Q3 2024 Geospace Technologies Corp Earnings Call

Operator: Please stand by. We're about to begin.

Speaker Change: Please stand by, we're about to begin.

Operator: 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 Curda, the company's Chief Financial Officer, and Mr. Rich Kelly, the company's Chief Operating Officer.

Speaker Change: 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 Curda, the company's Chief Financial Officer, and Mr. Rich Kelly, the company's Chief Operating Officer.

Operator: Today's call is being recorded and will be available on the Geospac, 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.

Speaker Change: 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.

Speaker Change: 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.

Operator: 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 Rick Wheeler. Sir, you may begin.

Speaker Change: 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 Rick Wheeler. Sir, you may begin.

Rick Wheeler: Good morning, and welcome to Geospace Technologies' 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 Curda, the company's Chief Financial Officer, and Rich Kelly, the company's Chief Operating Officer.

Rick Wheeler: Thanks, Jamie.

Rick Wheeler: Good morning and welcome to Geospace Technologies' 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 Curda, the company's Chief Financial Officer, and Rich Kelly, the company's Chief Operating Officer.

Rick Wheeler: 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 about 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.

Rick Wheeler: 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.

Rick Wheeler: I will then give some final comments before opening the line for questions.

Rick Wheeler: 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.

Rick Wheeler: 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.

Rick Wheeler: These statements are based on what we know now, but actual outcomes are affected by uncertainties beyond our control or prediction.

Rick Wheeler: 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.

Rick Wheeler: Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filing. For convenience, we will link a recording of this call to 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.

Speaker Change: 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.

Speaker Change: 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.

Rick Wheeler: 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 30th, 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 $0.47 per share. In addition, there's been no change in our longstanding and unwavering commitment to 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.

Speaker Change: 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.

Speaker Change: 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 $0.47 per share.

Speaker Change: In addition, there has been no change in our long-standing and unwavering commitment toward 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.

Rick Wheeler: Nonetheless, further gaps in our OBX rental contracts had a negative impact on third-quarter revenue from our oil and gas market sector, leading to a net loss of $2.1 million for the three months ended June 30, 2024.

Speaker Change: Nonetheless, further gaps in our OBX rental contracts had a negative impact on third-quarter revenue from our oil and gas market segment. This led to a net loss of $2.1 million for the three months ended June 30, 2024.

Rick Wheeler: 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. By 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.

Speaker Change: 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.

Speaker Change: In quite a contrast, our adjacent market segment generated yet another all-time revenue record for the third quarter, generating $16 million.

Speaker Change: This represents an increase of $1.1 million over the previous quarterly record, which was set a year ago.

Speaker Change: The ever-growing industry acceptance of our water meter cables and connectors is a strong enabler for additional revenue from these products.

Rick Wheeler: In addition, we anticipate substantial revenue contributions to this segment from our Aquana smart water valve and IoT technology products as market traction grows and an increasing sales backlog continues to gather. In combating the very familiar and often extreme volatility we experience in our oil and gas business, 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.

Speaker Change: In addition, 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.

Speaker Change: In combating the very familiar and often extreme volatility we experience in our oil and gas segment,

Speaker Change: 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.

Speaker Change: 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.

Rick Wheeler: Our Emerging Markets segment posted $640,000 in revenue in the third quarter, with the largest portion coming from the fulfillment of a DARPA contract that is now essentially complete. As a result 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 30, 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: In addition, as of June 30, 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.

Rick Wheeler: 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 1st, 2024. I have complete confidence in the skills and business acumen exhibited by Rich Kelley in his time with Geospace. As such, I look forward to an effective and smooth transition that will progressively preserve and increase shareholder value.

Rich Kelly: 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 1st, 2024.

Speaker Change: I have complete confidence in the skills and business acumen exhibited by Rich Kelley in his time with Geospace. As such, I look forward to an effective and smooth transition that will progressively preserve and increase shareholder value.

Rick Wheeler: 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.

Speaker Change: 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 Curda: 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 our third quarter ending June 30th, 2024, we reported revenue of $25.9 million compared to last year's revenue of $32.7. 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.

Speaker Change: 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.

Robert Curda: In yesterday's press release for our third quarter into June 30, 2024, we reported revenue at $25.9 million compared to last year's revenue of $32.7 million.

Robert Curda: The net loss for the quarter was $2.1 million, or $0.16 per diluted share, compared to last year's net income of $3.2 million, or $0.24 per diluted share.

Robert Curda: For the nine months ended June 30th, 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 ending June 30, 2024. This compares with revenue of $17.7 billion for the same period of the prior fiscal year, a decrease of 48 percent. 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.

Robert Curda: For the nine months ended June 30, 2024, we reported revenue of $100.2 million compared to revenue of $95.2 million last year.

Robert Curda: 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.

Robert Curda: Our oil and gas market segment produced revenue of $9.2 million for the three months into June 30, 2024.

Robert Curda: This compares with revenue of $17.7 million.

Robert Curda: for the same period of the prior fiscal year, a decrease of 48 percent.

Robert Curda: 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.

Robert Curda: 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 2020, which was partially offset by lower utilization of our OVX room. 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 ending June 30, 2024 is $38 million, a very modest decrease over the same period in fiscal year 2023 of less than 1%.

Robert Curda: 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.

Robert Curda: which was partially upset by lower utilization of our OBX rails.

Robert Curda: 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.

Robert Curda: 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%.

Robert Curda: The increase in revenue for the three-month period is due to higher demand for water meter cable and connector products, partially offset by a decrease in demand for a contract manufacturer. 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.

Robert Curda: 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 services.

Robert Curda: Finally, revenue from our emerging market segment for the third quarter was $640,000 compared to $109,000 for the same period in 2023.

Robert Curda: The nine-month revenue for this segment for fiscal year 2024 was $2 million compared to $400,000 for the same prior year period.

Robert Curda: 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, 2020. 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 2020.

Robert Curda: The increase in revenue for both periods is due to revenue recognized from the completion of a DARPA contrast we announced in 2023.

Robert Curda: 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.

Robert Curda: 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.

Robert Curda: Our nine-month cash investments into our rental fleet were $8.2 million, and Property Implant and Equipment Investments were $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 in short-term investments. Our credit facility has available borrowings of $15 million, and thus, our total liquidity is $57.5 million as of June 30, 2021. 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 over to Rich. Thanks, Robert.

Robert Curda: Our nine-month cash investments into our rental fleet is $8.2 million.

Robert Curda: 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.

Robert Curda: Our balance sheet at the end of the third quarter reflected $42.5 million of cash in short-term investments.

Robert Curda: Our credit facility has available borrowings of $15 million, thus our total liquidity is $57.5 million as of June 30, 2024.

Speaker Change: Lastly, we own real estate holdings in Houston and around the world that are owned free and clear without any leverage.

Rich Kelly: Thank you, everyone. As Robert mentioned, I am Rich Kelly, Executive Vice President and Chief Operating Officer of Geospace Technologies. Since joining Geospace, the team has been welcoming and supportive. I've enjoyed getting to know the company and the team over the past several months. As previously mentioned by management, Geospace has a strategy to diversify beyond the traditional seismic industry given the ongoing challenges in that market. While we will continue to support our customer base and bring new products to market, we will also explore exciting opportunities for growth in our adjacent and emerging markets.

Speaker Change: This concludes my discussion of Alternative Call to Rich.

Speaker Change: Thanks, Robert. Greetings, everyone. As Robert mentioned, I am Rich Kelly, Executive Vice President and Chief Operating Officer of Geospace Technologies.

Rich Kelly: Since joining Geospace, the team has been welcoming and supportive. I've enjoyed getting to know the company and the team over the past several months.

Speaker Change: As previously mentioned by management, Geospace has a strategy to diversify beyond the traditional seismic industry given the ongoing challenges in that market.

Speaker Change: While we will continue to support our customer base and bring new products to market, we will also explore exciting opportunities for growth in our adjacent and emerging markets.

