Q4 2025 Geospace Technologies Corp Earnings Call

November 21, 2025

Speaker #2: Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings for convenience. A recording of this call will be available on the Investor Relations page of our website, which I'll invite everyone to browse through and learn more about Geospace.

Speaker #2: Our subsidiaries and our products. Note that today's recorded information is time-sensitive and may not be accurate at the time. One listens to the replay.

Operator: Please stand by. Your program is about to begin. Welcome to the Geospace Technologies Fourth Quarter 2025 earnings conference call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for questions following the presentation. If you'd like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. We ask that you pick up your handset to allow optimal sound quality.

Please stand by. Your program is about to begin. Welcome to the Geospace Technologies Fourth Quarter 2025 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, the company's Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for questions following the presentation. If you'd like to ask a question at that time, please press star one on your telephone keypad.

Speaker #2: Yesterday, after the market closed, we released our financial results for the period ended September 30th, our fourth quarter of fiscal year 2025.

Speaker #2: For the three months ended September 30, 2025, we reported revenue of $30.7 million, with a net loss of $9.1 million. For the full 12 months of our fiscal year, we had $110.8 million in revenue, with a net loss of $9.7 million.

If at any point your question has been answered, you may remove yourself from the queue by pressing star two. We ask that you pick up your handset to allow optimal sound quality. Lastly, should you require any assistance, you may press star zero. It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin.

Operator: Lastly, should you require any assistance, you may press star zero. It is now my pleasure to turn the floor over to Rich Kelley. Sir, you may begin.

Richard Kelley: Good morning and welcome to Geospace Technologies' conference call for the fourth quarter of fiscal year 2025. I am Rich Kelley, the company's Chief Executive Officer and President. I am joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will first provide an overview of the fourth quarter, and Robert will then follow up with more in-depth commentary on our financial performance, as well as an overview of our financials. I will then give some final comments before opening the line for questions. Today's commentary on markets, revenue, planned operations, and capital expenditures may be considered forward-looking as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on what we know now, but actual outcomes are affected by uncertainties beyond our control or prediction.

Rich Kelley: Good morning and welcome to Geospace Technologies' conference call for the fourth quarter of fiscal year 2025. I am Rich Kelley, the company's Chief Executive Officer and President. I am joined by Robert Curda, the company's Chief Financial Officer. In our prepared remarks, I will first provide an overview of the fourth quarter, and Robert will then follow up with more in-depth commentary on our financial performance, as well as an overview of our financials. I will then give some final comments before opening the line for questions. Today's commentary on markets, revenue, planned operations, and capital expenditures may be considered forward-looking as defined by the Private Securities Litigation Reform Act of 1995.

These statements are based on what we know now, but actual outcomes are affected by uncertainties beyond our control or prediction. Both known and unknown risks can lead to results that differ from what is said or implied today. Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings. For convenience, we will link a recording of this call on the Investor Relations page of our geospace.com website, which I invite everyone to browse through, and learn more about Geospace, our subsidiaries, and our products. Note that today's recorded information is time-sensitive and may not be accurate at the time one listens to the replay.

Richard Kelley: Both known and unknown risks can lead to results that differ from what is said or implied today. Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings. For convenience, we will link a recording of this call on the Investor Relations page of our geospace.com website, which I invite everyone to browse through, and learn more about Geospace Technologies, our subsidiaries, and our products. Note that today's recorded information is time-sensitive and may not be accurate at the time one listens to the replay. Yesterday, after the market closed, we released our financial results for the period ended 30 September 2025, our fourth quarter of fiscal year 2025. For the three months ended 30 September 2025, we reported revenue of $30.7 million, with a net loss of $9.1 million.

Yesterday, after the market closed, we released our financial results for the period ended 30 September 2025, our fourth quarter of fiscal year 2025. For the three months ended 30 September 2025, we reported revenue of $30.7 million, with a net loss of $9.1 million. For the full 12-months of our fiscal year, we had $110.8 million in revenue with a net loss of $9.7 million. The mixed fiscal year performance across the market segments continues to reinforce our vision of diversification and innovation for the company. Our smart water segment delivered another strong year, exceeding expectations with double-digit revenue growth for the fourth sequential fiscal year.

Richard Kelley: For the full 12 months of our fiscal year, we had $110.8 million in revenue with a net loss of $9.7 million. The mixed fiscal year performance across the market segments continues to reinforce our vision of diversification and innovation for the company. Our smart water segment delivered another strong year, exceeding expectations with double-digit revenue growth for the fourth sequential fiscal year. The Hydrocon connector line continued to gain market share, and drove significant revenue gains compared to last year. We are also seeing increased market acceptance of the Aquana products, both domestically and in the Caribbean markets. For international markets, we will build upon the municipal water management model in the US, and address challenges of water scarcity, environmental changes, and natural disaster mitigation. Domestically, we'll remain focused on the increased success and interest we have seen in both the municipal and multi-family residential markets.

