GEOSPACE TECHNOLOGIES CORP

Previous wording

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “could”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating”, or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the timing, adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, sales or rentals for our ocean bottom nodes, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for channels of our Pioneer™ system, the fulfillment of customer payment obligations, the impact of the current armed conflict between Russia and Ukraine, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as other cautionary language in such Annual Report and this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of the Quantum and OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels, the failure of our products to achieve market acceptance (despite substantial investment by us), our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, credit losses associated with …

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “could”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating”, or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the timing, adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, sales or rentals for our ocean bottom nodes, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for channels of our Pioneer™ system, the fulfillment of customer payment obligations, the impact of the current armed conflicts between Russia and Ukraine and between the U.S. and Iran, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as other cautionary language in such Annual Report and this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of the Quantum and OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels, the failure of our products to achieve market acceptance (despite substantial investment by us), our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies,…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Over the last decade, we have seen an increase of over 400% in sales volume of our Hydroconn® connector cables used in Automated Meter Reading (AMR) applications. These cables play a role in Advanced Metering Infrastructure (AMI) by enabling remote collection of usage data from utility meters, thereby eliminating the need for manual meter reading.

Current wording

Over the last decade, we have seen a significant increase in sales volume of our Hydroconn® connector cables used in Automated Meter Reading (AMR) applications. These cables play a role in Advanced Metering Infrastructure (AMI) by enabling remote collection of usage data from utility meters, thereby eliminating the need for manual meter reading.

Previous wording

In August 2025, we acquired Heartbeat Detector® by purchasing all of the outstanding common stock of Geovox Securities, Inc. ("Geovox"). Heartbeat Detector® is a heartbeat detection security technology developed by the United States Department of Energy’s Oak Ridge National Laboratory which bolsters our perimeter security and surveillance offerings. Used in more than a dozen countries to address human trafficking and prison security, the Heartbeat Detector® uses proprietary 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 geophones we manufacture, has been proven 99% effective by Oak Ridge, Sandia and Thunder Mountain national laboratories.

Current wording

In August 2025, we acquired Heartbeat Detector® by purchasing all of the outstanding common stock of Geovox. Heartbeat Detector® is a heartbeat detection security technology developed by the United States Department of Energy’s Oak Ridge National Laboratory which bolsters our perimeter security and surveillance offerings. Used in more than a dozen countries to address human trafficking and prison security, the Heartbeat Detector® uses proprietary 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 geophones we manufacture, has been proven 99% effective by Oak Ridge, Sandia and Thunder Mountain national laboratories.

Previous wording

Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our Smart Water segment. Automatic meter reading efficiencies in operations and improved customer service has begun to be understood by the municipalities of the United States. We expect this portion of our business to continue to grow for the foreseeable future. Additionally, we anticipate this segment to see revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather. Given the well-known and often extreme volatility experienced in our Energy Solutions segment, careful expansion of products and market diversity in our Smart Water and Intelligent Industrial segments has been a longstanding part of our strategic vision and reflects our on-going diversification efforts.

Current wording

Our Smart Water segment has experienced a decline in sales in fiscal year 2026, however we believe this decline is temporary, largely due to overstocking by our customers in the prior fiscal year. Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our Smart Water segment. Automatic meter reading efficiencies in operations and improved customer service has begun to be understood by the municipalities of the United States. We expect this portion of our business to continue to grow for the foreseeable future. Additionally, we anticipate this segment to see revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather. Given the well-known and often extreme volatility experienced in our Energy Solutions segment, careful expansion of products and market diversity in our Smart Water and Intelligent Industrial segments has been a longstanding part of our strategic vision and reflects our on-going diversification efforts.

Previous wording

Our Energy Solution segment saw a shift from rentals of our ocean bottom nodes to purchases of the equipment in fiscal years 2024 and 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, because we expect the market is saturable and future rental fleet use will come from our customers' 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. During the third quarter of fiscal year 2025, we entered into a PRM contract. The majority of the contract is expected to be completed in approximately 18 months. Revenue will be recognized in our Energy Solutions segment over the duration of the contract.

Current wording

Our Energy Solution segment has seen a shift from rentals of our ocean bottom nodes to purchases of the equipment since fiscal year 2024. 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, because we expect the market is saturable and future rental fleet use will come from our customers' 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. During the third quarter of fiscal year 2025, we entered into a PRM contract. The Company began production of the PRM in the second quarter of 2026. The majority of the revenue from this contract is expected to be completed by the third quarter of fiscal year 2027. Revenue from this contract is being recognized in our Energy Solutions segment over the duration of the contract.