Rich Kelly: As Rick and Robert mentioned, our Jason Markets posted record revenue this quarter. We look forward to expanding this success further. Our Aquana product line continues to gain acceptance in the market, and we anticipate continued growth driven by the value of the Industrial Internet of Things, or IoT, and cloud-based technology. Our subsidiary, Quantum Technology Sciences, continues to explore interesting uses for its analytics technology outside of traditional markets. Our team is focused on continuing to identify and develop opportunities to leverage our knowledge and expertise in these growth markets.

Speaker Change: As Rick and Robert mentioned,

Speaker Change: Our adjacent markets posted record revenue this quarter. We look forward to expanding this success further.

Speaker Change: Our Aquana product line continues to gain acceptance in the market, and we anticipate continued growth driven by the value of Industrial Internet of Things, or IoT, and cloud-based technologies.

Speaker Change: Our subsidiary, Quantum Technology Sciences, continues to explore interesting uses for its analytics technology,

Speaker Change: outside of traditional markets.

Speaker Change: Our team is focused on continuing to identify and develop opportunities to leverage our knowledge and expertise in these growth markets.

Rich Kelly: Lastly, I want to thank the board for having confidence in my ability to lead the company going forward. I also want to thank Rick for his guidance and support these past few months and look forward to continuing to work with both Robert and Rick as we move along the succession plan through the remainder of the calendar year.

Speaker Change: Lastly, I want to thank the board for having the confidence in my ability to lead the company going forward.

Speaker Change: I also want to thank Rick for his guidance and support these past few months and look forward to continuing to work with both Robert and Rick as we move along the succession plan through the remainder of the calendar year. Thank you.

Rich Kelly: As a final note, I'd like to draw attention to the success of our stock repurchase program authorized by the Board of Directors in May of 2024. Under this program, as of August 7, 2024, the company repurchased approximately 512,000 of its common shares on the open market. In addition, our Board of Directors has approved an extension of the program that will allow up to an additional $2 million of shares to be repurchased. With that, this concludes our prepared commentary, and I'll now turn the call back over to Jamie for any questions from the listeners. Thank you. The floor is now open for questions.

Rich Kelly: Thanks, Rich. As a final note, I'd like to draw attention to the success of our stock repurchase program authorized by the Board of Directors in May of 2024.

Rich Kelly: Under this program, as of August 7, 2024, the company has repurchased approximately 512,000 of its common shares on the open market.

Speaker Change: In addition, our Board of Directors has approved an extension of the program that will allow up to an additional $2 million of shares to be repurchased.

Speaker Change: With that, this concludes our prepared commentary, and I'll now turn the call back over to Jamie for any questions from the listeners.

Josh Goldberg: Hi, good morning. This question is for Rich.

Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that while you pose your question, you pick up your handset to provide optimal sound quality. We will pause for just a moment to assemble the question queue. We'll take our first question from Josh Goldberg with G2. Please go ahead.

Jamie: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad.

Jamie: If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that while you pose your question that you pick up your handset to provide optimal sound quality. We will pause for just a moment to assemble the question queue.

Jamie: Thank you for watching, and I'll see you in the next video, and I'll see you in the next video, and I'll see you in the next video.

Jamie: Thank you for watching, and I'll see you in the next video.

Jamie: We'll take our first question from Josh Goldberg with G2. Please go ahead.

Josh Goldberg: First of all, congratulations on your promotion and I'm certainly excited to see where you're taking this great company. I guess for me, I just want to hear a little more about what you see in the adjacent market growth. I think, you know, in my own opinion, it probably shouldn't be called adjacent markets anymore because it's going to be as meaningful maybe as your oil and gas markets, and what are you thinking about, or how are you planning on driving double-digit or more growth at the adjacent markets over the next two years?

Josh Goldberg: Hi, good morning. This question is for Rich. First of all, congratulations on your promotion and certainly excited to see where you're taking this great company.

Josh Goldberg: I guess for me, I just want to hear a little more about what you see on the adjacent market growth.

Rich Kelly: You know, I think, you know, in my own opinion, it probably shouldn't be called adjacent markets anymore because it's

Speaker Change: It's going to be as meaningful maybe as your oil and gas markets and what are you thinking about or how are you planning on driving double digit or more growth at the adjacent markets over the next few years?

Rich Kelly: Thank you, Josh. I appreciate the question.

Speaker Change: Basin.

Rich Kelly: Clearly, as we look at what we are, the space we're playing in today with Jason Marcus, especially around smart water and water metering, we have seen significant growth in that space year on year over the last several years. And so we have a strategy to continue to diversify in that, growing our existing product lines through consideration of possibly adding to that. That's always up for discussion and part of our strategy going forward.

Speaker Change: Thank you, Josh. I appreciate the question.

Speaker Change: Clearly, as we look at the space we're playing in today with adjacent markets, especially around smart water and water metering, we have seen significant growth in that space year on year over the last several years.

Speaker Change: And so we have a strategy to continue to diversify in that, growing our existing product lines through consideration of possibly adding to that. That's always up for discussion and part of our strategy going forward.

Josh Goldberg: You mentioned in the press release that Aquana has a backlog for the first time. Can you tell me a little bit about what that product is and why you are able to have a backlog on that product?

Speaker Change: You mentioned on the press release that Aquana has a backlog for the first time. Can you tell me a little bit about what that product is and why are you able to have a backlog of that product?

Rich Kelly: So Aquana is our smart valve technology that allows municipalities to control the valve at the point of view. That is gaining traction with municipalities as they look to increase the smartness and intelligence of monitoring their product, which is water. And that is a newer technology to that industry, and it's taken us a while to educate and grow that technology in that space, which is not really known for technology, but it's gained some significant traction over the last couple of years, and it's really, plus the product has matured now, so we're really starting to see an uptake and acceptance of that technology.

Speaker Change: So Aquana is our smart valve technology that allows municipalities to control the valve at the point of use.

Speaker Change: that is gaining traction with municipalities as they look to increase the smartness, the intelligence of monitoring their product, which is water.

Speaker Change: and that is a newer technology to that industry. It's taken us a while to educate and grow that technology in that space, which is not really known for technology.

Speaker Change: But it's gained some significant traction over the last couple of years, and it's really, plus the product has matured now, so we're really starting to see an uptake and acceptance of that technology.

Rich Kelly: The other place that we're starting to see growth, so that's municipalities, is that we're also starting to see interest in multi-family use. So we're seeing a lot of growth in that space, as you know, and smart water metering is important to that industry.

Speaker Change: The other place that we're starting to see growth, so that's municipalities, we're also starting to see interest in multi-family usage.

Speaker Change: So, we're seeing a lot of growth in that space, as you know, and smart water metering is important to that industry.

Josh Goldberg: Do you have a sense that Aquanaut could be a $5 million-a-year business a year from now?

Speaker Change: Do you have a sense that Aquana could be a $5 million a year business in a year from now?

Rich Kelly: Well, that's certainly our open anticipation. Okay.

Speaker Change: Well, that's certainly our hope and anticipation.

Josh Goldberg: And regarding your business with I-Tron, have you disclosed how much of your revenue is coming from that relationship, and what the opportunity is with them?

Speaker Change: For sure.

Speaker Change: And regarding your business with ITRON, have you disclosed how much of your revenue is coming from that relationship and what could the opportunity be with them?

Rich Kelly: No, we don't share that information specific to particular relationships like that.

Speaker Change: No, we don't share that information specific to particular relationships like that.

Josh Goldberg: Okay, but it's fair to say that with a corner coming on stronger and some of the other businesses of Jason Marcus could be a double-digit grower than it is now.

Jason Mark: Okay, but it's fair to say that with Aquana coming on stronger and some of the other businesses, Jason Marcus could be a double-digit grower going forward.

Rich Kelly: We certainly anticipate that. I mean, if you look at what the industry itself is advertising, they are advertising 10 to 15% growth over the next five to six years. We are seeing that trend in our water meter business, so we fully anticipate seeing something similar to that, but there's no guarantees on that. True. No, because this year you guys are down 1%.