The Hydroconn connector line continued to gain market share, and drove significant revenue gains compared to last year. We are also seeing increased market acceptance of the Aquana products, both domestically and in the Caribbean markets. For international markets, we will build upon the municipal water management model in the US, and address challenges of water scarcity, environmental changes, and natural disaster mitigation. Domestically, we'll remain focused on the increased success and interest we have seen in both the municipal and multi-family residential markets.

Our SmartWater segment delivered another strong year, exceeding expectations, with double-digit revenue growth for the fourth sequential fiscal year.

The Hydrocon connector line continued to gain market share and drove significant revenue gains compared to last year.

We are also seeing increased market acceptance of the Auana products, both domestically and in the Caribbean markets.

300 national markets; we will build upon the Municipal Water Management model in the U.S.

And address challenges of water scarcity, environmental changes, and natural disasters. Mitigation.

Richard Kelley: We anticipate continued market demand for both the Hydrocon and Aquana solutions. Continued market uncertainty and volatility in oil prices resulted in lower revenue from energy solutions. We experienced another year of reduced offshore exploration activity, increased competition, and consolidation. These factors have led to decreased utilization of our ocean bottom node rental fleet, which has negatively impacted segment revenue. Despite lower revenue, we achieved strategic wins in the segment. As reported on 16 June 2025, we were awarded a major permanent reservoir monitoring contract with Petrobras, followed by the release and completed major sale of our ultra-lightweight land node Pioneer to several customers, including Dawson Geophysical, a longtime valued partner. We have a strong backlog going into next fiscal year, and while there are encouraging signs, the short-term exploration market remains uncertain due to continued pressure from low oil prices.

We anticipate continued market demand for both the Hydroconn and Aquana solutions. Continued market uncertainty and volatility in oil prices resulted in lower revenue from energy solutions. We experienced another year of reduced offshore exploration activity, increased competition, and consolidation. These factors have led to decreased utilization of our ocean bottom node rental fleet, which has negatively impacted segment revenue. Despite lower revenue, we achieved strategic wins in the segment. As reported on 16 June 2025, we were awarded a major permanent reservoir monitoring contract with Petrobras, followed by the release and completed major sale of our ultra-lightweight land node Pioneer to several customers, including Dawson Geophysical, a longtime valued partner.

Domestically, we will remain focused on the increased success and interest we have seen in both the municipal and multifamily residential markets.

We anticipate continued market demand for both the Hydrocon and Auana solutions.

Continued market uncertainty and volatility in oil prices resulted in lower revenue from Energy Solutions.

We experienced another year of reduced offshore exploration activity, increased competition, and consolidation.

These factors have led to decreased utilization of our ocean. Bottom node rental and a fleet that is negatively impacting segment revenue.

Despite lower revenue, we achieved strategic wins in the segment.

As reported on June 16, 2025, we were awarded a major permanent reservoir monitoring contract with Petrol Brass.

We have a strong backlog going into next fiscal year, and while there are encouraging signs, the short-term exploration market remains uncertain due to continued pressure from low oil prices. However, long-term demand forecasts should drive more favorable market conditions in future periods. Our intelligent industrial segment continues to provide steady, predictable revenue from our industrial sensors and contract manufacturing solutions. As previously announced, to increase revenue from this segment, we acquired Geovox Security Inc, the exclusive licensee of a human heartbeat detection algorithm developed by Oak Ridge National Laboratory.

followed by the release and completed major sale of our ultra-lightweight land node Pioneer to several customers, including Dawson Geophysical, a long-time valued partner,

Richard Kelley: However, long-term demand forecasts should drive more favorable market conditions in future periods. Our intelligent industrial segment continues to provide steady, predictable revenue from our industrial sensors and contract manufacturing solutions. As previously announced, to increase revenue from this segment, we acquired Geovox Security, the exclusive licensee of a human heartbeat detection algorithm developed by Oak Ridge National Laboratory. The heartbeat detector complements our border and perimeter security portfolio. It further serves to advance our strategy toward adding more solutions, with a move toward annual recurring revenues. We also restructured our Xile product portfolio to increase revenues and improve margins. Both heartbeat detector and Xile have seen increased interest in their respective markets. While energy solutions continue to play a key role in our overall strategy, we will continue to drive growth and profitability through diversification.

Going into the next fiscal year, and while there are encouraging signs, the short-term exploration market remains uncertain due to continued pressure from low oil prices.

However, long-term demand forecasts should drive more favorable market conditions in future periods.

Our intelligent industrial segment continues to provide steady, predictable revenue for my industrial sensors and contract manufacturing solutions.

As previously announced, to increase revenue from this segment, we acquired Geobox Security, Inc.

The Heartbeat Detector complements our border and perimeter security portfolio. It further serves to advance our strategy toward adding more solutions, with a move toward annual recurring revenues. We also restructured our EXILE product portfolio to increase revenues and improve margins. Both heartbeat detector and EXILE have seen increased interest in their respective markets. While energy solutions continue to play a key role in our overall strategy, we will continue to drive growth and profitability through diversification. We see incredible opportunities in our Smart Water and intelligent industrial segments to leverage our technology and manufacturing capabilities.

