10-Q 1 geos20240331_10q.htm FORM 10-Q geos20240331_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the Quarterly Period Ended March 31, 2024 OR

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from ____ to ____

 

Commission file number 001-13601


GEOSPACE TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 


Texas

76-0447780

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7007 Pinemont

Houston, Texas

77040

(Address of principal executive offices)

(Zip Code)

 

Registrants telephone number, including area code: (713) 986-4444


Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

GEOS

 

The Nasdaq Global Select Market

 

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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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

 

   

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 No ☒

 

As of April 30, 2024, the registrant had 13,362,090 shares of common stock, $0.01 par value, per share outstanding.



 

 

 

 
 
 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share amounts)

(unaudited)

 

  

March 31, 2024

  

September 30, 2023

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $20,762  $18,803 

Short-term investments

  30,448   14,921 

Trade accounts and note receivable, net

  15,330   21,373 

Inventories, net

  23,932   18,430 

Prepaid expenses and other current assets

  1,611   2,251 

Total current assets

  92,083   75,778 
         

Non-current inventories, net

  18,141   24,888 

Rental equipment, net

  15,077   21,587 

Property, plant and equipment, net

  24,552   24,048 

Non-current trade accounts receivable

  1,510    

Operating right-of-use assets

  590   714 

Goodwill

  736   736 

Other intangible assets, net

  4,601   4,805 

Other non-current assets

  408   486 

Total assets

 $157,698  $153,042 
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities:

        

Accounts payable trade

 $4,955  $6,659 

Operating lease liabilities

  257   257 

Other current liabilities

  9,863   12,882 

Total current liabilities

  15,075   19,798 
         

Non-current operating lease liabilities

  397   512 

Deferred tax liabilities, net

  32   16 

Total liabilities

  15,504   20,326 
         

Commitments and contingencies (Note 11)

          
         

Stockholders’ equity:

        

Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding

      

Common Stock, $.01 par value, 20,000,000 shares authorized; 14,204,082 and 14,030,481 shares issued, respectively; and 13,362,090 and 13,188,489 shares outstanding, respectively

  142   140 

Additional paid-in capital

  96,800   96,040 

Retained earnings

  70,212   61,860 

Accumulated other comprehensive loss

  (17,460)  (17,824)

Treasury stock, at cost, 841,992 shares

  (7,500)  (7,500)

Total stockholders’ equity

  142,194   132,716 

Total liabilities and stockholders’ equity

 $157,698  $153,042 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

March 31, 2024

   

March 31, 2023

   

March 31, 2024

   

March 31, 2023

 

Revenue:

                               

Products

  $ 19,497     $ 17,701     $ 63,211     $ 37,249  

Rental

    4,773       13,669       11,091       25,230  

Total revenue

    24,270       31,370       74,302       62,479  

Cost of revenue:

                               

Products

    14,995       13,196       38,837       28,561  

Rental

    3,394       5,225       7,348       10,435  

Total cost of revenue

    18,389       18,421       46,185       38,996  
                                 

Gross profit

    5,881       12,949       28,117       23,483  
                                 

Operating expenses:

                               

Selling, general and administrative

    6,546       6,387       12,372       12,822  

Research and development

    3,863       3,483       7,465       7,741  

Provision for credit losses

    (22 )     17       (51 )     137  

Total operating expenses

    10,387       9,887       19,786       20,700  
                                 

Gain on disposal of property

          1,315             1,315  
                                 

Income (loss) from operations

    (4,506 )     4,377       8,331       4,098  
                                 

Other income (expense):

                               

Interest expense

    (44 )     (39 )     (100 )     (78 )

Interest income

    247       127       482       283  

Foreign currency transaction gains (losses), net

    (20 )     185       (183 )     292  

Other, net

    7       6       (67 )     (6 )

Total other income, net

    190       279       132       491  
                                 

Income (loss) before income taxes

    (4,316 )     4,656       8,463       4,589  

Income tax expense

    11       19       111       49  

Net income (loss)

  $ (4,327 )   $ 4,637     $ 8,352     $ 4,540  
                                 

Income (loss) per common share:

