Q2 2025 Geospace Technologies Corp Earnings Call
Operator: Stand by, we're about to begin. The Geo...
Please standby were about to begin.
Speaker Change: Welcome to the G O space technologies second quarter 2025 earnings conference call hosting the call today from Geo space is Mr. Rich Kelly, President and Chief Executive Officer. He is joined by Robert Courteau, Chief Company's Chief Financial Officer, today's call is being recorded and will be available on the Geo space technologies Investor.
Robert Curda: by Robert Curda, the company's Chief Financial Officer. At this time, all participants have We would like to ask a question at that time. If your question has been answered, you may remove yourself from the queue by pressing star 2.
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Speaker Change: At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the presentation. If you would 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.
Speaker Change: We ask that you. Please pickup your handset to allow optimal sound quality lastly, if you should require operator assistance press Star zero. It is now my pleasure to turn the floor over to rich Kelly, Sir you may begin.
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Rich Kelly: Thank you Bill.
Richard Kelley: Good morning and welcome to Geospace Technologies conference call for the second 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.
Rich Kelly: Good morning, and welcome to Geospatial Technologies conference call for the second quarter of fiscal year 2025.
Rich Kelly: I am rich Kelly, the company's Chief Executive Officer, and President I'm joined by Robert Courteau, The company's Chief Financial Officer.
Richard Kelley: In our prepared remarks, I will first provide an overview of the second quarter, and Robert will then follow up with more in-depth commentary on our financial performance, as well as an overview of our financials.
Robert Courteau: In our prepared remarks, I will first provide an overview of the second quarter and Robert will then follow up with more in depth commentary on our financial performance as well as an overview of our financials.
Richard Kelley: I will then give some final comments before opening the line for questions.
Robert Courteau: I will then give some final comments before opening the line for questions.
Richard Kelley: Today's commentary on markets, revenue, planned operations, and capital expenditures may be considered forward-looking as defined in 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.
Robert Courteau: Today's commentary on markets revenue planned operations and capital expenditures may be considered forward looking as defined in the private Securities Litigation Reform Act of 1995.
Robert Courteau: These statements are based on what we know now but actual outcomes are affected by uncertainties beyond our control or predictions.
Robert Courteau: Both known and unknown risks can lead to results that differ from what is said or implied today.
Richard Kelley: Some of these risks and uncertainties are discussed in our SEC Form 10-K and 10-Q filings.
Robert Courteau: 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 geospatial Dot Com website, which I invite everyone to browse through and learn more about G O space, our subsidiaries and our products.
Richard Kelley: 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.
Robert Courteau: Yes.
Robert Courteau: Note that todays recorded information is time sensitive and may not be accurate at the time, one listens to the replay.
Richard Kelley: Yesterday, after the market closed, we released our financial results for the period ended March 31st, our second quarter of the fiscal year. For the three months ended March 31st, 2025, we reported revenue of $18 million with a net loss of $9.8 million. For the first half of our fiscal year, we had $55.2 million in revenue with a net loss of $1.4 million.
Robert Courteau: Yesterday after the market closed we released our financial results for the period ended March 31st or second quarter of the fiscal year.
Robert Courteau: For the three months ended March 31, 2025, we reported revenue of $18 million with a net loss of $9 $8 million for.
Robert Courteau: For the first half of our fiscal year, we had $55 $2 million in revenue with a net loss of $1 $4 million.
Richard Kelley: Like many companies, the second quarter provided volatility for our company. We had record performance in our smart water segment, with our Hydrocon universal connectors continuing to outperform year over year. We are also experiencing increased interest in our Aquana product offering. We anticipate continued organic growth in this market segment.
Robert Courteau: Like many companies the second quarter provided volatility for our company.
Robert Courteau: We had record performance in our Smartwater segment.
Robert Courteau: With our hydrocarbon Universal connector is continuing to outperform year over year.
Robert Courteau: We're also experiencing increased interest in our corner product offerings.
Robert Courteau: We anticipate continued organic growth in this market segment.
Richard Kelley: Offsetting that is the ongoing uncertainty in the energy solution segment. Global trade concerns, tariffs, and decreasing oil prices have impacted project decisions for our customers, resulting in delayed and canceled opportunities.
Robert Courteau: Offsetting that is the ongoing uncertainty in the energy solutions segment.
Robert Courteau: Global trade concerns tariffs and decreasing oil prices have impacted project decisions for our customers, resulting in delayed and cancelled opportunities.
Richard Kelley: The OBN rental market and land equipment sales continue to underperform previous years. That being said, we recently announced a Mariner contract and have ongoing inquiries for possible future requirements for OVN solutions. Combined with the ongoing PRM studies, this reinforces the market's interest in our technology and possible future resilience.
Robert Courteau: The Ob and rental market and land equipment sales continued to underperform previous years.
Robert Courteau: That being said, we recently announced our Mariner contract and have ongoing inquiries for possible future requirements for Ob and solutions.
Robert Courteau: Combined with the ongoing P. R. M studies this reinforces the market's interest in our technology and possible future resilience.
Richard Kelley: Our intelligent industrial segment is negatively impacted by tariff concerns, especially for our Exxon products. Recognizing those external factors, we are working to optimize our supply chains to minimize the impact to our company and our customers. Our industrial center products remain steady, and with increased interest in American-made products, there are more inquiries into our contract manufacturing business.
Robert Courteau: Our intelligent industrial segment is negatively impacted by tariff concerns, especially for our <unk> products.
Robert Courteau: Recognizing those external factors, we are working to optimize our supply chain to minimize the impact to our company and our customers.
Robert Courteau: Our industrial sensor products remained steady and with increased interest in American made products. There are more inquiries into our contract manufacturing business.
Richard Kelley: We are well positioned to exploit the tremendous potential we have created with our innovative IoT technologies, our talented staff, and our continuing diversification into new high-margin markets in the smart water and intelligent industrial segment. Additionally, our current backlog places us in a strong position going into the second half of the year.
Robert Courteau: We are well positioned to exploit the tremendous potential we have created with their innovative Iot technologies, our talented staff and our continuing diversification into new high margin markets and the Smartwater and intelligent industrial segments.