Speaker Change: We certainly anticipate that. I mean, if you look at what the industry itself is advertising, they are advertising 10 to 15 percent growth over the next five to six years.

Speaker Change: And, you know, we're seeing that trend in our water meter business, so we fully anticipate seeing similar to that, but there's no guarantees, obviously.

Josh Goldberg: Sure, but no, because this year you guys are down 1% through the first 9 months, and I know somewhere that was inventory issues. So you should probably not have the same issues next year.

Speaker Change: True. No, because this year you guys are down 1% through the first nine months and I know some of that was inventory issues.

Speaker Change: Thank you for watching!

Speaker Change: So you should probably not have the same issues next year.

Rich Kelly: Well, and to just add, there is some seasonality to all of this. So there are always ups and downs. But if you go back and look at the history, and Josh, I know you've already done that, but when you look at the history of our adjacent markets, and in particular, that industrial component, as it's been reported, it has just done nothing but grow. And we certainly, as Rich just said, we certainly anticipate that to be continued in the future.

Speaker Change: Well, and two, just to add, there is some seasonality to all of this. There are always ups and downs, but...

Josh Goldberg: If you go back and look at the history, and Josh, I know you've already done that, but when you look at the history of our adjacent markets, and in particular that industrial component, as it's been reported, it has just done nothing but grow. And we certainly, as Rich just said, we certainly anticipate that to be continued in the future.

Josh Goldberg: Do you think that, you know, the adjacent market business pretty good operating margins? You know, you guys are doing about 4.6 million on the 16. So, you know, close to 25% median margins. Does that stay at that level, or does a quantum make you guys have lower margins in total?

Speaker Change: Do you think that, you know, the adjacent market business...

Speaker Change: Pretty good operating margins, you know, you guys are doing about 4.6 million on the 16. So, you know, close to 25% median margins.

Speaker Change: Does that stay at that level or does the quantum make you guys have lower margins going forward?

Rich Kelly: Well, we're always going to strive for higher margins. We really beat on our costs of production and our manufacturing operations. Rich has an extreme acumen for helping with that and is going to make some inroads very prolifically in that regard. But as a company, we need to make margins, but it has to be of value to the customer. So that's one of the reasons that we're pursuing technological avenues within that domain because that's where the value really exists for the customer base. And higher-tech products can demand higher margins.

Speaker Change: Well, we're always going to strive for higher margins. You know, we really beat up on our costs of production and our manufacturing operations. You know, Rich has an extreme acumen in helping with that and is going to make some inroads, you know, very prolifically in that regard.

Speaker Change: But, you know, as a company, we need to make margins, but, you know, it has to be of value to the customer. So that's one of the reasons that we're pursuing technology avenues within that domain.

Speaker Change: because that's where the value really exists for the customer base and, you know, higher technology products can demand higher margins.

Josh Goldberg: Great. Just going to the oil and gas section. Obviously, it is a lumpy business. Sometimes you guys have had a stronger year, other times it's been somewhat weaker. Could you give us any sort of visibility or pipeline on what you think could happen over the next sort of 9 or 12 months where you can possibly grow your oil and gas business? And I have one more question.

Speaker Change: Okay, great. Just going to the oil and gas section, I mean obviously it is a lumpy business.

Speaker Change: Sometimes you guys have had a stronger year, other times it's been somewhat weaker.

Speaker Change: Could you give us any sort of visibility or pipeline on what you think could happen over the next sort of 9 or 12 months where you can possibly grow your oil and gas business? And I have one more question.

Rich Kelly: You know, the oil and gas business is exactly as you described it; it's very lumpy, it's very volatile, it is hard to navigate around that oftentimes, hence, you know, our conservative approach to managing cash and our balance sheet, etc. It's very difficult to predict. I mean, it's something I tell you today, tomorrow, when there's news from the Middle East, that will be entirely false; it will not represent any real truth at that point in time.

Speaker Change: You know, the oil and gas business is exactly as you described. It's very lumpy. It's very volatile. It is hard to navigate around that oftentimes. Hence, you know, our conservative approach to managing cash and our balance sheet, etc.

Speaker Change: It's very difficult to predict. Something I tell you today, tomorrow, when there's news from the Middle East, that will be entirely false. It will not represent any real truth at that point in time.

Rich Kelly: What we do see is that there is certainly more recognition worldwide at this point that economies need energy, and the fact is that oil and gas will remain an energy provider of consequence for many, many years to come, if not decades. So that being said, the part of that industry that we are a part of, which is on the very front end of it with respect to instrumentation and sensing and that sort of thing, has its ups and downs and is largely volatile because it can be cut off and then turned on in rapid succession.

Speaker Change: What we do see is there's certainly more recognition, worldwide at this point, that economies need energy. And the fact is that oil and gas will remain an energy provider of consequence.

Speaker Change: for many, many years to come, if not decades.

Speaker Change: So, that being said, you know, the part of that industry that we are a part of, which is on the very front end of it.

Speaker Change: with respect to instrumentation and sensing and that sort of thing has its ups and downs and is largely volatile because it can be cut off and then turned on in rapid succession.

Rich Kelly: So, it's really difficult for me to give you some meaningful prediction as to how that will go, but we're certainly going to try to take advantage of every one of those opportunities that present themselves by, as Rich said, continuing to support those customers with good products as time goes on.

Speaker Change: So, it's really difficult for me to give you some meaningful prediction as to how that will go, but we're certainly going to try to take advantage of every one of those opportunities that present themselves by having, as Rich said, continuing to support those customers with good products as time goes on.

Josh Goldberg: Okay, last one for me on the balance sheet. Clearly, you are bullish on your future with the Stockbuy Act, and I noticed that your inventories also went up quite a bit. What was your current inventory? Is there a focus on being a head of the curve with that, or what were the reasons why you're currently mentors when I'm some?

Speaker Change: Okay, last one for me on the balance sheet. Clearly you are bullish on your future with the Stockbuy Act.

Speaker Change: and I noticed that your inventories also went up quite a bit.

Speaker Change: But was there, at least your current inventories, is there a focus on being ahead of the curve with that or what was the reason why your current inventories went up so much?

Robert Curda: So there's kind of two aspects to that question, with the main one being we're identifying long-lead components that we can strategically buy to ensure we have supply when needs come up for our guests, components, and the oil and gas industry. We've also recently sold some items that have been in inventory and built out of components that have been in inventory for a very long time, for a very long time, some of our long-term inventory. So as a result of that generating usage and sales, it's changed the aspect of some of those components as we view them for the long term.

Speaker Change: So there's kind of two aspects to that question, with the main one being we're identifying long-lead components that we can strategically buy to ensure we have supply when needs come up for our gas.

Speaker Change: components, oil and gas instruments.

Speaker Change: We also have recently sold some items that have been in inventory and built out of components that have been in inventory for a very long time.

Speaker Change: for a very long time, some of our long-term inventory. So as a result of that generating usage and sales, it's changed the aspect of some of those components as we view them for a long-term versus current estimate.

Robert Curda: Adding to what Robert said, Josh, to the extent that we've increased some of these inventories on the raw components that Robert mentioned, you've got to recall that there have been great upheavals in the supply chain worldwide with respect to components, even things as simple as plastics in some cases. So, that definitely throws a curveball in terms of managing the business and trying to ensure that we can get our products out, but we do try to diligently examine where, you know, some of those components that we assure ourselves will get used are put on the shelf so that we can, you know, make production work.

Robert Curda: Adding to what Robert said, Josh, to the extent that we've increased some of these inventories on the raw components that Robert mentioned, you've got to recall that there have been

Speaker Change: Great upheavals in the supply chain worldwide with respect to components, even things as simple as plastics in some cases.

Speaker Change: So, that definitely throws a curve in terms of managing the business and trying to ensure that we can get our products out, but we do try to diligently examine where some of those components that we assure ourselves will get used are put on the shelf so that we can.