                               

Basic

  $ (0.32 )   $ 0.35     $ 0.63     $ 0.35  

Diluted

  $ (0.32 )   $ 0.35     $ 0.62     $ 0.35  
                                 

Weighted average common shares outstanding:

                               

Basic

    13,343,793       13,156,715       13,297,324       13,111,866  

Diluted

    13,343,793       13,156,715       13,471,775       13,111,866  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

March 31, 2024

   

March 31, 2023

   

March 31, 2024

   

March 31, 2023

 

Net income (loss)

  $ (4,327 )   $ 4,637     $ 8,352     $ 4,540  

Other comprehensive income (loss):

                               

Change in unrealized gains on available-for-sale securities, net of tax

    (20 )     7       (5 )     15  

Foreign currency translation adjustments

    (122 )     (1,348 )     369       (1,342 )

Total other comprehensive income (loss)

    (142 )     (1,341 )     364       (1,327 )

Total comprehensive income (loss)

  $ (4,469 )   $ 3,296     $ 8,716     $ 3,213  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE six months ended March 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, 2023

    13,188,489     $ 140     $ 96,040     $ 61,860     $ (17,824 )   $ (7,500 )   $ 132,716  

Net income

                      12,679                   12,679  

Other comprehensive income

                            506             506  

Issuance of common stock pursuant to the vesting of restricted stock units

    128,601       2       (2 )                        

Stock-based compensation

                406                         406  

Balance at December 31, 2023

    13,317,090       142       96,444       74,539       (17,318 )     (7,500 )     146,307  
                                                         

Net loss

                      (4,327 )                 (4,327 )

Other comprehensive loss

                            (142 )           (142 )

Issuance of common stock pursuant to the vesting of restricted stock units

    45,000                                      

Stock-based compensation

                356                         356  

Balance at March 31, 2024

    13,362,090     $ 142     $ 96,800     $ 70,212     $ (17,460 )   $ (7,500 )   $ 142,194  
                                                         

Balance at October 1, 2022

    13,021,241     $ 139     $ 94,667     $ 49,654     $ (15,313 )   $ (7,500 )   $ 121,647  

Net loss

                      (97 )                 (97 )

Other comprehensive income

                            14             14  

Issuance of common stock pursuant to the vesting of restricted stock units

    109,748       1                               1  

Stock-based compensation

                370                   -       370  

Balance at December 31, 2022

    13,130,989       140       95,037       49,557       (15,299 )     (7,500 )     121,935  
                                                         

Net income

                      4,637                   4,637  

Other comprehensive loss

                            (1,341 )           (1,341 )

Issuance of common stock pursuant to the vesting of restricted stock units

    40,500                                      

Stock-based compensation

                306                         306  

Balance at March 31, 2023

    13,171,489     $ 140     $ 95,343     $ 54,194     $ (16,640 )   $ (7,500 )   $ 125,537  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

6

 

 

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

   

Six Months Ended

 
   

March 31, 2024

   

March 31, 2023

 

Cash flows from operating activities:

               

Net income

  $ 8,352     $ 4,540  

Adjustments to reconcile net income to net cash used in operating activities:

               

Deferred income tax expense

    15        

Rental equipment depreciation

    6,026       6,442  

Property, plant and equipment depreciation

    1,682       1,896  

Amortization of intangible assets

    204       430  

Amortization of premiums (accretion of discounts) on short-term investments

    (234 )     1  

Stock-based compensation expense

    762       676  

Provision for (recovery of) credit losses

    (51 )     137  

Inventory obsolescence expense

    110       1,836  

Gross profit from sale of rental equipment

    (20,553 )     (3,925 )

Gain on disposal of property

          (1,315 )

Loss (gain) on disposal of equipment

    10       (464 )

Effects of changes in operating assets and liabilities:

               

Trade accounts and note receivable

    5,963       (8,352 )

Inventories

    (5,566 )     (7,882 )

Other assets

    873       1,702  

Accounts payable trade

    (684 )     (574 )