Robert Courteau: Additionally, our current backlog places us in a strong position going into the second half of the year.
Richard Kelley: Importantly, the longstanding strength of our balance sheet with no debt and $19.8 million in cash and short-term investments illustrate our conservative approach to managing the business. Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability. Beyond our traditional conservative fiscal management in our profitability plan, we continue to pursue growth through acquisition and immediately accretive additions to our top-line revenue.
Robert Courteau: Importantly, the long standing strength of our balance sheet with no debt and $19 $8 million in cash and short term investments illustrate our conservative approach to managing the business.
Robert Courteau: Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability.
Robert Courteau: Beyond our traditional conservative fiscal management and our profitability plan, we continue to pursue growth through acquisition and immediately accretive additions to our topline revenue.
Richard Kelley: Overall, I have continued optimism that our company is well positioned to perform in our newer markets.
Robert Courteau: Overall I have continued optimism that our company is well positioned to perform in our newer markets.
Richard Kelley: I will now turn the call over to Robert to provide more detail on our financial performance. Thanks, Rich.
Robert Courteau: I will now turn the call over to Robert to provide more detail in our financial performance.
Robert Curda: 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 second quarter ended March 31st, 2025, we reported revenue of $18 million compared to last year's revenue of $24.3 million. The net loss for the quarter was $9.8 million or $0.77 per diluted share, compared to last year's net loss of $4.3 million or $0.32 per diluted share. For the six months ended March 31st, 2025, we reported revenue of $55.2 million, compared to revenue of $74.3 million last year.
Robert Courteau: Thanks, Rich 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.
Robert Courteau: In yesterday's press release for our second quarter ended March 31, 2025, we reported revenue of 18 million compared to last year's revenue of $24 3 million.
Robert Courteau: The net loss for the quarter was $9 8 million or 77 cents per diluted share compared to last year's net loss of $4 3 million or 32 cents per diluted share.
Robert Courteau: For the six months ended March 31, 2025, we reported revenue of $55 2 million compared to revenue of $74 3 million last year, our net loss for the six month period was $1 4 million or 11 cents per diluted share compared to last year's net income of $8 four.
Robert Curda: Our net loss for the six-month period was $1.4 million, or $0.11 per diluted share, compared to last year's net income of $8.4 million, or $0.65 per diluted share. Our SmartWater segment generated revenue of $9.5 million for the three-month period ended March 31, 2025. In comparison, revenue for the same prior year period was $6.4 million, an increase of 48%. Revenue for the six-month period of 2025 was $16.8 million compared to $10.6 million from the same period of fiscal year 2024.
Robert Courteau: Six.
Robert Courteau: Per diluted share.
Robert Courteau: Our Smartwater segment generated revenue of $9 5 million for the three months period ended March 31, 2025, and comparison revenue for the same prior year period was $6 4 million an increase of 40, 48%.
Robert Courteau: Revenue for the six months period of 2025 was $16 8 million compared to $10 6 million from the same period of fiscal year 2024. This marks a record high level of second quarter and first half revenue for our Smartwater segment.
Robert Curda: This marks a record high level of second quarter and first half revenue for our smart water segment. Our energy solution segment second quarter revenue totaled $2.6 million. This compares to $11 million in revenue for the same period of fiscal year 2024, representing a decrease of 77%. Revenue for the six-month period of 2025 is $26.9 million, a decrease of 47 percent over the equivalent prior year period of $50.9 million. The decrease in revenue for the three-month and six-month periods was due to lower demand for our marine wireless products and lower utilization of our marine ocean bottom node rental fleet.
Robert Courteau: Our energy solutions segment second quarter revenue totaled $2 6 million.
Robert Courteau: This compares to 11 million in revenue for the same period of fiscal year 2024, representing a decrease of 77%.
Robert Courteau: Revenue for the six month period of 2025 is $26 9 million a decrease of 47% over the equivalent prior year period, a 50.9 million.
Robert Courteau: The decrease in revenue for the three month and six month periods was due to lower demand for our marine wireless products and lower utilization of our marine Ocean bottom node rental fleet.
Robert Curda: The three-month period was also impacted by concerns of collectability of receivables from an OBN rental customer. Our concern resulted in the rent receivable balance due from this customer of $2.2 million to be reversed against rental revenue. Any future cash we receive from this customer will be recognized as rental revenue. The Intelligent Industrial Segment Revenue totaled $5.9 million for the three-month period. This compares with $6.7 million from the equivalent year-ago period, representing a decrease of 13 percent. Revenue for the six-month period of fiscal year 2025 was $11.5 million. This compares to the same prior year period revenue of $12.6 million, a decrease of 9%.
Robert Courteau: The three month period was also impacted by concerns of Collectability of receivables from Obi in rental customer.
Robert Courteau: Our cursor resulted in rent receivable in the rent receivable balance due from this customer a $2 2 million to be reversed against rental revenue.
Robert Courteau: The future cash we received from this customer will be recognized as rental revenue.
Robert Courteau: The intelligent industrial segment revenue totaled $5 9 million for the three month period. This compares with $6 7 million from the equivalent year ago period, representing a decrease of 13%.
Robert Courteau: Revenue for the six month period of fiscal year 2025 was $11 5 million. This compares to the same prior year period revenue of $12 6 million a decrease of 9%.
Robert Curda: The decrease in revenue for both periods was primarily due to revenue recognized for the three and six months ended March 31, 2024, on a government contract that we completed in the fourth quarter of fiscal year 2024, and lower demand for our imaging products. The decrease for both periods was partially offset by an increase in demand for our sensor products. Our operating expenses increased by $1.6 million, or 16%, for the second quarter of 2025, and increased $4.6 million, or 23%, for the six-month period ended March 31, 2025. The increase in operating expenses for both periods is due to higher personnel costs, increased research and development project costs, and higher sales and marketing work.
Robert Courteau: The decrease in revenue for both periods was primarily due to revenue recognized for the three and six months ended March 31, 2024 on a government contract that we completed in the fourth quarter of fiscal year 2024 <unk>.
