Rapid sales growth on tap due to new requirements for 3D mapping of underground infrastructure.
Sometimes investors are fortunate enough to discover a company that is perfectly positioned to meet an urgent need that arises due to new state or federal legislation. Such is the case of Geospatial Corporation (GSPH), and I believe this stock may be one of the best performing in the small and microcap space during the remainder of 2016 and into 2017 due to reasons explained below.
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Geospatial Corporation at a Glance
Closing Price 8/12/16: 0.16
Market Cap: $23 million
Shares outstanding: 181 million
Insider ownership : 30%
Geospatial Corporation (web site) provides cloud-based solutions to locate and digitally map underground pipelines and other infrastructure in three dimensions in the United States. It provides data acquisition services to locate the exact position and depth of underground pipelines and conduits along with information on existing aboveground infrastructure. The company also provides data management services in which it manages clients’ critical infrastructure data through the licensing of its cloud-based GeoUnderground GIS (Geographic Information System) software. It serves contractors, municipalities, government agencies, utilities, telecoms, and engineering companies. The company was founded in 2007 and is headquartered in Pittsburgh, PA.
Huge Market, Urgent Need
Until recently, 3 dimensional mapping of underground pipes and infrastructure was a somewhat quieter, niche market. That changed dramatically on June 22 of this year when The PIPES ACT of 2016 was signed into law. This new federal law requires certification, data management, testing and mapping of all types of the more than 2.6 million miles of buried energy pipelines across the USA.
The law had major bipartisan support, and was in large part a response to the 2010 PG&E explosion in San Bruno, CA that tragically killed eight people, injured another 66 and destroyed 38 homes. PG&E was later fined a record $1.6 billion as a result of (among other deficiencies), a poorly maintained pipeline with faulty welding work that dated back to the 1950’s. A key problem was that PG&E did not have maps of the underground infrastructure organized and available to both the Company management before the incident nor for the Federal inspectors after the incident.
The lack of accurate maps of subterranean infrastructure is alarmingly common in the industrialized world, causing public service disruptions, project delays, cost overruns, property damage, injuries, and preventable fatalities that cost billions of dollars each year. There is an urgent need for reliable data regarding the true locations of underground utilities as well as the need to effectively communicate this data to excavators.
“The United States has the most expansive network of energy pipelines in the world, and it powers nearly every facet of our daily activities. The network includes more than 2.6 million miles of pipelines, which transport 64 percent of the energy commodities consumed in the country. Therefore, ensuring that pipelines are a safe means to transport natural gas and hazardous liquids is essential.”
House Committee on Transportation and Infrastructure
Geospatial Corporation Solutions
It’s important to understand there is no single solution to address the underground infrastructure mapping, data collection/management, and data communication needs that oil and gas companies, electrical utilities, municipalities, and others are confronted with.
Geospatial Corporation utilizes a wide array of data collection technologies and has extensive experience with difficult and unique situations.
Geospatial CEO Mark Smith explains:
“There is no one technology or a silver bullet that will provide 3D mapping of every infrastructure for every industry. That is why it is crucial to have a strategic process in place that starts with assessing the situation and conditions of the area before determining which technology or combination of technologies to apply. As technological advances continue to progress, so will the feature-rich GIS management applications and the safety and security of our underground space.”
The state-of-the-art underground mapping technologies at Geospatial’s disposal are truly amazing and include:
- in-line mapping systems
- electromagnetic mapping systems
- infrared & microwave technology systems
- electromagnetic underground infrastructure location and mapping technologies
- ground penetrating radar
- vacuum excavation
Investors can read more about these technologies here.
The Only Google for Work Technology Partner for Underground Mapping
With the PIPES Act of 2016 now in place, an enormous competitive advantage for GSPH going forward is the fact that Geospatial Corporation is the only Google For Work Technology Partner that 3 dimensionally maps underground infrastructure. This needs to be stated again:
Geospatial Corporation is the only Google For Work Technology Partner that 3 dimensionally maps underground infrastructure.
Geospatial Corporation recently launched an upgraded version of GeoUnderground (see web site). GeoUnderground is a mobile, lightweight, secure, and feature-rich web-based Geographic Information System (GIS) management portal providing a suite of tools that makes critical data available to customers in a user friendly platform.
