GEOSPACE TECHNOLOGIES CORP

Previous wording

Effective October 1, 2024, the Company changed the composition of its three operating business segments and changed its methodology for allocating manufacturing costs including overhead and other costs of revenue to the segments. The business segments are now comprised of: Smart Water, Energy Solutions and Intelligent Industrial. The change methodology for allocating manufacturing costs affected each segment's operating income (loss) but had no effect on consolidated operating income.

Current wording

Effective October 1, 2024, the Company changed the composition of its three operating business segments and changed its methodology for allocating manufacturing costs including overhead and other costs of revenue to the segments. The business segments are now comprised of: Smart Water, Energy Solutions and Intelligent Industrial. The change methodology for allocating manufacturing costs affected each segment's operating income (loss) but had no effect on consolidated operating income (loss).

Previous wording

We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner® and Mariner Deep™. Similar to our land-based wireless systems, these marine wireless systems may be deployed in virtually unlimited channel configurations and do not require interconnecting cables between each station. Through December 31, 2024, we have sold 35,000 OBX stations and we currently have 13,000 OBX stations in our rental fleet. The Mariner® is a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder designed for extended duration seabed ocean bottom seismic data acquisition. Through December 31, 2024, we have sold 7,600 Mariner® nodes.

Current wording

We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner® and Mariner Deep™. Similar to our land-based wireless systems, these marine wireless systems may be deployed in virtually unlimited channel configurations and do not require interconnecting cables between each station. Through March 31, 2025, we have sold 28,000 OBX stations and we currently have 9,000 OBX stations in our rental fleet. The Mariner® is a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder designed for extended duration seabed ocean bottom seismic data acquisition. Through March 31, 2025, we have sold 7,600 Mariner® nodes and currently have 3,000 Mariner® nodes in our rental fleet.

Previous wording

Additionally, we have developed high-definition permanent reservoir monitoring systems ("PRM") for land and ocean-bottom applications in producing oil and gas fields. Our primary offering, OptoSeis® fiber optic sensing technology, provides high-definition seismic data acquisition systems with a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects. We are in the process of responding to a large-scale seabed PRM tender from a major oil and gas producer. The project is expected to be awarded in the third quarter of fiscal year 2025. We have also entered into a contract for two Front-End Engineering and Design studies with this producer which is expected to be completed in the fourth quarter of fiscal year 2025. We have not received any orders for a large-scale seabed PRM system since 2012.

Current wording

Additionally, we have developed high-definition permanent reservoir monitoring systems ("PRM") for land and ocean-bottom applications in producing oil and gas fields. Our primary offering, OptoSeis® fiber optic sensing technology, provides high-definition seismic data acquisition systems with a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects. We continue to have discussions with potential clients for future PRM systems. We are currently performing engineering services for two Front-End Engineering and Design studies for a major oil and producer. We have not received any orders for a large-scale seabed PRM system since 2012.

Previous wording

Our Energy Solution segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment in fiscal year 2024, of which trend has continued into fiscal year 2025. This shift signifies our customer’s recognition of future backlog to justify ownership versus renting the nodes. We do not expect significant expansion of the ocean bottom nodal market, for we expect the market is saturable and future rental fleet use will come from our customer’s need to temporarily expand their nodal fleet. We expect our Energy Solutions segment to provide the majority of our revenue for years to come, but in diminishing portion to our other segments. Demand for our seismic products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.

Current wording

Our Energy Solution segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment in fiscal year 2024, of which trend has continued into fiscal year 2025. This shift signifies our customer’s recognition of future backlog to justify ownership versus renting the nodes. We do not expect significant expansion of the ocean bottom nodal market, for we expect the market is saturable and future rental fleet use will come from our customer’s need to temporarily expand their nodal fleet. We expect our Energy Solutions segment to provide a significant portion of our revenue for years to come, but in diminishing portion to our other segments. Demand for our seismic products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.

