MIND Technology, Inc.

Greetings. Welcome to Mind Technology's second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan. Thank you, Mr. Vaughan. You may begin. Thank you.

Thank you, Operator. Good morning and welcome to Mind Technologies Fiscal 2026 Second Quarter Earnings Conference Call. We appreciate all of you joining us today. With me are Rob Capps, President and Chief Executive Officer, and Mark Cox, Vice President and Chief Financial Officer. Before I turn the call over to Rob, I have a few items to cover. If you would like to listen to a replay of today's call, it will be available for 90 days via webcast by going to the Investor Relations section of the company's website, mind-technology.com or via a recorded instant replay until September 17th. Information on how to access the replay was provided in yesterday's earnings release. Information reported on this call speaks only as of today, Wednesday, September 10th, 2025, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties, and other factors, many of which the company is unable to predict or control, that may cause the company's actual future financial results or performance to materially differ from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the company from time to time in its filings with the SEC, including in its annual report on Form 10-K for the year ended January 31st, 2025. Furthermore, as we start this call, please also refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday, and please note that the contents of our conference call this morning are covered by these statements. Now, I'd like to turn the call over to Rob Capps.

Rob Capps Thank you, Zach, and thank you all for joining us today. Today, I'll discuss some highlights from the quarter. Mark will then provide a more detailed update on our financials, and I'll return to wrap things up with some remarks about our outlook. Line delivered strong results for the second quarter that were in line with our expectations. We were able to get back on track and return our profitability after certain delivery delays in the first quarter. We generated increased second quarter CMAP revenues driven by system sales and the growing contributions from our aftermarket activities, which I'll touch on in more detail shortly. Our business continues to operate efficiently, and our execution is generating resilient results. Despite some economic uncertainty, we are finding ways to capitalize on pockets of demand, and our near-term visibility bodes well for the balance of this fiscal year. Mine remains strategically positioned for growth, favorable financial results, and continued profitability in coming periods. Our backlog of firm orders as of July 31, 2025, was approximately $12.8 million. compared to 21.1 million as of April 30, 2025, and approximately 26 million as of July 31, 2024. Now, I'll remind you that it's not uncommon to see pauses in order activity throughout the year, especially during the summer months, and more specifically, our second quarter. Therefore, this lower sequential backlog is not unexpected after the substantial deliveries we made this quarter. Let me also remind you that for an order to be included in our backlog, We must have a purchase order or signed contract in hand. There are a number of pending orders in various stages that we are highly confident in. Let me give you a little color on that. There are two orders in particular, totaling about $10 million that we believe are imminent. We've been in almost constant contact with this customer, finalizing technical specifications, which is necessary before the formal purchase orders are issued. These orders are not in our backlog, but we are highly confident that they will be received soon. Our pipeline of potential orders remains strong. We believe we will continue to convert these into firm orders. Within our backlog, our orders reminds three main product lines, Finlink Source Controllers, Vuelink Positioning Systems, and C-Link Streamer Systems. All three of these product lines provide the foundation for our business and will continue to drive our financial results going forward. As a whole, our CMAP business continues to enjoy a strong market position in each of its products even a dominant position in some cases. As I mentioned earlier, another component that has meaningfully contributed to our improved financial results is our aftermarket business. This consists of spare parts, repairs, service, and other support activities. Contribution as a percentage of revenue fluctuates from quarter to quarter based on product mix and the timing of larger system deliveries. However, in the first six months of this fiscal year, aftermarket revenue accounted for about 68% of our total revenues. I'm pleased that our aftermarket activity has continued to meaningfully support revenue. Additionally, this often carries higher margins since these orders normally do not attract discounts and find a full system order. As our installed base of semi-products continues to expand, with it comes the prospect for increased aftermarket activity. To address this growing aftermarket opportunity, and as I highlighted last quarter, We recently expanded our manufacturing and repair facility in Huntsville, Texas. This expansion provides us with additional floor space and other enhancements that will allow our mine maritime acoustics unit to efficiently take on significantly larger manufacturing and product repair projects from that location. This increased capacity will be used to further support our existing CMAP products, newly developed products, and services to third parties. I'll turn it to our results. Marine Technology product revenues for the second quarter of fiscal 2026 were 13.6 million. This was a healthy improvement from the same quarter last year. And despite the noise from the first quarter, we remain on track to achieve our fiscal 2026 goals. I'll touch on our outlook in a moment, but I'm pleased with our ability to navigate uncertainty within the market to generate favorable results. We will continue to capitalize on opportunity as it presents itself to stimulate order flow and generate improved returns in future periods. Although we are pleased with our results for the second quarter and maintain our near-term optimism, the current market and global economic environment remain impacted by various macro uncertainties that are limiting visibility into next year. General market conditions within the marine technology space continue to be good. However, at this stage, some customers are taking a more wait-and-see approach. This has caused some delays in purchase commitments. Despite this limited visibility, we remain encouraged by the favorable long-term market dynamics within the marine technology industry and expect customers to firm up their Helder 2026 plans in the coming months. I continue to believe that we have a differentiated approach and best-in-class suite of products that will give us a competitive advantage. To maintain this competitive edge, we will continue making additional investments to further develop and advance our next generation of marine technology products to meet the evolving needs of our customers. Now, I'll let Mark walk you through our second quarter financial results in a bit more detail.

