Geospace Technologies - Earnings Call - Q3 2025

Executive Summary

• Q3 revenue was $24.8M and diluted EPS was $0.06, up from a loss of $(0.16) in Q3 2024; sequential revenue increased meaningfully versus Q2 amid Smart Water growth and a gain on property sale.
• Energy Solutions remained soft on OBN rental utilization, but management announced a major PRM award at Petrobras’ Mero Fields; equipment manufacturing revenue is expected to exceed $80M over 16–18 months, with no recognition in FY25 and potential start in Q1 FY26 (not yet finalized).
• Intelligent Industrial expanded with the Heartbeat Detector acquisition, which management plans to sell on a subscription basis to drive recurring revenue.
• No formal guidance was provided; catalysts ahead include PRM ramp timing, border-security RFP expected early next calendar year, and continuing Smart Water adoption.

What Went Well and What Went Wrong

What Went Well

• Smart Water revenue hit $10.5M (+6% YoY) and a record nine-month contribution, underpinned by Hydroconn connector demand; “Hydroconn… remain a reliable revenue and profit center”.
• Strategic wins: PRM award for Mero 3 & 4 (nearly 500 km OptoSeis PRM), and first sale of Pioneer ultralight land node; “equipment manufacturing portion… should generate in excess of $80M”.
• Balance sheet actions and portfolio focus: completed sale of adjacent property ($9.2M gross proceeds) and divested streamer recovery assets to Seis Gear.

What Went Wrong

• Energy Solutions revenue fell to $8.1M (−14% YoY) on lower OBN rental utilization; Intelligent Industrial declined 5% YoY on weaker imaging demand and lapping a completed government contract.
• Operating expenses rose (SG&A and R&D), pressuring margins; CFO cited higher personnel and sales/marketing costs in recent periods.
• No revenue recognition from the PRM award in FY25; installation revenue largely recognized by a partner, limiting near-term contribution.

Transcript

Speaker 3

Welcome to the Geospace Technologies Third Quarter 2025 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rich Kelley, President and Chief Executive Officer. He is joined by Mr. Robert Curda, 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. 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. We ask that you please pick up 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 Mr. Rich Kelley. Sir, you may begin.

Speaker 2

Thank you, everyone. Good morning and welcome to the Geospace Technologies Conference call for the third 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. In our prepared remarks, I will first provide an overview of the third quarter, and Robert will then follow up with more in-depth commentary on our financial performance, as well as an overview of our financials. I will then give some final comments before opening the line for questions. Today's commentary on markets, revenues, planned operations, and capital expenditures may be considered forward-looking, as defined by 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 June 30, our third quarter of fiscal year 2025. For the three months ended June 30, 2025, we reported revenue of $24.28 million with a net income of $0.8 million.

For the first nine months of our fiscal year, we had $80.1 million in revenues, with a net loss of $0.7 million. Strategic accomplishments during the third quarter in all of our business segments have reinforced the success of our diversification efforts, laying the foundation to further our revenue and profitability goals. In our Smart Water segment, we continue to generate strong organic growth with our HydroCon Universal AMI connectors. They remain a reliable revenue and profit center, setting another revenue record for the first nine months. Our Aquana line of products continues to gain market acceptance, and we are seeing increased demand. We also announced the product launch of AquaLink. It is an advanced multi-device and multi-unit Internet of Things, or IoT, endpoint designed to transform submetering and leak detection into multi-unit residential and commercial properties.

With AquaLink, we are providing a smart, scalable solution that addresses the growing demand for accurate water monitoring in multi-unit properties. This multi-device, multi-unit capability, combined with advanced intelligent features, makes it an invaluable tool for property owners and managers to meet regulatory standards while smartly monitoring usage. These achievements continue to support our position that the Smart Water segment has great potential for growth. Our Energy Solutions team announced a permanent reservoir monitoring contract award for the Marine Field Merrill Field 3 and 4 from Petrobras, operator of the Merrill Field Consortium. The contract encompasses the supply and installation of nearly 500 kilometers of the OptiSeis Permanent Reservoir Monitoring (PRM) System, or PRM, covering 140 square kilometers of seabed area located deep offshore in the Santos Basin off the coast of Brazil.