Robert Courteau: And lower demand for imaging products. The decrease for both periods was partially offset by an increase in demand for our sensor products.
Robert Courteau: Our operating expenses increased by $1 6 million or 16% for the second quarter of 2025, and increased $4 6 million or 23% for the six month period ended.
Robert Courteau: March 31, 2025, the increase in operating expenses for both periods is due to higher personnel cost increased research and development project cost and higher is higher sales and marketing expenses.
Robert Curda: Our six-month cash investments into our rental fleet is $900,000, and property plant equipment investments is $4.4 million. Our balance sheet at the end of the second quarter reflected $19.8 million of cash in short-term investments. And our credit facility has available borrowings of $15 million as of March 31, 2025. Additionally, the company's working capital is $71 million, which includes $36 million of trade accounts and financing receivables.
Robert Courteau: Our six month cash investments into our rental fleet is 900000 and property and plant property plant equipment investments is $4 4 million.
Robert Courteau: Our balance sheet at the end of the second quarter reflected $19 8 million of cash and short term investments and our credit facility has available borrowings of $15 million as of March 31, 2025. Additionally.
Robert Courteau: Additionally, the company's working capital is $71 million, which includes $36 million of trade accounts and financing receivables.
Robert Curda: Lastly, we own real estate holdings in Houston and around the world that are owned free and clear without any leverage.
Robert Courteau: Lastly, we own real estate holdings in Houston and around the world that are owned free and clear without any leverage.
Robert Curda: This concludes my discussion, and I'll turn the call back to Rich. Thank you, Robert.
Rich Kelly: This concludes my discussion and I'll turn the call back to rich.
Rich Kelly: Thank you Robert.
Richard Kelley: This concludes our prepared commentary, and I will now turn the call back to the moderator for any questions from our listeners. Thank you.
Speaker Change: This concludes our prepared commentary and I will now turn the call back to the moderator for any questions from our listeners.
Speaker Change: Thank you Mr. Kelly, ladies and gentlemen at this time, if you would like to ask a question. Please press star one on your telephone keypad. If you find your question has been addressed you may remove yourself from the queue by pressing star to once again that is star one to ask a question and we will pause for a moment to allow questions to queue.
Speaker Change: Okay.
Speaker Change: And we'll take our first question. This morning from Bill does L. M. At Teton Capital Bill. Please go ahead.
Unknown Attendee: First of all, you'd mentioned the cost cutting that you all continue to work on.
Bill: Thank you first of all you'd mentioned the cost cutting that you all continue to work on.
Richard Kelley: How are you thinking about a target break-even level, or is that even the way at which you're approaching the exercise? Good morning, Bill. It's a good question. We're really more focused on strategic cost cutting. So as we evaluate our overall, you know, individual business units, which ones continue to make sense? Which ones are we going to invest in going forward versus which ones we were considering possible making changes? So it's more strategic and really just trying to focus on what makes the best sense for the business.
Bill: Are you thinking about a target breakeven level or is that even the way in which you're approaching the the exercise.
Speaker Change: Good morning, Bill. Good question, we're really more focused on strategic cost cutting so as we evaluate our overall individual business units, which ones continue to makes sense, which ones are we going to invest in going forward versus which ones. We were considering a possible <unk>.
Bill: The changes so it's more strategic.
Bill: And really just trying to focus on what makes the best sense for the business.
Unknown Attendee: That's helpful. Thank you.
Bill: That's helpful. Thank you and then the.
Unknown Attendee: And then The Mariner contract, I believe in the press release, you have a phrase similar to interest in possible future requirements, something to that effect. Would you please...
Bill: The Mariner contract I believe in the press release, you have a phrase similar to interest and possible future requirements something to that effect would you. Please.
Richard Kelley: Discuss what that means. It sounds like that's code for something more. That's a good question. So that's a new customer for us over in the Caspian area. And there I think they have a business strategy where they anticipate increased activity in that area. So once they're operational, I think that they'll be evaluating what their future business might look like. So we're definitely having discussions to be a partner with them going forward to help them grow and develop their business.
Bill: Uh huh.
Bill: Discuss what that means it sounds like that's code for something more interesting.
Bill: [laughter] Yeah. It's a good question. So that's a new customer for us over in the Caspian area and.
Bill: And there I think they have a business strategy, where they anticipate increased activity in that area. So once they're operational I think that there'll be evaluating what their future business might look like.
Bill: So we are definitely having discussions to be a partner with them going forward to help them grow and develop their business.
Unknown Attendee: That is, that is helpful. Thank you.
Bill: That is a that is helpful. Thank you and then.
Unknown Attendee: And then The federal government is working on a budget.
Bill: The federal government has.
Bill: <unk> is working on a budget.
Unknown Attendee: What do you know about the implications of that budget for you all? from the various, various.
Bill: What do you know about the implications of that budget for you all and I'm from the various various businesses.
Richard Kelley: I wish my crystal ball was more clear on that. I don't think Congress even knows what they're doing sometimes. I will say that we are pretty bullish for our border security products. I think, as you read in the press, there's lots of interest in border security, border protection, and they're going to be looking at technologies and solutions that help them secure the border. So I think that's all positive for us. We've not gotten any news or any indication from them specifically. I think we just feel fairly bullish about it. The same can be said on the defense side.
Bill: I wish my Crystal ball is more clear on that I don't think Congress, even knows what theyre doing sometimes.
Bill: I will say that we are pretty bullish.
Bill: For our border security products I think there as you can as you're reading the press there is lots of interest.
Bill: And border security border protection.
Bill: And they're going to be looking at technologies and solutions that help them secure the border. So I think thats all positive for us we have not gotten any news or any indication from them specifically I think we just feel fairly bullish about it.
Bill: The same can be said on the defense side you know the they are focused on growing the defense part of the business. The defense part of the country and again, even though we don't today know of any specific opportunities.
Richard Kelley: They are focused on growing the defense part of the country. And again, even though we don't today know of any specific opportunities, we feel pretty good about it. And the conversations we are having with our partners.
Bill: We feel pretty good about it and the conversations we are having with our partners.