Previous wording

Three months ended December 31, 2025, compared to the three months ended December 31, 2024

Current wording

Three and six months ended March 31, 2026 compared to the three and six months ended March 31, 2025

Previous wording

Consolidated revenue for the three months ended December 31, 2025, was $25.6 million, a decrease of $11.6 million, or 31.3%, from the corresponding period of the prior fiscal year. The decrease for the three months ended December 31, 2025 was primarily due to a decrease in revenue from our Energy Solutions segment attributable to (i) a $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025 and (ii) lower utilization of our ocean bottom nodes rental fleet. The decrease was largely offset by an increase in demand for our wireless land-based Pioneer™. The decrease in consolidated revenue was also attributable to lower demand for our Hydroconn® cable and connector products from our Smart Water segment.

Current wording

Consolidated revenue for the three months ended March 31, 2026, was $19.7 million, an increase of $1.7 million, or 9.5%, from the corresponding period of the prior fiscal year. The increase for the three months ended March 31, 2026 was primarily due to higher revenue from our Energy Solutions segment, which included initial revenue of $3.6 million recognized on our PRM contract. The increase was largely offset by lower demand for our Hydroconn® cable and connector products from our Smart Water segment. Furthermore, during the second quarter of the prior fiscal year, we determined the collectability of a receivable from an ocean bottom 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, our consolidated rental revenue for the three months ended March 31, 2025 was in a negative position ($0.7 million). Consolidated revenue for the six months ended March 31, 2026, was $45.3 million, a decrease of $9.9 million, or 18.0%, from the corresponding period of the prior fiscal year. The decrease for the six months ended March 31, 2026 was primarily due to lower demand for our Hydroconn® cable and connector products from our Smart Water segment. The decrease in consolidated revenue was also due to lower revenue from our Energy Solutions segment attributable to a $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025, which was largely offset by an increase in demand for our wireless land-based Pioneer™.

Previous wording

Consolidated gross profit for the three months ended December 31, 2025, was $2.7 million, a decrease of $17.5 million, or 86.6%, from the corresponding period of the prior fiscal year. The decrease in gross profit for the three months ended December 31, 2025 was primarily due to the decrease in revenue from our Energy Solutions segment coupled by a high gross margin on our $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025. The decrease in gross profit was also attributable to a lower utilization of our ocean bottom rental fleet, in addition to an increase in tariffs on the raw materials we purchase.

Current wording

Consolidated gross profit for the three months ended March 31, 2026, was $0.7 million, compared to $1.7 million from the corresponding period of the prior fiscal year. The decrease for the three months ended March 31, 2026 was primarily due to the decrease in revenue and related gross profits from our Smart Water segment. Consolidated gross profit for the six months ended March 31, 2026, was $3.4 million, compared to $21.9 million from the corresponding period of the prior fiscal year. The decrease in gross profit for the six months ended March 31, 2026 was primarily due to (i) a high gross margin on our $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025 and (ii) the decrease in revenue and gross profits from our Smart Water segment. The decrease in gross profit for both three and six months ended March 31, 2026 was also attributable to an increase in tariffs on the raw materials we purchase.

Previous wording

Consolidated operating expenses for the three months ended December 31, 2025, were $12.9 million, an increase of $0.6 million, or 5.1%, from the corresponding period of the prior fiscal year. The increase for the three months ended December 31, 2025 was primarily due to (i) an increase in sales and marketing costs and (ii) a change in the fair value of contingent consideration. The increase was partially offset by (i) a decrease in personnel costs, primarily severances and (ii) lower research and development project expenditures.

Current wording

Consolidated operating expenses for the three months ended March 31, 2026, were $12.1 million, an increase of $0.1 million, or 0.7%, from the corresponding period of the prior fiscal year. Consolidated operating expenses for the six months ended March 31, 2026, were $25.1 million, an increase of $0.7 million, or 2.9% from the corresponding period of the prior fiscal year. The increase for both periods was primarily due to (i) an increase in sales and marketing costs, (ii) higher professional fees and (iii) severance costs. The increase in operating expenses six months ended March 31, 2026 was partially offset by a decrease in research and development expenses, primarily personnel costs and project expenditures.

Previous wording

Consolidated other income decreased $0.1 million, or 13.9% for the three months ended December 31, 2025, from the corresponding period of the prior fiscal year. The decrease for the three months ended December 31, 2025 was principally due to a decrease in interest income on short-term investments, partially offset by an increase in interest income on our financing receivables.

Current wording

Consolidated other income was unchanged for the three months ended March 31, 2026 and 2025. Consolidated other income for the six months ended March 31, 2026, decreased $0.1 million, or 8.8% from the corresponding period of the prior fiscal year. The decrease was principally due to (i) a decrease in interest income on short-term investments and (ii) a decrease in foreign exchange transaction losses.