Speaker Change: you know, make production work.

Josh Goldberg: Okay, gotcha. Well, I just wanted to thank Rick for bringing them. I want to thank Walter for all his hard work over the last few years. I know from long-term experience how much effort and time and how much value he's created for the company. And I just want to wish him much success in the future.

Speaker Change: Okay, gotcha.

Speaker Change: Well, I just wanted to thank Rick for bringing them.

Speaker Change: I want to thank Walter for all his hard work over the last few years. I know from long-term experience how much effort and time and how much value he's created for the company. And I just want to wish him much success in the future.

Rick Wheeler: I thank you very much and will be in touch.

Walter: I thank you very much.

Speaker Change: We'll be in touch.

Operator: Once again, if you do have a question, you may press star one on your telephone keypad at this time. We'll hear next from Bill Dezellem with Titan Capital. Please go ahead. Thanks.

Speaker Change: Once again, if you do have a question, you may press star 1 on your telephone keypad at this time.

Speaker Change: We'll hear next from Bill Dezellem with Titan Capital. Please go ahead.

William Dezellem: Thank you, and congratulations on your retirement, Rick. We'll miss having you on the calls.

Bill Delsom: Thank you and congratulations on your retirement, Rick. We'll miss having you on the calls.

William Dezellem: Thank you very much, Bill. I'm going to assume that others will ask a little bit more about the oil and gas market, and the prior questioner asked about Aquana. So, I'm going to jump into, you know, what's currently the smallest business, the emerging markets, because it seems like you gave us some insights into what's going on there. So, let's start, if we could, with the DARPA contract, and would you please talk about the spillover benefits that you're seeing from that that were referenced in the press release.

Rick Wheeler: Thank you very much, Bill.

Speaker Change: So, I'm going to assume that others will ask a little bit more about the oil and gas market and the prior questioner asked about Aquana, so I'm going to jump into the, you know, what's currently the smallest business, the emerging markets.

Speaker Change: It seems like you gave us some insights into what's going on there. So, let's start, if we could, with the DARPA contract. And would you please talk about the spillover benefits that you're seeing from that, that were referenced in the press release?

Rich Kelly: Specifically, the DARPA contract went very well for us. We got great feedback from DARPA, and there are a number of opportunities that they've identified within the military community where they could potentially apply that technology and that application, and so even since our report came out on that, we've had a couple of really good meetings with other parties within the government. So we do see some really interesting opportunities, nothing that's been formalized yet, but definitely some interesting conversations, and some real interest on their side in including our technology going forward.

Speaker Change: Specific to the DARPA contract, that went very well for us. We got great feedback from DARPA.

Speaker Change: and there are a number of opportunities that they've identified within the military community where they could potentially apply that technology and that application.

Speaker Change: And so, even since our report out on that, we've had a couple of really good meetings with other parties within the organization.

Speaker Change: the government. So we do see

Speaker Change: Some really interesting opportunities. Nothing that's been formalized yet, but definitely some interesting conversations and some real interest on their side in including our technology going forward.

William Dezellem: I'm not familiar with how those processes work. Talk to us about the timeline. If in fact something were to develop, how quickly could that go? I realize I won't ask how long it could go because that could be decades, but how quickly could it go? On the other end, if things were to move along at a favorable pace.

Speaker Change: to

Rich Kelly: Yeah, so as you can expect, I mean, dealing especially with anything government related, we're at the mercy of appropriations, you know, and approvals. Once the money is allocated, and the project is kicked off. These projects are not short-lived. They take time to develop. They can be, you know, 12 to 24-month-type projects in a lot of cases, and even longer, but they're not, they're just people. They're not the typical commercial where you get an order, and six months later, you deliver.

William Dezellem: Okay, so are you saying that once the money has been allocated, it can take an additional 12 to 24 months before you begin delivery, or once the money has been allocated, the delivery process can take up to a couple of years?

Speaker Change: Okay. So are you, saying that once the money has been allocated it can take an additional 12 to 24 months before you begin delivery or once the money has been allocated the delivery process, Ken can be up to a couple of years.

Rich Kelly: I really can't get into specifics because every project is unique when dealing with these particular parties. But what I really want to drive home is there's not going to be money allocated three months later; we're going to recognize that as revenue as an organization. It'll be a partnership that will take time. Government contracts are always phased, and so there's a lot of complexity there. So what's really more interesting to us is that we're starting to see the technology actually be mentioned by name within these organizations, and there is a real interest in that. And so that is really what's more exciting to us.

Speaker Change: And I really can't get into specifics because every project is unique when dealing with these particular parties but.

Speaker Change: What I really want to drive home is theres not going to be monies allocated three months later, we're going to recognize that as revenue as an organization it'll be a partnership that will take time.

Speaker Change: Government contracts are always phased and so theres a lot of complexity there so.

Speaker Change: What's really more interesting to us is that we're starting to see the technology actually be mentioned by name within these organizations and a real interest in that and so that is really what's more exciting to us at this point.

William Dezellem: Great, thank you. And let me Transcription by Transcription Outsourcing, LLC. We understand that they have done extensions in the past, but I guess I'm a little bit surprised by the, at least the CBO report would indicate that in the spring, there's going to be a more significant decision coming. Walk us through that extension, why they would do that in advance of a larger decision, and is this potentially a very positive signal about how the equipment is performing versus the competing products?

Speaker Change: Great. Thank you and.

Speaker Change: Let me.

Speaker Change: Kind of shift if I may too.

Speaker Change: The backlog.

Speaker Change: <unk> referenced that that's due to an extension of the border border patrol contract, which.

Speaker Change: We understand that they have gotten extensions in the past, but I guess.

Speaker Change: I am a little bit surprised with the.

Speaker Change: At least the <unk>.

Speaker Change: CBO report.

Speaker Change: Would.

Speaker Change: Indicate that in the spring there is going to be a a more significant decision company coming.

Speaker Change: Walk us through that extension why they would do that in advance of a larger decision and is this potentially a.

Speaker Change: Very positive signal to housing.

Speaker Change: Equipment is performing versus the competing products.

Rich Kelly: We can't speak too much of that because that's still an ongoing project, and quite honestly, we don't get a lot of feedback from Border Patrol. We do know that the testing is still ongoing. They're doing the acceptance testing.

Speaker Change: So we can't speak too much to that because that's still an ongoing project and quite honestly, we don't we don't get a lot of feedback from border patrol we.

Speaker Change: We do know that the testing is still ongoing theyre doing the acceptance testing.

Rich Kelly: That project is due to expire in April of 2025, thus the early, Q1, Q2 timeline for the extension. They will make a decision. They are obligated to make a decision next year on how to move forward, and so we expect to hear back in calendar year Q2 next year.

Speaker Change: That project is due to expire in April of 2025, thus the early Q1.

Speaker Change: Q1, Q2 timeline for the extension.

Speaker Change: The they will make a decision they are obligated to make a decision next year on how to move forward.

Speaker Change: And so we will here, we expect to hear back cute calendar year Q2 next year.

William Dezellem: And actually, allow me to have a little fun with that. Originally, that decision was supposed to be in September. So, next month. So when you say that they're obligated to make a decision, is that obligated, kind of as we might think to pay the IRS? Or is this obligated, like I might, I might consider going to a friend's for dinner next week?

Speaker Change: And actually allow me to have a little fun with that.

Speaker Change: Originally that decision we're supposed to be in September.

Speaker Change: So next month.

Speaker Change: So when you say that they are obligated to make a decision.

Speaker Change: Is that obligated.

Speaker Change: As we might think to pay the IRS, whereas this obligated.

Speaker Change: Like I might I might consider going to your friends for dinner next week.

