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Year-on-year revenues increase 17% to $165 million Company maintains 2007 earnings guidance
HOUSTON, Aug 08, 2007 /PRNewswire-FirstCall via COMTEX News Network/ — Input/Output, Inc. (NYSE: IO)
today announced second quarter 2007 net income of $7.1 million, or $0.08 per
diluted share, on revenues of $165.2 million compared to net income of
$14.4 million, or $0.16 per diluted share, on revenues of $141.0 million for
the same period a year ago. During the quarter, the Company shipped 9 of the
14 system order awarded last December by ONGC. However, because of certain
provisions in the contract, $1.7 million, or approximately $0.02 diluted
earnings per share, was deferred until later this year. Second quarter results
also included a $1.0 million charge associated with a lawsuit by a former
employee.

Bob Peebler, President and Chief Executive Officer of I/O, said, “We are
particularly pleased with a strong second quarter performance, especially in
our Marine Imaging Systems Division and our Concept Systems data management
solutions groups. Three major strategic milestones were accomplished during
the quarter. First, we shipped a significant portion of the ONGC land
systems, including several thousand VectorSeis(R) stations. In addition,
although delayed by serious flooding in East Texas, the second survey using
FireFly(R) equipment was successfully completed for Apache in mid-June. The
raw data is excellent and is currently in the early processing stages. We are
still on schedule for a full commercial FireFly offering in late 2007 or most
likely early 2008. Lastly, we entered into a joint venture with Reservoir
Innovation AS and Hydro Technology Ventures to develop and market a full-wave
seismic system to permanently monitor offshore oil and gas reservoirs. As
expected, the mix of our business for the quarter has generated earnings that
are below that of prior year and, as stated in last quarter’s conference call,
we continue to project the majority of our earnings to occur during the second
half of 2007. We are starting to see improvements in our land system margins
and a very robust marine business that will likely continue to grow. The
lumpiness of our business makes quarter-over-quarter comparisons difficult,
but we believe when the full year is rolled up we will see significant
progress in all categories, including the individual margins of each
business-line and our over-all financial results.”

SECOND QUARTER 2007

Revenues increased 17% to $165.2 million from the second quarter of 2006,
with I/O Systems division sales increasing 45% to $136.6 million. This gain
was partially offset by a reduction in sales at our I/O Solutions (GXT)
division, which generated $28.6 million compared to $47.0 million in the same
period a year ago. This reduction was primarily a result of the timing of data
library sales and multi-client activities partially offset by strong
proprietary data processing sales. We expect solid growth in our processing
business for the balance of the year.

Marine Imaging Systems revenues continue to be robust with $35.7 million
compared to $38.5 million a year ago. Strong DigiCOURSE(R) positioning and
source product sales substantially offset a large VSO order in the same period
last year improving year-over-year profitability.

Land Imaging Systems revenues increased 81 percent to $90.3 million from
$49.8 million a year ago, driven by stronger than expected vibroseis truck
sales and the delivery of 9 of the 14 systems for the ONGC order. The Company
expects the ONGC order to be fully delivered by the end of the third quarter
of 2007. Gross margins in Land Imaging Systems decreased slightly during the
second quarter driven by the overall mix of lower margin vibroseis trucks.

Gross margin for the second quarter was 28 percent, improving from 23
percent in the first quarter, but down compared to 33 percent for the same
quarter a year ago. The year-over-year difference is mainly a reflection of
business mix, including a very large and high margin data library sale in the
second quarter of 2006. The second quarter of 2007 also had a large component
of lower margin vibroseis trucks that was only partially offset by very strong
margins in our Marine Imaging Systems and Concept Systems data management
solutions groups.

Operating expenses for the second quarter were 21 percent of revenues as
compared to 21 percent of revenues for the second quarter of 2006 and 19
percent of revenues in the first quarter of 2007. The second quarter
operating expenses as a percentage of revenues declined despite a $4.9 million
increase in R&D, as compared to the same period prior year.

Income from operations in the second quarter fell to $11.5 million
compared to $17.4 million in the second quarter of 2006. EBITDA (earnings
before net interest expense, taxes, depreciation and amortization) for the
second quarter declined to $21.2 million compared to $29.2 million in the
second quarter of 2006. A reconciliation of EBITDA to reported earnings can
be found at the end of this press release.

YEAR TO DATE 2007

Revenues for the first six months ended June 30, 2007 increased 45 percent
to $330.2 million compared to $227.3 million for the first six months of 2006.
Gross margin for the first six months of 2007 declined to 25 percent compared
to 31 percent in the comparable period of 2006. Included in the $103 million
in year-over-year revenue is an aggregate $34 million in revenue with an
average margin of 8% that represents unique and one time transactions that
include the first FireFly system being used by Apache and BP, a strategic
risk-sharing multi-client project and the sale of a VSO replacement cable for
the original VSO system. This unusual grouping of special items has had a
distorting effect on the overall gross margins of the business.

