UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
for the Quarterly Period Ended
for the transition period from ____ to ____
Commission file number
GEOSPACE TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||
| | ☒ | Smaller reporting company | | ||||
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 31, 2023, the registrant had
Table of Contents
| Page Number |
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| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. Quantitative and Qualitative Disclosures about Market Risk |
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PART I - FINANCIAL INFORMATION
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
| June 30, 2023 | September 30, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Trade accounts and notes receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current inventories, net | ||||||||
| Rental equipment, net | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating right-of-use assets | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable trade | $ | $ | ||||||
| Contingent consideration | ||||||||
| Operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current operating lease liabilities | ||||||||
| Deferred tax liabilities, net | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, shares authorized, shares issued and outstanding | ||||||||
| Common Stock, $ par value, shares authorized; and shares issued, respectively; and and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Products |
$ | $ | $ | $ | ||||||||||||
| Rental |
||||||||||||||||
| Total revenue |
||||||||||||||||
| Cost of revenue: |
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| Products |
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| Rental |
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| Total cost of revenue |
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| Gross profit |
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| Operating expenses: |
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| Selling, general and administrative |
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| Research and development |
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| Change in estimated fair value of contingent consideration |
( |
) | ( |
) | ||||||||||||
| Bad debt expense (recovery) |
( |
) | ( |
) | ||||||||||||
| Total operating expenses |
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| Gain on disposal of property |
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| Income (loss) from operations |
( |
) | ( |
) | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest income |
||||||||||||||||
| Foreign exchange gains (losses), net |
( |
) | ( |
) | ||||||||||||
| Other, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other income, net |
||||||||||||||||
| Income (loss) before income taxes |
( |
) | ( |
) | ||||||||||||
| Income tax expense |
||||||||||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Income (loss) per common share: |
||||||||||||||||
| Basic |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Diluted |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Weighted average common shares outstanding: |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
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The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized gains (losses) on available-for-sale securities, net of tax | ( | ) | ||||||||||||||
| Dissolution of foreign subsidiary | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Total comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE nine months ended June 30, 2023 and 2022
(in thousands, except share amounts)
(unaudited)
| Common Stock |
Accumulated |
|||||||||||||||||||||||||||
| Additional |
Other |
|||||||||||||||||||||||||||
| Shares |
Paid-In |
Retained |
Comprehensive |
Treasury |
||||||||||||||||||||||||
| Outstanding |
Amount |
Capital |
Earnings |
Loss |
Stock |
Total |
||||||||||||||||||||||
| Balance at October 1, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive income |
— | |||||||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units |
||||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||
| Balance at December 31, 2022 |
( |
) | ( |
) | ||||||||||||||||||||||||
| Net income |
— | |||||||||||||||||||||||||||
| Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units |
||||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||
| Balance at March 31, 2023 |
( |
) | ( |
) | ||||||||||||||||||||||||
| Net income |
— | |||||||||||||||||||||||||||
| Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units |
||||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||
| Balance at June 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
| Balance at October 1, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units |
||||||||||||||||||||||||||||
| Purchase of treasury stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||
| Balance at December 31, 2021 |
( |
) | ( |
) | ||||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||
| Balance at March 31, 2022 |
( |
) | ( |
) | ||||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Other comprehensive income |
— | |||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||
| Balance at June 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended |
||||||||
| June 30, 2023 |
June 30, 2022 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Deferred income tax expense (benefit) |
( |
) | ||||||
| Rental equipment depreciation |
||||||||
| Property, plant and equipment depreciation |
||||||||
| Amortization of intangible assets |
||||||||
| Amortization of premiums (accretion of discounts) on short-term investments |
( |
) | ||||||
| Stock-based compensation expense |
||||||||
| Bad debt expense (recovery) |
( |
) | ||||||
| Inventory obsolescence expense |
||||||||
| Change in estimated fair value of contingent consideration |
( |
) | ||||||
