GEOSPACE TECHNOLOGIES CORP 10-K

Item 1. Business Business Overview Unless otherwise specified, the discussion in this Annual Report on Form 10-K refers to Geospace Technologies Corporation and its subsidiaries. We design and manufacture sophisticated technology solutions for applications in smart water management, energy exploration, as well as industrial and Internet of Things. Our seismic equipment and services are marketed to the energy 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 Hydroconn® connector cables, imaging equipment, remote shutoff water valves and Internet of Things ("IoT") platform. Additionally, we provide specialized contract manufacturing services, which leverage our capabilities and manufacturing resources. 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. We report and categorize our customers and products into three different segments: Smart Water, Energy Solutions and Intelligent Industrial. In recent years, the revenue contribution from our Smart Water segment has grown to represent nearly half of our total revenue. This revenue growth in this segment is largely attributable to the rise in water utility modernization which includes our waterproof meter connector cable series of products. Demand for our seismic products targeted at customers in our Energy Solutions segment has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general. For more information, please refer to the risks discussed under the heading “Risk Factors”. Segment and Geographical Information 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 the following: 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 (loss). For a discussion of the products sold and markets served by each of our segments, see “Products and Product Development” below. For a discussion of financial information by segment and geographic area, see Note 21 to the consolidated financial statements contained in this Annual Report on Form 10-K. Products and Product Development Smart Water Our Smart Water segment emphasizes our targeted approach to growing its footprint in the water management industry. This business segment contains the highly successful Hydroconn® smart water connectivity offerings along with the Aquana products. The adoption of advanced technology in water management has been bolstered by U.S. Federal funding programs such as Water Infrastructure Finance Act funding, which provides $7.5 billion for water-related infrastructure projects. Over the last decade, we have seen an increase of over 400% in sales volume of our Hydroconn® connector cables used in Automated Meter Reading (AMR) applications. These cables play a role in Advanced Metering Infrastructure (AMI) by enabling remote collection of usage data from utility meters, thereby eliminating the need for manual meter reading. Our remote disconnect values and water IoT platform allows 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 re-claim non-revenue water at a lower energy and field service cost through remote control of water service without placing their 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 and various other seismic products. We believe our Energy Solutions products are among the most technologically advanced instruments and equipment available for seismic data acquisition. 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 allow our customers to operate more effectively and efficiently because of their reduced environmental impact, lower weight, ease of operation and less maintenance requirements. We have also developed an ocean bottom seismic data acquisition system called the OBX, and recently released Mariner® and Mariner Deep®. Similar to our land-based wireless systems, these ocean bottom systems may be deployed in virtually unlimited channel configurations and do not require interconnecting cables between each station. 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. Mariner™ is the next generation node designed for extended duration seabed ocean bottom seismic data acquisition. The slim profile nodes, which are part of our shallow water stations, are ideally deployed as deep as 750 meters. The device continuously records for up to 70 days and offers more rapid recharging times. Its slim profile creates space savings on seismic survey vessels, allowing contractors to fit up to 25% more nodes into a download/charge container. Mariner Deep® is a deepwater, wireless seismic acquisition node capable of operating for 200 days in water as deep as 3,450 meters. 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 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 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. Our SADAR® technology provides energy companies real-time monitoring of seismic data. Intelligent Industrial Our Intelligent Industrial segment consists of industrial sensors, electronic pre-press solutions and specialized contract manufacturing. The growing defense and security applications offered by Quantum and Heartbeat Detector® will also be reflected in this segment. 