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

Rhea-AI Summary

ION Geophysical Corporation (NYSE: IO) reported a revenue of $44.4 million for Q3 2021, a 125% increase from Q2 2021 and 173% year-over-year. Despite a net loss of $0.5 million or $0.02 per share, this shows significant improvement from Q3 2020's loss of $16.6 million. Adjusted EBITDA rose to $22 million. Year-to-date revenues decreased by 18% to $78.1 million due to a prior data library sale. The backlog stands at $12 million, with expectations for revenue recognition in the next two quarters, while total liquidity increased to $35 million.

Positive

• 125% revenue increase from Q2 2021 to Q3 2021.
• Adjusted EBITDA improved to $22 million.
• Multi-client revenues surged by approximately 250% from Q2 2021.
• Total liquidity increased to $35 million.
• Backlog of $12 million expected to drive future revenue.

Negative

• Year-to-date revenues declined by 18% compared to 2020.
• Net loss of $31.2 million for nine months in 2021.
• Operating margin dropped to (14%) compared to (11%) the previous year.
• Ongoing concerns regarding market recovery.

HOUSTON, Nov. 03, 2021 (GLOBE NEWSWIRE) -- ION Geophysical Corporation (NYSE: IO) today reported revenues of $44.4 million in the third quarter 2021, a 125% increase compared to $19.7 million in the second quarter 2021 and a 173% increase compared to $16.2 million one year ago.

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

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

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

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

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

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

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

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

THIRD QUARTER 2021

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

		Three Months Ended
		September 30, 2021				June 30, 2021				% Change				September 30, 2020				% Change
E&P Technology & Services		$	35,820			$	11,704				206	%		$	10,093				255	%
Operations Optimization			8,571				8,010				7	%			6,141				40	%
Total		$	44,391			$	19,714				125	%		$	16,234				173	%

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

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

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

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

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

YEAR-TO-DATE 2021

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

		Nine Months Ended September 30,
		2021				2020				% Change
E&P Technology & Services		$	54,760			$	71,833				(24	)%
Operations Optimization			23,381				23,546				(1	)%
Total		$	78,141			$	95,379				(18	)%

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

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

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

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

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

CONFERENCE CALL

The Company has scheduled a conference call for Thursday, November 4, 2021, at 10:00 a.m. Eastern Time that will include a slide presentation to be posted in the Investor Relations section of the ION website by 9:00 a.m. Eastern Time. To participate in the conference call, dial (833) 362-0195 at least 10 minutes before the call begins and ask for the ION conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until November 18, 2021. To access the replay, dial (855) 859-2056 and use pass code 1139057.

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

About ION

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

Contact
Mike Morrison
Executive Vice President and Chief Financial Officer
+1.281.879.3615

The information herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include information and other statements that are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the risks associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased demand; changes in oil prices; agreements made or adhered to by members of OPEC and other oil producing countries to maintain production levels; the COVID-19 pandemic; the ultimate benefits of our completed restructuring transactions; political, execution, regulatory, and currency risks; the outcome or changes, if any, of our consideration of various strategic alternatives; and the impact to our liquidity in the current uncertain macroeconomic environment. For additional information regarding these various risks and uncertainties, see our Form 10-K for the year ended December 31, 2020, filed on February 12, 2021. Additional risk factors, which could affect actual results, are disclosed by the Company in its filings with the Securities and Exchange Commission (SEC), including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.

Tables to follow

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) 

