Greetings and welcome to MIND Technology's earnings conference call for the first quarter of fiscal 2026. This call is being recorded. I'm pleased to introduce your host, Zach Vaughan. Thank you, and you may begin.

Thank you, operator. Good morning, and welcome to the MIND Technology Fiscal 2026 First 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'd 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 June 18. 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, June 11, 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 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.

Thank you, Zach, and thanks to everyone for joining us today. I will highlight some aspects from the quarter. Mark will follow with a detailed financial update, and I will conclude with some comments on our outlook. As we expected, MIND's first-quarter results were lower compared to a record fourth quarter. The decrease was steeper than we initially thought because a few customers could not receive approximately $5.5 million in orders before the quarter ended. This was due to delays in receiving certain third-party components or issues with shipping arrangements. However, these delays are merely timing issues, not lost sales. As I have mentioned before, a few weeks or days of delay on a large order can significantly affect a particular period. We anticipate delivering these orders in the second quarter. Despite these setbacks, operational cash flow grew again this quarter to about $4.1 million, indicating our improved liquidity. We are optimistic about the rest of this fiscal year, despite the first quarter's shortfall, and we expect a much stronger second quarter. MIND has become a more resilient business with better order visibility, a robust demand environment, and a significantly improved balance sheet and capital structure. We will likely face additional timing issues in the future, but we are making efforts to limit their impact on our financial results. We are focused on managing our supply chain effectively to meet our customers’ delivery needs. Our inventory levels over the past six months demonstrate this, as we are now utilizing our better visibility to reduce inventory balances. Therefore, we believe MIND is well-positioned for growth and improved financial outcomes in the coming periods. As of April 30, 2025, our backlog of firm orders was approximately $21 million, up from $16.2 million on January 31, 2025, and down from about $31 million on April 30, 2024. In addition to this backlog, we have a strong pipeline of pending orders and prospects that far exceed our current backlog of received orders. The order we announced yesterday for our GunLink 4000 system is a prime example of these prospects. The combination of our current backlog and this active pipeline suggests positive financial performance as we advance through fiscal 2026 and beyond. As summer approaches, I want to remind everyone that new orders do not come in consistently throughout the year and can be sporadic. Variations in order flow are typical and not a cause for concern. We believe that recent uncertainties in the global economy have caused some delays in purchase commitments. Nevertheless, we have identified new opportunities that we believe will positively impact the remainder of this fiscal year and beyond. We continue to derive benefits from our three main product lines: GunLink source controllers, BuoyLink positioning systems, and SeaLink streamer systems. All three significantly contribute to our backlog and will help improve financial results moving forward. Overall, our Seamap business boasts a strong market position with each of its products, and in some cases, a dominant position. Our backlog and order pipeline consist mainly of these products, and I am confident that favorable market conditions will help us secure many new orders in the future. We are also seeing new promising opportunities related to our products that I hope to update you on later this year. Another key factor contributing to our improved financial results is our aftermarket business. Historically, around 40% of our revenue comes from aftermarket activities. However, in the first quarter of this year, aftermarket activities represented approximately 71% of our revenues, which was expected due to the deferral of some system sales. As our installed base of Seamap products continues to grow, we also see increased chances for aftermarket opportunities such as spare parts, repairs, and support services. Our products often operate in harsh conditions, which makes damage common and unavoidable. We are nearing the completion of our facility expansion in Huntsville, Texas, which will enable us to provide additional repair and manufacturing services from that location. Although our revenue-generating activities were impacted during this expansion, we expect this location to contribute significantly to our revenue once modifications are completed. Now turning to our results, marine technology product revenues for the first quarter of fiscal 2026 were $7.9 million. We anticipated a natural decline in revenue after an outstanding fourth quarter, but approximately $5.5 million in orders were pushed to the next period. We will continue to take advantage of macro trends and customer engagement to boost order flow and improve results. We are actively improving our execution, efficiency, and cost structure, and we expect these initiatives to yield positive results in future periods. Despite broader economic uncertainties recently, general market conditions in the marine technology sector remain strong. We are seeing numerous opportunities and continue to respond to inquiries and requests for quotes. Thus, we are increasing our investments to further develop our next generation of marine technology products to meet our customers' evolving needs. I am confident that our unique approach and best-in-class product lineup will continue to provide us with a competitive edge in addressing the demand in the marine technology industry. Now I will hand it over to Mark for a detailed look at our first quarter financial results.

