Mind Technology, Inc Q4 FY2025 Earnings Call

Thank you, operator. Good morning, and welcome to the MIND Technology Fiscal 2025 Fourth 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've got a few housekeeping items to run through. If you'd like to listen to a replay of today's call, it'll be available approximately 90 days via webcast, going to the Investor Relations section of the company's website, and that's MIND-technology.com, or via a recorded telephonic instant replay until April 30th. Information on how to access the replay features was provided in yesterday's earnings release. Information reported on this call speaks only as of today, Wednesday, April 23rd, 2025. And therefore, you're 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 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 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. And now with that behind me, I'd like to turn the call over to Rob Capps. Rob.

Okay. Thanks, Ken. And thank all of you for joining us today. Today, I'll discuss some highlights from the quarter and fiscal 2025. Mark will then provide a more detailed update on our financials. I'll return to wrap things up with some remarks about our outlook. As expected, MIND delivered very strong fourth quarter results that contributed to a record fiscal 2025. Our business continues to perform at a high level, and I'm pleased with our consistent execution and operational efficiency. Our renewed focus, encouraging business environment, and pipeline of opportunities are delivering improved year-over-year results. We're optimistic for continued success in future periods. Our cash flow from operations again grew during the quarter, which is an indication of our improved liquidity. We're pleased to have generated a fifth consecutive quarter of profitable results. This is a trend we expect to continue. There will undoubtedly be quarterly revenue fluctuations going forward. We will also undoubtedly experience a quarter of lower revenue than we've seen recently. However, the transformation that MIND has undergone has established a more resilient business. We have greater order visibility, a strong demand environment, and our balance sheet and capital structure are much improved. As a result, we believe MIND remains strategically positioned for growth, improved financial results, and continued profitability in the coming periods. We enter fiscal 2026 with a backlog of approximately $16 million. Although backlog was down a bit at year-end, this is to be expected at times as we execute and make substantial deliveries like we did during the fourth quarter. However, as we have mentioned before, there were a number of highly confident orders pending at year-end. Accordingly, we have received approximately $15.9 million of orders subsequent to year-end that further support our backlog. These orders and others that we expect to receive in the coming weeks and months bode well for continued strong financial performance as we progress through fiscal 2026. As a reminder, new orders don't always arrive at a constant rate throughout the year and order flow is often sporadic. Beyond our backlog, we have an active pipeline of pending and highly confident orders and prospects that are well in excess of our backlog received orders. This backlog and pipeline instill confidence for strong and sustainable financial results in coming periods. Three meaningful contributors to our backlog and improved financial results are: our GunLink source controllers; BuoyLink positioning systems, and SeaLink streamer systems. As a whole, our Seamap business enjoys a strong market position in each of its products, even a dominant position in some cases. We currently have a number of other pending orders across these product lines, and I'm confident that the favorable market dynamics and our focus will prove to be a recipe for success in generating many more orders in the future. Another component that has meaningfully contributed to our improved financial results is our aftermarket business. Roughly 40% of our revenue comes from this aftermarket activity. As our installed base of Seamap products continues to expand, with it comes the chance for aftermarket opportunities such as spare parts, repairs, and support services. As a reminder, our products are deployed in a very harsh environment and damage is common, often inevitable. This is good for MIND, since customers will require more from us than just their initial purchase. As I've done in the past, I must remind you that the timing of specific orders is subject to variability due to any number of challenges, unforeseen circumstances, or just customer delivery requirements. Optimizing our supply chain to drive revenue improvements continues to be an area of focus. Our improved order visibility has been instrumental in managing lead times on components and meeting delivery requirements of our customers. Our efforts initially led to an increase in inventories. We have been able to draw down our inventory balances in recent quarters. I turn it to our results. Marine Technology product revenues for the fourth quarter and full fiscal year 2025 were $15 million and $46.9 million, respectively. Both periods represented meaningful growth for our business and enabled us to set records for nearly all key financial metrics. We continue to capitalize on macro tailwinds and customer engagement to stimulate order flow and generate improved results. We've deliberately worked to improve our execution, efficiency, and cost structure. We expect these efforts to deliver consistent profitability in future quarters. General market conditions within the Marine Technology space continue to be strong. We see a number of opportunities and continue to field inquiries and respond to requests for quotations. Our team continues to develop new and innovative ways to adapt and implement our technologies to meet the evolving needs of our customers. Our recent SeaLink streamer systems sales are a good example of this. As a result, we are making additional investments to further develop and advance the next generation of our ultra-high resolution SeaLink streamer systems. I'm confident that our differentiated approach and best-in-class suite of products will continue to give us the competitive advantage to address the demand we see within the Marine Technology industry. Now, I'll let Mark walk you through the fourth quarter and full-year financial results in a bit more detail.

