Scott Bundy

Scott Bundy of Moors & Cabot asked about the technical advantages of the OptiSize PRM system, the potential for gross margins to return to the 40% range, the status of a large receivable, details of the HeartBee Detector acquisition, and the latest expectations for Homeland Security funding and contracts for tunnel detection.

Answer

CEO Richard Kelley highlighted that OptiSize's key advantage is its lack of in-water wet-mate connectors, which improves reliability. CFO Robert Curda stated that with the PRM contract's manufacturing activity, he expects overall gross margins could return to the 40-45% range. Curda also clarified that a large receivable is on a progress payment plan extending beyond the current calendar year. Kelley described the HeartBee acquisition as a cash deal with an earn-out, designed to build a recurring subscription revenue stream. Regarding border security, Kelley indicated that an RFP for more tunnel detection mileage is now anticipated in the next calendar year.

Scott Bundy of Moors & Cabot inquired about the timing and value of a pending real estate sale, the status of a national oil company's PRM decision, the profitability of the Smart Water segment, and the revenue contribution from the Aquana product line.

Answer

CFO Robert Curda confirmed the company expects to complete a 17-acre land sale in the current quarter within the previously guided $7-$10 million range. CEO Richard Kelley clarified that a decision on the PRM FEED study is due this quarter, with the final investment decision to follow later. Curda affirmed that the Smart Water segment is generating operating income. Both executives noted that Aquana's revenue is currently a single-digit, insignificant portion of total revenue, with significant corporate impact not expected for 24 to 36 months.

Scott Bundy of Moors & Cabot asked about the retrievability of cash from the divested Russian subsidiary, the status of the 17 acres of land for sale, the nature of the $1.8 million in other assets for sale, the seasonality of the water business, and whether any shares were repurchased in the quarter.

Answer

CFO Robert Curda confirmed that some, but not all, cash from Russia was retrieved and that the $1.8 million in assets for sale is a facility in Colombia. President and CEO Richard Kelley added that the land sale is expected to close early in the next calendar year, noted a slight seasonal slowdown in the water business for the calendar fourth quarter despite a strong 2025 backlog, and confirmed zero shares were bought back.

Scott Bundy from Moors & Cabot inquired how the current downturn compares to previous cycles over the last 30 years and asked for perspective on the consequences of the severe lack of investment in the energy sector, particularly in the U.S.

Answer

Stephen Jumper, Chairman, President & CEO, described the current cycle as by far the deepest he has experienced, calling it a "multi-headed monster" due to the combination of supply issues, COVID-related demand destruction, and investor apathy. He opined that the significant underinvestment worldwide will eventually require increased, more prudent capital deployment, which should ultimately benefit the seismic sector as companies utilize technology for better results.