Geospace Technologies Corporation (GEOS) reported its financial performance for the first quarter of fiscal year 2025, revealing a substantial decline in revenue and a mixed response from the market. The company posted earnings per share (EPS) of $0.65, with total revenue amounting to $37.2 million, down from $50 million in the same quarter last year. According to InvestingPro data, the company maintains a "FAIR" overall financial health score of 2.49 out of 5, with particularly strong metrics in its balance sheet structure. The company’s stock saw a slight decline in after-hours trading, reflecting investor sentiment towards the earnings report.
Key Takeaways
- Revenue decreased by 25.6% year-over-year, primarily due to a significant drop in the Energy Solutions segment.
- Net income for the quarter stood at $8.4 million, translating to an EPS of $0.65.
- The Smart Water segment experienced a 72% increase in revenue, highlighting growth potential.
- Operating expenses rose by 31%, driven by higher personnel costs and R&D expenditures.
- The company completed a $7 million stock repurchase program, buying back 716,000 shares.
Company Performance
Geospace Technologies experienced a challenging first quarter, with overall revenue declining significantly compared to the previous year. The Energy Solutions segment, a key revenue driver, saw a 39% decrease, which was a major factor in the overall revenue decline. However, the Smart Water segment showed promising growth, with a 72% increase, indicating potential areas for expansion.
Financial Highlights
- Revenue: $37.2 million, down from $50 million in Q1 FY2024.
- Earnings per share: $0.65, with net income at $8.4 million.
- Smart Water segment revenue: $7.3 million, a 72% increase.
- Energy Solutions segment revenue: $24.3 million, a 39% decrease.
- Operating expenses: $12.3 million, a 31% increase.
Earnings vs. Forecast
The earnings per share of $0.65 met market expectations, although the significant drop in revenue compared to the previous year raised concerns among investors. The company’s focus on expanding its Smart Water segment may help offset declines in other areas.
Market Reaction
Following the earnings announcement, Geospace Technologies’ stock experienced a 1.34% decline in after-hours trading, with the price dropping by $0.12 to $8.82. The stock remains near its 52-week low of $8.09, reflecting ongoing investor caution. InvestingPro analysis indicates the stock is currently trading below its Fair Value, with a current market cap of $113 million and an EV/EBITDA ratio of 3.74x. The company holds more cash than debt on its balance sheet, though it’s worth noting it’s been quickly burning through cash reserves.
Executive Commentary
CEO Rich Kelly expressed optimism about the company’s prospects, stating, "We are pleased to begin the fiscal year with a strong quarter, yielding net income for our shareholders." He also highlighted the positive market uptake and continued focus on client-driven growth.
Risks and Challenges
- The Energy Solutions segment’s declining revenue poses a risk to overall financial stability.
- Rising operating expenses, particularly in personnel and R&D, could impact profitability.
- The company’s reliance on new market opportunities, such as border security and carbon capture, may not yield immediate revenue.
Q&A
During the earnings call, analysts inquired about potential opportunities in border security and carbon capture technologies. The company indicated ongoing discussions but no immediate revenue from these areas. Executives also addressed the limited near-term opportunities for PRM technology, reflecting a cautious outlook in certain segments. For deeper insights into GEOS’s financial health and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company’s market position, financial metrics, and growth potential among 1,400+ top US stocks.
Full transcript - Geospace Technologies Corporation (GEOS) Q1 2025:
Call Moderator: Welcome to the Geospace Technologies First Quarter twenty twenty five Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelly, President and Chief Executive Officer. He is joined by Mr. Robert Curta, the Company’s Chief Financial Officer.
Today’s call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to Rich Kelly. Sir, you may begin.
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Good morning, and welcome to Geospace Technologies’ conference call for the first quarter of fiscal year twenty twenty five. As stated, I am Rich Kelly, the company’s Chief Executive Officer and President. I am joined by Robert Curta, the company’s Chief Financial Officer. In our prepared remarks, I will first provide an overview of the first quarter and Robert will then follow-up with more in-depth commentary on our financial performance as well as an overview of our recast financials under our new segment realignment. I will then give some final comments before opening the line for questions.
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. 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 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. Yesterday, after the market closed, we released our financial results for the period ended 12/31/2024, our first fiscal quarter for 2025. We are pleased to begin the fiscal year with a strong quarter, yielding net income for our shareholders. For the first quarter, we reported revenue of $37,200,000 and net income of $8,400,000 or $0.65 per diluted share. These results show that our focus on driving profitability through strategic decisions continues to generate positive financial performance.
This earnings release marks the first time we are reporting financial information since the announcement of our business segment realignment in September of twenty twenty four. We updated and reorganized our business segments to better reflect the areas where our technology driven solutions should produce improved results. As a reminder, our new business segments are Smart Water, Energy Solutions and Intelligent Industrial. In our Smart Water segment, we reported revenue of $7,300,000 for the quarter, an increase from a year ago period. This is a positive indicator given that historically the first quarter of fiscal year shows lesser revenue than other quarters due to both seasonality and government budget cycles.