| Gross profit from sale of used rental equipment |
( |
) | ( |
) | ||||
| Gain on disposal of property |
( |
) | ||||||
| Gain on disposal of equipment |
( |
) | ( |
) | ||||
| Realized loss on short-term investments |
||||||||
| Realized foreign currency translation loss from dissolution of foreign subsidiary |
||||||||
| Effects of changes in operating assets and liabilities: |
||||||||
| Trade accounts and notes receivable |
( |
) | ||||||
| Unbilled receivables |
||||||||
| Inventories |
( |
) | ( |
) | ||||
| Other assets |
( |
) | ||||||
| Accounts payable trade |
( |
) | ||||||
| Other liabilities |
||||||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of property, plant and equipment |
( |
) | ( |
) | ||||
| Proceeds from the sale of equipment |
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| Proceeds from the sale of property |
||||||||
| Investment in rental equipment |
( |
) | ( |
) | ||||
| Proceeds from the sale of used rental equipment |
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| Purchases of short-term investments |
( |
) | ||||||
| Proceeds from the sale of short-term investments |
||||||||
| Net cash provided by investing activities |
||||||||
| Cash flows from financing activities: |
||||||||
| Payments on contingent consideration |
( |
) | ( |
) | ||||
| Debt issuance costs |
( |
) | ||||||
| Purchase of treasury stock |
( |
) | ||||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Effect of exchange rate changes on cash |
( |
) | ( |
) | ||||
| Increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents, beginning of fiscal year |
||||||||
| Cash and cash equivalents, end of fiscal period |
$ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Cash paid for income taxes |
$ | $ | ||||||
| Issuance of note receivable related to sale of used rental equipment |
||||||||
| Inventory transferred to rental equipment |
||||||||
| Inventory transferred to property, plant and equipment |
||||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Significant Accounting Policies
Basis of Presentation
The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2022 was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at June 30, 2023 and the consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three and nine months ended June 30, 2023 and 2022 were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. All significant intercompany balances and transactions have been eliminated. The results of operations for the three and nine months ended June 30, 2023 are not necessarily indicative of the operating results for a full year or of future operations.
Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") were omitted pursuant to the rules of the Securities and Exchange Commission. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2022.
Use of Estimates
The preparation of financial statements in conformity GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to revenue recognition, bad debt reserves, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets, impairment of goodwill and other intangible assets, contingent consideration and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents. At June 30, 2023 and September 30, 2022, the Company had restricted cash of $
Impairment of Long-lived Assets
The Company's long-lived assets are reviewed for impairment whenever an event or circumstance indicates that the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of the expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value. During the quarter ended June 30, 2023, no events or changes in circumstances were identified indicating the carrying value of any of the Company's asset groups may not be recoverable.
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in generally accepted accounting principles. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments. For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a smaller reporting company, the Company must adopt this standard no later than the first quarter of its fiscal year ending September 30, 2024, although early adoption is permitted. The standard’s provisions will be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company intends to adopt this standard during the first quarter of its fiscal year ending September 30, 2024 and does not expect the adoption of this guidance to have any material impact on its consolidated financial statements.
All other new accounting pronouncements that have been issued, but not yet effective, are currently being evaluated and at this time are not expected to have a material impact on the Company's financial position or results of operations.
2. Revenue Recognition
In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.
The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is probable. The Company records deferred revenue when customer funds are received prior to shipment or delivery or performance has not yet occurred. The Company assesses collectability during the contract assessment phase. In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers and there is not a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. The Company’s products are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to return products for credit.
Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billed on a per hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate.
The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured. Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year. The Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of ASC Topic 842, Leases.
As permissible under ASC 606, sales taxes and transaction-based taxes are excluded from revenue. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.
The Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and not as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in revenue and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of revenue.
