MIND Technology, Inc. (MIND) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary indicates strong financial metrics, a robust backlog, and optimistic guidance for fiscal 2026. The Q&A section reveals stable margins and potential new partnerships, though management was vague on some details. The lack of negative trends or risks suggests a positive sentiment overall. The absence of market cap information limits precise prediction, but the overall tone suggests a positive stock price movement in the short term.

Key Financial Performance

Marine technology product revenues $7.9 million (down approximately 18% year-over-year due to $5.5 million of orders sliding to the right due to delivery delays)

Gross profit $3.3 million (gross profit margin of 42%, impacted by lower revenue due to delivery delays)

General and administrative expenses $3.4 million (up sequentially and year-over-year due to normal seasonality and nonrecurring costs related to restructuring and tax analysis)

Research and development expense $380,000 (down compared to the same quarter a year ago)

Operating loss $658,000 (compared to operating income of $730,000 in the same quarter a year ago)

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Operating Highlights

GunLink 4000 system order: The order for our GunLink 4000 system that we announced yesterday morning is a great example of our active pipeline of pending and highly confident orders.

Backlog of firm orders: Our backlog of firm orders as of April 30, 2025, was approximately $21 million compared to $16.2 million as of January 31, 2025.

Aftermarket activity revenue: In the first quarter of this year, the aftermarket activity represented approximately 71% of our revenues, up from the historical average of 40%.

Cash flow from operations: Cash flow from operations grew during the quarter to about $4.1 million, indicating improved liquidity.

Facility expansion: We are in the final stages of an expansion of our facility in Huntsville, Texas, which will enable us to provide additional repair and manufacturing services.

Market positioning: MIND has established a more resilient business with greater order visibility, a strong demand environment, and an improved balance sheet.

Focus on supply chain optimization: We are focused on optimizing our supply chain to manage lead times on components to meet delivery requirements.

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Risk or Challenges

Delivery Delays: Approximately $5.5 million of orders were unable to be delivered prior to quarter end due to late delivery of third-party components and shipping difficulties.

Supply Chain Challenges: The company is working to optimize its supply chain to manage lead times on components to meet delivery requirements, indicating ongoing supply chain challenges.

Economic Uncertainty: Recent uncertainty in the global economic environment has caused delays in purchase commitments from customers.

Regulatory Risks: Moderate level of uncertainty related to tariffs and trade restrictions, although the company does not anticipate a material direct impact on its business.

Operational Risks: The company acknowledges that as a small entity, it faces inherent challenges that could affect its growth and market standing.

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Guidance & Outlook

Backlog of Firm Orders: As of April 30, 2025, the backlog of firm orders was approximately $21 million, up from $16.2 million as of January 31, 2025.

Expansion of Facility: MIND is in the final stages of expanding its facility in Huntsville, Texas, which will enhance repair and manufacturing services.

Aftermarket Business Growth: In the first quarter, aftermarket activity represented approximately 71% of revenues, up from the historical average of 40%.

Product Development: Investments are being made to develop next-generation marine technology products to meet evolving customer needs.

Strategic Positioning: MIND is focused on optimizing its supply chain to manage lead times and mitigate delivery issues.

Revenue Expectations: MIND expects a meaningful increase in revenue in the current quarter, aiming for positive adjusted EBITDA and return to profitability in Q2.

Financial Performance Outlook: The company anticipates improved financial results for the balance of fiscal 2026, supported by a strong backlog and active pipeline of orders.

Market Conditions: Despite macro uncertainties, the marine technology market remains strong, with ongoing customer inquiries and requests for quotations.

Future Growth: MIND is optimistic about future growth driven by a solid backlog, significant pipeline, and favorable market dynamics.

Operational Cash Flow: The company generated approximately $4.1 million in cash flow from operations in Q1, indicating improved liquidity.

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Shareholder Return Plan

Shareholder Return Plan: The company maintains a clean, debt-free balance sheet and is focused on enhancing shareholder value through strategic opportunities and growth initiatives.

Cash Flow from Operations: Generated approximately $4.1 million of cash flow from operations in the first quarter, indicating improved liquidity.

Backlog of Orders: As of April 30, 2025, the backlog of firm orders was approximately $21 million, with a strong pipeline of pending orders.

Future Outlook: Expecting a meaningful increase in revenue in the current quarter, aiming for positive adjusted EBITDA and return to profitability.

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Key Q&A

Q:On the 5.5 delayed delivery, have those been delivered as of yet? And are they mainly comprised of 1 or 2 systems?

A:Partially delivered. There was a large -- one large system and then a few other orders. So it's a little bit of both. So partially delivered, but not completely yet. So those -- it will be soon, though.

Q:So on an accounting practice, those remain in backlog finished goods. You're expecting those deliveries take place in the second quarter. So that full cash cycle should be complete by the time you end Q2?

A:Yes. From a billing standpoint, yes. From a cash cycle, collections may or may not have happened at that time. But yes, from a standpoint, absolutely.

Q:On the tax loss carryforwards, after you did your analysis, what did you determine as the amount that you reasonably have that could be used in the future?