Richard Kelley: So overall, if Congress can actually reconcile and pass a budget, I think it's going to be positive for us as a company.
Bill: No.
Bill: Overall, if congress can actually reconcile and passed a budget I think it's going to be positive for us as a company.
Richard Kelley: And Rich, do we understand correctly that the continuing resolution that the budget It seems to have perpetually been under, that that has negative implications or had negative implications for you all, whereas passing an actual budget, even if it is at the end of the year, does have some positive, potential positives for you all, is that correct? It's interesting. You know who you speak to in regards to the continuing resolution because even though it was a CR It does seem that Congress and the administration are reshuffling those dollars. So, there are possibilities that some of our projects get funded as they try to divert more money to border security.
Rich Kelly: And rich do do we understand correctly that.
Bill: The continuing resolution is that the budget.
Bill: Boy seems to have perpetually been under that that has negative implications or had negative implications for you all.
Speaker Change: Whereas passing.
Bill: Actual budget, even if it is at the end of the year. It does have some positive.
Speaker Change: Potential positives for you all is that correct.
Speaker Change: Okay.
Speaker Change: It's interesting.
Speaker Change: You know, who you speak to the guards to the continuing resolution because even though it was a C. R.
Speaker Change: Does seem that Congress administration are reshuffling those dollars.
Speaker Change: So there are possibilities that some of our projects get funded as they try to divert more money to border security.
Richard Kelley: So we are following that closely and we're talking to our partners, both our lobbying partners and our commercial partners.
Speaker Change: So we are we are following that closely and we're talking to our partners, both our lobbying partners and our commercial partners.
Richard Kelley: So it's going to be interesting to see what happens over the coming months. As funds may be favorably diverted.
Speaker Change: It's been interesting to see what happens over the coming months.
Speaker Change: Yeah.
Speaker Change: And.
Speaker Change: Yeah as funds may be favorably diverted do you sense that those are for different.
Richard Kelley: Do you sense that those are for different applications than you have been testing for up to this point? Or is it a continuation of what the Border Patrol has been evaluating for many quarters?
Speaker Change: Different applications than you have been Ben.
Speaker Change: Testing for up to this point or is it a continuation of of what the border patrol there's been evaluating for for many quarters now.
Richard Kelley: So we went to the Border Security Expo a few weeks ago over in Phoenix, and I would say the message is it's an all-in approach. So whether it's boots on the ground, whether it's technology, whether it's support functionality, I think the message from Hohmann and Noem was it's all in to try to secure the border. So, I think if you have an interesting solution that meets their mission, that you're going to have an opportunity in that space. So, if we think about what we offer today, I think You know, it's an interesting technology with regards to tunnel detection and tunnel prevention.
Speaker Change: So we went to the border security Expo a few weeks ago over in Phoenix, and I would say the message is it's an all in approach.
Speaker Change: So whether it's boots on the ground, whether it's the technology whether it's.
Speaker Change: Support functionality I think the message from home and know what it's all in to try to secure the border.
Speaker Change: So I think if you have an interesting solution that meets their mission that youre going to have an opportunity in that space. So if we think about what we offer today I think.
Speaker Change: It's an interesting technology with regards to tunnel detection and tunnel prevention, So I feel pretty good about that.
Unknown Attendee: So I feel pretty good about that.
Unknown Attendee: Great, thank you.
Speaker Change: Great. Thank you and then one additional question on the PR front that you referenced in the release in your remarks.
Unknown Attendee: And then one additional question on the PRM front, you referenced in the release in your remarks, the ongoing discussions, what implications if and Have you heard from those that you were in discussions with about lower oil prices and or tariffs negatively impacting? their decision process. That's a good question and one that we are obviously monitoring closely. You know, our ongoing discussions, as we've said in the past, are mostly with national oil companies, not necessarily the independents, and so their decision-making is more strategic long-term than possible short-term impacts with regards to tariffs and things like that.
Speaker Change: The ongoing discussions what implications.
Speaker Change: If any.
Speaker Change: Have you heard from from those that you were in discussions with about lower oil prices and or tariffs.
Speaker Change: Tivoli impacting their decision process.
Speaker Change: That's a good question and one that we're obviously monitoring closely.
Speaker Change: Our ongoing discussions as we said in the past are mostly with national oil companies not necessarily the independents and so their decision making is more strategic long term than possible short term impacts with regards to tariffs and.
Speaker Change: And things like that so.
Richard Kelley: So, we're still having conversations. They're still interested in the technology. They look at it as how to maximize the return on their investment on their overall reservoirs over the life of the reservoir. And they look at the PRM technology versus nodal technology, and if you do a total cost of ownership over the life of a reservoir, PRM starts to make sense. And so I think that there's still interest in the technology. The feed studies are still ongoing. And so ultimately, the national health company has to make the decision on how they want to proceed. But it certainly is a short-term concern.
Speaker Change: They are still we're still having conversations theyre still interested in the technology. They look at it as how to maximize the return on their investment on their overall reservoirs over the life of the reservoir.
Speaker Change: And they look at the PRN technology versus nodal technology, and if you do a total cost of ownership over the life of reservoir PRN starts to make sense.
Speaker Change: And so I think that there is still interest in the technology. The feed studies are still ongoing and so ultimately that the national oil company has to make the decision on how they want to proceed.
Speaker Change: But it certainly is a short term concern, but I think long term in their decision, making process is not as much of a weight as what the what they can gain overall from the technology.
Unknown Attendee: But I think long-term in their decision-making process, it's not as much of a weight as what they can gain overall from the technology. Great, that's helpful.
Unknown Attendee: I'll step back in queue and let someone else ask about Aquana and others. Thank you very much. Thank you, Bill, appreciate it. Thank you.
Speaker Change: Great. That's helpful I'll step back in queue, and let someone else ask about the quanta others. Thank you very much. Thanks.
Speaker Change: Thanks, Bill appreciate it.
Operator: And just a quick reminder, ladies and gentlemen, any further questions this morning, please press star 1.
Speaker Change: Thank you and just a quick reminder, ladies and gentlemen, any further questions. This morning. Please press star one well go next now to Sheldon Grodsky Grodsky associates.