Thanks, Rob, and good morning, everyone. As Rob mentioned earlier, revenues from marine technology product sales totaled $7.9 million for the quarter, which was down approximately 18% from the same period a year ago. Revenue was impacted by the timing of $5.5 million of orders that were unable to be delivered prior to quarter end. We expect these orders to be delivered in the second quarter. We're continuing to see strength in all our key markets and the favorable customer demand environment gives us confidence for improved results over the balance of fiscal 2026 and beyond. First quarter gross profit was $3.3 million. This represents a gross profit margin of 42% for the quarter. Both of these metrics were impacted by lower revenue during the quarter, stemming from the delivery delays addressed in Rob's opening comments. The lower revenue resulted in less cost absorption and drove the year-over-year decline. Revenue increases in the second quarter and our cost structure continue to benefit from greater production efficiencies; we expect these metrics to improve. Our general and administrative expenses were approximately $3.4 million for the first quarter of fiscal 2026. This was up both sequentially and compared to the same quarter a year ago. The sequential increase is partially expected due to normal seasonality of certain costs. However, our first quarter expense included nonrecurring costs related to a restructuring of our U.K. operation and tax analysis surrounding the preferred stock conversion last year. I think it's worth noting that the tax analysis confirmed our understanding that the preferred stock conversion did not limit or impair our U.S. tax attributes, primarily tax loss carryforwards. Our research and development expense for the first quarter was $380,000, which was down compared to the same quarter a year ago. Consistent with prior periods, these costs were largely directed towards the development of our next-generation streamer system. Operating loss for the first quarter was approximately $658,000 compared to operating income of $730,000 in the same quarter a year ago. First quarter adjusted EBITDA was a loss of approximately $179,000 compared to adjusted EBITDA of $1.5 million in the first quarter a year ago. As I mentioned earlier, the first quarter was impacted by approximately $250,000 of nonrecurring expenses related to restructuring and tax-related professional fees that would have otherwise resulted in positive adjusted EBITDA for the quarter. Net loss for the first quarter was approximately $970,000 compared to net income of $954,000 in the same quarter a year ago. As of April 30, 2025, we had working capital of approximately $22.8 million, including $9.2 million of cash on hand. Liquidity continues to be impacted by our operational requirements such as acquiring inventory and executing on our backlog of orders. However, we did generate approximately $4.1 million of cash flow from operations in the first quarter. This was an improvement of approximately 98% sequentially. 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 fiscal 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. Our efforts to transform the company in recent years have positioned MIND for long-term success. The strength of our balance sheet has made MIND more resilient and financially flexible while allowing us to pursue value-enhancing strategic opportunities for growth. We continue to see significant customer interest and engagement regarding our Seamap product lines. Our current visibility, strong backlog, and robust pipeline give us optimism for favorable financial performance for the remainder of this year. We are also exploring innovative ways to expand and repurpose our existing technology for new applications. I am excited for us to actively pursue these new initiatives and opportunities in the upcoming periods. Given that we spoke with you just over a month ago, there have not been significant changes in the political and economic landscape. There remains a moderate level of uncertainty in the market regarding tariffs and trade restrictions. The majority of our revenues come from our Singapore subsidiary, and a similar proportion of our production occurs in our Singapore and Malaysia facilities. Furthermore, in fiscal 2025, nearly 95% of our revenue was generated from customers outside the United States, meaning our import and export activity through the U.S. is quite limited. Therefore, we do not anticipate a material direct impact on our business from additional tariffs imposed by the United States or other countries. As I've mentioned, uncertainty in the global economic environment can lead customers to postpone purchasing decisions. This situation is fluid, and we are monitoring the evolving dynamics. As we noted last quarter, while our recent momentum has been encouraging, MIND remains a small company, which comes with inherent challenges. We have taken necessary steps to strategically position ourselves for growth and enhance shareholder value. We will evaluate all opportunities with a focus on adding scale, expanding our offerings, and growing existing product lines. This approach should strengthen MIND and improve its market standing for the benefit of shareholders. The macro environment remains favorable for MIND, fostering optimism for the future. Our marine technology products continue to penetrate various industries and markets. We believe our backlog of firm orders and pipeline of pending and prospective orders reflects strong demand and market adoption of our product lines. Consequently, we expect a meaningful revenue increase in the current quarter, enabling us to achieve positive adjusted EBITDA and return to profitability in the second quarter. Barring any unforeseen issues, we expect to maintain this standard for the remainder of the year. Looking ahead, we will focus on what we can control. Customer delivery requirements and other factors may impact future periods; however, we anticipate a general trend of improved results in fiscal 2026 and beyond. We have a solid backlog and a substantial pipeline of pending and highly confident orders, supported by strong customer interest and engagement in our key markets. We are also pursuing several new opportunities in our existing and future markets, which I believe will yield positive results soon. We have a differentiated, market-leading suite of products, a favorable market environment, and a solid capital structure. I am confident we will deliver another great year in fiscal 2026 as we strive to enhance shareholder value. We can now open the call for questions.

