Name: GEOSPACE TECHNOLOGIES CORP Q2 2025 Earnings Call
Start: 2025-05-09T14:01:00.000Z

Executive Summary

Q2 2025 was weak: revenue fell to $18.023M and net loss widened to ($9.798)M, or $(0.77) diluted EPS, driven by a sharp Energy Solutions downturn and a $2.2M receivable reversal against rental revenue .
Smart Water was the bright spot with record revenue of $9.472M, up 47.8% year over year; cumulative Hydroconn connectors sold surpassed 27 million, and BABA compliance was confirmed, supporting demand tailwinds .
Liquidity remains solid: $19.8M in cash/short-term investments, $14.9M undrawn revolver availability, and $71.4M working capital; management expects sale of excess Houston land in Q3 (management indicated $7–$10M range) .
Near-term catalysts: delivery of the $7.6M Mariner OBN contract in Q3, potential PRM decisions following FEED milestones (Petrobras PRM award announced post-quarter), and backlog supporting stronger H2 per management commentary .
No formal revenue/EPS guidance was provided; management remains “optimistic” on Smart Water and sees tariff/OBN rental headwinds as transitory, positioning the stock for narrative shifts on H2 execution and contract deliveries .

What Went Well and What Went Wrong

What Went Well

Smart Water delivered record Q2 and first-half revenue: $9.472M in Q2 (+47.8% YoY) and $16.760M for six months, underpinned by Hydroconn connector adoption; cumulative Hydroconn units sold reached 27M and BABA compliance was confirmed .
Balance sheet strength: no debt, $19.8M cash and short-term investments, $14.9M revolver availability, and $71.4M working capital, providing flexibility through volatility .
Management tone on diversification: “We are well-positioned to exploit the tremendous potential… in Smart Water and Intelligent Industrial” and pursuing “immediately accretive additions to topline revenue” via acquisitions .

What Went Wrong

Energy Solutions revenue collapsed to $2.588M (–76.5% YoY) on lower OBN rental utilization and marine wireless demand; rent receivable of $2.2M was reversed against rental revenue due to collectability concerns .
Gross profit compressed and operating loss widened: Q2 gross profit was $1.748M vs $5.881M YoY; operating loss was $(10.281)M vs $(4.506)M YoY, reflecting mix and the receivable reversal .
Tariffs and macro headwinds impacted Intelligent Industrial (EXILE products) and Energy Solutions project decisions; management cited global trade concerns, tariffs, and decreasing oil prices driving delays/cancellations .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$35.438	$37.223	$18.023
Net Income ($USD Millions)	($12.860)	$8.376	($9.798)
Diluted EPS ($USD)	$(1.00)	$0.65	$(0.77)
Gross Profit Margin %	44.95%*	54.13%*	9.70%*
EBIT Margin %	11.12%*	21.05%*	(57.04%)*
EBITDA ($USD Millions)	$7.277*	$10.623*	($7.810)*

Values marked with * retrieved from S&P Global.

Segment revenue and operating income (Q2 year-over-year):

Segment	Q2 2024 Revenue ($M)	Q2 2025 Revenue ($M)	Q2 2024 Operating Income ($M)	Q2 2025 Operating Income ($M)
Smart Water	$6.411	$9.472	$1.666	$1.420
Energy Solutions	$11.035	$2.588	$(1.948)	$(6.668)
Intelligent Industrial	$6.749	$5.883	$(0.708)	$(1.287)
Corporate	$0.075	$0.080	$(3.516)	$(3.746)
Total	$24.270	$18.023	$(4.506)	$(10.281)

KPIs and operating metrics:

KPI	Q4 2024	Q1 2025	Q2 2025
Cash + Short-Term Investments ($M)	$37.122	$22.065	$19.825
Borrowing Availability ($M)	$12.000	$12.000	$14.900
Working Capital ($M)	—	—	$71.400
Hydroconn Cumulative Units (Millions)	—	—	27.0
SG&A ($M)	—	—	$6.775 (vs $6.546 YoY)
R&D ($M)	—	—	$5.235 (vs $3.863 YoY)
OBN Receivable Reversal ($M)	—	—	$2.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue/EPS Guidance	FY/Q2 2025	Not provided	Not provided	Maintained
Capital Expenditure	FY 2025	Up to $6M (management expectation)	No update in Q2; prior expectation remains reference	Maintained
Asset Sale (Houston land)	Q3 2025	$7–$10M range discussed previously	Sale expected Q3 per press release; CFO reaffirmed “in that range”	Maintained timeline