Previous wording

Three months ended December 31, 2024, compared to the three months ended December 31, 2023

Current wording

Three and six months ended March 31, 2025, compared to the three and six months ended March 31, 2024

Previous wording

Consolidated revenue for the three months ended December 31, 2024, was $37.2 million, a decrease of $12.8 million, or 25.6%, from the corresponding period of the prior fiscal year. The decrease was primarily due to lower revenue from our Energy Solutions segment. Revenue for the three months ended December 31, 2024, included a $17 million OBX marine wireless product sale structured as a sales-type lease. However, in comparison, revenue for the first quarter of the prior year included a $30 million sale of our Mariner™ shallow water ocean bottom nodes. The decrease in revenue from our Energy Solutions segment was partially offset by higher revenue generated from our Smart Water segment attributable to an increase in demand for our water meter products.

Current wording

Consolidated revenue for the three months ended March 31, 2025, was $18.0 million, a decrease of $6.2 million, or 25.7%, from the corresponding period of the prior fiscal year. The decrease was primarily due to lower OBX marine wireless rental revenue from our Energy Solutions segment. During the second quarter of fiscal year 2025, the Company determined the collectability of a receivables from a rental customer was less than probable. As a result of this determination, the rent receivable balance due from this customer of $2.2 million was reversed against rental revenue. As a result of reversal, the Company's consolidated rental revenue for the three ended March 31, 2025 was in a negative position ($0.7 million). Any future cash received from this customer will be recognized as rental revenue. Consolidated revenue for the six months ended March 31, 2025, was $55.2 million, a decrease of $19.1 million, or 25.6%, from the corresponding period of the prior fiscal year. The decrease was primarily due to lower revenue from our Energy Solutions segment. Revenue for the six months ended March 31, 2025, included a $17 million OBX marine wireless product sale structured as a sales-type lease. However, in comparison, revenue for the first quarter of the prior year included a $30 million sale of our Mariner™ shallow water ocean bottom nodes. The decrease was also attributable to lower rental revenue. The decrease in consolidated revenue for both the three and six months ended March 31, 2025 was partially offset by an increase in demand for our Hydroconn® cable and connector products from our Smart Water segment.

Previous wording

Consolidated gross profit for the three months ended December 31, 2024, was $20.1 million, a decrease of $2.1 million, or 9.4%, from the corresponding period of the prior fiscal year. The decrease in gross profit was primarily due to a decrease in wireless product revenue from our Energy Solutions segment. This decrease was partially offset by a high gross profit margin on our $16 million wireless product sale in the first quarter of fiscal year 2025 and the increase in revenue from our Smart Water segment.

Current wording

Consolidated gross profit for the three months ended March 31, 2025, was $1.7 million, a decrease of $4.1 million, or 70.3%, from the corresponding period of the prior fiscal year. The decrease in gross profit was primarily due to a decrease in both our wireless product revenue and rental revenue from our Energy Solutions segment. Consolidated gross profit for the six months ended March 31, 2025, was $21.9 million, a decrease of $6.2 million, or 22.1%, from the corresponding period of the prior fiscal year. The decrease in gross profit was primarily due to a decrease in wireless product revenue and rental revenue. This decrease was partially offset by a high gross profit margin on a $16 million wireless product sale in the first quarter of fiscal year 2025.

Previous wording

Consolidated operating expenses for the three months ended December 31, 2024, were $12.3 million, an increase of $2.9 million, or 31.0%, from the corresponding period of the prior fiscal year. The increase was due to higher personnel costs, including severance costs, higher professional fees and research and development project expenditures.