Our first question is from Tyson Bauer with KC Capital.

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

Partially delivered. There was one large system and a few other orders, so it's a mix. It's not completely delivered yet, but it will be soon.

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?

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

Okay. 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?

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

Now the problem with that is you have to generate in the U.S. You just commented 95% is out of Singapore. So how do you, as a management team, unlock that value? And either that comes from U.S.-generated business or partnering with somebody who has U.S. business that can utilize your tax carryforward. 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.

You hear a lot of different figures regarding that. It really hinges on the specifics, Tyson. You need to be cautious about changes in ownership, which we can manage, but there are certainly ways to capitalize on that and shift more income to the U.S. Under current U.S. tax laws, worldwide income is taxed with allowances for overseas payments, so there is some advantage there. We see potential in utilizing that. While I won't speculate on whether it's 25% of face value, we believe there is indeed value to be gained.

I mean if it was, that's literally half of your enterprise value is just in something that's in an accounting treatment.

That's the way the numbers work.

Yes. That's really untapped value that's gone unrecognized by the marketplace. A couple of days after you reported last quarter or the fiscal year-end, we see Trump doing an executive order for deep sea offshore resources. China is in the news for increasing their activity for deep sea mining and rare earth elements. Those things may be further down the line, but there seems to be a lot more attention in and activity in regards to those industries that could potentially utilize your technology in finding these things. Are you seeing that on your customer base that, that is an area and an opportunity that could develop in the years coming?

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.

Now in the past, you've done some master supply agreements with some of the bigger worldwide customers, especially those out of Norway, Scandinavian countries. Do you have any currently active? And is that an approach that you see as favorable for MIND as you go forward to either renew or to develop those master supply type agreements?

We do have agreements with some of our larger customers, which serve as a framework for general terms. While these agreements don't cover specific orders, they provide a solid foundation. We currently have these in place and are looking to establish more. This helps us facilitate new business.

Is it not just an accordion feature that, okay, this is going to be a cost-plus type contract or otherwise. So we can expedite the process on getting orders and getting production out to those customers?

That's correct. So you've agreed to standard terms and conditions, and you may have also agreed to some pricing parameters. This certainly makes it much quicker for new orders to come through, and that has definitely been our experience.