Rich Kelly: Well, I mean, I'm sure all of you are familiar with the way our government's worked the last few years, and we would hope that at some point they can actually pass a budget and allocate money appropriately, but we do anticipate being in an election year. There's a lot of frugality within our government agencies, most likely a continuing resolution, and so these budgets will probably not firm up until next year. So our anticipation is that after that's happened, then these monies will be allocated, and projects will move forward.

Speaker Change: Well I mean I'm sure you all of you are familiar with the way our government's worked in the last few years and we would hope that at some point they actually can pass a budget in and allocate money appropriately, but we do anticipate being an election year.

Speaker Change: Keenness within our government agencies.

Speaker Change: Most likely a continuing resolution and so these budgets will probably not firm up until next year. So our anticipation is after thats happened then these monies will be allocated and projects will move forward.

William Dezellem: Okay, that is helpful. And then would you then take this quantum discussion to the energy industry and discuss the comments that you referenced in the release about the energy industry, the application of quantum, and the timing that this could convert to revenue?

Speaker Change: Okay that is helpful and.

Speaker Change: And then would you then take.

Speaker Change: Take this quantum discussion towards the energy industry.

Speaker Change: And discuss the the comments that you referenced in the release about the energy industry the application of quantum edge.

Speaker Change: And the timing.

Speaker Change: It could.

Speaker Change: Could convert to revenue.

Speaker Change: Sure. So our quanta has quantified sorry.

Rich Kelly: Sure, so Aquana has- My apologies, Quantum has conducted a number of research projects over the past couple of years in the energy industry, particularly with carbon capture and sequestration, with some success. [inaudible] But, as we know, that industry is still trying to find itself. And while we've had success, we don't really anticipate much opportunity in the short term, I would say. There are some other applications within the energy industry, which are early days, that take advantage of that technology in new and interesting ways, and we do see interest in that. So we anticipate the possibility of that developing into a commercial, releasable, and sellable product within the coming years.

Speaker Change: My apologies quantum has conducted a number of I.

William Dezellem: Great, thank you. And then one additional question coming back to Aquana, if I may. That 900,000 backlog, what were the circumstances that led to that developing?

Speaker Change: I would say research projects over the past couple of years in the energy industry, particularly with carbon capture and sequestration with some success.

Speaker Change: But as we know that industry is still trying to find itself.

Speaker Change: And while we've had six success, we don't really anticipate much opportunity within the next.

Speaker Change: Short term I would say.

Speaker Change: There are other there are some other applications within the energy industry, which are early days.

Speaker Change: That take advantage of that technology in new and interesting ways and.

Speaker Change: And we do see interest in that so we anticipate the possibility of that developing into a commercial release of bowl and Sellable product.

Within the coming.

Speaker Change: Years, I would say.

Speaker Change: Great. Thank you and.

And then one additional question coming back to our call.

Speaker Change: And if I may that nine.

Speaker Change: 900000 of backlog, but what were the circumstances that led to that developing.

Rich Kelly: Sales, really, I mean, fundamentally, as traction has been gained on the Iguana product, we've seen that sales pipeline start to begin filling. And to that extent, we have these opportunities to deliver these valves. We announced the Jordan order some time ago. And so there's certainly fulfillment of that that's taking place.

Speaker Change: Sales really are I mean fundamentally.

Speaker Change: As traction has been gained on the quantum product.

Speaker Change: We've seen that sales pipeline.

Speaker Change: Start to begin filling and to that extent.

Speaker Change: We have these opportunities to deliver these valves, we announced the Jordan order.

Speaker Change: Some time ago, and so theres certainly fulfillment of that that's taking place as well.

William Dezellem: I'd also like to add to that we've been priming that hump for quite a while, supplying customers with valves to test and use to see if they like its performance, if it meets their needs. So I think what we're seeing now is that priming is resulting in orders coming our way. And as a result, we now have back, Yeah, as I mentioned, I mean, that's new technology to that industry.

Speaker Change: I'd also like to add to that that we've been priming the pump for quite a while supplying customers.

With the valves to test and in use.

Speaker Change: Used to see if they like its performance if it meets their needs. So so I think what we're seeing now is that priming is resulting in.

Speaker Change: Orders coming our way and as a result, we now have backlog.

William Dezellem: And it's taken them a while to really understand the benefit of that. As Robert said, you know, we have provided samples for them to test. And that, as he said, that pipeline is very, it's got a very, pretty long pole on it. So we are just now starting to see the fruits of that labor from geospace for the last several years in that market. We anticipate that revenue to grow going forward. As that pipeline continues to evolve and grow, we fully anticipate additional revenues from it.

Speaker Change: As I mentioned I mean, that's a new technology to that to that industry and it's taken them a while to really understand the benefit of that as Robert said, we had provided samples to them to test and that he said that pipeline is very it's got a very pretty long pole on it.

Josh Goldberg: William Touch. Thank you.

Speaker Change: So we are just now starting to see the fruits of that labor from geospatial for the last several years in that market.

Speaker Change: And we anticipate that to grow going forward is that is that pipe continues to to evolve and grow we fully anticipate additional revenues from it.

Rich Kelly: And so is the 900,000 a single, single customer order? Is it multiple orders? And where's the quanta at in terms of its ability to manufacture? It's

Speaker Change: And so is the 900000, a single single customer order is it multiple orders and is whereas the quanta at in terms of its ability to manufacture.

Rich Kelly: It's certainly multiple orders across multiple applications, so not just municipalities but also the multifamily application that we discussed. So we're seeing uptake of that technology and that product across all of the areas we're interested in. Yeah. Yeah, I mean, we fully expect that to continue. And on the manufacturing question, we're there. Oh, yeah. Yeah, so that product is now released in some of its variants, and we are shipping, essentially, from inventory.

Speaker Change: It's certainly multiple orders across multiple applications. So not just municipalities, but also the multifamily application that we discussed so.

Speaker Change: So we are seeing uptake of that technology in that product across all of the areas. We're interested in.

Speaker Change: And.

Speaker Change: Yeah, I mean, we fully expect that to continue and on the manufacturing question were there Oh, yeah, yeah. So.

Speaker Change: That product is now released and some of its variance and we are shipping essentially from inventory.

William Dezellem: Great. Okay, so the backlog is not due to a manufacturing bottleneck. It's just a timing, shipment timing phenomenon.

Great. Okay. So the backlog is not due to a.

Speaker Change: Yes.

Speaker Change: Our manufacturing bottleneck.

Speaker Change: The timing of the shipment timing phenomenon.

Rich Kelly: Exactly. Yeah, the kind of normal lead time for those orders coming in. And some of those orders are fairly new.

Speaker Change: Exactly yeah.

Speaker Change: The normal lead time on those orders coming in and some of those orders are fairly new.

William Dezellem: Great, well, congratulations on that, and I'll turn the floor over to someone else.

William Dezellem: Great, welcome.

Speaker Change: Great well, congratulations on that and I'll turn the floor over to someone else.

Bill Delsom: Thank you Bill.

Operator: We'll go now to Scott Bundy with Boards and Cabins.

Bill Delsom: We'll go now to Scott Bundy with boys and cabinet.

Scott Bundy: Good morning, guys. Hi Scott. Good morning, Rick. Rich, welcome.

Scott Bundy: Good morning, guys.

Speaker Change: Hi, Scott.

Scott Bundy: Good morning, Rick Rich welcome.

Scott Bundy: So I'm just going to follow up on Aquana for a second. If I were a distributor and I gave you an order for five million of the various Aquana products, could you...

Speaker Change: I'm just going to follow up on quanta for a second.

Speaker Change: If if.

Speaker Change: If I were a distributor and.

Speaker Change: And I gave you an order for $5 million.

Speaker Change: A quantum of products could you deliver on that.

Rich Kelly: If I had the proper timeline, absolutely. Would I deliver it tomorrow? No.

Speaker Change: If I had the proper timeline absolutely.

Scott Bundy: I mean, we still have the supply chain, and we still have the ramp-up in manufacturing. But we have the process now; we have the supply chain now. It's just a matter of the lead time, the componentry, and the lead time through manufacturing. But being able to come up to scale, coming up to scale for us should not be an issue given the facilities that we have, the team that we have, and the capabilities that we have.