		Three Months Ended												Nine Months Ended September 30,
		September 30, 2021				June 30, 2021				September 30, 2020				2021				2020
		(In thousands, except per share data)
Service revenues		$	36,455				12,366			$	10,202			$	56,285			$	73,234
Product revenues			7,936				7,348				6,032				21,856				22,145
Total net revenues			44,391				19,714				16,234				78,141				95,379
Cost of services			18,349				11,223				11,491				38,842				47,033
Cost of products			3,812				4,853				3,454				12,572				12,962
Impairment of multi-client data library			—				—				—				—				1,167
Gross profit			22,230				3,638				1,289				26,727				34,217
Operating expenses:
Research, development and engineering			3,156				3,382				2,899				9,485				9,943
Marketing and sales			3,142				3,179				2,811				9,080				8,888
General, administrative and other operating expenses			9,158				4,458				6,743				19,003				21,546
Impairment of goodwill			—				—				—				—				4,150
Total operating expenses			15,456				11,019				12,453				37,568				44,527
Income (loss) from operations			6,774				(7,381	)			(11,164	)			(10,841	)			(10,310	)
Interest expense, net			(2,736	)			(3,299	)			(3,669	)			(9,297	)			(10,304	)
Other income (expense), net			(855	)			(4,070	)			(525	)			(5,532	)			6,675
Income (loss) before income taxes			3,183				(14,750	)			(15,358	)			(25,670	)			(13,939	)
Income tax expense			3,623				8,776				1,056				5,550				9,982
Net loss			(440	)			(23,526	)			(16,414	)			(31,220	)			(23,921	)
Less: Net income (loss) attributable to noncontrolling interests			(13	)			(60	)			(193	)			18				(168	)
Net loss attributable to ION		$	(453	)		$	(23,586	)		$	(16,607	)		$	(31,202	)		$	(24,089	)
Net loss per share:
Basic and Diluted		$	(0.02	)		$	(0.90	)		$	(1.16	)		$	(1.33	)		$	(1.69	)
Weighted average number of common shares outstanding:
Basic and Diluted			28,590				26,198				14,278				23,546				14,255

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) 

		September 30,				December 31,
		2021				2020
		(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents		$	24,143			$	37,486
Accounts receivable, net			15,890				8,045
Unbilled receivables			17,541				11,262
Inventories, net			10,673				11,267
Prepaid expenses and other current assets			5,808				7,116
Total current assets			74,055				75,176
Property, plant and equipment, net			9,067				9,511
Multi-client data library, net			56,513				50,914
Goodwill			19,449				19,565
Right-of-use assets			29,896				35,501
Other assets			1,928				2,926
Total assets		$	190,908			$	193,593
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt		$	26,447			$	143,731
Accounts payable			28,061				33,418
Accrued expenses			30,402				16,363
Accrued multi-client data library royalties			20,003				21,359
Deferred revenue			3,009				3,648
Current maturities of operating lease liabilities			8,263				7,570
Total current liabilities			116,185				226,089
Long-term debt, net of current maturities			107,379				—
Operating lease and other long-term liabilities, net of current maturities			32,509				38,594
Total liabilities			256,073				264,683
Commitment and contingencies
Deficit:
Common stock, $0.01 par value; authorized 100,000,000 shares; outstanding 28,627,268 and 14,333,101 shares at September 30, 2021 and December 31, 2020, respectively.			285				143
Preferred stock			—				—
Additional paid-in capital			995,821				958,584
Accumulated deficit			(1,042,718	)			(1,011,516	)
Accumulated other comprehensive loss			(19,772	)			(19,913	)
Total stockholders’ deficit			(66,384	)			(72,702	)
Noncontrolling interests			1,219				1,612
Total deficit			(65,165	)			(71,090	)
Total liabilities and deficit		$	190,908			$	193,593

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 

		Three Months Ended September 30,									Nine Months Ended September 30,
		2021					2020				2021					2020
Cash flows from operating activities:
Net loss		$	(440	)			$	(16,414	)		$	(31,220	)			$	(23,921	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization (other than multi-client library)			897					1,088				3,277					2,936
Amortization of multi-client data library			13,251					3,973				21,970					16,674
Impairment of multi-client data library			—					—				—					1,167
Impairment of goodwill			—					—				—					4,150
Stock-based compensation expense			527					543				1,306					1,637
Amortization of government relief funding			—					—				—					(6,923	)
Loss on restructuring transactions			—					—				4,696					—
Deferred income taxes			—					(101	)			—					237
Change in operating assets and liabilities:
Accounts receivable			(5,423	)				2,387				(7,880	)				21,065
Unbilled receivables			(10,442	)				3,261				(6,291	)				1,181
Inventories			58					(102	)			397					77
Accounts payable, accrued expenses and accrued royalties			5,104					501				(2,787	)				(6,429	)
Deferred revenue			1,194					(1,780	)			(619	)				(2,246	)
Other assets and liabilities			4,626					3,461				7,195					3,563
Net cash provided by (used in) operating activities			9,352					(3,183	)			(9,956	)				13,168
Cash flows from investing activities:
Investment in multi-client data library			(9,664	)				(5,245	)			(22,307	)				(19,841	)
Purchase of property, plant and equipment			(1,271	)				(168	)			(2,038	)				(865	)
Net cash used in investing activities			(10,935	)				(5,413	)			(24,345	)				(20,706	)
Cash flows from financing activities:
Borrowings under revolving line of credit			—					—				—					27,000
Repayments under revolving line of credit			(400	)				—				(3,150	)				(4,500	)
Proceeds from the rights offering			—					—				41,836		(a)			—
Payments on notes payable and long-term debt			(128	)				(287	)			(18,704	)	(b)			(1,814	)
Costs associated with debt issuance			(489	)	(c)			—				(8,185	)	(c)			—
Net proceeds from the registered direct offering			—					—				9,802					—
Receipt of Paycheck Protection Program loan			—					—				—					6,923
Other financing activities			(28	)				(313	)			(603	)				(308	)
Net cash provided by (used in) financing activities			(1,045	)				(600	)			20,996					27,301
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash			13					(37	)			(65	)				501
Net increase (decrease) in cash, cash equivalents and restricted cash			(2,615	)				(9,233	)			(13,370	)				20,264
Cash, cash equivalents and restricted cash at beginning of period			29,058					62,615				39,813					33,118
Cash, cash equivalents and restricted cash at end of period		$	26,443				$	53,382			$	26,443				$	53,382