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
Smart Water (Hydroconn)	Record year in FY24; strong adoption	Q1 up 72% YoY; continued uptake	Record Q2 and first-half; 27M units; BABA compliance	Improving
Aquana adoption	First international sale; growing interest	Early commercial deliveries; pipeline building	Single-digit % of revenue; 24–36 month path to “significant” (>10%)	Building
Energy Solutions (OBN, PRM)	OBN sales strong in Aug; FY24 resilient	Mixed; $17M OBX sale; PRM competition	OBN rental weak; $2.2M reversal; Mariner $7.6M delivery in Q3; FEED decisions ahead	Near-term weak; H2 potential
Tariffs/Macro	N/A	N/A	Tariffs and lower oil prices delaying/canceling opportunities; EXILE impact	Deteriorating
Border Security/Quantum	N/A	Monitoring DHS; pilot with CBP; optimism	“All-in” approach at Border Security Expo; potential funding shifts	Watchlist
Balance Sheet/Capital Allocation	Strong liquidity; buyback in FY24	Debt-free; buyback completed in Q2; $34M total liquidity	$19.8M cash/STI; $14.9M revolver; land sale expected	Stable

Management Commentary

“We had record performance in our Smart Water segment, with our Hydroconn® universal connectors continuing to outperform year over year… Offsetting that is the on-going uncertainty in the Energy Solutions segment. Global trade concerns, tariffs, and decreasing oil prices have impacted project decisions…” .
“Our Intelligent Industrial segment is negatively impacted by tariff concerns, especially for our EXILE products… we are working to optimize our supply chains” .
“Our current backlog places us in a strong position going into the second half of the year… no debt and $19.8 million in cash and short-term investments” .
CFO: “We will not provide any specific revenue or earnings guidance” .
On Mariner: “Delivery was always planned for later in the year” (Q3 timing) .

Q&A Highlights

Cost actions are strategic (portfolio evaluation) rather than targeting a simple breakeven metric .
Mariner $7.6M OBN: contract announced Feb 12; delivery not in Q2, planned for later in the year (Q3) .
Federal budget and border security: management “bullish” on border products; potential funding diversion under CR could benefit projects; outlook contingent on Congressional action .
PRM timeline: FEED study decision due in current quarter; final investment decision would follow later .
Smart Water profitability: segment had operating income; Aquana remains single-digit % of revenue near term; path to >10% of corporate revenue over 24–36 months .

Estimates Context

Wall Street (S&P Global) consensus coverage for Q2 2025 EPS and revenue was unavailable; the tools returned actuals but no consensus fields or estimate counts for Q2, implying limited analyst coverage for GEOS this quarter [GetEstimates Q2 2025].
Implication: With no formal consensus, post-print estimate revisions are unlikely to be a major stock driver; narrative will hinge on H2 execution (Mariner delivery, PRM milestones) and segment mix.

Key Takeaways for Investors

Smart Water is the engine: record growth, 27M Hydroconn units, BABA compliance, and OEM relationships should support continued share gains and margin contribution .
Energy Solutions headwinds are acute but likely transitory: watch Q3/Q4 for delivery of the $7.6M Mariner contract and potential PRM decisions following FEED outcomes; these can pivot mix and margins .
Gross margin/mix risk: the Q2 receivable reversal and rental underutilization crushed margins; a rebound requires improved OBN utilization and less revenue reversal risk .
Tariff sensitivity: management flagged tariff impacts on EXILE and broader industrial exposure—monitor policy developments and supply-chain optimization initiatives .
Balance sheet optionality: no debt, $19.8M cash/STI, $14.9M revolver, and expected land-sale proceeds ($7–$10M) provide dry powder for R&D and accretive acquisitions—a potential multiple support .
Near-term trading setup: Q3/Q4 could show sequential improvement on backlog conversion and Mariner delivery; absence of formal guidance shifts focus to execution and contract news flow .
Medium-term thesis: Diversification toward Smart Water and Intelligent Industrial enhances resilience; PRM win momentum post-quarter (Petrobras Mero) underscores longer-term Energy Solutions upside potential .