GEOS 10-Q
Geospace Technologies Corp (GEOS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
for the Quarterly Period Ended
for the transition period from ____ to ____
Commission file number
GEOSPACE TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | ☒ | ||||
| Non-accelerated filer | ☐ | Smaller reporting company | | ||||
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of January 31, 2025 the registrant had
PART I - FINANCIAL INFORMATION
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
| December 31, 2024 | September 30, 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Trade accounts and financing receivables, net | ||||||||
| Inventories, net | ||||||||
| Assets held for sale | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current inventories, net | ||||||||
| Rental equipment, net | ||||||||
| Property, plant and equipment, net | ||||||||
| Non-current trade accounts and financing receivables | ||||||||
| Operating right-of-use assets | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable trade | $ | $ | ||||||
| Operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current operating lease liabilities | ||||||||
| Deferred tax liabilities, net | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, shares authorized, shares issued and outstanding | ||||||||
| Common Stock, $ par value, shares authorized; and shares issued, respectively; and and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, at cost, and shares, respectively | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenue: | ||||||||
| Products | $ | $ | ||||||
| Rental | ||||||||
| Total revenue | ||||||||
| Cost of revenue: | ||||||||
| Products | ||||||||
| Rental | ||||||||
| Total cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Provision for recovery of credit losses | ( | ) | ||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Foreign currency transaction gains (losses), net | ( | ) | ( | ) | ||||
| Other, net | ( | ) | ( | ) | ||||
| Total other income (loss), net | ( | ) | ||||||
| Income before income taxes | ||||||||
| Income tax expense | ||||||||
| Net income | $ | $ | ||||||
| Income per common share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average common shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net income | $ | $ | ||||||
| Other comprehensive income (loss): | ||||||||
| Change in unrealized gains (losses) on available-for-sale securities, net of tax | ( | ) | ||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Total other comprehensive income (loss) | ( | ) | ||||||
| Total comprehensive income | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE three months ended December 31, 2024 and 2023
(in thousands, except share amounts)
(unaudited)
| Common Stock | Accumulated | |||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
| Shares | Paid-In | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||
| Outstanding | Amount | Capital | Earnings | Loss | Stock | Total | ||||||||||||||||||||||
| Balance at October 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Other comprehensive income | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units | ( | ) | ||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Balance at October 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||
| Issuance of common stock pursuant to the vesting of restricted stock units | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Deferred income tax expense | ||||||||
| Rental equipment depreciation | ||||||||
| Property, plant and equipment depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of premiums (accretion of discounts) on short-term investments | ( | ) | ( | ) | ||||
| Stock-based compensation expense | ||||||||
| Provision for recovery of credit losses | ( | ) | ||||||
| Inventory obsolescence expense | ||||||||
| Gross profit from sale of rental equipment | ( | ) | ( | ) | ||||
| Gain on disposal of property, plant and equipment | ( | ) | ||||||
| Realized gain on investments | ( | ) | ||||||
| Effects of changes in operating assets and liabilities: | ||||||||
| Trade accounts and financing receivables | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable trade | ( | ) | ( | ) | ||||
| Other liabilities | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from the sale of property, plant and equipment | ||||||||
| Investment in rental equipment | ( | ) | ( | ) | ||||
| Proceeds from the sale of rental equipment | ||||||||
| Proceeds from the sale of short-term investments | ||||||||
| Payments received on note receivable related to sale of subsidiary | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Purchase of treasury stock | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Accounts and financing receivables related to sale of rental equipment | ||||||||
| Inventory transferred to rental equipment | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Significant Accounting Policies
Basis of Presentation
The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2024, was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at December 31, 2024 and the consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the three months ended December 31, 2024 and 2023 were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. All significant intercompany balances and transactions have been eliminated. The results of operations for the three months ended December 31, 2024, are not necessarily indicative of the operating results for a full year or of future operations.
Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") were omitted pursuant to the rules of the Securities and Exchange Commission. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2024.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to revenue recognition, credit loss, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets, impairment of goodwill and other intangible assets and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents. At December 31, 2024 and September 30, 2024, cash and cash equivalents included $
Concentration of Credit Risk
The Company sells products to customers throughout the United States and various foreign countries. The Company’s normal credit terms for trade receivables are
The Company had trade accounts and financing receivables from
Impairment of Long-lived Assets
The Company's long-lived assets are reviewed for impairment whenever an event or circumstance indicates that the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of the expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value. During the quarter ended December 31, 2024, no events or changes in circumstances were identified indicating the carrying value of any of the Company's asset groups may not be recoverable.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued guidance which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance shall be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the provisions of this guidance and the impact on its consolidated financial statements.
