Geospace Technologies Corporation

Welcome to the Geospace Technologies 4th Quarter and Fiscal Year 2024 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelly, President and Chief Executive Officer. He is joined by Mr. Robert Kurta, the Company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following this 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 zero. It is now my pleasure to turn the floor over to Rich Kelly. Sir, you may begin.

Good morning, and welcome to Geospace Technologies Conference Call for the fourth quarter of fiscal year 2024. I am Rich Kelly, the company's president and chief executive officer, and I am joined by Robert Curta, 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. 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 and solutions. Note that today's recorded information is time sensitive and may not be accurate at the time of one listens to the replay. Yesterday, after the market closed, we released our financial results for the fourth quarter and full year fiscal year 2024, which ended September 30th, 2024. We close the year with $135.6 million in revenue. This represents the greatest revenue figure in 10 years. However, due to non-cash charges in the fourth quarter totaling $17.3 million, the year ended with a net loss of $6.5 million. These one-time charges are primarily associated with the divestiture of our Russian entity, But excluding these non-cash charges, the fiscal year adjusted net income is $10.7 million. While examining the increasing conflict in Ukraine and potential conflicts, complications within Russian sanctioned entities, management and our board of directors determined the most prudent action would be to divest of our Russian entity. This divestment resulted in a loss driven mainly by accrued foreign exchange losses which had minimal effect on the value of the net assets of the company. Additionally, our fiscal year financial reporting reflects another one-time charge related to a non-cash intangible asset impairment related to our subsidiary, Quantum Technology Sciences. Following our longstanding and unwavering commitment towards sustaining a strong balance sheet, we finished the year with zero debt and holdings of $37.1 million in cash and short-term incentives, investment, excuse me. While the financials indicate a net loss for the year due to two non-cash charges, we are pleased to have 24 months of consecutive adjusted net income, indicating our core business remains profitable. We started the fourth quarter of fiscal year 2024 with significant contributions from our oil and gas market segment, with more than $20 million in sales and rental announcements for our OBX seabed nose in August. This follows a trend for the fiscal year of multimillion dollar contracts for this product line and contributed to an overall increase in revenue from the prior fiscal year. In our adjusted market segment, we enjoyed a record-setting year for our Hydrocon line of smart water meter cables and our Aquana product line. The market continues to recognize our leading technology and resulting growth outpaces the industry. We also had our first successful international sale of our Aquana products. The Aquana product line generates further traction in smart water markets for both municipal and multifamily residential applications. We believe that our focus on smart water going forward will continue to drive growth for the organization. I now turn the call over to Robert to provide more financial detail on our fourth quarter and full year 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. In yesterday's press release for our fourth quarter ended September 30, 2024, we reported revenue at $35.4 million compared to last year's revenue of $29.3 million. The net loss for the quarter was $12.9 million or $1 per diluted share compared to last year's net income of $4.4 million or $0.33 per diluted share. For the 12 months ended September 30, 2024, we reported revenue of $135.6 million compared to revenue of $124.5 million last year. Our net loss for the 12-month period was $6.6 million or $0.50 per diluted share compared to last year's net income of $12.2 million, or $0.92 per diluted share. In the fourth quarter ended September 30, 2024, we recorded non-cash charges totaling $17.3 million. To add additional detail to Rich's prior comments on this subject, $14.5 million was from the divestiture of our Russian legal entity, while another was a $2.8 million charge from the impairment of tangible assets from our quantum technology sciences subsidiary. It's important to note that the divestiture of the Russian legal entity has virtually no effect on the company's net assets, as most of the charge came from cumulative unrealized foreign currency translation losses previously recorded within shareholders' equities. The oil and gas segment produced revenue of $17.5 million for the three months ended September 30, 2024. This compares with revenue of $17.8 million for the same period of the prior fiscal year. For the 12-month period, the segment contributed revenue of $77.5 million versus $74 million for the same prior year period. The 12-month increase in revenue is due to increased sales of ocean-bottom nodal products, such as the Mariner, and sales of OBX equipment from our rental fleet. This was offset by lower utilization of our rental fleet and lower demand for seismic sensors and marine products. Now our adjacent market segment revenue, which includes our industrial products and imaging products. Our industrial product revenue for the fourth quarter of fiscal year 2024 is was $14.6 million compared to $7.6 million for the fourth quarter of 2023, an increase of 91%. Industrial Products' 12-month revenue for fiscal year 2024 is $43 million, an increase over the same period in 2023 of 17%. Both periods' increases are the result of record high revenue from our Hydrocon water meter cables and connector product line. Imaging product revenue for the fourth quarter was $3 million, which is equal to last year's revenue for the same period. The 12-month revenue for imaging products for fiscal year 2024 is $12.6 million versus $12.2 million for the same period in 2023. Finally, revenue from our emerging market segment for the fourth quarter was $200,000 compared to $800,000 for the same period in 2023. The 12-month revenue for the segment for fiscal year 2024 was $2.2 million compared to $1.2 million for the same prior year period. Our 12-month cash investments into the rental fleet was $8.3 million, and cash investments into our property plant equipment was $3.9 million. As of September 30, 2024, we have $37 million of cash in short-term investments and $15 million of additional available liquidity from our credit facility. In addition, we own numerous real estate holdings in Houston and around the world that are owned free and clear without any leverage. This concludes my discussion. I would like to wish everyone a happy Thanksgiving and now return the call to Rich for his closing comments.