Geospace Technologies Corporation Aktie

Good morning, everyone, and welcome to the Geospace Technologies Second Quarter 2026 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelly, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call.

[Operator Instructions] It is now my pleasure to turn the call over to today's CEO, Mr. Rich Kelly. Please go ahead, sir.

Thank you, Bo. Good morning, and welcome to Geospace Technologies conference call for the second quarter of fiscal year 2026. I am Rich Kelly, the company's President and Chief Executive Officer. I am joined by Robert Curda, the company's Chief Financial Officer.

In our prepared remarks, I will first provide an overview of the second quarter, and 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, but 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 and services.

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 March 31, our second quarter for the fiscal year 2026. For the 3 months ended March 31, 2026, we reported revenue of $19.7 million with a net loss of $11.1 million. While our recent results reflect near-term market pressures, they do not change our longer-term plan for diversification and growth. We have seen encouraging signs through new contract wins and expanding opportunities beyond our traditional oil and gas markets. We also recognized revenue with the Heartbeat Detector subscription model, which underscores the growing value of our reoccurring revenue initiatives.

Additionally, we are leveraging our contract manufacturing expertise to pursue white label product developments and manufacturing in smart water technologies. Despite lower utilization of our ocean bottom node fleet, we are seeing increased interest for the summer survey season. As planned, we recognized our first revenue from the previously announced permanent reservoir monitoring, or PRM project as initial manufacturing activities began in Houston, representing an important milestone in the project execution.

While the conflict in the Middle East has delayed potential future business due to travel restrictions and regional uncertainty associated with the conflict, we have maintained positive North American interest in our Pioneer land node solution. Currently, we are providing proposals to new and existing customers for the Pioneer. To date, Pioneer has been and is currently deployed in numerous basins across North America.

As part of ongoing operations and to support potential sales opportunities, we have increased our inventory position in both Pioneer and Mariner components and finished goods. This gives us the opportunity to respond quickly to customer needs and remain flexible given the current market environment. In addition, we have procured many of the long lead components needed for the PRM project and started the manufacturing process to meet the expected delivery schedule.

As part of ongoing efforts to align our cost structure with current market conditions and long-term strategic priorities, we implemented a workforce reduction of approximately 20%. Combined with other cost reduction efforts, we expect to generate annualized cost savings of roughly $12 million. The reductions primarily reflect actions to streamline operations, optimize resource allocation and enhance organizational efficiency across key business segments. These steps are intended to strengthen operating leverage, support disciplined capital management and position our company to respond more effectively to evolving customer demand while maintaining focus on its core growth initiatives. We remain committed to building a stronger, more resilient company for the future.

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 second quarter ended March 31, 2026, we reported revenue of $19.7 million compared to last year's revenue of $18 million. The net loss for the quarter was $11.1 million or $0.86 per diluted share compared to last year's net loss of $9.8 million or $0.77 per diluted share. For the 6 months ended March 31, 2026, we reported revenue of $45.3 million compared to revenue of $55.2 million last year.

Our net loss for the 6-month period was $20.8 million or $1.62 per diluted share compared to last year's net loss of $1.4 million or $0.11 per diluted share. Our Smart Water segment generated revenue of $3.7 million for the three-month period ended March 31, 2026. In comparison, revenue for the same prior year period was $9.5 million, a decrease of 61%. Revenue for the 6-month period was $9.5 million compared to $16.8 million for the same period of the prior fiscal year.

Currently, demand for our Hydroconn connector is lower than expected as customers work through excess inventory. As their inventory levels return to normal, we anticipate gradual revenue improvement in the coming quarters. We continue to see growth potential for this segment as utilities increasingly adopt automated metering solutions that use our Hydroconn connector.

Our Energy Solutions segment second quarter revenue totaled $9.6 million for the 3 months ended March 31, 2026. This compares to $2.6 million in revenue for the same period of fiscal year 2025, representing an increase of 272% Revenue for the 6-month period is $24.3 million, a decrease of 10% over the equivalent prior year period revenue of $26.9 million. The decrease in revenue for the 3 months was due to revenue recognized related to the PRM contract, the final deliveries of our Pioneer land wireless product purchased by Dawson Geophysical. This increase in revenue is partially offset by lower demand for our traditional seismic products.

Additionally, the prior year included a reduction to rental revenue due to concerns about collectibility of receivables from a rental customer. The decrease in revenue for the 6-month period is attributed to lower utilization of our ocean bottom nodal rental fleet, offset by the above-mentioned Pioneer sale to Dawson Geophysical and the revenue recognized for the PRM contract.

The Intelligent Industrial segment revenue totaled $6.3 million for the 3-month period ended March 31, 2026. This compares with $5.9 million from the equivalent year ago period, representing an increase of 7%. Revenue for the 6-month period of fiscal year 2026 was $11.4 million. This compares to the same prior year period revenue of $11.5 million. The increase in revenue for the 3-month period was driven by higher demand for our industrial sensors and contract manufacturing services.

Our operating expenses increased by $100,000 for the second quarter of 2026 and increased by $700,000 for the 3 -- or 3% for the 6-month period ended March 31, 2026. The increase in operating expenses for the 6-month period is due to higher legal fees and increased facility costs, offset by lower research and development project costs.

Our 6-month cash investments into plant and equipment is $3 million. Our balance sheet at the end of the second quarter reflected $13.4 million in cash, and we maintain available borrowings of $25 million from our credit agreement with Woodforest Bank. At March 31, 2026, the company's working capital is $45 million, which includes $19 million of trade accounts and financing receivables.

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

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

[Operator Instructions] We'll go first this morning to Bill Dezellem with Tieton Capital.

A group of questions here. First of all, would you walk through the layoffs that you did and what part of the organization that is impacted? And really just discuss that full rightsizing thought process there, if you would, please.

The layoffs, the reduction impacted all departments across the organization. What we did is we looked at those areas where we felt we weren't as efficient or where we had put more efficient processes and procedures in place. We looked at where we needed resources going forward to support the business going forward. And we took the opportunity to also -- embedded in that was a voluntary early retirement plan, similar to what we did last year.

So we offered people who were close to retirement a chance to take advantage of that. So all those combined is how we got to the number. And as I said, it impacted all departments in the organization.

And did it impact the plant more than the inside or kind of 20% on both sides?

It was a mix. We didn't -- it was not a focus on direct labor. It was a focus more on operational efficiency and where we needed resources going forward versus sort of where we had been in the past. But we had both direct and indirect professional and direct labor.

Okay. That's helpful. And then let's talk a little bit, if we could, about Petrobras and the contract. A couple of questions there. The first one is walk us through how you see the revenue recognition progressing from here now that you have the first quarter where you've had some revenue.

How you see that unfolding over the next several quarters? And when does that reach conclusion? And then in your discussions with Petrobras. What are you hearing relative to what they have for future fields and their thinking? And has any of their thinking spilled over to any of their partners that are on these fields?

Okay. I will take the second part of the question, and then I'll turn it over to Robert to discuss specific about revenue recognition, okay?

So strategically, with Petrobras looking at their future fields, as we've mentioned in the past, we did a FEED study for their 2 next planned fields, which were Sepia and Buzios. They are still ongoing. They still have plans for that. They have a rough time line of the next couple of years, but they are not as I've said in the past, until they actually launch a request for proposals, we can't really state when that might hit. But we -- in the discussions we have with them on a regular basis, those are still in the queue. They're still -- they still are bought into the advantages of permanent reservoir monitoring with regards to efficiency on managing those reservoirs. They see a clear financial advantage to that and strategic advantage to that. So beyond that, I can't really comment. But for revenue recognition, I'm going to turn that over to Robert.

Yes. So, although we have 2 separate contracts, a products contract and a services contract, the way we view that is one performance obligation. You don't have one contract without the other contract. So as a result, we expect to have revenue recognitions throughout the end of the entire endeavor. So we won't stop recognizing revenue until the system is completely deployed. My expectation is -- will be that revenue will increase as we're moving further into production and move into full production. It will be like a nice bell curve that increases over as product is being manufactured and then it will taper off at the end as the cables are being deployed.

And Robert, when would you anticipate that, that top of the bell curve arrives? And then when do you anticipate the contract to be finished?

