# Dear Fellow Shareholder

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NASDAQ_GEOS_2017/NASDAQ_GEOS_2017.mmd` · pages 2-8_

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Dear Fellow Shareholder:

In the fiscal year ended September 30, 2017, our revenues were \(73.7 million and we incurred a net loss of \)56.8 million, or \(4.32 per diluted share. This compares with revenues of \)62.1 million and a net loss of \(46.0 million, or \)3.52 per diluted share, in the prior fiscal year.

Seismic product revenues increased 39% during the year, largely due to sales from our rental fleet. The seismic market, however, remained depressed as oil companies continued adopting a "lower, longer" belief and committing their limited capital to unconventional oil plays and enhanced production operations.

Amidst acceptance that commodity price increases may be pushed out – possibly for years – many oil & gas exploration and geophysical contracting companies continued to struggle with debt and deteriorating cash positions. As a result, demand for seismic equipment continued to be severely constrained. Conversely, the supply side of equipment has never seen so many new competitors. We believe none of them offer the breadth of capabilities and features that our field-proven equipment does, but even such lesser performing products offered at reduced price points can prove compelling to a cash-strapped industry.

Meanwhile, we continue to improve our products in ways that our customers believe offer considerable feature-rich flexibility and power they can utilize when they are once again ready and able to invest in new equipment. This year we will also be restoring our depleted rental fleet. Along with producing significant revenue, it has served our customers well when their needs for equipment have exceeded their ability to make capital commitments. Unfortunately, we do not see the permanent reservoir monitoring (PRM) segment of our market as a major revenue contributor in the coming year. As a result, we have correspondingly levied impairments and obsolescence reserves against a significant portion of our PRM manufacturing machinery and inventories. We nonetheless believe that the PRM segment continues to pose vital opportunities in our long-term future.

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Revenues from our non-seismic product lines declined slightly this year, largely due to the timing of product distribution in certain industry facets. Despite this decrease, we expect our non-seismic product markets to modestly strengthen in the coming year.

While seismic market conditions have certainly impeded our progress, we have not been standing idle. We continue to pursue avenues that can lead to increased revenues from our non-seismic business segment through complementary manufacturing opportunities in relevant industries where our leveraged capabilities will yield a significant advantage. We have also been designing innovative ways to further penetrate our existing seismic markets.

In addition, last year we spent considerable time re-envisioning our manufacturing processes. Today, Geospace is on its way to achieving process improvements and efficiencies with new equipment and modernized methodology that were previously unimagined. With the benefits of these changes, we will continue rethinking and retooling our manufacturing operations.

Our financial strength has been our fortress during the past few years of poor market conditions. Our conservative strategy has left us debt free in addition to owning all of our property and equipment outright and unencumbered. As we enter fiscal year 2018, we will continue to exercise fiscal discipline, implementing additional cost control initiatives as appropriate. It is our intention to return to days of financial prosperity while maintaining our core competencies and capabilities. We will continue our efforts to strengthen our profitable product lines and increase sales in our non-seismic markets. As a part of this, we will also further explore new avenues of products and manufacturing in complementary industries.

Geospace has always tried to maximize the use of its manufacturing capabilities, and while this downturn is seriously testing us, we continue to seek ways to leverage our core strengths while maintaining our financial flexibility. It is in this way that we can return to increasing shareholder value in the manner you and we have come to expect.

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Rick Wheeler

President & Chief Executive Officer