Current wording

Consolidated operating expenses for the three months ended March 31, 2025, were $12.0 million, an increase of $1.6 million, or 15.8%, from the corresponding period of the prior fiscal year. Consolidated operating expenses for the six months ended March 31, 2025, were $24.3 million, an increase of $4.6 million, or 23.0%, from the corresponding period of the prior fiscal year. The increase for both the three and six months ended March 31, 2025 was primarily due to higher personnel costs, including severance costs and acceleration of stock-based compensation expense. The increase in consolidated operating expenses for the six months ended March 31, 2025 was also attributable to higher sales and marketing costs in addition to an increase in research and development project expenditures.

Previous wording

Consolidated other income was $0.6 million for the three months ended December 31, 2024, compared to a loss of $0.1 million from the corresponding period of the prior fiscal year. The increase for the three months ended December 31, 2024 was principally due to higher interest income attributable to its short-term investments and financing receivables.

Current wording

Consolidated other income was $0.4 million for the three months ended March 31, 2025, compared to $0.2 million from the corresponding period of the prior fiscal year. Consolidated other income was $1.0 million for the six months ended March 31, 2025, compared to $0.1 million from the corresponding period of the prior fiscal year. The increase for both periods was principally due to higher interest income attributable to our financing receivables.

Previous wording

Revenue from our Smart Water segment for the three months ended December 31, 2024, increased $3.1 million, or 72.1%, from the corresponding period of the prior fiscal year. The increase for the three months ended December 31, 2024, was primarily due to an increase in demand for our Hydroconn® cable and connector products.

Current wording

Revenue from our Smart Water segment for the three months ended March 31, 2025, increased $3.1 million, or 47.7%, from the corresponding period of the prior fiscal year. Revenue from our Smart Water segment for the six months ended March 31, 2025, increased $6.1 million, or 57.4%, from the corresponding period of the prior fiscal year. The increase for both periods was primarily due to an increase in demand for our Hydroconn® cable and connector products.

Previous wording

Revenue from our Energy Solutions segment for the three months ended December 31, 2024, decreased $15.6 million, or 39.2%, from the corresponding period of the prior fiscal year. The components of this decrease were as follows:

Current wording

Revenue from our Energy Solutions segment for the three months ended March 31, 2025, decreased $8.4 million, or 76.5%, from the corresponding period of the prior fiscal year. Revenue from our Energy Solutions segment for the six months ended March 31, 2025, decreased $24.1 million, or 47.3%, from the corresponding period of the prior fiscal year. The components of this decrease were as follows:

Previous wording

Operating income associated with our Energy Solutions segment for the three months ended December 31, 2024, was $13.3 million, a decrease of $1.8 million from the corresponding period of the prior fiscal year. The decrease in operating income for the three months ended December 31, 2024, was primarily due to a decrease in wireless product revenue. This decrease was largely offset by (i) a high profit margin on our $17 million product sale in the first quarter of fiscal year 2025 and (ii) the change in the composition of our business segments.

Current wording

Operating loss associated with our Energy Solutions segment for the three months ended March 31, 2025, was $(6.7) million, compared to $(1.9) million for the corresponding period of the prior fiscal year. The increase in operating loss was largely due to (i) the decrease in revenue and related gross profits and (ii) a change in the composition of our business segments. Operating income associated with our Energy Solutions segment for the six months ended March 31, 2025, was $6.6 million, a decrease of $6.5 million from the corresponding period of the prior fiscal year. The decrease in operating income for the six months ended March 31, 2025, was primarily due to lower revenue and related gross profits largely driven by (i) a high profit margin on our $17 million product sale in the first quarter of fiscal year 2025 and (ii) the change in composition of our business segments and our methodology for allocating manufacturing costs including overhead and other costs of revenue to our segments.

Previous wording

Revenue from our Intelligent Industrial segment for three months ended December 31, 2024, decreased $0.2 million, or 4.1%, from the corresponding period of the prior fiscal year. The decrease in revenue for the three months ended December 31, 2024, was primarily due to lower demand for our imaging products. The decrease was partially offset by an increase in demand for our sensor products.