Okay. New streamer system coming on later this year. The interest you've garnered so far, have you been able to go out and demonstrate this to your customers? And what causes the customer to go with the older technology as opposed to the new technology that's coming or the new system that's coming? And will we start to see preorders for that as we get toward the back half of the year?

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. It's more of an enhancement and allows us to address some additional markets. And let me just leave it at that at this point and not get too detailed about that.

Are you observing any favorable trends in bid margins as we move forward, or are they mostly stable?

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

Outside of the normal course of marine seismic activity that includes renewable energy, offshore wind, rare earth elements, oil, and gas, you mentioned new opportunities and expanding your addressable market. Do you have any additional insights on that?

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. We pulled back on that as we try to refocus the company to become profitable, which we've done. So that's an area that we're reexamining today as to how we might we think that basic concept is still very valid. So we are just looking at how do we best address that and maybe reenter that marketplace.

Okay. And that goes beyond your AI spectrum and your oceans agreement that you have. This is...

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

First, congratulations on the real improvement on the balance sheet and picking up on Tyson's line of reasoning about the value of the tax losses adding to your cash. You really have a company selling at $3 or less a share in the marketplace with a lot of earnings potential, which the market hasn't fully recognized yet, but eventually, they will. You've done a great job. Can you explain what happened with the $5.5 million and how it affected your unrecovered costs? It sounds like you built out a lot of that and had much of it ready, but weren't able to ship it out. How did that influence your earnings for the quarter?

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. So...

Yes, it would have been on the gross profit level, something like $0.25 a share or something of that nature.

That sounds about right.

Yes, which once again goes to the power. And as I said, congratulations on that. And you announced an order yesterday. Can you give us an idea how has the backlog moved since the end of the quarter you're reporting today?

Gosh, I want to be careful what I say there is because we add and subtract things every day. So there's things going in and out all the time. That certainly is an add to the backlog. What's interesting about that, Ross, is that's a prospect that frankly, if we're having this discussion 2 months ago, that wasn't on our radar. So that's really interesting to me that that's a new opportunity that's arisen recently. And there's been some others that we've now have visibility on. I don't have the order yet, but we have visibility of prospects that we didn't have 2, 3 months ago, which that's really encouraging me. Now some of that is a next fiscal year activity for sure, but that's still good news, I think.

When you mention a new customer, are you referring to a new use case or someone from your existing areas who had not previously done business with you but is now engaging with you?

It's not a new customer, but it's someone we've worked with before. They were already an existing customer, but they have a new need now.

Okay. Interesting. Interesting. We were talking about, obviously, with your tax losses, you talked about you've been building up your Texas repair refurbishment capability. A couple of things. One is how much money have you put into that facility? And how does that coming to be brought online impact your income statement and the cash flows?

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, something like that. Just about done with that. We think the activities there will then start to ramp up. We won't turn it on completely, but we think this can be several million dollars a year of additional revenue for us. Again, starting here soon and then kind of ramping up through the balance of this year and into next year. And to your point, that's a nice piece of business for us and that it's more recurring, more predictable, and also it's U.S.-based. So it helps us utilize those tax losses.

That's just where I was going with that, the fact that it's actually going to start to help build that up and therefore, that income will have a significant tax advantage here in the U.S. for you.

Correct. That's right.

I noticed that there seems to be an arrangement involving a German company. Can you provide some background on that and explain what it is related to?

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 and kind of jointly promote that. But we'll have more to say about that in the near future.

It’s interesting because you’ve been discussing this, and Tyson asked you about it. Your comments in your release mentioned new opportunities, which seem to involve both new customers and new business lines. Is that correct?

Absolutely. I mean one of our objectives is to expand our offerings. So we have more kit to offer our existing customers and new customers. So yes, most definitely, that's part of the strategy, most definitely.

