GEOSPACE TECHNOLOGIES CORP

Geospace Technologies Corporation designs and manufactures sophisticated technology solutions for applications in smart water management, energy exploration, as well as industrial and Internet of Things. The company's seismic equipment and services are marketed to the energy industry to locate, characterize and monitor hydrocarbon producing reservoirs, and its seismic products are also marketed to other industries for vibration monitoring, border and perimeter security and various geotechnical applications. The company also designs and manufactures non-seismic products including Hydroconn connector cables, imaging equipment, remote shutoff water valves and an IoT platform, and provides specialized contract manufacturing services. In recent years, the revenue contribution from non-energy related products has grown to represent nearly half of total revenue, with the Smart Water segment's revenue growth largely attributable to the rise in water utility modernization. The adoption of advanced technology in water management has been bolstered by U.S. Federal funding programs such as Water Infrastructure Finance Act funding, which provides $7.5 billion for water-related infrastructure projects.

The company is one of the world's largest designers and manufacturers of seismic products used in the oil and gas industry. Principal competitors for traditional seismic products include Sercel (a division of Viridien), Dynamic Technologies, and INOVA, while entities in China affiliated with Sercel and other Chinese manufacturers produce low-cost oil and gas seismic products. Primary competitors for land wireless data acquisition systems are SmartSolo, Sercel, INOVA, STRYDE, Geophysical Technology, and numerous smaller entities. Primary competitors for ocean bottom data acquisition systems are Sercel and InApril AS. For seabed PRM systems, the primary competitor is Alcatel-Lucent, and for high-definition borehole seismic data acquisition systems, competitors are Avalon Sciences Ltd and Sercel. In the smart water products market, real estate competition includes Water Hero, Moen, and Watercop, while utility market competitors include Mueller, Sensus, and Badger. The border and perimeter security marketplace is dominated by large integrated system providers such as Boeing, General Dynamics, Lockheed Martin, Raytheon, and Elbit Systems, with competitive geophysical technologies provided by OptaSense, Fibersensys, and Future Fiber Technologies. The primary competition for the Heartbeat Detector is Ensco. The company believes its Energy Solutions products are among the most technologically advanced instruments and equipment available for seismic data acquisition.

The company generates revenue through product sales, product rentals, and services. Revenue from product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred, and collectability of the sales price is probable. Rental revenue is recognized within the scope of ASC 842, Leases, as earned over the rental period if collectability of the rent is reasonably assured. Revenue from engineering services is recognized as services are rendered over the duration of a project or as billed on a per hour basis, and field service revenue is recognized when services are rendered. The company's primary customer segments include municipalities, water utilities, water meter manufacturing companies, asset management firms such as multifamily property owners, seismic contractors, major independent and government-owned oil and gas companies, large international oil and gas companies for PRM products, specialty manufacturers, research institutions, industrial product distributors, direct users of imaging equipment, specialized resellers, and government agencies for border and perimeter security products. Two customers comprised 19.1% and 16.2% of revenue during fiscal year 2025, and two customers comprised 27.4% and 16.0% of revenue during fiscal year 2024.

The Smart Water segment emphasizes a targeted approach to growing its footprint in the water management industry and contains the Hydroconn smart water connectivity offerings along with the Aquana products. Over the last decade, the company has seen an increase of over 400% in sales volume of its Hydroconn connector cables used in Automated Meter Reading applications. Revenue from the Smart Water segment was $35,816,000 for fiscal year 2025 and $32,434,000 for fiscal year 2024. The Energy Solutions segment includes wireless seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, cables and various other seismic products. The segment's products include the Pioneer ultralight wireless sensor product, the OBX ocean bottom seismic data acquisition system, the Mariner and Mariner Deep shallow water and deepwater wireless seismic acquisition nodes, OptoSeis fiber optic sensing technology for permanent reservoir monitoring, Insight by OptoSeis for high temperature downhole applications, seismic borehole acquisition systems, and SADAR technology for real-time monitoring of seismic data. Revenue from the Energy Solutions segment was $50,706,000 for fiscal year 2025 and $77,977,000 for fiscal year 2024, with product revenue of $44,600,000 and $58,878,000 respectively, and rental revenue of $6,106,000 and $19,099,000 respectively. The Intelligent Industrial segment consists of industrial sensors, electronic pre-press solutions, specialized contract manufacturing, and the growing defense and security applications offered by Quantum and Heartbeat Detector. Revenue from the Intelligent Industrial segment was $23,960,000 for fiscal year 2025 and $24,891,000 for fiscal year 2024, with product revenue of $23,788,000 and $24,724,000 respectively, and rental revenue of $172,000 and $167,000 respectively. Corporate revenue was $321,000 for fiscal year 2025 and $296,000 for fiscal year 2024.