In December 2023, the FASB issued guidance improvements on income tax disclosure which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt this guidance in its fourth quarter of fiscal year 2026. The guidance allows for adoption using either a prospective or retrospective transition method. The adoption of this guidance is not expected to have any material impact on its consolidation financial statements.
In November 2024, the FASB, as further amended in January 2025, issued guidance requiring enhanced disclosures in financial statements by requiring detailed disclosures of specific expenses like inventory purchases, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the provisions of this guidance and the impact on its consolidated financial statements.
All other new accounting pronouncements that have been issued, but not yet effective, are currently being evaluated and at this time are not expected to have a material impact on the Company's financial position or results of operations.
2. Revenue Recognition
In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.
The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these 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. The Company records deferred revenue when customer funds are received prior to shipment or delivery or performance has not yet occurred. The Company assesses collectability during the contract assessment phase. In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers and there is not a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. The Company’s products are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to return products for credit.
Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billed on a per hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate.
The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured. Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year. The Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of ASC Topic 842, Leases.
As permissible under ASC 606, sales taxes and transaction-based taxes are excluded from revenue. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.
The Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and not as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in revenue and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of revenue.
At December 31, 2024 and September 30, 2024, the Company had
For the three months ended December 31, 2024,
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Smart Water | $ | $ | ||||||
| Energy Solutions | ||||||||
| Intelligent Industrial | ||||||||
| Total | $ | $ | ||||||
See Note 12 for more information on the Company’s operating business segments.
For each of the geographic areas where the Company operates, the following table presents revenue (in thousands) from the sale of products and services under contracts with customers. The table excludes all revenue earned from rental contracts:
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Asia (including Russian Federation) | $ | $ | ||||||
| Canada | ||||||||
| Europe | ||||||||
| Mexico | ||||||||
| United States | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
Revenue is attributable to countries based on the ultimate destination of the product sold, if known. If the ultimate destination is not known, revenue is attributable to countries based on the geographic location of the initial shipment.
3. Short-term Investments
The Company classifies its short-term investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.
The Company’s short-term investments were composed of the following (in thousands):
| As of December 31, 2024 | ||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| U.S. treasury securities and securities of U.S. government-sponsored agency | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| As of September 30, 2024 | ||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| U.S. treasury securities and securities of U.S. government-sponsored agency | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company had
4. Fair Value of Financial Instruments
The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and financing receivables and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts receivable and accounts payable, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates. The Company measures its short-term investments at fair value on a recurring basis.
The following tables present the fair value of the Company’s short-term investments, note receivable on sale of subsidiary and Emerging Markets asset group intangible assets by valuation hierarchy and input (in thousands):
| As of December 31, 2024 | ||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Totals | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| U.S. treasury securities and securities of U.S. government-sponsored agency | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| As of September 30, 2024 | ||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Totals | |||||||||||||
| Recurring: | ||||||||||||||||
| Short-term investments: | ||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| U.S. treasury securities and securities of U.S. government-sponsored agency | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Nonrecurring: | ||||||||||||||||
| Note receivable on sale of subsidiary | $ | $ | $ | $ | ||||||||||||
| Emerging Markets asset group intangible assets | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Assets and liabilities Measured on a Nonrecurring basis
In August 2024, the Company performed a fair value analysis on its $
At September 30, 2024, the Company performed a recoverability assessment on its long-lived assets of it Emerging Markets asset group in which its carrying value was compared to the estimated undiscounted cash flows over the remaining useful life of the asset group's primarily asset, its developed technology. Accordingly, a fair value analysis was performed. Based on the assessment, the Company determined the fair value of the asset was less than its carrying value and recorded an impairment charge of $
5. Trade Accounts and Financing Receivables
Trade accounts receivable, net (excluding financing receivables) are reflected in the following table (in thousands):
| December 31, 2024 | September 30, 2024 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Total | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current trade accounts receivable | $ | $ | ||||||
The Company determines the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers. Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.