Other liabilities

    (3,180 )     (226 )

Net cash used in operating activities

    (6,271 )     (5,078 )
                 

Cash flows from investing activities:

               

Purchase of property, plant and equipment

    (3,166 )     (1,126 )

Proceeds from the sale of property, plant and equipment

    2       4,221  

Investment in rental equipment

    (3,949 )     (635 )

Proceeds from the sale of rental equipment

    30,502       8,794  

Purchases of short-term investments

    (19,293 )      

Proceeds from the sale of short-term investments

    4,000       900  

Net cash provided by investing activities

    8,096       12,154  
                 

Cash flows from financing activities:

               

Payments on contingent consideration

          (175 )
                 

Effect of exchange rate changes on cash

    134       (205 )

Increase in cash and cash equivalents

    1,959       6,696  

Cash and cash equivalents, beginning of period

    18,803       16,109  

Cash and cash equivalents, end of period

  $ 20,762     $ 22,805  
                 

SUPPLEMENTAL CASH FLOW INFORMATION:

               

Cash paid for income taxes

  $     $ 26  

Inventory transferred to rental equipment

    5,352       82  

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

7

 

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, 2023 was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at  March 31, 2024 and the consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three and six months ended March 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 and six months ended March 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, 2023.

 

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 March 31, 2024, cash and cash equivalents included $3.3 million held by the Company’s foreign subsidiaries and branch offices, including $2.0 million held by its subsidiary in the Russian Federation.  In response to sanctions imposed by the U.S. and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but the Company may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition, if the Company were to repatriate the cash held by its Russian subsidiary, it would be required to accrue and pay taxes on any amount repatriated.

 

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 March 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 Adopted Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in generally accepted accounting principles. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments. For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The Company adopted this standard on October 1, 2023. The adoption of this standard did not have any material impact on its consolidated financial statements.

 

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. 

 

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.

 

8

 
 

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 March 31, 2024, the Company had deferred contract liabilities of $0.3 million and no deferred contract cost.  At September 30, 2023, the Company had deferred liabilities of $0.7 million and no deferred contract costs.  During the three and six months ended March 31, 2024, revenue of $0.7 million and $0.7 million, respectively, was recognized from deferred contract liabilities.  During the three and six months ended March 31, 2024, no cost of revenue was recognized from deferred contract costs.  During the three and six months ended March 31, 2023, no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs.  At March 31, 2024, all contracts had an original expected duration of one year or less.

 

For each of the Company’s operating segments, the following table presents revenue (in thousands) only from the sale of products and the performance of services under contracts with customers.  Therefore, the table excludes all revenue earned from rental contracts.

 

  

Three Months Ended

  

Six Months Ended

 
  

March 31, 2024

  

March 31, 2023

  

March 31, 2024

  

March 31, 2023

 

Oil and Gas Markets

                

Traditional exploration product revenue

 $3,472  $3,296  $5,234  $6,051 

Wireless exploration product revenue

  2,679   1,411   34,548   7,170 

Reservoir product revenue

  41   132   114   287 

Total revenue

  6,192   4,839   39,896   13,508 
                 

Adjacent Markets

                

Industrial product revenue

  9,023   9,642   15,466   17,572 

Imaging product revenue

  3,169   3,029   6,502   5,885 

Total revenue

  12,192   12,671   21,968   23,457 
                 

Emerging Markets

                

Revenue

  1,113   191   1,347   284 
                 

Total

 $19,497  $17,701  $63,211  $37,249 

 

See Note 12 for more information on the Company’s operating segments.

9

 

 

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

  

Six Months Ended

 
  

March 31, 2024

  

March 31, 2023

  

March 31, 2024

  

March 31, 2023

 

Asia (including Russian Federation)

 $3,672  $1,443  $35,888  $7,977 

Canada

  1,002   333   2,228   1,094 

Europe

  1,507   1,792   2,885   2,926 

United States

  12,831   13,479   21,249   24,070 

Other

  485   654   961   1,182 

Total

 $19,497  $17,701  $63,211  $37,249 

 

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 loss in stockholders’ equity. 