In August 2025, the company acquired Heartbeat Detector by purchasing all the outstanding common stock of Geovox Securities, Inc. The acquisition purchase price for Geovox consisted of cash of $1.7 million ¹, which included $1.5 million ² paid at closing and $0.2 million ³ to be paid June 1, 2027, and contingent earn-out payments of up to $3.3 million ⁴ over a four-year period. In June 2025, the company sold its real property located at 4318 Northfield Lane Houston, Texas, a 17.3-acre ⁵ property, and recognized a gain on disposal of property of $4.6 million ⁶ during the third quarter of fiscal year 2025. In August 2024, the company sold its oil and gas product manufacturing operations based in the Russian Federation to a group of former employees, with consideration consisting of a $1.0 million ⁷ cash payment and a $3.5 million ⁸ promissory note, and recorded a loss on sale of $14.5 million ⁹. Since fiscal year 2021, the company has repurchased 1,558,260 ¹⁰ shares of its common stock in open market transactions under stock-buy-back programs authorized by its Board of Directors. On August 29, 2025, the company amended its credit agreement with Woodforest National Bank, which provides a revolving credit facility with a maximum availability of $25 million ¹¹ for a three-year term, with interest accruing at 30 Day Term SOFR plus a margin equal to 2.75% ¹² per annum.

Consolidated revenue for fiscal year 2025 was $110,803,000 ¹³, a decrease of $24.8 million ¹⁴, or 18.3% ¹⁵, from fiscal year 2024 revenue of $135,598,000 ¹⁶. The decrease was primarily due to lower product revenue from the Energy Solutions segment, including a $17 million ¹⁷ sale of ocean bottom nodes structured as a sales-type lease in fiscal year 2025 compared to a $30 million ¹⁸ sale of Mariner shallow water ocean bottom nodes in fiscal year 2024, and a decrease in wireless marine rental revenue, partially offset by an increase in demand for Hydroconn cable and connector products from the Smart Water segment. Consolidated gross profit for fiscal year 2025 was $32,897,000 ¹⁹, a decrease of $19.7 million ²⁰, or 37.4% ²¹, from fiscal year 2024 gross profit of $52,573,000 ²². Consolidated operating expenses for fiscal year 2025 were $48,797,000 ²³, an increase of $3.3 million ²⁴, or 7.3% ²⁵, from fiscal year 2024 operating expenses of $45,456,000 ²⁶. The company reported a net loss of $9,724,000 ²⁷ for fiscal year 2025 compared to a net loss of $6,578,000 ²⁸ for fiscal year 2024. Basic and diluted loss per common share was $0.76 ²⁹ for fiscal year 2025 compared to $0.50 ³⁰ for fiscal year 2024.

Management expects fiscal year 2026 revenue from the Energy Solutions reservoir products to increase significantly over fiscal year 2025 levels due to the PRM contract entered into in the third quarter of 2025, which has a duration expected to be approximately 18 months ³¹ with revenue recognized over the duration of the contract. Management expects fiscal year 2026 revenue from the Smart Water business segment products to increase slightly over fiscal year 2025 levels due in part to the continued increase in demand for Hydroconn products and growth in market acceptance in Aquana products. Management expects fiscal year 2026 revenue from the Intelligent Industrial business segment products to increase over fiscal year 2025 levels due to the recent acquisition of Geovox's Heartbeat Detector as well as optimism that demand for surveillance and defense products and contract manufacturing services will increase. Management believes wireless product sales will moderately increase in fiscal year 2026 over 2025 levels, primarily driven by the recent introduction of the Pioneer land-based wireless system and the Mariner wireless system, but can make no assurance in this regard.

The company's primary growth initiative is to seek out other business opportunities in its smart water and intelligent industrial markets which complement its existing products, engineering and manufacturing capabilities, company-wide culture, and are immediately accretive to its existing revenue stream. In order to diversify its revenue base and expose itself to different markets with different business cycles with recurring revenue streams, the company has directed efforts toward businesses outside the energy industry, as seen with its acquisitions of Quantum, Aquana and Geovox. The company intends to continue significant investments in product research and development for all of its business segments in order to diversify and grow its revenue base. The company is aggressively marketing its SADAR technologies to both its security and oil and gas industry customers, and while marked acceptance of SADAR as an effective analytical tool for categorizing seismic data, the company continues to believe acceptance will occur.