Allowance for credit losses related to trade accounts receivable are reflected in the following table (in thousands):
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Allowance for credit losses: | ||||||||
| Beginning of period | ||||||||
| Provision for credit losses | ||||||||
| Recoveries | ( | ) | ||||||
| Write-offs | ( | ) | ||||||
| Currency translation | ||||||||
| End of period | $ | $ | ||||||
In November 2024, the Company entered into a sales-type lease with a customer on wireless seismic equipment from its rental fleet. The lease matures in October 2025. Future minimum payments required under the lease at December 31, 2024, were $
In August 2024, the Company entered into a $
In August 2024, the Company entered into a $
Credit quality indicators used for the financing receivables consisted of historical collection experience, internal credit risk grades and collateral. The Company determined the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers.
6. Inventories
Inventories consist of the following (in thousands):
| December 31, 2024 | September 30, 2024 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Obsolescence reserve (net realizable value adjustment) | ( | ) | ( | ) | ||||
| Total | ||||||||
| Less current portion | ||||||||
| Non-current portion | $ | $ | ||||||
Inventory obsolescence expense for the three months ended December 31, 2024 and 2023, was $
7. Rental Equipment
The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to year. All of the Company’s current leasing arrangements for which the Company acts as lessor, are classified as operating leases, except for one sales-type lease. The majority of the Company’s rental revenue is generated from its marine-based wireless seismic data acquisition systems.
The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are no longer probable and concurrently records a direct write-off of the lease receivable to rental revenue and limits future rental revenue recognition to cash received. As of December 31, 2024, the Company’s trade accounts receivable included lease receivables of $
Rental revenue related to leased equipment for the three months ended December 31, 2024 and 2023 was $
Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of December 31, 2024, were $
Rental equipment consisted of the following (in thousands):
| December 31, 2024 | September 30, 2024 | |||||||
| Rental equipment, primarily wireless recording equipment | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
8. Long-Term Debt
On July 26, 2023, the Company entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender. The Agreement refinanced the Company's credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender. The Agreement provides a revolving credit facility with a maximum availability of $
9. Stock-Based Compensation
During the three months ended December 31, 2024, the Company issued
For the three months ended December 31, 2024 and 2023, stock-based compensation expense was $
10. Earnings Per Common Share
The following table summarizes the calculation of net earnings and weighted average common shares and common equivalent shares outstanding for purposes of the computation of earnings per share (in thousands, except share and per share data):
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net income | $ | $ | ||||||
| Weighted average number of common share equivalents: | ||||||||
| Common shares used in basic earnings per share | ||||||||
| Common share equivalents outstanding related to RSUs | ||||||||
| Total weighted average common shares and common share equivalents used in diluted earnings per share | ||||||||
| Earnings per share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
For the calculation of diluted earnings per share for the three months ended December 31, 2024 and 2023, there were
11. Commitments and Contingencies
Contingent Compensation Costs
In connection with the acquisition of Aquana, LLC (“Aquana”) in July 2021, the Company is subject to additional contingent cash payments to the former members of Aquana over a -year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The merger agreement with Aquana requires the continued employment of a certain key employee and former member of Aquana for the first years of the year earn-out period in order for any of Aquana’s former members to be eligible for any earn-out payments. Due to the continued employment requirement, no liability has been recorded for the estimated fair value of earn-out payments for this transaction. Earn-outs achieved are recorded as compensation expense when incurred.
Legal Proceedings
The Company is involved in various pending legal actions in the ordinary course of its business. Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty of such actions. However, management believes that the most probable, ultimate resolution of current pending matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
12. Segment Information
Effective October 1, 2024, the Company changed the composition of its operating business segments and changed its methodology for allocating manufacturing costs including overhead and other costs of revenue to the segments.
The Company's business segments are now comprised of: Smart Water, Energy Solutions and Intelligent Industrial. The Smart Water segment emphasizes the Company’s targeted approach in the water management industry. This business segment contains the Hydroconn® smart water connectivity offerings and the Company's Aquana products. The Energy Solutions segment encompass' the Company’s traditional business in oil and gas land and marine exploration products, reservoir monitoring solutions, and will additionally incorporate emerging energy solutions and microseismic monitoring. This segment will include energy-related business from Quantum’s SADAR® products and associated analytics. The Intelligent Industrial segment includes seismic sensor products used for vibration monitoring geotechnical applications such as mine safety applications and earthquake detection, designs seismic products targeted at the border and perimeter security markets, imaging products, as well as providing contract manufacturing services. The change methodology for allocating manufacturing costs affected each business segment's operating income (loss) but had no effect on consolidated operating income.