Thanks Rob. And good morning everyone. For a final time, I would like to remind everyone that with the sale of Klein in August 2023, those operations have been treated as discontinued operations and results for prior periods have been restated to reflect that. Accordingly, the prior period comparative data reported yesterday and discussed here today do not include amounts related to Klein. They include only our ongoing business. Rob mentioned earlier, revenues from Marine Technology product sales totaled a record $15 million in the quarter, which was up about 12% from the same period a year ago and 24% sequentially from our fiscal 2025 third quarter. Full year revenue amounted to approximately $46.9 million, which was up approximately 28% over the previous year and represents the highest annual revenue ever reported by our Seamap business. These record results are representative of the deliberate actions we've taken to improve MIND's financial stability and positioning within the market. We are continuing to see strength in all our key markets and the favorable customer demand environment gives us confidence for sustainable high-level revenue in 2026. Full year gross profit was approximately $21 million, which was about 31% higher when compared to fiscal 2024. This represents a gross profit margin of approximately 45% for the year. As I previously mentioned, we implemented various price increases early in 2025 that contributed to elevated revenue throughout the year. We are benefiting from greater production efficiencies on the cost side that drove year-over-year gross profit margin improvement. Our general and administrative expenses were approximately $3 million for the fourth quarter of 2025, which was flat when compared to the same quarter a year ago. As we've highlighted in previous quarters, the sale of Klein allowed us to reduce general and administrative expenses and to streamline overhead costs, most notably corporate costs related to the support of Klein. This resulted in full year savings of $851,000 when compared to 2024. Our research and development expense for the fourth quarter of 2025 was $562,000, which was down sequentially compared to the same quarter a year ago. These costs are largely directed toward the development of our next generation streamer system. Operating income for the fourth quarter was approximately $2.8 million compared to operating income of approximately $2.3 million in the fourth quarter of 2024. Operating income for 2025 was $6.8 million, which was an increase of approximately $6.3 million from 2024. Our fourth-quarter adjusted EBITDA was approximately $3 million compared to adjusted EBITDA of approximately $2.6 million in the fourth quarter a year ago. Adjusted EBITDA for fiscal 2025 was $8.2 million, which was an increase of approximately 256% when compared to 2024. Net income from continuing operations for the fourth quarter was $2 million, which was an improvement of 36% from the same quarter a year ago. Total net income from continuing operations for 2025 was approximately $5.1 million compared to a loss of $1.1 million in 2024. As Rob mentioned, we're pleased to have achieved another quarter and full year of record results and continued profitability. As of January 31, 2025, we had working capital of approximately $23.5 million, including approximately $5.3 million of cash on hand. The liquidity continued to be impacted by our operational requirements, such as acquiring inventory and executing on our backlog of orders. However, we did generate approximately $2.1 million of cash flow from operations in the fourth quarter. The company continues to maintain a clean, debt-free balance sheet with a simplified capital structure following the conversion of the preferred stock to common stock in the third quarter of 2025. We believe our solid footing and flexibility will further enhance stockholder value in future periods. I'll now pass it back over to Rob for some concluding comments.