The equipment manufacturing portion of this contract should generate in excess of $80 million in revenue and is anticipated to take 16 to 18 months to complete. We will be recognizing this revenue throughout the project per normal revenue recognition rules. We do not anticipate any revenue recognition in this fiscal year. The contract also includes installation of the system, which is to be completed by Blue Marine Telecom, a Brazilian subsea cable company. Full installation of this system and any associated revenue is anticipated in fiscal year 2027. Energy Solutions also achieved its first sale of the newly released Pioneer, an ultra-lightweight land node used for seismic surveys. The first units were purchased by a global engineering and professional services firm based in Canada.

As part of our ongoing review and modernization of our product portfolio, we sold the assets associated with our Trima Recovery Device product line to Size Gear in June. We have confidence that Size Gear will support SRG customers with outstanding service and experience. While we continue to face headwinds in the ocean bottom node markets, these accomplishments indicate there are still opportunities to generate revenue and profitability in this segment. The increased success in our Smart Water and Energy Solutions segment has further improved utilization of our Houston facility and should positively impact operational efficiencies. Building off this success, we invested in the growth of our intelligent industrial segment this quarter with the recently announced acquisition of Heartbeat Detector, a security technology developed by the U.S. Department of Energy's Oak Ridge National Laboratory.

Used in more than a dozen countries to address human trafficking and prison security, the Heartbeat Detector is a small, portable device that uses advanced sensors to rapidly identify people hidden in vehicles, providing a modern, user-friendly interface in as little as 10 seconds. The product, which relies on the GSONE low-frequency single-element geophones manufactured in our facilities, has been proven 99% effective by Oak Ridge, Sandia, and Thunder Mountain National Laboratories. Domestically, the Heartbeat Detector is used extensively by departments of corrections and prison systems. Globally, the product has been leveraged for border crossings and prisons in many countries. There are more than 300 manned border checkpoint crossings in the U.S. and more than double that in Europe, based on EU estimates. We intend to offer the Heartbeat Detector on a subscription basis, aligning with our strategy to grow recurring revenue streams.

As we increase the emphasis on our security and defense product portfolio, we have engaged former U.S. Border Patrol Chief Carla Provost to educate fellow national and homeland security professionals and accelerate end-user adoption of our advanced analytics and testing solutions for border and perimeter security applications. We remain well-positioned to exploit the tremendous potential we have created with our products and services portfolio, our talented staff, and our continuing diversification into new high-margin markets. Additionally, our current backlog places us in a strong position going into the remainder of this year and beyond. Executive leadership continues to address workforce costs and development expenses on our path to sustained profitability. We will continue to pursue growth through acquisition, with immediately accretive addition to top-line revenues. Overall, I have continued optimism that our company is well-positioned to perform going forward.

I will now turn the call over to Robert to provide more details of our financial performance. Thanks, Rich, and 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 of our third quarter ended June 30, 2025, we reported revenue of $24.8 million compared to last year's revenue of $24.9 million. The net income for the quarter was $760,000 or $0.06 per diluted share compared to last year's net loss of $2.1 million or $0.16 per diluted share. For the nine months ended June 30, 2025, we reported revenue of $80.1 million compared to revenue of $100.2 million last year. Our net loss for the nine-month period was $662,000 or $0.05 per diluted share compared to last year's net income of $6.3 million or $0.47 per diluted share.

Our Smart Water segment produced revenue of $10.5 million for the three months ended June 30, 2025. This compares with revenue of $9.9 million for the same period of the prior fiscal year, an increase of 6%. For the nine-month period, the segment contributed revenue of $27.3 million versus $20.6 million, an increase of 33%. The increase in revenue of both periods is due to higher demand for our HydroCon Universal AMI connectors. The nine-month revenue marks a new high revenue for our Smart Water segment. Revenue from our Energy Solutions segment totaled $8.1 million for the three-month period ended June 30, 2025. This compares to $9.4 million in revenue for the same prior year period, representing a decrease of 14%. Revenue for the nine-month period is $35.3 million, a decrease of 42% over the equivalent prior year period.

The decrease in revenue for the three-month and nine-month period was due to lower utilization and sales of our marine ocean bottom nodes. Our Intelligent Industrial segment revenue totaled $6.1 million for the three-month period ended June 30, 2025. This compares with $6.5 million for the equivalent year-ago period, representing a decrease of 5%. Revenue for the nine-month period was $17.6 million. This compares to the prior year period of $19.1 million, a decrease of 8%. The decrease in revenue for both periods is due to lower demand from our surveillance and defense products and our imaging products. The decrease for both periods is partially offset by an increase in demand for our contract manufacturing services. Our operating expenses increased by $900,000 for the third quarter of 2025, or 8%, and increased by $5.4 million, or 18%, for the nine-month period.