Well, the contract won't be finished until late in 2027 or early of 2028. I'm not -- haven't totally nailed down what installation is in my mind yet. But the top of the bell curve is going to be...

We think about the peak in those revenues essentially being the midpoint in time between now and let's just call it December of '27?

Yes, I would think that's probably a good call.

Mr. Dezellem, did you have anything further, sir?

Are you still there?

Yes.

We can hear you, sir, Your line is still active. Hearing no response, we will circle back around. We'll go next now to Karl Birkenfeld with American Trust Investment Services.

Karl Birkenfeld, American Trust. Question, you recently sold your ultralight seismic land nodes to Dawson. Do they have applications for the miners that are now going after these strategic metals that are buried underground, the 11 metals that the Chinese currently control, and we are now actively mining.

Thank you for joining the call. We can't really comment to Dawson's business. What we can say in general that the Pioneer can be used in mining applications. I mean we know that it can be used and has -- its sister products have been used in coal and lithium and gold mining. But we can't speak specifically to how Dawson using our solutions.

Okay. Well, I didn't want to know that. I want to know if other miners have been contacting you for your services.

Absolutely. I mean our solutions, even the prior solutions to Pioneer have been used in mining applications, for sure.

[Operator Instructions] And we'll go back now to Bill Dezellem for a follow-up question.

My apologies. I had a technical difficulty, and I did not hear the response to your answer to the question of whether peak revenues for the Petrobras contract are probably somewhere essentially between the midpoint between now and late '27, call it, December 27.

Yes, Bill, I think that's a pretty good estimate at this point to use as the peak timing.

Just kind of think of it as a normal bell curve essentially.

Yes, sir.

And then would you please walk through a couple of the comments that you made in the press release. Number one, that you had increased interest in the summer survey season for your rental fleet. Maybe give some more detail behind that. And then secondarily, you talked about the white label opportunity. Provide more detail on that also, please?

Sure. So with regards to the summer season, if we compare the number of requests for quotes and the request for availability of rental compared to last summer season, we're definitely seeing an uptick in activity. Now none of those have converted to orders -- well, I would say none of them. Very few of them have converted to orders yet. But it gives us an idea that the activity and request for surveys for the summer seems to be much improved over last year.

We don't know if that's being driven by just the overall macroeconomics or what might -- the underlying forces might be by that. But we are prepared to respond to those. As you know, we have equipment readily available, and we're working closely with those customers to try to win that work that we can. With the regards to the white label, I mean, because it's a white label, I can't give too much detail there, but -- what's interesting is companies in the smart water space that are looking to add to their portfolio without having to invest in the research and development dollars where they can take our solution and have us package it for them and then they then turn around and sell it as part of their larger portfolio or larger solution.

So it's embedded in the solution they're offering to the market. We've had a couple of opportunities like that, and it's been quite successful for us. So it gives us a different distribution channel into some areas that we haven't been too terribly successful at before.

And Rich, this is for the actuator valve? Or is this the cable side of your water business?

No, this is specific to the Aquana solutions.

Right. All right. Two additional questions. The first one is relative to Petrobras, have they -- have you been in discussions? And does it appear that they have additional fields beyond Buzios and Sepia that you've done the FEED studies on that they are interested in doing additional homework on FEED studies or otherwise? And then secondarily, given that the water business had been a bright spot and has been pretty weak in the last several quarters. Would you walk us all through what was driving the strength, what changed and how that business ultimately develops going forward for us, please?

Sure. So with regards to Petrobras, we have seen their long-term plan. I mean, it's like a lot of other national companies. They have a number of fields that they have identified and they are looking to develop. But they are really focused on Buzios and Sepia right now with regards to putting assets in place and how they want to manage those reservoirs. And so that's the only thing that they're really discussing in any kind of detail for the next few years.

I would fully anticipate some sort of FEED study, if not next year, the year after for the next 2 fields that they're looking to develop. But there's nothing concrete now. But we have a great relationship with Petrobras. We're really -- because, obviously, with the Mero 3 and 4 project going on, we're in discussions with their teams every week. So we have a pretty good finger on the pulse of what's going on there. But it's like everything else. I mean, they don't want to get -- they have limited resources as well. So they don't want to get too distracted with a project that might not really start for another 4 or 5 years.

So like I said, they do have a long-term plan. They -- obviously, offshore exploration and production is critical to their success going forward. And so we'll continue to support them as best as we can.

Switching gears to the water market. And it's a good question and one that we really ask given how much growth we saw over the last few years. As you know, I mean, we were 15% plus growth year-on-year, especially around the Hydroconn. We've had a lot of good discussions with other players in this space, and it's across the board. There seems to have been a little bit of a step back with regards to infrastructure investment. Not really sure what's driving that, if it's a lack of infrastructure dollars or just more of a refocus on other projects.

But there's -- if we look at the long-term water industry, specifically around water scarcity, water quality, water management and water loss, I mean, AMI will continue to play a key part in that. And AMI with regards to smart meters and remote communications of those smart meters, that business is going to continue to grow over time, and it's going to be there. And not only that, but with regards to AMR, AMI, we're now -- that technology is mature enough now where that sort of first generation is starting to age out. And so now they're actually starting to get into a replacement cycle. So we do see with some municipalities who are early adopters, they're now into replacement mode. And so that's going to continue to drive demand as well. So -- we have a strong and encouraging philosophy around that, and we do continue to expect that market to grow for some reason, and we don't really have a good feel for that. This year, it seems to be a little bit of a step back. But we don't anticipate that to be the long-term situation.

And Rich, is it your sense that some that you are selling your cables to that they have lost market share, and that's part of the equation also? Or is that -- does that not seem to be a phenomenon and it truly is macro spending?

I mean, as you know, I mean, we sell to almost every OEM. So we're seeing that same drop across really all the players. There's not really a new evolving technology out there. There's not really a new evolving company out there. So we don't see it a loss of market share. What you see is the overall market itself is down. And we've talked to all the key players, the AWWA and the other players plus the OEMs we do business with. And it's across the board that they're seeing a slowdown in meter deployment.

And gentlemen, it appears we have no further questions this morning. Mr. Kelly, sir, I'd like to turn things back to you for any closing comments.

Thank you, Bo, and thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the third quarter of fiscal year 2026. Goodbye, and have a great day.

Thank you, Mr. Kelly, and thank you, Mr. Curda. Ladies and gentlemen, if you did experience any technical issues with the audio during today's call, it was being recorded and will be available on the Geospace Technologies Investor Relations website following today's call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.

Hello, and welcome to the Annual Meeting of Stockholders of Geospace Technologies Corporation. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Steve Jumper, Chairman of the Board.

Mr. Jumper, the floor is yours.

Well, thank you, Megan.

Good morning. I am Steve Jumper, Chairman of the Board of Geospace Technologies Corporation. On behalf of myself and the other members of the Board of Directors, I welcome you to the 2026 Annual Meeting of Stockholders. We are pleased to have each of you join us in this meeting.

If you have joined this call, you have either joined as a stockholder or a guest. Only stockholders who have signed in as stockholders may vote during our meeting. Those who have signed into the meeting as guests may listen but may not vote. If you joined as a stockholder, you are required to enter a control number. If you are a stockholder and joined as a guest, and as a stockholder, you may -- you want to vote, you will need to leave the meeting and sign in again as a stockholder and provide your control number as the meeting notice describes.

Any votes that any stockholder cast prior to the meeting will not be changed unless the stockholder has logged in as a stockholder and votes during the meeting. Stockholders who have signed in as stockholders must click the Vote tab on your screen if you desire to change your vote or cast a vote for any matter. Before we begin the business portion of the meeting, I would like to recognize several individuals. First, I would like to introduce to you the other members of our Board of Directors who are joining us today. They are Ms. Margaret Ashworth; Dr. Thomas Davis; Mr. Edgar Giesinger, Jr.; Mr. Richard Kelley, Mr. Richard Miles; Mr. Walter Wheeler. The executives of the Geospace joining us today are Mr. Richard Kelley, our Chief Executive Officer; Mr. Robert Curda, our Chief Financial Officer; and Mr. Todd Bushey, our Chief Technology Officer.

Finally, I would like to introduce Leah Zeitzu with Computershare Trust Company, our transfer agent and registrar, who will act as judge of election for the meeting. Leah will handle any inquiries that stockholders may have about their respective votes. The Geospace Technologies Corporation Annual Meeting of Stockholders is now called to order. I will act as Chairman of the meeting, and Mr. Robert Curda will act as Secretary of the meeting.