GeoUnderground is a software-as-a-service (SaaS) model developed exclusively for web-based multi-users who need to manage and easily access critical infrastructure data. Customers gain two key benefits: their data is stored and accessible to authorized users via a secure centralized data repository, and it is delivered to them in an easy to use interface through their existing web browser.
Geospatial’s proprietary, cloud-based, 3-D mobile GIS mapping platform enables users to securely view, edit and share accurate x,y&z coordinates of buried pipelines, geo-referenced photos and mapping application. Users can view x,y&z coordinates of buried pipelines, geo-referenced photos and video of above ground attributes from a laptop, phone or tablet while in the field.
It’s important for investors to understand that the PIPES Act of 2016 not only requires accurate underground mapping of infrastructure, it also mandates secure information storage and information retrieval. I believe there is no company better prepared to meet this regulatory compliance than Geospatial Corporation.
CEO Mark Smith told me that:
“Inquiries have skyrocketed since passage of the PIPES Act”
“As a Google for Work Technology Partner, our Data Acquisition Technologies and our GeoUnderground Solution is positioned for rapid growth.”
Turning “Location” Only Competitors Into GeoUnderground Service Partners
Geospatial Corporation’s advanced 3D underground mapping technologies combined with GeoUnderground’s SaaS platform is a one-two punch to competitors. There is a world of difference between “locating” underground infrastructure in only 2 dimensions and 3 dimensionally mapping it. Location-only, 2 dimensional providers don’t convey depth of structures and accuracy is limited. This “location only” group would include engineering companies and companies that plant yellow flags and paint lines on streets prior to a construction project. It also over 60,000 conventional surveyors across the United States.
Between offering vastly superior data collection technologies for 3 dimensional mapping and being the only Google For Work Technology Partner for 3D underground mapping at GeoUnderground, Geospatial Corporation sees the thousands of 2 dimensional, location-only providers as future customers, not competitors. It’s easy to see how the newly-launched Geospatial Partner Program could drive revenue growth going forward, especially as the PIPES Act of 2016 mandates the certification, data management, testing and accurate mapping of all buried energy pipelines in the USA.
Expect Strong Forward Sales Growth
Geospatial’s sales have been choppy from quarter to quarter and even year to year, but recent trend has been positive with sales of $181,000 in the most recent quarter more than double the sales for all of last year. I think investors can expect to see very strong sales growth going forward.
It would be difficult to overstate the significance of the combination of the passage of the PIPES Act, Geospatial’s cutting edge technology for 3D mapping, and the company’s enviable position as a the only Google for Work Technology Partner in the space.
Avenues for future revenue generation and growth include:
- Gathering and accurately mapping subterranean data (required by PIPES Act of 2016)
- Providing Software as a Service for access to data (required by PIPES Act of 2016)
- Providing monitoring and change detection services in pipes
- GeoUnderground partnership program & expansion to provide services on a global basis
Target customers include, but are not limited to:
- Oil and gas companies
- Municipalities (3D underground mapping of entire cities is an expected, near-term future trend)
- Cable, telecom, water, and electric companies
- Military bases, universities, airports, school systems
- Global expansion potential (Geospatial has been approached by government agencies, national energy companies, water companies and domestic companies with international interests to discuss the implementation of infrastructure mapping and management projects in countries around the globe.)
Geospatial Corporation is an exciting company with best-in-class 3D underground mapping technology and a proprietary SaaS platform that looks like an ideal source for rapid revenue expansion as thousands of 2 dimensional, location only providers become GeoUnderground, 3D mapping data partners. Being “the” Google For Work Technology Partner for underground 3D mapping at a time when federal law now mandates the certification, proper data management, testing and mapping of all of buried energy pipelines nationwide is competitive advantage that is unique to Geospatial Corporation.
Shares of GSPH are, for now, somewhat thinly traded and spreads can be wide. As a result, investors may prefer averaging into a position.
Having said that, nothing drives volume and share prices up like strong sales growth and improving fundamentals. Based on the evidence outlined above, that is exactly what investors should expect to see happen with shares of GSPH.
We will be following GSPH closely in the months ahead and expect a very strong and positive flow of information to come from the company that we look forward to sharing with our subscribers.
I highly recommend this additional reading: What Lies Beneath , by Geospatial CEO, Mark Smith.
See Also: Geospatial Corporation Business Summary