Core Viewpoint - Geospace Technologies Corporation (GEOS) has experienced significant stock volatility, with a 21.9% decline since its latest earnings report, but a recent rebound of 24.4% over the past month indicates potential recovery [1] Financial Performance - For Q3 fiscal 2025, Geospace reported revenues of $24.8 million, a decrease of 3.9% from $25.9 million year-over-year, with net income of $0.8 million or $0.06 per diluted share, compared to a net loss of $2.1 million or $0.16 per share in the prior-year quarter [2] - For the nine months ended June 30, 2025, total revenue fell 20% to $80.1 million from $100.2 million, with a net loss of $0.7 million compared to a profit of $6.3 million in the same period last year [4] Segment Performance - Smart Water revenue increased by 6.1% to $10.5 million, driven by demand for Hydroconn connectors [3] - Energy Solutions revenue decreased by 13.6% to $8.1 million due to lower utilization and sales of marine ocean bottom node rental fleet [3] - Intelligent Industrial revenue fell by 5.4% to $6.1 million, impacted by reduced demand for imaging products and the absence of a completed government contract [3] Key Business Metrics - Gross profit for the quarter was $7.5 million, down 11.6% from $8.5 million last year, primarily due to lower rental revenue [5] - Operating expenses rose by 7.9% year-over-year to $11.8 million, influenced by increased personnel and sales and marketing costs [5] - Cash and short-term investments totaled $25.6 million at quarter-end, down from $37.1 million as of September 30, 2024, with no outstanding borrowings [7] Strategic Developments - CEO Richard Kelley highlighted a major contract with Petrobras for the OptoSeis PRM system, valued at over $80 million, expected to be fulfilled over 16-18 months [8] - The Smart Water segment achieved a record nine-month revenue of $27.3 million, up 32.7% from the previous fiscal year [6] - The company divested its streamer recovery device product line to streamline operations and acquired Heartbeat Detector to expand into the security technology market [13] Management Commentary - Management expressed optimism about sustaining profitability through diversification and strategic acquisitions, despite acknowledging ongoing challenges in ocean bottom node markets [12] - The launch of AquaLink, an IoT endpoint for multiunit water monitoring, is expected to enhance growth potential in the Smart Water segment [9]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements, showing decreased assets and a shift to a net loss [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets and a reduction in total liabilities and stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $23,559 | $6,895 | | Short-term investments | $1,997 | $30,227 | | Total current assets | $90,127 | $89,366 | | **Total Assets** | **$149,832** | **$152,194** | | **Total Liabilities** | **$15,541** | **$17,570** | | **Total Stockholders' Equity** | **$134,291** | **$134,624** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company's operations shifted from net income to a net loss year-over-year, driven by a significant revenue decline Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | YoY Change | Nine Months 2025 | Nine Months 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$24,843** | **$25,858** | **-3.9%** | **$80,089** | **$100,160** | **-20.0%** | | Product Revenue | $23,227 | $20,223 | +14.9% | $74,580 | $83,434 | -10.6% | | Rental Revenue | $1,616 | $5,635 | -71.3% | $5,509 | $16,726 | -67.1% | | **Gross Profit** | **$7,539** | **$8,526** | **-11.6%** | **$29,436** | **$36,643** | **-19.7%** | | **Income (Loss) from Operations** | **$369** | **($2,393)** | **N/A** | **($2,077)** | **$5,938** | **N/A** | | **Net Income (Loss)** | **$760** | **($2,070)** | **N/A** | **($662)** | **$6,282** | **N/A** | | **Diluted EPS** | **$0.06** | **($0.16)** | **N/A** | **($0.05)** | **$0.47** | **N/A** | - A gain on disposal of property of **$4.6 million in Q3 2025** significantly impacted income from operations, turning it positive for the quarter despite higher operating expenses[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations was negative, but investing activities provided a significant cash inflow Consolidated Cash Flow Summary (Nine Months Ended June 30, in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,125) | ($7,527) | | Net cash provided by investing activities | $35,406 | $3,909 | | Net cash used in financing activities | ($615) | ($2,999) | | **Increase (decrease) in cash** | **$16,664** | **($6,476)** | - Cash from investing activities was primarily driven by **$28.4 million** in proceeds from the sale of short-term investments and **$8.7 million** from the sale of property, plant, and equipment[20](index=20&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures include segment restructuring, a property sale, a subsequent acquisition, and credit risk concentration - The company has a significant concentration of credit risk, with two customers in the Energy Solutions segment accounting for receivables of **$15.3 million** and **$9.7 million** at June 30, 2025[27](index=27&type=chunk) - In June 2025, the company sold a property for a **gain of $4.6 million**, which is included in income from operations[61](index=61&type=chunk) - Effective October 1, 2024, the company restructured its operating segments into **Smart Water, Energy Solutions, and Intelligent Industrial**, with prior periods recast for comparability[74](index=74&type=chunk)[75](index=75&type=chunk) - On August 1, 2025, the company