The exclusive license of a human heartbeat detection algorithm developed by Oak Ridge National Laboratory, the heartbeat detector, complements our border and perimeter security portfolio.

At further serves to advance our strategy toward adding more solutions with a move toward annual recurring revenues.

We also restructured our Exile product portfolio to increase revenues and improve margins.

Both Heartbeat Detector and Exile have seen increased interest in their respective markets.

Richard Kelley: We see incredible opportunities in our smart water and intelligent industrial segments to leverage our technology and manufacturing capabilities. We remain well-positioned to exploit the tremendous potential we have created with our products and services portfolio, our talented staff, and our continuing diversification into new high-margin markets. Additionally, our current backlog places us in a strong position going into the next fiscal year and beyond. Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability. We will continue to pursue growth through acquisition with immediately accretive additions to top-line revenue. Now I will turn it over to Robert to provide more detail on our financial performance.

While Energy Solutions continues to play a key role in our overall strategy, we will continue to drive growth and profitability through diversification.

We see incredible opportunities in our smart water and intelligent industrial segments to leverage our technology and manufacturing capabilities.

We remain well-positioned to exploit the tremendous potential we have created with our products and services portfolio, our talented staff, and our continuing diversification into new high-margin markets. Additionally, our current backlog places us in a strong position going into the next fiscal year and beyond. Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability. We will continue to pursue growth through acquisition with immediately accretive additions to top-line revenue. Now I will turn it over to Robert to provide more detail on our financial performance.

We remain well positioned to exploit the tremendous potential we have created with our products and services portfolio. Our talented staff and our continuing diversification into new high-margin markets.

Additionally, our current backlog places us in a strong position going into the next fiscal year and beyond. Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability.

We will continue to pursue growth through acquisition with immediate, creative additions to topline revenue.

And now I will turn it over to Robert to provide more detail on our financial performance.

Robert Curda: Thanks, Rich, and good morning. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during our call this morning. In yesterday's press release for our fourth quarter ended 30 September 2025, we reported revenue of $30.7 million compared to last year's revenue of $35.4 million. The net loss for the quarter was $9.1 million, or $0.71 per diluted share, compared to last year's net loss of $12.9 million, or $1 per diluted share. For the 12 months ended 30 September 2025, we reported revenue of $110.8 million compared to revenue of $135.6 million last year. Our net loss for the 12-month period was $9.7 million, or $0.76 per diluted share, compared to last year's net loss of $6.6 million, or $0.50 per diluted share.

Thanks, Rich, and good morning. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance. During our call this morning, and in yesterday's press release for our fourth quarter ended September 30, 2025, we reported revenue of $30.7 million compared to last year's revenue of $35.4 million. The net loss for the quarter was $9.1 million, or $0.71 per diluted share, compared to last year's net loss of $12.9 million, or $1.00 per diluted share.

Our net loss for the 12-month period was $9.7 million, or $0.76 per diluted share, compared to last year's net loss of $6.6 million, or $0.50 per diluted share. Revenue for our smart water segment totaled $8.5 million for the three months ended 30 September 2025. This compares to $11.9 million in revenue for the same period a year ago, a decrease of 28%. For the fiscal year, revenue for this segment totaled $35.8 million versus $32.4 million for the same prior year period, for an increase of 10%. The decrease in revenue for the three-month period is due to decreased demand for our Hydroconn universal AMI connectors.

For the 12 months ended September 30, 2025, we reported revenue of $110.8 million compared to revenue of $135.6 million last year.

Our net loss for the 12-month period was $9.7 million, or $0.76 per diluted share, compared to last year's net loss of $6.6 million, or $0.50 per diluted share.

Robert Curda: Revenue for our smart water segment totaled $8.5 million for the three months ended 30 September 2025. This compares to $11.9 million in revenue for the same period a year ago, a decrease of 28%. For the fiscal year, revenue for this segment totaled $35.8 million versus $32.4 million for the same prior year period, for an increase of 10%. The decrease in revenue for the three-month period is due to decreased demand for our Hydrocon universal AMI connectors. Typically, we expect a slight seasonal drop in demand for these products during the fall and winter months. The 12-month increase in revenue is due to the increased demand for Hydrocon connectors. Fiscal year 2025 marks the fourth annual year with double-digit percentage revenue growth from these connectors.

Revenue for our Smart Water segment totaled $8.5 million for the three months ended September 30, 2025.

This compares to $11.9 million in revenue for the same period a year ago, a decrease of 28%.

For the fiscal year, revenue for this segment totaled $35.8 million versus $32.4 million for the same prior year period, representing an increase of 10%.

Typically, we expect a slight seasonal drop in demand for these products during the fall and winter months. The 12-month increase in revenue is due to the increased demand for Hydroconn connectors. Fiscal year 2025 marks the fourth annual year with double-digit percentage revenue growth from these connectors. For the three-month period ended 30 September 2025, revenue from our energy solution segment totaled $15.7 million, for a decrease of 11% when compared to $17.6 million from the same prior year period. Revenue from the 12-month period was $50.7 million, a decrease of 35% when compared to revenue from the same prior year period of $78 million.