The following table summarizes the Company’s segment information (in thousands). Segment information for the three months ended December 31, 2024 and 2023, has been recast for comparability.
| Three Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenue: | ||||||||
| Smart Water | $ | $ | ||||||
| Energy Solutions | ||||||||
| Intelligent Industrial | ||||||||
| Corporate | ||||||||
| Total | $ | $ | ||||||
| Income (loss) from operations: | ||||||||
| Smart Water | $ | $ | ||||||
| Energy Solutions | ||||||||
| Intelligent Industrial | ( | ) | ( | ) | ||||
| Corporate | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The Company's manufacturing operations for its operating business segments are combined. Therefore, the Company does not segregate and report separate balance sheet accounts for each of its segments and therefore, no total asset information is presented in the table above.
13. Income Taxes
Consolidated income tax expense for the each of the three months ended December 31, 2024 and 2023, was $
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is management’s discussion and analysis of the major elements of our consolidated financial statements. You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended September 30, 2024.
Forward-Looking Statements
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, future demand for OBX rental equipment, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for channels of our GCL 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, 2024, 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 customer accounts, inability to collect on financing receivables, lack of further orders for our OBX rental equipment, failure of our Quantum products to be adopted by the border and security perimeter market or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property. The occurrence of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public over the internet at the SEC’s website at www.sec.gov. Our SEC filings are also available to the public on our website at www.geospace.com. From time to time, we may post investor presentations on our website under the “Investor Relations” tab. Please note that information contained on our website, whether currently posted or posted in the future, is not a part of this Quarterly Report on Form 10-Q or the documents incorporated by reference in this Quarterly Report on Form 10-Q.
Overview
Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries. We design and manufacture sophisticated technology solutions for applications in energy exploration, smart water management as well as industrial and Internet of Things. Our seismic equipment and services are marketed to the energy exploration industry and used to locate, characterize and monitor hydrocarbon producing reservoirs. We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications. We design and manufacture other products of a non-seismic nature, including water meter connector cables, imaging equipment, remote shutoff water valves and Internet of Things ("IoT") platform. Additionally, the company provides specialized contract manufacturing services. In recent years, the revenue contribution from our non-energy related products has grown to represent nearly half of our total revenue. Our business diversification strategy has centered largely on translating expertise in ruggedized engineering and technology manufacturing into expanded customer markets.
Effective October 1, 2024, the Company changed the composition of its three operating business segments and changed its methodology for allocating manufacturing costs including overhead and other costs of revenue to the segments. The business segments are now comprised of: Smart Water, Energy Solutions and Intelligent Industrial. The change methodology for allocating manufacturing costs affected each segment's operating income (loss) but had no effect on consolidated operating income.
Products and Product Development
Smart Water
Our Smart Water business segment comprises our market dominant water meter connector cable series known as Hydroconn®, and our Aquana branded remote shut-off water valves and cloud-based IoT Platform. In municipal and utility applications, our smart water products support the global smart meter connectivity water utility market. These products provide our customers with highly reliable automated meter-reading and automated meter infrastructure with our robust water-proof connectors. Our highly-ruggedized outdoor valves include the AquaFlex™ and AquaFlow™ remote shut off valves.
In commercial applications for multi-family and real estate property management, our remote sensing water valves offer asset managers the ability to gather accurate usage information, implement occupancy-based billing and submetering as well as guard against costly leak and burst events. The AquaSense remote disconnect valve and AquaControl smart water IoT platform allow customers that manage multi-family and commercial properties to monitor their properties for leak and burst events, with real-time notifications, complimented with our remote-shut off to stop water damage. These products also allow water utilities to control and monitor water use remotely, discontinue or limit service without placing its employees in potential harm or danger.
Energy Solutions
Our Energy Solutions business segment has historically accounted for the majority of our revenue. Geoscientists use seismic data primarily in connection with the exploration, development and production of oil and gas reserves to map potential and known hydrocarbon bearing formations and the geologic structures that surround them. This segment’s products include wireless seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, cables, marine streamer retrieval and steering devices and various other seismic products.
Our seismic sensor, cable and connector products are compatible with most major competitive seismic data acquisition systems currently in use. Revenue from these products results primarily from seismic contractors purchasing our products as components of new seismic data acquisition systems or to repair and replace components of seismic data acquisition systems already in use.
