MIND Technology, Inc.

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 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.

Okay, thanks, Zach, and thank all of you 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. In my results in the third quarter, we're in line with our expectations. Although CMAP revenues moderated slightly from the strong second quarter, We believe we are positioned for a positive finish to fiscal 2026. We're also pleased to deliver another quarter of profitable results. We believe this demonstrates our consistent execution and the benefits of our cost structure optimization and production efficiencies. Our business continues to generate resilient results in an uncertain market, and we're finding ways to capitalize on pockets of demand. This bodes well for the balance of this fiscal year. The growing contributions from our aftermarket activities are also providing a stable and recurring revenue stream that is supporting our overall results. Now, this component of our business has become increasingly important. I'll touch on this in more detail shortly. Overall, mine remains positioned for growth, favorable financial results, and profitability in coming periods. Our backlog of firm orders as of October 31, 2025, was approximately 7.2 million. compared to $12.8 million as of July 31st, 2025, and approximately $26.2 million as of October 31st, 2024. However, subsequent to the end of the quarter, we received some long-anticipated orders totaling about $9.5 million. We expect these new orders to have a positive impact on our fourth quarter results. While it's not uncommon to see pauses in order activity throughout the year, we are finding that many customers, regardless of industry or end use, are taking a wait-and-see approach to larger system orders. Based on discussions with customers and industry commentary, we believe the long-term outlook in the seismic exploration industry is quite bullish. We think the recent lull in order activity is a temporary reaction to geopolitical and economic uncertainty. I think most industry observers would agree that the long-term outlook for marine exploration is very positive and an uptick in activity is inevitable. Now, 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. Our pipeline of potential orders remains solid. While some customers are delaying their commitments until they have a better visibility of geopolitical and economic factors, we believe we will continue to convert these opportunities into firm orders. Our backlog and pipeline of potential orders consists primarily of our three main product lines, GENLINK Source Controllers, moving positioning systems and sealing streamer systems. However, our backlog also contains some aftermarket orders. Together, these serve as a foundation for our business. As a whole, our cement business continues to enjoy strong market position, even a dominant position in some cases. We've worked hard to carve out a niche within the marine technology industry and have established strong relationships with our customers. We also pride ourselves in finding innovative ways to capture demand. As I mentioned earlier, our aftermarket business continues to serve as a meaningful contributor to our results. This aftermarket activity consists of spare parts, repairs, service, and other support activities. Now, while this activity is influenced to some degree by the general activity level within the industry, it is more recurring in nature than orders for new systems. Additionally, expenditures for aftermarket activity are generally operating costs as opposed to capital expenditures. Therefore, they come from a different budget bucket for our customers. As I noted, customers may be delaying their purchase decisions for new orders and systems. However, their existing equipment will need maintenance. Products that are currently deployed will need repair and service to keep operating. And mine has established itself as a company that can do this quickly, efficiently, and reliably. The contribution of this activity as a percentage of revenue fluctuates from quarter to quarter, based on product metrics and the timing of larger system deliveries. However, in the first time months of this fiscal year, aftermarket revenues accounted for about 64% of our total revenues. Margins for this business also tend to be better than larger system sales that might attract discounts. As our installed base of cement products continues to expand, with it comes the prospect for increased aftermarket activity. We continue to ramp up activity at our newly expanded Hessville facility. The additional floor space at this facility enables us to efficiently take on significantly larger manufacturing and product repair projects. This increased capacity will be used to further support our existing SEMA products, newly developed products, and services to third parties. Now turning to our results. Marine Technology product revenues for the third quarter of fiscal 2026 for $9.7 million. Although revenue was down slightly sequentially, we continue to be profitable and 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 resilient results. We will continue to capitalize on opportunity as it presents itself and stimulate order flow and generate sustainable results in future periods. I continue to believe that we have a differentiated approach and best-in-class switch of products that will give us competitive advantage. To maintain this 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, at this point, I'll let Mark walk you through our third quarter financial results in a bit more detail.