The increase for both periods is due to the higher personnel cost and increased sales and marketing costs. Our nine-month cash investments in supplied property and equipment were $5.8 million, and in addition to our rental fleet, was $1.1 million. Our balance sheet at the end of the third quarter reflects $25.6 million of cash and short-term investments, and our credit facility has available borrowings of $15 million, with no borrowings outstanding. As of June 30, 2025, the company's working capital is $75 million, which includes $32 million of trade accounts and financing receivable. Additionally, the company owns unencumbered property and real estate in both domestic and international locations. This concludes my discussion, and I'll turn the call back to Rich.

Speaker 1

Thank you, Robert. This concludes our prepared commentary, and I will now turn the call back to the moderator for any questions from our listeners.

Speaker 3

At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We will pause for a moment to allow questions to queue. Once more, that is star one if you'd like to ask a question. We'll go first to Investor Michael Cox. Your line is open. Please go ahead.

Speaker 5

Hi, guys. I just wanted to start with a couple of questions about the PRM announcement. The announcement itself came as a bit of a surprise. I think from previous quarters' discussions around this, it sounded like there were conversations happening, but didn't deal with the announcement of a contract with them. Can you just talk about how we got to the point where all of a sudden this announcement came out? I know it wasn't sudden to you guys, but how to, for the fact that it became a rather surprising announcement.

Speaker 1

Thank you, Michael, for the call. As you know, we really don't discuss in detail operations going ongoing. This contract was actually in discussion for many months with Petrobras.

Speaker 5

Mm-hmm.

Speaker 1

Lots of back and forth with regards to technical requirements and commercial requirements. It was nice to be able to land that contract, going against our competitor that's already on Merrill One and Two.

Speaker 5

Mm-hmm.

Speaker 1

I would say overall, we worked on that contract. We worked on the negotiation of the contract around six months.

Speaker 5

Okay. In comparing, you know, obviously, when the announcement came out, we didn't have a whole lot of numbers to go on, and you just talked about $80 million of equipment manufacturing revenue. Size-wise, you know, just by a kilometer, it's similar to the Snorr Field from a decade ago. I don't recall that being broken down into equipment versus installation versus other revenues. Is this, you know, that was the least headline number was big. Can you help us think about what this is going to overall impact over the course of the contract will be from a revenue perspective beyond the $80 million?

Speaker 1

It's slightly different than Sonora and the other Equinor contracts in the sense that that was the older PRM technology with electromechanical devices versus an optical solution that we have now. The other thing, too, is that our end customer, Petrobras, has announced the overall value of the contract in their press release, but they did not break down the details between the goods portion and the installation portion. We're not at liberty to discuss the details of that as well. What we can say is the majority of the installation revenue will be recognized by our partner in Brazil, Blue Marine.

Speaker 5

Gotcha.

Speaker 1

I can address what the goods portion is, but I can't really address the overall services contract.

Speaker 5

Okay. Obviously, it sounds like reading between the lines there, the new technology versus the old electromechanical, is it higher margin? It's lower revenue, right, for you guys. Higher margin? I mean, what's, or is this just the state of the world these days? Is it just not going to make as much money on PRM as it used to?

Speaker 1

I mean, we still anticipate good margins on it, but just the cost breakdown of the components themselves puts forth a completely different financial model with regards to calculating revenue and cost.

Speaker 5

Got it. Okay. Are there other discussions going on, on the PRM front now that this one has been announced?

Speaker 1

What I can say is, yes, there are ongoing discussions with other partners, including Petrobras. They have a multi-year plan for their fields, and of course, each of those are subject to final approval by their management team where it makes financial sense. We will continue to discuss with partners who are interested in PRM, advising them on these opportunities and the benefits of our technology. I would not want you to read into that. There are other contracts pending.

Speaker 5

Got it. Okay, I'll step back and let someone else ask some questions.

Speaker 1

Thank you, Michael.

Speaker 3

We'll go next to Saad Bundy with Moore's Encounter. Your line is open. Please go ahead.

Speaker 4

Morning, guys. A couple of questions for you.

Speaker 5

Go ahead.

Speaker 4

Does OptiSeis allow you guys to go deeper than existing equipment out there provided by Oak Ridge, for example?

