Geospace Technologies Corporation

Good morning, everyone, and welcome to the Geospace Technology 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 Kurta, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technology Investor Relations website following the call. At this time, all participants have been placed in the 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. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. we do ask that you please pick up your handset to allow for optimal sound quality. And lastly, if you should require any operator assistance today, please press a star zero. It is now my pleasure to turn the call over to today's CEO, Mr. Rich Kelly. Please go ahead, sir.

Thank you, Bill. Good morning, and welcome to Geostate 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 Carta, 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 three months ended March 31, 2026, we reported revenue of 19.7 million dollars 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 recognize 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 development 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 recognize 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's 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 companies 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 six 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 six-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 six-month period was $9.5 million compared to $16.8 million for the same period of the prior fiscal year. Currently, demand for our hydroton 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 new automated metering solutions that use our hydrocon connector. Our energy solution segment second quarter revenue totaled $9.6 million for the three 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 six-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 three 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 collectability of receivables from a rental customer. The decrease in revenue for the six-month period is attributed to lower utilization of our ocean-bottom total 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 three-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 six-month period of fiscal year 2026 was $11.4 million. This compares to the same prior year period revenue, $11.5 million. The increase in revenue for the three-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 three or 3% for the six-month period in March 31st, 2026. The increase in operating expenses for the six-month period is due to higher legal fees and increased facility costs offset by lower research and development project costs. Our six-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 Wood Forest 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.