Geospace Technologies Corporation Q2 FY2026 earnings call

• Recent results reflect near-term market pressures but longer-term plan for diversification and growth continues.
• Encouraging signs from new contract wins, expanding opportunities beyond traditional oil and gas markets, and heartbeat detector subscription model.
• Leveraging contract manufacturing expertise for white-label product development in smart water technologies.
• Despite lower ocean bottom node fleet utilization, increased interest for summer survey season.
• First revenue from PRM project recognized as initial manufacturing began in Houston.
• Middle East conflict delayed future business due to travel restrictions, but maintained positive North American interest in Pioneer land node solution.
• Increased inventory position in Pioneer and Mariner components and finished goods.
• Implemented 20% workforce reduction to generate annualized cost savings of ~$12 million, aiming to align cost structure with market conditions and strategic priorities.

For the three months ended March 31, 2026, smart water segment revenue was $3.7 million. Energy solution segment revenue totaled $9.6 million. Intelligent industrial segment revenue was $6.3 million. Revenue contribution %: smart water ~18.8% (3.7/19.7), energy solution ~48.7% (9.6/19.7), intelligent industrial ~32% (6.3/19.7). For six months ended March 31, 2026, smart water segment revenue was $9.5 million, energy solution segment revenue was $24.3 million, intelligent industrial segment revenue was $11.4 million.

• No specific revenue or earnings guidance provided during the call.
• PRM project revenue recognition expected to unfold throughout the project with revenue increasing as production progresses.
• Anticipated gradual revenue improvement in smart water segment as customer inventory levels return to normal.
• Increased interest in summer survey season for rental fleet.

• Middle East conflict delayed potential future business due to travel restrictions and regional uncertainty.
• Lower demand for hydroton connector in smart water segment as customers work through excess inventory.
• Lower utilization of ocean-bottom rental fleet affecting energy solution segment revenue.

Q: Walk through the layoffs that you did and what part of the organization that is impacted and the right-sizing thought process?

A: Layoffs impacted all departments across the organization, looking at inefficient areas, needed resources for future, and included a voluntary early retirement plan, mix of direct and indirect labor.

Q: Walk through how you see the revenue recognition progressing from here now that you have the first quarter where you've had some revenue for Petrobras and when does that reach conclusion?

A: Viewed as one performance obligation, expect revenue recognitions throughout the end of the entire endeavor, with revenue increasing as product is manufactured and tapering off as cables are deployed, contract to be finished late in 2027 or early of 2028, peak revenues around midpoint between now and late 2027.

Q: You recently sold your ultralight seismic land nodes to Dawson. Do they have applications for miners?

A: Pioneer can be used in mining applications, solutions have been used in coal and lithium and gold mining, but can't speak specifically to Dawson's use, but absolutely other miners have contacted regarding services.

Q: Relative to Petrobras, have you been in discussions and does it appear that they have additional fields beyond Bezos and Tapia that they are interested in doing additional homework on?

A: Seen their long-term plan, focused on Buzios and Sepia now, but fully anticipate fee study for next fields in future, have good relationship with them.

Q: Given that the water business had been a bright spot and has been pretty weak in the last several quarters. Would you walk us all through what was driving this strength, what changed, and how that business ultimately developed going forward?

A: Strong growth earlier due to AMI and replacement cycle, now step back possibly due to overall market down, but long-term water industry around water scarcity, quality, etc. will continue to drive AMI growth, technology mature with replacement cycle starting, not loss of market share but overall market down.