acquired Geovox Security, Inc for **$1.7 million in cash** and up to **$3.3 million** in contingent earn-out payments[79](index=79&type=chunk)[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 20% revenue decrease driven by the Energy Solutions segment, offset by growth in Smart Water [Consolidated Results of Operations](index=24&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated revenue and gross profit declined nearly 20% year-over-year, primarily due to lower Energy Solutions sales Consolidated Revenue and Gross Profit (Nine Months Ended June 30, in millions) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $80.1 | $100.2 | -20.0% | | Gross Profit | $29.4 | $36.6 | -19.7% | - The decrease in nine-month revenue was primarily due to a lower value sale of ocean bottom nodes (**$17M in FY2025** vs **$30M in FY2024**) and reduced marine rental revenue[107](index=107&type=chunk) - A **gain of $4.6 million** from a property sale was recognized in Q3 2025, boosting operating income for the quarter[110](index=110&type=chunk) [Segment Results of Operations](index=25&type=section&id=Segment%20Results%20of%20Operations) The Smart Water segment grew significantly while the Energy Solutions segment experienced a sharp revenue decline Segment Revenue (Nine Months Ended June 30, in thousands) | Segment | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Smart Water | $27,278 | $20,558 | +32.7% | | Energy Solutions | $34,977 | $60,328 | -42.0% | | Intelligent Industrial | $17,596 | $19,051 | -7.6% | Segment Income (Loss) from Operations (Nine Months Ended June 30, in thousands) | Segment | 2025 | 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Smart Water | $4,023 | $5,372 | ($1,349) | | Energy Solutions | $5,380 | $13,003 | ($7,623) | | Intelligent Industrial | ($3,268) | ($2,181) | ($1,087) | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong debt-free liquidity position despite negative operating cash flow - The company maintains a strong liquidity position with **$25.6 million in cash** and short-term investments and **no outstanding debt**[119](index=119&type=chunk)[125](index=125&type=chunk) - Net cash used in operating activities for the nine months was **$18.1 million**, driven by a net loss and an increase in inventories[119](index=119&type=chunk) - The company has a **$15 million revolving credit facility** that was amended to extend its maturity to August 26, 2025, with negotiations for a long-term extension underway[67](index=67&type=chunk)[123](index=123&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Geospace Technologies is exempt from providing market risk disclosures - The company is a **smaller reporting company** as defined by Rule 12b-2 of the Exchange Act and is not required to provide quantitative and qualitative disclosures about market risk[131](index=131&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective**[134](index=134&type=chunk) - **No changes occurred** in the company's internal control over financial reporting during the fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[135](index=135&type=chunk) PART II. OTHER INFORMATION [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from tariffs and trade restrictions due to its international operations and sourcing - The company faces risks from tariffs and trade restrictions due to its significant international sales (**approximately half of revenue**) and sourcing of raw materials from foreign countries, including China[137](index=137&type=chunk) - Escalating trade tensions, particularly between the U.S. and China, could lead to **increased manufacturing costs**, reduced profit margins, and decreased product competitiveness[137](index=137&type=chunk) - Regulatory uncertainty related to changes in the U.S. presidential administration and control of Congress could further impact trade policies and the company's operations[137](index=137&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including a credit agreement amendment and required CEO/CFO certifications - The report includes several exhibits, notably the **First Amendment to the Credit Agreement** dated July 26, 2025, and certifications from the CEO and CFO pursuant to SEC rules[138](index=138&type=chunk)

Financial Data and Key Metrics Changes - For the three months ended June 30, 2025, the company reported revenue of $24.8 million, a slight decrease from $24.9 million in the same period last year. The net income for the quarter was $760,000, compared to a net loss of $2.1 million in the prior year [6][14] - For the first nine months of the fiscal year, revenue was $80.1 million, down from $100.2 million last year, with a net loss of $662,000 compared to a net income of $6.3 million in the previous year [6][14] Business Line Data and Key Metrics Changes - The Smart Water segment generated revenue of $10.5 million for the three months ended June 30, 2025, an increase of 6% from $9.9 million in the prior year. For the nine-month period, revenue was $27.3 million, up 33% from $20.6 million [15] - The Energy Solutions segment reported revenue of $8.1 million for the three-month period, a decrease of 14% from $9.4 million last year. For the nine-month period, revenue was $35.35 million, down 42% from the previous year [16] - The Intelligent Industrial segment's revenue totaled $6.1 million for the three-month period, a decrease of 5% from $6.5 million last year. For the nine-month period, revenue was $17.6 million, down 8% from $19.1 million [17][18] Market Data and Key Metrics Changes - The company continues to face challenges in the ocean