Speaker Change: But I deliver it tomorrow no.

Speaker Change: I mean, we still have supply chain I mean, we're still have ramp up in manufacturing.

Speaker Change: But we have the process now we have the supply chain now it's just a matter of the lead times of Componentry and the lead times of your manufacturing.

Speaker Change: But being able to come up to scale coming up to scale for us should not be an issue given the facilities that we have the team that we have the capabilities that we have.

Rich Kelly: So, Richard. Timeline is an interesting word. So could you deliver within a six-month period of time if, in fact, that happens?

Speaker Change: So so rich.

Speaker Change: Timeline is an interesting word so could you deliver within a six month period of time, if in fact that happened.

Scott Bundy: Give me an interesting what-if and put me in the spotlight. I don't really know how I could answer that today, but I would say that we would give it a good go.

Speaker Change: Can you give me an interesting water what effort and put me in the spotlight.

Speaker Change: I don't really know I could answer that today.

But I would say that we would give it a good go.

Speaker Change: Okay.

Robert Curda: Robert, just a quick question. Is the first buyback complete, the first $5 million complete?

Speaker Change: Robert just a quick question as the first buyback complete the first $5 million complete.

Scott Bundy: Yeah, as of today, yes, or very close to it. Complete as of today.

Speaker Change: Yes.

Speaker Change: Yes, or very close to compete.

Robert Curda: Complete as of today.

Scott Bundy: Okay, great. Thank you. So, Rick, just a little background here.

Speaker Change: Okay, great. Thank you and.

Speaker Change: So Rick just a little background here.

Rick Wheeler: Where do you see the seismic market? Relative to, you know, your years in the industry? I mean, you guys are spending 12 million bucks on new equipment. That certainly implies that utilization of your existing equipment is going to go up. Am I wrong to think that?

Rick: Where do you see the seismic market.

Speaker Change: Relative to.

Rick: Your years in the industry.

Speaker Change: I mean, you guys are spending 12 million bucks on new equipment that certainly implies utilization of your existing equipment is going to go up.

Speaker Change: <unk> to think that.

Scott Bundy: Well, not really. We've come out with new designs that, you know, incorporate the latest technologies out there. And in fact, that large sale that we made in Q1 was a direct result of having technology that didn't exist in any other quarter. So, you know, the thing is, though, it's a market that, as you're well aware, has significant ups and downs. Certainly, and exactly as Rich said earlier, we intend to service that market, but we will service that market, you know, in a very cautious way to make sure that we don't overextend ourselves. The market itself lends itself to that sort of approach.

Speaker Change: Well not really I mean, we've come out with new designs that.

Speaker Change: Incorporate the latest technologies out there and in fact that was the large sale that we made in Q1 was a direct result of having technology that didn't exist in any other quarters.

Speaker Change: No.

Speaker Change: The thing is though.

Speaker Change: It's a market that as you're well aware.

Speaker Change: Just it has significant ups and downs.

Rich Kelly: Certainly in exactly as rich said earlier, we intend to service that market, but we will service that market.

Rich Kelly: Very cautious way to make sure that we don't overextend ourselves the market itself lends itself to.

Rich Kelly: That sort of approach.

Scott Bundy: We believe our manufacturing capabilities are able to keep up with the demand as it manifests, but, you know, the days when you kept, you know, thousands of these in stock on the shelf ready to go are not the, that's not the, situation that we live in these days, so it's more of an on-demand situation, but we're prepared to fulfill that demand as it comes up. For more information, visit www. FEMA.gov

Rich Kelly: We believe our manufacturing capabilities are able to keep up with the demand.

Speaker Change: Hasnt manifest but.

Speaker Change: Days like it was with <unk>, where you keep.

Speaker Change: Thousands of those in stock on the shelf ready to go is not.

Speaker Change: That's not the.

Speaker Change: The situation that we live in these days so it's more of a on demand.

Speaker Change: Situations, but we're prepared to fulfill that demand as it comes up.

Rick Wheeler: So, is bidding activity stronger now than it was, let's say, you know, 16, 18 months ago? Can you just give us an idea of what sort of activity is going on in that space?

Speaker Change: So is bidding activity.

Speaker Change: Stronger now than it was let's say.

Speaker Change: 16, 18 months ago can you just give us an idea of what sort of activity is going on in that space.

Scott Bundy: I think compared to 16 to 18 months ago, it probably is. Now, last year was a significant year with respect to activity, particularly in the ocean bottom node market. We've seen a lull in that, as we've said, in recent quarters, and that extended itself into this quarter. But, compared to a year and a half or two years ago, I think it's an increased level of activity. But I think even our customers, the contractors, are very cautious about things and are very selective about how they go about accepting these bids.

Speaker Change: I think compared to 16 to 18 months ago. It probably isn't that last year was a significant year with respect to activity, particularly in the ocean bottom node market.

Speaker Change #100: We've seen a lull in that as we've said in the recent quarters and that extended itself into this quarter.

Speaker Change #100: So.

Speaker Change #100: Compared to a year and a half or two years ago I think it's it's an increased level of activity.

Speaker Change #100: But I think even our even our customers are contractors are very cautious about things and being very selective about how they go about accepting these bids.

Rick Wheeler: Rick, is that, you think, a direct result of the consolidation in the industry?

Rick: Rick is that you think a direct result of the consolidation in the industry.

Scott Bundy: I think that does have a bearing on it. The consolidation in the industry does change the discussions in terms of how the clients, the oil companies, and the library houses go about trying to service their own customers in need. So it does have a bearing on it, but I don't think it's a paradigm shift or anything like that. But it is, there's always some turmoil when you have consolidation with an NNN.

Rick: I think that does have a bearing on it the consolidation in the industry does change.

Speaker Change #101: The discussions in terms of how the clients the oil companies and the and the library houses go about trying to service there.

Speaker Change #101: Their own customers and needs. So it does have a bearing on it but I don't think it's.

Speaker Change #101: A paradigm shift or anything like that but it is theres always some turmoil when you have consolidation within an industry.

Rick Wheeler: And along the lines of PRM, are there still discussions out there? Are they more active? Do you see it as making any final investment decisions within the next three to nine months?

Speaker Change #102: And along the lines of PRN, there's still discussions out there are they more active do you sense any final investment decisions within the next three to nine months.

Speaker Change #102: But the three to nine months no I don't the discussions absolutely those are continuing and in fact extending themselves in many respects. So that is a market that still remains viable.

Scott Bundy: But the three to nine months? No, I don't. The discussions? Absolutely.

Rick Wheeler: These are continuing and, in fact, expanding in many respects. So that is a market that still remains viable, but it is one, as you well know, that is not a steady, ongoing business in terms of the types of contracts that are made available. They are very sporadic, with long spans of time in between. But those discussions are very active, so we don't expect anything to come across that quickly, but in the next several years, we do.

Speaker Change #102: But it is as one as you well know that is not a steady ongoing.

Business in terms of the types of contracts that are made available very sporadic and long spans of time in between but those discussions are very active so.

Speaker Change #102: We don't expect anything to come across that quickly.

Speaker Change #102: But in the next in the next several years we do.

Scott Bundy: And would you anticipate another pilot program similar to the one that was done 18 months or two years ago as a way of, you know, checking out the product?

And do you would you anticipate another pilot program similar to the one that was done 18 months or two years ago.

Speaker Change #102: Checking up a product.

Rick Wheeler: That's very likely, even if it's one that we don't announce or anything of that nature, but yes.

Speaker Change #102: That's very likely even if it's one that we are.

Speaker Change #103: Don't announce or anything of that nature, but yes.

Scott Bundy: I think we still see an interest in PRM for sure. So, you know, the oil companies are still interested in what value that could add over time for their reservoirs.

Speaker Change #103: Great Alright.

Speaker Change #104: I think we I think we still see an interest in PRN for sure.

