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DATE

Friday, August 7, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer and President - Richard Kelley
• Chief Financial Officer - Robert Curda

TAKEAWAYS

• Revenue -- $15.8 million, representing a decline from $24.8 million in the prior-year period due to geopolitical uncertainty, project timing, and reduced demand for seismic equipment.
• Net Loss -- $9.7 million, compared to a net income of $800,000 in the third quarter of the previous fiscal year, reflecting lower sales volumes and inflationary margin pressures.
• Net Loss Per Share -- $0.75, compared to an earnings per share of $0.06 for the comparable quarter of the previous year.
• Smart Water Segment Revenue -- $4.6 million, a 56.1% decrease attributed to lower demand for the Hydroconn Series III connector product line.
• Energy Solutions Segment Revenue -- $5.9 million, a 28% decrease driven by the prior-year sale of streamer recovery device assets and lower demand for seismic acquisition equipment.
• Intelligent Industrial Segment Revenue -- $5.2 million, a 14% decline resulting from reduced demand for industrial sensors and contract manufacturing services.
• Nine-Month Revenue -- $61.1 million, down from $80.1 million in the equivalent nine-month period of the prior fiscal year.
• Nine-Month Net Loss -- $30.5 million, compared to a net loss of $700,000 during the first nine months of the previous fiscal year.
• U.S. Navy Contract Value -- $10.8 million, awarded to subsidiary Quantum Technology Sciences for the delivery of a seismic acoustic detection and ranging system.
• Operating Expenses -- $10.6 million, representing a $1.2 million reduction compared to the prior-year quarter due to lower personnel costs and reduced research and development spending.
• Cash and Cash Equivalents -- $2.8 million as of June 30, 2026, compared to $26.3 million at the start of the fiscal year.
• Working Capital -- $40.6 million, which includes $17.5 million in trade accounts and financing receivables.
• Current Inventories -- $39.6 million, reflecting ongoing production for existing contracts and strategic inventory management.
• Non-Current Inventories -- $11.1 million, representing long-term asset holdings as of the end of the third quarter.
• Rental Equipment Sales Proceeds -- $9.4 million generated during the first nine months of the fiscal year.
• Selling, General and Administrative Expenses -- $6.7 million, a decrease from $7.5 million in the prior-year quarter.
• Research and Development Expenses -- $3.9 million for the quarter, compared to $4.2 million in the same period last year.
• Nine-Month Capital Expenditures -- $3.3 million invested in property, plant, and equipment.
• Credit Facility Availability -- $25 million remains available under the company's credit agreement with Woodforest Bank.
• Permanent Reservoir Monitoring (PRM) Timeline -- Delivery is expected in the third quarter of fiscal year 2027 following customer-requested engineering modifications.
• U.S. Navy Contract Completion -- December 2027 is the targeted date for the fulfillment of the $10.8 million firm-fixed price contract.
• Smart Water Nine-Month Revenue -- $14.1 million, compared to $27.3 million in the same period of the prior year.
• Energy Solutions Nine-Month Revenue -- $30.1 million, a decrease from $35 million in the prior year despite partial offsets from Pioneer land wireless node sales.
• Intelligent Industrial Nine-Month Revenue -- $16.7 million, compared to $17.6 million in the equivalent prior-year period.

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RISKS

• Kelley stated, "Margins were pressured by product mix, inflation, raw material costs and component availability," which negatively impacted the quarterly financial results.
• CFO Curda acknowledged a significant cash burn, reporting that the company "used $27.3 million in cash and cash equivalents from operating activities" during the first nine months of the fiscal year.

SUMMARY

Management reported a decline in quarterly revenue across all three operating segments, attributed to reduced demand for seismic equipment and smart water components. The company stated that margin performance was affected by inflationary pressures and raw material availability, while operating expenses were reduced through cost-saving measures. Geospace Technologies Corporation (GEOS -2.10%) secured a new $10.8 million contract with the U.S. Navy for seismic acoustic systems and reported that production has commenced on a large-scale permanent reservoir monitoring project following customer-requested engineering modifications.