This is the Annual Meeting of Stockholders of Geospace Technologies Corporation and as such, is a forum for dialogue between the stockholders and management of the company about matters related to the business of the company. As stated before, stockholders may vote or change their vote during this meeting by clicking the link Vote tab on your screen. Your virtual vote will cancel out any prior ballot or proxy that you may have previously voted.

An affidavit of mailing executed to Computershare Trust Company was delivered to the company, which states that Computershare Trust Company caused to be mailed on or about December 26, 2025, to each of the record holders of the company's common stock as of the close of business, December 11, 2025, either a proxy statement, the annual report to stockholders, a pre-addressed proxy card and return envelope relating to this annual meeting or a notice of Internet availability of proxy materials.

The Secretary of the meeting will cause this affidavit, together with a copy of the proxy statement to be filed with the minutes of this meeting. Leah Zeitzu of Computershare Trust Company will act as a judge of election for this annual meeting. Leah will handle any inquiries that stockholders may have about their respective votes. Prior to the meeting, she executed an oath of judge of election and presented the oath to the Secretary. The Secretary of the meeting will file the oath with the minutes of this meeting.

A list of stockholders of the company entitled to notice of and to vote at this annual meeting, along with their addresses and number of shares held, has been on file at the principal executive offices of the company, open to examination by any stockholder during the ordinary course of business hours for at least 10 days. This list may also be accessed by shareholders (sic) [ stockholders ] by clicking on the Document tab. The judge of election will now report as to whether the presence of a quorum can be determined from the proxy submitted prior to the meeting and from the stockholders virtually present.

Leah?

Mr. Chairman, a quorum is present. I have set forth the calculations of the quorum in the certificate of proxy inspection and tabulation.

Thank you. The Secretary of the meeting will file the certificate of proxy inspection and tabulation executed by the Judge of Election with the minutes of this meeting. Notice of this meeting has been properly sent and a quorum of the shares is present in person or by proxy. This annual meeting is, therefore, duly constituted and ready for the transaction of business. The first item of business is to elect three directors to hold office as Class I directors until the 2029 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified.

The Nominating and Corporate Governance Committee of the Board of Directors has nominated Dr. Thomas Davis, Richard Miles and Walter Wheeler to be elected as Class I directors. The second item of business is to ratify the appointment by the Audit Committee of the Board of Directors of RSM US LLP, independent accountants as our auditors for the year ending September 30, 2026. The third item of business is to vote on a nonbinding advisory resolution regarding the compensation of Geospace Technologies Corporation's named executive officers.

We will now proceed to the vote. If you voted previously, you do not need to vote again unless you wish to change your vote. As a reminder, submission of a ballot revokes any prior ballot or proxy you may have submitted. If you have sent in proxies or voted via telephone or Internet and do not want to change your vote, you do not need to take any further action. The judge of election will now count the vote.

[Voting]

Have all the ballots been counted?

Yes, Mr. Chairman.

Since all the stockholders and proxies entitled and desiring to vote have done so, I declare the polls closed. Will the judge of election please report on the preliminary results of the votes for the proposals presented?

Yes. On Proposal 1, each of the three director nominees standing for election have received the affirmative vote of a majority of the votes cast for election as directors of the company and are therefore reelected. On Proposal 2, a majority of the shares present in person or represented by proxy at the meeting and entitled to vote were voted in favor of the ratification of the appointment of RSM US LLP, independent public accountants as the company's auditors for the fiscal year ended September 30, 2026, and therefore, the proposal 2 has passed.

And on Proposal 3, a majority of the shares present in person or represented by proxy at the meeting and entitled to vote were voted in favor of the nonbinding advisory resolution regarding the compensation of the company's named executive officers as disclosed in the proxy statement, and therefore, the proposal 3 has passed.

I have set forth the results of my tabulation of the voting in the Certificate of Judge of Election.

Well, thank you, Leah. The Secretary of the meeting will file the Certificate of Judge of Election with the minutes of the meeting. This concludes our formal agenda for today. There being no further business to come before the meeting, the meeting is now adjourned. I will turn it back to you, Megan. Megan?

That does conclude today's call. Thank you for joining. You may now disconnect.

Welcome to the Geospace Technologies First Quarter 2026 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer.

Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. [Operator Instructions] It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin.

Thank you, Katie. Good morning, and welcome to Geospace Technologies conference call for the first 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 provide an overview of the first quarter, and Robert will then follow up with more in-depth commentary on our financial performance as well as an overview of our financials. I will then give some final comments before opening the line for questions.

Today's commentary on markets, revenue, planned operations and capital expenditures may be considered forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on what we know now, but 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 December 31, our first quarter of fiscal year 2026. For the 3 months ended December 31, we reported revenue of $25.6 million with a net loss of $9.8 million.

This past year was not without its challenges, many of which are reflected in our first quarter performance. We continue to operate in an environment shaped by economic uncertainty. Inflation drove up material costs faster than we could adjust pricing, tariffs impacted margins and supply chain challenges forced us to carry higher inventory costs.

With that said, we remain committed to what we can control: serving our customers; running the business efficiently; and making smart long-term decisions that benefit our clients, our shareholders and our employees.

Overall, I am encouraged by how our organization performed in this difficult operating environment. We continue to invest wisely in our future, advance our strategic initiatives and leverage innovative technology to further diversify our business. These efforts position us well to drive sustainable growth and long-term value for our shareholders.

The Smart Water segment continues to operate in a stable yet increasingly demanding environment. As is typical of the first quarter, revenue was reduced due to seasonal deployment schedules and the timing of municipal government budget cycles.

However, long-term demand for water infrastructure, treatment and management services remains strong, driven by population growth, urbanization, aging infrastructure and heightened regulatory and environmental standards. We are expanding the geographic reach of our sales and marketing operations where these pressure points are most acute, where demand criteria exists and our technology offers significant added value.

At the same time, the industry faces challenges, including rising operating costs, climate-related variability, evolving compliance requirements and the need for sustained capital investment. These dynamics reinforce the importance of prudent planning, operational discipline and long-term asset stewardship.

The environment surrounding our Energy Solutions segment is defined by uncertainty and change. The global energy demand remains resilient, reflecting the essential role that oil and natural gas play in supporting economic activity, industrial production and energy security.

We were encouraged by the award of the large Permanent Reservoir Monitoring contract in fiscal year 2025, which reinforces the strength of our capabilities and marketing position. In addition, our Pioneer land node solution continues to drive interest in the market. We have completed several sales and anticipate additional sales later this year.

At the same time, the sector faces ongoing volatility driven by geopolitical events, inflationary pressures, regulatory developments and evolving expectations from investors and policymakers.

While commodity prices have fluctuated over the past year, these movements reinforce the importance of maintaining a disciplined approach rather than reacting to short-term market signals. The long-term fundamentals of our industry remain intact, but success requires caution, adaptability and operational excellence.

Our Intelligent Industrial segment continues to generate steady predictable revenue from our industrial sensors, imaging products and contract manufacturing solutions. As previously announced, we strengthened our security portfolio with the acquisition of GeoVox Security, the exclusive licensee of a human heartbeat detection algorithm developed by Oak Ridge National Labs.

Since the acquisition, customer interest and engagement has exceeded Geovox's historical levels, driven largely by the reduced product form factor and the introduction of a monthly subscription model, which simplifies procurement by enabling purchase orders under operating budgets rather than capital expenditures. Combined with the consistent revenue from our long-established industrial product lines, this recurring revenue model positions the Intelligent Industrial segment for growth in 2026 and beyond.

Over the past year, we prioritized safe and reliable operations across our company. We manage costs carefully, maintain capital discipline and continue to strengthen our strategic position. Our investment decisions were guided by conservative assumptions and rigorous return criteria, ensuring that capital was deployed where it could generate durable value.

Looking ahead, we expect continued uncertainty in global markets. While challenges remain, we believe the company is well positioned due to the quality of our portfolio, the experience and professionalism of our workforce, and our conservative financial framework. We will continue to evaluate opportunities carefully, avoid speculative investments and remain guided by returns, risk management and long-term shareholder value.