Speaker Change #103: So.

Speaker Change #105: Oil companies are still interested and what value that could add over time for their reservoirs.

Scott Bundy: Okay, terrific. Thank you. I'm just going to one last question in the release when you guys say, I don't know if I'm going to quote it correctly here, but significant revenue with Aquana or substantial contribution from Aquana. Substantial is different in everybody's mind. What's it in your mind?

Speaker Change #106: Okay terrific. Thank you I am just kind of one last question.

Speaker Change #107: In the release when you.

Speaker Change #108: Guys say.

Could it correctly here, but significant revenue with quanta, our substantial contribution from our quanta.

Speaker Change #109: Substantially different in everybody's mind, what's it in your mind.

Thank you.

Rick Wheeler: Well, I think what we're seeing is that it's going to be noteworthy revenue to where you see it as a line item on our P&L. And to me, that's significant, to the extent that it's a notable contribution, not unlike our water meter cables and connectors as it contributes to that particular segment under the industrial mark. Now, it was mentioned earlier that maybe that's not the right name anymore. We're going to consider how best to sort of organize our filings and our, you know, our reporting of this data and the revenue, that might lend itself a little better to understanding where Aquana fits into all that. But what we mean is something notable that's going to create value and gross profit and net income.

Speaker Change #110: Well I think what we're seeing is that it's going to be noteworthy revenue to where you see it as a line item on our P&L.

Speaker Change #111: And to me that's significant.

Speaker Change #112: To the extent that it is a notable contribution.

Speaker Change #112: Not unlike our water meter cables and connectors as it contributes.

Speaker Change #112: To that particular segment under the industrial Mark now it was mentioned earlier that maybe that's not the right name anymore, we're going to consider how best to sort of organize.

Speaker Change #112: Our filings in our.

Speaker Change #112: Our.

Speaker Change #112: Reporting of this data in the revenue.

Speaker Change #112: Mike.

Speaker Change #112: Lend itself, a little better to understanding where quanta fits into all of that.

Mike: But what we mean is something notable that's going to create value.

Speaker Change #112: <unk>.

Speaker Change #112: Gross profit and net income.

Scott Bundy: Sorry, last question regarding cross-border tunnel threats as it's related to the CBP. It's interesting that you can find all the information regarding your subsidiary's quantum, but nothing about the competitors. Is that what you're finding also?

Speaker Change #114: Sorry last question regarding cross border tunnel threats as it were.

Speaker Change #115: Related then.

Speaker Change #115: The.

Speaker Change #116: Seabee Pea.

Speaker Change #117: It's interesting that you can find all of the information regarding your subsidiary quantum but nothing about the competitors.

Speaker Change #117: Is that what you are finding also.

Rick Wheeler: Isn't that interesting? Yes, it is the case. I guess us being a public company and certainly making ourselves known in quantum, making sure that they're represented in the discussion space out there with respect to Homeland Security and other parts of the defense industry might contribute to it, but you're right, there's not nearly as much information available as what might be available about quantum.

Speaker Change #119: Isn't that interesting [laughter], yes. It is the case I.

I guess.

Speaker Change #120: US being a public company, and certainly making ourselves known and quantum.

Speaker Change #120: Making sure that they are represented in the discussion space out there with respect to.

Speaker Change #120: Homeland security and other parts of the defense industry.

Speaker Change #120: Maybe that contributes to it but youre right. There is there is there is not nearly as much information available as what might be available about quantum.

Scott Bundy: It's just such unbelievable. Thank you, guys. Thank you, Rick.

Speaker Change #121: That's unbelievable.

Speaker Change #121: Thank you guys. Thank you Rick.

Rick Wheeler: Thanks, Scott. I appreciate it.

Scott Bundy: Thanks, Scott appreciate it.

Operator: Our next question comes from John Elliott, a private investor.

Speaker Change #122: Our next.

Speaker Change #122: Lesson comes from John Elliot private Investor.

Speaker Change #122: Yeah.

John Elliott: Good morning, gentlemen. I was going to ask if PRM was dead, but you briefly discussed that with Scott. Do you know why companies are so slow to use PRM again?

John Elliot: Good morning, gentlemen, I was going to ask it P. R. M was dead, but you briefly discussed that with Scott do you know why companies are so slow Ts PRN mcgann.

John Elliot: Well.

Rick Wheeler: Well, it requires a significant capital investment. And when the oil companies are putting their budgets together, you know, the fight in the boardroom is over projects for LNG facilities, about refineries, and other things that draw significantly more on the capital of the organization. Although the operating expense approach, which is to pay for the reservoir monitoring in an over-time manner of speaking, where you hire a contractor to come in, lay out equipment, record data, and then take it all back and then come back a year later or whatever the time span may be, those cost more, and it takes about five to seven years, depending on the span of time between these surveys before you recoup your up-front capital investment in a PRM So there it is.

Speaker Change #124: It requires a significant capital investment and when the oil companies are putting their budgets together.

Speaker Change #124: Sure.

Fight.

Speaker Change #124: In the boardroom is over projects about LNG facilities about refineries and other things.

Speaker Change #124: Draw significantly more on the capital of the organization.

Speaker Change #124: Although the operating expense approach, which is to pay for the reservoir monitoring.

Speaker Change #124: And Ah.

Speaker Change #124: Over time manner of speaking, where you hire a contractor to come in.

Speaker Change #124: Lay out equipment, a record data and then take it all back and then come back a year later or whatever.

Speaker Change #124: <unk> may be those cost more and it takes about five to seven years, depending on the span of time between these surveys before you recoup your upfront capital investment and a P. RM system. So there is.

Speaker Change #124: <unk>.

Rick Wheeler: You know, there is some concern, I guess, within the oil companies about the volatility they see within their own markets, about laying out capital that spans a length of time like that. Now, many of them do realize that benefit, and those are exactly the ones that have serious discussions about that. And in the long run, they save money, but it's really just a matter of balance.

Speaker Change #124: There is some <unk>.

Speaker Change #124: <unk> I guess within the oil companies about the volatility they see within their own markets.

Speaker Change #124: About laying out capital.

Speaker Change #124: That spans a length of time like that now many of them do realize that benefit and that those are exactly the ones that are that have.

Speaker Change #124: Have serious discussions about this and.

Speaker Change #124: And in the long run they save money, but it's really just a matter of balancing their capital budgets as they go forward.

John Elliott: One of the levels of complexity is that a lot of these fields have multiple partners. And so to come to an agreement across those partners about the capital outlay can add just another level of complexity and the PRM position. That's true.

Speaker Change #124: One of them.

Speaker Change #124: One of them.

Speaker Change #125: A lot of these fields have multiple partners and so to come to an agreement across those partners about the capital outlay can add just another level of complexity to the PRN decision that's true.

Rick Wheeler: And I believe when Scott was asking some questions, you said that, you know, there could be, or maybe I misunderstood you, but perhaps a tender in the next several years. So does that mean you're not expecting any activity with PRM in 2025 or the near future?

Speaker Change #125: And I believe when when Scott was asking some questions you said that there could be perhaps eight or maybe I misunderstood you, but perhaps a tender in the next several years. So does that mean, you're not expecting any activity with PRA them in 2025 or the near future.

John Elliott: No, to clarify on that, I think a tender could come out much sooner than that. But there would not be any revenue recognition because these systems will take, you know, the better part of a year to manufacture with effective design that has to take place up front with respect because each field is a different animal. Each one has its own requirements that have to take place, so a tender could easily come out sooner than that, but, you know, the likelihood of one coming out in three to nine months is, those are short odds.

No.

Speaker Change #126: To clarify on that I think a tender could come out much sooner than that.

Speaker Change #127: But there would not be any revenue recognition because these systems will take.

Speaker Change #127: The better part of a year to manufacture.

Speaker Change #127: <unk>.

Speaker Change #128: Effective design that has to take place upfront.