We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system including our most recent launch of the Pioneer™, an ultralight wireless sensor product. We believe our wireless sensor systems allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight, ease of operation, and which require less maintenance.
We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner® and Mariner Deep™. Similar to our land-based wireless systems, these marine wireless systems may be deployed in virtually unlimited channel configurations and do not require interconnecting cables between each station. Through December 31, 2024, we have sold 35,000 OBX stations and we currently have 13,000 OBX stations in our rental fleet. The Mariner® is a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder designed for extended duration seabed ocean bottom seismic data acquisition. Through December 31, 2024, we have sold 7,600 Mariner® nodes.
Additionally, we have developed high-definition permanent reservoir monitoring systems ("PRM") for land and ocean-bottom applications in producing oil and gas fields. Our primary offering, OptoSeis® fiber optic sensing technology, provides high-definition seismic data acquisition systems with a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects. We are in the process of responding to a large-scale seabed PRM tender from a major oil and gas producer. The project is expected to be awarded in the third quarter of fiscal year 2025. We have also entered into a contract for two Front-End Engineering and Design studies with this producer which is expected to be completed in the fourth quarter of fiscal year 2025. We have not received any orders for a large-scale seabed PRM system since 2012.
We also have a derivative of the OptoSeis® technology for high temperature downhole applications. The product known as Insight by OptoSeis offers a passive, all-optical downhole sensor network - no electronics downhole - resulting in years long operational lifetime at 150 °C.
We also produce a seismic borehole acquisition systems that employ a fiber optic augmented wireline capable of very high data transmission rates. These systems are used for several reservoir monitoring applications, including an application pioneered by us allowing operators and service companies to monitor and measure the results of hydraulic fracturing operations.
Lastly, our SADAR® technology provides passive seismic real-time monitoring in emerging energy applications such as Carbon Capture and Storage (CCS) and geothermal energy. Our customers include various agencies of the U.S. government including the Department of Defense, Department of Energy, Department of Homeland Security and other agencies as well as energy companies needing real-time monitoring of seismic data.
Intelligent Industrial
Our Intelligent Industrial segment is comprised of diverse software and hardware solutions leveraging decades of sensor technologies for use by the U.S. Federal government, specialized contractors and academia. This segment also includes specialized contract manufacturing in the United States along with solutions for industrial screen printers.
For more than a decade our sensor products have been used for national security and homeland defense applications. More recently our SADAR® technology, has been used for border and perimeter security surveillance, cross-border tunneling detection and other products targeted at movement monitoring, intrusion detection and situational awareness. Our seismic sensors provide unique high definition, low frequency sensing that allows for vibration monitoring in industrial machinery, mine safety and earthquake detection.
Our imaging products include electronic pre-press products that employ direct thermal imaging, direct-to-screen printing systems, and digital inkjet printing technologies targeted at the commercial graphics, industrial graphics, textile and flexographic printing industries.
Our robust manufacturing capabilities have allowed us to provide specialized contract manufacturing services for printed circuit board manufacturing, cabling and harnesses, machining, injection molding and electronic system assembly. We are certified to the latest revisions of ISO9001, 14001, 13485, and AS9100 standards and are committed to quality manufacturing, document and process control, qualification, non-conformance handling as well as continuous improvement. We maintain environmentally sound working conditions in all of our facilities.
Consolidated Results of Operations
We report and evaluate financial information for three segments: Smart Water, Energy Solutions, and Intelligent Industrial Markets. Summary financial data by business segment follows (in thousands):
| Three Months Ended |
||||||||
| December 31, 2024 |
December 31, 2023 |
|||||||
| Smart Water |
||||||||
| Product revenue |
$ | 7,288 | $ | 4,234 | ||||
| Income from operations |
370 | 1,095 | ||||||
| Energy Solutions |
||||||||
| Product revenue |
19,826 | 33,706 | ||||||
| Rental revenue |
4,456 | 6,205 | ||||||
| Total revenue |
24,282 | 39,911 | ||||||
| Income from operations |
13,282 | 15,068 | ||||||
| Intelligent Industrial |
||||||||
| Product revenue |
5,531 | 5,774 | ||||||
| Rental revenue |
46 | 39 | ||||||
| Total revenue |
5,577 | 5,813 | ||||||
| Loss from operations |
(940 | ) | (191 | ) | ||||
| Corporate |
||||||||
| Rental revenue |
76 | 74 | ||||||
| Loss from operations |
(4,877 | ) | (3,135 | ) | ||||
| Consolidated Totals |
||||||||
| Product revenue |
32,645 | 43,714 | ||||||
| Rental revenue |
4,578 | 6,318 | ||||||
| Total revenue |
37,223 | 50,032 | ||||||
| Income from operations |
7,835 | 12,837 | ||||||
Business Overview
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.