The company expects fiscal year 2026 cash investments in property, plant and equipment will be approximately $7 million ³². Capital expenditures are expected to be funded from cash on hand and internal cash flows or, if necessary, borrowings under the new credit agreement.

The company does not anticipate paying any cash dividends in the foreseeable future, and since fiscal year 2021 has repurchased 1,558,260 ³³ shares of its common stock in open market transactions under stock-buy-back programs authorized by its Board of Directors. The company had a stock buy-back program authorized by its board of directors to repurchase up to $7 million ³⁴ of its common stock in open market transactions, which was completed in the second quarter of fiscal year 2025. The company incurred company-sponsored research and development expenses of $18.9 million ³⁵ and $16.3 million ³⁶ during the fiscal years ended September 30, 2025 and 2024, respectively.

The company's Energy Solutions segment saw a shift from rentals of ocean bottom nodes to purchases of the equipment in fiscal years 2024 and 2025, signifying the customer's recognition of future backlog to justify ownership versus renting the nodes. The company does not expect significant expansion of the ocean bottom nodal market because it expects the market is saturable and future rental fleet use will come from customers' need to temporarily expand their nodal fleet. The company expects its Energy Solutions segment to provide a significant portion of its revenue for years to come, but in diminishing portion to its other segments. The vast majority of the Energy Solutions business segment revenue in fiscal year 2025 was derived from wireless product sales. The need for new seismic equipment, particularly traditional land-based equipment, remains restrained due to customers' limited capital resources, lack of visibility into future demand for their seismic services, and in some cases, under-utilized legacy equipment.

Demand for the company's seismic products targeted at customers in the Energy Solutions segment has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general. The company's supply chain frequently experiences disruption, resulting in longer lead times in materials available from suppliers and extending the shipping time for these materials to reach its facilities, which could constrain the company's ability to provide products to customers in the time frame they require. The company's business diversification strategy has centered largely on translating expertise in ruggedized engineering and technology manufacturing into expanded customer markets.

Demand for many of the company's products depends primarily on the level of worldwide oil and gas exploration activity, which is significantly affected by prevailing oil and gas prices, and any material changes in oil and gas prices could adversely impact seismic exploration activity and demand for the company's products. The company's revenue is concentrated among a limited number of customers, with two customers comprising 19.1% and 16.2% of revenue during fiscal year 2025 ³⁷, and the loss of a small number of customers could materially and adversely impact future revenues. The company relies on key suppliers for certain components, including two single source suppliers for certain electronic components used in land and marine wireless products and a single supplier for all thermal imaging film, and thermal film sales represented approximately 7% ³⁸ of the company's revenue for fiscal year 2025. The company's strategy of renting oil and gas seismic products exposes it to risks relating to equipment recovery from foreign countries, technological obsolescence, and impairment of assets, and the equipment rental business has high fixed costs primarily consisting of depreciation expenses. The company's long-lived assets may be subject to impairment, and significant sustained future decreases in crude oil and natural gas prices may require the company to write down the value of its long-lived assets in the Energy Solutions business segment.

Management's message emphasizes a conservative and prudent business strategy with a focus on sound financial management practices, including limiting or eliminating debt leverage in the balance sheet, minimizing exposure to long-term debt obligations, and retaining cash to fund future cash outflows. Management states they have not changed their primary focus on continued investment in product research and development, selective acquisitions and joint ventures, and in the long term are seeking to grow recurring revenue offerings through internal development or acquisition and expand the majority of revenue in business segments not associated or dependent on the cyclical nature historically seen in the energy industry. Management expects fiscal year 2026 revenue from the Energy Solutions reservoir products to increase significantly over fiscal year 2025 levels due to the PRM contract entered into in the third quarter of 2025, which has a duration expected to be approximately 18 months ³⁹ with revenue recognized over the duration of the contract. Management expects fiscal year 2026 revenue from the Smart Water business segment products to increase slightly over fiscal year 2025 levels, and fiscal year 2026 revenue from the Intelligent Industrial business segment products to increase over fiscal year 2025 levels. Management believes wireless product sales will moderately increase in fiscal year 2026 over 2025 levels, primarily driven by the recent introduction of the Pioneer land-based wireless system and the Mariner wireless system, but can make no assurance in this regard.