MIND Technology, Inc. Common Stock (DE) 2027 Q2 Earnings Call

Thank you, operator. Good morning, and welcome to the MIND Technology Fiscal 2027 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 at mind-technology.com, or via a recorded instant replay until September 16th. 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 9th, 2026, 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 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, 2026. 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.

Thanks, Zach, and thank you all for joining us today. As usual, I'll touch on the results for the second quarter and provide an update on the current market environment. Mark Cox will then provide a more detailed review of our financials, and I'll return to wrap things up with some remarks about our outlook. Our second quarter results reflect the ongoing market softness, offset to some extent by the resilience of our aftermarket business. Order flow continues to be constrained, and customers are maintaining their wait and see approach amid a very unsettled geopolitical and commodity price environment. Our results reflect this. Despite these headwinds, our aftermarket business continues to provide a recurring stream of revenue. This gives us a durable base through a period when new system orders are difficult to predict. This allows us to remain patient and opportunistic rather than reactive.

The last quarter, I laid out two dynamics in the broader energy landscape with the potential to drive increased activity and order flow. There's a growing need for energy security following a significant supply disruption and a favorable oil pricing backdrop is expected to support a resurgence in exploration activity. We believe both dynamics remain intact, but they have yet to result in firm orders. The war with Iran has had a significant impact on our recent results. Certain ongoing projects in the Middle East have been temporarily interrupted. Additionally, and perhaps more importantly, the award and commencement of additional projects in the region have been delayed. These factors have caused customers to delay spending plans. They also, in some cases, have interrupted our customers' anticipated cash flow. This, in turn, caused certain customers to delay payments to us.

We are confident these amounts will be received, just not within the time frames we originally anticipated. We continue to believe energy independence is top of mind for governments and operators alike, and there's a real need to replenish lost production and secure reliable supply. We expect that to drive exploration investment over time. However, at the present, the stops and starts of the war with Iran have created such volatility within the energy markets that customers are hesitant to commit to project timing. While oil prices remain elevated relative to historical standards, it's the durability of these prices, not the level, that drives investment decisions. Futures market does not expect today's prices to last. What matters more to our customers and to their customers is certainty. An end to the conflict would remove much of that uncertainty impacting projects today. We would then expect these programs to move forward.

We see a resolution to the war as good for our business. Our backlog of firm orders as of July 31, 2026, was approximately $4.8 million, compared to $7.6 million as of April 30, 2026, and $12.8 million as of July 31, 2025. Protracted customer decision-making regarding new system orders and the execution of our existing backlog during the quarter were the drivers of the decline. As our backlog continues to illustrate, there is considerable variability in the pace and timing of new orders. This has been magnified by the ongoing macro uncertainty. I'll remind you that even in a normal market, new orders don't always arrive at a constant rate throughout the year.

Importantly, we continue to view these as temporary pauses as customers iron out their operational plans and evaluate market conditions. Despite the near-term softness, the longer-term outlook for the marine exploration and the survey industry, and more specifically our business, remains very positive in our opinion. We have begun to see early signs of recovery and feel that an uptick in activity is inevitable. I will talk a bit more about this later. Outside of our backlog, which is defined as orders for which we have a purchase order or a signed contract in hand, the pipeline of potential orders remains solid and is several times greater than our firm backlog. We are continuing to pursue certain significant projects, including some worth $10 million or more each. We have taken actions in recent months to strengthen our positioning and make ourselves more competitive bidders.

This provides us with optimism as we work to convert these opportunities into firm orders in coming periods. Turning to our results, marine technology product revenues for the second quarter of fiscal 2027 were approximately $5.6 million. The majority of this revenue, roughly 87%, came from aftermarket activity, consisting of spare parts, repairs, service, and other support activities. We have talked at length in recent quarters about this component of our business and its critical role within our overall results. This has become increasingly important as system orders have slowed. While the aftermarket business is influenced by the general activity level within the industry, it is more recurring in nature than orders for new systems. Customers might be slow to purchase new systems, but their existing equipment will need maintenance to keep operating. This benefits MIND since expenditures for aftermarket activity are generally operating costs as opposed to capital expenditures.

As our installed base of Seamap products expands, so does the potential for increased aftermarket activity. The second quarter was a difficult one, and our results reflect that. Our aftermarket activity held up and continued to generate meaningful revenue at a time when system orders were effectively on hold. It allows us to manage through a period of disruption and position the company for when activity improves. I remain confident in the opportunities ahead of us, and I believe it is just a matter of time until order flow returns. Now, I will let Mark walk you through our second quarter financial results in a bit more detail.

Thanks, Rob, and good morning, everyone. Revenues for marine technology product sales totaled approximately $5.6 million for the quarter. As Rob mentioned, our second quarter results continued to be impacted by general market softness and our customers taking a more cautious approach to the decision-making process. Despite these headwinds, we are benefiting from aftermarket activity that provides a solid foundation of recurring revenue. This activity supports our overall results and serves as a buffer in times of reduced large system order volume. Second quarter gross profit was approximately $2.1 million. This represents a gross profit margin of 37% for the quarter. Although a significant portion of our second quarter revenue came from aftermarket activity, which typically generates higher margins than larger system orders, lower overall revenue in the quarter resulted in less fixed cost absorption impacting our gross margin.

As revenue returns to more normalized levels, we expect our cost optimization efforts and improved production efficiencies to support stronger margins. Our G&A expenses were approximately $3.3 million for the second quarter of fiscal 2027. This was down both sequentially and when compared to the same quarter a year ago. Our R&D expense for the second quarter was approximately $470,000, which was up sequentially and compared to the second quarter of fiscal 2026. This increase was due to the timing of cost recognition for component purchases. Consistent with prior periods, these costs were largely directed toward the development enhancement of our streamer systems and source controller offerings. Operating loss for the second quarter of fiscal 2027 was approximately $1.8 million, compared to operating income of approximately $2.7 million in the second quarter of fiscal 2026.

Second quarter adjusted EBITDA loss was approximately $949,000 compared to adjusted EBITDA of $3.1 million in the same quarter a year ago. Net loss for the second quarter was approximately $1.7 million compared to net income of $1.9 million in the second quarter of fiscal 2026. As of July 31st, 2026, we had working capital of approximately $36.7 million, including $15.8 million of cash on hand. This compares to approximately $19 million of cash at the beginning of the fiscal year. I would caution against reading that change as a reflection of our cash burn rate. Movement in cash reflects the timing of receivable collections as much as it does operating performance. As Rob mentioned a moment ago, collections in the first half of fiscal 2027 were slower than we anticipated due to circumstances impacting certain of our customers' markets.