Our Energy Solution segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment in fiscal year 2024, of which trend has continued into fiscal year 2025. This shift signifies our customer’s recognition of future backlog to justify ownership versus renting the nodes. We do not expect significant expansion of the ocean bottom nodal market, for we expect the market is saturable and future rental fleet use will come from our customer’s need to temporarily expand their nodal fleet. We expect our Energy Solutions segment to provide the majority of our revenue for years to come, but in diminishing portion to our other segments. Demand for our seismic products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.
We continue to maintain a strong balance sheet with no debt. Our current liquidity enables our ability to seek out business acquisitions, allows us to continue investments in capital assets and product research and development, which have historically driven revenue growth.
Three months ended December 31, 2024, compared to the three months ended December 31, 2023
Consolidated revenue for the three months ended December 31, 2024, was $37.2 million, a decrease of $12.8 million, or 25.6%, from the corresponding period of the prior fiscal year. The decrease was primarily due to lower revenue from our Energy Solutions segment. Revenue for the three months ended December 31, 2024, included a $17 million OBX marine wireless product sale structured as a sales-type lease. However, in comparison, revenue for the first quarter of the prior year included a $30 million sale of our Mariner™ shallow water ocean bottom nodes. The decrease in revenue from our Energy Solutions segment was partially offset by higher revenue generated from our Smart Water segment attributable to an increase in demand for our water meter products.
Consolidated gross profit for the three months ended December 31, 2024, was $20.1 million, a decrease of $2.1 million, or 9.4%, from the corresponding period of the prior fiscal year. The decrease in gross profit was primarily due to a decrease in wireless product revenue from our Energy Solutions segment. This decrease was partially offset by a high gross profit margin on our $16 million wireless product sale in the first quarter of fiscal year 2025 and the increase in revenue from our Smart Water segment.
Consolidated operating expenses for the three months ended December 31, 2024, were $12.3 million, an increase of $2.9 million, or 31.0%, from the corresponding period of the prior fiscal year. The increase was due to higher personnel costs, including severance costs, higher professional fees and research and development project expenditures.
Consolidated other income was $0.6 million for the three months ended December 31, 2024, compared to a loss of $0.1 million from the corresponding period of the prior fiscal year. The increase for the three months ended December 31, 2024 was principally due to higher interest income attributable to its short-term investments and financing receivables.
Segment Results of Operations
Smart Water
Revenue
Revenue from our Smart Water segment for the three months ended December 31, 2024, increased $3.1 million, or 72.1%, from the corresponding period of the prior fiscal year. The increase for the three months ended December 31, 2024, was primarily due to an increase in demand for our Hydroconn® cable and connector products.
Operating Income
Operating income from our Smart Water segment for the three months ended December 31, 2024, was $0.4 million, a decrease of $0.7 million, or 66.2%, from the corresponding period of the prior fiscal year. The decrease for the three months ended December 31, 2024, was primarily a result of the change in composition of our business segments. This decrease was largely offset by the increase in revenue.
Energy Solutions
Revenue
Revenue from our Energy Solutions segment for the three months ended December 31, 2024, decreased $15.6 million, or 39.2%, from the corresponding period of the prior fiscal year. The components of this decrease were as follows:
| ● |
Product Revenue – For the three months ended December 31, 2024, product revenue decreased $13.9 million, or 41.2%, from the corresponding period of the prior fiscal year. The decrease was primarily due to a decrease in demand for our wireless products. Revenue for the three months ended December 31, 2024 included a $17 million OBX marine wireless product sale structured as a sales-type lease. However, in comparison, revenue for the first quarter of the prior year included a $30 million sale of our Mariner™ shallow water ocean bottom nodes. |
| ● |
Rental Revenue – For the three months ended December 31, 2024, rental revenue from our wireless exploration products decreased $1.7 million, or 28.2%, from the corresponding period of the prior fiscal year. The decrease was primarily due lower utilization of our OBX rental fleet. |
Operating Income
Operating income associated with our Energy Solutions segment for the three months ended December 31, 2024, was $13.3 million, a decrease of $1.8 million from the corresponding period of the prior fiscal year. The decrease in operating income for the three months ended December 31, 2024, was primarily due to a decrease in wireless product revenue. This decrease was largely offset by (i) a high profit margin on our $17 million product sale in the first quarter of fiscal year 2025 and (ii) the change in the composition of our business segments.