I will now turn the call over to Robert to provide more detail of our financial performance.

Thanks, Rich. 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 first quarter ended December 31, 2025, we reported revenue of $25.6 million compared to last year's revenue of $37.2 million. Net loss for the quarter was $9.8 million or $0.76 per diluted share compared to the first quarter of last year's net income of $8.4 million or $0.65 per diluted share.

First quarter revenue from the company's Smart Water segment totaled $5.8 million for the 3 months ended December 31, 2025. This compares to $7.3 million in revenue for the same period a year ago, a decrease of 21%. The decrease in revenue is due to lower demand for the company's Hydroconn cable and connector products.

The Energy Solutions segment revenue totaled $14.6 million for the 3 months ended December 31, 2025. This compares to $24.3 million in revenue for the same period a year ago, a decrease of 40%. Revenue for the 3 months ended December 31, 2025, included $10.6 million of Pioneer and related equipment for an order to Dawson Geophysical announced in August of 2025.

However, in comparison, revenue for the first quarter of the prior year included a $17 million OBX marine wireless product sale. Additionally, the reduction in revenue for the first quarter of fiscal year 2026 was due to lower utilization of the OBX rental fleet.

Revenue for the company's Intelligent Industrial segment totaled $5.1 million for the 3-month period ended December 31, 2025. This is compared with $5.6 million for the same year ago period, a decrease of 8%. The decrease in revenue for the 3 months ended December 31, 2025, was primarily due to lower demand for industrial sensor products. This decrease was partially offset by an increase in demand for our contract manufacturing services.

As of December 31, 2025, the company had $10 million in cash and cash equivalents. Additionally, the company's working capital was $52.2 million, which includes $25.4 million of trade accounts and financing receivables as of December 31.

The company continues to own unencumbered property and real estate in both domestic and international locations. In fiscal year 2026, management anticipates a capital expenditure budget of $5 million and does not anticipate additions to the rental fleet given current market conditions.

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

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

[Operator Instructions] Our first question will come from [ Martin Lorentzon ], private investor.

Can you talk about the strategic importance of the heartbeat installed base? Specifically, when should we expect a meaningful portion of those contracts to come up for renewal? And if that installed base were fully subscription-based today, which I realize it's not, but just hypothetically posing, what would be the implied annual recurring revenue for us?

Thanks for the question, Martin. So I'll break it into two pieces. The first one is that we have reached out to the historical installed base. The prior system was designed to last for many, many years. However, that equipment is aging out. And there is obviously interest in replacing their legacy equipment with the new subscription model.

However, that base is pretty diverse and it's international in nature. We've not really run the numbers if we did 100% replacement, knowing that really wasn't possible. So I don't have a good answer for you. But that clearly would be -- there's several hundred installed bases, so you can sort of imply what that might be. That's a good question.

[Operator Instructions] Our next question will come from Bill Dezellem with Tieton Capital.

I have a group of questions. First of all, on the government's -- the U.S. government's website, there is a reference to Homeland Security doing an RFP for persistent surveillance detection system for 15 miles. Did you all bid on that?

Bill, thanks for the question. So even though that's out there, if you also look, they actually did a direct award. We followed up with that. And this administration in order to expedite contracts has taken the mindset to do direct awards where applicable. And so in the areas of interest, they did direct awards. We were not direct awarded in relation to that. So there is no expectation of a further RFP.

Okay. And then shifting to Petrobras and that contract win. Would you discuss the time line for the deployment of that and how you anticipate revenues will be reflected over time?

Do you want to speak to the revenue recognition?

The revenue recognition will be an overtime model, which will be very similar in nature to percentage completion. So as we accumulate cost against what our total anticipated cost, we'll recognize revenue proportionately.

And we anticipate recognizing revenue for the first time in Q3.

Yes, beginning in Q3.

And that project is slated to -- as you remember, Bill, in prior discussions, the goods contract, which is our portion of that, is expected to be completed in Q1 of 2027. So we'll have revenue recognition through that. And then on the actual installation, that's the consortium that we're partnered with in Brazil, and there'll be a small other portion of revenue recognition later in 2027.

And so as we shift into Q3, what is your anticipated revenue level that you would experience in that quarter and then in Q4?

We're not really speaking in actuals at this time, Bill. But if you can imagine, I mean, the portion of the contract, if you divided it over the next 3 quarters, roughly, it will be slightly lower in the first quarter as we build up production capacity, full capacity in Q4 going into Q1 and then downgrading at the end of Q1. So you can think about the revenue curve being kind of a curve versus a fixed number.

Got it. And literally, you do think it will be over 3 quarters that this will be recognized?

The expectation is that we ship this equipment out in Q1. So yes, I mean, the goods portion should be completed in Q1, possibly depending on the customer's final schedule in Q2 of 2027.

We'll continue to recognize revenue on the services contract as services are performed...

Afterwards.

Afterwards, yes.

And Robert, roughly how large will that be?

The total value of the contract, which we've announced in the past is in the $90-ish million range.

With the vast majority...

We've never announced what the difference is between the goods and the services, Bill.

The services is a much more insignificant portion in comparison to the goods.

Okay. That is helpful. And then let's shift, if we could, to GeoVox. Would you provide a detailed update on the deployments that you have experienced to date and on the pipeline of the -- on essentially the pipeline?

So we've just started shipping the units this quarter. So we'll have revenue recognition in this quarter, which we'll announce at the next call, the next release. We anticipate a couple of hundred units in this year and then that building over the subsequent periods. There is a tremendous amount of interest, both domestically and internationally in that.

And so if you think about the pipeline, what's the magnitude or what's the size of it? You mentioned you have a couple of hundred units that will be deployed, it sounds like, starting next quarter?

The first deliveries are this quarter, ramping up into next quarter. As far as the pipe, I mean, we anticipate -- we've talked about this in the past. I mean, the overall market size is in the thousands, it's not tens of thousands. And so we anticipate over the next couple of years, reaching a saturable -- close to saturable level.

And is the market continuing to be prisons and jails, essentially incarceration facilities?

Short term, yes. And then, of course, border crossings, and then we are trying to expand into secured sites like nuclear power facilities, power transfer stations where you want to protect the egress and ingress on the site.

Yes, that's really the new market we'll be moving towards as we develop that product line.

And relative to the border, where does the Border Patrol's interest lie in this product? And how large could that be?

They're definitely interested in the technology. I mean they utilize a couple of different technologies today. They're obviously looking at ways to make it more efficient and effective. As we've said in the past, the number of trucks that are checked coming across the border are in the single percentiles. They would obviously like to increase that.

And they do like the efficiency as far as the timeliness of the system. There are 300-ish border crossing points in the U.S. alone. So if you talk about multiple units on each site to build -- check multiple trucks, it could be 1,000-plus units for CBP.

That's helpful. And then two additional questions. You did increase the contingent consideration on one business here this quarter by, I think, $196,000. Which business was that?

It's related to Heartbeat Detector.

Okay. And then lastly, what's the prospects for the rental fleet seeing activity levels pick up a little more on the deployment front?

So overall, the ocean bottom node business as of last year, expected this year is still to be flattish. We have seen a number of requests for quotations going into the summer season, but none of those are developed into orders yet. So the volume has increased as far as requesting information, but we've not seen any actual impact on orders yet.

[Operator Instructions] We do have a follow-up from Martin Lorentzon.

Just on PRM, could you disclose the number of parties you have ongoing discussions with, excluding Petrobras?

No, due to confidentiality, we're not able to discuss which parties. There's a couple of other companies we're talking to, but we're not allowed to disclose those discussions at this time.

And just a number of those? Is it one additional party? Or is it two or three, without going into...

It's multiple.

I would say it's multiple, Martin.

At this time, this concludes our question-and-answer session. I'd now like to turn the meeting back over to management for any final or closing remarks.

Thank you, Katie, and thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the second quarter of fiscal year 2026. Thank you, and have a good day.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Welcome to the Geospace Technologies Fourth Quarter 2025 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call.

[Operator Instructions] It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin.

Good morning, and welcome to Geospace Technologies conference call for the fourth quarter of fiscal year 2025. I am Rich Kelley, the company's Chief Executive Officer and President. I'm joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will first provide an overview of the fourth quarter, and Robert will then follow up with more in-depth commentary on our financial performance as well as an overview of our financials.