Sheldon Grotsky: We'll go next now to Sheldon Grotsky of Grotsky Associates. Yes, good morning, everybody. Back on February 17th, you announced that you had this $7.6 million contract from Mariner Ocean Bottom Nodes. Was that all received in the quarter or was any of that received in the quarter? No. No, two words.
Sheldon Grodsky: Good morning, everybody.
Speaker Change: On February 17th.
Speaker Change: So you had this.
Speaker Change: Seven 6 million dollar contract from Mariner Ocean bottom nodes.
Speaker Change: Did was that well received in the quarter or was any of that received in the quarter.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Oh two ish.
Richard Kelley: We made the announcement, but the delivery was always planned for later in the year.
Speaker Change: That we made the announcement, but the delivery was always planned for later in the year.
Sheldon Grotsky: Okay, so that was not I think, I'm kind of hoping you guys have touched bottom in this quarter, this is rather dramatic. Is there any expectation that the revenues will continue at this low level? I know you had some odd items in the quarter, and now you've... Some things haven't, didn't happen.
Speaker Change: Okay.
Speaker Change: That was not in there okay.
Speaker Change: Well.
Speaker Change: I think I'm kind of hoping you guys have touched bottom in this quarter. This is it.
Speaker Change: Rather dramatically.
Poor.
Speaker Change: Our results, especially in terms of the revenues.
Speaker Change: And is there any expectation that the revenues will continue at this low level I know you had some odd items in the quarter.
Speaker Change: And then now you've just mentioned that some things haven't had it didn't happened in the quarter, but.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Go ahead.
Speaker Change: Yeah. So Sheila I appreciate the question that I think if you look historically at G. O space. The second quarter has always been a challenge for for the business.
Richard Kelley: I think if you look historically at geospace, the second quarter has always been a challenge for the business, just from the cyclical nature of how we operate. We do anticipate with our backlog that we're going to be much stronger in Q3 and Q4. and our indicators that we're looking at point in that direction as well. So I think, as I mentioned, there's some push out on some schedules, but no significant cancellations. We have some small things, but no significant cancellations. Our customers are still engaged. They're monitoring very closely what's going on in the market space.
Speaker Change: Just from the cyclical nature of how we operate.
Speaker Change: We do anticipate with our backlog that we're going to be much stronger in Q3 and Q4.
Speaker Change: And the R are indicators that we're looking at point in that direction as well. So I think as I mentioned there are some.
Speaker Change: Push out on some schedules, but no no significant cancellations, we have some small things, but no significant cancellations are customers are still engaged there are monitoring very closely what's going on in the market space.
Richard Kelley: As everybody knows, it's very volatile right now, especially on the oil and gas side. But a lot of these investments that our partners and our customers are making, they're more longer term decisions. So, yeah, I think there's risk there, but we're not overly pessimistic at this point.
Speaker Change: Everybody knows it's very volatile right now, especially on the oil and gas side.
Speaker Change: But a lot of these investments that are our partners.
Speaker Change: Customers are making their more longer term decisions.
Speaker Change: So yes.
Speaker Change: Yes, I think there is risk there, but we're not we're not overly pessimistic at this point.
Richard Kelley: Sheldon, also, if that announcement gave you the impression we expected that revenue to happen in Q2, we'll do a much better job of communicating when we expect that to happen in the future, because it was never planned for Q2. Yeah, we announced the partnership, but the customer always anticipated taking delivery in the later quarter.
Speaker Change: Sheldon also with that announcement gave you the impression we expected that revenue to happen in Q2, we will do a much better job of communicating when we expect that to happen in the future because it was never planned for Q2, yes, we announced the partnerships, but the customer always anticipated taking.
Speaker Change: And the later quarter.
Sheldon Grotsky: Thank you.
Speaker Change: Thank you.
Speaker Change: Mhm.
Speaker Change: Thank you and just a final reminder, ladies and gentlemen, any further questions. This morning. Please press star one at this time, we'll pause for just one moment.
Scott Bundy: We'll go next to Scott Bundy.
Speaker Change: Moors <unk> Cabot Scott. Please go ahead.
Unknown Attendee: Good morning, guys. Just a couple of quick questions. Robert. The sale of the 17 acres, you guys anticipate that we will, that will be completed in the current quarter? Yes, sir. That's our anticipation as of today. It was originally discussed that was sort of in the 7 to 10 million range. Is that still accurate? That's, that's, it's in that range. Yes, sir.
Speaker Change: Good morning, guys, just a couple of quick questions Rob.
Scott Bundy: Robert.
Scott Bundy: The sale of the 17 acres you guys anticipate that we will that will be completed in the current quarter.
Speaker Change: Yes, Sir.
Scott Bundy: That's our anticipation as of today.
Scott Bundy: And.
Scott Bundy: It was originally discussed that was sort of in the $7 million to $10 million range is that still accurate.
Scott Bundy: Yeah.
Scott Bundy: That's that's a it's in that range, yes, Sir.
And.
Robert Curda: The there was a discussion in your 10Q last time that the National Oil Company would make a final investment decision for PRM sometime in the current quarter. Is that still the case? So, there may be a little bit of confusion, Scott. The decision with regards to the feed study is due in the current quarter. How they make a decision based on that feed study would come later on.
Scott Bundy: The there was a discussion in your 10-Q last time that the National oil company would make a final investment decision for PR and <unk>.
Scott Bundy: Sometime in the current quarter is that still the case.
Speaker Change: So there may be a little bit of confusion Scott the decision with regards to the feed study is due in the current quarter how.
Scott Bundy: How they make a decision based on that feed study would come later on.
Unknown Attendee: Okay, and lastly, Can you give us a rough idea of what we're going to be looking at today? What sort of revenue number you need from the water business to begin making money? given your allocated costs. from the from our smart water division. Correct. Is that what you're asking?
Scott Bundy: Okay and lastly.
Scott Bundy: Can you give us a rough idea of.
Scott Bundy: What sort of revenue number you need from the water business to begin making money.
Scott Bundy: Given your allocated costs.
Scott Bundy: Yeah.