Thanks, Rob, and good morning, everyone. Revenues from marine technology product sales totaled $9.7 million for the quarter. Our existing backlog, contributions from our aftermarket business, and current visibility give us confidence that we will achieve improved results in the fourth quarter. Although customer decision-making has slowed, as Rob mentioned earlier, overall interest and engagement remains positive. Third quarter gross profit was $4.5 million. This represents a gross profit margin of 47% for the quarter compared to 45% for the same quarter a year ago. The year-over-year margin improvement was primarily attributable to product mix, which included a greater portion of spare parts and other aftermarket activity. 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 million for the third quarter of fiscal 2026. This was down sequentially, but up slightly compared to the same quarter a year ago, with a year-over-year increase primarily due to higher stock-based compensations. The research and development expense for the third quarter was $506,000, 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 systems and source controller offerings. Operating income for the third quarter was approximately $774,000 when compared to operating income of $1.9 million. in the same quarter a year ago. Third quarter adjusted EBITDA was approximately 1.3 million compared to adjusted EBITDA of 2 million in the third quarter of fiscal 2025. Net income for the third quarter was 62,000 compared to net income of 1.3 million in the same quarter a year ago. Our effective tax rate for the third quarter increased significantly both sequentially and year over year due to a combination of discrete tax expense items, primarily return to provision adjustments recorded by our Singapore entity, and the mix of net income generated in jurisdictions in which we record tax expense, mainly Singapore, and net losses incurred in jurisdictions in which we do not recognize a tax benefit due to valuation allowances on our deferred tax assets, mainly the U.S. and the United Kingdom. The impact of discrete tax items and unbenefited net losses on our effective tax rate is greater when our pre-tax income is lower. As of October 31st, 2025, we had significant working capital of approximately $35.8 million, including $19.4 million of cash on hand. Approximately $11 million of our cash at quarter end was provided by share issuances through our ATM program during the quarter. 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. Mine remains very well positioned for future success. Our prospects are plentiful. As we look at today, the long-term pipeline of opportunities continues to be very positive. That being said, our near-term visibility is a bit more limited than it has been in recent periods. As we've discussed, there is some current uncertainty in the market that has caused customers to delay purchase decisions and capital commitments. However, we view these as temporary positives. Commentary from numerous companies for marine exploration exposure have echoed this sentiment. For the most part, the effects on our business today have been minimal, and impacts to our backlog have been delayed relative to others. I personally believe that geopolitical risk is a major contributor to the prevalent uncertainty today. The global economic environment continues to evolve. Tariffs and conflicts are creating unease. There are still plenty of positive tailwinds for our business, and we expect this pause in order activity to be temporary and resolved in the coming months. I expect to have a clear picture of how fiscal 2027 will look on our next call. You know, it's times of uncertainty like this that serve as a great reminder of just how well positioned we are relative to previous cycles. We have a streamlined footprint, strong balance sheet, and simplified capital structure. We're operating lean and efficiently, and it really doesn't take much to move our needle in a positive direction. As one or two large orders materialize, we have a very different outlook. Our marine technology products continue to penetrate a variety of industries and in markets, and our pipeline of future opportunities remains robust. Additionally, our technological innovation allows us to expand our capabilities and address new opportunities. We're consistently evaluating unique ways to repurchase our efficient technology for new applications. We're also looking for ways to expand our product offerings. Given our current visibility, we expect to conclude fiscal 2026 on a positive note. We have line of sight to orders that we anticipate delivering before year-end, barring unforeseen circumstances. We expect improved financial results, which will continue our trend of profitability. There's always a chance that timing issues or customer delivery delays could impact future results. However, I continue to believe that our results for 2026 will look similar to fiscal 2025 and we expect to be profitable for fiscal 2026 as a whole. Going forward, as a part of our capital allocation strategy, we have several levers we can pull to add a greater scale, expand our offerings, and enhance value for our stockholders. These include mergers and acquisitions, investments in organic growth opportunities, such as expansion of our existing product lines, and strategic alliances with industry partners. We intend to be very disciplined in our approach to capital allocation, weighing the expected return with the cost of capital. Now let me take a moment to address the recent sales of stock through our ATM program that Mark mentioned. As a result of our proactive approach and strategic planning, we have the framework in place to quickly and efficiently strengthen our balance sheet and enhance the ability during the third quarter. Our stock price experienced a positive fluctuation we were given the opportunity to raise capital at levels that we deemed appropriate without negatively impacting our existing stockholders. In total, we raised approximately $11 million prior to quarter end. This additional liquidity gives us immense flexibility and opportunity. As a result, we have broadened our opportunity set as it pertains to acquisitions of businesses or product lines to help grow our existing business. We will continue to evaluate the potential impacts of any IETM activities in the future with the primary focus of preserving stockholder value for years to come. We remain committed to positioning mine for success and strengthening it for the future. We continue to evaluate all suitable opportunities with a goal of maintaining financial flexibility, preserving our balance sheet, adding scale, expanding our offerings, and growing existing product lines. All of these address our overall objective, increasing stockholder value. To conclude today's call, I'd like to reiterate our long-term optimism for the future. Despite our limited near-term visibility, our long-term trajectory is still intact. The underlying fundamentals associated with various macro demand trends, such as power energy transition, defense, and offshore energy exploration are positive for the range survey, exploration, and security entries, and more specifically, mines technology. I'm proud of the platform we've built, and our differentiated and market-leading suite of products continue to position us favorably. We are pursuing several new opportunities within our current and future markets, which I expect to bear fruit. I look forward to sharing updates on our outlook and other strategic actions in the coming periods as we strive to enhance stockholder value. And with that, operator, I think we can open the call up for some questions.

