Geospace Technologies Corporation Q4 FY2025 earnings call

• Smart Water: Delivered strong year with double-digit revenue growth for 4th sequential fiscal year, Hydroconn connector line gained market share and drove revenue gains, Aquana products saw increased acceptance domestically and in Caribbean.
• Energy Solutions: Lower revenue due to reduced offshore exploration, increased competition; achieved strategic wins like PRM contract with Petrobras and sale of ultra lightweight land node pioneer, had strong backlog but short-term exploration market uncertain.
• Intelligent Industrial: Provided steady revenue from industrial sensors and contract manufacturing, acquired Geovox Security Inc. for heartbeat detection algorithm, restructured Exile product portfolio to increase revenues and margins.
• Diversification: Focus on Smart Water and Intelligent Industrial segments for growth, leveraging technology and manufacturing capabilities; current backlog positions strong for next fiscal year.
• Other highlights: Tariffs impacted material costs, government shutdown delays resolved with continuing resolution, working with partners to understand new project timelines.

For the 3 months ended September 30, 2025: Smart Water segment had revenue of $8.5 million (down 28% Y/Y); Energy Solutions segment had revenue of $15.7 million (down 11% Y/Y); Intelligent Industrial segment had revenue of $6.4 million (up 9% Y/Y). For the full fiscal year 2025: Smart Water segment had revenue of $35.8 million (up 10% Y/Y); Energy Solutions segment had revenue of $50.7 million (down 35% Y/Y); Intelligent Industrial segment had revenue of $24 million (down 4% Y/Y).

No specific revenue/earnings guidance provided. Anticipate continued market demand for Hydroconn and Aquana solutions. Energy Solutions has strong backlog but short-term market uncertain; long-term demand forecast positive. Intelligent Industrial sees increased interest in Heartbeat Detector and Exile.

• Tariffs impacting material costs, affecting product costs.
• Market uncertainty and volatility in oil prices negatively impacting Energy Solutions segment.
• Government shutdown delays affecting projects with U.S. Navy, Customs and Border Protection.
• Price pressure and commoditization in land market affecting Energy Solutions margins, particularly with Pioneer sales.

Q: You had mentioned the gross margin or cost of goods under pressure, specifically tied to tariffs. Would you talk in more detail about that phenomenon given that you had higher revenues and lower profitability in that segment?

A: Specific to Energy Solutions, price pressure and commoditization in land market, lower margins on Pioneer sales due to first-unit manufacturing costs; procurement team working to mitigate tariff impact by sourcing from U.S. as much as possible.

Q: So walk us through how much of the impact, the margin impact this quarter was transitionary here this quarter versus what you would expect to last longer, if you would, please?

A: Monitoring the situation, procurement team working to resolve issues, PRM project expected to have better margin performance balancing out lower margins on other products.

Q: The government has a couple of different initiatives where they are looking at you all, I believe, the Customs Border Patrol, the military. Update us what you are seeing, hearing and thinking that there may be for a decision matrix with the government activities, please?

A: Customs Border Patrol tunnel detection quiet, anticipate feedback early next year; Navy project delayed until Q3 or Q4 next year.

Q: Early this year, you announced 2 large projects, the Brazilian project and another sale of nodes. Have any of these been shipped yet? Or are you still waiting for these to be shipped?

A: Petrobras PRM project first shipments anticipated early to middle of next year; Mariner contract deferred by customer; Pioneer shipments ongoing with majority revenue recognition in Q1 and some in Q2.