We see significant potential in the municipal and multifamily marketplace for our water management solutions. We intend to grow both organically and through potential acquisition to realize our long term vision for this segment. In our Energy Solutions segment, we reported revenue of $24,300,000 for the quarter. It is important to view this decrease in context to the same period a year ago. Our quarter of fiscal year twenty twenty four included a large $30,000,000 sale of our Mariner shallow water ocean bottom nodes.
This quarter, we were pleased to secure a $17,000,000 OBX marine wireless product sale. Our Intelligent Industrial segment revenue totaled $5,600,000 for the quarter. This compared with $5,800,000 from the same period a year ago, a decrease of 4%, which we attribute to lower demand in the quarter for our imaging products. I will now turn the call over to Robert to provide more financial detail on our first quarter performance.
Robert Curta, Chief Financial Officer, Geospace Technologies: Thanks, Rich. 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 first quarter ended 12/31/2024, we reported revenue of $37,200,000 compared to last year’s revenue of $50,000,000 Net income for the quarter was $8,400,000 or $0.65 per diluted share compared to the first quarter of last year’s net income of $12,700,000 or $0.94 per diluted share. Revenue from our Smart Water segment totaled $7,300,000 for the three months ended 12/31/2024. This compares to $4,200,000 in revenue for the same year ago period, an increase of 72%.
The increase in revenue is due to higher demand for the company’s Hydrakon cable and connector products. The Energy Solutions segment revenue totaled $24,300,000 for the three months ended 12/31/2024. This compares to $39,900,000 in revenue for the first quarter of fiscal year ’twenty four, a decrease of 39%. Revenue for the three months ended 12/31/2024 included a $17,000,000 OPX marine wireless product sale from our rental fleet. However, in comparison, revenue for the first quarter of the prior year included a $30,000,000 sale of our marine shallow water option bottom notes.
Additionally, the reduction in revenue for the first quarter of fiscal year twenty twenty five was also due to lower utilization of the OBX rental fleet. Revenue for our Intelligent Industrial segment totaled $5,600,000 for the three month period ended 12/31/2024. This compares with $5,800,000 from the same year ago period, a decrease of 4%. The decrease in revenue for the three months ended 12/31/2024 was primarily due to lower demand for our imaging products. This decrease was partially offset by an increase in demand for our industrial sensor products.
The first quarter of fiscal year twenty twenty five operating expenses were $12,300,000 This is an increase of 31% compared to $9,400,000 for the first three months of fiscal year twenty twenty four. The increase is due to higher personnel costs related costs including wages, benefits, severance, recruiting fees and bonus. Additionally, during our first quarter, we experienced higher agent commissions due to increased revenue from our Smartwater segment and higher R and D related project expenditures. Fiscal year twenty twenty five cash investments into property, plant and equipment are $3,200,000 and cash investments into our rental fleet is $400,000 We expect fiscal year twenty twenty five investments into in property, plant and equipment to be as much as $6,000,000 Our balance sheet at the end of the first quarter remains strong and debt free with $22,000,000 of cash and short term investments and trade and financing receivables of $41,000,000 Additionally, we have borrowing availability of $12,000,000 under our bank credit agreement. Thus, as of December 31, our total liquidity was $34,000,000 Lastly, we own numerous real estate holdings in Houston and around the world that are free and clear without any leverage.
That concludes my discussion, and I’ll turn the call back to Rich.
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Thank you, Robert. I am pleased to announce the company completed its $7,000,000 stock repurchase program early in the second quarter of fiscal year twenty twenty five. Through that program, the company purchased roughly 716,000 shares at an average price of $9.72 per share, and that program is now considered complete. As a final note, I’d like to thank my team for the support they have given me and the company during my first quarter as CEO. Our long term engineering expertise, manufacturing capabilities and continued focus on our clients is continuing to drive profitable growth for our valued shareholders in each of our new business segments.
This concludes our prepared commentary, and I’ll now turn the call back to the moderator for any questions from our listeners.
Call Moderator: We’ll go first to Morris Schimmel. Your line is open. Please go ahead.
Morris Schimmel/John Elliott, Investor: Yes. Congratulations on your I’m wondering if you could comment on what is happening with Homeland Security and if there is any activity that could significantly impact the company?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Thank you, Morris, for the question. I mean, we are monitoring this new administration, trying to understand the direction they’re taking it. Obviously, there’s a lot of interest in immigration, border protection. And as we said in prior calls, we have a project going on with customs and border protection. So we don’t have any guidance to provide right now on that, but we are continuing to monitor that and keep our ear to the ground hoping for opportunities.
Morris Schimmel/John Elliott, Investor: And one additional thought. Is there anything happening on the front with carbon capture that is in the foreseeable future?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Regarding carbon capture, I mean, we continue to talk to our partners, our customers, understand what their needs are. That’s, again, an industry that’s in transition, really trying to understand what the revenue opportunities are. We’ve had lots of discussions, but nothing that’s actually generating revenue for us today.