(a) Represents $30.1 million in New Notes and $11.7 million of ION's common stock issued in connection with the Rights Offering.
(b) Consists primarily of $17.1 million payment for the Old Notes resulting from the Exchange Offer.
(c) Represents transaction costs incurred in connection with the Restructuring Transactions.

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

		September 30,
		2021				2020
		(In thousands)
Cash and cash equivalents		$	24,143			$	51,056
Restricted cash included in prepaid expenses and other current assets			2,300				2,326
Total cash, cash equivalents, and restricted cash shown in consolidated statements of cash flows		$	26,443			$	53,382

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
SUMMARY OF SEGMENT INFORMATION
(In thousands)
(Unaudited)

		Three Months Ended													Nine Months Ended September 30,
		September 30, 2021					June 30, 2021				September 30, 2020				2021					2020
Net revenues:
E&P Technology & Services:
New Venture		$	26,287				$	3,882			$	1,213			$	31,256				$	7,340
Data Library			6,225					5,393				5,085				14,102					52,083
Total multi-client revenues			32,512					9,275				6,298				45,358					59,423
Imaging and Reservoir Services			3,308					2,429				3,795				9,402					12,410
Total			35,820					11,704				10,093				54,760					71,833
Operations Optimization:
Optimization Software & Services			3,814					3,370				3,007				10,028					10,811
Devices			4,757					4,640				3,134				13,353					12,735
Total			8,571					8,010				6,141				23,381					23,546
Total net revenues		$	44,391				$	19,714			$	16,234			$	78,141				$	95,379
Gross profit (loss):
E&P Technology & Services		$	17,925				$	1,018			$	(1,092	)		$	17,336				$	24,902		(c)
Operations Optimization			4,305					2,620				2,381				9,391					9,315
Total gross profit		$	22,230				$	3,638			$	1,289			$	26,727				$	34,217
Gross margin:
E&P Technology & Services			50	%				9	%			(11	)%			32	%				35	%
Operations Optimization			50	%				33	%			39	%			40	%				40	%
Total gross margin			50	%				18	%			8	%			34	%				36	%
Income (loss) from operations:
E&P Technology & Services		$	13,973				$	(2,691	)		$	(4,591	)		$	6,429				$	13,803		(c)
Operations Optimization			624					244				(232	)			48					(3,965	)	(d)
Support and other			(7,823	)	(a)			(4,934	)			(6,341	)			(17,318	)	(a)			(20,148	)
Income (loss) from operations			6,774					(7,381	)			(11,164	)			(10,841	)				(10,310	)
Interest expense, net			(2,736	)				(3,299	)			(3,669	)			(9,297	)				(10,304	)
Other income (expense), net			(855	)				(4,070	)			(525	)			(5,532	)	(b)			6,675		(e)
Income (loss) before income taxes		$	3,183				$	(14,750	)		$	(15,358	)		$	(25,670	)			$	(13,939	)

(a) Includes severance expense of $1.9 million for the three and nine months ended September 30, 2021.
(b) Includes the loss on restructuring transaction of $4.7 million for the nine months ended September 30, 2021 resulting from the exchange of our Old Notes for New Notes.
(c) Includes impairment of multi-client data library of $1.2 million for the nine months ended September 30, 2020.
(d) Includes impairment of goodwill of $4.2 million for the nine months ended September 30, 2020.
(e) Includes amortization of government relief funding of $6.9 million for the nine months ended September 30, 2020.