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. Our seismic sensors provide unique high definition, low frequency sensing that allows for vibration monitoring in industrial machinery, mine safety and earthquake detection. Imaging Products 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. Defense and Security Our Quantum product line includes SADAR®, a proprietary detection system which detects, locates and tracks items of interest in real-time. Using the SADAR® technology, Quantum designs and sells products used for border and perimeter security surveillance, cross-border tunneling detection and other products targeted at movement monitoring, intrusion detection and situational awareness. Quantum’s customers include various agencies of the U.S. government including the Department of Defense, Department of Energy, Department of Homeland Security and other agencies. In August 2025, we acquired Heartbeat Detector® by purchasing all the of the outstanding common stock of Geovox Securities, Inc. ("Geovox"). Heartbeat Detector® is a heartbeat detection security technology developed by the United States Department of Energy’s Oak Ridge National Laboratory which bolsters our perimeter security and surveillance offerings. Used in more than a dozen countries to address human trafficking and prison security, the Heartbeat Detector® uses proprietary sensors to rapidly identify people hidden in vehicles, providing a modern, user-friendly interface in as little as 10 seconds. The product, which relies on geophones we manufacture, has been proven 99% effective by Oak Ridge, Sandia and Thunder Mountain national laboratories. The acquisition purchase price for Geovox consisted of (i) cash of $1.7 million, which included $1.5 million paid at closing and $0.2 million to be paid June 1, 2027, and (ii) contingent earn-out payments of up to $3.3 million over a four-year period. The contingent payments, if any, will be derived from certain eligible revenue that may be generated during the four-year period. Business Strategy We have adopted what we think is a conservative and prudent business strategy which places a focus on sound financial management practices, as outlined below. We have not changed our primary focus on continued investment in product research and development, selective acquisitions and joint ventures. In the long term we are seeking to grow our recurring revenue offerings through internal development or acquisition, and expand the majority of our revenue in our business segments not associated or dependent on the cyclical nature historically seen in the energy industry. ● Continue Investment in Product Research and Development – Prior to our plan for diversification, past periods of revenue growth were primarily driven through our internal development of new products for the energy industry. In more recent years, product innovations included the introduction of IoT values, Pioneer™, and Mariner®. These innovative technologies are the result of our unceasing investment in research and development initiatives. A majority of our product research and development cost relates to our engineers. Our engineering staff have been key to our past success, and we intend to continue our tradition of retaining and attracting quality engineering staff by providing appropriate compensation and benefits. Going forward, we intend to continue significant investments in product research and development for all of our business segments in order to diversify and grow our revenue base. ● Selectively Pursue Acquisitions of Businesses with Technological and Engineering Overlap – Historically, the oil and gas industry periodically experiences volatile business cycles requiring us to rapidly increase and decrease our business activities to meet the industry’s demand for our products, resulting in our plan for diversification through acquisitions. Our primary growth initiative is to seek out other business opportunities in our smart water and intelligent industrial markets which complement our existing products, engineering and manufacturing capabilities, company-wide culture, and are immediately accretive to our existing revenue stream. In order to diversify our revenue base and expose us to different markets with different business cycles, with recurring revenue streams, we have directed these efforts toward businesses outside the energy industry, as seen with our acquisitions of Quantum, Aquana and Geovox. 4 ● Financial Management – Due to the cyclicality of our core business, we have historically managed our financial risk by limiting or eliminating debt leverage in our balance sheet. While we are not opposed to moderate amounts of short-term debt during favorable business cycles, we choose to minimize our exposure to long-term debt obligations which, in our view, restrict our ability to operate during periodic difficult business cycles. We believe this strategy has allowed us to continue operations through difficult business cycles without disruption for debt and equity restructuring as has been seen among our peers, many of whom have significant long-term debt burdens. In addition, we have limited our investments in capital assets and have liquidated, and made appropriate reserves for, significant amounts of our inventories and rental fleet assets. We also believe that the value of our common shares outstanding will be best served in the long-term by retaining our cash to fund future cash outflows as they become necessary. In this regard, we do not anticipate paying any cash dividends in the foreseeable future, however, since fiscal year 2021 we have repurchased 1,558,260 shares of our common stock in open market transactions under stock-buy-back programs authorized by our Board of Directors. Competition Smart Water Products Our smart water products face competition in both the real estate and utilities markets. Real estate competition consists of companies such as Water Hero, Moen, and Watercop who offer similar products and services but don’t offer a full turn-key solution to real estate asset protection, operational efficiency and modular product combinations. For the utility market, our products face competitors such as Mueller, Sensus, and Badger who offer AMI/AMR network valve/meter combinations. However, our smart valves are more versatile, accommodating multiple valve sizes and valve positions