 

The Company’s short-term investments were composed of the following (in thousands):

 

  

As of March 31, 2024

 
  

Amortized Cost

  

Unrealized Gains

  

Unrealized Losses

  

Estimated Fair Value

 

Short-term investments:

                

Corporate bonds

 $21,937  $  $(14) $21,923 

U.S. treasury securities and securities of U.S. government-sponsored agency

  8,526      (1)  8,525 

Total

 $30,463  $  $(15) $30,448 

 

 

 

  

As of September 30, 2023

 
  

Amortized Cost

  

Unrealized Gains

  

Unrealized Losses

  

Estimated Fair Value

 

Short-term investments:

                

Corporate bonds

 $11,310  $  $(15) $11,295 

U.S. treasury securities and securities of U.S. government-sponsored agency

  3,622   4      3,626 

Total

 $14,932  $4  $(15) $14,921 

 

 

 

The Company had no securities in a material unrealized loss position at  March 31, 2024 and  September 30, 2023 and does not believe these securities represent credit losses based on the evaluation of evidence, which includes an assessment of whether it is more likely than not it will be required to sell or intend to sell the investment before recovery of the investments amortized cost basis. No gains or losses were realized during the six months ended March 31, 2024 and 2023 from the sale of short-term investments. 

 

 

4. Fair Value of Financial Instruments

 

The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and notes receivable and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts and notes 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 and contingent consideration by valuation hierarchy and input (in thousands):

 

 

  

As of March 31, 2024

 
  

Quoted Prices in

  

Significant

         
  

Active Markets for

  

Other

  

Significant

     
  

Identical Assets

  

Observable

  

Unobservable

     
  

(Level 1)

  

(Level 2)

  

(Level 3)

  

Totals

 

Short-term investments:

                

Corporate bonds

 $  $21,923  $  $21,923 

U.S. treasury securities and securities of U.S. government-sponsored agency

      8,525       8,525 

Total assets

 $  $30,448  $  $30,448 

 

 

 

 

 

 

  

As of September 30, 2023

 
  

Quoted Prices in

  

Significant

         
  

Active Markets for

  

Other

  

Significant

     
  

Identical Assets

  

Observable

  

Unobservable

     
  

(Level 1)

  

(Level 2)

  

(Level 3)

  

Totals

 

Short-term investments:

                

Corporate bonds

 $  $11,295  $  $11,295 

U.S. treasury securities and securities of U.S. government-sponsored agency

     3,626      3,626 

Total assets

 $  $14,921  $  $14,921 

 
 

 

5. Trade Accounts and Notes Receivable

 

Trade accounts receivable, net (excluding notes receivable) are reflected in the following table (in thousands):

 

  

March 31, 2024

  

September 30, 2023

 

Trade accounts receivable

 $16,907  $20,282 

Allowance for credit losses

  (67)  (125)

Total

  16,840   20,157 

Less current portion

  (15,330)  (20,157)

Non-current trade accounts receivable

 $1,510  $ 

 

Trade accounts receivable at  March 31, 2024 included $1.5 million classified as non-current which is due in December 2025.  Credit quality indicators used for the non-current portion of this receivable consisted of historical collection experience, internal credit risk grades and collateral.  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

  

Six Months Ended

 
  

March 31, 2024

  

March 31, 2023

  

March 31, 2024

  

March 31, 2023

 

Allowance for credit losses:

                

Beginning of period

  92   689   125   591 

Provision for credit losses

  12   98   55   384 

Recoveries

  (34)  (81)  (106)  (247)

Write-offs

        (7)  (6)

Currency translation

  (3)        (16)

End of period

 $67  $706  $67  $706 

 

The Company had one note receivable from a customer at September 30, 2023 with a balance of $1.2 million, which was paid in January 2024.