Thanks, Rob, and good morning, everyone. As Rob mentioned earlier, revenues from marine technology product sales totaled $13.6 million for the quarter. which was up approximately 35% from the same period a year ago. We're continuing to see strength in all our key markets in the current favorable customer demand environment, and our backlog give us confidence for solid results in the second half of fiscal 2026. Second quarter gross profit was 6.8 million. This represents a gross profit margin of 50% for the quarter. These metrics improved both sequentially and year-over-year due primarily to product mix, which included a greater proportion of spare parts and other aftermarket activity. Additionally, higher revenue in the quarter helped absorb overhead costs. We also continue to benefit from our cost structure optimization, which includes greater production efficiencies, and we expect these efforts to help maintain favorable gross profit and margins in future quarters. Our general and administrative expenses were approximately $3.6 million for the second quarter of fiscal 2026. This was up both sequentially and compared to the same quarter a year ago. The sequential increase is partially expected due to normal seasonality of certain costs, such as incentive and stock-based compensation. Our research and development expense for the second quarter was $311,000. which was down slightly compared to the same quarter a year ago. Consistent with prior periods, these costs were largely directed toward the development and enhancement of our streamer and source controller off. Operating income for the second quarter was approximately $2.7 million, which represents an increase of approximately 86% when compared to operating income of $1.4 million in the same quarter a year ago. Second quarter adjusted EBITDA was approximately 3.1 million compared to adjusted EBITDA of 1.8 million in the second quarter a year ago. Net income for the second quarter was approximately 1.9 million compared to net income of 798,000 in the same quarter a year ago. As of July 31st, 2025, we had working capital of approximately 25.1 million including $7.8 million of cash on hand. Equity is impacted by the timing of receipts and expenditures, as well as our operational requirements, such as acquiring inventory and executing on our backlog of orders. The company continues to maintain a clean, debt-free balance sheet with a simplified capital structure. We continue to believe our solid footing and flexibility will help us enhance stockholder value in future periods. I'll now pass it back over to Rob for some concluding comments.