The decrease in revenue for the three-month period is due to decreased demand for our hydrocon Universal Ami connectors. Typically, we expect a slight seasonal drop in demand for these products during the fall and winter months.

The 12-month increase in revenue is due to increased demand for hydrogen connectors. Fiscal year 2025 marks the fourth consecutive year with double-digit percentage revenue growth from these connectors.

Robert Curda: For the three-month period ended 30 September 2025, revenue from our energy solution segment totaled $15.7 million, for a decrease of 11% when compared to $17.6 million from the same prior year period. Revenue from the 12-month period was $50.7 million, a decrease of 35% when compared to revenue from the same prior year period of $78 million. The decrease for the three-month and 12-month period is due to lower utilization and sales of our marine ocean bottom nodes, particularly partially offset by sales of our ultra-light land node known as Pioneer. Revenue from our intelligent industrial segment totaled $6.4 million for the three-month period ended 30 September 2025. This compares with $5.8 million for the equivalent year ago period, representing an increase of 9%. Revenue for the 12-month period ending 30 September 2025 was $24 million.

For the 3-month period ended September 30, 2025, our Energy Solutions segment totaled $15.7 million, a decrease of 11% compared to $17.6 million from the same prior year period.

The decrease for the three-month and 12-month period is due to lower utilization and sales of our marine ocean bottom nodes, particularly partially offset by sales of our ultra-light land node known as Pioneer. Revenue from our intelligent industrial segment totaled $6.4 million for the three-month period ended 30 September 2025. This compares with $5.8 million for the equivalent year ago period, representing an increase of 9%. Revenue for the 12-month period ending 30 September 2025 was $24 million.

Revenue for the 12-month period was $50.7 million, a decrease of 35% when compared to revenue from the same prior year period of $78 million. The decrease for the 3-month and 12-month periods is due to lower utilization and sales of our marine ocean bottom nodes, which were partially offset by sales of our Ultra Lite land node. Notably, revenue from our intelligent industrial segment totaled $6.44 million for the 3-month period ended September 30, 2025.

This compares with 5.8 million for the equivalent year ago, representing an increase of 9%.

Robert Curda: This compares to the prior year period of $24.9 million, a decrease of 4%. The increase in revenue for the three-month period was due to higher demand for our industrial sensors and contract manufacturing services. The decrease in revenue for the 12-month period was primarily due to revenue recognized for the three and 12 months ended 30 September 2024, on a government contract completed in the fourth quarter of fiscal year 2024, and lower demand for our imaging products, partially offset by an increase in demand for our industrial sensors and contract manufacturing services. Our 12-month cash investments into our rental fleet and property, plant, and equipment was $9.1 million, and we invested $1.8 million in the acquisition of the Heartbeat Detector product line. As of 30 September 2025, we have $26.3 million of cash and $8 million of additional available liquidity from our credit facility.

This compares to the prior year period of $24.9 million, a decrease of 4%. The increase in revenue for the three-month period was due to higher demand for our industrial sensors and contract manufacturing services. The decrease in revenue for the 12-month period was primarily due to revenue recognized for the three and 12 months ended 30 September 2024, on a government contract completed in the fourth quarter of fiscal year 2024, and lower demand for our imaging products, partially offset by an increase in demand for our industrial sensors and contract manufacturing services

Prior year period of $24.9 million, a decrease of 4%.

The increase in revenue for the three-month period was due to higher demand for our industrial sensors and Contract Manufacturing Services.

. Our 12-month cash investments into our rental fleet and property, plant, and equipment was $9.1 million, and we invested $1.8 million in the acquisition of the Heartbeat Detector product line. As of 30 September 2025, we have $26.3 million of cash and $8 million of additional available liquidity from our credit facility. Additionally, as of 30 September 2025, we have working capital of $64.1 million, which includes $28 million of trade accounts and financing receivables. That concludes my discussion, and I'll return the call to Rich.

The decrease in revenue for the 12-month period was primarily due to revenue recognized for the 3 and 12 months ended September 30, 2024, on a government contract completed in the fourth quarter of fiscal year 2024, and lower demand for our Imaging products, partially offset by an increase in demand for our Industrial Sensors and Contract Manufacturing Services.

Our 12-month cash investments into our rental fleet and property, plant, and equipment were $9.1 million, and we invested $1.8 million in the acquisition of the heartbeat detector product line.

Robert Curda: Additionally, as of 30 September 2025, we have working capital of $64.1 million, which includes $28 million of trade accounts and financing receivables. That concludes my discussion, and I'll return the call to Rich.

As of September 30, 2025, we have $26.3 million in cash and $8 million in additional availability from our credit facility. Additionally, as of September 30, 2025, we have working capital of $64.1 million, which includes $28 million of trade accounts and financing receivables.