EBITDA for the first six months was $41.6 million compared to
$34.8 million in the same period of 2006. Income from operations for the
first half of 2007 was $17.5 million compared to $16.3 million in the first
half of 2006. For the first six months of 2007, I/O reported net income of
$10.1 million, or $0.12 per diluted share, compared to net income of
$11.0 million, or $0.14 per diluted share, for the first six months of 2006.

OUTLOOK

The following statements are based on our current expectations. These
statements are forward looking and actual results may differ materially.
Factors affecting these forward-looking statements are detailed below.

Brian Hanson, Executive Vice President and Chief Financial Officer of I/O,
commented, “Based on our first-half results and our current pipeline of
business, we are reiterating the earnings guidance we provided on February 28,
2007, although increasing our revenue guidance as the overall mix of business
is different than originally anticipated. We now expect 2007 consolidated
revenues to range between $660 and $710 million, with much of the projected
incremental revenue growth being driven by higher than anticipated sales in
vibroseis vehicles, marine positioning and source products and strong
performance in our Concept Systems data management solution segment. In
addition, we expect consolidated gross margin rate to decrease from our
original guidance as a result of the strategic, low margin multi-client survey
mentioned in our last earnings call, the first FireFly system sale and the
overall mix of our business. Accordingly, we continue to anticipate 2007
earnings to be between $0.45 and $0.60 per diluted share. We expect earnings
to remain back-end loaded due to timing issues related to permitting and other
operational considerations for I/O Solutions (GXT’s) multi-client business,
the influence of natural budgeting cycles on our data library business, and
the delivery of the fourth VSO system to RXT later this year.”

CONFERENCE CALL

I/O has scheduled a conference call for Thursday, August 9, 2007, at 9:30
a.m. Eastern Time. To participate in the conference call, dial 303-262-2142
at least 10 minutes before the call begins and ask for the Input/Output
conference call. A replay of the call will be available approximately two
hours after the live broadcast ends and will be accessible until August 22,
2007. To access the replay, dial 303-590-3000 and use pass code 11093938.

Investors, analysts and the general public will also have the opportunity
to listen to the conference call live over the Internet by visiting
http://www.i-o.com. Also, an archive of the web cast will be available
shortly after the call on the company’s website.

About I/O

I/O is a leading, technology-focused seismic solutions provider. The
company provides cutting-edge seismic acquisition equipment, software,
planning and seismic processing services and data libraries to the global oil
and gas industry. I/O’s technologies are applied in both land and marine
environments, in traditional 2D and 3D surveys, and in rapidly growing areas
like time-lapse (4D) reservoir monitoring and full-wave imaging. Headquartered
in Houston, Texas, I/O has regional offices in Canada, Latin America, Europe,
China, Russia, Africa and the Middle East. Additional information is available
at http://www.i-o.com.

The information included 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 include statements concerning estimated revenues, earnings and
earnings per share for fiscal 2007, and estimated gross margins, EBITDA and
operating expenses as a percentage of revenue for fiscal 2007, future sales
and market growth, 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 timing and development of the Company’s products and
services and market acceptance of the Company’s new and revised product
offerings; risks associated with competitor’s product offerings and pricing
pressures resulting therefrom; the relatively small number of customers that
the Company currently relies upon; the fact that a significant portion of the
Company’s revenues is derived from foreign sales; the risks that sources of
capital may not prove adequate; the Company’s inability to produce products to
preserve and increase market share; collection of receivables; and
technological and marketplace changes affecting the Company’s product line.
Additional risk factors, which could affect actual results, are disclosed by
the Company from time to time in its filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year ended
December 31, 2006.

    Tables to follow

     CONTACTS:  R. Brian Hanson
                Chief Financial Officer
                Input/Output (281) 879-3672

                Jack Lascar / Karen Roan
                DRG&E (713) 529-6600



                     INPUT/OUTPUT, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)

                               Three Months Ended         Six Months Ended
                                    June 30,                  June 30,
                               2007         2006         2007         2006
                                (In thousands, except per share amounts)

    Product revenues        $135,861     $ 92,829    $ 259,341     $158,478
    Service revenues          29,295       48,162       70,860       68,862
      Total net revenues     165,156      140,991      330,201      227,340

    Cost of products          98,548       67,032      191,437      113,568
    Cost of services          21,136       27,001       55,312       43,052
      Gross profit            45,472       46,958       83,452       70,720