 

 

6. Inventories

                                                                                                                                                                                                                                                                              

Inventories consist of the following (in thousands):

 

  

March 31, 2024

  

September 30, 2023

 

Finished goods

 $19,078  $18,555 

Work in process

  6,089   11,992 

Raw materials

  26,165   26,832 

Obsolescence reserve (net realizable value adjustment)

  (9,259)  (14,061)
   42,073   43,318 

Less current portion

  23,932   18,430 

Non-current portion

 $18,141  $24,888 

 

Inventory obsolescence expense for the three and six months ended March 31, 2024 was $0.1 million and $0.1 million, respectively.  Inventory obsolescence expense for the three and six months ended March 31, 2023 was $0.5 million and $1.8 million, respectively.  Raw materials include semi-finished goods and component parts that totaled approximately $8.1 million and $10.6 million at March 31, 2024 and September 30, 2023, respectively. 

 

10

 

 

 

7. Rental Equipment

 

The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to one year. All of the Company’s current leasing arrangements, which the Company acts as lessor, are classified as operating leases. 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 March 31, 2024, the Company’s trade accounts receivables included lease receivables of $2.8 million.

 

Rental revenue related to leased equipment for the three and six months ended March 31, 2024 was $4.7 million and $10.9 million, respectively. Rental revenue related to leased equipment for the three and six months ended March 31, 2023 was $13.6 million and $25.1 million, respectively.

 

Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of  March 31, 2024 were $4.9 million, all of which is expected to be due within the next 12 months.

 

Rental equipment consisted of the following (in thousands):

 

  

March 31, 2024

  

September 30, 2023

 

Rental equipment, primarily wireless recording equipment

 $76,909  $82,926 

Accumulated depreciation

  (61,832)  (61,339)
  $15,077  $21,587 

 

 

 

 

8. Long-Term Debt

 

The Company had no long-term debt outstanding at March 31, 2024 and September 30, 2023.

 

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 $15 million.  Availability under the Agreement is determined based upon a borrowing base comprised of certain of the Company’s domestic assets which include (i) 80% of eligible accounts, 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.  The Company is required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of the Company's assets, except for certain excluded property. The Agreement requires the Company 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 the Company 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.  At March 31, 2024 the Company's borrowing availability under the Agreement was $11.3 million after consideration of a $0.1 million outstanding letter of credit. At March 31, 2024, the Company was in compliance with all covenants under the Agreement.  The Company had no borrowings outstanding under the Agreement at March 31, 2024 and September 30, 2023.

 

 

 

9. Stock-Based Compensation

 

During the six months ended March 31, 2024, the Company issued 213,200 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as amended. The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of each RSU was $12.23 per unit. The grant date fair value of the RSUs was $2.6 million, which will be charged to expense over the next four years as the restrictions lapse. Compensation expense for the RSUs was determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of units that are anticipated to fully vest. Each RSU represents a contingent right to receive one share of the Company’s common stock upon vesting.

 

As of March 31, 2024, there were 400,020 RSUs outstanding. As of March 31, 2024, the Company had unrecognized compensation expense of $2.9 million relating to RSUs that is expected to be recognized over a weighted average period of 2.8 years.

 

11

  
 

10. Earnings (Loss) Per Common Share

 

The following table summarizes the calculation of net earnings (loss) and weighted average common shares and common equivalent shares outstanding for purposes of the computation of earnings (loss) per share (in thousands, except share and per share data):

 

  

Three Months Ended

  

Six Months Ended

 
  

March 31, 2024

  

March 31, 2023

  

March 31, 2024

  

March 31, 2023

 

Net income (loss)

 $(4,327) $4,637  $8,352  $4,540 

Less: Income allocable to unvested restricted stock

            

Income (loss) attributable to common shareholders for diluted earnings (loss) per share

 $(4,327) $4,637  $8,352  $4,540 

Weighted average number of common share equivalents:

                

Common shares used in basic earnings (loss) per share

  13,343,793   13,156,715   13,297,324   13,111,866 

Common share equivalents outstanding related to RSUs

        174,451    

Total weighted average common shares and common share equivalents used in diluted earnings (loss) per share

  13,343,793   13,156,715   13,471,775   13,111,866 

Earnings (loss) per share:

                

Basic

 $(0.32) $0.35  $0.63  $0.35 

Diluted

 $(0.32) $0.35  $0.62  $0.35 

 

           For the calculation of diluted earnings (loss) per share for the three months ended March 31, 2024 and 2023, there were 400,020 and 394,924 non-vested RSUs, respectively, excluded from the calculation of weighted average shares outstanding since their impact on diluted earnings (loss) per share were antidilutive. For the calculation of diluted earnings per share for the six months ended March 31, 2024 and 2023, there were 225,569 and 394,924 non-vested RSUs, respectively, excluded from the calculation of weighted average shares outstanding since their impact on diluted earnings per share were antidilutive.

