Geospace Technologies Corporation

Welcome to the Geospace Technologies 3rd Quarter 2024 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rick Wheeler, President and Chief Executive Officer. He is joined by Robert Kurta, the Company's Chief Financial Officer, and Mr. Rich Kelly, the Company's Chief Operating 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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, press star 0. It is now my pleasure to turn the floor over to Rick Wheeler. Sir, you may begin.

Thanks, Jamie. Good morning, and welcome to Geospace Technology's conference call for the third quarter of fiscal year 2024. As mentioned, I'm Rick Wheeler, the company's president and chief executive officer, and I'm joined by Robert Curta, the company's chief financial officer, and Rich Kelly, the company's chief operating officer. In our prepared remarks, I'll first provide an overview of the third quarter, and Robert will then follow with more in-depth commentary on our financial performance. Following Robert's update, Rich will speak to some of our operations and shed some light on our strategic direction. 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 hope everyone will browse through and learn more about Geospace. our subsidiaries, and our products as well. 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 third quarter and first nine months of fiscal year 2024, which ended June 30, 2024. With only three months of fiscal year 2024 remaining, we continue to maintain a profitable year, reporting positive net income, of $6.3 million, or 47 cents per share. In addition, there's been no change in our longstanding and unwavering commitment towards sustaining a strong balance sheet, which remains firmly intact with zero debt and holdings of $42.5 million in cash and short-term investments as of June 30, 2024. Nonetheless, further gaps in our OBX rental contracts had a negative impact on third-quarter revenue from our oil and gas market segments. This led to a net loss of $2.1 million for the three months ended June 30, 2024. During the quarter, a combination of unexpected weather delays, customers' operational difficulties, and unawarded client surveys contributed to the extended gaps, although some of the work is expected to resume in the fourth quarter. In quite a contrast, our adjacent market segment generated yet another all-time revenue record for the third quarter, generating $16 million. This represents an increase of $1.1 million over the previous quarterly record, which was set a year ago. The ever-growing industry acceptance of our water meter cables and connectors is a strong enabler for additional revenue from these products. We anticipate substantial revenue contributions to this segment from our Aquana smart water valve and IoT technology products as market traction grows and increasing sales backlog continues to gather. In combating the very familiar and often extreme volatility we experience in our oil and gas segment, the careful expansion of products and market diversity in our adjacent market segment has been a long-standing part of our strategic vision for Geospace. The noteworthy continuation of record-setting performances from this segment is strong evidence that this strategy is on track to provide long-term value to our shareholders. Our emerging markets segment posted $640,000 of revenue in the third quarter, with the largest portion coming from the fulfillment of a DARPA contract that is now essentially complete. As an outcome of this project and other independent efforts, Multiple government agency security projects and advanced energy and energy transition monitoring projects offer future opportunities where this technology can be uniquely applied. In addition, as of June 30th, 2024, this business segment had a backlog of approximately $750,000, primarily derived from an extension through April of 2025 of our existing U.S. Border Patrol contract. In other news, We were pleased to reveal some specifics of the company's Board of Directors Management and Leadership Succession Plan, wherein Rich Kelly will become the company's President and Chief Executive Officer on October 1, 2024. I have complete confidence in the skills and business acumen exhibited by Rich Kelly in his time with Geospace. As such, I look forward to an effective and smooth transition that will progressively preserve and increase shareholder value. In a few moments, Rich will speak on the call to give additional insight on our operations and strategic direction. But first, I'll turn the call over to Robert to provide more financial detail on the third quarter and nine-month performance. Robert?

Thanks, Rick, 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 For our third quarter ended June 30th, 2024, we reported revenue of 25.9 million compared to last year's revenue of 32.7 million. The net loss for the quarter was 2.1 million or 16 cents per diluted share compared to last year's net income of 3.2 million or 24 cents per diluted share. For the nine months ended June 30, 2024, we reported revenue of $100.2 million compared to revenue of $95.2 million last year. Our net income for the nine-month period was $6.3 million, or $0.47 per diluted share, compared to last year's net income of $7.8 million, or $0.59 per diluted share. Our oil and gas market segment produced revenue of $9.2 million for the three months into June 30, 2024. This compares with revenue of 17.7 for the same period of the prior fiscal year, a decrease of 48%. For the nine-month period, the segment contributed revenue of $59.9 million versus $56.2 million, an increase of 6.6%. The decrease in revenue for the three-month period was due to lower utilization of our OBX rental fleet. The nine-month period increase in revenue is due to the $30 million sale of our mariner ocean bottom nodes, which occurred in the first quarter of fiscal year 2024, which was partially offset by lower utilization of our OBX rental fleet. Our adjacent market segment revenue for the third quarter of fiscal year 2024 was $16 million compared to $14.9 million for the same prior year period. Revenue for the nine-month period into June 30, 2024, is $38 million, a very modest decrease over the same period in fiscal year 2023 of less than 1%. The increase in revenue for the three-month period is due to higher demand for our water meter cable and connector products, partially offset by a decrease in demand for our contract manufacturing service. Finally, revenue from our emerging market segment for the third quarter was $640,000 compared to $109,000 for the same period in 2023. The nine-month revenue for this segment for fiscal year 2024 was $2 million compared to $400,000 for the same prior year period. The increase in revenue for both periods is due to revenue recognized from the completion of a DARPA contract we announced in 2023. Our operating expenses increased by $100,000 for the third quarter of 2024, while they decreased by $800,000, or 2.6%, for the nine-month period ended June 30, 2024. The increase in the three-month period is primarily due to higher sales and marketing costs, while the decrease in operating expense for the nine-month period is primarily due to lower personnel costs as a result of our workforce reduction in the first quarter of fiscal year 2023. Our nine-month cash investments into our rental fleet is $8.2 million, and property and plant and equipment investments are $3.6 million. For fiscal year 2024, we expect to invest a total of $12 million in equipment for our rental fleet and $5 million for our plant and equipment. Our balance sheet at the end of the third quarter reflected $42.5 million of cash and short-term investments. Our credit facility has available borrowings of $15 million. Thus, our total liquidity is $57.5 million as of June 30, 2024. Lastly, we own real estate holdings in Houston and around the world that are owned free and clear without any leverage. This concludes my discussion. I'll turn the call to Rich.