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Summary of Net Revenues by Geographic Area
(In thousands)
(Unaudited)

		Three Months Ended												Nine Months Ended September 30,
		September 30, 2021				June 30, 2021				September 30, 2020				2021				2020
Latin America		$	24,808			$	1,072			$	7,925			$	29,383			$	35,978
Europe			11,557				6,599				3,257				22,522				15,413
Middle East			2,867				704				474				3,404				7,585
Asia Pacific			1,801				3,437				2,332				10,051				16,719
Africa			1,800				6,479				361				7,439				12,725
North America			1,262				934				1,493				4,298				2,370
Other			296				489				392				1,044				4,589
Total net revenues		$	44,391			$	19,714			$	16,234			$	78,141			$	95,379

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Reconciliation of Adjusted EBITDA to Net Loss (Non-GAAP Measure)
(In thousands)
(Unaudited)

The term EBITDA (excluding non-recurring items) represents net loss before net interest expense, income taxes, depreciation and amortization and other non-recurring charges such as impairment charges, severance expenses, government relief and loss on restructuring transactions. The term Adjusted EBITDA is EBITDA (excluding non-recurring items) but also excludes the impact of fair value adjustments related to the Company’s outstanding stock appreciation awards. EBITDA (excluding non-recurring items) and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA (excluding non-recurring items) and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA (excluding non-recurring items) and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA (excluding non-recurring items) and Adjusted EBITDA provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates.

		Three Months Ended													Nine Months Ended September 30,
		September 30, 2021				June 30, 2021					September 30, 2020				2021					2020
Net loss		$	(440	)		$	(23,526	)			$	(16,414	)		$	(31,220	)			$	(23,921	)
Interest expense, net			2,736				3,299					3,669				9,297					10,304
Income tax expense (benefit)			3,623				8,776					1,056				5,550					9,982
Depreciation and amortization expense			14,148				6,855					5,061				25,247					19,610
Impairment of multi-client data library			—				—					—				—					1,167
Impairment of goodwill			—				—					—				—					4,150
Severance expense			1,930				—					—				1,930					3,102
Amortization of government relief funding			—				—					—				—					(6,923	)
Loss on restructuring transactions			—				4,696					—				4,696					—
EBITDA excluding non-recurring items			21,997				100					(6,628	)			15,500					17,471
Stock appreciation rights (credit) expense			—				—					58				7					(952	)
Adjusted EBITDA		$	21,997			$	100				$	(6,570	)		$	15,507				$	16,519

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
Description of Special Items and Reconciliation of GAAP (As Reported) to Non-GAAP (As Adjusted) Measures
(In thousands, except per share data)
(Unaudited)

The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may provide users of this financial information, additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is adjusted income (loss) from operations or adjusted net income (loss), which excludes certain charges or amounts. This adjusted income (loss) amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) from operations, net income (loss) or other income data prepared in accordance with GAAP. See the tables below for supplemental financial data and the corresponding reconciliation to GAAP financials for the three and nine months ended September 30, 2021 and 2020 and three months ended June 30, 2021:

		Three Months Ended September 30, 2021													Three Months Ended June 30, 2021													Three Months Ended September 30, 2020
		As Reported				Special Items					As Adjusted				As Reported				Special Items					As Adjusted				As Reported				Special Items					As Adjusted
Net revenues		$	44,391			$	—				$	44,391			$	19,714			$	—				$	19,714			$	16,234			$	—				$	16,234
Cost of sales			22,161				—					22,161				16,076				—					16,076				14,945				—					14,945
Gross profit			22,230				—					22,230				3,638				—					3,638				1,289				—					1,289
Operating expenses			15,456				(1,930	)	(a)			13,526				11,019				—					11,019				12,453				(58	)	(d)			12,395
Income (loss) from operations			6,774				1,930					8,704				(7,381	)			—					(7,381	)			(11,164	)			58					(11,106	)
Interest expense, net			(2,736	)			—					(2,736	)			(3,299	)			—					(3,299	)			(3,669	)			—					(3,669	)
Other income (expense), net			(855	)			—					(855	)			(4,070	)			4,696		(b)			626				(525	)			—					(525	)
Income (loss) before income taxes			3,183				1,930					5,113				(14,750	)			(4,696	)				(10,054	)			(15,358	)			58					(15,300	)
Income tax expense (benefit)			3,623				—					3,623				8,776				(7,743	)	(c)			1,033				1,056				—					1,056
Net income (loss)			(440	)			1,930					1,490				(23,526	)			3,047					(11,087	)			(16,414	)			58					(16,356	)
Net income attributable to noncontrolling interests			(13	)			—					(13	)			(60	)			—					(60	)			(193	)			—					(193	)
Net income (loss) attributable to ION		$	(453	)		$	1,930				$	1,477			$	(23,586	)		$	3,047				$	(11,147	)		$	(16,607	)		$	58				$	(16,549	)
Net income (loss) per share:
Basic and Diluted		$	(0.02	)							$	0.05			$	(0.90	)							$	(0.43	)		$	(1.16	)							$	(1.16	)
Weighted average number of common shares outstanding:
Basic and Diluted			28,590									28,590				26,198									26,198				14,278									14,278