Thanks, Mark. We're very pleased with where MIND is positioned today. We stabilized the company, restored it to profitability, and positioned ourselves to take advantage of opportunities within our existing and future markets. MIND continues to benefit from significant customer interest and engagement related to our Seamap product lines. We're also continuously exploring innovative ways to expand and repurpose our existing technology for new applications. These favorable demand trends and the market penetration of MIND's technology have resulted in a strong pipeline of orders and our improved visibility gives us confidence for sustained higher-level revenue in future periods. Our strong balance sheet simplifies the capital structure and streamlined operations also provide a great deal of flexibility from which to pursue various strategic alternatives as we strive for growth. I'm excited for us to actively chase these new initiatives and opportunities. I'd like to comment now on the current political and economic environment, specifically as it relates to tariffs and other trade restrictions. I'd remind everyone that the vast majority of our revenues are generated from our Singapore subsidiary. A similar proportion of our production activity takes place either in our Singapore or Malaysia facilities. Furthermore, in fiscal 2025, almost 95% of our revenue was derived from customers outside the United States. Importantly, our import and export activity through the United States is quite limited. Due to this, we do not currently anticipate a material direct impact on our business from the imposition of additional trade tariffs by the United States or other countries. Of course, this is a fluid situation and we, along with most other businesses, continue to monitor the situation. As I think you can see, we believe MIND has much going for it. However, we're still a small company, which presents certain challenges. We believe that in order to realize our potential and enhance shareholder value, MIND needs to add scale. We need to be bigger. There are a number of different ways we can achieve this. We can execute on identified organic growth opportunities. We can acquire assets from businesses that are similar to our current business, or we can combine with other organizations, whether it could even be an outright sale of the company. All of these options are open to us. We intend to strategically evaluate all opportunities that present themselves with a focus on what's best for MIND and its shareholders. As a result, we've retained Lucid Capital Markets to assist in identifying and analyzing these various opportunities. We currently do not see a need to raise additional capital and have no near-term plans to do so. However, we believe it’s prudent to prepare ourselves should such a need arise in the future. We want to ensure that we are positioned to act quickly and efficiently. Therefore, we intend to file a shelf registration statement with the Securities and Exchange Commission in the very near future. This will provide us with added financial flexibility. Our objective is to maintain the ability to pursue growth opportunities, whatever they may be. MIND is far better positioned as a company today than in recent years, and the macro environment remains advantageous, which gives us optimism for the future. Our Marine Technology products continue to penetrate a variety of industries and markets. We believe our backlog of firm orders and pipeline of pending orders and other prospects are reflective of the significant demand and market adoption of our product lines. While we're pleased with our record results for the fourth quarter, we do expect our first-quarter results to return to a more normalized level. However, we believe MIND is poised to capitalize on additional opportunities and deliver favorable results in coming quarters. As a result, we expect to deliver positive adjusted EBITDA and continued profitability as we progress through fiscal 2026 and beyond. Looking forward, we remain very well positioned for continued favorable results, which has us excited for the future. Our efforts to transform the company in recent years have proven fruitful, and the renewed strength of our balance sheet has opened the door for us to pursue value-enhancing strategic growth opportunities. We also remain encouraged by the current demand environment and customer engagement we are experiencing across our product lines. Additionally, our current visibility, healthy customer engagement, strong backlog, and robust pipeline give us optimism for an equally strong year ahead. We have a differentiated and market-leading suite of products, a favorable market environment, and a clean capital structure. We look forward to delivering another great year fiscal 2026 as we strive to maximize stockholder value. With that, operator, I think we can open the call up for some questions.

Thank you. Our first question comes from Tyson Bauer with KC Capital. Please proceed, Tyson, your line is live.

Yes. Good morning, gentlemen.

Hi, Tyson.

Congratulations on another strong quarter. Let's take a closer look at the pipeline and backlog, including what I call your unofficial backlog, which consists of aftermarket services expected to be between $15 million and $20 million this year. While we don't have exact timing, historically, that seems to be the range we can anticipate. Therefore, any backlog figure you mention should be viewed as that amount plus the $15 million to $20 million from ongoing parts of your business. Another aspect of your optimism appears to stem from the items you place in backlog, which are confirmed system sales backed by a purchase order. For instance, if a customer indicates their intention to order five systems this year and provides a purchase order for the first one, we expect to receive the remaining four as the year progresses, barring any complications. Does this assurance from a loyal repeat customer, akin to an accordion purchase order, contribute to your confidence in future orders as the year unfolds?