Current wording

Revenue from our Intelligent Industrial segment for three months ended March 31, 2025, decreased $0.9 million, or 12.8%, from the corresponding period of the prior fiscal year. Revenue from our Intelligent Industrial segment for six months ended March 31, 2025, decreased $1.1 million, or 8.8%, from the corresponding period of the prior fiscal year. The decrease in revenue for both the three and six months ended March 31, 2025, was primarily due to (i) revenue recognized for the three and six months ended March 31, 2024 on a government contract completed in the fourth quarter of fiscal year 2024 and (ii) lower demand for our imaging products. The decrease for both periods was partially offset by an increase in demand for our sensor products.

Previous wording

Operating loss from our Intelligent Industrial segment for the three months ended December 31, 2024, was $0.9 million, an increase of $0.7 million from the corresponding period of the prior fiscal year. The increase in operating loss for the three months ended December 31, 2024, was primarily due (i) the decrease in revenue and (ii) the change in composition of our business segments.

Current wording

Operating loss from our Intelligent Industrial segment for the three months ended March 31, 2025, was $1.3 million, an increase of $0.6 million from the corresponding period of the prior fiscal year. Operating loss from our Intelligent Industrial segment for the six months ended March 31, 2025, was $2.2 million, an increase of $0.9 million from the corresponding period of the prior fiscal year. The increase in operating loss for both periods was primarily due (i) the decrease in revenue and (ii) the change in composition of our business segments and our methodology for allocating manufacturing costs including overhead and other costs of revenue to our segments.

Previous wording

At December 31, 2024, we had $22.1 million in cash and cash equivalents and short-term investments. For the three months ended December 31, 2024, we used $11.5 million of cash from operating activities. Uses of cash included a (i) $3.0 million increase in inventories for the strategic purchase of long lead-time components needed for use in wireless products, valves and contract manufacturing, (ii) $3.6 million increase in trade accounts receivables due to timing of collections from customers and (iii) $0.7 million decrease in trade accounts payable due to timing of payments to our suppliers. Uses of cash were partially off our net income of $8.4 million and non-cash charges of $3.5 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for recovery of credit losses.

Current wording

At March 31, 2025, we had $19.8 million in cash and cash equivalents and short-term investments. For the six months ended March 31, 2025, we used $13.4 million of cash from operating activities. Uses of cash included (i) our net loss of $1.4 million, offset by non-cash charges of $6.9 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for credit losses, a (ii) $3.5 million increase in inventories for the strategic purchase of long lead-time components needed for use in wireless products, valves and contract manufacturing, (iii) $2.6 million decrease in trade accounts payable due to timing of payments to our suppliers and (iv) $0.7 increase in other liabilities related to accrued compensation costs. These uses of cash were partially offset by a (i) $1.8 million increase in trade accounts receivables due to timing of collections from customers and (ii) a $0.7 million decrease in other assets, primarily prepayment of insurance premiums.

Previous wording

For the three months ended December 31, 2024, we generated cash of $6.3 million in investing activities. Sources of cash consisted of (i) $9.7 million from the sale of short-term investments and (ii) $0.1 million of proceeds from the sale of rental equipment. These sources of cash were partially offset by (i) $3.2 million for additions to our property, plant and equipment and (ii) $0.4 million for additions to our equipment rental fleet. We expect fiscal year 2025 cash investments in property, plant and equipment will be approximately $6 million. We expect fiscal year 2025 cash investments into our rental fleet will be limited unless we experience an expansion of customer demand of our rental fleet. Our capital expenditures are expected to be funded from our cash on hand, short-term investments, internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.

Current wording

For the six months ended March 31, 2025, we generated cash of $15.5 million in investing activities. Sources of cash consisted of (i) $18.9 million from the sale of short-term investments and (ii) $1.7 million of proceeds from the sale of rental equipment. These sources of cash were partially offset by (i) $4.4 million for additions to our property, plant and equipment and (ii) $0.9 million for additions to our equipment rental fleet. We expect fiscal year 2025 cash investments in property, plant and equipment will be approximately $7 million. We expect fiscal year 2025 cash investments into our rental fleet will be limited unless we experience an expansion of customer demand of our rental fleet. Our capital expenditures are expected to be funded from our cash on hand, short-term investments, internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.