I will then give some final comments before opening 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, but 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 September 30, our fourth quarter of fiscal year 2025. For the 3 months ended September 30, 2025, we reported revenue of $30.7 million with a net loss of $9.1 million. For the full 12 months of our fiscal year, we had $110.8 million in revenue, with a net loss of $9.7 million.

The mixed fiscal year performance across the market segments continues to reinforce our vision of diversification and innovation for the company. Our Smart Water segment delivered another strong year exceeding expectations with double-digit revenue growth for the fourth sequential fiscal year. The Hydroconn connector Line continued to gain market share and drove significant revenue gains compared to last year. We are also seeing increased market acceptance of the Aquana products, both domestically and in the Caribbean markets.

For international markets, we will build upon the municipal water management model in the U.S. and address challenges of water scarcity, environmental changes and natural disaster mitigation. Domestically, we'll remain focused on the increased success and interest we have seen in both the municipal and multifamily residential markets. We anticipate continued market demand for both the Hydroconn and Aquana solutions.

Continued market uncertainty and volatility in oil prices resulted in lower revenue from Energy Solutions. We experienced another year of reduced offshore exploration activity, increased competition and consolidation. These factors have led to decreased utilization of our ocean bottom node rental fleet that has negatively impacted segment revenue.

Despite lower revenue, we achieved strategic wins in this segment. As reported on June 16, 2025, we were awarded a major Permanent Reservoir Monitoring contract with Petrobras, followed by the release and completed major sale of our ultra lightweight land node pioneer to several customers, including Dawson Geophysical, a long-time valued partner.

We have a strong backlog going into next fiscal year. And while there are encouraging signs, the short-term exploration market remains uncertain due to continued pressure from low oil prices. However, long-term demand forecast should drive more favorable market conditions in future periods. Our Intelligent Industrial segment continues to provide steady predictable revenue from our industrial sensors and contract manufacturing solutions.

As previously announced, to increase revenue from this segment, we acquired Geovox Security Inc., the exclusive licensee of a human heartbeat detection algorithm developed by Oak Ridge National Labs. The Heartbeat Detector complements our border and perimeter security portfolio. It further serves to advance our strategy towards adding more solutions with a move toward annual recurring revenues. We also restructured our Exile product portfolio to increase revenues and improve margins. Both Heartbeat Detector and Exile have been -- have seen increased interest in their respective markets.

While Energy Solutions continues to play a key role in our overall strategy, we will continue to drive growth and profitability through diversification. We see incredible opportunities in our Smart Water and Intelligent Industrial Segments to leverage our technology and manufacturing capabilities. We remain well positioned to exploit the tremendous potential we have created with our products and services portfolio, our talented staff and our continuing diversification into new high-margin markets.

Additionally, our current backlog places us in a strong position going into the next fiscal year and beyond. Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability. We will continue to pursue growth through acquisition with immediately accretive additions to top line revenue.

And now I will turn it 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 fourth quarter ended September 30, 2025, we reported revenue of $30.7 million compared to last year's revenue of $35.4 million. The net loss for the quarter was $9.1 million, or $0.71 per diluted share, compared to last year's net loss of $12.9 million, or $1 per diluted share.

For the 12 months ended September 30, 2025, we reported revenue of $110.8 million compared to revenue of $135.6 million last year. Our net loss for the 12-month period was $9.7 million, or $0.76 per diluted share, compared to last year's net loss of $6.6 million or $0.50 per diluted share.

Revenue for our Smart Water Segment totaled $8.5 million for the 3 months ended September 30, 2025. This compares to $11.9 million in revenue for the same period a year ago, a decrease of 28%. For the fiscal year, revenue for this segment totaled $35.8 million versus $32.4 million for the same prior year period for an increase of 10%. The decrease in revenue for the 3 months period is due to decreased demand for our Hydroconn universal AMI connectors. Typically, we expect a slight seasonal drop in demand for these products during the fall and winter months.

The 12-month increase in revenue is due to the increased demand for our Hydroconn connectors. Fiscal year 2025 marks the fourth annual year with double-digit percentage revenue growth from these connectors. For the 3-month period ended September 30, 2025, revenue from our Energy Solutions segment totaled $15.7 million for a decrease of 11% when compared to $17.6 million from the same prior year period.

Revenue from the 12-month period was $50.7 million, a decrease of 35% when compared to revenue from the same prior year period of $78 million. The decrease for the 3-month and 12-month period is due to lower utilization and sales of our marine ocean bottom nodes, particularly -- partially offset by sales of our ultralight land node known as Pioneer.

Revenue from our Intelligent Industrial segment totaled $6.4 million for the 3-month period ended September 30, 2025. This compares with $5.8 million for the equivalent year ago period, representing an increase of 9%. Revenue for the 12-month period ending September 30, 2025, was $24 million. This compares to the prior year period of $24.9 million, a decrease of 4%. The increase in revenue for the 3-month period was due to higher demand for our industrial sensors and contract manufacturing services.

The decrease in revenue for the 12-month period was primarily due to revenue recognized for the 3 and 12 months ended September 30, 2024, on a government contract completed in the fourth quarter of fiscal year '24 and lower demand for our imaging products, partially offset by an increase in demand for our industrial sensors and contract manufacturing services.

Our 12-month cash investments into our rental fleet and property, plant and equipment was $9.1 million, and we invested $1.8 million in the acquisition of the Heartbeat Detector product line. As of September 30, 2025, we have $26.3 million of cash and $8 million of additional available liquidity from our credit facility. Additionally, as of September 30, 2025, we have working capital of $64.1 million, which includes $28 million of trade accounts and financing receivables. That concludes my discussion, and I'll return the call to Rich.

Thank you, Robert. The ongoing trade disputes and related tariffs have impacted our material costs. We are working to mitigate the impact to our customers, but our product costs were higher in Q4, and we anticipate similar impacts in fiscal year 2026. The government shutdown resulted in delays related to our projects for the U.S. Navy as well as potential opportunities with the Department of Homeland Security and Customs and Border Protection. Now that Congress has passed the continuing resolution, we are working with our partners to better understand the new time lines for the relevant projects.

This concludes our prepared commentary, and I'll now turn the call back to the moderator for any questions from our listeners.

[Operator Instructions] We'll take our first question from Bill Dezellem with Tieton Capital.

You had mentioned the gross margin or cost of goods under pressure, specifically tied to tariffs. So Energy solutions segment was the one that had the greatest pressure and most noteworthy. Would you talk in more detail about that phenomenon given that you had higher revenues and lower profitability in that segment?

Bill, yes, specific to Energy Solutions, there was actually another weighing factor on that, which is the ongoing price pressure and commoditization of the -- in the land market. And so we did have a nice sale and revenue recognition on our Pioneer sales, but the margin results on that were lower. We also had higher-than-expected manufacturing costs because these were the first units that were built. We've since resolved some of those, and we expect better margins going forward.

With regards to the tariff impact overall, we try to build and source as much from the U.S. as we can. However, there are certain components that we have to source overseas. Our procurement team and supply chain team have been working to try to mitigate that as much as possible. We've also been closely following the developments in the ongoing trade disputes. And we're hoping that some of that gets resolved now that it seems that there's a number of agreements in place now.

So walk us through how much of the impact, the margin impact this quarter was transitionary here this quarter versus what you would expect to last longer, if you would, please?

I don't really have a good feel for the -- if you're looking for percentages, Bill, I haven't taken as deep a dive as I need to on that. We are monitoring it. The procurement team, like I said, is trying to do their best to resolve some of that. The other thing, too, is I want to make a comment. We've talked about this in the past, which is the ongoing capacity and underutilization of the manufacturing.

Okay. Anything else, Bill?

Yes. Did you have something more you wanted to add to that?

No, I was just looking at another note I had. I think we're okay.

So then the way to think about this is that you had inefficiencies with manufacturing of Pioneer given that it was your first order. And there is some commodity pricing, that probably sticks around, but your manufacturing inefficiencies, those will improve and tariffs, you're still trying to get your head wrapped around what the longer-term implications are of those.

That's a pretty good summary, Bill.

Yes. I would say that now that we've built our first several runs of Pioneer, our manufacturing costs are much more in line with what we expected. So we do expect improved margins on that. Some of the tariffs have resolved since we bought those early -- because for those particular orders, we bought those components earlier in the year when the tariffs were actually higher, and we've mitigated some of that as well. So we do expect improved margins on that product line going forward.

