管理層發言
Greetings, and welcome to MIND Technology's Fiscal 2026 Third Quarter Earnings Call. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Zach Vaughan. Thank you. You may begin.
Thank you, operator. Good morning, and welcome to MIND Technology's Fiscal 2026 Third 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 December 17. 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, December 10, 2025, and therefore, you are advised that the 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 31, 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. MIND's results in the third quarter were in line with our expectations. Although Seamap 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, MIND remains positioned for growth, favorable financial results, and profitability in the 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 31, 2025, and approximately $26.2 million as of October 31, 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 positives 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 a signed contract in hand. Our pipeline of potential orders remains solid. While some customers are delaying their commitments until they have 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 consist primarily of our three main product lines: GunLink source controllers, BuoyLink positioning systems, and SeaLink streamer systems. However, our backlog also contains some aftermarket orders. Together, these serve as a foundation for our business. As a whole, our Seamap business continues to enjoy a 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 on 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, repair, 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 MIND 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 mix and the timing of larger system deliveries. However, for the first nine 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 Seamap products continues to expand, so too does the prospect for increased aftermarket activity. Additionally, we continue to ramp up activity at our newly expanded Huntsville facility. The additional 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 Seamap product lines, newly developed products, and services to third parties. Now turning to our results, Marine Technology product revenues for the third quarter of fiscal 2026 were $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 to stimulate order flow and generate sustainable results in future periods. I continue to believe that we have a differentiated approach and a best-in-class suite of products that will give us a 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 remain 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 the year-over-year increase primarily due to higher stock-based compensation. Our 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 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 the 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 pretax income is lower. As of October 31, 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. MIND 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 are some current uncertainties in the market that have caused customers to delay purchase decisions and capital commitments. However, we view these as temporary positives. Commentary from numerous companies with marine exploration exposure have echoed this sentiment. For the most part, the effect on our business to date has 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 complexities are creating unease. There's still plenty of positive tailwinds for our business, and we expect this pause in order activity to be temporary and resolve in the coming months. I expect to have a clear picture of how fiscal 2027 will look on our next call. 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 end markets, and our pipeline of future opportunities remains robust. Additionally, our technological innovation allows us to expand our capabilities and address new opportunities. We are consistently evaluating unique ways to repurpose our existing technology for new applications. We're also looking at ways to expand our product offerings. Given our 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 accretive scale, expand our offerings, and enhance value for our stockholders. These include mergers and acquisitions and 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 against the cost of capital. Now let me take a moment to address the recent sales of stock to our ATM program that Mark mentioned. As a result of our pricing approach and strategic planning, we have a framework in place to quickly and efficiently strengthen our balance sheet and enhance liquidity during the third quarter. Our stock price experienced a positive fluctuation, and 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 ATM activities in the future with the primary focus of preserving stockholder value for years to come. We remain committed to positioning MIND for success and strengthening it for the future. We continue to evaluate all suitable opportunities with the 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 of 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 generation, energy transition, defense, and offshore energy exploration are positive for the marine survey exploration and security industries and more specifically, MIND's 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.
分析師問答
Our first question comes from Tyson Bauer with KC Capital.
Before we get to the ATM questions, your confidence in your fiscal Q4, does that in part relate to the 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 two to three quarters before you actually deliver those?
That's exactly the case, Tyson. 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. But we have 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, but it is a growing piece of our business, but that certainly does help give us confidence for what we see in the fourth quarter.
If we look at past quarters, such as Q1 of fiscal '25, similar revenue, similar product mix. This go around, you had a 300 basis point improvement in your gross margin. So you've done well in that part of the business, obviously offset a little bit by a 10% increase on the SG&A due to 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?
I think it's more than 40% fixed overhead more than anything. A large system, as you might imagine, we will be a bit more aggressive on pricing sometimes. 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. You mentioned a period of slowdown in orders. Can you elaborate on your confidence that this lull will come to an end, especially considering the current geopolitical climate? Also, in terms of your current order pipeline, are the orders predominantly from existing customers, or are you noticing a rise in interest from new customers for 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 the fact 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 discuss the ATM. Based on the numbers, it appears you sold around 1 million shares at $11 after brokerage fees at the end of the quarter. In the two weeks following the quarter, the stock price increased by 14%. I would assume if you were involved, you would have informed us and likely ended the ATM to allow the stock to reach 14. Did you identify something specific that you were targeting as a potential event? Or is this more about creating a buffer for your net working capital?