bottom node markets, but there are opportunities for revenue generation in the Smart Water and Energy Solutions segments, which have improved operational efficiencies [10][12] Company Strategy and Development Direction - The company is focused on growth through acquisitions and has recently acquired HeartBee Detector, a security technology, to enhance its portfolio and create recurring revenue streams [11][12] - The company aims to leverage its products and services portfolio to exploit high-margin markets and has engaged former US Border Patrol chief to promote its security solutions [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning for future performance, citing a strong backlog and ongoing discussions with partners for additional contracts [12][13] - The company is addressing workforce costs and development expenses to achieve sustained profitability [12] Other Important Information - The company announced a significant contract with Petrobras for the supply and installation of a permanent reservoir monitoring system, expected to generate over $80 million in revenue, with installation anticipated to be completed by fiscal year 2027 [8][9] Q&A Session Summary Question: Can you discuss the PRM announcement and its implications? - Management indicated that the contract with Petrobras had been in negotiation for several months and was a significant achievement against competitors [22][23] Question: What is the expected revenue recognition timeline for the Petrobras contract? - Revenue recognition is hoped to begin in the first fiscal quarter, but specific milestones are still being defined [52] Question: Why has the Border Patrol not adopted the heartbeat detector technology? - The current technologies in use are capital-intensive and less efficient, presenting an opportunity for the new technology to improve operational efficiency [53][55] Question: What funding is allocated for tunnel detection in the recent bill? - There is a $30 million allocation, but it is not guaranteed that the full amount will be dedicated to tunnel detection [57] Question: What is the status of the SBIR-3 certification and its implications for government contracts? - The SBIR-3 certification is in place, but the specifics of government procurement processes remain unclear [59][60]

Financial Performance - FY25 Q2 revenue was $18 million, down 26% quarter-over-quarter[17] - FY25 Q2 gross profit was $1.7 million, down 70% quarter-over-quarter[17] - FY25 Q2 net loss was $9.8 million, a 126% increase quarter-over-quarter[17] - FY25 Q2 adjusted EBITDA was a loss of $6.5 million, down 129% quarter-over-quarter[17] - Trailing twelve months (TTM) revenue was $116.5 million, down 15% year-over-year[20] - TTM gross profit was $46.4 million, down 17% year-over-year[20] - TTM net loss was $16.4 million, down 202% year-over-year[20] - TTM adjusted EBITDA was $16 million, down 53% year-over-year[20] Segment Performance - Smart Water segment Q2 revenue increased 48% quarter-over-quarter to $9.5 million[25] - Energy Solutions segment Q2 revenue decreased 77% quarter-over-quarter to $2.6 million[31] - Intelligent Industrial segment Q2 revenue decreased 13% quarter-over-quarter to $5.9 million[37] Smart Water Segment - Over 27 million Hydroconn® universal AMI connectors have been sold[13] - Hydroconn® connectors achieved their highest first six-months revenue to date[15, 28] - Hydroconn® smart water meter connector cabling product line is BABA compliant[29]

[Earnings Release Overview](index=1&type=section&id=Earnings%20Release%20Overview) [Financial Highlights (Q3 and 9-month)](index=1&type=section&id=Financial%20Highlights%20(Q3%20and%209-month)) Geospace Technologies achieved Q3 2025 profitability with **$0.8 million** net income, but reported a nine-month net loss of **($0.7) million** due to decreased revenue Key Financial Highlights | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $24.8 million | $25.8 million | $80.1 million | $100.2 million | | Net Income (Loss) | $0.8 million | ($2.1) million | ($0.7) million | $6.3 million | | Diluted EPS | $0.06 | $(0.16) | $(0.05) | $0.47 | - The company achieved **profitability in Q3 2025**, reversing a **net loss** from the prior year, despite a slight decrease in quarterly revenue[2](index=2&type=chunk) - For the nine-month period, the company reported a **net loss**, a **decline from net income** in the previous year, alongside a **notable reduction in total revenue**[3](index=3&type=chunk) [Management's Strategic Review](index=1&type=section&id=Management%27s%20Strategic%20Review) CEO Richard Kelley highlighted Q3 2025 strategic wins: OptoSeis® PRM contract, Pioneer™ land node first sale, and Heartbeat Detector® acquisition - Strategic Accomplishments in Q3 2025: * **Energy Solutions:** Secured a substantial contract to supply nearly 500km of the **OptoSeis® Permanent Reservoir Monitoring (PRM) system** for the Mero field off Brazil * **Energy Solutions:** Achieved the **first sale** of the new ultralight land node, **Pioneer™**, to a global engineering firm in Canada, with delivery expected before fiscal year-end * **Asset Sale:** Completed the sale of assets related to the streamer recovery device product line to Seis Gear, Inc. in June * **Intelligent Industrial:** Acquired **Heartbeat Detector®**, a security technology from ORNL, with plans to offer it on a subscription basis to grow recurring revenue * **Security & Defense Focus:** Engaged former U.S. Border Patrol Chief Carla Provost to promote advanced analytics and sensing solutions for border and perimeter security * **Smart Water:** Continued strong organic growth, with **Hydroconn®** universal AMI connectors remaining a reliable revenue and profit center * **Property Sale:** Completed the sale of idle property adjacent to the facility for **$9.2 million** in gross proceeds[4](index=4&type=chunk)[5](index=5&type=chunk)[6](index=6&type=chunk)[7](index=7&type=chunk) [Segmental Performance Analysis](index=2&type=section&id=Segmental%20Performance%20Analysis) [Smart Water Segment](index=2&type=section&id=Smart%20Water%20Segment) The Smart Water segment achieved robust growth, with Q3 revenue up **6.1%** and nine-month revenue up **32.7%**, setting a new record Smart Water Segment Revenue | Period | June 30, 2025 Revenue ($M) | June 30, 2024 Revenue ($M) | YoY Change (%) | | :----- | :------------------------- | :------------------------- | :------------- | | Q3 | 10.5 | 9.9 | +6.1% | | 9-month| 27.3 | 20.558 | +32.7% | - The segment achieved a **record high level of nine-month revenue**, driven by the reliability of **Hydroconn® universal AMI connectors** and positive market reception to new branding[6](index=6&type=chunk)[7](index=7&type=chunk) [Energy Solutions Segment](index=2&type=section&id=Energy%20Solutions%20Segment) Energy Solutions revenue declined **13.6%** in Q3 and **42.0%** for nine months, primarily from lower marine node utilization, offset by Pioneer™'s first sale Energy Solutions Segment Revenue | Period | June 30, 2025 Revenue ($M) | June 30, 2024 Revenue ($M) | YoY Change (%) | | :----- | :------------------------- | :------------------------- | :------------- | | Q3 | 8.1 | 9.4 | -13.6% | | 9-month| 35.0 | 60.328 | -42.0% | - The **decrease in revenue** for both periods was attributed to **lower utilization and sales** for the **marine ocean bottom node rental fleet**[8](index=8&type=chunk) - The **first sale** of the new **Pioneer™ ultralight land node** is encouraging, signaling demand for **lighter, faster deployment solutions** in geophysical surveys[8](index=8&type=chunk) [Intelligent Industrial Segment](index=2&type=section&id=Intelligent%20Industrial%20Segment) Intelligent Industrial revenue decreased **5.4%** in Q3 and **7.6%** for nine months, due to a completed government contract and lower imaging demand Intelligent Industrial Segment Revenue | Period | June 30, 2025 Revenue ($M) | June 30, 2024 Revenue ($M) | YoY Change (%) | | :----- | :------------------------- | :------------------------- | :------------- | | Q3 | 6.1 | 6.5 | -5.4% | | 9-month| 17.6 | 19.1 | -7.6% | - **Revenue decrease** was primarily due to the **completion of a government contract** in Q4 FY2024 and **lower demand for imaging products**[9](index=9&type=chunk) - The decline was **partially mitigated** by an **increase in demand for contract manufacturing services**[9](index=9&type=chunk) [Financial Position and Cash Flows](index=3&type=section&id=Financial%20Position%20and%20Cash%20Flows) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) Geospace Technologies reported strong liquidity as of June 30, 2025, with **$25.6 million** in cash and **$15.0 million** available borrowing capacity Key Liquidity Metrics (as of June 30, 2025) | Metric | Amount ($M) | | :------------------------------- | :---------- | | Cash and short-term investments | 25.6 | | Working capital | 74.5 | | Trade accounts and financing receivables | 32.3 | | Additional borrowing availability| 15.0 | - The company has **no outstanding borrowings** under its bank credit agreement and owns **unencumbered property and real estate**, enhancing its **financial flexibility**[11](index=11&type=chunk) [Cash Flow Activities](index=3&type=section&id=Cash%20Flow%20Activities) For nine months ended June 30, 2025, operating activities used **$18.1 million** cash, while investing activities generated **$35.4 million** Cash Flow Summary (Nine Months Ended June 30, 2025) | Activity | Cash Flow ($M) | | :----------------------- | :------------- | | Net cash used in operating activities | (18.1) | | Net cash provided by investing activities | 35.4 | - Investing activities **generated significant cash**, including **$28.4 million** from short-term investments, **$8.7 million** from property sales, and **$5.1 million** from rental equipment sales, partially offset by capital expenditures[10](index=10&type=chunk) [Detailed Financial Statements](index=5&type=section&id=Detailed%20Financial%20Statements) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details revenues, costs, operating expenses, and net income (loss) for Q3 and nine months ended June 30, 2025, versus prior periods Consolidated Statements of Operations (in thousands, except share and per share amounts) | | Three Months Ended | | Nine Months Ended | | :--- | :--- | :--- | :--- | :--- | | | June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | | **Revenue:** | | | | | | Products | $23,227 | $20,223 | $74,580 | $83,434 | | Rental | $1,616 | $5,635 | $5,509 | $16,726 | | **Total revenue** | **$24,843** | **$25,858** | **$80,089** | **$100,160** | | Cost of revenue: | | | | | | Products | $15,150 | $14,179 | $43,166 | $53,016 | | Rental | $2,154 | $3,153 | $7,487 | $10,501 | | **Total cost of revenue** | **$17,304** | **$17,332** | **$50,653** | **$63,517** | | **Gross profit** | **$7,539** | **$8,526** | **$29,436** | **$36,643** | | Operating expenses: | | | | | | Selling, general and administrative | $7,546 | $6,941 | $21,741 | $19,313 | | Research and development | $4,238 | $4,011 | $14,367 | $11,476 | | Provision for (recovery of) credit losses | $2 | $(33) | $21 | $(84) | | **Total operating