Intelligent Industrial
Revenue
Revenue from our Intelligent Industrial segment for three months ended December 31, 2024, decreased $0.2 million, or 4.1%, from the corresponding period of the prior fiscal year. The decrease in revenue for the three months ended December 31, 2024, was primarily due to lower demand for our imaging products. The decrease was partially offset by an increase in demand for our sensor products.
Operating Loss
Operating loss from our Intelligent Industrial segment for the three months ended December 31, 2024, was $0.9 million, an increase of $0.7 million from the corresponding period of the prior fiscal year. The increase in operating loss for the three months ended December 31, 2024, was primarily due (i) the decrease in revenue and (ii) the change in composition of our business segments.
Liquidity and Capital Resources
At December 31, 2024, we had $22.1 million in cash and cash equivalents and short-term investments. For the three months ended December 31, 2024, we used $11.5 million of cash from operating activities. Uses of cash included a (i) $3.0 million increase in inventories for the strategic purchase of long lead-time components needed for use in wireless products, valves and contract manufacturing, (ii) $3.6 million increase in trade accounts receivables due to timing of collections from customers and (iii) $0.7 million decrease in trade accounts payable due to timing of payments to our suppliers. Uses of cash were partially off our net income of $8.4 million and non-cash charges of $3.5 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for recovery of credit losses.
For the three months ended December 31, 2024, we generated cash of $6.3 million in investing activities. Sources of cash consisted of (i) $9.7 million from the sale of short-term investments and (ii) $0.1 million of proceeds from the sale of rental equipment. These sources of cash were partially offset by (i) $3.2 million for additions to our property, plant and equipment and (ii) $0.4 million for additions to our equipment rental fleet. We expect fiscal year 2025 cash investments in property, plant and equipment will be approximately $6 million. We expect fiscal year 2025 cash investments into our rental fleet will be limited unless we experience an expansion of customer demand of our rental fleet. Our capital expenditures are expected to be funded from our cash on hand, short-term investments, internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.
For the three months ended December 31, 2024, we used million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors. The program authorizes us to repurchase up to $7 million of our common stock in open market transactions. At December 31, 2024, $0.4 million of our common stock remains available for repurchases under the program.
On July 26, 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank ("Woodforest"), as sole lender. The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest, as a lender. The Agreement provides a revolving credit facility with a maximum availability of $15 million. Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) 80% of eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments. Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25% per annum (7.75% at December 31, 2024). We are required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of our assets, except for certain excluded property. The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly. The Agreement also requires us to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance on the revolving credit facility. The Agreement expires in July 2025. We intend to begin negotiations with Woodforest for an extension in the second quarter of fiscal year 2025.
At December 31, 2024 we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $12.1 million after consideration of a $0.1 million outstanding letter of credit. We were in compliance with all covenants under the Agreement. We do not currently anticipate the need to borrow under the Agreement, however, we may decide to do so in the future, if needed.
Our available cash, cash equivalents and short-term investments was $22.1 million at December 31, 2024, which included $0.9 million of cash and cash equivalents held by our foreign subsidiaries and branch offices. In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under the Agreement through its expiration in July 2025, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.
We do not have any obligations which meet the definition of an off-balance sheet arrangement, and which have or are reasonably likely to have a current or future effect on our financial statements or the items contained therein that are material to investors.
Contractual Obligations
Contingent Compensation Costs
In connection with the acquisition of Aquana in July 2021, we are subject to additional contingent cash payments to the former members of Aquana over a six-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The merger agreement with Aquana requires the continued employment of a certain key employee and former member of Aquana for the first four years of the six year earn-out period for any of Aquana’s former members to be eligible to any earn-out payments. In accordance with ASC 805, Business Combinations, due to the continued employment requirement, no liability has been recorded for the estimated fair value of contingent earn-out payments for this transaction. Earn-outs achieved are recorded as compensation expense when incurred.
See Note 11 to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on our contractual contingencies.