while supporting connections to mechanical, ultrasonic and pulse or encoded water meters. Energy Solutions Products We are one of the world’s largest designers and manufacturers of seismic products used in the oil and gas industry. The principal competitors for many of our traditional seismic products are Sercel (a division of Viridien, formerly a division of CGG), Dynamic Technologies, and INOVA. Furthermore, entities in China affiliated with Sercel, as well as other Chinese manufacturers produce low-cost oil and gas seismic products, which compete with our traditional seismic products. The primary competitors for our land wireless data acquisition systems are SmartSolo, Sercel, INOVA, STRYDE, Geophysical Technology, and numerous smaller entities who have introduced similar versions of wireless data acquisition systems. We believe the primary competitors for our ocean bottom data acquisition systems are Sercel and InApril AS (which merged with SAExploration in September 2024), each of whom utilizes their own proprietary nodal technology. Most oil and gas seismic products are price sensitive, so the ability to manufacture these products at a low cost is essential to maintain market share. While price is an important factor in a customer’s decision to purchase a land or marine wireless data acquisition system, we believe customers also place a high value on a product’s historical performance and the ongoing engineering and field support provided by the product’s manufacturer. The principal keys for success in the seismic instruments and equipment market are technological superiority, product durability under harsh field conditions, reliability, size, weight and customer support. Product deliverability is always an important consideration for our customers. In general, most customers prefer to standardize data acquisition systems, particularly if they are used by seismic companies that have multiple crews which are able to support each other. This standardization makes it difficult for competitive manufacturers to gain market share from other manufacturers with existing customer relationships. Our primary competitor for our seabed PRM systems is Alcatel-Lucent. Our primary competitors for high-definition borehole seismic data acquisition systems are Avalon Sciences Ltd and Sercel. Our primary competitors for the new energy or energy transition market are Microseismic, Inc., Namometrics, ISTI and ESG. Intelligent Industrial Products Our industrial and imaging products face competition from numerous domestic and international specialty product manufacturers. The border and perimeter security marketplace is dominated by large integrated system providers such as Boeing, General Dynamics, Lockheed Martin, Raytheon, Elbit Systems and others. Systems provided by these competitors are generally multifaceted and may include numerous integrated surveillance technologies, including the geophysical sensor and software systems that we have developed. Our sensing technology does not rely on line-of-sight motion detection, which is required by cameras and other visual and radio frequency technologies, and thus enables motion-sensing such devices would miss. Competitive geophysical technologies utilizing fiber optic sensing techniques are provided by OptaSense, Fibersensys, Future Fiber Technologies, and other specialty sensor manufacturing firms. Our primary competition for the Heartbeat Detector® is Ensco. Ensco’s MicroSearch system directly competes with the Heartbeat Detector® in the human-presence detection market. Both offerings detect concealed humans by analyzing micro-vibrations from heartbeats. However, Heartbeat Detector offers a more modern, efficient and flexible approach – delivering reliable detection in under a minute, with fewer setup components and enhanced adaptability across vehicle, container, and structural applications. 5 Suppliers We purchase raw materials from a variety of suppliers located in various countries. We typically have multiple suppliers for our critical materials. In our Energy Solutions business segment, certain models of our land and marine wireless nodes are purchased from two single source suppliers. In the event a change in one or both of these suppliers is necessary, significant engineering design efforts would be required by us. In our Intelligent Industrial business segment, we purchase all of our thermal imaging film from a single supplier. Beyond this film supplier, we know of no other source for thermal film that performs as well in our imaging equipment. For a discussion of the risks related to our reliance on these suppliers, see “Risk Factors – We Rely on Key Suppliers for Certain Components Used in Our Products.” Our supply chain frequently experiences disruption, resulting in longer lead times in materials available from suppliers and extending the shipping time for these materials to reach our facilities. These disruptions could constrain our ability to provide products to our customers in the time frame they require. Product Manufacturing and Assembly Our manufacturing and product assembly operations consist of machining, molding or cabling the necessary component parts, configuring these parts along with components received from various vendors and assembling a final product. We manufacture many of our products to the specifications required by our customers and upon order. Consistent with industry practice, we normally manufacture our products based on firm customer orders, anticipated customer orders and historical product demand. Markets and Customers Our smart water connectivity customers include municipalities, water utilities, water meter manufacturing companies as well as asset management