So then in your opening remarks, you referenced that you had expected ongoing margin pressure. My initial read on interpreting those comments would have been that this level of gross margin for the Energy Solutions would continue, particularly with the PRM contract, but that is not at all what you're trying to communicate. It sounds like that you have mitigated a lot of those impacts and the margin will maybe be a bit less than historical, but much closer to normal margins than what you had this quarter.

I would parse that just slightly different. I would say that on PRM because there's not the same pricing pressure on that product line as we see on the land nodes and even on the ocean bottom nodes that we expect better margin performance on the PRM project going forward. So I think that will help balance out some of the lower margin performance on these other products.

Great. Have I taken up my time or may I ask a couple of additional questions?

You could ask one more question, Bill, how about that?

That's fair. So the government has a couple of different initiatives where they are looking at you all, I believe, the Customs Border Patrol, the military. Update us what you are seeing, hearing and thinking that there may be for a decision matrix with the government activities, please?

So I'll speak to the tunnel detection on Customs and Border Protection to start with. That has been very quiet from CBP since even before the government shutdown. We anticipate probably some feedback early next year. I don't anticipate with them just not coming back online and trying to understand where they're at with their projects and with the holidays coming up, I don't anticipate really hearing much more until the quarter after next, basically our Q2, Q1 calendar year. Specific to the Navy, we did continue to have informal conversations.

We know that, that project is going to be delayed until probably our Q3 before we see any kind of movement on that, maybe even closer to Q4, so middle of the summer next year. Both projects are -- as far as we know are still anticipated, it's really a question of where on the time line it's going to be.

[Operator Instructions] We'll take our next question from Sheldon Grodsky with Grodsky Associates.

Early this year, you announced 2 large projects, the Brazilian project and another sale of nodes. Have any of these been shipped yet? Or are you still waiting for these to be shipped?

Sheldon, I appreciate the question. So on the Permanent Reservoir Monitoring project for Petrobras, that is a long-term project for us. We have actually not shipped any of that. We will make our first shipment -- our planned first shipments on that probably the early to middle of next year. So let's say, spring/summer time will be some of the anticipated first revenue recognition on that. And then that revenue recognition will go into fiscal year 2027 for us. That project is expected to last between 12 and 18 months. with regards to the large contract we sold to Dawson Geophysical for -- I'm sorry.

I think he's talking about Mariner contract.

Yes. On the Mariner contract -- I'm sorry, let me defer it to Robert.

Yes. So earlier this year, we announced the Mariner contract. We have not shipped that contract yet. It's been deferred by our customer due to delays from their customer.

I do want to speak to the Pioneer sale that we had. That was a large channel count and those shipments were broken into smaller shipments between this quarter and next quarter. So we have shipped some of those units this year. We anticipate a majority of revenue recognition in Q1 with some of the revenue in Q2.

Thank you. And at this time, there are no further questions in queue. I'd like to now turn the meeting back to our presenters for any additional or closing remarks.

Thank you, Stephanie, and thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the first quarter of fiscal year 2026. Goodbye, and happy holidays.

Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.

Welcome to the Geospace Technologies Third Quarter 2025 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. [Operator Instructions]

It is now my pleasure to turn the floor over to Mr. Rich Kelley. Sir, you may begin.

Thank you, Angela. Good morning, and welcome to Geospace Technologies conference call for the third quarter of fiscal year 2025. I am Rich Kelley, the company's Chief Executive Officer and President. I'm joined by Robert Curda, the company's Chief Financial Officer.

In our prepared remarks, I will first provide an overview of the third quarter, and Robert will then follow up with more in-depth commentary on our financial performance as well as an overview of our financials. I will then give some final comments before opening 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, but 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 30, our third quarter fiscal year 2025.

For the 3 months ended June 30, 2025, we reported revenue of $24.8 million with a net income of $0.8 million. For the first 9 months of our fiscal year, we had $80.1 million in revenue with a net loss of $0.7 million. Strategic accomplishments during the third quarter in all of our business segments have reinforced the success of our diversification efforts, laying the foundation to further our revenue and profitability goals.

In our Smart Water segment, we continue to generate strong organic growth with our Hydroconn universal AMI connectors. They remain a reliable revenue and profit center, setting another revenue record for the first 9 months. Our Quantum line of products continues to gain market acceptance, and we are seeing increased demand. We also announced the product launch of AquaLink. It is an advanced multi-device and multiunit Internet of Things, or IoT endpoint designed to transform submetering and leak detection into multiunit residential and commercial properties.

With AquaLink, we are providing a smart, scalable solution that addresses the growing demand for accurate water monitoring and multiunit properties. This multi-device, multiunit capability, combined with advanced intelligence features makes it an invaluable tool for property owners and managers to meet regulatory standards while smartly monitoring usage.

These achievements continue to support our position that the Smart Water segment has great potential for growth. Our Energy Solutions team announced a permanent reservoir monitoring contract award for the Mero Field 3 & 4 from Petrobras, operator of the Mero Field Consortium.

The contract encompasses the supply and installation of nearly 500 kilometers of the OptoSeis Permanent Reservoir Monitoring System, or PRM, covering 140 square kilometers of seabed area located deep offshore in the Santos Basin off the coast of Brazil. The equipment manufacturing portion of this contract should generate in excess of $80 million in revenue and is anticipated to take 16 to 18 months to complete.

We will be recognizing this revenue throughout the project for normal revenue recognition rules. We do not anticipate any revenue recognition in this fiscal year. The contract also includes installation of the system, which is to be completed by Blue Marine Telecom, a Brazilian subsea cable company. Full installation of this system and any associated revenue is anticipated in fiscal year 2027.

Energy Solutions also achieved its first sale of the newly released Pioneer, an ultra-lightweight land node used for seismic surveys. The first units were purchased by a global engineering and professional services firm based in Canada. As part of our ongoing review and modernization of our product portfolio, we sold the assets associated with our streamer recovery device product line to Seis Gear, in June.

We have confidence that Seis Gear will support SRD customers with outstanding service and experience. While we continue to face headwinds in the ocean bottom node markets, these accomplishments indicate there are still opportunities to generate revenue and profitability in this segment.

The increased success in our Smart Water and Energy Solutions segments have further improved utilization of our Houston facility and should positively impact operational efficiencies. Building off this success, we invested in the growth of our Intelligent Industrial segment this quarter with a recently announced acquisition of Heartbeat Detector, a security technology developed by United States Department of Energy's Oak Ridge National Laboratory.

Used in more than a dozen countries to address human trafficking and prison security, the Heartbeat Detector is a small portable device that uses advanced sensors to rapidly identify people hidden in vehicles, providing a modern, user-friendly interface in as little as 10 seconds. The product, which relies on the GS-ONE low-frequency single-element geophones manufactured in our facilities has been proven 99% effective by Oak Ridge, Sandia and Thunder Mountain National Laboratories.

Domestically, the Heartbeat Detector is used extensively by Departments of Corrections and prison systems. Globally, the product has been leveraged for border crossings and prisons in many countries. There are more than 300 manned border checkpoint crossings in the United States and more than double that in Europe based on EU estimates.

We intend to offer the Heartbeat Detector on a subscription basis, aligning with our strategy to grow recurring revenue streams. As we increase the emphasis on our security and defense product portfolio, we have engaged former U.S. Border Patrol Chief, Carla Provost, to educate fellow national and homeland security professionals and accelerate end-user adoption of our advanced analytics and sensing solutions for border and perimeter security applications.

We remain well positioned to exploit the tremendous potential we have created with our products and services portfolio, our talented staff and our continuing diversification into new high-margin markets. Additionally, our current backlog places us in a strong position going into the remainder of this year and beyond.

Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability. We will continue to pursue growth through acquisition with immediately accretive additions to top line revenue. Overall, I have continued optimism that our company is well positioned to perform going forward. I will now turn the call over to Robert to provide more detail of 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 of our third quarter ended June 30, 2025, we reported revenue of $24.8 million compared to last year's revenue of $24.9 million. The net income for the quarter was $760,000 or $0.06 per diluted share compared to last year's net loss of $2.1 million or $0.16 per diluted share.