Yes, I might say it a little bit differently, but you're right conceptually. There are absolutely opportunities that we are highly confident about that aren't in backlog because we don't have the paper in hand yet. And the reason that is, Tyson, these are complex systems and so there's lots of negotiations that go back as to configuration and delivery times and things like that, so there is a great deal of interaction with the customer prior to actually getting that order in hand, so that gives us very high confidence in a number of areas. Also back to your point about the aftermarket business, that oftentimes is kind of a book and build situation where, while there will be some aftermarket activity in our backlog, reported backlog, it's not unusual to get an order today that we deliver next month. So that's a much quicker turn than with the larger complete systems, which tend to have multi-week or multi-month lead times. I think, conceptually, you have it right. And we have a very good visibility on items beyond our reported backlog.

And because of the customization of certain large systems, you might already be developing something in the design phase or specifically for that one vessel or use. You just don't have the final purchase order because the last customization details have not been finalized.

That's exactly right. As a matter of fact, in some cases we're confident enough we'll start building stuff. So we'll actually load stuff into our MRP system and start to build the process before we have the PO in hand. Now, not always. It depends on who the customer is and what the situation is, but there are certain situations where we are comfortable enough to do and make those commitments.

And just going to get this one out of the way. The shelf registration. Historically, that is what MIND and previously Mitcham has always done with a renewal with the 10-Ks each year. The only reason it was interrupted was because of the preferred stock event and converting. Otherwise, you would have been active all the way through this process. So we're just getting back to what we've always done in the past.

That's exactly right. While we were behind on the deferred dividends, we were not eligible to use that Form S3, which is the shelf registration. So I mean, people ask me why I do this, and I say, well, why not? This is a very common practice for companies to have available. It's inexpensive and not much work, so why wouldn't you do it?

I think in the past during calls or when things were a bit more stable, we had the organizational structure and manufacturing capacity to support potentially two times growth. We've always aimed to reach that benchmark of $100 million in revenue. Is that your target for the next phase, whenever it happens?

Yes, I don't know that I have a specific target. We certainly have substantial capacity to grow our existing business. I think to do it quickly, we want to add some things to it. As I inferred in my comments, we need to be bigger. We need some more scale. And I think the quicker we do that, the better without going out and doing something reckless. So that's what we're looking to do and looking at various ways we can do that.

And I guess we'll put in quotes, everything's on the table, not that it hasn't been in the past, but you've just officially put it in the press release that everything's on the table. You're not anchored to any one thing. Whatever is best for the shareholders, that's what you're going to do. Within the industry in the past years, purchase multiples have had a huge spread from say high single digits EBITDA multiples all the way to mid double digits EBITDA, obviously case by case and depending on growth and technology in there and we've seen some that are highly correlated to yourselves get some pretty healthy double-digit EBITDA multiples. Is that kind of the mindset if somebody comes in through the door with that kind of offer, you're going to take a serious look at it?

Well, obviously, we have to consider anything that comes in the door. And perhaps without getting specific, it just depends on the circumstances. Every deal looks different and what's the potential, what's the certainty. So, we're just going to evaluate each deal, if any, that comes through, or each opportunity that comes through, or things that we can uncover.

Okay. And last question for me. It appears just going through, we got a week left of the quarter. So we may walk back a little bit in Q1 on revenue due to the lumpiness that exists as part of the business. And then as we get into Q2 and forward, we really start to pick up steam again. Obviously, there could be some lumpiness in three and some of those quarters, but we walk back a little bit in Q1, solid quarter, build the backlog. Q2, we start to see some acceleration.

Yes, I think that's a fair statement. Obviously, you take the fourth quarter times four, that's probably a little bit aggressive for us right now. So we think we will come back some in the first quarter, but again, we feel really good about the full year.

That sounds great. Thanks a lot, gentlemen.

You bet, Tyson.

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

Thank you. It's always both taxing and exhausting to follow, Tyson, because so many of your questions get checked off.

Next time we'll let you go first, Ross.

No, no, I don't want to get Tyson angry with me. Probably be worse than getting my wife angry at me. Couple of questions in here. Your EBITDA margin for the quarter was 20%. Your EBITDA margin for the year was around 16.6%. It therefore indicates a certain sensitivity on the EBITDA margin to volume. Would we expect or should we expect your EBITDA margin for the current fiscal year you're in, the January 2026 fiscal year, to come in somewhere between those two numbers as we see overall top-line perform better than it did last year, but not necessarily in the way it did in the fourth quarter?