 

 

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 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 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, if any, will be recorded as compensation expense when incurred.  No eligible revenue has been generated to date.

 

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 not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

 

12. Segment Information

 

The Company reports and evaluates financial information for three operating business segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. The Oil and Gas Markets 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. The Adjacent Markets segment's products include imaging equipment, water meter products, remote shut-off valves and Internet of Things (IoT) platform, as well as and seismic sensors used for vibration monitoring and geotechnical applications such as mine safety applications and earthquake detection. The Emerging Markets segment designs and markets seismic products targeted at the border and perimeter security markets.

 

The following table summarizes the Company’s segment information (in thousands):

 

  

Three Months Ended

  

Six Months Ended

 
  

March 31, 2024

  

March 31, 2023

  

March 31, 2024

  

March 31, 2023

 

Revenue:

                

Oil and Gas Markets

 $10,847  $18,419  $50,756  $38,567 

Adjacent Markets

  12,235   12,708   22,050   23,530 

Emerging Markets

  1,113   191   1,347   284 

Corporate

  75   52   149   98 

Total

 $24,270  $31,370  $74,302  $62,479 
                 

Income (loss) from operations:

                

Oil and Gas Markets

 $(3,135) $4,176  $11,428  $6,582 

Adjacent Markets

  2,796   3,055   4,830   4,802 

Emerging Markets

  (651)  (1,007)  (1,276)  (2,220)

Corporate

  (3,516)  (1,847)  (6,651)  (5,066)

Total

 $(4,506) $4,377  $8,331  $4,098 
  
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13. Income Taxes

 

Consolidated income tax expense for the three and six months ended March 31, 2024 was $11,000 and $111,000, respectively.  Consolidated income tax expense for the three and six months ended March 31, 2023 was $19,000 and $49,000, respectively.  The primary difference between the Company's effective tax rate and the statutory rate is adjustments to the valuation allowance against deferred tax assets.

 

 

14. Risks and Uncertainties

 

Concentration of Credit Risk

 

As of March 31, 2024, the Company had combined trade accounts receivable from two customers of $4.0 million and $2.2 million, respectively.  During the three months ended March 31, 2024, revenue recognized from these two customers was $2.3 million and $3.2 million, respectively. During the six months ended March 31, 2024 revenue recognized from these two customers was $33.7 million and $6.7 million, respectively.

 

COVID-19 Pandemic

 

The ongoing COVID-19 pandemic has negatively impacted worldwide economic activity and continues to create challenges in the Company’s markets. The COVID-19 pandemic and the related mitigation measures have disrupted the Company’s supply chain, resulting in longer lead times in materials available from suppliers and extended the shipping time for these materials to reach the Company’s facilities. The occurrence or a resurgence of global or regional health events such as the COVID–19 pandemic, and the related government responses, could result in a material adverse effect on the Company's business, financial condition, results of operations and liquidity.  As such, we continue to closely monitor COVID-19 and will continue to reassess our strategy and operational structure on a regular, ongoing basis.