Scott Bundy: From the from our Smartwater Division.
Scott Bundy: Correct.
Robert Curda: I mean, when you say start making money, are you talking about profitability for the entire company or profitability for that division? I mean, it has the operating income for the quarter. That's operating income for the year. So in the 10Q last quarter, we increased revenues pretty dramatically, but the costs associated with those revenues were also pretty substantial. It didn't look like you were making any money. That's what I'm trying to understand. Yeah, we we made money we we had operating income from their last last quarter. I, you know, We're going to continue to make money from that, that segment going forward, even with the change in our allocation methodology for the new business segment.
Scott Bundy: Correct correct.
Speaker Change: When you say start making money or you're talking about profitability for the entire company or profitability for that division.
Scott Bundy: I mean, we last it has operating income for the quarter.
Scott Bundy: So last year and operating income for the year.
Speaker Change: So so in the 10-Q last quarter, we increased revenues pretty dramatically, but the cost associated with those revenues were also pretty substantial it didn't look like you are making any money, that's what I'm trying to understand.
Speaker Change: Yes, we make money, we we had operating income from their last last quarter.
Speaker Change: You know.
Speaker Change: We're going to continue to make money from that that segment going forward, even with the change in our allocation methodology for the new business segments.
Robert Curda: Yeah, got this rigged. I think I think last quarter was a result of how we allocate our overhead expenses. Not so much the business segment itself. That's exactly right.
Speaker Change: Yeah. Scott. This is Rick I think I think last quarter was.
Speaker Change: A result of how we allocate our overhead expenses, yes, not so much the business segment itself, that's exactly right and I don't anticipate the scenarios that generated that to reoccur. This fiscal year that doesn't mean, the scenarios can't reoccur in the future, but it won't.
Robert Curda: And I don't anticipate the scenarios that generated that to reoccur this fiscal year. That doesn't mean the scenarios can't reoccur in the future, but it won't happen again this fiscal year.
Speaker Change: It happened again this fiscal year.
Unknown Attendee: And last, my last question regarding Aquana. Can you give us an idea of what percentage Aquana is of the revenues? It still continues to be an insignificant portion. Single digit, Scott. Do you anticipate that to change over the course of the next nine months or in terms of people testing and using the product? So, what I would say is, over the next nine months, probably not, we're not going to see that kind of significant growth compared to the overall revenue of the corporation. I would say that as a percentage of our water segment, we will see that to increase over the coming periods.
Speaker Change: And lastly, my last question regarding a quanta can you give us an idea of what percentage of quanta is of the revenues.
Speaker Change: It still continues to be an insignificant portion of single digit Scott.
Speaker Change: Okay and.
Speaker Change: Do you anticipate that to change over the course of the next nine months are in terms of people testing and using the product.
Speaker Change: So what I would say is.
Speaker Change: Over the next nine months, probably not we're not gonna see that kind of significant growth compared to the overall revenue of the corporation I would say that as a percentage of our water segment, we will see that to increase over the coming periods.
Robert Curda: You know, we've talked about this in the past, the water municipalities are slow to adopt technology, but we're getting great positive feedback from the pilots that we have. And so, that distribution pipeline is 12 to 18 months from initial pilot to decision making, and then, of course, then they phase that in over time. So, I would say that in our business plan, we're looking at 24 to 36 months, what a quantity is going to look like with regards to significant impact on the corporation. And what do you determine to be significant? more than 10.
Speaker Change: You know we've talked about this in the past the <unk>.
Speaker Change: Water municipalities are slow to adopt technology, but we're getting great positive feedback from the pilots that we have and so that that's that's distribution pipeline is 12 to 18 months from initial pilot to decision, making and then of course in a phase that in over time, So I would say that.
Speaker Change: And our business plan, we're looking at 24 to 36 months, what what Colin is going to look like with regards to significant impact on the corporation.
Speaker Change: And what would you determined to be significant.
Speaker Change: More than 10%.
Unknown Attendee: Okay.
Unknown Attendee: Thanks, bye. Yeah, just one last comment on that. Remember, you know, any large energy solutions sale can significantly change the ratios. So we like to look at base business versus those kind of one off sales that we do we do get from time to No, I understand.
Speaker Change: Okay.
Speaker Change: Thanks, Brian.
Speaker Change: Yes, just one last comment on that remember.
Speaker Change: Any large [laughter].
Speaker Change: <unk> energy solutions sale can significantly change the ratios.
Speaker Change: So we went to look at our base business versus those kind of one off sales that we do we do get from time to time.
Speaker Change: No I understand thanks, guys.
Unknown Attendee: Thanks, guys.
Bill: Thanks Scott, I appreciate it. Passover, kind of where the real. bulk of activity is, which is in the Hydrocon connectors. You've talked about, I think, 20-some million connectors. And I think, in response to the last questioner's question, you said that it takes time for, essentially, the flywheel to get moving. So the question is, is relative to the Hydrocon connector. Are you at some point where you anticipate a and and increasing rate of growth and and and essentially where there's just a a massive momentum. behind that, behind that business now. Whether the answer is yes or no, would you provide some more feedback and color around kind of how that business has developed.
Speaker Change: Thanks, Scott I appreciate it Scott.
Speaker Change: Yeah.
Speaker Change: Thank you and we'll take a follow up question now from Bill <unk> Bill. Please go ahead.
Speaker Change: Thank you I actually wanted to continue down the smartwater path, because I realized that I I have a tendency to to jump to the what's exciting and new which in this case is a quanta and and.
Speaker Change: Pass over kind of where the the real bulk of activity is which isn't the the hydrocarbon connectors.
Speaker Change: So.
Speaker Change: You've talked about a 20 some million connectors.
Hank: And Hank in response to the last question here is Oh.
Speaker Change: Question, you said that it takes time for the essentially the flywheel to to get moving.
Speaker Change: So the question is is relative to the hydrocarbon connectors.
Speaker Change: Are you at at some point, where you anticipate a O.
Speaker Change: And an increasing rate of growth and essentially where there's just a massive momentum behind that are behind that business now.
Speaker Change: And and.
