Geospace Technologies Reports Q3 2026 Results: Full Earnings Call Transcript

Geospace Technologies (NASDAQ: GEOS ) held its third-quarter earnings conference call on Friday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

7 million. Challenging market conditions and geopolitical uncertainties impacted revenue, compounded by inflation, raw material costs, and component availability, though cost-reduction efforts partially offset these pressures. The Smart Water segment saw a decline in revenue due to reduced orders, while the Energy Solutions segment faced decreased demand for seismic acquisition equipment. S.

Navy, expected to be completed by December 2027. Management emphasized a focus on innovation, financial discipline, and converting pipeline opportunities into revenue for long-term growth, despite current challenges. The company did not provide specific future revenue or earnings guidance, but remains optimistic about future opportunities as market conditions improve. Full Transcript OPERATOR Welcome to the Geospace Technologies third 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. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two.

We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, press star zero. It is now my pleasure to turn the floor over to Rich Kelly. Sir, you may begin.

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

In our prepared remarks, I will first provide an overview of the third quarter, 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. 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 close, we released our financial results for the period ended June 30, our third quarter of fiscal year 2026. 7 million. Challenging market conditions across our business segments continue to impact our short-term financial performance. Revenue was impacted by geopolitical uncertainty, project timing, sales volumes, and customer access to capital.

Margins were pressured by product mix, inflation, raw material costs, and component availability. We were able to offset some of this impact with previously stated cost-reduction efforts and improvements in manufacturing productivity. Our financial performance this quarter does not reflect the strength of our long-term opportunities across our diversified markets. We remain focused on the factors within our control and on strengthening the foundation of our future performance.

With a diversified portfolio of technology-driven solutions and a strong competitive position across our end markets, we believe the company is well positioned as market conditions improve. Our Smart Water segment continued its dip in revenue, which is driven in large part by reduced orders of the Hydrocon connector. In June, we announced the release of the Series 5 connector, providing our customers increased flexibility to address continuing supply chain challenges. With this new product release, we offer the most universally compatible portfolio of smart water meter connectors and adapters available domestically.

We believe this enhanced product offering strengthens our competitive position and better aligns us with customers' evolving infrastructure needs. Our Intelligent Industrial segment remains a consistent revenue contributor with expected future revenue growth from our security portfolio. S. Navy to deliver the Seismic Acoustic Detection and Ranging system.

This contract is expected to be completed by December 2027. Our Energy Solutions segment generated less revenue than a year ago due to continued reduced demand for seismic acquisition equipment. Third quarter revenue contribution from the PRM contract, or permanent reservoir monitoring contract, was lower than was expected due to customer-requested changes to the project scope. Importantly, our customer agreed to extend the PRM contract period of performance to account for these modifications.

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

Robert Curda, Chief Financial Officer 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. 8 million. 06 per diluted share.

1 million last year. 05 per diluted share. 6 million for the three-month period ending June 30, 2026. 5 million, a decrease of 56%.

3 million from the same prior-year period. The decline in revenue for the three-month and nine-month period is due to lower demand for our hydroton connector product line. 9 million for the three months ended June 30, 2026. 1 million in revenue for the same period a year ago, representing a decrease of 28%.

1 million, increase of 14% over the equivalent prior-year period of $35 million. The decrease in revenue for the three months was due in part to the sale of assets associated with our streamer recovery device product line in the prior year. The decrease in revenue for the nine-month period is attributed to lower demand for our ocean bottom nodal products, partially offset by revenue recognized on our PRM contract and increased LAN wireless product sales. 2 million for the three-month period ended June 30, 2026.

1 million from the same year-ago period, representing a decrease of 14%. 6 million compared with the revenue for the comparable year-ago period. The decrease in revenue for both periods was driven by lower demand for our industrial sensors. The decrease in the three-month period was also due to decreased demand for our company's contract manufacturing services.

2 million for the third quarter of 2026 and decreased $400,000 for the nine-month period. This decrease in operating expense for the three-month period was due to lower personnel costs, agent commissions, and legal and professional fees. The decrease in operating expenses for the nine-month period is due to lower research and development costs and agent commissions. 3 million, and at the end of the third quarter we maintained available borrowings of $25 million under our credit agreement with Woodforest Bank, and our working capital is $41 million, which includes $17 million of trade accounts and financing receivables.

This concludes my discussion, and I'll turn the call back to Rich. Richard Kelley, Chief Executive Officer Thank you, Robert. This concludes our prepared commentary, and I will now turn the call back to Madison for any questions from our listeners. OPERATOR Thank you.

If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. And we'll pause for just a moment to allow everyone a chance to join the queue.

And we will take our first question from Bill Dzellum with Titan Capital. Please go ahead. Bill Dzellum, Analyst at Titan Capital Thank you. I'd like to start with the PRM contract.

Of course, you noted in the press release there's been some changes there. Instead of me asking a whole bunch of questions, why don't I just ask you to provide a lot more detail around those scope changes and ultimately the implications, please? Richard Kelley, Chief Executive Officer Sure. Bill, good morning.

Thanks for the question. So there's no financial impact to the contract. The total value remains the same. It was regarding the structure of the equipment.

Our customer decided to change some of the layout, so we went through some engineering changes, and that led to a delay. Obviously, our customer was willing to accept that and they gave us a contract extension. So structurally, the contract is the same. It's just an extension on the period of performance.