 

Oil Commodity Price Levels

 

Demand for many of the Company’s products and the profitability of its operations depend primarily on the level of worldwide oil and gas exploration activity. Prevailing oil and gas prices, with an emphasis on crude oil prices, and market expectations regarding potential changes in such prices significantly affect the level of worldwide oil and gas exploration activity. During periods of improved energy commodity prices, the capital spending budgets of oil and natural gas operators tend to expand, which results in increased demand for our customers services leading to increased demand in the Company’s products. Conversely, in periods when these energy commodity prices deteriorate, capital spending budgets of oil and natural gas operators tend to contract causing demand for the Company’s products to weaken. Historically, the markets for oil and gas have been volatile and are subject to wide fluctuations in response to changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors that are beyond its control. These factors include the level of consumer demand, regional and international economic conditions, weather conditions, domestic and foreign governmental regulations (including those related to climate change), price and availability of alternative fuels, political conditions, the war between Russia and Ukraine, instability and hostilities in the Middle East and other significant oil-producing regions, increases and decreases in the supply of oil and gas, the effect of worldwide energy conservation measures and the ability of the Organization of Petroleum Exporting Countries ("OPEC') to set and maintain production levels and prices of foreign imports.

 

Crude oil prices have stabilized over the past 18 months, which may result in higher cash flows for exploration and production companies. Any material changes in oil and gas prices or other market trends, like slowing growth of the global economy, could adversely impact seismic exploration activity and would likely affect the demand for the Company's products and could materially and adversely affect its results of operations and liquidity.

 

Generally, imbalances in the supply and demand for oil and gas will affect oil and gas prices and, in such circumstances, demand for the Company’s oil and gas products may be adversely affected when world supplies exceed demand.

 

13

 

Armed Conflict Between Russia and Ukraine

 

A portion of the Company's oil and gas product manufacturing is conducted through its wholly-owned subsidiary Geospace Technologies Eurasia LLC ("GTE"), which is based in the Russian Federation. In February 2022, the Russian Federation launched a full-scale military invasion of Ukraine, and Russia and Ukraine continue to engage in active and armed conflict. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions in addition to any direct impact on the Company's operations in Russia. As a result of the invasion, the governments of several western nations, including the U.S., Canada, the United Kingdom and the European Union, implemented new and/or expanded economic sanctions and export restrictions against Russia, Russian-backed separatist regions in Ukraine, certain banks, companies, government officials, and other individuals in Russia and Belarus. The implementation of these sanctions and exports restrictions, in combination with the withdrawal of numerous private companies from the Russian market, has had, and is likely to continue to have, a negative impact on the Company's business in the region. During fiscal year 2023 the Company imported $3.8 million of products from GTE for resale elsewhere in the world and since then has imported $1.7 million of products during the first six months of fiscal year 2024. The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to material delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment. If imports of these products from the Russian Federation are restricted by government regulation, the Company may be forced to find other sources for the manufacturing of these products at potentially higher costs. Likewise, restrictions on the Company's ability to send products to GTE, may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher costs.  However, the Company's exports to GTE have historically been limited. Boycotts, protests, unfavorable regulations, additional governmental sanctions and other actions in the region could also adversely affect the Company's ability to operate profitably. Delays in obtaining governmental approvals can affect the Company's ability to timely deliver its products pursuant to contractual obligations, which could result in the Company being liable to its customers for damages. The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect the Company's operations and earnings. It is possible that increasing sanctions, export controls, restrictions on access to financial institutions, supply and transportation challenges, or other circumstances or considerations could necessitate a reduction, or even discontinuation, of operations by GTE or other business in Russia.

 

The Company is actively monitoring the situation in Ukraine and Russia and assessing its impact on its business, including GTE. The net carrying value of GTE on the Company's consolidated balance sheet at March 31, 2024 was $5.5 million, including cash of $2.0 million. In response to sanctions imposed by the U.S. and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but we may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition to the products the Company imported from GTE, the subsidiary generated $1.8 million in revenue from domestic sales in fiscal year 2023 and has generated $1.5 million from domestic sales during the first six months of fiscal year 2024. The Company has no way to predict the duration, progress or outcome of the military conflict in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the Company's business for an unknown period of time.

 

14

 

 

Item 2. Managements 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, 2023.        

 

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 and the recovery from the impact of the coronavirus (or COVID-19) pandemic, 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, 2023, 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 continued adverse impact of COVID-19 which could reduce demand for our products, 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, bad debt write-offs associated with customer accounts, inability to collect on promissory notes, 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.