    Operating expenses:
      Research and
       development            13,042        8,189       23,161       15,270
      Marketing and sales      9,608       10,470       20,245       18,645
      General and
       administrative         11,316       10,906       22,596       20,539
        Total operating
         expenses             33,966       29,565       66,002       54,454
    Income from operations    11,506       17,393       17,450       16,266
    Interest expense          (1,800)      (1,426)      (3,253)      (2,825)
    Interest income              524          567        1,139          887
    Other expense               (420)        (603)        (647)        (622)
      Income before income
       taxes and change in
       accounting principle    9,810       15,931       14,689       13,706
    Income tax expense         2,145          971        3,349        1,913
      Net income before
       change in accounting
       principle               7,665       14,960       11,340       11,793
    Cumulative effect
     of change in
     accounting principle         --           --           --          398
      Net income               7,665       14,960       11,340       12,191
    Preferred stock
     dividends and accretion     589          600        1,191        1,165
      Net income applicable
       to common shares       $7,076      $14,360      $10,149      $11,026

    Basic net income per share:
      Net income per basic
       share before change in
       accounting principle    $0.09        $0.18        $0.13        $0.13
      Cumulative effect of
       change in accounting
       principle                  --           --           --         0.01
      Net income per
       basic share             $0.09        $0.18        $0.13        $0.14

    Diluted net income per share:
      Net income per
       diluted share before
       change in accounting
       principle               $0.08        $0.16        $0.12        $0.13
      Cumulative effect
       of change in
       accounting principle       --           --           --         0.01
      Net income per
       diluted share           $0.08        $0.16        $0.12        $0.14

    Weighted average number
     of common shares outstanding:
      Basic                   80,550       79,308       80,384       79,222
      Diluted                 97,806       98,893       83,379       80,919



                     INPUT/OUTPUT, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)
                                 (Unaudited)

                                                       June 30,   December 31,
                                                         2007         2006
                            ASSETS

    Current assets:
      Cash and cash equivalents                        $11,539        $17,056
      Restricted cash                                    1,676          1,044
      Accounts receivable, net                         141,449        167,747
      Current portion of notes receivable, net          12,485          6,299
      Unbilled receivables                              27,383         28,599
      Inventories                                      146,421        115,520
      Prepaid expenses and other current assets         17,278          9,854
        Total current assets                           358,231        346,119
    Notes receivable                                     1,126          4,968
    Non-current deferred income tax asset                6,914          6,197
    Property, plant and equipment, net                  37,328         38,129
    Multi-client data library, net                      44,370         33,072
    Investments at cost                                  4,436          4,254
    Goodwill                                           156,736        156,091
    Intangible and other assets, net                    60,985         66,306
        Total assets                                  $670,126       $655,136

          LIABILITIES AND STOCKHOLDERS' EQUITY

      Current liabilities:
      Notes payable and current
       maturities of long-term debt                     $7,026         $6,566
      Accounts payable                                  49,016         47,844
      Accrued expenses                                  49,788         50,819
      Accrued multi-client data library royalties       24,260         27,197
      Deferred revenue                                  20,266         37,442
      Deferred income tax liability                      5,909          5,909
        Total current liabilities                      156,265        175,777
    Long-term debt, net of current maturities           87,610         70,974
    Non-current deferred income tax liability            3,806          4,142
    Other long-term liabilities                          4,271          4,588
        Total liabilities                              251,952        255,481

    Cumulative convertible preferred stock              30,000         29,987

    Stockholders' equity:
      Common stock                                         818            810
      Additional paid-in capital                       501,349        493,605
      Accumulated deficit                             (112,946)      (123,095)
      Accumulated other comprehensive income             5,537          4,859
      Treasury stock, at cost                           (6,584)        (6,511)
        Total stockholders' equity                     388,174        369,668
        Total liabilities and stockholders' equity    $670,126       $655,136



                    Reconciliation of EBITDA to Net Income
                             (Non-GAAP Measures)
                                (In thousands)
                                 (Unaudited)

EBITDA is a Non-GAAP measurement that is presented as an additional
indicator of operating performance and is not a substitute for net income or
net income per share calculated under generally accepted accounting principles
(GAAP). We believe that EBITDA provides useful information to investors
because it is an indicator of the strength and performance of our ongoing
business operations, including our ability to service our debt. The
calculation of EBITDA shown below is based upon amounts derived from the
company’s financial statements prepared in conformity with GAAP.

                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                       2007      2006      2007       2006

    Net income applicable to common
     shares                           $7,076   $14,360   $10,149    $11,026
    Interest expense                   1,800     1,426     3,253      2,825
    Interest income                     (524)     (567)   (1,139)      (887)
    Income tax expense                 2,145       971     3,349      1,913
    Depreciation and amortization                         25,950     19,918
     expense                          10,690    12,977
    EBITDA                           $21,187   $29,167   $41,562    $34,795



SOURCE Input/Output, Inc.

R. Brian Hanson, Chief Financial Officer of Input-Output, Inc., 1-281-879-3672; or
Jack Lascar or Karen Roan of DRG&E, 1-713-529-6600, for Input-Output, Inc.

http://www.i-o.com