Speaker 1

I think the depth performance between the two are very similar. I mean, in the sense that they're already going to be on Merrill One and Two, we're on Merrill Three and Four. I think, you know, the depth performance is the same. However, we differentiate on the fact that our technology does not require any kind of in-water retinate connectors, which improves the reliability of the product over the life of the reservoir. There are some other technologies with regards to how we actually interpret the optical sense, optical signals that give us an advantage over our competitors as well.

Speaker 4

For Rob, going back to December of 2023, when we produced something in the vicinity of $50 million in revenues and gross margins around pushing 40%. In a $45 to $50 million revenue per quarter, are we capable of getting back to that 40% gross margin?

Speaker 0

I think you said 2023. Does it mean 2013?

Speaker 4

Nope. 2020. We sold the product that produced roughly $50 million in revenues in the December quarter of 2023, and margins back then were roughly 40%. That was the product that was originally going to be rented, and it was converted to a sale.

Speaker 0

Oh, yes. We sold some Mariners at that time.

Speaker 4

Correct.

Speaker 0

I think part of the things that affect the gross margin at that time is we had some manufacturing times, manufacturing activity that went on to build that equipment, so we had nice absorption. Also, that's a high-profitability product to begin with. Through the PRM contract, we will certainly have a higher level of absorption, which will lead to a higher profitability. I would expect it to be somewhere in the 40 to 45% range overall.

Speaker 4

Okay. Great. Just while I have you, there's a receivable for that particular contract that I believe comes due in late September or early October that's somewhere in the vicinity of $25 to $30 million. Do I have that correct?

Speaker 0

No. From October to December of 2023, no. We do not have a receivable on the books associated with that transaction.

Speaker 4

I could be wrong, but there is a receivable that, if I'm correct, that comes due in October of this year for $25 million or $30 million. Am I wrong?

Speaker 0

We do have receivables on the books.

Speaker 1

One second, Scott. We're just reviewing the numbers real quick.

Speaker 0

We have receivables on the books for customers that have bought Energy Solutions equipment, but their due dates are a little bit further out than that.

Speaker 4

Okay, but this calendar year, is that correct?

Speaker 0

No, I think they extend beyond this calendar year.

Speaker 4

Okay.

Speaker 1

They're on progress payments, plans. We'll have some this year and some next year.

Speaker 4

Okay. Got it. Rich, if you can, can you just talk a little bit about this product that you just purchased? Can you give any indication of did we buy it for stock, cash, what sort of revenues? The only thing you've really told us is that it would be accretive. Can you give us a little more detail about this particular product and why you're excited about it?

Speaker 1

Sure. With regards to the deal itself, it was a cash deal. It had an upfront component and then an earnout component for the overall purchase. Depending on the performance of the product over the next five years, we'll center on what the total purchase price is. There are two things that are exciting to us. One is it's really our first foray into a fully subscription model. We provide the solutions to, let's say in the U.S., it's mostly used in prisons. Anywhere you have a gate where you're concerned about security, you've got a man with a gun standing post, and you've got crooks coming and going, you're concerned about any kind of trafficking or, in prisons, for example, people coming out.

This allows a very low-cost, effective solution for the guard to very quickly mount a couple of sensors on the vehicle, and it can detect if there's a human inside the truck within 10 seconds. This has been proven for over 25 years. This was a technology developed by Oak Ridge National Laboratory for their own security of their own labs. We have the exclusive license from Oak Ridge National Laboratory for this technology. That was what we were going after. It fits very well with our security and perimeter detection solutions portfolio. It ties in very well with, if you think about the SADAR solution with regards to perimeter security, it ties in very well with that as well. It's a nice fit into our overall portfolio. It has great growth potential.

The former solutions, the former company had an older solution that was more of a big CapEx expenditure for the end client. This has now been redeveloped and repackaged into a low-cost subscription model. We think it's got a great opportunity not only in the U.S., but also internationally. The other thing that we're very excited about is, there's obviously intense focus on the borders with regard to human trafficking. This gives a great solution for the U.S. Border Patrol to take advantage of this technology at the truck checkpoints. When we talked about bringing Carla Provost on, she has experience with those teams and those people, and she's a firm believer in the technology, so we feel like we have a strong champion in her in promoting this within the U.S.

Speaker 4

Speaking of Carla, was Carla involved in the original Homeland Security $10 million sale back in early 2020, I think?

Speaker 1

She was not directly involved, but she was aware of it. I mean, she was obviously in Border Patrol at the time. What she'll tell you is she was in the room when that tunnel was detected by our technology.

