Geospace Technologies Corporation Common Stock 2026 Q3 Earnings Call

Sir, you may begin. Thank you, Madison.

Good morning, and welcome to Geospace Technologies conference call for the third quarter of fiscal year 2026. I am Rich Kelley, the company's Chief Executive Officer and President. I am joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will first provide an overview of the third quarter. Robert will then follow up with more in-depth commentary on our financial performance, as well as an overview of our financials. We will then open the line for questions. Today's commentary on markets, revenue, planned operations, and capital expenditures may be considered forward-looking as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on what we know now. Actual outcomes are affected by uncertainties beyond our control or prediction. Both known and unknown risks can lead to results that differ from what is said or implied today.

Some of these risks and uncertainties are discussed in our SEC form 10-K and 10-Q filings. For convenience, we will link a recording of this call on the investor relations page of our geospace.com website, which I invite everyone to browse through and learn more about Geospace, our subsidiaries, and our products. Note that today's recorded information is time sensitive and may not be accurate at the time one listens to the replay. Yesterday, after the market closed, we released our financial results for the period ended June 30th, our third quarter of fiscal year 2026. For the three months ended June 30, 2026, we reported revenue of $15.8 million with a net loss of $9.7 million. Challenging market conditions across our business segments continue to impact our short-term financial performance. Revenue was impacted by geopolitical uncertainty, project timing, sales volumes, and customer access to capital.

Margins were pressured by product mix, inflation, raw material costs, and component availability. We were able to offset some of this impact with previously stated cost reduction efforts and improvements in manufacturing productivity. Our financial performance this quarter does not reflect the strength of our long-term opportunities across our diversified markets. We remain focused on the factors within our control and on strengthening the foundation of our future performance. With a diversified portfolio of technology-driven solutions and a strong competitive position across our end markets, we believe the company is well-positioned as market conditions improve. Our Smart Water segment continued its dip in revenue, which is driven in large part by reduced orders of the Hydroconn connector. In June, we announced the release of the Series V connector, providing our customers increased flexibility to address continuing supply chain challenges.

With this new product release, we offer the most universally compatible portfolio of Smart Water meter connectors and adapters available domestically. We believe this enhanced product offering strengthens our competitive position and better aligns us with customers' evolving infrastructure needs. Our Intelligent Industrial segment remains a consistent revenue contributor with expected future revenue growth from our security portfolio. At the end of the third quarter, our subsidiary, Quantum Technology Sciences, received a $10.8 million contract from the U.S. Navy to deliver the Seismic Acoustic Detection and Ranging system. This contract is expected to be completed by December 2027. Our Energy Solutions segment generated less revenue than a year ago due to continued reduced demand for seismic acquisition equipment. Third quarter revenue contribution from the PRM contract or Permanent Reservoir Monitoring contract was lower than was expected due to customer-requested changes to the project scope.

Importantly, our customer agreed to extend the PRM contract period of performance to account for these modifications. We have now successfully entered full production of the goods contract. We will continue executing our strategic priorities by investing in innovation, supporting our customers, and maintaining financial discipline. Our focus remains on converting the opportunities within our pipeline into revenue, improving operating performance, and positioning the company for long-term profitable growth. I will now turn the call over to Robert to provide more detail on our financial performance.

Thanks, Rich, and good morning. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during our call this morning. In yesterday's press release for our third quarter ending June 30th, 2026, we reported revenue of $15.8 million compared to last year's revenue of $24.8 million. The net loss for the quarter was $9.7 million or $0.75 per diluted share compared to last year's net income of $800,000 or $0.06 per diluted share. For the nine months ending June 30th, 2026, we reported revenue of $61.1 million compared to revenue of $80.1 million last year.

Our net loss for the nine-month period was $30.5 million or $2.37 per diluted share compared to last year's net loss of $700,000 or $0.05 per diluted share. Our Smart Water segment generated revenue of $46 million for the three-month period ending June 30, 2026. Revenue for the three-month period ending June 30, 2025 was $10.5 million, a decrease of 56%. Revenue for the nine-month period was $14.1 million, compared to $27.3 million from the same prior year period. The decline in revenue for the three-month and nine-month period is due to lower demand for our Hydroconn connector product line. Energy Solutions third quarter revenue totaled $5.9 million for the three months ended June 30, 2026. This compares to $8.1 million in revenue for the same period a year ago, representing a decrease of 28%.

Revenue for the nine-month period is $30.1 million, an increase of 14% over the equivalent prior year period of $35 million. The decrease in revenue for the three months was due in part to the sale of assets associated with our Streamer Recovery Device product line in the prior year. The decrease in revenue for the nine-month period is attributed to lower demand for our ocean bottom nodal products, partially offset by revenue recognized on our PRM contract and increased land wireless product sales. Intelligent Industrial revenue totaled $5.2 million for the three-month period ended June 30, 2026. This compares with $6.1 million from the same year ago period, representing a decrease of 14%. Revenue for the nine-month period ended June 30, 2026 was $16.6 million, compared to revenue of $17.6 million for the comparable year ago period.

The decrease in revenue for both periods was driven by lower demand for our industrial sensors. The decrease in the three-month period was also due to decreased demand for our company's contract manufacturing services. Our operating expenses decreased by $1.2 million for the third quarter of 2026 and decreased $400,000 for the nine-month period. This decrease in operating expense for the three-month period was due to lower personnel costs, agent commissions, and legal and professional fees. The decrease in operating expenses for the nine-month period is due to lower research and development costs and agent commissions. Our nine-month cash investment in our plant equipment is $3.3 million, and at the end of the third quarter, we maintained available borrowings of $25 million for our credit agreement with Woodforest National Bank. Our working capital is $41 million, which includes $17 million of trade accounts and financing receivables.

This concludes my discussion, I'll turn the call back to Rich.

Thank you, Robert. This concludes our prepared commentary. I will now turn the call back to Madison for any questions from our listeners.