• President Kelley reported that the $10.8 million U.S. Navy contract "marries our SADAR technology from Quantum technologies with our PRM technology from Geospace" to provide an underwater solution for detecting potential threats.
• CFO Curda stated the company is "eliminating things as we can" regarding expenses and intends to utilize its $25 million credit facility to manage cash flow until the next milestone payment from Petrobras.
• Kelley clarified that the U.S. Navy contract serves to demonstrate the company can meet technical performance expectations rather than acting as a proof of concept.
• Management reported that Petrobras is "monitoring the greater geopolitical situation" and oil price volatility, factors that have delayed the release of new proposals for additional permanent reservoir monitoring systems.
• Kelley attributed the Smart Water segment's competitive position to the June release of the Series V connector, which he described as the "most universally compatible portfolio of smart water meter connectors and adapters available domestically."
• The company reported that its heartbeat detector product is progressing ahead of schedule with several pilots completed and a pipeline of government agency customers established.
• Management confirmed that changes to the PRM contract scope involved rerouting sensors and cables but did not involve technical changes to the equipment or any alteration to the total contract value.

INDUSTRY GLOSSARY

• PRM (Permanent Reservoir Monitoring): A seismic system installed on the seabed to monitor changes in oil and gas reservoirs over time.
• SADAR (Seismic Acoustic Detection and Ranging): A technology used for the detection and tracking of acoustic signals in the ground or water.
• Hydroconn: A brand of water meter connectors designed for universal compatibility with various utility infrastructures.
• SBIR (Small Business Innovation Research): A United States government program that provides funding for small businesses to engage in federal research and development.
• OBN (Ocean Bottom Nodes): Autonomous seismic recording devices placed on the seafloor to collect data for oil and gas exploration.

Full Conference Call Transcript

Operator: Welcome to the Geospace Technologies Third 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. It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin.

Richard Kelley: Thank you, Madison. Good morning, and welcome to Geospace Technologies Conference Call for the Third Quarter of Fiscal Year 2026. I am Rich Kelley, the company's Chief Executive Officer and President. I am joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will first provide an overview of the third quarter and Robert will then follow up with a 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. 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 of fiscal year 2026. For the 3 months ended June 30, 2026, we reported revenue of $15.8 million with a net loss of $9.7 million. Challenging market conditions across our business segments continue to impact our short-term financial performance. Revenue was impacted by geopolitical uncertainty, project timing, sales volumes and customer access to capital. Margins were pressured by product mix, inflation, raw material costs and component availability. We were able to offset some of this impact with previously stated cost reduction efforts and improvements in manufacturing productivity.

Our financial performance this quarter does not reflect the strength of our long-term opportunities across our diversified markets. We remain focused on the factors within our control and on strengthening the foundation of our future performance. With a diversified portfolio of technology-driven solutions and a strong competitive position across our end markets, we believe the company is well positioned as market conditions improve. Our Smart Water segment continued its dip in revenue, which is driven in large part by reduced orders of the Hydroconn connector. In June, we announced the release of the Series V connector, providing our customers increased flexibility to address continuing supply chain challenges.

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

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

Robert Curda: Thanks, Rich, and good morning. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during our call this morning. In yesterday's press release for our third quarter ending June 30, 2026, we reported revenue of $15.8 million compared to last year's revenue of $24.8 million. The net loss for the quarter was $9.7 million or $0.75 per diluted share compared to last year's net income of $800,000 or $0.06 per diluted share. For the 9 months ending June 30, 2026, we reported revenue of $61.1 million compared to revenue of $80.1 million last year.

Our net loss for the 9-month period was $30.5 million or $2.37 per diluted share compared to last year's net loss of $700,000 or $0.05 per diluted share. Our Smart Water segment generated revenue of $46 million (sic) [ $4.6 million ] for the 3 months period ending June 30, 2026. Revenue for the three-month period ending June 30, 2025, was $10.5 million, a decrease of 56%. Revenue for the 9-month period was $14.1 million compared to $27.3 million from the same prior year period. The decline in revenue for the 3-month and 9-month period is due to lower demand for our Hydroconn connector product line.

Energy Solutions third quarter revenue totaled $5.9 million for the 3 months ended June 30, 2026. This compares to $8.1 million in revenue for the same period a year ago, representing a decrease of 28%. Revenue for the 9-month period is $30.1 million, a decrease of 14% over the equivalent prior year period of $35 million. The decrease in revenue for the 3 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 9-month period is attributed to lower demand for our ocean bottom nodal products, partially offset by revenue recognized on our PRM contract and increased land wireless product sales.