Richard Kelley: Thank you, Robert. The ongoing trade disputes and related tariffs have impacted our material costs. We are working to mitigate the impact to our customers, but our product costs were higher in Q4, and we anticipate similar impacts in fiscal year 2026. The government shutdown resulted in delays related to our projects for the US Navy, as well as potential opportunities with the Department of Homeland Security, and Customs and Border Protection. Now that Congress has passed the continuing resolution, we are working with our partners to better understand the new timelines for the relevant projects. This concludes our prepared commentary, and I'll now turn the call back to the moderator for any questions from our listeners.

Rich Kelley: Thank you, Robert. The ongoing trade disputes and related tariffs have impacted our material costs. We are working to mitigate the impact to our customers, but our product costs were higher in Q4, and we anticipate similar impacts in fiscal year 2026. The government shutdown resulted in delays related to our projects for the US Navy, as well as potential opportunities with the Department of Homeland Security, and Customs and Border Protection. Now that Congress has passed the continuing resolution, we are working with our partners to better understand the new timelines for the relevant projects.

That concludes my discussion, and I'll return the call to Rich.

Thank you, Robert.

The ongoing trade disputes and related tariffs have impacted our material costs. We are working to mitigate the impact to our customers, but our product costs were higher in Q4, and we anticipate similar impacts in fiscal year 2026.

The government shutdown resulted in delays related to our projects for the U.S. Navy, as well as potential opportunities with the Department of Homeland Security and Customs and Border Protection.

This concludes our prepared commentary, and I'll now turn the call back to the moderator for any questions from our listeners.

Now that Congress has passed a continuing resolution, we are working with our partners to better understand the new timelines for the relevant projects.

This concludes our prepared commentary, and I'll turn the call back to the moderator for any questions from our listeners.

Operator: Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, you may press Star 1 on your telephone keypad now. If you'd like to remove yourself from the queue, you may press Star 2. Again, that is Star 1 if you'd like to ask a question. We'll pause for just a moment to allow questioners to queue. We'll take our first question from Bill D'Zellum with Titan Capital.

Operator: Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, you may press star one on your telephone keypad now. If you'd like to remove yourself from the queue, you may press star two. Again, that is Star one if you'd like to ask a question. We'll pause for just a moment to allow questioners to queue. We'll take our first question from Bill Dezellem with Tieton Capital.

Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, you may press star 1 on your telephone keypad. Now.

If you'd like to remove yourself from the queue, you may press *2.

Again, that is star 1. If you would like to ask a question, we'll pause for just a moment to allow questions to queue.

We'll take our first question from Bill Dellum with Titan Capital.

William Dezellem: Thank you. You had mentioned the gross margin or cost of goods under pressure, specifically tied to tariffs. The energy solution segment was the one that had the greatest pressure and most noteworthy. Would you talk in more detail about that phenomenon, given that you had higher revenues and lower profitability in that segment?

Bill Dezellem: Thank you. You had mentioned the gross margin or cost of goods under pressure, specifically tied to tariffs. The energy solution segment was the one that had the greatest pressure and most noteworthy. Would you talk in more detail about that phenomenon, given that you had higher revenues and lower profitability in that segment?

Uh, thank you. Uh, um

You had mentioned the, uh, the gross margin or cost of goods under, under pressure, um, specifically tied to tariffs, so energy. Um, the solution segment was the one that had the greatest, uh, pressure and most noteworthy. Would you talk in, uh, in more detail about that phenomenon, you know, given that you had, uh, um, higher revenues and, and lower profitability in that segment?

Richard Kelley: Good morning, Bill. Yeah, specific to energy solutions, there was actually another weighing factor on that, which is the ongoing price pressure and commoditization in the land market. We did have a nice sale and revenue recognition on our Pioneer sales, but the margin results on that were lower. We also had higher-than-expected manufacturing costs because these were the first units that were built. We've since resolved some of those, and we expect better margins going forward.

Rich Kelley: Good morning, Bill. Yeah, specific to energy solutions, there was actually another weighing factor on that, which is the ongoing price pressure and commoditization in the land market. We did have a nice sale and revenue recognition on our Pioneer sales, but the margin results on that were lower. We also had higher-than-expected manufacturing costs because these were the first units that were built. We've since resolved some of those, and we expect better margins going forward.

Good morning Bill. Yeah. Uh, specific to Energy Solutions, there was actually another weighing Factor on that, which is the ongoing price pressure and commoditization of the in in the land market. And so we did have a, a nice, uh, sale and revenue recognition on our Pioneers sales. But the, uh, the margin results on that were were lower. We also had higher than expected manufacturing costs because these were the first units that were built. Uh, We've since, uh, resolved some of those and we expect better margins going forward,

William Dezellem: Okay. Thank you.

Bill Dezellem: Okay. Thank you.

Richard Kelley: With regards to the tariff impact overall, we try to build and source as much from the US as we can. However, there are certain components that we have to source overseas. Our procurement team and supply chain team have been working to try to mitigate that as much as possible. We've also been closely following the developments in the ongoing trade disputes, and we're hoping that some of that gets resolved now that it seems that there's a number of agreements in place now.