expenses** | **$11,786** | **$10,919** | **$36,129** | **$30,705** | | Gain on disposal of property | $4,616 | — | $4,616 | — | | **Income (loss) from operations** | **$369** | **$(2,393)** | **$(2,077)** | **$5,938** | | Other income (expense): | | | | | | Interest expense | $(44) | $(44) | $(131) | $(144) | | Interest income | $537 | $472 | $1,975 | $954 | | Foreign currency transaction gains (losses), net | $4 | $(70) | $(265) | $(253) | | Other, net | $(38) | $(37) | $(109) | $(104) | | **Total other income, net** | **$459** | **$321** | **$1,470** | **$453** | | **Income (loss) before income taxes** | **$828** | **$(2,072)** | **$(607)** | **$6,391** | | Income tax expense (benefit) | $68 | $(2) | $55 | $109 | | **Net income (loss)** | **$760** | **$(2,070)** | **$(662)** | **$6,282** | | Income (loss) per common share: | | | | | | Basic | $0.06 | $(0.16) | $(0.05) | $0.47 | | Diluted | $0.06 | $(0.16) | $(0.05) | $0.47 | | Weighted average common shares outstanding: | | | | | | Basic | 12,805,414 | 13,216,386 | 12,783,832 | 13,270,444 | | Diluted | 12,805,414 | 13,216,386 | 12,783,832 | 13,431,714 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and stockholders' equity, as of June 30, 2025, versus September 30, 2024 Consolidated Balance Sheets (in thousands except share amounts) | ASSETS | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Current assets: | | | | Cash and cash equivalents | $23,559 | $6,895 | | Short-term investments | $1,997 | $30,227 | | Trade accounts and financing receivables, net | $32,308 | $21,868 | | Inventories, net | $29,232 | $26,222 | | Assets held for sale | — | $1,841 | | Prepaid expenses and other current assets | $3,031 | $2,313 | | **Total current assets** | **$90,127** | **$89,366** | | Non-current inventories, net | $18,860 | $18,031 | | Rental equipment, net | $10,321 | $14,186 | | Property, plant and equipment, net | $22,189 | $21,083 | | Non-current trade accounts and financing receivables | $5,570 | $6,375 | | Operating right-of-use assets | $334 | $464 | | Goodwill | $736 | $736 | | Other intangible assets, net | $1,537 | $1,649 | | Other non-current assets | $158 | $304 | | **Total assets** | **$149,832** | **$152,194** | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities: | | | | Accounts payable trade | $3,771 | $8,003 | | Operating lease liabilities | $119 | $173 | | Other current liabilities | $11,383 | $9,021 | | **Total current liabilities** | **$15,273** | **$17,197** | | Non-current operating lease liabilities | $249 | $339 | | Deferred tax liabilities, net | $19 | $34 | | **Total liabilities** | **$15,541** | **$17,570** | | Commitments and contingencies | | | | Stockholders' equity: | | | | Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding | — | — | | Common Stock, $.01 par value, 20,000,000 shares authorized; 14,365,212 and 14,206,082 shares issued, respectively; and 12,806,952 and 12,709,381 shares outstanding, respectively | $144 | $142 | | Additional paid-in capital | $98,540 | $97,342 | | Retained earnings | $54,620 | $55,282 | | Accumulated other comprehensive loss | $(4,513) | $(4,257) | | Treasury stock, at cost, 1,558,260 and 1,496,701 shares, respectively | $(14,500) | $(13,885) | | **Total stockholders' equity** | **$134,291** | **$134,624** | | **Total liabilities and stockholders' equity** | **$149,832** | **$152,194** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows from operating, investing, and financing activities for the nine months ended June 30, 2025, versus the prior year Consolidated Statements of Cash Flows (in thousands) | | Nine Months Ended | | :--- | :--- | :--- | | | June 30, 2025 | June 30, 2024 | | Cash flows from operating activities: | | | | Net income (loss) | $(662) | $6,282 | | Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | Deferred income tax expense (benefit) | $(16) | $10 | | Rental equipment depreciation | $4,830 | $8,534 | | Property, plant and equipment depreciation | $2,716 | $2,595 | | Amortization of intangible assets | $112 | $300 | | Accretion of discounts on short-term investments | $(169) | $(415) | | Stock-based compensation expense | $1,200 | $1,029 | | Provision for (recovery of) credit losses | $21 | $(84) | | Inventory obsolescence expense | $1,100 | $144 | | Gross profit from sale of rental equipment | $(16,297) | $(20,751) | | (Gain) loss on disposal of property, plant and equipment | $(4,708) | $11 | | Realized gain on investments | $(9) | — | | Effects of changes in operating assets and liabilities: | | | | Trade accounts and financing receivables | $2,229 | $5,162 | | Inventories | $(5,617) | $(5,787) | | Other assets | $(591) | $(176) | | Accounts payable trade | $(4,232) | $(1,408) | | Other liabilities | $1,968 | $(2,973) | | **Net cash used in operating activities** | **$(18,125)** | **$(7,527)** | | Cash flows from investing activities: | | | | Purchase of property, plant and equipment | $(5,841) | $(3,577) | | Proceeds from the sale of property, plant and equipment | $8,663 | $2 | | Investment in rental equipment | $(1,083) | $(8,181) | | Proceeds from the sale of rental equipment | $5,122 | $30,948 | | Purchases of short-term investments | — | $(24,033) | | Proceeds from the sale of short-term investments | $28,408 | $8,750 | | Payments received on note receivable related to sale of subsidiary | $137 | — | | **Net cash provided by investing activities** | **$35,406** | **$3,909** | | Cash flows from financing activities: | | | | Purchase of treasury stock | $(615) | $(2,999) | | **Net cash used in financing activities** | **$(615)** | **$(2,999)** | | Effect