Thanks, Mark. MIND remains well positioned for long-term success, and we are focused on enhancing and maximizing stockholder value. We've taken necessary steps to strategically position the company to realize its full potential. We intend to evaluate all suitable opportunities with the goal of maintaining financial flexibility, preserving our balance sheet, adding scale, expanding offerings, and growing existing product lines. This proactive approach should enable us to strengthen mind and improve its standing within the market for the benefit of all stockholders. Operationally, we have a streamlined footprint, but our technological innovation allows us to expand our capabilities and address new opportunities. We're constantly evaluating unique ways to repurpose our existing technology for new applications. I'm excited to chase these new opportunities in coming periods. We look forward to providing an update as we strive for growth. Given our current visibility, we remain bullish on the balance of this fiscal year. Customer interest and engagement related to our CMAP product lines remain steady. However, the prevalent uncertainty within the market has slowed some customer decision-making for the next year. Despite this, The current strength of our existing backlog and pipeline of orders gives us optimism with favorable financial performance in the coming quarters. We expect customers to solidify their plans for next year in the coming months, and I look forward to sharing updates as our longer-term pipeline takes shape. Now, let me take a moment to address our recent actions to establish an at-the-market, or ATM, program and a stock buyback program. I know some of you have questioned these steps, or at least the timing of the steps. We believe that these preparatory actions are entirely consistent with and supportive of our stated objective of enhancing stockholder value by whatever means available. The ATM facility enables us to raise capital if and when we believe circumstances dictate and in amounts we think appropriate. By having the program in place in advance, we can act quickly and efficiently to take advantage of opportunities. These opportunities could include acquisitions of businesses or product lines to help grow our business. We intend to be very disciplined in our approach to this, weighing the expected return with the cost of capital. The cost of additional capital, essentially the price of our stock at the time, will always be an important consideration. Conversely, market conditions and our view of the prospects for our business might indicate that buying our own stock is the best use for our capital. By establishing the buyback program now, We are able to react quickly and efficiently should circumstances dictate. There's always a chance that timing issues or customer delivery delays, like the ones we experienced earlier this year, could impact our results in any given period. However, our current belief is that our results for fiscal 2026 will look similar to that of fiscal 2025. Our marine technology products continue to penetrate a variety of industries and markets. We believe our backlog of firm orders and the pipeline of pending orders and other prospects are reflective of the significant demand and market adoption of our product lines. As a result, we have line of sight that gives us confidence for continued favorable financial results in the near future. Or in any unforeseen circumstances, we expect to achieve positive adjusted EBITDA and profitability in each of the remaining quarters of fiscal 2026 and on a full year basis. Looking forward, we are encouraged by the setup for the back half of this year with a solid existing backlog and pipeline of pending and highly competent orders that will prove advantageous as we aim to deliver consistently favorable financial results. We are also pursuing several new opportunities within our current and future markets, which I'm confident will bear fruit. We will remain focused on controlling what we can control, which includes optimizing our operations and efficiently managing our cost. Customer delivery requirements and other factors may impact future periods, but we are doing everything in our power to mitigate these impacts on our financial results. We have a differentiated and market-leading suite of products, a favorable market environment, and a clean capital structure. I look forward to sharing updates on our strategic actions in the coming periods as we strive to enhance stockholder value. With that, operator, I think we can now open the call up for some questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For a participant choosing speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Tyson Bauer with Casey Capital. Please proceed.

Good morning, gentlemen. Just a couple of clarifications on some of the numbers. The Parks and Services revenue, given your 68% for the full year, so that was roughly about $7 million in the quarter?

That's probably about right. I don't have the number in front of me, but that's in the ballpark anyway.

That's how the math works. Does that include any catch-up from Huntsville where you had kind of the delays until you got that capital project done? Or is that $7 million from what we've seen in the first quarter, second quarter, a fairly good run rate as we go through the second half of the year?

Yeah, so there's really no catch-up from Huntsville. First answer. Run rate, I'm hesitant to say that's a run rate. I think it's indicative of where that trend is going. Could it be less next quarter? Sure it could, because there will still be some fluctuations in that. But clearly that line is trending up, and it's going to be more consistent as we go forward.

And should we see a boost given the expansion in Huntsville at some point going forward?

I think we will. We'll be ramping up that operation to the balance of this year and into next year. So I think we'll see that start to increase.

Okay. You had a $4.5 million delayed order in Q1 that hit in Q2. At least that was what was relayed to us on the last conference call. Given the $7 million, that leaves about $2 million of new activity in the quarter to hit your revenue level. which I find interesting with your backlog because you ended April with $21.1 million. You had a $4 million order on June 10th, a gun link system. So if you deliver that $4.5 million, you had $2 million in new activity. Backlog looks like it should be closer to $18 million, ended up $12.8 million. Were there a cancellation? Was there a reclassification? Just kind of where's that variance of $6 million?

So a couple of things. There's no cancellations for sure. Some of the aftermarket business will be in backlog. So we'll get an order for spare parts that will be in backlog at some point in time. So that's part of it. And I'm not sure that $7 million is exactly the number for the quarter. Again, I don't have that in front of me. So I think a combination of those things make up that difference.

Okay. As we go forward, you made the comment that fiscal 26 should – be now similar to fiscal 25, which is a little different. We're almost like the Fed speak here. Previously you said fiscal 25, so you have a little bit of an adjustment there. The implication is with your expectation of parts and services, that's about one, you know, basically two or three more full systems delivered before year end to hit those numbers. Does that sound about right? And if we're going to get $10 million immediately on new orders, it almost seems like we need to get another $10 million just to feel comfortable that that's achievable for the second half of the year.