At June 30, 2023, the Company had deferred contract liabilities of $
For each of the Company’s operating segments, the following table presents revenue (in thousands) only from the sale of products and the performance of services under contracts with customers. Therefore, the table excludes all revenue earned from rental contracts.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Oil and Gas Markets | ||||||||||||||||
| Traditional exploration product revenue | $ | $ | $ | $ | ||||||||||||
| Wireless exploration product revenue | ||||||||||||||||
| Reservoir product revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Adjacent Markets | ||||||||||||||||
| Industrial product revenue | ||||||||||||||||
| Imaging product revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Emerging Markets | ||||||||||||||||
| Revenue | ||||||||||||||||
| Corporate | ||||||||||||||||
| Revenue | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
See Note 14 for more information on the Company’s operating segments.
For each of the geographic areas where the Company operates, the following table presents revenue (in thousands) from the sale of products and services under contracts with customers. The table excludes all revenue earned from rental contracts:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Asia (including Russian Federation) | $ | $ | $ | $ | ||||||||||||
| Canada | ||||||||||||||||
| Europe | ||||||||||||||||
| United States | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Revenue is attributable to countries based on the ultimate destination of the product sold, if known. If the ultimate destination is not known, revenue is attributable to countries based on the geographic location of the initial shipment.
3. Short-term Investments
The Company classifies its short-term investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders’ equity.
The Company’s short-term investments were composed of the following (in thousands):
| September 30, 2022 (in thousands) | ||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Corporate bonds | $ | $ | $ | ( | ) | $ | ||||||||||
The Company had
4. Fair Value of Financial Instruments
The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and notes receivable and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts and notes receivable and accounts payable, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates. The valuation technique used to measure the fair value of the contingent consideration was based on internal estimates and the use of internal projections of future revenue.
The Company measures its short-term investments and contingent consideration at fair value on a recurring basis.
The following tables present the fair value of the Company’s short-term investments and contingent consideration by valuation hierarchy and input (in thousands):
| As of September 30, 2022 | ||||||||||||||||
| Quoted Prices in | Significant | |||||||||||||||
| Active Markets for | Other | Significant | ||||||||||||||
| Identical Assets | Observable | Unobservable | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Totals | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Contingent consideration liabilities: | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
The Company had
The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the nine months ended June 30, 2023 and 2022 (in thousands):
| Contingent consideration balance at October 1, 2022 | $ | |||
| Fair value adjustments | ||||
| Payment of contingent consideration | ( | ) | ||
| Contingent consideration at June 30, 2023 | $ | |||
| Contingent consideration balance at October 1, 2021 | $ | |||
| Fair value adjustments | ( | ) | ||
| Payment of contingent consideration | ( | ) | ||
| Contingent consideration balance at June 30, 2022 | $ |
Adjustments to the fair value of the contingent consideration were based on internal estimates and management assessments regarding potential future scenarios which involved significant judgment.
5. Trade Accounts and Notes Receivable
Trade accounts receivable, net (excluding notes receivable) are reflected in the following table (in thousands):
| June 30, 2023 |
September 30, 2022 |
|||||||
| Trade accounts receivable |
$ | $ | ||||||
| Allowance for doubtful accounts |
( |
) | ( |
) | ||||
| Total |
$ | $ | ||||||
The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses. The Company determines the allowance based upon historical experience and a current review of its trade accounts receivable balances. Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.