For the 9 months ended June 30, 2025, we reported revenue of $80.1 million compared to revenue of $100.2 million last year. Our net loss for the 9-month period was $662,000 or $0.05 per diluted share compared to last year's net income of $6.3 million or $0.47 per diluted share. Our Smart Water segment produced revenue of $10.5 million for the 3 months ended June 30, 2025. This compares with revenue of $9.9 million for the same period of the prior fiscal year, an increase of 6%.

For the 9-month period, the segment contributed revenue of $27.3 million versus $20.6 million, an increase of 33%. The increase in revenue of both periods is due to higher demand for our Hydroconn connectors. The 9-month revenue marks a new high revenue for our Smart Water segment. Revenue from our Energy Solutions segment totalled $8.1 million for the 3-month period ended June 30, 2025. This compares to $9.4 million in revenue for the same prior year period, representing a decrease of 14%.

Revenue for the 9-month period is $35 million, a decrease of 42% over the equivalent prior year period. The decrease in revenue for the 3-month and 9-month period was due to lower utilization and sales of our marine ocean bottom nodes.

Our Intelligent Industrial segment revenue totalled $6.1 million for the 3-month period ended June 30, 2025. This compares with $6.5 million for the equivalent year ago period, representing a decrease of 5%. Revenue for the 9-month period was $17.6 million. This compares to the prior year period of $19.1 million, a decrease of 8%. The decrease in revenue for both periods is due to lower demand from our surveillance and defense products and our imaging products.

The decrease for the both periods was partially offset by an increase in demand for our contract manufacturing services. Our operating expenses increased by $900,000 for the third quarter of 2025 or 8% and increased by $5.4 million or 18% for the 9-month period. The increase for both periods is due to the higher personnel costs and increased sales and marketing costs.

Our 9-month cash investments into plant, property and equipment was $5.8 million and additions to our rental fleet was $1.1 million. Our balance sheet at the end of the third quarter reflects $25.6 million of cash and short-term investments and our credit facility has available borrowings of $15 million with no borrowings outstanding.

As of June 30, 2025, the company's working capital is $75 million, which includes $32 million of trade accounts and financing receivables. Additionally, the company owns unencumbered property and real estate in both domestic and international locations. This concludes my discussion, and I'll turn the call back to Rich.

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

[Operator Instructions] We go first to investor, Michael Cox.

I just wanted to start with a couple of questions about the PRM announcement. I just -- the announcement itself came as a bit of a surprise. I think from previous quarters' discussions around us, it sounds like there were conversations happening, but didn't feel like the announcement of a contract was imminent. Can you just talk about sort of how we got to the point where all of a sudden this announcement came out? And I know it wasn't to you guys, but sort of the fact that it became a rather surprising announcement.

Well, thank you, Michael, for the call. Yes, as you know, we really don't discuss in detail operations ongoing. This contract was actually in discussions for many months with Petrobras, lots of back and forth with regards to technical requirements and commercial requirements. So it was nice to be able to land that contract going against our -- the competitor that's already on Barrel 1 and 2. So I would say, overall, we work on the negotiations of the contract around 6 months.

In comparing, obviously, when the announcement came out, we didn't have a whole lot of numbers to go on, and you just talked about $80 million of equipment manufacturing revenue. Size-wise, just by kilometers, it's similar to the [indiscernible] field from a decade ago. But I don't recall that being broken down into equipment versus installation versus other revenues. Is this -- that was the headline number was big. But can you help us think about what this is going to overall impact over the course of the contract will be from a revenue perspective beyond [indiscernible]?

So it's slightly different than Sonora and the other Equinor contracts in the sense that, that was the older PRM technology with electromechanical devices versus an optical solution that we have now. The other thing, too, is that our end customer, Petrobras has announced the overall value of the contract in their press release, but they did not break down the details between the goods portion and the insulation portion. So we're not at liberty to discuss the details of that as well. But what we can say is the majority of the insulation revenue will be recognized by our partner in Brazil, Blue Marine. So that's why I can address what the goods portion is, but I can't really address the overall services contract.

And then -- so obviously, it sounds like reading between the lines here, the new technology versus the old [indiscernible] mechanical is it higher margin and lower revenue, for you guys, higher margin? I mean what's -- or is it just the state of the world these days is you're just not going to make as much money on PRM [indiscernible].

I mean we still anticipate good margins on it. But just the cost breakdown of the components themselves put forth a completely different financial model with regards to calculating revenue and costs.

Well, how are there other discussions going on, on the PRM front now that this one has been announced?

So what I can say is, yes, I mean, there are ongoing discussions with other partners, including Petrobras. I mean they have a multiyear plan for their fields. Of course, each of those are subject to final approval by their management team where it makes financial sense. So I mean, we will continue to discuss with partners who are interested in PRM, advising them on the opportunities and the benefits of our technology. But I would not want you to read into that. There are other contracts pending.

We'll go next to Scott Bundy with Moors & Cabot.

Does OptoSeis allow you guys to go deeper than existing equipment out there provided by [indiscernible] for example?

I think the depth performance between the two are very similar. I mean, in the sense that they're already going to be on Mero 1 & 2, we're on Mero 3 & 4. I think the depth performance is the same. However, we differentiate on the fact that our technology does not require any kind of in-water wagmi connectors, which improves the reliability of the product over the life of the reservoir. There are some other technologies with regards to how we actually interpret the optical signals that give us an advantage over our competitors as well.

And just for, Rob, going back to December of '23, when we produced something in the vicinity of $50 million in revenues and gross margins around pushing 40% in a $45 million to $50 million revenue per quarter, are we capable of getting back to that 40% gross margin?

I think you said 2023, did you mean 2013?

No. And so we sold a product that produced roughly $50 million in revenues in the December quarter 2023. And margins back then were roughly 40%. That was on a -- that was the product that was originally going to be rented and it was converted to a sale.

Yes. We sold some mariners at that time.

Correct.

Yes. I think part of the things that affect the gross margin at that time is we had some manufacturing times, manufacturing activity that went on to build that equipment, so we had nice absorption, also that's a high profitability product to begin with. And through the PRM contract, we will certainly have a higher level of absorption, which will lead to a higher profitability. I would expect it to be somewhere in the 40% to 45% range overall.

Okay. Great. And just while I have you there's a receivable for that particular contract that I believe comes due in late September or early October that's somewhere in the vicinity of $25 million to $30 million. Do I have that correct?

No. From October -- December '23, no, we do not have a receivable on the books associated with that transaction.

I could be wrong, but there is a receivable that -- if I'm correct, that comes due in October of this year for $25 million to $30 million. Am I wrong?

We do have receivables on the books that -- one second, Scott. We're just reviewing the numbers real quick. Yes. We have receivables on the books for customers that have [indiscernible] Energy Solutions equipment, but their due dates are a little bit further out than that.

Okay. But this calendar year, is that correct?

No, I think they extend beyond this calendar year. They're on progress payment plans, so we'll have some this year and some next year.

Rich, if you -- can you just talk a little bit about this product that you just purchased? Can you give any indication of did we buy it for stock, cash? What sort of revenues? The only thing you've really told us is that it would be accretive. Can you give us a little more detail about this particular product and why you're excited about it?

Sure. So with regards to the deal itself, it was a cash deal. It had an upfront component and then an earn-out component for the overall purchase. So depending on performance of the product over the next 5 years, depending on what the total purchase price is. The part -- there's two things that are exciting to us. One is it's really our first foray into a fully subscription model, so we provide the solution to -- in the U.S., it's mostly used in prison.

So anywhere you have a gate where you control -- you're concerned about security, you've got a man with a gun standing post. And you got trucks coming and going, you're concerned about any kind of trafficking or in prisons example, people coming out. This allows a very low cost effective solution for the [indiscernible] to very quickly run a couple of sensors on the vehicle, and it can detect if there is a human inside the truck within 10 seconds.

And this has been proven for over 25 years. This was a technology developed by Oak Ridge National Labs for their own security of their own labs. And we have the exclusive license from ORNL for this technology, and that was what we were going after. It fits very well with our security and perimeter detection solutions portfolio, it ties in very well with -- if you think about the SADAR solution with regards to perimeter security, it ties in very well with that as well, so it's a nice fit into our overall portfolio.