Bill Dzellum, Analyst at Titan Capital And that structural change that they—excuse me, that engineering change that they wanted to do—does that have any implications for you from a competitive perspective and thinking with respect to future contracts? Richard Kelley, Chief Executive Officer Quite honestly, Bill, no. I mean, it was really around—I mean, not to get too much, too complex in this—the way that they envisioned their infrastructure being in place when we did the original field design changed from that point until after the contract was established. So we needed to reroute some of the sensors and some of the cables, change some of the facing and stuff like that.

But in the big picture, there was no technical change to the equipment that we're providing. Bill Dzellum, Analyst at Titan Capital Great, thank you. So essentially, if we think about this from an external perspective or the investment community's perspective, the implication is simply one quarter delay. Everything else is the same.

Richard Kelley, Chief Executive Officer That's correct, yes. Bill Dzellum, Analyst at Titan Capital Got it. And given that this contract was awarded some time ago, and I know we haven't started meaningfully producing on this yet, what's the prognosis for the next PRM contract and whether that would be with Petrobras or with someone else? Richard Kelley, Chief Executive Officer I mean, that's a good question.

I mean Petrobras, as we've stated in the past, I mean they still have a long-term strategy for using PRM systems on their fields, but obviously they're monitoring the greater geopolitical situation, the volatility in oil prices, and their internal decision is driven by a lot of those factors. So they have not put forward when they anticipate releasing the next proposed PRM system. So that addresses Petrobras. But we do anticipate participating in any proposal they put out.

We plan to participate. Regarding other fields, I mean obviously we have ongoing discussions with the majors who consider PRM a viable solution, and if they happen to put out a proposal or request for proposal, obviously we intend to respond to that. But as it stands right now, there is nothing firm on the calendar. Bill Dzellum, Analyst at Titan Capital Great, thank you.

And then you announced the Navy. How about if I again just open this up and let you discuss the Navy, and then I'll ask additional questions from there. Richard Kelley, Chief Executive Officer Yeah, sure. S.

Navy, there's only so much that we can share. S. Navy for detection of potential threats. And so this is under an SBIR envelope, and we're working closely with them to make sure the project is fully vetted out and, you know, as I said in the announcement, plan to deliver our solution by the end of next calendar year.

Bill Dzellum, Analyst at Titan Capital And the release made reference to this being an initial contract. Is there an implication there that prior to this contract being fulfilled there could be additional contracts? How are you thinking about that? Richard Kelley, Chief Executive Officer No, I wouldn't say before it's completed.

As I said, this is an SBIR. I would say it's not really a proof of concept because these are viable solutions that we're offering. It's more of a prove that we can meet the Navy's expectations with regards to technical performance, and then the Navy will use that to determine how they want to move forward in a larger scale. Bill Dzellum, Analyst at Titan Capital Great, that's helpful.

And then as you think about revenue recognition, is this essentially going to be recognized over time? We used to call it percentage of completion. I'm not sure what the right term is now. Richard Kelley, Chief Executive Officer Yeah, exactly.

It's a progress payment type structure, right? So if we hit certain milestones, we are able to recognize revenue. You know, we'll have revenue recognition in fiscal year 2027 and, given that we'll finish it in fiscal year 28, similar to the PRM contract, it'll bridge a couple of fiscal years for us. Robert Curda, Chief Financial Officer Let me slightly modify what Rich said.

We will recognize revenue independent of the milestones we're paid, and we'll recognize revenue over time. That's similar to percentage of completion. Bill Dzellum, Analyst at Titan Capital Thank you, Robert. Yes, okay, that's helpful.

And actually on that note, I do want to circle back to the PRM contract. You said it's in production now here in this quarter. When is the final quarter of revenue recognition that you now anticipate with these changes? Richard Kelley, Chief Executive Officer It's going to be—I mean, right now we're anticipating somewhere between our fiscal Q3 and fiscal Q4 of next year.

Bill Dzellum, Analyst at Titan Capital Of fiscal '27. Okay, great. Thank you. And then I would like to jump to Heartbeat Detector if we could.

Would you please provide us an update there? Richard Kelley, Chief Executive Officer Sure. Heartbeat Detector is—obviously, you know, the market that that applies to is excited. We've done several pilots, we've got a pipeline of customers lined up.

Yeah, I mean it's proceeding as planned. I think we're actually a little bit ahead of our plan regarding Heartbeat Detector. But as we said in the past, I mean the revenue growth on this is going to be fairly—it'll be ramped up, right. I mean we recognize that the sales life or the lead-up to a completion of sales is—because we're dealing with government agencies and things like that—I mean, it just takes some time, but still expect that to meet our expectations over the coming Bill Dzellum, Analyst at Titan Capital Great, thank you.

And then, given the stock price reaction this morning, I suspect there is some concern about the cash burn rate. Would you please address how you are thinking about that to provide comfort at how you're thinking about cash going forward? Richard Kelley, Chief Executive Officer Yeah, Robert, do you want to jump in there? Robert Curda, Chief Financial Officer Yeah.

We're managing cash very closely, Bill. We're, you know, getting a group together to analyze expenses and eliminating things as we can and just trying to stay on top of incomings and outgoings cash as closely as possible.