Speaker Change: What are the answer is yes, or no would you provide some more more feedback and had color around kind of how that business has developed it right now it feels like you're an overnight success and what the opportunities and risks are and I I I jokingly say overnight success, because it's taken years to get here.
Richard Kelley: Right now it feels like you're an overnight success in what the opportunities and risks are and I jokingly say overnight success because it's taken you years to get here. I appreciate that, Bill, because a 10-year cycle is not really considered overnight for most people. But, yeah, I mean, Hydrocon has been a part of geospaces history. It was organically developed over 10 years ago, and, you know, we've been partnered with our strategic partner, NICOR, for a number of years. And between the two of us, we've done a great job building the inertia within the municipalities as making that connector the connector of choice.
Speaker Change: I appreciate that bill because tenure.
Speaker Change: The cycle is not really considered overnight for most people but.
Speaker Change: Yes, I mean hydro tonne has been a part of geospatial. Its history. It was organically developed over 10 years ago, and we've been partnered with with a R.
Speaker Change: Does your partner Nicor for a number of years and between the two of US we've done a great job building the inertia with any municipalities as making that connector the connector of choice and.
Richard Kelley: And what we're seeing today is, and we have seen for the last few years, is that continued 10 to 15% growth year-on-year adoption. You know, we work directly with the OEMs now with regards to smart meters, so all the major players are customers of ours now. Even the ones that have their own connectors, you see pressure from the municipalities to adopt the Hydrocon as the solution of choice. And so, yeah, it's been a very bright spot for geospace for the last number of years. We make good margins on that. It drives a good portion of our production here in Houston.
Speaker Change: What we're seeing today is and we have seen for the last few years is that continued 10% to 15% growth year on year.
Speaker Change: Adoption, we worked directly with the Oems now with regards to smart meters. So all the major players are customers of ours now.
Speaker Change: Even the ones that have their own connectors, you see pressure opinion municipalities to adopt the hydrocarbon as the solution of choice.
Speaker Change: And so yes, it's been a very bright spot for Geo space for the last number of years.
We make good margins on that.
Speaker Change: It drives a good portion of our prototype production here in Houston.
Richard Kelley: And we're producing, you know, around 5 million connectors a year now and generating, you know, a good portion of our revenue and margins are coming out of that business. is there, is there anything I guess, are you seeing an increased level of adoption so that 10 to 15% growth? It hums a larger number as you move forward. If we look at this particular corridor, the numbers were significantly greater than 10 to 15.
Speaker Change: And we are producing around 5 million connectors a year now.
Speaker Change: And generating a significant significant a good portion of our revenue and margins are coming out of that business.
Speaker Change: And is there is there anything.
Speaker Change: I guess are you seeing an increased level of adoption so that 10.
Speaker Change: 10% to 15% growth becomes a larger number as you as you move forward I mean, if we look at this at this particular quarter.
Speaker Change: The numbers were significantly greater than 10% to 15% you know pushing up over 40%.
Richard Kelley: Unknown Operator. You're pushing up over 40%. Yeah, and we're very happy about that. I tend not to be overly optimistic because the water municipality space, there is a certain level, not that we're anywhere close to that, but there is a level of saturation where the larger municipalities that buy in very large chunks, once they're adopted, then it transitions to kind of the medium and smaller municipalities where you don't get the same volume. Larger number of customers, smaller volumes, and so we still continue to expect growth. We're planning around growth. We have lots of flexibility on our manufacturing capacity.
Speaker Change: Yeah.
Speaker Change: And we're very happy about that I don't I tend not to be overly optimistic because the water municipalities space. There is a certain level nothing anywhere close to that but there is a level of saturation, where the larger municipalities that buy in very large chunks once they're adopted.
Speaker Change: And then it transitions to kind of the medium and smaller municipalities, where you don't get the same volume larger number of customers smaller volumes and so are we.
Speaker Change: We still continue to expect growth we're planning around growth, we have lots of flexibility on our manufacturing capacity, we see economics economies of scale and larger volumes.
Richard Kelley: We see economies of scale at larger volumes. So we're able to adapt and be flexible with regards to market requirements. So I mean, that is one of our best performing business segments for us today in product lines. Bill, I also want to remind you that we had a very good year in 2023, and unfortunately at the first half of 2024, our customers had overbought in the prior fiscal year, which led to a very poor first half in 2024. So this growth that we're seeing now in those two comparative periods is a result of overbuying from two years ago.
Speaker Change: So we were able to adapt and be flexible with regards to market requirements.
Speaker Change: I mean that is one of our best performing business segments for us today or in product lines. Bill also want to remind you that.
Speaker Change: We had a very good year in 2023, and unfortunately at the first half of 2024, our customers had over bought in their prior fiscal year, which led to a very poor first half in 2024. So.
Speaker Change: This growth that we're seeing now.
Speaker Change: And those two comparative periods as a result of over buying from two years ago.
Richard Kelley: Yeah, we have to we have to kind of go back to the supply chain crunch of 2023, 2022, 2023, where our customers were really nervous about being able to meet their customers demands. And so they, they bought our capacity as much as they could to make sure they can meet their requirements. And as Robert said, it's moved out through the first part of 2024. And I think we're back into kind of a normal growth now. So, I think if we see, we'll be monitoring closely year on year growth Q3 and Q4, just to see if we're seeing that same sort of trend.
Speaker Change: Yes, we have to we have to kind of go back to the supply chain Crunch of 2023 22 2023.
Speaker Change: Our customers were really nervous about being able to meet their customers' demands and so they they bought our capacity as much as they could to make sure. They can meet their requirements.
Speaker Change: And.
Speaker Change: As Robert said, it's moved out through the first part of 2024, and I think we're back into kind of a normal growth now.
Speaker Change: I think if we see will be monitoring closely our year on year growth Q3, and Q4 just to see if we're seeing that same sort of trend.
Richard Kelley: But for sure, we get lots of inquiries and this whole AMI smart meter movement, now that there's proven business cases at large and meet middle sized municipalities, the other municipalities who have been hesitant to make the decision, they're starting to see the ROI on that and starting to make decisions on investment.