It has great growth potential. The former solution, the [indiscernible] company had an older solution that was more of a big CapEx expenditure for the end client. This has now been redeveloped and repackaged into a low-cost subscription model. And so we think it's got a great opportunity not only in the U.S. but also internationally.

The other thing that we're very excited about is there's obviously intense focus on the borders with regards to human trafficking. This gives a great solution for the U.S. Border Patrol to take advantage of this technology at the truck checkpoints. And that's one of the things when we talk about bringing Carla Probus on, she has experience with those teams and those people, and she's a firm believer in this technology, so we feel like we have a strong champion in her and promoting this within the U.S.

So speaking of Carla, was Carla involved in the original Homeland Security $10 million sale back in early 2020, I think.

She was not directly involved, but she was aware of it. I mean she was obviously in border patrol at the time. What she'll tell you is she was in the room when that tunnel was detected by our technology. And there were highs all around.

So just a couple of others regarding budget and homeland, the annual review that comes out of February has a pretty significant number over years associated with a 30-mile project. The recent budget looks a little different. Can you square that up for me?

Yes. I think that you're speaking about the General Accounting Office report that we reviewed earlier compared to the One Big Beautiful Bill that's got roughly $30 million allocated for that. So I think that if you look at the [indiscernible] that line is structured, even though it does mention tunnel detection specifically, it also mentions other expenditures on that line. Talking to CBP, I mean, they do anticipate still to issue another request for proposals for more mileage. That number is still not finalized, and the timing of that has been delayed until probably next calendar year. So we do anticipate with the availability of funds, we do anticipate CBP wanting to do more mileage on tunnel detection. We just don't have much more insight than that at this time.

But the committee has directed the CBP to provide tunnel detection technology no later than 90 days, which is 90 days from July. Is that going to help the cause here?

I don't think so. I mean, I know that they were directed that, but I'm sure you know what's going on in D.C. and in all these agencies. I mean they are scrambling. They're losing people, and so they're resource constrained. The procurement people are prioritizing -- they were given the directors to review all of their contracts, review and justify them again and renew them. So as far as this as being a priority for them, I don't see it being a top priority given all the other directors they have to follow.

So your best guess is that this is a 2026 event, not a -- calendar 2026 event, not a 2025 event.

That's the feedback we're getting, Scott, is that we can anticipate an RFP sometime early next calendar year.

We'll go next to Bill Dezellem with Tieton Capital.

Let's start with the Petrobras comment or contract for just a moment, and then we'll jump to a couple of other areas. So relative to that contract, given that there's some confusion about the revenue versus for you all versus contractors, et cetera, et cetera. And I guess, electromechanical versus the fiber optic. Is it fair to say that this is the second largest contract in Geospace's history based off of the operating income or gross margin dollar contribution that you will ultimately receive over the life of the contract?

Yes, absolutely

And congratulations, by the way. It's not every day one wins the second largest contract in your history, so well done. And that revenue, you are going to begin recognizing that revenue in your first fiscal quarter of the coming fiscal year. Is that what we heard? Or am I confused?

Well, I was very careful about that because we are still working with our customer to define the actual revenue recognition milestones and the timing of those. So we are hoping to be able to recognize revenue in Q1, but that has not been finalized yet.

Explains why I was a little bit confused. Let me shift then to the border patrol and first of all, why is the border patrol not adopted the Heartbeat Detector technology up to this point?

That's a great question and one that gets asked frequently. So we had long conversations with the team from GeoVox about how the border works and there are two technologies that are currently used down there. One is a Backscatter and the other one is x-ray. Neither one of those are ideal, but they are used, they've already made the investment.

So the uphill climb that we have, I guess, for Carla and the team is to sell them on the efficiency of using this technology. So the other ones that take a long time to set up. They're very capital intensive. This is -- takes just a minute -- less than a minute to set up less than 10 seconds to detect and the truck is on its way. So we can vastly improve their operational efficiency at the border. The other thing, too, is at the border with their current technology, they scan less than 1% of the trucks that come through the border. This should vastly improve the percentage of trucks that they can actually scan and detect. So we think we have some winning arguments going forward. And I think with this current environment and the current focus on the border that we'll have a much better success in selling the solution.

And then let's circle back to the One Big Beautiful Bill Act, if we could. What funding -- I think you already gave the answer in a previous comment. But what funding is in that bill for subterranean tunnel detection?

There's a particular line in there that is $30 million, but it's addressed in several different solutions in there is mission tunnel detection. And so it's the discretion of the CBPs how they actually allocate those funds.

So it is not a [indiscernible] that, that will be -- that the full $30 million would be for tunnels.

No. And given the way that this -- the administration today, how they're deciding to apportion and allocate funds, I mean, all that's going to be a question mark at this point.

And then relative to your comment in response to a prior question that you anticipate an RFP in the first calendar quarter, so the March quarter of next year. You all have -- and I don't understand the government contracting that well, so bear with me here. But I believe you have SBR 3 certification. And it was our understanding that the implications of that, that if there is a government need and an acquisition of tunnel detection equipment that it would be -- the contract would go to Geospace because you have the SBR 3 certification. But you mentioned an RFP. Can you -- would you please reconcile these things? And maybe help me understand what I don't understand about the whole process.

That's a great question, Bill. So the SBR 3, we certainly have that. That's certainly in place with regards to the technology. However -- and we've asked -- we sought legal guidance on this as well as far as what that really means for the government, whether they're actually forced to buy from us or what that actually means.

So I don't have a good answer for you on that. I do know that there were 3 solutions that were -- that are existing on the border today being evaluated. Until the RFP comes out, we don't really know -- we don't really have -- we can't really defend our SBR 3 position with regards to the RFP until we see it. I know it's not very clear. And we have the same question, Bill. So I don't have a good answer for you today, but we are definitely investigating that. And so we're looking forward to the actual RFP to see what the wording is, what the technology is referenced in there to see if we can apply the SBR 3 that we have to it.

And what do you know about the, I'll call it, the bake-off between you and the 2 other competitors on the border?

Absolutely nothing. As I've said in the previous calls and previous meetings, the CBP has been very tight-lipped about the 3 solutions.

Then coming back to the One Big Beautiful Bill Act, what allocations are in that bill for military and/or Navy that would be interesting and relevant to Geospace?

That was not as clear. I mean, obviously, they have money in there for harbor protection, threat detection, things like that but they weren't as specific as the appropriations we had seen earlier, they had specifically $12.8 million allocated to that. So we are still working with our partners to understand what the priorities are and the timing of that. I will say that we don't anticipate -- talking to our partners on that particular topic, we don't anticipate any decisions until either late this calendar year or early next calendar year.

So the $12.8 million that was in maybe the house bill, if I recall correctly, that is not -- did not make it specifically into the final bill.

That’s correct.

That is appreciated. And yet, you think that there is some activity going on later this year or early next year that could be relevant to you all?

Yes. The discussions that we're having both with our partners and with the U.S. Navy, there's obvious concern about harbor protection and threat detection, especially with regards to unmanned underwater vehicles. And so they are seeking solutions, commercially available solutions, which we -- obviously, with -- between our SADAR technology and our PRM technology, we bring a commercially viable solution for that. So those discussions are ongoing. We're having good discussions, good progress. But at this time, we don't anticipate in the near term any kind of commercial agreement.

And then relative to Aquana, that has essentially been the star of the company here for -- excuse me, not Aquana, Hydroconn has been the star. Would you provide some more commentary around it? I know that connectors aren't near as exciting as $80-plus million contracts and Heartbeat Detection, et cetera, et cetera. But talk to us about the [indiscernible], if you would, please.

Sure. I mean Hydroconn is, as you say, I mean, it's been a great performer for us being organically developed and working with our partners to get it out to the market. As I said in previous calls, that water space offers a 10% to 15% growth year-on-year overall. Hydroconn is in that range and actually outperforms that some quarters more than others. It's still the industry standard. You may have seen there was a recent announcement where Nycor, our partner was acquired by Hubbell. We've had great conversations with Hubbell on how to grow that relationship, so we continue -- we expect to see continued growth and acceptance of this solution in the water space going forward.

This does conclude today's question-and-answer session. I will now turn the program back over to Rich Kelley for any additional or closing remarks.

Thank you, Angela, and thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the fourth quarter of fiscal year 2025. Goodbye, and have a good day.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.