Previous wording

Revenue from our Smart Water segment for the three months ended December 31, 2025, decreased $1.5 million, or 21.0%, from the corresponding period of the prior fiscal year. The decrease was primarily due to a decrease in demand for our Hydroconn® cable and connector products.

Current wording

Revenue from our Smart Water segment for the three months ended March 31, 2026, decreased $5.7 million, or 60.6%, from the corresponding period of the prior fiscal year. Revenue from our Smart Water segment for the six months ended March 31, 2026, decreased $7.3 million, or 43.4%, from the corresponding period of the prior fiscal year. The decrease for both periods was primarily due to a decrease in demand for our Hydroconn® cable and connector products. We believe this decline is temporary due to overstocking by our customers in the prior fiscal year.

Previous wording

Operating loss from our Smart Water segment for the three months ended December 31, 2025, was $(0.8) million, in comparison to operating income of $0.4 million from the corresponding period of the prior fiscal year. The decrease was primarily due the decrease in revenue and higher research and development costs.

Current wording

Operating loss from our Smart Water segment for the three months ended March 31, 2026, was $(1.6) million, in comparison to operating income of $1.4 million from the corresponding period of the prior fiscal year. Operating loss from our Smart Water segment for the six months ended March 31, 2026, was $(2.4) million, in comparison to operating income of $1.8 million from the corresponding period of the prior fiscal year. The decrease for both periods was primarily due the decrease in revenue and related gross profits. The decrease for the six months ended March 31, 2026 was also attributable to higher research and development expense, largely personnel costs.

Previous wording

Revenue from our Energy Solutions segment for the three months ended December 31, 2025, decreased $9.6 million, or 39.7%, 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, 2026, increased $7.0 million, or 272.1%, from the corresponding period of the prior fiscal year. Revenue from our Energy Solutions segment for the six months ended March 31, 2026, decreased $2.6 million, or 9.7%, from the corresponding period of the prior fiscal year. The components of this changes were as follows:

Previous wording

Operating loss associated with our Energy Solutions segment for the three months ended December 31, 2025, was $(3.4) million, compared to operating income of $13.3 million for the corresponding period of the prior fiscal year. The decrease was primarily due to the decrease in revenue coupled by a high gross margin on our $17 million sale of ocean bottom noted in the first quarter of fiscal year 2025.

Current wording

Operating loss associated with our Energy Solutions segment for the three months ended March 31, 2026, was $(4.8) million, compared $(6.7) million for the corresponding period of the prior fiscal year. The decrease in operating loss was primarily due to the increase in revenue and related gross profits. Operating loss for the six months ended March 31, 2026, was $(8.2) million, compared to operating income of $6.6 million for the corresponding period of the prior fiscal year. This decrease was primarily attributable to the decrease in revenue, largely rental revenue, coupled by a high gross margin on our $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025.

Previous wording

Revenue from our Intelligent Industrial segment for the three months ended December 31, 2025, decreased $0.5 million, or 8.4%, from the corresponding period of the prior fiscal year. The decrease in revenue for the three months ended December 31, 2025, was primarily due to a decrease in demand for our industrial sensor products. The decrease was partially offset by higher demand for our contract manufacturing services.

Current wording

Revenue from our Intelligent Industrial segment for the three months ended March 31, 2026, increased $0.4 million, or 7.1%, from the corresponding period of the prior fiscal year. The increase was primarily due to an increase in demand for our contract manufacturing services. Revenue from our Intelligent Industrial segment for the six months ended March 31, 2026, decreased $0.1 million, or 0.4%, from the corresponding period of the prior fiscal year. The decrease in revenue for the six months ended March 31, 2026, was primarily due to a decrease in demand for our industrial sensor products, largely offset by increased demand for our contract manufacturing services.

Previous wording

Operating loss from our Intelligent Industrial segment for the three months ended December 31, 2025 decreased $0.1 million, or 13.5%, from the corresponding period of the prior fiscal year. The decrease for the three months ended December 31, 2025 was primarily due to a decrease in operating expenses. The decrease was largely offset by a decrease in revenue and related gross profits incurred during the period.

Current wording

Operating loss from our Intelligent Industrial segment for the three months ended March 31, 2026 decreased $0.7 million, or 54.4%, from the corresponding period of the prior fiscal year. The decrease in operating loss for the three months ended March 31, 2026 was primarily due to the increase in revenue and related gross profits. Operating loss for the six months ended March 31, 2026 decreased $0.8 million, or 37.1%, from the corresponding period of the prior fiscal year. The decrease in operating loss for the six months ended March 31, 2026 was primarily due to lower research and development expense, principally personnel costs.