Previous wording

For the three months ended December 31, 2024, we used million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors. The program authorizes us to repurchase up to $7 million of our common stock in open market transactions. At December 31, 2024, $0.4 million of our common stock remains available for repurchases under the program.

Current wording

For the six months ended March 31, 2025, we used $0.6 million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors. The program authorized us to repurchase up to $7 million of our common stock in open market transactions. The program was completed in the second quarter of fiscal year 2025.

Previous wording

On July 26, 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank ("Woodforest"), as sole lender. The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest, as a lender. The Agreement provides a revolving credit facility with a maximum availability of $15 million. Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) 80% of eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments. Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25% per annum (7.75% at December 31, 2024). We are required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of our assets, except for certain excluded property. The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly. The Agreement also requires us to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance on the revolving credit facility. The Agreement expires in July 2025. We intend to begin negotiations with Woodforest for an extension in the second quarter of fiscal year 2025.

Current wording

On July 26, 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank ("Woodforest"), as sole lender. The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest, as a lender. The Agreement provides a revolving credit facility with a maximum availability of $15 million. Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) 80% of eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments. Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25% per annum (7.66% at March 31, 2025). We are required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of our assets, except for certain excluded property. The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly. The Agreement also requires us to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance on the revolving credit facility. The Agreement expires in July 2025. We have begun negotiations with Woodforest for a maturity extension to the Agreement.

Previous wording

At December 31, 2024 we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $12.1 million after consideration of a $0.1 million outstanding letter of credit. We were in compliance with all covenants under the Agreement. We do not currently anticipate the need to borrow under the Agreement, however, we may decide to do so in the future, if needed.

Current wording

At March 31, 2025 we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $14.9 million after consideration of a $0.1 million outstanding letter of credit. We were in compliance with all covenants under the Agreement. We do not currently anticipate the need to borrow under the Agreement, however, we may decide to do so in the future, if needed.

Previous wording

Our available cash, cash equivalents and short-term investments was $22.1 million at December 31, 2024, which included $0.9 million of cash and cash equivalents held by our foreign subsidiaries and branch offices. In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under the Agreement through its expiration in July 2025, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

Current wording

Our available cash, cash equivalents and short-term investments was $19.8 million at March 31, 2025, which included $0.7 million of cash and cash equivalents held by our foreign subsidiaries and branch offices. In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under the Agreement through its expiration in July 2025, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

Previous wording

In connection with the acquisition of Aquana in July 2021, we are subject to additional contingent cash payments to the former members of Aquana over a six-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The merger agreement with Aquana requires the continued employment of a certain key employee and former member of Aquana for the first four years of the six year earn-out period for any of Aquana’s former members to be eligible to any earn-out payments. In accordance with ASC 805,Business Combinations, due to the continued employment requirement, no liability has been recorded for the estimated fair value of contingent earn-out payments for this transaction. Earn-outs achieved are recorded as compensation expense when incurred.

Current wording

In July 2021, the Company acquired Aquana, LLC (“Aquana”). Pursuant to the merger agreement with Aquana, as amended ("the Merger Agreement"), the Company is subject to additional contingent cash payments to the former members of Aquana over a seven-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The Merger Agreement requires the continued employment of a certain key employee and former member of Aquana for the first five years of the seven-year earn-out period in order for any of Aquana’s former members to be eligible for any earn-out payments. Due to the continued employment requirement, no liability has been recorded for the estimated fair value of earn-out payments for this transaction. Earn-outs achieved are recorded as compensation expense when incurred.

Previous wording

During the three months ended December 31, 2024, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

Current wording

During the six months ended March 31, 2025, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.