firms such as multifamily property owners. Our principal customers for our seismic products are seismic contractors and, to a lesser extent, major independent and government-owned oil and gas companies that either operate their own seismic crews or specify seismic instrument and equipment preferences to contractors. For our PRM products, our customers are generally large international oil and gas companies that operate long-term offshore oil and gas producing properties. We also provide oil and gas companies with real-time monitoring of seismic data with our SADAR® technology. Our industrial product customers consist of specialty manufacturers, research institutions and industrial product distributors. Our imaging customers primarily consist of direct users of our equipment as well as specialized resellers that focus on the screen-printing and flexographic printing industries. Our border and perimeter security customers are primarily government agencies. Two customers comprised 19.1% and 16.2% of our revenue during fiscal year 2025. Two customers comprised 27.4% and 16.0% of our revenue during fiscal year 2024. The following table describes our revenue by product type (in thousands): YEAR ENDED SEPTEMBER 30, 2025 2024 Smart Water $ 35,816 $ 32,434 Energy Solutions 50,706 77,977 Intelligent Industrial 23,960 24,891 Corporate 321 296 Total revenue $ 110,803 $ 135,598 Intellectual Property We seek to protect our intellectual property by means of patents, trademarks, trade secrets and other measures. We hold patents on geophones, micro-geophones, piezo-electric sensors, seismic data acquisition, our Hydroconn® water meter connectors, and we have pending applications on related technology. We do not consider any single patent essential to our success. Our patents are scheduled to expire at various dates through 2042. We are not able to predict the effect of any patent expiration. We protect our proprietary rights to our technology through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information. 6 Research and Development We incur significant research and development expenditures. These efforts are primarily aimed at the development of additional products for each of our business segments. The majority of our product research and development costs relate to the Company's engineers. The Company's engineering staff have been key to our past success. Research and development expense includes personnel costs of the Company's engineers, project expenditures, on-going product maintenance and improvements to our existing products, as well as general and administrative expenses associated with the engineering department. We have incurred company-sponsored research and development expenses of $18.9 million and $16.3 million during the fiscal years ended September 30, 2025 and 2024, respectively. Human Capital, Environmental and Social In order to continue to produce the most technologically advanced instruments and equipment available for the industrial, border and perimeter security and seismic data acquisition markets, it is crucial that we continue to attract and retain top talent. To attract and retain talented employees, we strive to make Geospace Technologies Corporation a diverse and safe workplace, with opportunities for our employees to receive educational benefits and cross-function skill-development to grow and develop their careers, all supported by competitive compensation and benefits. Workforce Composition - At September 30, 2025, we employed 519 people predominantly on a full-time basis, of which 502 were employed in the United States and the remainder in the United Kingdom, Canada and Colombia. Our professional staff includes geoscientists, electrical and mechanical engineers, accountants, computer and data scientists, and marketing and human resource professionals. 58% of our global workforce is employed in manufacturing, 19% in engineering, 5% in field services and 18% in sales and administration. Our employees are not unionized. We have never experienced a work stoppage. As a global manufacturer of high-tech offerings, we believe that a diverse workforce benefits everyone, from our skilled workforce, to our valued clients, our trusted shareholders and our society. Our domestic workforce make-up includes 29% white, 33% Asian, 25% Hispanic or Latino, 9% Black or African American, and 4% two or more races. Women in managerial roles represent 3% of our domestic workforce. We proudly employ veterans of the US Armed Forces, who make up 5% of our domestic workforce. Health, Safety and Wellness - The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees. We provide our full-time employees and their families with access to healthcare programs. Compensation and Benefits - We provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs (which vary by country/region and employment classification) include an incentive compensation plan, a 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, tuition assistance and on-site services, among others. We use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly those with critical skills and experience. Talent Development - We invest resources to develop the talent needed to remain a leading manufacturer and developer of industrial, border and perimeter security and seismic data acquisition products. We provide our employees with training opportunities and educational benefits to assist in career and skill development. We focus on continuous learning and provide feedback to assist in the development of talent. Company Culture – Our Board of Directors established a Code of Business Conduct applicable to all our employees, directors and officers and a Supplemental Code of Ethics for