (2.39)                                                         $
       (2.00)



     Diluted                             $
       (1.69)                                                                                      $
          (1.68)                                                           $
      (2.39)                                                         $
       (2.00)


      Weighted average
       number of common
       shares outstanding:



     Basic                      14,255                                                                           14,255                                                               14,104                                                          14,104



     Diluted                    14,255                                                                           14,255                                                               14,104                                                          14,104




              
                (1)              Represents 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.



              
                (2)              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.



              
                (3)              Represents amortization of the
                                               government relief funding
                                               expected to be forgiven for
                                               the nine months ended
                                               September 30, 2020.



              
                (4)              Represents severance expense of
                                               $2.8 million and stock
                                               appreciation right awards
                                               expense of $2.7 million for
                                               the nine months ended
                                               September 30, 2019.

View original content:http://www.prnewswire.com/news-releases/ion-reports-third-quarter-2020-results-301166725.html

SOURCE ION Geophysical Corporation