I think it's more of the latter. Certainly, there are things that we are looking at right now, but I can't say there's a specific event that we were looking to finance. We just saw the value proposition looks positive. The stock was moving in the right direction and took the 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 price got back in that range, you would use that as an opportunity again? Or are you pretty well set with where you are now?
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 at what we think given the current circumstances is 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? Or is there something, a new product or something that allows us to step up to show that growth for the company?
Yes, Tyson, I believe that's important. If we reflect on our earlier comments this year regarding our strategy to enhance our scale, we recognize that there are various pathways to achieve that. Most likely, we can consider expanding our range of offerings, such as introducing new products or entering new markets. It doesn't necessarily have to involve acquiring a product line or another company through mergers and acquisitions. We also see potential for organic growth within our existing technology that could allow us to capitalize on these opportunities. Ultimately, our focus is on increasing scale, and there are several routes to reach that goal.
Our next question comes from Mike Mitcham with NCR Corporation.
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 or 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 in early days 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, as something we can add to our quiver and therefore, help increase our scale.
Our next question comes from the line of Ross Taylor with ARS Investment Partners.
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. To clarify, there were trades on the last day of the previous quarter, about 60,000 to 65,000 shares, that did not settle until the current quarter. This will be reported in the current quarter due to accounting rules. However, we have been in blackout since the end of the previous quarter and have not been active in the market.
But when you're talking about your 1 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 about 60,000, 65,000. No, just the accounting rules don't let you do that. This says you have to look at the settlement date, which I don't agree with, but I don't make the rules.
Okay. So we got the math from that now. Okay. A couple of things. One, you talked about the ability to do a 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 Q, will those costs actually be in the Q anywhere?
They will be in inventory. Anything we spent to date on those orders will be in inventory.
Okay. And what kind of cost are we looking at? So 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. There's $10 million in orders. Just to make the math easy, the cost is 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 for current 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.
I'm trying to understand what we should anticipate for free cash flow. It appears that you might experience a solid free cash flow quarter since you've already accounted for some of the costs in the inventory.
Okay. I understand where you're heading on that now. So yes, 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 January 20 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 in the quarter.
Okay, I see your point. You're correct about that. The main issue is the timing of our delivery and when we actually receive payment for it. For instance, I could deliver on January 20 but not get paid until February, meaning it wouldn't reflect in the free cash flow for that quarter. So, it has a dual impact, but I understand your inquiry. We have already incurred a significant portion of the costs, so there won't be any cash outflow for the quarter.
Yes, you're right about that. And expanding the Huntsville facility is certainly part of that strategy. 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 million, $4 million, $5 million, or $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 and expanding that facility, we'll continue to evaluate that, and that's just part of our economics and looking at new opportunities.
Okay. Regarding the recurring maintenance work that Tyson mentioned about the 661, can we consider this a stable quarterly run rate going forward? Should we expect it to grow as your systems expand in the market?
Yes. 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 equipment out there. Everything we have out in the field needs to be serviced. 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 have bought the equipment 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 it becomes more and more recurring for us. So just as we sell more equipment, that's going to layer on over time. So I don't see that going down over time. I see it continue to increase incrementally.
Okay. Should we expect your operating profit margin to increase again towards the levels seen in some of your previous quarters? This quarter appears to be setting up as a strong one. You have significant business, including systems business, that should help you effectively utilize your fixed cost structure. Last quarter, I noticed a dip in the net profit margin. I'm curious if we'll see a strong recovery in the current quarter.
Well, the gross profit was 47% in the quarter. So I mean, gross profit is going in the right direction. Operating profit, top-line impacts that. 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 in his comments, a big part of the increase in the G&A line was stock-based compensation, which is a noncash item, obviously. And so that's really otherwise, it's pretty flat from an excellent standpoint.
I am excited to see what you can achieve this quarter. I hope that you can refrain from using the ATM for a while until you figure out how to invest it to recover those funds. I understand your desire for U.S. liquidity, but at the same time, I believe shareholders would appreciate seeing that capital utilized in a manner that contributes to the company's value.
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.
Thanks, everyone, for joining us this morning. I appreciate your time and look forward to visiting with you again as we report 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.