Yes, that's a great question. You are correct that there is sensitivity to volume. There’s no doubt that overhead is absorbed as revenue increases. However, I also believe we have opportunities to improve productivity and enhance our margins this year. Last year was a significant growth year for us, and we were heavily focused on manufacturing and production, which introduced some inefficiencies. We believe there are areas where we can make improvements. I hope we can maintain margins similar to what we observed late last year. In the last couple of quarters, we had a strong quarter with better margins, possibly in the second or third quarter. There is certainly downward pressure if revenues aren't as high, but I believe we can offset some of that, and that’s our goal.

Okay, that's fantastic, because that argues that we should expect to see the higher end, particularly as you grow. Can you give us a little bit more color on the potential order book outlook? What types of things are you looking at doing? There's a lot of talk. I get people talking to me about the plan to map the seabottom and lay 35,000 miles of cable and things of this nature. How do you fit into that? And where do you see the various industries you serve? There's been talk about sea mining for rare earths and other precious metals and the like, where do you see that going for you?

Our addressable market is expanding beyond traditional energy exploration, and we have already been involved in that. Our ultra-high resolution streamer systems are being utilized for ocean bottom mapping and survey purposes, including offshore installations like wind farms. There are numerous other applications we are observing, which indicates increased interest and demand for this type of equipment, suggesting positive prospects for us. Companies are beginning to explore other uses such as pipeline monitoring and undersea cables, making our equipment applicable in those areas. Survey companies are looking to acquire this equipment, and we are noticing our traditional customers venturing into these new areas as well, which is encouraging for our growth. Regarding mineral exploration, while our equipment has been used historically, it hasn't been a significant growth driver for us. Many governmental research organizations we've previously sold to are engaged in such activities, which only adds to our potential applications.

Okay. Yes, it would make sense. A great difference. Have you seen any progress in utilizing your systems in the defense space?

Not yet, but we are hopeful to kind of restart that. Frankly, we put that program pretty much on pause as we wanted to focus on near-term opportunities and give this thing back to profitability. We still believe there are some significant opportunities there, and so we've been reengaging in that activity and kind of looking at maybe a different way to approach that. And we'll talk more about that as time goes on, but I think that's still an interesting potential market for us.

Okay. I would also agree with Tyson's point. Everyone has a shelf, and it's wise to have it available. Honestly, I know some people may feel apprehensive about it, but since everyone does it, there's really no reason to be concerned. Now, regarding the internal growth opportunities, have you worked on these and are just waiting for the market to respond, or do you need to actively convince the market? Or is it more about design work and R&D that still needs to be completed?

A little bit of both. There's certainly some R&D work involved in some of this. And it's a little bit of both, frankly. There's some of it where we need the market to accept what we have, but there's also some design work that goes along with that. So a little bit of both.

Okay. To summarize as you approach the end of your fiscal first quarter for 2026, do you believe that 2026 will be a stronger year for the company compared to 2025 in terms of revenue, earnings, and overall performance?

I think marginally better. We're not going to see the same growth rate as we just saw this past year. But yes, I think marginally better. I mean, there's lots of things going to happen from the timing standpoint, but overall, we feel very good about things.

One suggestion I have is that if you're considering raising growth capital, you might want to look at how many smaller companies have taken a strategic approach. Instead of going to the market for capital, which often leads to a discounted raise, they seek a strategic buyer interested in forming or enhancing a relationship, which typically results in a better outcome. Once a price is set, the stock rarely reaches that level again. So if you're exploring options for internal growth capital rather than selling the company, that could be worth considering. I agree that the company's current size makes staying public challenging; it either needs to grow significantly or be monetized, or a combination of both at the right time. Look for potential investors or natural buyers for the future who might be willing to contribute capital to help seize growth opportunities instead of entering the market and issuing equity, where the stock could be shorted beforehand.

Understood. I appreciate that.

You all have done an impressive job. The turnaround in this company has been remarkable. I haven't seen something change so quickly and effectively since the Mariners traded Randy Johnson to the Astros.

That was a while ago. All right, Ross, I appreciate it.

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

Just like to thank everyone for joining us today and look forward to talking to you again here in a few weeks after our first quarter. 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.