Speaker 4

Okay.

Speaker 1

There were high fives all around.

Speaker 4

Just a couple of others regarding budget and Homeland. The annual review that comes out in February has a pretty significant number over years associated with a 30-mile project. The recent budget looks a little different. Can you square that up for me?

Speaker 1

Yeah. I think that you're thinking about the General Accounting Office report that we had reviewed earlier compared to the one big beautiful bill that's got roughly $30 million allocated for that.

Speaker 4

Correct.

Speaker 1

I think that if you look at the way that line is structured, even though it does mention tunnel detection specifically, it also mentions other expenditures on that line. Talking to our CVP, they do anticipate still to issue another request for proposal for more mileage. That number is still not finalized, and the timing of that has been delayed until probably next calendar year. We do anticipate with the availability of funds, we do anticipate CVP wanting to do more mileage on tunnel detection. We just don't have much more insight than that at this time.

Speaker 4

The committee has directed the CVP to provide tunnel detection technology no later than 90 days, which is 90 days from July. Is that going to help the cause here?

Speaker 1

I don't think so. I mean, I know that they were directed that, but I'm sure you know what's going on in D.C. and in all these agencies. I mean, they are scrambling. They're losing people, and so they're resource constrained. The procurement people are prioritizing. You know, they were given the directives to review all of their contracts, review and justify them again and renew them. As far as this as being a priority for them, I don't see it as being a top priority given all the other directives they have to follow.

Speaker 4

Is your best guess that this is a 2026 event, not a 2025 event?

Speaker 1

That's the feedback we're getting, Scott, is that we can anticipate an RFP sometime early next calendar year.

Speaker 4

Okay. All right, guys. Thanks very much. Appreciate the time.

Speaker 1

Thanks, Scott. Good call.

Speaker 5

Bye.

Speaker 3

We'll go next to Bill Fazelem with Tieten Capital. Your line is open. Please go ahead.

Speaker 4

Thank you. Let's start with the Petrobras contract for just a moment, and then we'll jump to a couple of other areas. Relative to that contract, given that there's some confusion about the revenue versus, for you all versus contractors, etc., is, and I guess electromechanical versus the fiber optic, is it fair to say that this is the second largest contract in Geospace's history based off of the operating income or gross margin dollar contribution that you will ultimately receive over the life of the contract?

Speaker 0

Yes, absolutely.

Speaker 4

Okay. That's helpful, thank you, and congratulations, by the way. It's not every day one wins the second largest contract in your history. So well done.

Speaker 1

Thanks, Bill.

Speaker 4

That revenue, you are going to begin recognizing that revenue in your first fiscal quarter of the coming fiscal year. Is that what we heard, or am I confused?

Speaker 1

I was very careful about that because we are still working with our customer to define the actual revenue recognition milestones and the timing of those. We are hoping to be able to recognize revenue in Q1, but that has not been finalized yet.

Speaker 4

Understood. Okay, that's helpful. Explains why I was a little bit confused.

Speaker 1

Yeah.

Speaker 4

Let me shift to the Border Patrol. First of all, why has the Border Patrol not adopted the Heartbeat Detector technology up to this point?

Speaker 1

That's a great question and one that gets asked frequently. We had long conversations with the team from Geospace Technologies about how the border works. There are two technologies that are currently used down there. One is ThatScatter, and the other one is X-ray. Neither one of those are ideal, but they are used. They've already made the investment. The uphill climb that we have, I guess, for Carla Provost and the team is to sell them on the efficiency of using the technology. Those other ones take a long time to set up. They're very capital intensive. This takes just a minute to less than a minute to set up, less than 10 seconds to detect, and the truck is on its way. We can vastly improve their operational efficiency at the border.

The other thing, too, is at the border, with their current technology, they scan less than 1% of the trucks that come through the border. This has vastly improved the percentage of trucks that they can actually scan and detect. We think we have some winning argument going forward. I think with this current environment and the current focus on the border, we'll have a much better success at selling the solution.

Speaker 4

Great. That's helpful. Let's circle back to the one big beautiful bill act if we could. What funding, and I think you already gave the answer in a previous comment, but what funding is in that bill for subterranean tunnel detection?

Speaker 1

There's a particular line in there that is $30 million, but it addresses several different solutions in their mission tunnel detection. If this is correct, I don't know if CVP to how they actually allocate those funds.

Speaker 4

It is not a for sure that the full $30 million would be for tunnels?