I believe Tyson covered everything I was considering. My list of questions becomes quite short after he speaks. I want to congratulate you all on your accomplishments. As Tyson mentioned, the financial assets of the company are valued at well over half of the total value of the business currently. Is it safe to assume that when we look for a yearly model instead of a quarterly one, the revenue is projected to be between $48 million and $50 million? Looking at the numbers, if we had managed to ship everything, it could have exceeded $13 million. You had a strong fourth quarter, honestly stronger than I anticipated, excluding the shipping issues. Should we consider this type of performance when discussing numbers and the potential to push towards a $50 million annual run rate?

Yes, roughly. I think we'd be really happy if we reached that point this year. That would be two consecutive years of progress in that direction. But that's essentially where we are, I believe.

Okay. And your margins should be in line to perhaps a little bit better as we push forward.

Yes, I think that's right. Margin...

Yes. You guys have done a great job. The company is worth a lot more than it's trading at.

Our next question is from Gregg Hillman, a private investor.

I wanted to ask you about the sale of Klein Marine Systems. I think it went for like 2x revenue, roughly, something like that. And I was wondering if in terms of metrics for what the value of your company is now, would that fall into that area?

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. So I think that's not necessarily a metric that would apply, but it is one data point for sure.

Okay. In terms of the sale, did you engage an investment bank or identify strategic and financial buyers for a bidding process? Or was the sale conducted differently? Did your cash needs at that time influence the price?

We did have a banker assist in the process. But I would say it's more we identify potential buyers and approach potential buyers. They're all industry partners, we knew. So it wasn't like an auction, the typical investment banker process. We certainly were in a different financial position then. And so we had a need, we think, to make that transaction. So I think that certainly did have some impact on our motivation. So did it impact the ultimate price? Who knows? But certainly, we were motivated to sell.

Okay. And just another thing, basically, is offshore drilling more environmentally friendly than fracking onshore?

Gosh, I'm not sure how to answer that. That's a huge question. I mean I think there are opinions on both sides of those arguments for both things. So I'm not sure you can kind of compare the two. I think there are issues for both to be addressed or to be aware of, but I think they both are overall very safe and very effective. And so I think the concerns are, in my opinion, at least are overtalked about.

Okay. And just another kind of macro thing. I think 37% of world oil production comes from offshore. How is that trending over time? Or where do you see that going?

Well, I think that trend continues probably to increase. I think what we're seeing is the general attitude or general trend in offshore exploration is positive from a long-term standpoint. And there are short-term disruptions and the price of oil today really, in my opinion, doesn't impact what people are doing from an exploration standpoint because it's much longer-term horizon. So I think the general trend is one of being pretty bullish about offshore exploration and offshore production.

Okay. And those companies that have databases of mapping and sell out the databases, do you have any like valuable data that you sell?

No, all we are doing is providing equipment that people use to gather data. We don't gather the data ourselves, and we don't possess the data at all. That's not our focus.

Can you clarify what that software business entails? I'm not sure I understand. Don't you have a software suite?

It was something we actually retained from the Klein sale with our Spectral AI. That's really limited to side-scan sonar, and we actually are promoting that through the company that bought Klein, General Oceans. So that has not produced significant revenue at all to us. It's been de minimis so far. So I wouldn't put a lot of value on that on a go-forward basis. I think it's something that's interesting that might be able to generate some things in the future, but it's not really our focus right now.

Okay. And then finally, could you say something on the human resource side of the company, what you're doing to develop people? And also whether you have really like superstar engineers that can come up with patentable stuff?

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. We've got really smart production people. We've got really smart admin people. So we try to give these guys the tools they need to do those jobs and give them a good career path. Most of our employees are outside the U.S., as you might imagine. So a little different environment in some cases. But I wouldn't say there's 1 or 2 superstars that we keep locked in the closet to kind of develop new things. I think we have a broad bench of really good people that do those sort of things for us.

That will conclude our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Okay. I'd like to thank everyone for joining us today and look forward to talking to you again here in a few weeks, months after our second 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.