 

Business Overview

 

Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries. We principally design and manufacture seismic instruments and equipment. These seismic products are marketed to the oil and gas 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 products, imaging equipment, remote shutoff water valves and Internet of Things ("IoT") platform and provide contract manufacturing services. We report and categorize our customers and products into three different segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. In recent years, the revenue contribution from our Adjacent Markets segment has grown to represent nearly half of our total revenue, which is reflective of our diversification strategy.

 

Demand for our seismic products targeted at customers in our Oil and Gas Markets 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” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

 

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.

 

Products and Product Development

 

Oil and Gas Markets

 

Our Oil and Gas Markets 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. We believe that our Oil and Gas Markets products are among the most technologically advanced instruments and equipment available for seismic data acquisition.

 

Traditional Products

 

An energy source and a data recording system are combined to acquire seismic data. We provide many of the components of seismic data recording systems, including geophones, hydrophones, multi-component sensors, leader wire, geophone strings, connectors, seismic telemetry cables and other seismic related products. On land, our customers use geophones, leader wire, cables and connectors to receive and measure seismic reflections resulting from an energy source into data recording units, which store the seismic information for subsequent processing and analysis. In the marine environment, large ocean-going vessels tow long seismic cables known as “streamers” containing hydrophones that are used to detect pressure changes. Hydrophones transmit electrical impulses back to the vessel’s data recording unit where the seismic data is stored for subsequent processing and analysis. Our marine seismic products also help steer streamers while being towed and help recover streamers if they become disconnected from the vessel.

 

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.

 

Wireless Products

 

We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system. Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each of our wireless stations operate as an independent data collection system, allowing for virtually unlimited channel configurations. As a result, our wireless systems require less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight and ease of operation. Each wireless station is available in a single-channel or three-channel configuration.

 

We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner™.  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. We have two versions of OBX nodal stations: a shallow water version that can be used in depths up to 750 meters and a deepwater version that can be deployed in depths of up to 3,450 meters.  Through March 31, 2024, we have sold 14,000 OBX stations and we currently have 24,000 OBX stations in our rental fleet.  The Mariner™ is a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder.  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.  Through March 31, 2024, we have sold 7,600 Mariner™ nodes.

 

Reservoir Products

 

Seismic surveys repeated over selected time intervals show dynamic changes within a producing oil and gas reservoir, and operators can use these surveys to monitor the effects of oil and gas development and production. This type of reservoir monitoring requires special purpose or custom designed systems in which portability becomes less critical and functional reliability assumes greater importance. This reliability factor helps assure successful operations in inaccessible locations over a considerable period of time. Additionally, reservoirs located in deep water or harsh environments require special instrumentation and new techniques to maximize recovery. Reservoir monitoring also requires high-bandwidth, high-resolution seismic data for engineering project planning and reservoir management. Utilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

 

We have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields. Our electrical reservoir monitoring systems are currently installed on numerous offshore reservoirs in the North Sea and elsewhere. Through our acquisition of the OptoSeis® fiber optic sensing technology, we now offer both electrical and fiber optic reservoir monitoring systems. These high-definition seismic data acquisition systems have a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects. The scalable architecture of these systems enables custom designed configuration for applications ranging from low-channel engineering and environmental-scale surveys requiring a minimum number of recording channels to high-channel surveys required to efficiently conduct permanent reservoir monitoring (“PRM”). The modular architecture of these products allows virtually unlimited channel expansion for these systems.

 

In the spring of 2023, we released 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.

 

In addition, we 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.

 

We believe our reservoir characterization products make seismic acquisition a cost-effective and reliable process for reservoir monitoring. Our multi-component seismic product developments also include an omni-directional geophone for use in reservoir monitoring, a compact marine three-component or four-component gimbaled sensor and special-purpose connectors, connector arrays and cases.

 

We have maintained active discussions with potential clients for future PRM systems. During 2022, in coordination with a potential client, we concluded a successful demonstration of our OptoSeis® fiber optic PRM technology in real-world field conditions. This demonstration was a pre-re