(a) Represents severance expense for the three months ended September 30, 2021.
(b) Represents loss on restructuring transaction of $4.7 million for the three months ended June 30, 2021 resulting from the exchange of Old Notes for New Notes.
(c) Represents a full valuation allowance on net deferred tax assets of $7.7 million resulting from the going concern conclusion for the three months ended June 30, 2021.
(d) Represents stock appreciation rights awards expense for the three months ended September 30, 2020.

		For the Nine Months Ended September 30, 2021													For the Nine Months Ended September 30, 2020
		As Reported				Special Items					As Adjusted				As Reported				Special Items					As Adjusted
Net revenues		$	78,141			$	—				$	78,141			$	95,379			$	—				$	95,379
Cost of sales			51,414				—					51,414				61,162				(1,167	)	(c)			59,995
Gross profit (loss)			26,727				—					26,727				34,217				(1,167	)				35,384
Operating expenses			37,568				(1,937	)	(a)			35,631				44,527				(6,301	)	(d)			38,226
Income (loss) from operations			(10,841	)			1,937					(8,904	)			(10,310	)			7,468					(2,842	)
Interest expense, net			(9,297	)			—					(9,297	)			(10,304	)			—					(10,304	)
Other income (expense), net			(5,532	)			4,696		(b)			(836	)			6,675				(6,923	)	(e)			(248	)
Income (loss) before income taxes			(25,670	)			6,633					(19,037	)			(13,939	)			545					(13,394	)
Income tax expense			5,550				—					5,550				9,982				350		(c)			10,332
Net income (loss)			(31,220	)			6,633					(24,587	)			(23,921	)			195					(23,726	)
Net loss (income) attributable to noncontrolling interests			18				—					18				(168	)			—					(168	)
Net income (loss) attributable to ION		$	(31,202	)		$	6,633				$	(24,569	)		$	(24,089	)		$	195				$	(23,894	)
Net loss per share:
Basic and Diluted		$	(1.33	)							$	(1.04	)		$	(1.69	)							$	(1.68	)
Weighted average number of common shares outstanding:
Basic and Diluted			23,546									23,546				14,255									14,255

(a) Represents severance expense and stock appreciation rights awards expense for the nine months ended September 30, 2021.
(b) Represents loss on restructuring transaction of $4.7 million for the nine months ended September 30, 2021 resulting from the exchange of Old Notes for New Notes.
(c) Represents the impairment of multi-client data library of $1.2 million and the related tax impact of $0.4 million for the nine months ended September 30, 2020.
(d) Represents impairment of goodwill of $4.2 million and severance expense of $3.1 million, partially offset by stock appreciation right awards credit of $1.0 million for the nine months ended September 30, 2020.
(e) Represents the amortization of government relief funding of $6.9 million for the nine months ended September 30, 2020.

FAQ

What were ION Geophysical's Q3 2021 revenues?

ION Geophysical reported revenues of $44.4 million for Q3 2021.

How did ION Geophysical's net loss in Q3 2021 compare to Q3 2020?

The net loss in Q3 2021 was $0.5 million, significantly improved from $16.6 million in Q3 2020.

What is ION Geophysical's adjusted EBITDA for Q3 2021?

ION Geophysical reported adjusted EBITDA of $22 million for Q3 2021.

What was the change in ION Geophysical's backlog in Q3 2021?

The backlog decreased to $12 million in Q3 2021 due to revenue recognition.

How much did ION Geophysical's total liquidity increase by?

Total liquidity increased to $35 million as of September 30, 2021.