Input/Output Inc. (IO, Financial) filed Quarterly Report for the period ended 2010-09-30.
Input/output Inc. has a market cap of $761.5 million; its shares were traded at around $5.11 with and P/S ratio of 1.9. IO is in the portfolios of Chuck Royce of Royce& Associates, Kenneth Fisher of Fisher Asset Management, LLC.
Systems. Net revenues for the three months ended September 30, 2010 decreased by $11.5 million to $25.7 million, compared to $37.2 million for the three months ended September 30, 2009. The decrease in net revenues within our Systems division was attributable to continued softness in our geophone string product sales and softer marine positioning and source product sales compared to the same period of last year. Gross profit for the three months ended September 30, 2010 decreased by $5.0 million to $11.2 million compared to $16.2 million for the three months ended September 30, 2009. Gross margin remained consistent at 44% for both the current and prior periods.
Software. Net revenues for the three months ended September 30, 2010 increased by $1.5 million to $9.1 million, compared to $7.6 million for the three months ended September 30, 2009. The increase was due to the continued strong performance of Orca, our marine command and control software. Gross profit increased by $1.3 million to $6.1 million, representing a 67% gross margin, compared to $4.8 million, representing a 63% gross margin, for the three months ended September 30, 2009. The increase in gross margins for our Software segment was due to changes in product mix, with more software sales, which have higher margins than the associated hardware sales for this segment.
Solutions. Net revenues for the three months ended September 30, 2010 increased by $36.5 million, to $86.7 million, compared to $50.2 million for the three months ended September 30, 2009. The results for the third quarter of 2010 reflected strong revenues from our new venture programs, due primarily to a significant portion of our 2010 data acquisition programs, primarily in the Arctic region, being performed during the third quarter of 2010. Unlike 2010, our new venture programs in 2009 were more evenly spread across the year. Also contributing to the overall increase in net revenues during the third quarter of 2010 were increases in our data processing revenues and data library sales. Gross profit increased by $14.9 million to $31.7 million, or a 37% gross margin for the three months ended September 30, 2010, compared to $16.8 million, or a 33% gross margin, for the three months ended September 30, 2009. The increase in gross margins for our Solutions division was primarily due to higher margin new venture projects revenues.
General and Administrative. General and administrative expenses of $12.3 million for the three months ended September 30, 2010 decreased $3.2 million compared to $15.5 million, as adjusted, for the third quarter of 2009. General and administrative expenses as a percentage of net revenues for the three months ended September 30, 2010 and 2009 were 10% and 16%, respectively. This decrease in general and administrative expense was primarily due to reductions in payroll costs and professional fees associated with our previously implemented cost reduction measures.
Equity in Losses of INOVA Geophysical. We account for our 49% interest in INOVA Geophysical as an equity method investment and record our share of earnings of INOVA Geophysical on a one fiscal quarter lag basis. Thus, our share of INOVA Geophysicals second quarter results (three months ended June 30, 2010) are included in our financial results for the three month period ended September 30, 2010. For the three months ended September 30, 2010, we recorded approximately $8.0 million representing our 49% share of equity in losses of INOVA Geophysical for the three months ended June 30, 2010. For the three months ended June 30, 2010, INOVA Geophysicals total net revenues were $18.6 million, with a gross profit of ($3.3) million, a loss from operations of ($14.4) million and a net loss of ($16.3) million. The land operations business continues to be significantly impacted by the economic slow-down, particularly in North America and Russia. These businesses are starting to see an increase in interest and tender activities by its customers, but we do not expect this increase in activity to have any significant impact on INOVA Geophysicals results of operations in 2010.
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Input/output Inc. has a market cap of $761.5 million; its shares were traded at around $5.11 with and P/S ratio of 1.9. IO is in the portfolios of Chuck Royce of Royce& Associates, Kenneth Fisher of Fisher Asset Management, LLC.
Highlight of Business Operations:
and other regions. Oil prices increased to record levels during the second quarter of 2008, but, in conjunction with the global recession, sharply declined, falling to approximately $35 per barrel during the first quarter of 2009. By the end of 2009, oil prices had recovered to approximately $83 per barrel and, as of the end of September 2010, remained at approximately $78 per barrel. Natural gas prices followed a similar, recession-induced downturn. After peaking at $13.31 MMBtu in July 2008, Henry Hub natural gas prices fell by more than 50%. Unlike the recovery in oil prices, natural gas prices have remained depressed due to the excess supply of natural gas in the North American market.Systems. Net revenues for the three months ended September 30, 2010 decreased by $11.5 million to $25.7 million, compared to $37.2 million for the three months ended September 30, 2009. The decrease in net revenues within our Systems division was attributable to continued softness in our geophone string product sales and softer marine positioning and source product sales compared to the same period of last year. Gross profit for the three months ended September 30, 2010 decreased by $5.0 million to $11.2 million compared to $16.2 million for the three months ended September 30, 2009. Gross margin remained consistent at 44% for both the current and prior periods.
Software. Net revenues for the three months ended September 30, 2010 increased by $1.5 million to $9.1 million, compared to $7.6 million for the three months ended September 30, 2009. The increase was due to the continued strong performance of Orca, our marine command and control software. Gross profit increased by $1.3 million to $6.1 million, representing a 67% gross margin, compared to $4.8 million, representing a 63% gross margin, for the three months ended September 30, 2009. The increase in gross margins for our Software segment was due to changes in product mix, with more software sales, which have higher margins than the associated hardware sales for this segment.
Solutions. Net revenues for the three months ended September 30, 2010 increased by $36.5 million, to $86.7 million, compared to $50.2 million for the three months ended September 30, 2009. The results for the third quarter of 2010 reflected strong revenues from our new venture programs, due primarily to a significant portion of our 2010 data acquisition programs, primarily in the Arctic region, being performed during the third quarter of 2010. Unlike 2010, our new venture programs in 2009 were more evenly spread across the year. Also contributing to the overall increase in net revenues during the third quarter of 2010 were increases in our data processing revenues and data library sales. Gross profit increased by $14.9 million to $31.7 million, or a 37% gross margin for the three months ended September 30, 2010, compared to $16.8 million, or a 33% gross margin, for the three months ended September 30, 2009. The increase in gross margins for our Solutions division was primarily due to higher margin new venture projects revenues.
General and Administrative. General and administrative expenses of $12.3 million for the three months ended September 30, 2010 decreased $3.2 million compared to $15.5 million, as adjusted, for the third quarter of 2009. General and administrative expenses as a percentage of net revenues for the three months ended September 30, 2010 and 2009 were 10% and 16%, respectively. This decrease in general and administrative expense was primarily due to reductions in payroll costs and professional fees associated with our previously implemented cost reduction measures.
Equity in Losses of INOVA Geophysical. We account for our 49% interest in INOVA Geophysical as an equity method investment and record our share of earnings of INOVA Geophysical on a one fiscal quarter lag basis. Thus, our share of INOVA Geophysicals second quarter results (three months ended June 30, 2010) are included in our financial results for the three month period ended September 30, 2010. For the three months ended September 30, 2010, we recorded approximately $8.0 million representing our 49% share of equity in losses of INOVA Geophysical for the three months ended June 30, 2010. For the three months ended June 30, 2010, INOVA Geophysicals total net revenues were $18.6 million, with a gross profit of ($3.3) million, a loss from operations of ($14.4) million and a net loss of ($16.3) million. The land operations business continues to be significantly impacted by the economic slow-down, particularly in North America and Russia. These businesses are starting to see an increase in interest and tender activities by its customers, but we do not expect this increase in activity to have any significant impact on INOVA Geophysicals results of operations in 2010.
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