Previous wording

At December 31, 2025, we had $10.6 million in cash and cash equivalents. For the three months ended December 31, 2025, we used $15.1 million of cash from operating activities. Uses of cash included (i) our net loss of $9.8 million, offset by non-cash charges of $3.6 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for credit losses, a (ii) $4.0 million increase in inventories largely due to raw material purchases for use in our PRM contract, (iii) $4.1 million decrease in other liabilities due to a decrease in deposits held from customers on product sales and lower accrued compensation costs, a (iv) $3.2 million increase in notes receivable on product sales and (v) $3.0 million increase in other assets, primarily due to prepaid product purchases related to our PRM contract. These uses of cash were partially offset by a $5.1 million increase in trade accounts payable in large part due to raw material purchases for our PRM contract.

Current wording

At March 31, 2026, we had $13.4 million in cash and cash equivalents. For the six months ended March 31, 2026, we used $16.7 million of cash from operating activities. Uses of cash included (i) our net loss of $20.8 million, offset by non-cash charges of $7.7 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for credit losses, a (ii) $2.8 million increase in inventories largely due to material purchases for use in our PRM contract, (iii) $2.4 million increase in notes receivable on product sales, (iv) $5.2 million decrease in trade accounts payable primarily due the timing of payments and (v) $2.6 million increase in other assets, primarily due to prepaid product purchases related to our PRM contract. These uses of cash were partially offset by a $9.1 million increase in other liabilities, primarily deferred contract liabilities related to our PRM contract.

Previous wording

For the three months ended December 31, 2025, we used cash of $0.4 million in investing activities. Uses of cash included (i) $2.5 million for additions to our property, largely offset by $2.1 million of proceeds from the sale of rental equipment. We expect fiscal year 2026 cash investments in property, plant and equipment will be approximately $5 million and do not anticipate a significant increase to its rental fleet.

Current wording

For the six months ended March 31, 2026, we generated cash of $4.0 million in investing activities. Sources of cash included $6.9 million of proceeds from the sale of rental equipment, partially offset by $3.0 million used for additions to our property, plant and equipment. We do not expect significant cash investments in property, plant and equipment or our rental fleet for the remainder of fiscal year 2026.

Previous wording

For the three months ended December 31, 2025, we used $0.3 million from financing activities for tax payments on stock-based compensation for the exchange of common stock.

Current wording

For the six months ended March 31, 2026, we used $0.3 million from financing activities for tax payments on stock-based compensation for the exchange of common stock.

Previous wording

On August 29, 2025, we amended our credit agreement (“the Agreement”) with Woodforest National Bank. The Agreement extended our revolving loan agreement, dated as of July 26, 2023, with Woodforest. The Agreement is for a three-year term and provides a revolving credit facility with a maximum availability of $25 million. Interest shall accrue on outstanding borrowings at 30 Day Term SOFR plus a margin equal to 2.75% per annum. 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 (i) a minimum consolidated tangible net worth of $85 million, (ii) minimum liquidity of $10 million, which includes cash and amounts available to borrow and (iii) a minimum asset coverage ratio of 2.00 to 1.00. The Agreement also requires us to maintain a springing minimum interest coverage ratio of at least 1.50 to 1.00, tested quarterly whenever (a) there is an outstanding balance on the revolving credit facility or (b) have letter of credit exposure greater than $1 million. Effective December 31, 2025, we entered into a limited waiver agreement with Woodforest which waived our springing minimum interest coverage ratio through February 16, 2027.

Current wording

On August 29, 2025, we amended and restated our credit agreement (“the Agreement”) with Woodforest National Bank. The Agreement extended our revolving loan agreement, dated as of July 26, 2023, with Woodforest. The Agreement is for a three-year term and provides a revolving credit facility with a maximum availability of $25 million. Interest shall accrue on outstanding borrowings at 30 Day Term SOFR plus a margin equal to 2.75% per annum. 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 (i) a minimum consolidated tangible net worth of $85 million, (ii) minimum liquidity of $10 million, which includes cash and amounts available to borrow and (iii) a minimum asset coverage ratio of 2.00 to 1.00. The Agreement also requires us to maintain a springing minimum interest coverage ratio of at least 1.50 to 1.00, tested quarterly whenever (a) there is an outstanding balance on the revolving credit facility or (b) have letter of credit exposure greater than $1 million. Effective December 31, 2025, we entered into a limited waiver agreement with Woodforest which waived our springing minimum interest coverage ratio through February 16, 2027. At March 31, 2026 we were in compliance with all financial and non-financial covenants under the Agreement. We had no debt outstanding at March 31, 2026 and had a borrowing availability of $25 million.

Previous wording

During the three months ended December 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, 2025.

Current wording

During the six months ended March 31, 2026, 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, 2025.