Rich Kelley: With regards to the tariff impact overall, we try to build and source as much from the US as we can. However, there are certain components that we have to source overseas. Our procurement team and supply chain team have been working to try to mitigate that as much as possible. We've also been closely following the developments in the ongoing trade disputes, and we're hoping that some of that gets resolved now that it seems that there's a number of agreements in place now.

Okay, with regards to the regards to the ter, regards to the Tariff impact overall, um, you know we we try to build and source as much from the us as we can. However, there are certain components that we have to Source overseas, our procurement team and and supply chain team have been working to try to mitigate that as much as possible. We've also been closely following, uh, the developments in the ongoing trade.

Disputes, and we're hoping that some of that gets resolved. Now that it seems that there are a number of agreements in place now.

William Dezellem: Walk us through how much of the margin impact this quarter was transitionary here this quarter versus what you would expect to last longer, if you would, please.

Bill Dezellem: Walk us through how much of the margin impact this quarter was transitionary here this quarter versus what you would expect to last longer, if you would, please.

So, um, walk us through how much of the impact, the margin impact, this quarter was, uh, transitionary here. This quarter versus what you would expect to last, uh, longer, if you would please.

Richard Kelley: I don't really have a good feel for the—if you're looking for percentages, though, I haven't taken as deep a dive as I need to on that. We are monitoring it. The procurement team, like I said, is trying to do their best to resolve some of that. The other thing, too, is I want to make a comment. We've talked about this in the past, which is the ongoing capacity and underutilization of the manufacturing. One second, please. I'll speak to that. Okay. Anything else, Bill?

Rich Kelley: I don't really have a good feel for the—if you're looking for percentages, though, I haven't taken as deep a dive as I need to on that. We are monitoring it. The procurement team, like I said, is trying to do their best to resolve some of that. The other thing, too, is I want to make a comment. We've talked about this in the past, which is the ongoing capacity and underutilization of the manufacturing. One second, please. I'll speak to that. Okay. Anything else, Bill?

I don't really have a good feel for the, you know, if you're looking for percentages. Though we haven't...

Deeper dive, as I need to on that. Um, we, we are monitoring it, the procurement team like I said, is trying to do their best to resolve some of that. The other thing too, is I, I want to make a comment. We've talked about this in the past. This is the ongoing, uh, capacity and under, uh, under utilization of the manufacturing.

1 second, please.

Okay.

Anything else bill?

William Dezellem: Yes. Did you have something more you wanted to add to that?

Bill Dezellem: Yes. Did you have something more you wanted to add to that?

Yes, did you have something more you wanted to add to that?

Richard Kelley: No, I was just looking at another note I had. I think we're okay.

Rich Kelley: No, I was just looking at another note I had. I think we're okay.

No, I was just looking at another note. I had, uh, I think we're okay.

William Dezellem: The way to think about this is that you had inefficiencies with manufacturing of Pioneer, given that it was your first order. There is some commodity pricing. That probably sticks around, but your manufacturing inefficiencies, those will improve. Tariffs, you're still trying to get your head wrapped around what the longer-term implications are of those.

so,

Bill Dezellem: The way to think about this is that you had inefficiencies with manufacturing of Pioneer, given that it was your first order. There is some commodity pricing. That probably sticks around, but your manufacturing inefficiencies, those will improve. Tariffs, you're still trying to get your head wrapped around what the longer-term implications are of those.

So then the way to think about this is that you had inefficiencies with manufacturing of pioneer. Uh given that it was your first uh your first uh um order. And uh there is some commodity pricing that that probably sticks around but your manufacturing inefficiencies, those will improve and tariffs, you're still trying to get your head wrapped around, um, what the uh, what the longer term implications are of of those.

Richard Kelley: That's a pretty good summary, Bill.

Rich Kelley: That's a pretty good summary, Bill.

That's a pretty good summary, Bill.

William Dezellem: Okay, that's good.

Richard Kelley: Yeah. I would say that now that we've built our first several runs of Pioneer, our manufacturing costs are much more in line with what we expected. We do expect improved margins on that. Some of the tariffs have resolved since we bought those early because for those particular orders, we bought those components earlier in the year when the tariffs were actually higher. We've mitigated some of that as well. We do expect improved margins on that product line going forward.

Bill Dezellem: Okay, that's good.

Rich Kelley: Yeah. I would say that now that we've built our first several runs of Pioneer, our manufacturing costs are much more in line with what we expected. We do expect improved margins on that. Some of the tariffs have resolved since we bought those early because for those particular orders, we bought those components earlier in the year when the tariffs were actually higher. We've mitigated some of that as well. We do expect improved margins on that product line going forward.

Okay. Yeah, I would, I would say that. Now that we've we've built our, our first, several runs of pioneer, our manufacturing costs are much more in line with what we expected. So we do expect improved margins on that. Uh, some of the tariffs have resolved uh, since we bought those uh, early because, you know, for those particular, whereas we bought those components earlier in the year, when the, when the, uh, Market, when the tariffs were actually higher, um, and we've mitigated some of that as well. So we do expect improved margins on that product line, going forward.