Thank you. If you'd 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'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Tyson Bauer with KC Capital. Please proceed with your question.

Good morning, gentlemen.

Hey, Tyson.

Before we get to the ATM questions, your confidence in your fiscal Q4, is that in part we got at that recurring base around $6 million per quarter? And even though we just heard the announcement on the orders, These are orders we've talked about for a couple of quarters. Does that imply that they were already in process, so the turnaround for delivery is going to be much quicker than maybe a typical order that you might get that would require, you know, two, three quarters before you actually deliver those?

That's exactly the case, Tyson. You know, we've expected these orders for some time. As we said, we were working with the customer very closely to finalize configuration of the system itself. We had been building these systems. Actually, I'm in Singapore right now, as a matter of fact, and I've actually seen the systems on the bench being worked on, so we very much have been working on these. And, yes, the aftermarket business, kind of the base level, does have an impact on our visibility and our outlook for the quarter. What the exact amount is each quarter will vary from time to time. It is a growing piece of our business, but that certainly does help you notice confidence for what we see in the fourth quarter.

If we look at past quarters, such as Q1 or fiscal 25, similar revenue, similar product mix, This go around, you had 300 basis point improvement in your gross margin, so you've done well on that part of the business. Obviously offset a little bit by 10% increase on the SG&A due to the stock-based comp. When we see the system sales included in those numbers where it makes up a bigger part of that mix, it appears the contribution margin of those large systems is 60%, roughly, or if not greater. Is that what you're able to bid those projects at, or is that because we're seeing some of that fixed cost absorption that allows that contribution margin to be so robust?

Oh, I think it's more the absorption of fixed overhead more than anything. A large system, as you might imagine, we will be a bit more aggressive on pricing sometimes, so therefore you might see a larger discount than you do on aftermarket business. But certainly as we have greater volume, we're absorbing more fixed costs. So that's a big contributor. That's the biggest contributor, I should say. Okay.

And you talked about a lull period, orders slowed. You talked about geopolitical risk. Given the leadership in the globe right now, it doesn't seem like that's going to abate anytime soon. What gives you that confidence that lull period ends? And two, of the pipeline of orders that you do have, Is it more from existing past customers or are you seeing an influx of new customers showing interest in your product lines?

Let me answer the last first. It's both, Tyson. We certainly have a number of new prospects we're looking at, people that we haven't sold to in the past necessarily or haven't sold to on a regular basis, I should say. But at the same time, we are seeing recurring revenues from existing customers as well. So it's really a mix. But I will say I am kind of encouraged by we're seeing some new customers, some new opportunities that we haven't seen in the past. So that's very encouraging to me.

Okay. Now let's get to the ATM. Backing into the numbers, it looks like you sold about a million shares at $11 less brokerage fees at the end of the quarter. The two weeks subsequent to the quarter the stock price runs up to 14. I would assume if you participated you would have let us know that and probably by ending the ATM allow the stock to get up to 14 on that side of it. Did you see something that you were targeting as a potential event or is this a more of a case of just getting a buffer to your networking capital?