of exchange rate changes on cash | $(2) | $141 | | **Increase (decrease) in cash and cash equivalents** | **$16,664** | **$(6,476)** | | Cash and cash equivalents, beginning of period | $6,895 | $18,803 | | **Cash and cash equivalents, end of period** | **$23,559** | **$12,327** | | SUPPLEMENTAL CASH FLOW INFORMATION: | | | | Cash paid for income taxes | $122 | $185 | | Accounts and financing receivables related to sale of rental equipment | $11,975 | — | | Inventory transferred to rental equipment | $2,498 | $5,765 | [Segment Revenue and Operating Income (Loss)](index=8&type=section&id=Segment%20Revenue%20and%20Operating%20Income%20(Loss)) Segmental revenue and operating income (loss) are presented for Smart Water, Energy Solutions, Intelligent Industrial, and Corporate for Q3 and nine months Summary of Segment Revenue and Operating Income (Loss) (in thousands) | | Three Months Ended | | Nine Months Ended | | :--- | :--- | :--- | :--- | :--- | | | June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | | Revenue: | | | | | | Smart Water | $10,518 | $9,913 | $27,278 | $20,558 | | Energy Solutions | $8,107 | $9,382 | $34,977 | $60,328 | | Intelligent Industrial | $6,136 | $6,489 | $17,596 | $19,051 | | Corporate | $82 | $74 | $238 | $223 | | **Total** | **$24,843** | **$25,858** | **$80,089** | **$100,160** | | Income (loss) from operations: | | | | | | Smart Water | $2,233 | $2,611 | $4,023 | $5,372 | | Energy Solutions | $(1,234) | $(117) | $5,380 | $13,003 | | Intelligent Industrial | $(1,041) | $(1,282) | $(3,268) | $(2,181) | | Corporate | $411 | $(3,605) | $(8,212) | $(10,256) | | **Total** | **$369** | **$(2,393)** | **$(2,077)** | **$5,938** | [Additional Information](index=3&type=section&id=Additional%20Information) [About Geospace Technologies](index=3&type=section&id=About%20Geospace%20Technologies) Geospace Technologies is a global manufacturer of advanced sensing, IoT, and ruggedized products for diverse markets including smart water and energy - **Geospace Technologies** is a **global technology and instrumentation manufacturer** specializing in **advanced sensing, IoT, and highly ruggedized products**[13](index=13&type=chunk) - The company serves **smart water, energy exploration, industrial, government, and commercial customers worldwide**, with products designed to **optimize energy exploration, enhance national/homeland security, empower water utility/property managers, and streamline electronic printing solutions**[13](index=13&type=chunk) - With **over four decades of excellence** and **more than 450 employees**, Geospace is traded on **NASDAQ under the ticker symbol GEOS**[13](index=13&type=chunk) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Geospace Technologies will host a conference call on August 8, 2025, to discuss Q1 FY2025 financial results, with replay available - Conference Call Date and Time: **August 8, 2025, at 10:00 a.m. Eastern Time (9 a.m. Central)**[12](index=12&type=chunk) - Access Details: Participants can call (800)274-8461 (US) or (203)518-9814 (International), using **conference ID GEOSQ325**[12](index=12&type=chunk) - Replay Availability: A **replay will be accessible for approximately 60 days** via the Investor Relations tab on **www.geospace.com**[12](index=12&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section provides a cautionary note on forward-looking statements, defining terminology and directing readers to Form 10-K for associated risks - **Forward-looking statements** are identified by terms such as **'may', 'will', 'intend', 'expect', 'plan', 'budget', 'forecast', 'anticipate', 'believe', 'estimate', 'predict', 'potential', 'continue', 'evaluating'** or similar words[15](index=15&type=chunk) - Examples include statements regarding **expected operating results**, **success of product rollouts** (e.g., Aquana smart water valves, Quantum security solutions), **future demand for products and rental equipment**, **completion of new orders**, and the **impact of external factors like oil prices or geopolitical conflicts**[15](index=15&type=chunk) - Readers are advised to review **'Risk Factors'** in the most recent **Annual Report on Form 10-K** and other periodic reports for **risks and uncertainties** that may cause actual results to differ materially from expectations, such as **technology failure, commodity price decreases, lack of market acceptance, and intellectual property issues**[15](index=15&type=chunk)

Company Overview - Narweena is an asset manager that focuses on identifying market dislocations caused by a poor understanding of businesses' long-term prospects [1] - The firm aims to achieve excess risk-adjusted returns by targeting businesses with secular growth opportunities in markets with barriers to entry [1] Investment Strategy - Narweena's research process emphasizes company and industry fundamentals to uncover unique insights [1] - The company has a high risk appetite and a long-term investment horizon, focusing on deeply undervalued stocks, particularly in smaller cap stocks and markets with less obvious competitive advantages [1] Market Insights - The aging population, low population growth, and stagnating productivity growth are expected to create a different set of investment opportunities compared to the past [1] - Many industries may experience stagnation or secular decline, which could paradoxically enhance business performance due to reduced competition [1] - Conversely, some businesses may face rising costs and diseconomies of scale [1] Economic Trends - There is a growing dominance of asset-light businesses in the economy, leading to a declining need for infrastructure investments over time [1] - A large pool of capital is pursuing a limited set of investment opportunities, resulting in rising asset prices and compressing risk premia [1] Leadership Background - Richard Durant, the leader of Narweena, holds undergraduate degrees in engineering and finance from the University of Adelaide and an MBA from Nanyang Technological University [1] - Durant has passed the CFA exams, indicating a strong foundation in finance and investment analysis [1]