Critical Accounting Estimates
During the three months ended December 31, 2024, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Recent Accounting Pronouncements
Please refer to Note 1 to our consolidated financial statements contained in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item, in accordance with Item 305(e) of Regulation S-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within our Company and consolidated subsidiaries to report material information otherwise required to be set forth in our reports.
In connection with the preparation of this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the CEO and CFO, as of December 31, 2024, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Increases in Tariffs, Trade Restrictions or Taxes on our Products Could Have an Adverse Impact on our Operations.
Approximately half of our revenue is generated from customers outside of the U.S. We also purchase a portion of our raw materials from suppliers in China and other foreign countries. The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, as well as those between the U.S. and Canada, Mexico and other countries have been escalating in recent years. In addition, the transition to a new presidential administration in the United States could further impact our business and operations, due to potential trade wars as a result of the implementation of tariffs or otherwise. Historically, trade tensions have led to a series of tariffs imposed by the U.S. on imports from China, as well as retaliatory tariffs imposed by China on imports from the U.S. If the U.S. and China are able to negotiate the issues to restore a mutually advantageous and fair trading regime, the increased tariffs could be eliminated. Certain raw materials we purchase from China are subject to these tariffs which has increased our manufacturing costs. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell uncompetitive to similar products not subjected to such import tariffs. Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials including rare earth minerals, may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials, which could have a material adverse effect on our business, results of operations or financial conditions. Moreover, the change in presidential administration, as well as a transition of control in the U.S. House of Representatives and U.S. Senate, creates regulatory uncertainty and it remains unclear as to the tariff related impact the future geopolitical climate will bring to our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to purchases of common stock of the Company made during the three months ended December 31, 2024:
| Period |
Total Number of Shares Purchased (1) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) |
||||||||||||
| October 1, 2024 through October 31, 2024 |
— | $ | — | — | $ | 615,000 | ||||||||||
| November 1, 2024 through November 30, 2024 |
— | — | — | 615,000 | ||||||||||||
| December 1, 2024 through December 31, 2024 |
19,994 | 9.98 | 19,994 | 418,000 | ||||||||||||
(1) On May 9, 2024, Company's Board of Directors (the "Board') authorized a stock repurchase program (the "Program") under which the Company may repurchase up to $5 million of its outstanding stock. On August 8, 2024, the Board approved an extension to the Program increasing the dollar amount of shares allowed to be purchased to $7 million. Under the Program, the Company may purchase shares of common stock on a discretionary basis from time to time through open market transactions through block trades, in privately negotiated transactions and pursuant to any trading plan that may be adopted by the Company’s management in accordance with Rule 10b5-1 of the Exchange Act, or otherwise. The timing and number of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The Program has no time limit, does not obligate the Company to acquire a specified number of shares and may be modified, suspended or discontinued at any time at the Company’s discretion. The repurchase plan will be funded using existing cash or future cash flow.
The following exhibits are filed with this Report on Form 10-Q or are incorporated by reference
| 10.1* | Employment Termination Agreement dated January 1, 2025 between the Company and Walter R. Wheeler. | |
| 3.1 |
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| 3.2 |
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| 31.1* |
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| 31.2* |
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| 32.1** |
Certification of the Chief Executive Officer pursuant 18 U.S.C. Section 1350. |
|
| 32.2** |
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
|
| 101* |
The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets at December 31, 2024 and September 30, 2024 , (ii) the Consolidated Statements of Operations for the three months ended December 31, 2024 and 2023, (iii) the Consolidated Statements of Comprehensive Income for the three months ended December 31, 2024 and 2023, (iv) the Consolidated Statements of Stockholders’ Equity for the three months ended December 31, 2024 and 2023, (v) the Consolidated Statements of Cash Flows for the three months ended December 31, 2024 and 2023 and (vi) Notes to Consolidated Financial Statements. |
|
| 104* |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 formatted in Inline XBRL and contained in Exhibit 101. |
* Filed with this Quarterly Report on Form 10-Q
** Furnished with this Quarterly Report on Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GEOSPACE TECHNOLOGIES CORPORATION |
| Date: |
February 6, 2025 |
By: |
/s/ Richard J. Kelley |
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| Richard J. Kelley, President |
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| and Chief Executive Officer |
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| (duly authorized officer) |
| Date: |
February 6, 2025 |
By: |
/s/ Robert L. Curda |
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| Robert L. Curda, Vice President, |
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| Chief Financial Officer and Secretary |
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| (principal financial officer) |