Geospace Technologies Corporation (GEOS) Earnings Call Transcript & Summary

Since all the stockholders and proxies entitled in desiring to vote have done so, I declare the polls closed. Will the Judge of Election, please, report on the preliminary results of the votes for the proposals presented.

On proposal 1, each of the 3 director nominees standing for reelection have received the affirmative vote of a majority of the votes cast for their reelection as directors of the company and are therefore reelected. On proposal 2, a majority of the shares present in person or represented by proxy at the meeting and entitled to vote were voted in favor of the ratification of the appointment of RSM US LLP, independent public accountants as the company's auditors for the fiscal year ended September 30, 2023, and therefore, the proposal 2 has passed. On proposal 3, a majority of the shares present in person or represented by proxy at the meeting and entitled to vote were voted in favor of the nonbinding advisory resolution regarding the compensation of the company's named executive officers as disclosed in the proxy statements, and therefore, the proposal 3 has passed. And on proposal 4, a majority of the shares present in person or represented by proxy at the meeting and entitled to vote were voted in favor of an advisory vote on executive compensation every year. I have set forth the results of my tabulation of the voting and a Certificate of Judge of Election.

Thank you. The Secretary of the meeting will file the Certificate of Judge of Election with the minutes of the meeting. That concludes our formal agenda for today. There being no further business to come before the meeting, the meeting is now adjourned. Rick Wheeler, our Chief Executive Officer, will bring this up to date on the company's activities, this presentation will be followed by a brief question-and-answer session. Rick?

Thank you, Gary, and thanks to everyone attending this year's virtual Annual Shareholders Meeting. To begin, this morning's commentary may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. And as such, these statements are subject to both known and unknown risks, some of which are discussed in our annual report and our SEC Form 10-K and 10-Q filings. I'll first review our 2022 fiscal year, which ended on September 30, 2022. I'll then follow up with an update on the company through the first quarter of fiscal year 2023. As final thoughts, I will comment on what lies ahead for Geospace Technologies. As we began fiscal year 2022 on October 1, 2021, our Oil and Gas segment had just closed out a very challenging fiscal year. Demand for Oil and Gas have been improving from pandemic lows, but was still well below pre-COVID levels. For the Oil and Gas industry, uncertainty had been a pervasive mantra. With Nations worldwide at the time, aspiring to find a new normalcy and a way to ramp up their deeply stalled economies, uncertainty continued to be the persistent influencer throughout 2022. This was only amplified with Russia's invasion of Ukraine, China's Zero-COVID lockdown policies and looming recession. Rystad Energy, a trusted source of energy industry research also reported in September that the adverse political landscape for fossil fuels was yet another factor for perpetuating a year of continued decline in exploration spending by Oil and Gas companies. They were instead focused on getting the most out of their existing assets. This did prove beneficial for sales and rentals of our OBX ocean-bottom node technology, which provides an efficient means of lower risk exploration near existing fields. However, despite this benefit, revenue from our Oil and Gas segment in fiscal year 2022 dropped below that of the prior 3 years due to the overall reduced demand for seismic exploration products. In [ stark ] contrast, our adjacent markets segment chartered a completely different path through fiscal year 2022, one marked by continued growth. The foundation of our vision for mitigating the sensitivities of our Oil and Gas segment to market fluctuations as the strategic diversification into other products that are aligned with our core engineering and manufacturing competencies. And it's rewarding to see the tangible payoff of these efforts. Having already set a record for generated revenue in the previous fiscal year '22 -- 2022, we saw our adjacent market segment reach even greater heights, beating that full year record by 21%. Results might have even been better had supply chain issues not interfere with the anticipated rollout of our Aquana smart water valves and cloud control platform. Let's now turn to the recently reported first quarter of fiscal year 2023. Covering October 1 through December 31, 2022, our first quarter of fiscal year 2023 generated $31.1 million in revenue, the company's highest quarterly figure in 8.5 years. More than $10.8 million was contributed by our Adjacent Markets segment, an amount within roughly 1% of the segment's all-time high. This further demonstrates the benefits gained by our targeted diversification strategy. As is typical, though, our Oil and Gas segment produced the greatest component of revenue at over $20.1 million, more than double the amount of last year's first quarter. Rental contracts of our OBX ocean-bottom nodes were the primary source of this revenue, although a notable portion came in the way of compensation for lost OBX rental equipment. After factoring in expenses, the first quarter posted a net loss of $0.01 per share. However, it's worth noting that this slight loss comes after, including a combination of onetime charges totaling over $1.4 million. These charges were associated with our restructuring activities, Russian write-offs and certain nonrecurring repair costs, all of which support our plan of action toward profitability. This leads us to examine what we see ahead for Geospace in the remainder of fiscal year 2023. While there are some signs of improvement in land and seismic exploration, most of the positive indicators we see are related to offshore work. We're encouraged by the growing number of proposed ocean-bottom surveys and the increase in demand this portrays for our ocean-bottom nodal recorders. This includes our industry-proven OBX as well as our recently-introduced Mariner, comprising the latest technology in ocean-bottom recording. We believe this will continue to drive our Oil and Gas segment revenue over the year. In addition, new interest in deploying our OptoSeis fiber optic technology and high temperature downhole environments are under discussion for later in the year. And while customer dialogue remains active for OptoSeis permanent reservoir monitoring, or PRM applications, we don't anticipate any revenue from such a system this year. After the first quarter, our Quantum subsidiary secured a contract with a federal government contractor for an application that's unrelated to our previous border security work. This could potentially lead to additional contracts in the future and could also open new avenues for the use of OptoSeis technology. In addition, use of Quantum's unique near real-time analytics to monitor carbon sequestration as well as other acoustic applications within our Oil and Gas segment are also being pursued. Our adjacent market's products are poised for yet another year of continued growth. In addition, revenue from our Aquana smart water valves and cloud platform should begin meaningfully contributing to the segment this year. In summary, each of our business segments are well positioned to see increased revenues this year. Fiscal year 2023 will also see the earnest continuation in all aspects of our plan to reach profitability. This entails a clear and careful examination of our costs, efficiencies and revenue sources as well as the execution of identified steps to revamp and restructure the organization. As such, we expect fiscal year 2023 to be a productive transformative year for the company. In closing, I'd like to hardly thank all our dedicated employees. They continue to be the most important ingredient to our success and are instrumental in providing best-in-class products and services to our revere customers. I'd also like to thank you, our valued shareholders, for the support and trust you place in Geospace. This strengthens our [ resolve ] to provide the best value possible to both shareholders and customers alike. With that, I'll turn the meeting back over to Gary.

Thanks, Rick. We will now proceed to the stockholder question-and-comment period. Again, you may ask questions virtually by clicking the Q&A tab on your screen and submitting your question where indicated in writing. Please note, we will attempt to answer questions as time allows, but only questions that are appropriate and germane to the meeting will be addressed. Are there any questions or comments? We have received no questions. If you've submitted a question and it didn't respond, we encourage you to resubmit your question to us at investorquestions@geospace.com and we will reply in a timely manner. This concludes the question-and-answer session and the presentation, and we'd like to thank you for your participation in today's meeting. Thanks, and have a great day.

And this concludes the meeting, and you may now disconnect.