William Dezellem: In your opening remarks, you referenced that you had expected ongoing margin pressure. My initial read on interpreting those comments would have been that this level of gross margin for the energy solutions would continue, particularly with the PRM contract. That is not at all what you're trying to communicate. It sounds like you have mitigated a lot of those impacts, and the margin will maybe be a bit less than historical, but much closer to normal margins than what you had this quarter.

Bill Dezellem: In your opening remarks, you referenced that you had expected ongoing margin pressure. My initial read on interpreting those comments would have been that this level of gross margin for the energy solutions would continue, particularly with the PRM contract. That is not at all what you're trying to communicate. It sounds like you have mitigated a lot of those impacts, and the margin will maybe be a bit less than historical, but much closer to normal margins than what you had this quarter.

So then in your opening remarks, you referenced that you would expected ongoing um ongoing margin pressure, my my initial read on on interpreting those comments uh would have been that this level of gross margin uh for the Energy Solutions uh would continue uh particularly with the PRM contract but that is not at all what? You're trying to communicate, it sounds like that, you have mitigated a lot of those uh, impacts and the margin uh will maybe be a bit less than historical but much closer to normal margins than what you had this quarter.

Richard Kelley: I would parse that as just slightly different. I would say that on PRM, because there's not the same pricing pressure on that product line as we see on the land nodes, and even on the ocean bottom nodes, we expect better margin performance on the PRM project going forward. I think that will help balance out some of the lower margin performance on these other products.

Rich Kelley: I would parse that as just slightly different. I would say that on PRM, because there's not the same pricing pressure on that product line as we see on the land nodes, and even on the ocean bottom nodes, we expect better margin performance on the PRM project going forward. I think that will help balance out some of the lower margin performance on these other products.

I would parse that in just a slightly different way. I would say that on PRM, because there's not the same pricing pressure on that product line as we see on the land nodes and even on the ocean bottom nodes, we expect better margin performance on the PRM project going forward. So I think that will help balance out some of the lower margin performance on these other products.

William Dezellem: Great. Have I taken up my time, or may I ask a couple of additional questions?

Bill Dezellem: Great. Have I taken up my time, or may I ask a couple of additional questions?

Great. Um, have I taken up my time? Or may I ask a couple of additional questions?

Richard Kelley: You can ask one more question, Bill. How about that?

Rich Kelley: You can ask one more question, Bill. How about that?

William Dezellem: That's fair. The government has a couple of different initiatives where they are looking at you all, I believe, the Customs Border Patrol, the military. Update us what you are seeing, hearing, and thinking there may be for a decision matrix with the government activities, please.

Bill Dezellem: That's fair. The government has a couple of different initiatives where they are looking at you all, I believe, the Customs Border Patrol, the military. Update us what you are seeing, hearing, and thinking there may be for a decision matrix with the government activities, please.

If you could ask one more question, Bill, how about that?

That's a fair. So the uh uh, the government has a couple of of different initiatives where they are looking at you all, I believe the Customs border patrol. Uh, the military update is what you are seeing, uh, hearing and thinking that there may be for a decision Matrix with, uh, with the government activities, please?

Richard Kelley: I'll speak to the tunnel detection on Customs and Border Protection to start with. That has been very quiet from CBP since even before the government shutdown. We anticipate probably some feedback early next year. I don't anticipate, with them just now coming back online and trying to understand where they're at with their projects and with the holidays coming up, really hearing much more until the quarter after next, basically our Q2, Q1 calendar year. Specific to the Navy, we did continue to have informal conversations. We know that that project is going to be delayed until probably our Q3 before we see any kind of movement on that, maybe even closer to Q4, so middle of the summer next year. Both projects, as far as we know, are still anticipated. It's really a question of where on the timeline it's going to be.

Rich Kelley: I'll speak to the tunnel detection on Customs and Border Protection to start with. That has been very quiet from CBP since even before the government shutdown. We anticipate probably some feedback early next year. I don't anticipate, with them just now coming back online and trying to understand where they're at with their projects and with the holidays coming up, really hearing much more until the quarter after next, basically our Q2, Q1 calendar year. Specific to the Navy, we did continue to have informal conversations.

So, I'll speak to the tunnel detection on Customs and Border Protection to start with. That has been very quiet from CBP, even before the government shutdown. We anticipate probably some feedback early next year. I don't anticipate.

Uh, with them. Just now coming back online and trying to understand, where they're at with their projects and with the holidays coming up, I don't anticipate really hearing much more until uh, the quarter of uh, after next uh basically our Q, our Q2 q1 calendar year,

We know that that project is going to be delayed until probably our Q3 before we see any kind of movement on that, maybe even closer to Q4, so middle of the summer next year. Both projects, as far as we know, are still anticipated. It's really a question of where on the timeline it's going to be.

Uh specific to the Navy. We we we did continue to have informal conversations. Uh we know that that project is going to be delayed until probably our Q3 before we see any kind of uh, movement on that.

Uh, maybe even closer to Q4. So, middle of the summer next year.

