Geospace Technologies Corporation (NASDAQ:GEOS) Q3 2023 Earnings Call Transcript

Michael Melby: Hey, I was hoping you could expand on your Industrial Products segment or subsegment within Adjacent Markets. And it had a really good quarter, and it’s had a really good year. And you’ve described it as industrial centers and water meter cables. Can you give the audience a little more color on what’s involved there, the size of the market, the growth potential, and I think as Aquana has not contributed much yet I think it would be helpful for your investors to understand more about the potential here and what’s led to the really good results so far this year.

Robert Curda: Yes. So the largest portion of that growth is related to our water meter sensors, water meter cables and connectors. That growth is what we’re seeing as a result of the expansion of smart meters as a result of smart city initiatives within municipalities. As far as the size of that industry or that market, we expect it to continue to expand going forward and continue to grow. We just think that, that smart city initiative is just going to get larger and larger in the future. The seismic sensor portion of the business this year has been a very good part, has seen some growth. But as far as that being a continual business, it’s a little bit harder for us to measure and to determine and many times, the orders we receive are something that we haven’t necessarily planned for or expected.

Rick Wheeler: I think in some cases, Mike, the industrial sensors see some lumps. A lot of our business is lumpy. I think you already know that. And certainly, they are subject to that too. But these sensors are used in vibration monitoring of all sorts, including monitoring for equipment vibration aspects and also for making semiconductors. There are some special pieces of equipment and shake tables and isolation tables that are very important in the fabrication of some of these ICs and silicon-based products, and they’re used there. So in addition to that and some government actually uses of vibration monitoring, I think that drove this maybe a little higher than we would necessarily expect in any given case, and that’s exactly what Robert is alluding to with respect to sometimes they’re just not planned in the forecast or understood until they happen.

And as it relates to Aquana. Aquana has certainly had some sales, but most of these are pilot sales. So they’re really a precursor to some of the larger orders that are anticipated from these municipalities. You can well imagine with — when you’ve got thousands of meters that you as a municipality are managing, and you’ve got an innovative product that’s meant to and can seriously demonstrate savings with respect to their operational costs of having to roll trucks, send people out as well as just give them a better safety footprint for those employees. There’s going to be some pilot programs where they try these out and make sure that they’re doing what is proposed. So the majority of sales have been in these programs and I believe, are precursors to what will be larger orders.

Michael Melby: Got it. And within water meters, the cables and connectors business, is this something you have very high market share in or sole source in any OEM jobs?

Rick Wheeler: I think we have a good market. Well, go ahead, if you want to finish the second-half of that question.

Michael Melby: Yes. And I guess, I was trying to understand if the revenue gains you’ve seen our share increases or just benefiting from the overall growth in the market.