Core Insights - Geospace Technologies (NASDAQ: GEOS) has experienced a significant stock price increase, rising over 50% in a few trading sessions and exceeding 200% in the last month, with daily trading volume surging from below 100,000 shares to over 1.6 million [1][2] Group 1: Recent Developments - The surge in investor interest was triggered by a multi-year contract awarded by Petrobras for a high-value Permanent Reservoir Monitoring (PRM) system utilizing Geospace's OptoSeis® fiber optic technology, enabling continuous monitoring of deepwater oil reservoirs [3][4] - This contract provides Geospace with a long-term revenue stream, addressing investor concerns regarding the unpredictable, project-based revenue typical in the energy sector [4] Group 2: Business Strategy and Growth - Geospace is diversifying beyond its traditional energy roots, with a rebranding strategy called "Solutions for a Smarter Future" aimed at reducing dependence on the cyclical energy market [5][6] - The Smart Water segment has shown exceptional growth, reporting a 47.8% year-over-year revenue increase in Q2 2025, reaching $9.5 million, marking the highest first six-month revenue in company history [6][7] - The company has sold over 27 million Hydroconn® waterproof connectors, which are now certified for "Build America, Buy America" compliance, crucial for securing U.S. municipal contracts [7] Group 3: Financial Health - Geospace operates with virtually no long-term debt and holds approximately $20 million in cash and short-term investments, indicating strong financial health [7][8] - A current ratio of 5.59 suggests the company can comfortably cover its short-term obligations, allowing it to invest in high-growth segments without relying on external capital [8] Group 4: Future Outlook - The recent contract with Petrobras provides significant revenue visibility and potential cash flow, essential for accelerating the company's transformation into a diversified technology leader [9][10] - Key areas to monitor include the execution of the Petrobras project and continued innovation in the Smart Water segment, which will be critical for validating the long-term strategy [10][12]

Core Viewpoint - Geospace Technologies Corporation reported a significant decline in revenues and increased net losses for the second quarter of fiscal 2025, with mixed performance across its segments, particularly strong results in Smart Water but severe declines in Energy Solutions [2][6][8]. Earnings Snapshot and Segmental Overview - For Q2 fiscal 2025, Geospace reported revenues of $18 million, a 25.7% decrease from $24.3 million year-over-year [2]. - The company incurred a net loss of $9.8 million, or $0.77 per diluted share, worsening from a net loss of $4.3 million, or $0.32 per share, in the same quarter last year [2]. Segment Performance - The Smart Water segment generated $9.5 million in revenues, up 47.7% from $6.4 million in the prior-year quarter [3]. - Energy Solutions revenue plummeted by 76.5% to $2.6 million, down from $11 million [3]. - The Intelligent Industrial segment reported revenues of $5.9 million, a decline of 12.8% from $6.7 million [3]. Other Key Business Metrics - Gross profit for the quarter was $1.7 million, a decrease of 70.3% from $5.9 million a year ago [4]. - Operating expenses rose 15.8% to $12 million from $10.4 million, leading to an operating loss of $10.3 million compared to a loss of $4.5 million in the same period last year [4]. Financial Position - Cash and short-term investments totaled $19.8 million as of March 31, 2025, down from $22.1 million as of December 31, 2024 [5]. - The company had no debt and access to $14.9 million in additional credit, with working capital at $71.4 million [5]. Management Commentary - CEO Richard Kelley noted record results in Smart Water due to strong sales of Hydroconn connectors and the Aquana smart valve product, while attributing Energy Solutions' underperformance to global trade tensions and lower oil prices [6]. - CFO Robert Curda mentioned a $2.2 million receivable reversal that materially affected results and highlighted strategic investments in the rental fleet and property [7]. Factors Influencing Results - The drop in Energy Solutions revenue was attributed to low utilization of marine ocean bottom nodes and the receivable reversal [8]. - The Intelligent Industrial segment faced challenges from reduced demand and the absence of prior-year government contract revenues, though interest in American-made sensor products provided some offset [8]. Guidance - No specific forward-looking revenue or earnings guidance was provided, but management expressed confidence in stronger performance in the second half of fiscal 2025, supported by a robust backlog and anticipated deliveries [10]. Other Developments - Geospace plans to sell 17 acres of excess land, expected to generate between $7 million and $10 million, enhancing liquidity [11]. - Management reiterated intentions to seek accretive acquisitions for immediate top-line growth [11].