Uh, both projects are, as far as we know, still anticipated. It's really a question of where, on the timeline, it's going to be.

William Dezellem: Great, thank you.

Bill Dezellem: Great, thank you.

Great. Thank you.

Operator: Thank you. That's our one if you'd like to ask a question. We'll take our next question from Sheldon Grotzke with Grotzke Associates.

Operator: Thank you. That's our one if you'd like to ask a question. We'll take our next question from Sheldon Grotsky with Grotzsky Associates.

Thank you. And again, missed our 1. If you'd like to ask a question, we'll take our next question from Sheldon Croskey with Gretzky Associates.

Sheldon Grodsky: Good morning, everyone. Earlier this year, you announced two large projects, the Brazilian project, and another sale of nodes. Have any of these been shipped yet, or are you still waiting for these to be shipped?

Good morning everyone. Uh,

Charged, uh, projects of the Brazilian project and another sale of nodes—have any of these been shipped yet? Or are you still waiting for these to be shipped?

Richard Kelley: Good morning, Sheldon. I appreciate the question. On the permanent reservoir monitoring project for Petrobras, that is a long-term project for us. We have actually not shipped any of that. We will make our planned first shipments on that probably the early to middle of next year. Let's say spring, summertime will be some of the anticipated first revenue recognition on that. That revenue recognition will go into fiscal year 2027 for us. That project is expected to last between 12 and 18 months. With regards to the large contract, we sold to Dawson Geophysical for—I'm sorry.

Rich Kelley: Good morning, Sheldon. I appreciate the question. On the permanent reservoir monitoring project for Petrobras, that is a long-term project for us. We have actually not shipped any of that. We will make our planned first shipments on that probably the early to middle of next year. Let's say spring, summertime will be some of the anticipated first revenue recognition on that. That revenue recognition will go into fiscal year 2027 for us. That project is expected to last between 12 and 18 months. With regards to the large contract, we sold to Dawson Geophysical for—I'm sorry.

Good morning Sheldon. I appreciate the question. So the on the, on the permanent Reservoir monitoring project for patrol brass. That is a long-term project for us. We've actually not shipped any of that, we will make our first shipment, our plan first shipments on that. Uh, probably the early to middle of next year. So let's say spring summertime will be some of the uh anticipated first Revenue recognition on that and then that Revenue recognition will go into fiscal year 2027 for us. That project is expected to last between 12 and 18 months.

Sheldon Grodsky: I think he's talking about the Mariner contract, too.

Robert Curda: I think he's talking about the Mariner contract, too.

Richard Kelley: Oh. Yeah. On the Mariner contract, I'm sorry. Let me defer to Robert.

Rich Kelley: Oh. Yeah. On the Mariner contract, I'm sorry. Let me defer to Robert.

With regards to the large contract we sold to Dawson Geophysical, I'm sorry. I think he's talking about the Mariner contract too.

Uh, yeah. On the Mariner contract. Uh,

Sheldon Grodsky: Earlier this year, we announced a Mariner contract. We have not shipped that contract yet. It's been deferred by our customer due to delays from their customer.

Robert Curda: Earlier this year, we announced a Mariner contract. We have not shipped that contract yet. It's been deferred by our customer due to delays from their customer.

I'm sorry, let me, uh, defer to Robert. Yeah, so, uh, earlier this year we announced some Mariner contracts. We have not shipped that contract yet; it has been deferred by our customer due to, uh, delays from their customer.

Richard Kelley: I do want to speak to the Pioneer sale that we had. That was a large channel count, and those shipments were broken into smaller shipments between this quarter and next quarter. We have shipped some of those units this year. We anticipate a majority of revenue recognition in Q1, with some of the revenue in Q2.

Rich Kelley: I do want to speak to the Pioneer sale that we had. That was a large channel count, and those shipments were broken into smaller shipments between this quarter and next quarter. We have shipped some of those units this year. We anticipate a majority of revenue recognition in Q1, with some of the revenue in Q2.

But I, I do want to speak to the Pioneer sale that we had. That was a large channel count, and those shipments were broken into smaller shipments between this quarter and next quarter. So we have shipped some of those units. This year, we anticipate the majority of the revenue recognition in Q1, with some of the revenue in Q2.

Sheldon Grodsky: Thank you.

Operator: Thank you. At this time, there are no further questions in queue. I'd like to now turn the meeting back to our presenters for any additional or closing remarks.

Thank you. At this time, there are no further questions in the queue. I'd like to now turn the meeting back to our presenters for any additional closing remarks.

Richard Kelley: Thank you, Stephanie. Thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the first quarter of fiscal year 2026. Goodbye, and happy holidays.

Rich Kelley: Thank you, Stephanie. Thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the first quarter of fiscal year 2026. Goodbye, and happy holidays.

Thank you, Stephanie, and thanks to all of you who joined our call today. We look forward to speaking with you again on our conference call for the first quarter of fiscal year 2026.

Goodbye and happy holidays.

Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.

Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.

Q4 2025 Geospace Technologies Corp Earnings Call

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