A:It's about USD 80 million of NOL carryforward roughly.

Q:How do you, as a management team, unlock that value? And isn't typically in that kind of activity, a business combination that value on a stand-alone about 25% of what the listed value is?

A:You hear all sorts of numbers about that. It really depends on the circumstances, Tyson. I mean you have to be careful about subsequent ownership changes, which we can limit that. But there certainly are ways to take advantage of that and try to shift more income into the U.S. There are -- you understand that under the U.S. tax laws now, we're taxed on worldwide income with offsets for what you pay overseas. So there is some benefit there. So there are ways to utilize that. So I think there is value there to us. Is it 25% of face value? I'm not going to speculate on that, but there is certainly value there we think.

Q:Are you seeing that on your customer base that, that is an area and an opportunity that could develop in the years coming?

A:I think so. What we're seeing is some of our existing customers and potentially new customers are looking to go further afield in what they've done historically and use some of their expertise in that sort of survey type work, exploration survey work. And our products, especially the SeaLink product line is right in the wheelhouse for that sort of thing. So that's very encouraging for us.

Q:Do you have any currently active master supply agreements? And is that an approach that you see as favorable for MIND as you go forward?

A:We certainly have those type agreements with some of our larger customers, which is, again, a framework for general terms, doesn't address specific orders, but it does give us a framework. So we certainly have those in place today and are looking to put others like that in place.

Q:Is it not just an accordion feature that, okay, this is going to be a cost-plus type contract or otherwise?

A:That's correct. So you've agreed to standard terms and conditions. You may have agreed to some pricing parameters as well. So it certainly facilitates -- makes it much quicker for new order to come through.

Q:The interest you've garnered so far, have you been able to go out and demonstrate this to your customers?

A:I don't want to get too deep into that for some competitive reasons. But I would say it's more of an enhancement of what we have. It's not like a totally new technology.

Q:Are you seeing bid margin trends favorable? -- as we're going forward? Or are they pretty stable?

A:I'd say they're fairly stable. We have some ability to expand those, but it's fairly stable overall, I'd say.

Q:Any additional color you want to throw on that?

A:Well, I think we've talked a bit about this. In the past, we look at taking some of our technology into a more maritime security application, military type application.

Q:Can you give us an idea of what's going on with -- on the $5.5 million, what impact did that have on your unrecovered costs?

A:Well, it would have been another $5.5 million of revenue at least at the margin that we demonstrated. So there's another about $2 million of operating profit or gross profit.

Q:Can you give us an idea how has the backlog moved since the end of the quarter you're reporting today?

A:Gosh, I want to be careful what I say there is because we add and subtract things every day.

Q:How much money have you put into that facility? And how does that coming to being brought online impact your income statement and the cash flows?

A:So we've spent roughly, call it, $0.5 million to expand that. That's in rough terms over the past 9 months or so.

Q:Could you give any background? What is that tied into?

A:So again, we'll have more to say about that later. But that is a company that has a new product concept they're working on, and we're looking to partner with them to bring that to market.

Q:Is that correct?

A:Absolutely. I mean one of our objectives is to expand our offerings.

Q:Would that fall into that area?

A:Wow, Gregg, that's a tough one. I mean I guess you could make that assumption, but there's kind of different markets, kind of a different situation, different buyers.

Q:Did you have an investment bank or line up strategic buyers and financial buyers and bid that out?

A:We did have a banker assist in the process. But I would say it's more we identify potential buyers and approach potential buyers.

Q:Is offshore drilling more environmentally friendly than fracking onshore?

A:Gosh, I'm not sure how to answer that. That's a huge question.

Q:How is that trending over time? Or where do you see that going?

A:Well, I think that trend continues probably to increase.

Q:Do you have any like valuable data that you sell?

A:No. We -- all we're doing, Gregg, is providing equipment that people use to gather data.

Q:What does that do?

A:It was something we actually retained from the Klein sale with our Spectral AI.

Q:What you're doing to develop people?

A:So we're a company of 150 people or so roughly around the world. We have really smart engineers of all sorts that help develop new things.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer to questions regarding the specifics of the backlog movement, the impact of the $5.5 million on unrecovered costs, and the environmental comparison between offshore drilling and fracking. Their responses were vague and lacked sufficient detail.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

MIND Transcript

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The earnings call presents mixed signals: while there are positive elements like a strong backlog, improved margins, and optimistic guidance, these are countered by declining operating income, net income, and backlog due to customer delays. The Q&A session reveals confidence in quicker delivery and future growth, but management's vague responses on key issues like the GWL collaboration and share sales create uncertainty. Given the balance of positive and negative factors, a neutral stock price movement is likely over the next two weeks.

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The earnings call summary indicates strong financial performance with improved gross profit margins and operating income, supported by a solid backlog and optimistic guidance. The expansion in Huntsville is expected to boost revenues, and the company maintains a healthy cash position. The Q&A section reveals cautious optimism, with growth expected in high single digits to low double digits. Although there are some uncertainties in the market, the overall sentiment is positive, driven by strategic expansions and strong financial metrics.

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