Yeah, so it ties into the time into some of these orders is when we'll get them out the door is time. There's some uncertainty there, of course, as when we actually get some of the new orders, so when we'll actually be able to deliver them or when they want to be delivered. You know, we do have additional systems in the pipeline, including the two orders that we talked about specifically. So that's what we're trying to guide to. I think it's not too inconsistent with what we said before. I mean, I think what we said before was, you know, we're going to be in the same ballpark. I think what I try to guide to is Don't expect the same sort of growth in this fiscal year as you saw before. It's going to be a little more consistent. I think we're still seeing that. Could there be a $2 or $3 million swing, a $4 million swing between quarters because of delivery? You bet there could be, as we saw in the first quarter. But I think our general view of the year is pretty consistent as it has been all along.

Okay. This is the time of the year where you typically have received a large annual order from our Scandinavian friends, companies over there. Are they still in that time schedule or are they cautious also?

I think there is some cautiousness in the marketplace. There has been some softening in the seismic market at least, at least temporarily. So I think there's some some caution there. I think people are being careful about capex commitments right now. So I think, again, that's what we're trying to indicate. And the one reason I think we've seen, you know, the backlog down a bit from where it had been. But I think, again, the long-term prospects, the overall activity, offshore exploration is very bullish. So I think just a matter of timing from that standpoint. So, again, people are just being cautious about making those commitments until they, you know, they have their business in hand. That goes across the board. That's just not Scandinavia. That's across the board.

Okay. Last one for me, and I'll let others ask questions about your capital stuff. What we hear from the rhetoric from the administration, let's play a little what's real, what's just headlines. Moratorium on offshore wind projects, having an adverse look at wind energy, especially the offshore stuff. but wanting more rare earths and deep sea mapping, those kind of things, which we say may be off in the future or may be more of a commentary of what they want to do as opposed to what will be done. What's true, what's false between these headlines regarding those two things that do affect your business?

Wow, if I knew all those answers, I guess I wouldn't have to work for a living, Tyson. But I think what we're seeing is we're Remember, we're selling to people who do survey work. And that's all sorts of different kinds of survey work. It can be energy exploration. It can be wind farm installations. It can be carbon capture installations. It can be rare earth exploration. So they're doing lots of different things. And we don't always know what they're buying the equipment for. Sometimes you do based on configuration, but not always. Certainly there's been a slowdown in U.S. activity for offshore wind, no doubt about that. But we're seeing continued activity elsewhere in the world. So that's still been a good market for us. I think that's part of the cautiousness we see in the market right now is as to what is going to happen from a macro standpoint. You know, what's this administration going to do? So it's hard to know what's really going to happen there. I think a Certainly, though, has caused some of the caution that we're experiencing right now. But again, I think long term, I think those things will work themselves out and it's still very bullish.

Okay. Thank you, gentlemen.

Our next question is from Russ Taylor with ARS Investment Partners. Please proceed.

Thank you. First, great quarter. I will admit I was one of those people who was somewhat surprised. I think I've been in this business for a little over 40 years and I've never seen an ATM and a buyback announced on the same press release, but it's always good to learn. Along that line, I'd love for you to talk to me or us a little bit more about your acquisition strategy from what you've said and the like. What makes the most sense is you'd use the ATM if you were looking at, you had a very interesting acquisition that fell in What are you looking for? Are you looking for products that you see fit into your current structure? What would be additive? Also, what's your thinking on dilution and the like? You've talked a lot about wanting to do the right thing by shareholders and driving in concern about share price. I'm curious about, have you given thought about what parameters you would put on any acquisition you would make?

Yeah, so, Ross, what we're looking for primarily are things that are additive to what we do. Excuse me. We don't want to do a large step out and, frankly, do another climb. That's not what we're looking to do. What we want to do are things that are additive to what we're doing, things that we understand well operationally, so things that we can tuck in, not want to make a $30 million acquisition of another company necessarily, but things that... you know, tie into our customer base, the technologies that we know, so things that have a lower risk profile from that standpoint. You know, with any acquisition, there's risk, but the better you understand it, the closer it is to what you're doing, the lower that risk. So that's the sort of thing we're looking for.