Speaker Change: But for sure we get lots of inquiries and just this whole Ami smart meter movement now that there is proven business cases at large and middle size municipalities. The other municipalities who have been hesitant to make the decision. They are starting to see the ROI on that and starting to make decisions on investment.
Richard Kelley: Well, first of all, I want to say, keep your pessimism and so that we can continue to have 40% growth. That's fantastic. But it would you say that that have shifted from the early adopters now to kind of the mainstream. Is that where we're essentially at in the cycle? Yeah, absolutely. That's, as I said, you know, those early adopters, everyone was waiting to see a business case, and a true ROI for making the investment in AMR-AMI. Those cases are well published now, well communicated. If you, you know, we attend several conferences and conventions throughout the year in this space.
Speaker Change: Well first of all I want to say keep your pessimism and so that we can continue to have 40% growth that's fantastic.
Speaker Change: But it would you say that that you've shifted from the early adopters now to kind of the mainstream is that where we're essentially at and they are in the cycle.
Speaker Change: Yeah, absolutely that's a as I said those early adopters, everyone was waiting to see a business case and a true ROI for making the investment in <unk>.
Speaker Change: Those cases are well published now well communicated if you will.
Speaker Change: Several.
Richard Kelley: It's not a question of if they're going to make an investment, it's a question of when they're going to make the investment now.
Speaker Change: Conferences and conventions throughout the year in this space, it's not a question of if they're going to make an investment. It's a question of when theyre going to make the investment now.
Unknown Attendee: That's, that's helpful.
Speaker Change: That's that's helpful. One one additional question then.
Richard Kelley: One, one additional question then. and recognizing that the Aquana smart valves are not, truly not a market of any size today. But as you look out in terms of what the Aquana market size could be. versus the size of the hydrocon market, how would you relate those two to each other? That's a good question. So if we look at the The opportunity, the total addressable market in this space, there's roughly 60 million Water control valves in the nation, you know, just the dumb curb stop, turn the water on, turn the water off for a resident or for a company.
Speaker Change: Recognizing that the quantum of smart valves are not truly not a a.
Speaker Change: The market of any size today, but as you look out in terms of what the quantum of market size could be.
Speaker Change: Versus the size of of the hydrocarbon market how would you how would you relate to each other.
Speaker Change: That's a good question. So if we look at the.
Speaker Change: The opportunity the total addressable market in this space there is roughly $60 million.
Speaker Change: Water control valves in the nation, just a dumb curved stop turned the water all internal water off.
Speaker Change: For our resident or for our company.
Speaker Change: And.
Richard Kelley: of that, there's still a lot of municipalities that don't actually install meters or don't measure water. And so I think that's the real there's some of the opportunity. Of the ones that have it, they're putting smart meters in. Now the next question is, is how do I save money by being able to remotely shut off the water at the actual pit or at the actual water control valve? And that's the part that's now gaining traction is if you look at the operating cost to send a person in a truck out to a residence to turn the water off for or move in, move out, and then back, you know, today that's somewhere between $150 to $250 each time they do that.
Speaker Change: Of that there is still a lot of municipalities that don't actually install meters or don't measure water and so I think thats. The rollout there is some of the opportunity.
Speaker Change: Of the ones that have it they put out there putting smart meters and now. The next question is is how do I save money by being able to remotely shut off the water at the actual pit there at the actual.
Speaker Change: Water control valve.
Speaker Change: And that's the part that's now gaining traction is if you look at the operating cost to send a person in a truck out to our residents to turn the water off for non payment or move in move out and then back today.
Speaker Change: Today, that's somewhere between 150 to $250 each time, they do that.
Richard Kelley: So, there is a business case for making an investment in a remote shutoff valve where they can, sitting at the municipal office, turn that valve off and then turn that valve back on fairly quickly without having to pay overtime or have HSE risk for seeing someone out there. So, that's the business case. We do have some practitioners of that, some examples to point to now. So, it's similar to Hydrocon. You know, you had early adopters of Hydrocon. Now, it's not a question of if, but when. We see that same mentality playing out in the municipalities for Aquana.
Speaker Change: So there is a business case for making an investment in a remote shut off out where they can sitting at the municipal office turned that valve off and then turn that valve back on fairly quickly without having to pay over time or have HSA risks, we're seeing someone out there. So that's the business case.
Speaker Change: We do have some.
Speaker Change: Practitioners of that some examples to point you know so it's similar to hydrocarbon you know you had early early adopters of hydrocarbon now it's not a question of if but when we see that same mentality playing out in the municipalities for quanta. So we're in.
Richard Kelley: So, we're in the if. period right now. Does it make sense, you know, if we install it? And I think in the next couple of years you're going to see it's not necessarily if, but when. There's actually a business case for it. There's actually a cost savings model for it for the municipalities.
If period right now does it make sense, if we install it and I think in the next couple of years, you're going to see it's not necessarily if but when.
Speaker Change: A business case for it and there is actually a cost savings model for it for the municipalities.
Unknown Attendee: Great.
Unknown Attendee: Thank you both. We appreciate the extra time. Thanks, Bill. You have a good day. Thank you, Bo.
Speaker Change: Great. Thank you both and.
Speaker Change: I appreciate the extra time.
Speaker Change: Thanks, Bill do you have a good day.
Speaker Change: Thank you gentlemen, it appears we have no further questions. This morning, Mr. Kelley I'd like to turn things back to you Sir for any closing comments.
Speaker Change: Okay.
Richard Kelley: And thanks to all of you who joined our call today.
Speaker Change: Thank you Bo and thanks to all of you who joined our call today, we look forward to speaking to you again on our conference call for the third quarter of fiscal year, 2025, Goodbye and have a great day.
Richard Kelley: We look forward to speaking to you again on our conference call for the third quarter of fiscal year 2025. Goodbye and have a great day.
Speaker Change: Thank you Mr. Kelly again, ladies and gentlemen that will conclude the G O space technologies second quarter 2025 earnings conference call again, thanks, so much for joining US everyone and again, we wish you a great day Goodbye.
Unknown Executive: North Carolina School of Land too.
Speaker Change: Uh-huh.
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