Lemelson Capital Management announces 10 percent stake in Geospace Technologies (NASDAQ: GEOS), urges immediate share repurchase
Firm reiterates near-term intrinsic value at $38 per share
MARLBOROUGH, Mass., Dec. 1, 2017 /PRNewswire/ -- Lemelson Capital Management, LLC, a private investment management firm, announced today it has acquired, for its flagship Amvona Fund, LP, a stake of approximately 10 percent in shares of Geospace Technologies (NASDAQ: GEOS), a global leader in the design and manufacture of instruments and equipment used by the oil and gas industry. In addition, it is urging the company to initiate an immediate share repurchase plan.
"With oil prices at a two-year high and rising and an agreement by OPEC and other major producers to extend output curbs until the end of 2018, the market continues to radically under-value Geospace Technologies. This overlooks the firm's technological leadership—the company's state-of-the-art GCL and GSX product lines have no competitive analogue; as well as its $75 million in liquidity, understated assets, zero-debt balance sheet and substantial revenue growth," said Fr. Emmanuel Lemelson, Chief Investment Officer of Lemelson Capital Management.
With revenue in the fourth quarter increasing 45% over last year's fourth quarter and representing the highest quarterly revenue in more than two years, a near 15-fold year-over-year increase in sales of the company's market-leading GSX wireless recording system, a 61 percent increase in wireless product revenue in 2017 compared to fiscal year 2016 and operating income associated with the company's non-seismic products increasing each year over the last three consecutive years, Lemelson Capital Management believes the near-term intrinsic value of Geospace Technologies common stock to be at least $38 per share.1
"Geospace Technologies continues to experience significant increases in revenues and liquidity as evidenced by the more than $10 million in cash provided by operating activities in fiscal year 2017," Lemelson added. "We believe the company's non-cash charges2, including aggressive inventory write-downs and subsequent sales of these same depreciated inventories at significant profits represent a tremendous store of shareholder value which is not reflected on the company's balance sheet and points to the need for an immediate and aggressive share buyback program."
Lemelson Capital today also released a copy of a recent letter sent to the company's board of directors regarding this and other proposed actions. A copy of the letter can be found here: https://www.scribd.com/document/355452065/Letter-to-Gary-Owen-BoD-Geospace-Technologies-Corporation-NASDAQ-GEOS
About Lemelson Capital Management
Lemelson Capital Management, LLC is a private investment management firm focused on deep value and special situation investments. For more information, see: http://www.lemelsoncapital.com
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SPECIAL NOTE REGARDING THIS RELEASE
THIS REPORT INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA IS RELIABLE, WE HAVE NOT SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR INFORMATION IN THIS PRESENTATION. MANY OF THE STATEMENTS IN THIS PRESENTATION REFLECT OUR SUBJECTIVE BELIEF.
EMMANUEL LEMELSON'S VIEWS AND HIS HOLDINGS OF THE SECURITIES MENTIONED IN THIS RELEASE COULD CHANGE AT ANY TIME. HE MAY SELL ANY OR ALL OF HIS HOLDINGS OR INCREASE HIS HOLDINGS BY PURCHASING ADDITIONAL SECURITIES. HE MAY TAKE ANY OF THESE OR OTHER ACTIONS REGARDING ANY OF SUCH SECURITIES WITHOUT UPDATING THIS RELEASE OR PROVIDING ANY NOTICE WHATSOEVER OF ANY SUCH CHANGES.
THE INFORMATION CONTAINED ABOVE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF GEOSPACE TECHNOLOGIES MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED ABOVE SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING GEOSPACE TECHNOLOGIES AND ITS PROSPECTS BASED ON SUCH INVESTORS' OWN REVIEW OF PUBLICALLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED ABOVE. NEITHER LEMELSON CAPITAL MANAGEMENT, LLC NOR ANY OF ITS AFFILIATES ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT OR CONSEQUENTIAL LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED ABOVE.
Certain statements contained in this letter are forward-looking statements including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future performance or activities and are subject to many risks and uncertainties. Due to such risks and uncertainties, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "should," "may," "will," "objective," "projection," "forecast," "management believes," "continue," "strategy," "position" or the negative of those terms or other variations of them or by comparable terminology. Important factors that could cause actual results to differ materially from the expectations set forth in this letter include, among other things, the factors identified under the section entitled "Risk Factors" in Geospace Technologies Annual Report on Form 10-K for the year ended September 30, 2016. Such forward-looking statements should therefore be construed in light of such factors, and Lemelson Capital is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
1 Lemelson Capital believes the intrinsic value of Geospace Technologies is likely in the $50 to $60 per share range over the next few years
2 Non-cash adjustments for inventory obsolescence and impairment charges on factory equipment alone amounted to $26.8 million in fiscal year 2017
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