Notes receivable are reflected in the following table (in thousands):
| June 30, 2023 |
September 30, 2022 |
|||||||
| Notes receivable |
$ | $ | ||||||
| Less current portion |
( |
) | ( |
) | ||||
| Non-current notes receivable |
$ | $ | ||||||
Promissory notes receivable are generally collateralized by the products sold. At June 30, 2023, the Company had one promissory note outstanding from a customer with a face amount of $
6. Inventories
Inventories consist of the following (in thousands):
| June 30, 2023 | September 30, 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Obsolescence reserve (net realizable value adjustment) | ( | ) | ( | ) | ||||
| Less current portion | ||||||||
| Non-current portion | $ | $ | ||||||
Raw materials include semi-finished goods and component parts that totaled $
7. Property, Plant and Equipment
In February 2023, the Company completed the sale of its satellite property located at 6410 Langfield Road in Houston, Texas for a cash price of $
Property, plant and equipment consisted of the following (in thousands):
| June 30, 2023 |
September 30, 2022 |
|||||||
| Land and land improvements |
$ | $ | ||||||
| Building and building improvements |
||||||||
| Machinery and equipment |
||||||||
| Furniture and fixtures |
||||||||
| Tools and molds |
||||||||
| Construction in progress |
||||||||
| Transportation equipment |
||||||||
| 84,400 | 96,928 | |||||||
| Accumulated depreciation and impairment |
( |
) | ( |
) | ||||
| $ | $ | |||||||
Property, plant and equipment depreciation expense for the three and nine months ended June 30, 2023 was $
8. Leases
As Lessee
The Company has elected not to record operating right-of-use assets or operating lease liabilities on its consolidated balance sheet for leases having a minimum term of 12 months or less. Such leases are expensed on a straight-line basis over the lease term. Variable lease payments are excluded from the measurement of operating right-of-use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As of June 30, 2023, the Company has
Maturities of the operating lease liabilities as of June 30, 2023 were as follows: (in thousands):
| For fiscal years ending September 30, | ||||
| 2023 (remainder) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Future minimum lease payments | ||||
| Less interest | ( | ) | ||
| Present value of minimum lease payments | ||||
| Less current portion | ( | ) | ||
| Non-current portion | $ |
Lease costs recognized in the consolidated statements of operations for the three and nine months ended June 30, 2023 and 2022 were as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Right-of-use operating lease costs | $ | $ | $ | $ | ||||||||||||
| Short-term lease costs | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Right-of use operating lease costs and short-term lease costs are included as a component of total operating expenses.
Other information related to operating leases is as follows (in thousands):
| Nine Months Ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Weighted average remaining lease term (in years) | ||||||||
| Weighted average discount rate | % | % | ||||||
The discount rate used on the operating right-of-use assets represented the Company’s incremental borrowing rate at the lease inception date.
As Lessor
Equipment
The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to year. All of the Company’s current leasing arrangements, which the Company acts as lessor, are classified as operating leases. The majority of the Company’s rental revenue is generated from its marine-based wireless seismic data acquisition systems.
The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are no longer probable and concurrently records a direct write-off of the lease receivable to rental revenue and limits future rental revenue recognition to cash received. As of June 30, 2023, the Company’s trade accounts receivables included lease receivables of $
Rental revenue related to leased equipment for the three and nine months ended June 30, 2023 was $
Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of June 30, 2023 were $
Rental equipment consisted of the following (in thousands):
| June 30, 2023 | September 30, 2022 | |||||||
| Rental equipment, primarily wireless recording equipment | $ | $ | ||||||
| Accumulated depreciation and impairment | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Property
During the first quarter of fiscal year 2022, the Company leased a portion of its property located in Calgary, Alberta, Canada and fully leased its warehouse in Colombia. The lease in Canada commenced in November 2021 and is for a -year term. The lease on the warehouse in Bogotá commenced in December 2021 and is currently on a month-to-month basis.
Rental revenue related to these
Future minimum lease payments due to the Company as of June 30, 2023 on the lease in Canada was as follows (in thousands):
| For fiscal years ending September 30, | ||||
| 2023 (remainder) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| $ |
9. Goodwill and Other Intangible Assets
The Company’s consolidated goodwill and other intangible assets consisted of the following (in thousands):
| Weighted- |
|||||||||||
| Average |
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| Remaining Useful |
|||||||||||
| Lives (in years) |
June 30, 2023 |
September 30, 2022 |
|||||||||
| Goodwill: |
|||||||||||
| Emerging Markets reporting unit |
$ | $ | |||||||||
| Adjacent Markets reporting unit |
|||||||||||
| Total goodwill |
|||||||||||
| Accumulated impairment losses |
( |
) | ( |
) | |||||||
| $ | $ | ||||||||||
| Other intangible assets: |
|||||||||||
| Developed technology |
$ | $ | |||||||||
| Customer relationships |
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| Trade names |
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| Non-compete agreements |
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