I think it's more the latter. Certainly, there are things we are looking at right now, but I can't say there's a specific event that we are looking to finance. We just saw the value proposition look positive. The stock was moving in the right direction and took opportunity to put a little working capital on the balance sheet and give us the opportunity to move quickly should we be able to bring a couple of these opportunities to fruition.

Does that imply that if the share prices got back in that range, you would use that as an opportunity again, or are you pretty well set with where you are now?

You know, not necessarily. I think I don't want to make a comment one way or another as to what we might or might not do. I think I'll just leave it at if we see the value in what we think, given the current circumstances, are appropriate, we might go back in the market, but not necessarily.

Okay. And you talked about the horizon, long-term still looks good. What creates that step-up function for the company where we're not in that $8 million to $14 million a quarter type outlook, depending on the schedules and deliveries, where we get that to that $12 million to $20 million a quarter going forward? What's it going to take to step it up? Is it going to be a potential M&A type situation or affiliation situation? Or is there something, a new product or something that allows us to step up to show that growth for the company?

Yeah, Tyson, I think that's really, you know, you go back to what we said earlier this year as to our approach to try to increase our scale. So that's what we need to do to get to that position. And it could be, you know, any of those things. I think, you know, most likely it's we can look at adding, you know, new offerings to our river, if you will. new products, maybe addressing some new markets. So it doesn't necessarily have to be an M&A where we go and acquire a product line or another company, something like that. There are some organic things within our current technology that we think we can add to, which would give us that opportunity. But it's adding scale is the bottom line, and there are different ways to get there.

Okay. Thank you, gentlemen.

You bet.

Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. We'll pause a moment to allow for other questions. Thank you. Our next question comes from the line of Mike Mitchum with NCR Corporation. Please proceed with your question.

Hey, good morning, Rob. How are you?

Hi, Mike. How about you?

I'm doing fine, sir. Could you expand a little bit on the GWL collaboration? Is that meant to be an aftermarket servicing, or is that more of a product line expansion? Whatever you can share would be great.

Sure, that's really more of a product line expansion. I don't want to get too detailed as to that offering just yet. We're really nice in it, and there's some competitive reasons not to get too detailed about it, but it is an expansion of our product line and partnering with someone else in the industry. So that's a great example of what I was alluding to earlier with Tyson's question, something we can add to our quiver and therefore help increase our scale.

Yeah, okay. Thanks, Rob. I appreciate it. You bet.

Thank you. Our next question comes from the line of Ross Taylor with ARS Investment Partners. Please proceed with your question.

Thank you. First, I just want to confirm, so you had done no ATM action in the current quarter, correct?

That's correct. We've been in a blackout. Let me clarify that. There was the trades on the last day of the quarter, the past quarter. There were, I don't know, 60,000, 65,000 shares that traded that didn't settle until the current quarter. And so that will be reported in the current quarter just because that's when the accounting rules work. But no, we have been blackout since the end of the quarter and have not been active in the market.

But when you're talking about your million shares and 11 million raise, you're including what you did on the last day, correct?

We are not. No, we are not. So there's numbers about 60, 65. No, just the accounting rules don't let you do that. It says you have to look at the settlement date, which I don't agree with, but I don't like the rules.

Okay. So we got the math from that now. Okay. A couple of things. One, you talked about the ability to do quick turnaround on the recent orders that you got after the end of the prior quarter. Are the costs, for building those systems. It sounds like you've already started building some of them. You might even have some of them already built. Are those costs, when we get the queue, will those costs actually be in the queue anywhere?

There'll be an inventory. Anything we spent today on those orders will be in inventory.

Okay. And what kind of costs are we looking at? How much of inventory should we assume is tied into orders that will be going out this quarter?

Oh, gosh. Ross, I'm not sure I can answer that very accurately. You know, there's $10 million of orders. You know, just to make the math easy, you know, the cost is, you know, half of that. And so we've spent some amount of that. But I wouldn't get too worried about trying to figure those numbers out. We always are carrying some inventory. We always are carrying some components for current and future orders. So I think if you try to chase that down the rabbit hole too much, it's not going to tell you very much, frankly.

