[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements show a return to quarterly profitability driven by rental revenue and improved semi-annual results [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets remained stable as a shift from short-term investments funded a significant increase in rental equipment Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | September 30, 2018 | | :--- | :--- | :--- | | **Total current assets** | $55,607 | $76,654 | | Rental equipment, net | $56,434 | $39,545 | | Goodwill | $5,059 | $4,343 | | **Total assets** | **$199,650** | **$199,080** | | **Total current liabilities** | $14,602 | $14,735 | | Contingent earn-out liabilities | $12,055 | $7,713 | | **Total liabilities** | **$26,697** | **$22,493** | | **Total stockholders' equity** | **$172,953** | **$176,587** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company achieved quarterly net income of $0.7 million, a significant turnaround driven by a 35.7% revenue increase Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | Six Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$26,123** | **$19,247** | **$43,998** | **$33,891** | | - Product Revenue | $11,845 | $13,910 | $22,304 | $27,184 | | - Rental Revenue | $14,278 | $5,337 | $21,694 | $6,707 | | **Gross Profit** | **$10,351** | **$1,999** | **$13,441** | **$1,031** | | Income (loss) from operations | $1,022 | $(5,222) | $(5,041) | $(14,827) | | **Net Income (Loss)** | **$707** | **$(4,729)** | **$(5,146)** | **$(14,209)** | | Diluted EPS | $0.05 | $(0.36) | $(0.38) | $(1.07) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash from investing activities, funded by asset sales, offset operating cash use and supported rental fleet expansion Cash Flow Summary for the Six Months Ended March 31 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,904) | $(12,375) | | Net cash provided by investing activities | $3,851 | $11,532 | | Net cash provided by financing activities | $215 | $19 | | **Increase (decrease) in cash** | **$831** | **$(913)** | | Cash and cash equivalents, end of period | $12,765 | $14,179 | - Key investing activities included a **$20.4 million investment** to expand the rental equipment fleet and a **$1.8 million cash payment** for a business acquisition, funded by **$24.9 million in proceeds** from the sale of short-term investments[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the impact of new accounting standards, recent acquisitions, and segment reporting structures - The company adopted the new revenue recognition standard ASC Topic 606 on October 1, 2018, which **did not have a material impact** on the consolidated financial statements[28](index=28&type=chunk)[34](index=34&type=chunk)[39](index=39&type=chunk) - On November 13, 2018, the company acquired the OptoSeis® fiber optic sensing technology business for approximately **$1.8 million in cash** and potential contingent earn-out payments up to **$23.2 million**, resulting in **$0.7 million in goodwill**[44](index=44&type=chunk)[45](index=45&type=chunk) - The company has contingent earn-out liabilities from two acquisitions with fair values recorded at **$7.7 million** for the Quantum acquisition and **$4.3 million** for the OptoSeis acquisition[61](index=61&type=chunk)[62](index=62&type=chunk) Segment Revenue for Six Months Ended March 31 (in thousands) | Segment | 2019 | 2018 | | :--- | :--- | :--- | | Oil and Gas Markets | $29,673 | $19,326 | | Adjacent Markets | $13,894 | $14,280 | | Emerging Markets | $134 | $— | | **Total** | **$43,998** | **$33,891** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong quarterly revenue growth from OBX rentals, ongoing investments, and sufficient liquidity [Business Overview and Products](index=17&type=section&id=Business%20Overview%20and%20Products) The company operates across Oil and Gas, Adjacent, and Emerging Markets segments, recently expanding via acquisitions - The company operates through three segments: **Oil and Gas Markets**, **Adjacent Markets**, and **Emerging Markets**[65](index=65&type=chunk)[72](index=72&type=chunk) - The Oil and Gas segment includes wireless systems like the land-based GSX and the marine-based OBX, with **22,000 OBX stations** in the rental fleet[81](index=81&type=chunk)[82](index=82&type=chunk) - The Emerging Markets segment was created after the Quantum acquisition and focuses on security and surveillance products[91](index=91&type=chunk) [Consolidated Results of Operations](index=20&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated revenue increased 35.7% year-over-year, driving a return to operating income for the quarter Consolidated Results - Three Months Ended March 31 (in thousands) | Metric | 2019 | 2018 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$26,123** | **$19,247** | **35.7%** | | **Gross Profit** | **$10,351** | **$2,000** | **417.6%** | | Operating Expenses | $9,329 | $7,221 | 29.2% | | **Operating Income (Loss)** | **$1,022** | **$(5,222)** | **N/A** | - The increase in operating expenses was primarily due to **incremental costs of $1.8 million** for the quarter related to the Quantum and OptoSeis acquisitions[99](index=99&type=chunk) [Segment Results of Operations](index=21&type=section&id=Segment%20Results%20of%20Operations) The Oil and Gas segment drove performance with a 65.4% revenue increase, turning an operating loss into income Oil and Gas Markets Revenue - Three Months Ended March 31 (in thousands) | Product Line | 2019 | 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Wireless Exploration | $13,644 | $6,039 | 125.9% | | Traditional Exploration | $3,969 | $3,187 | 24.5% | | Reservoir Products | $1,056 | $2,061 | -48.8% | | **Total** | **$18,669** | **$11,287** | **65.4%** | - The Oil and Gas segment's operating income for Q2 2019 was **$3.3 million**, a significant improvement from an operating loss of **$3.8 million** in Q2 2018[104](index=104&type=chunk) - The new Emerging Markets segment generated **$45,000 in revenue** and a **$1.2 million operating loss** for the quarter[107](index=107&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is sufficient for operations and planned capital expenditures, supported by cash and an amended credit facility - The company expects fiscal year 2019 cash investments into its rental fleet could be **$30 million or more**[109](index=109&type=chunk) - At March 31, 2019, the company had **$13.5 million in available cash**, cash equivalents, and short-term investments[112](index=112&type=chunk) - In March 2019, the credit agreement was amended to **reduce the minimum unencumbered liquid assets threshold** to $5 million and add a new covenant requiring a tangible net worth of at least **$140 million**[113](index=113&type=chunk)[114](index=114&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from foreign currency exchange rates and interest rates on its credit facility - The company has foreign currency exposure from its operations in Russia and Colombia; a hypothetical 10% strengthening of the U.S. dollar would reduce working capital by approximately **$0.5 million**[123](index=123&type=chunk) - The company had an un-hedged position of **CAD $4.3 million** related to intercompany receivables[124](index=124&type=chunk) - The company is subject to floating interest rate risk on its credit facility but had **no outstanding borrowings** as of March 31, 2019[125](index=125&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019 - Based on an evaluation as of March 31, 2019, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective**[127](index=127&type=chunk) - **No material changes** occurred during the quarter that affected the company's internal control over financial reporting[128](index=128&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists key exhibits filed with the report, including a loan amendment and executive certifications - The report includes several exhibits, notably the **Sixth Amendment to the Loan Agreement** and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act[131](index=131&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended December 31, 2018 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____ to ____ Commission file number 001-13601 GEOSPACE TECHNOLOGIES CORPORATION (Exact Name of Registrant as Specified in Its Charter) Texas 76-0447780 (State or ...