Morris Schimmel/John Elliott, Investor: Thank you.
Call Moderator: We’ll take our next question from Matt Dain with Tieton Capital Management. Please go ahead.
Matt Dain, Investor/Analyst, Tieton Capital Management: Great. That’s Tieton Capital Management. I want to delve into the R and D projects for specific client projects, I guess, that you referenced earlier in the call. What more can you reference around that or what more can you tell us around that? And yes, I’m just curious to hear a little bit more about that, if you could.
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Good morning, Matt. Thanks for the question. Yes, so some of our projects can be fairly capital intensive and have long lead times depending on the size and scope of the project, requires R and D investment before we can actually capitalize that or get a return on investment. So we’ve got a couple of opportunities that we’ve spent some additional R and D resources on. Also with the transition to our new market segments, we’re looking at opportunities to make investments in R and D projects and trying to find future revenue streams.
So we have made some additional investments in R and D in the recent quarter.
Matt Dain, Investor/Analyst, Tieton Capital Management: Is there a specific segment that most of these R and D dollars have been directed to or anything there?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Nothing specific that we can provide guidance for today.
Matt Dain, Investor/Analyst, Tieton Capital Management: I also want to talk about your Smartwater momentum. If you could add some color around both Aquana and Hydrocon, what you’re seeing there, how we should be thinking about that going forward? And you folks have been doing great here and just wanted to get a little bit more color on future expectations
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Hydrocon. Hydrocon has been a product that was organically developed by Geospace a number of years ago. We continue to see year on year improvement in market uptake interest. As municipalities continue to adapt and adopt to automated meter reading and automated meter instrumentation, continuing need to upgrade their meters, which use our connector as part of that, Again, we had a great first quarter unexpected just because the market continued uptake in the market of the product offering. And we expect to see that same sort of interest and uptick in business in future quarters.
Same is true of Aquana. We had our first commercial deliveries last year. Great feedback from the customers. We were able to capitalize on that by taking that to our other potential customers, trying to shorten the pipeline on that. We’ve seen order increase for that for our product offerings there.
We expect that to grow in about the same range. So we’re very excited about both of those. The other thing that’s exciting about Aquana is we mentioned that we had our first international sale last year. The customer has been very excited about that and we’re in early discussions about future projects additional projects overseas as well. So we expect opportunities both domestically and internationally for that product offering.
So we’re very excited about it.
Call Moderator: We’ll go next to investor, John Elliott. Your line is open. Please go ahead.
Morris Schimmel/John Elliott, Investor: Good morning, gentlemen.
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Good morning, John.
Morris Schimmel/John Elliott, Investor: With the new administration, is there some optimism that Quantum (NASDAQ:QMCO) will benefit from border security and other developments?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: That is a good question. I mean, clearly, a focus as I said earlier, a focus on border security, immigration control, drug trafficking enforcement. So we really think there’s opportunities there. Now there’s been no clear indicators of how that money is going to be dispersed. So we are monitoring that closely.
We’ve had our solution on the border for a couple of years now. We’ve stated earlier, we expect the Customer Support Section to make some determination on that solution in the coming months. So I think overall, we’re positive. But again, until they actually determine how they want to spend the money and that money is allocated, we’re sort of at the mercy of the federal government.
Morris Schimmel/John Elliott, Investor: And I believe in the past, the focus has always been on the Mexican border. But has there been any discussion about deploying the quantum technology along the Canadian border?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Not specific to that, but we’ve obviously had internal discussions about other types of borders. You think about other countries around the world that are concerned with border security. I mean, it’s a solution that lends itself very well to those sort of applications. And so we are trying to figure out a way to monetize that and market that in other spaces, other areas of the world.
Morris Schimmel/John Elliott, Investor: And what about PRM? Have there been any developments with it?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Yes and no. I mean, there’s still a couple of reservoirs internationally that lend itself to PRM technology. We obviously have conversations with the companies that would consider putting PRM in. There’s obviously the ongoing competition with ocean bottom nodes. And so it really comes down to a financial decision with regards to reservoir managers.
And as it stands right now, there’s not a hard drive to or any pressing opportunities for PRM.
Morris Schimmel/John Elliott, Investor: It’s safe to say you wouldn’t expect a PRM tender in 2025?
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: You just never know what might develop. It’s going to be interesting to see the dynamics in the energy field with this administration and how that impacts the global energy industry. And if you look about what the long term supply and demand curves for oil and gas and how that’s going to play out with these reservoirs. And if there’s no more questions, we can end the call.
Call Moderator: I’m showing no additional questions at this time.
Rich Kelly, President and Chief Executive Officer, Geospace Technologies: Well, thank you, everybody. Thank you, Angela. Everyone have a good day.
Call Moderator: This does conclude today’s program. Thank you for your participation. You may disconnect at any time.
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