Revenue Performance - Smart Water segment product revenue increased to $9,472,000 for the three months ended March 31, 2025, compared to $6,411,000 for the same period in 2024, representing a growth of 47.5%[101] - Energy Solutions segment total revenue decreased to $2,588,000 for the three months ended March 31, 2025, down from $11,035,000 in the same period in 2024, a decline of 76.6%[101] - Intelligent Industrial segment product revenue was $5,837,000 for the three months ended March 31, 2025, compared to $6,706,000 for the same period in 2024, a decrease of 12.9%[101] - Consolidated total revenue for the three months ended March 31, 2025, was $18,023,000, down from $24,270,000 in the same period in 2024, a decline of 25.7%[101] - Revenue from the Smart Water segment for the three months ended March 31, 2025, increased $3.1 million, or 47.7%, driven by increased demand for Hydroconn® cable and connector products[109] - Revenue from the Energy Solutions segment for the three months ended March 31, 2025, decreased $8.4 million, or 76.5%, compared to the prior year[111] Operating Performance - Consolidated gross profit for the three months ended March 31, 2025, was $1.7 million, a decrease of $4.1 million, or 70.3%, driven by lower wireless product revenue and rental revenue[106] - Consolidated operating expenses for the three months ended March 31, 2025, were $12.0 million, an increase of $1.6 million, or 15.8%, primarily due to higher personnel costs and increased research and development expenditures[107] - Operating loss from the Energy Solutions segment for the three months ended March 31, 2025, was $(6.7) million, compared to $(1.9) million for the prior year[112] Cash Flow and Financial Position - Cash and cash equivalents at March 31, 2025, were $19.8 million, with $13.4 million used in operating activities during the six months ended March 31, 2025[116] - The company generated $15.5 million in cash from investing activities for the six months ended March 31, 2025, primarily from the sale of short-term investments[117] - The company had no outstanding borrowings under its credit agreement as of March 31, 2025, with a borrowing base availability of $14.9 million[120] - The company expects fiscal year 2025 cash investments in property, plant, and equipment to be approximately $7 million[117] Strategic Insights - The company anticipates continued growth in the Smart Water segment driven by the Aquana smart water valve and IoT technology products[102] - The Energy Solutions segment is expected to provide a significant portion of revenue for years to come, but in diminishing proportion to other segments[103] - The company maintains a strong balance sheet with no debt, enabling it to seek business acquisitions and invest in capital assets and product R&D[104] - The company has not received any orders for a large-scale seabed PRM system since 2012, indicating potential challenges in this area[91] - The company’s diversification strategy has led to non-energy related products contributing nearly half of total revenue[82] Reporting Classification - The company is classified as a smaller reporting company and is not required to provide market risk disclosures as per Rule 12b-2 of the Exchange Act[127]

Financial Data and Key Metrics Changes - For Q2 2025, the company reported revenue of $18 million, down from $24.3 million in the same period last year, representing a decrease of 26% [12] - The net loss for Q2 2025 was $9.8 million, or $0.77 per diluted share, compared to a net loss of $4.3 million, or $0.32 per diluted share, in the prior year [12] - For the first half of fiscal year 2025, revenue was $55.2 million, down from $74.3 million in the same period last year, marking a decrease of 26% [12] Business Line Data and Key Metrics Changes - The Smart Water segment generated revenue of $9.5 million in Q2 2025, an increase of 48% from $6.4 million in the same period last year [12] - The Energy Solutions segment saw revenue drop to $2.6 million in Q2 2025 from $11 million in the same period last year, a decrease of 77% [13] - The Intelligent Industrial segment reported revenue of $5.9 million for Q2 2025, down 13% from $6.7 million in the prior year [14] Market Data and Key Metrics Changes - The company noted ongoing uncertainty in the Energy Solutions segment due to global trade concerns, tariffs, and decreasing oil prices, which have impacted project decisions [6] - The OBN rental market and land equipment sales continued to underperform compared to previous years [6] Company Strategy and Development Direction - The company is focused on strategic cost-cutting and evaluating which business units to invest in for future growth [21] - There is an emphasis on optimizing the supply chain to mitigate external factors such as tariffs [8] - The company aims to exploit potential in high-margin markets, particularly in smart water and intelligent industrial segments [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning in newer markets and highlighted a strong backlog going into the second half of the year [9] - The company remains cautious about the impact of external factors but is not overly pessimistic about future performance [44] Other Important Information - The company has a strong balance sheet with no debt and $19.8 million in cash and short-term investments [9] - The company is pursuing growth through acquisitions and accretive additions to revenue [9] Q&A Session Summary Question: Target breakeven level and cost-cutting strategy - Management is focused on strategic cost-cutting and evaluating business units for future investment [21] Question: Mariner contract and future requirements - The Mariner contract is with a new customer in the Caspian area, and discussions are ongoing for future business opportunities [23] Question: Federal budget implications - Management is optimistic about potential opportunities in border security products due to increased interest from the government [24][26] Question: Revenue expectations and performance - Management anticipates stronger performance in Q3 and Q4 based on backlog and ongoing customer engagement [43] Question: Sale of 17 acres and timeline - The sale is anticipated to be completed in the current quarter [49] Question: Revenue needed from the water business for profitability - The smart water division has shown operating income, and management expects continued profitability despite changes in cost allocation [54] Question: Aquana's revenue contribution - Aquana continues to be a single-digit percentage of revenue, with slow adoption expected to change over time [59] Question: Hydrocon connectors growth - The Hydrocon connectors have seen a growth rate of 10% to 15% year-on-year, with recent performance exceeding that [70][72] Question: Market size comparison between Aquana and Hydrocon - The total addressable market for water control valves is significant, and there is growing interest in remote shutoff valves [82]