Geospace Q3 Revenue Falls to $15.8M on Weak Seismic Demand

Geospace Technologies (NASDAQ:GEOS) posted a sharp third-quarter downturn: Revenue fell to $15.8 million from $24.8 million a year earlier, while the company reported a $9.7 million net loss compared with prior-year net income of $800,000.

Demand was uneven across segments. The Smart Water unit saw lower revenue on reduced orders for Hydroconn connectors. Energy Solutions generated $5.9 million, down 28% from $8.1 million, reflecting the prior-year sale of Streamer Recovery Device assets and continued weak seismic equipment demand. The Intelligent Industrial segment brought in $5.2 million, down from $6.1 million, on lower industrial sensor sales and reduced contract manufacturing.

President and CEO Rich Kelley cited geopolitical uncertainty, project timing, and customers' access to capital as factors weighing on the quarter. Margins were pressured by product mix, inflation, raw-material costs, and component availability, though cost-reduction efforts and manufacturing productivity improvements offset part of the impact, he said.

"Our financial performance this quarter does not reflect the strength of our long-term opportunities across our diversified markets," Kelley said. "We remain focused on the factors within our control and on strengthening the foundation of our future performance."

Revenue from the company's Permanent Reservoir Monitoring (PRM) contract with Petrobras came in below expectations after the customer requested scope changes. Kelley said during the Q&A session that the contract's total value has not changed. The modifications involved rerouting sensors and cables and adjusting spacing – not altering the technical equipment Geospace is supplying. Final PRM revenue recognition is now expected between the third and fourth quarters of fiscal 2027, according to Kelley. He said Geospace has no firm timetable for a subsequent PRM opportunity but expects to participate in any proposal Petrobras issues and remains in talks with other major companies.

Near the end of the quarter, Geospace's Quantum Technology Sciences subsidiary won a $10.8 million U.S. Navy contract to deliver a Seismic Acoustic Detection and Ranging system, with completion expected by December 2027. Kelley said the project combines Quantum's technology with Geospace's PRM technology for in-water threat detection. It is a Small Business Innovation Research arrangement; the Navy will assess whether the system meets technical expectations before considering larger-scale deployment, he said. CFO Robert Curda said revenue from the Navy project will be recognized over time, spanning fiscal 2027 and fiscal 2028.

Kelley said the Heartbeat Detector business is progressing slightly ahead of its internal plan, with several pilots completed and a pipeline of prospective customers. He cautioned that converting sales can take time because customers include government agencies.

Operating expenses fell $1.2 million in the quarter and $400,000 over the first nine months of fiscal 2026, Curda said. Quarterly reductions reflected lower personnel costs, agent commissions, and legal and professional fees. Nine-month savings came from lower research and development costs and agent commissions.

Geospace invested $3.3 million in plant equipment during the first nine months of the fiscal year. At quarter-end, it had $25 million of available borrowings under its credit agreement with Woodforest National Bank and working capital of $41 million, including $17 million of trade accounts and financing receivables.

Curda said management is closely monitoring cash flows. He expects the bank relationship and credit facility to support operations until the next anticipated Petrobras milestone payment arrives.

The company did not issue specific revenue or earnings guidance. Kelley said Geospace will continue investing in innovation, supporting customers, maintaining financial discipline, and working to convert pipeline opportunities into revenue as market conditions improve.

For the first nine months of fiscal 2026, Geospace reported revenue of $61.1 million and a net loss of $30.5 million, or $2.37 per diluted share, compared with revenue of $80.1 million and a net loss of $700,000 in the same period last year.