Speaker 1

No. And given the way that the administration today, how they're deciding to apportion and allocate funds, I mean, all of that's going to be a question mark at this point.

Speaker 4

Right. Okay. That is helpful. Relative to your comment in response to a prior questioner that you anticipate an RFP in the first calendar quarter, so the March quarter of next year. You all have, and I don't understand the government contracting that well, so bear with me here, but I believe you have SDR3 certification. It was our understanding that the implications of that, that if there is a government need and an acquisition of tunnel detection equipment, the contract would go to Geospace because you have the SDR3 certification. You mentioned an RFP. Would you please reconcile these things and maybe help me understand what I don't understand about the whole process?

Speaker 1

That's a great question, Bill. The SDR3, we certainly have that currently in place with regards to the technology. However, we've asked, we sought legal guidance on this as well as far as what that really means for the government, whether they're actually forced to buy from us or what that actually means. I don't have a good answer for you on that. I do know that there were three solutions that are existing on the border today being evaluated. Until the RFP comes out, we don't really know. We don't really have, we can't really defend our SDR3 position with regards to the RFP until we see it.

Speaker 4

So that.

Speaker 1

I know it's not very clear. We have the same question, Bill. I don't have a good answer for you today, but it's something we're definitely investigating. We're looking forward to the actual RFP to see what the wording there is and what the technology is referenced in there to see if we can apply the SDR3 that we have to it.

Speaker 4

Great. That is helpful. What do you know about the, I'll call it the bake-off between you and the two other competitors on the border?

Speaker 1

Absolutely nothing. As I've said in previous calls and previous meetings, the CVP has been very tight-lipped about the three solutions.

Speaker 4

Great. That's helpful. Coming back to the one big beautiful bill, what allocations are in that bill for military and/or navy that would be interesting and relevant to Geospace?

Speaker 1

That one's not as clear. I mean, obviously, they have money in there for harbor protection, threat detection, and things like that, but they weren't as specific as the appropriations we've seen earlier, where they had specifically $12.8 million allocated for that. We're still working with our partners to understand and, you know, what the priorities are and the timing of that. I will say that we don't anticipate talking to our partners on that particular topic. We don't anticipate any decisions until either late this calendar year or early next calendar year.

Speaker 4

The $12.8 million that was in maybe the House bill, if I recall correctly, did not make it specifically into the final bill.

Speaker 1

That's correct.

Speaker 4

Okay. That is appreciated. Do you think that there is some activity going on later this year or early next year that could be relevant to you all?

Speaker 1

Yes. The discussions that we're having both with our partners and with the U.S. Navy, there's obvious concern about harbor protection and threat detection, especially with regards to unmanned underwater vehicles. They are seeking solutions, commercially available solutions, which we, you know, obviously, with between our SADAR technology and our PRM technology, we bring a commercially viable solution for that. Those discussions are ongoing. We're having good discussions, good progress, but at this time, we don't anticipate in the near term any kind of commercial agreement.

Speaker 4

Great, that's appreciated. Relative to Aquana, that has essentially been the star of the company here for, excuse me, not Aquana, HydroCon.

Speaker 1

HydroCon, yeah.

Speaker 4

Has been the star. Would you provide some more commentary around it? I know that connectors aren't near as exciting as the $80 million-plus contracts and the Heartbeat Detector, etc., but talk to us about the workhorse, if you would, please.

Speaker 1

Sure. HydroCon is, as you say, I mean, it's been a great performer for us, being organically developed and working with our partners to get it out to the market. As I've said in previous calls, that water space offers a 10% to 15% growth year-on-year overall. HydroCon is in that range and actually outperforms that from some quarters, more than others. It's still the industry standard. You may have seen there was a recent announcement, where Nitecore, our partner, was acquired by Hubble. We've had great conversations with Hubble on how to grow that relationship. We continue to expect to see continued growth and acceptance of this solution in the water space going forward.

Speaker 4

Great. Thank you. I appreciate you taking all these questions.

Speaker 1

Thanks, Bill. Have a good day. Thank you.

Speaker 3

This does conclude today's question and answer session. I will now turn the program back over to Rich Kelley for any additional or closing remarks.

Speaker 1

Thank you, Angela. Thank you to all of you who joined our call today. We look forward to speaking with you again on our conference call for the fourth quarter of fiscal year 2025. Goodbye and have a good day.

Speaker 3

This does conclude today's program. Thank you for your participation. You may disconnect at any time.