Okay. I'm trying to get at the idea of what we should be looking at for free cash flow. And it would seem that you should have a pretty strong free cash flow quarter, given that you've already put some of the cost in the inventory.

Okay, I understand where you're headed on that now. So, yeah, you're right about that. Just the issue is when do we actually deliver that, and therefore when do we actually get paid for it? So I could deliver it on, you know, January 20th and not get paid until February, so it doesn't show up in the free cash flow in that quarter. So it kind of works both ways on it, but I understand your question. So, yes, we have spent a great deal of the cost already, and therefore would not be a cash outlay.

Okay, cool. Now, it looks like, you know, you've talked about your opportunities. You obviously appear to be trying to find a way to shift or create income in the U.S. where you have tax loss carry forwards. Can you give an idea of kind of what type of magnitude, what type of expense? How do you value something if you're going to, you know, if you want to build that? How much of it can you effectively greenfield? Do you have your new facility? expanded facility? What should we see run through that on an annual basis? Because it does sound like what you're trying to do is become, you know, you've got that tax asset and you're trying to find a way to turn that into value.

Yeah, you're right about that. And, you know, expanding the wholesale facility was certainly part of that strategy. You know, the majority of our revenues have been out of Singapore historically. That's going to continue to be the case. So we're not going to start creating half of revenue in the U.S. all of a sudden. But if we can increase that to $3, $4, $5, $10 million a year out of the U.S., that can have a big impact on that tax rate. So that's what we're trying to do. So just to give you a sense of magnitude, again, it's not going to be half our revenue, but it could be a significant portion going forward. And As we look at opportunities beyond what we've done in Huntsville, expanding that facility, we'll continue to evaluate that. And that's just part of our economics and looking at new opportunities.

Okay. And touching on something Tyson asked on, the 6-6-1 in kind of maintenance type work that you guys, recurring work you guys are doing, is that a safe run rate on a quarterly basis? going forward, as we assume, that how does it grow as your systems in the market grow?

Yeah, I mean, I'm hesitant to put a dollar value on that because it does fluctuate from time to time, but it certainly is a growing percentage of our business as we've demonstrated. It just grows as we have more stuff out there. Everything we have out in the field needs to be serviced. You know, Does activity within the industry have some impact? Sure. If people aren't using their equipment, it doesn't wear out as much. If they're using it more, it wears out more quickly. So that does have an impact. But the important thing in my mind is it's not a capital expenditure decision. Our customers bought the stuff to use it, so they're out trying to generate revenue. So by and large, if they bought it, they're using it. And so that becomes more and more important. you know, recurring for us. So just as we sell more stuff, that's going to layer on, um, over time. So I don't see that going down over time. I see it continue to, you know, increase incrementally.

Okay. And lastly, should we be looking at expecting your operating profit margin to push back up towards the levels you were at some of your prior quarters? The quarter sets up, sounds like it sets up to be a strong quarter. You've got a lot of, uh, a business that, you know, you've got some systems business that should, I would think, allow you to push pretty well into the fixed cost structure. You know, the last quarter, I have to say, I was a little bit in that profit margin, so I'm wondering if we're going to see it recover strongly in the current quarter.

Well, the gross profit, you know what, we're at 47% in the quarter. So, I mean, gross profit is going in the right direction. Operating profit, you know, top line, if that's sad. So, we have some fixed G&A type costs. that don't get absorbed as much. So certainly as we have a better top line, we're going to see improvement there. But as Mark said, I think in his comments, a big part of the increase in the G&A line was stock-based compensation, which is a non-cash item, obviously. So that's really, otherwise it's pretty flat from an absolute standpoint.

Well, I'm excited to see what you can do this quarter, I'm hopeful that you will stay off the ATM for a bit until you find a way to spend it to make back that money. I understand you want U.S. liquidity, but at the same time, I think shareholders would love to see you actually, would love to see that capital deployed in ways that's going to be adding to value for the company. Other than that, that's what I got. Thank you.

Appreciate it, man. Thank you.

Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Mr. Capps for any final comments.

Okay. Thanks, everyone, for joining us this morning. I appreciate your time and look forward to visiting with you again as we record our fourth quarter in the new year. Thank you very much.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.