Speaker Change #128: With respect because each field is a different animal each one has its own requirements that have to take place. So a tender could easily come out sooner than that but.

Speaker Change #128: The likelihood of one coming out in three to nine months as.

Speaker Change #129: Those are short odds I would think.

Rick Wheeler: and at one time, it seemed like there were. I can't remember if the term you used was a handful of companies that were interested in PRM and were in discussions with Geospace about that.

Speaker Change #130: And at one time it seemed like there were.

Speaker Change #131: I can't remember if the term you used.

Speaker Change #131: Handful of companies.

Speaker Change #132: That we're interested in.

Speaker Change #133: N P R realm, and we're in discussions with G. S base about that would you say that the number of companies.

John Elliott: Would you say that the number of companies who were interested in it is the same? Has it increased? Has it decreased? No, I think it's about the same. Alright, well, thank you for answering my question.

Speaker Change #133: Who were interested in at the numbers. The same has it increase hasn't decreased.

Speaker Change #133: No I think it's about the same.

Speaker Change #133: Okay.

Speaker Change #134: Alright, well, thank you for answering my questions.

Rick Wheeler: You're welcome. Thank you, John.

Youre welcome. Thank you John.

Operator: Again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. I will return now to Bill DeZellem with Titan Capital.

Speaker Change #135: Again, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change #136: We'll return now to build the xylem with Titan capital.

Bill Dezellem: Thank you. A couple of additional questions that your comments prompted. The first is, have you considered using your balance sheet for PRM and leasing, lease to own, whatever you'd like to call it, or rental to essentially combat that decision by the oil companies that they don't want to make a big upfront amount? What's your view on that?

Speaker Change #137: Hi, Thank you a couple of additional questions that.

Speaker Change #138: Your comments.

Speaker Change #139: Prompted the first is have you considered.

Speaker Change #140: Using your balance sheet for Prs <unk> and leasing.

Speaker Change #141: One whatever you'd like to call it or rental to essentially come back that that decision by a buyer.

Speaker Change #142: By oil companies that they don't want to make a big upfront dollar amount.

Speaker Change #143: What's your view on that.

Rick Wheeler: No, that's a very good question, Bill. And we actually have considered, you know, what other means of approach might be amenable to that sort of thing. As it turns out, generally within the oil companies, if it's laying on the bottom of the ocean, they want to own it. So, you know, they're not really receptive to those sorts of ideas wherein one would lease the equipment back or have not done so to date. And we have actually had some discussions, certainly internally, about how we might try to organize an approach like that. But it doesn't seem to get very much traction when we present something like that.

No. That's a very good question Bill and we actually have considered.

Speaker Change #144: What other means of approach might be amenable to that sort of thing as it turns out.

Speaker Change #144: Generally within the oil companies, if it's laying on the bottom.

Speaker Change #145: The ocean they want to own it.

Speaker Change #145: So.

Speaker Change #146: They're not really.

Speaker Change #147: <unk> to those sorts of ideas, where in one would lease the equipment back or have not to date and we have actually had some discussions are certainly internally about how we might try to organize an approach like that but it doesn't it doesn't seem to get very much traction when we present something like that.

Bill Dezellem: So it creates quite a riddle if they're not receptive to leasing product on the ocean bottom, but nor are they receptive to writing checks for product on the ocean bottom.

Speaker Change #147: So it creates quite a riddle if theyre not receptive to leasing product on the ocean bottom, but nor are they receptive to writing a check for product on the ocean bottom.

Rick Wheeler: That's a hard squeeze, isn't it? It certainly is. Okay, and just for clarification, relative to a tender, was the implication of what you said that the second half of fiscal 25 is when you think a tender could come out, or are you thinking more the second half of calendar 25? No, I think the second half of 25 is probably the higher probability, but things could be a little more accelerated than that, but I don't anticipate that to be true.

That's a hard squeeze isn't it.

Speaker Change #147: Okay.

Speaker Change #147: Certainly, yes, okay and just for clarification.

Speaker Change #147: Relative to a tender.

Speaker Change #148: What is the implication of what you said that the second half of fiscal 'twenty. Five is when you think a tender could come out.

Speaker Change #149: Or are you thinking more second half of calendar 'twenty five.

Speaker Change #149: No I think second half of 'twenty five is probably the.

Speaker Change #150: The higher probability, but things could be a little more accelerated than that but I don't anticipate that to be true.

Bill Dezellem: Got it. Okay, that's helpful. And then you were talking earlier about the seismic exploration market and that the level of demand has taken a pause relative to the high strength that you were seeing, and yet you invested $4.2 million in rental equipment in the third quarter, and you're planning on another $3.5 million to be invested in the fourth quarter. So, that's a little bit in contrast. It seems like there may be something else going on there. So, why are you investing in the rental business or in rental properties if you're being a bit cautious about market demand?

Speaker Change #151: Got it okay. That's that's helpful and then.

Speaker Change #152: You were talking earlier about the.

Speaker Change #152: The.

Speaker Change #152: The seismic exploration market.

Speaker Change #152: And and.

Speaker Change #152: The level of demand.

Speaker Change #154: <unk> has taken a pause relative to the high strength that you were seeing and yet you invested I think it was $4 2 million in rental equipment in the in the third quarter.

Speaker Change #153: And you're planning on another three and a half million to be invested in the fourth quarter.

Speaker Change #152: So that.

Speaker Change #154: And that's a little bit in contrast, it seems like there maybe is something else going on there. So why are you investing in the rental business.

Speaker Change #156: And rentals, yes, if you're being a bit cautious about.

Speaker Change #156: About the market.

Speaker Change #156: Demand.

Speaker Change #156: Yes.

Rick Wheeler: A good portion of that is related to us building out mariners for a rental contract we announced earlier this year. So we have a contract that is in hand. We're ready to go, but unfortunately, our customer is not quite ready to go to work yet. We're waiting for them to decide to take the equipment out and start gathering data for us.

Speaker Change #156: A good portion of that is related to.

Speaker Change #156: US building out.

Speaker Change #158: Mariners for a rental contract we announced earlier this year. So we have a contract that is in hand, we're ready to go but unfortunately, our customers not quite ready to go to work yet so.

Speaker Change #158: We're waiting for them to decide.

Speaker Change #158: To take the equipment out will start gathering data for us.

Bill Dezellem: And what's your current understanding? Is this the comment in the release late in the fourth quarter, or is that a different contract?

Speaker Change #158: And what's your current understanding is just to comment in the release the.

Speaker Change #159: Late in the fourth quarter or is that a different contract.

Rick Wheeler: That's it. Great, OK.

That's it.

Bill Dezellem: Great. Okay. Thank you all again.

Speaker Change #159: Great. Okay. Thank you all again.

Thanks Bill.

Operator: And ladies and gentlemen, as there are no further questions at this time, I'd like to turn the floor back over to Mr. Rick Wheeler for any additional or closing comments. All right. Well, thank you, Jamie.

Speaker Change #160: And ladies and gentlemen, as there are no further questions at this time I'd like to turn the floor back over to Mr. Rick Wheeler for any additional or closing comments.

Speaker Change #159: Alright, well thank you Jamie.

Rick Wheeler: And thanks to all of you who joined our call today. We certainly appreciate it and appreciate the questions. And we look forward to speaking with you again on our conference call for the fourth quarter and year end of fiscal year 2024, which will come in November.

Speaker Change #161: And thanks to all of you who joined our call today, we certainly appreciate it and appreciate the questions and we look forward to speaking with you again on our conference call for the fourth quarter and year end of fiscal year 2024 that will come in November.

Speaker Change #161: So thank you and goodbye.

Operator: Thank you. This does conclude today's Geospace Technologies third quarter 2020 earnings conference call.

Speaker Change #162: Thank you. This does conclude today's deal space technology third quarter 2024 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.

Operator: Please disconnect your line at this time and have a wonderful day.....

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Speaker Change #162: [music].

Speaker Change #162: Yes.

Speaker Change #162: [music].

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