Intelligent Industrial revenue totaled $5.2 million for the 3 month period ended June 30, 2026. This compares with $6.1 million from the same year ago period, representing a decrease of 14%. Revenue for the 9-month period ended June 30, 2026 was $16.6 million (sic) [ $16.7 million ] compared to revenue of $17.6 million for the comparable year ago period. The decrease in revenue for both periods was driven by lower demand for our industrial sensors. The decrease in the 3-month period was also due to decreased demand for our company's contract manufacturing services. Our operating expenses decreased by $1.2 million for the third quarter of 2026 and decreased $400,000 for the 9-month period.

This decrease in operating expense for the 3-month period was due to lower personnel costs, agent commissions and legal and professional fees. The decrease in operating expenses for the 9-month period is due to lower research and development costs and agent commissions. Our 9-month cash investment in our plant and equipment is $3.3 million. And at the end of the third quarter, we maintained available borrowings of $25 million for our credit agreement with Woodforest 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: 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: And we will take our first question from Bill Dezellem with Tieton Capital.

William Dezellem: 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: Sure, Bill. 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.

William Dezellem: 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: Quite honestly, Bill, no. I mean it was really around -- I mean, not to get 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 [ facings ] like that. But in the big picture, there was no technical change to the equipment that we're providing.

William Dezellem: Great. So essentially, if we think about this from an external perspective or the investment communities perspective, the implication is simply 1 quarter delay, everything else is the same.

Richard Kelley: That's correct. Yes.

William Dezellem: Got it. And given that this contract was awarded some time ago, and I know we haven't started meaningfully producing on this yet, but what's the prognosis for the next PRM contract and whether that would be with Petrobras or with someone else?

Richard Kelley: I mean, it'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.

William Dezellem: Great. 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: Yes, sure. I mean, being the U.S. Navy, there's only so much we can share. But essentially, the project marries our SADAR technology from Quantum technologies with our PRM technology from Geospace to provide an in-water solution for the U.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 as I said in the announcement, plan to deliver our solution by the end of next calendar year.

William Dezellem: And the release made reference to this being an initial contract. Does -- is there an implication there that prior to this contract being fulfilled that there could be additional contracts? How are you thinking about that?

Richard Kelley: No, I wouldn't say before it's completed. As I said, this is an SBIR, it's -- 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 proof 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.

William Dezellem: 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: Yes, exactly. It's a progress payment type structure, right? So if we hit certain milestones, we were able to recognize revenue. We'll have revenue recognition in fiscal year 2027. And given that, we'll finish it in fiscal year '28. So you'll -- similar to the PRM contract, it will bridge a couple of fiscal years for us with regards to...

Robert Curda: 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 completion.

Richard Kelley: Thank you, Robert.

William Dezellem: Yes. Okay. That's helpful. And actually, on that note, I do want to circle back to the PRM contract. When is it currently -- you said it's in production now here in this quarter. When is the final quarter of production that you now -- excuse me, the final quarter of revenue recognition that you now anticipate with these changes?

Richard Kelley: It's going to be -- I mean, right now, we're anticipating somewhere between our fiscal Q3 and fiscal Q4 of next year.

William Dezellem: Fiscal '27.

Richard Kelley: Correct.

William Dezellem: Okay. Great. And then I would like to jump to heartbeat detector if we could. Could you please provide us an update there?

Richard Kelley: Sure. Heartbeat detector is obviously, the market that we're -- that applies to is excited. We've done several pilots. We've got a pipeline of customers lined up. Yes, 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 will be ramped up, right?

I mean, it's the -- 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 does take some time, but still expect that to meet our expectations over the coming periods.

William Dezellem: Great. 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: Robert, do you want to jump in there?

Robert Curda: Yes. We're managing cash very closely, Bill. We're 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. I think we're going to be in a good shape with the help of our bank -- our credit facility to make it through to when we expect to get our next milestone payment from Petrobras.

Operator: There are no further questions in queue at this time. I will now turn the meeting back to Rich Kelley.

Richard Kelley: Thank you, Madison. 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 2026. Goodbye, and have a good day.

Operator: This concludes today's meeting. We appreciate your time and participation. You may now disconnect. Thank you.