our CEO and Senior Financial Officers in accordance with applicable U.S. federal securities laws and the NASDAQ Listed Company Manual. The Code of Business Conduct provides guidance on corporate policies such as anti-harassment, anti-corruption, substance abuse, anti-trust, conflict minerals compliance, international trade restrictions as well as policies against insider trading, conflict of interest and hedging of our common stock. We offer a Whistle Blower program designed to protect any employee who reports valid suspicions related to our financial accounting, internal controls, or like matters to management without fear of termination or similar repercussions. Human Rights – We have established a Human Rights Policy Statement which demonstrates our commitment to supporting and promoting human rights that benefit all our stakeholders, including our customers, employees, shareholders, investors, and the communities in which we live and operate. Our approach is applied in our business operations, across our supply chain and through ethical business conduct. This policy statement promotes a safe and healthy workplace, diversity and inclusion, non-discrimination and anti-harassment as well as addresses forced labor, human trafficking, and child labor. The Human Rights Policy Statement is adhered to through our Business Code of Conduct and through responsible sourcing practices. 7 Our values and ethics serve as the guiding force through which we proactively maintain the highest standards of business conduct. Our Core Values guide our corporate policies and practices and promote ethical business conduct and compliance with the law. Our employees understand the importance of applying our Core Values toward their daily best practices. Annually, we hold an internal Core Values survey to inform leadership on the values in action and opportunities to improve. Governance – We pride ourselves on the highly ethical and transparent standards through the governance under our Board of Directors. Board Composition - Our Board of Directors is chaired by a highly experienced, independent Director whose position is wholly separate and divided from the role of the Chief Executive Officer. Unlike organizations where the two leadership roles are intertwined, this distinction helps ensure varying viewpoints designed to deliver improved returns for the shareholders we serve and the communities in which we operate. Board Charter Reviews - Every twelve-months, we conduct a Board and Board Committee assessment review to evalute and ensure that the highest quality standards are met. Executive Sessions Without Management - In order to ensure original and independent thought, non-management Board members meet throughout the year. Audit Policies – Our Audit Committee is comprised of trusted members who ensure the integrity of our financial statements, internal controls, compliance with legal and regulatory requirements, as well as the performance of our independent auditor. Enterprise Risk Management ("ERM") – Our Board of Directors takes an enterprise-wide approach to reviewing each of our business segments, which encompass our Smart Water, Energy Solutions and Intelligent Industrial operations, which include our Security & Surveillance sector. Board members meet regularly to oversee and ensure that company objectives are met, shareholder concerns are addressed and ERM policies are maintained. Environmental – We are committed to zero harm to people, property and the environment. We have an ISO 14001 certified environmental management system, employed over many health, safety and environmental programs. We do not exist in isolation. We strive to pursue a strategy of responsibility that not only encompasses all our activities but addresses the needs of our employees, customers, suppliers and our stakeholders. We operate in communities which have placed their trust in us. In doing this, we aim to better our impact on the environment and society, not only of our business but all businesses and organizations with whom we interact. We integrate responsible and sustainable practices throughout our organization. Our products are designed to not harm individuals, communities or the environment. We pledge to conduct ourselves in a most responsible manner in each community. As a manufacturer, we have a responsibility to reuse or recycle waste materials from our operations. Over the last three years, we have recycled approximately 600 tons of recyclable materials. Year to date 2025, we have recycled over 80 tons of manufacturing waste materials. This includes production recyclable materials (aluminum, brass, copper, stainless steel, steel, and titanium as well as armored cable, film, lithium batteries, PCB boards and solder paste) plus paper, plastic, cardboard and e-waste (electronics). Financial Information by Segment and Geographic Area For a discussion of financial information by segment and geographic area, see Note 21 to the consolidated financial statements contained in this Annual Report on Form 10-K. For a description of risks attendant to our foreign operations, please see “Risk Factors - Our Foreign Subsidiaries and Foreign Marketing Efforts Are Subject to Additional Political, Economic, Legal and Other Uncertainties Not Generally Associated with Domestic Operations". Available Information We file annual, quarterly and special 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 free of charge on our website at www.geospace.com. Please note that information contained on our website, whether currently posted or posted in the future, is not a part of this Annual Report on Form 10-K or the documents incorporated by reference in this Annual Report on Form 10-K. 8