Okay. So products or small divisions of other companies, things of that nature, is what you'd be looking to do?

Yes, that's the ideal situation for us.

Okay. Last quarter we talked about a deal with a company that, you know, innovative newcomer into the mapping space and the like. Has there been any progress with that?

There has. That project is ongoing right now, so we're right in the middle of it. I really don't have anything I could share right now for some proprietary reasons, but we are right in the middle of that right now. That is progressing well.

And what kind of opportunity do you think, if we come back, looking back a year in the future, two years or three years in the future, what kind of opportunity are you looking at for that?

In that deal specifically?

Yeah.

Yeah, again, I think I don't want to get too specific on that. I think, again, that is a product that would be used by our existing customer base. So it'd be easy for us to sell, you know, in partnership with the other company. So it's an easy step out for us. It's technology that's very familiar to us. Is it going to double the company? No. But is it additive, you know, can add a few million dollars? Yeah. That's that sort of magnitude, just to give you a sense of it. So, again, relatively low risk, relatively low investment at this point. So that's the ideal situation for us.

I might have missed it, but did you mention what cash was at the end of the quarter?

I did. It's about $7.2 million.

$7.2 million. Okay. Also, can you talk about the opportunity you've mentioned, and Tyson asked you about Huntsville. Can you talk about the opportunities? What is Huntsville going to do, and what kind of opportunities do you see coming out of it business-wise? Will this be something that's meaningful, meaningful, meaningful? Do you see it being able to add around 10% or more to annual revenues, or is it something less meaningful than that?

Well, I think it's in that magnitude, if not a little bit more, frankly. So what we are doing is we are repairing products that have been manufactured by others. So third-party products, we're doing some repair work and not just one customer. We are doing some ancillary work for CMAP of Singapore. There are some things that we can do here effectively or efficiently that help expand their capacity. So that's new products as well as some support activities as well. We also, in some cases, are doing some manufacturing for third parties of their designs. So it's not our IP, it's their IP that we're building for them. So it's really a combination of those things. The other thing that's interesting is if we're able to, you know, move our technology into the maritime security space, as we've talked about, and, again, that's still very early days there, being able to do that in the United States is a real plus for security reasons. So that's another reason we want to expand that stuff.

And also for tax and cash flow reasons then, right, as well, right?

Absolutely right. For cash flow, for sure. We don't have to bring money back from overseas. Obviously, we have tax law security for it. So if we can generate U.S. income, we can shelter that very efficiently. You're exactly right about that.

So that would be meaningful as well. With regard to your comments about this year, last year, last year, top line grew at about 29%. So far this year, it's been growing at about a 9% rate. listening to you and Tyson talk leaves me feeling that you're probably, you might not want to commit to it, but you're probably shooting for that kind of a continuation of the first half growth over year over year to see in the second half. It was something in that, you know, high single digits, low double digits type range. Am I wrong in that interpretation?

No, you're not wrong. I think the caution I'm trying to throw in here is, you know, Given what we saw in the first quarter, that situation can repeat itself, and that can have a big impact on that growth rate. So I think generally we're seeing those opportunities for that sort of maybe a single-digit, high single-digit growth rate. Will that all fall within this time period? That's more difficult to say with precision right now. So that's the reason I want everyone to be cautious.

Mm-hmm. Yeah, so it's lumpy, but the trends are there, and if it's not made, it's likely it's going to be seen in the backlog if you're not able to get it. Right. Okay. That's what we think, yeah. Okay, so basically we're looking at this thing so we can still trust Tyson and his numbers. Okay. Thank you.

Oh, my gosh, I'm a fan.

Yeah. I don't usually drink early in the morning, but sometimes I do. So, but yeah, it's great. Good job. I think, you know, you continue to push forward with it. Thank you for giving us some explanation on the overlapping ATM and share buyback. That did leave me somewhat scratching my rather thinning hair. But other than that, thank you. Keep it up. Okay. Thanks, Ross. Appreciate it.

This now concludes our question and answer session. I would like to turn the floor back over to Rob for closing comments.

Okay, thanks, everyone, for joining us today, and I look forward to getting with you again here in just a few months after we report our third quarter in early December. Thanks very much.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.