Greetings. Welcome to MIND Technology's Second Quarter 2026 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan. Thank you. Mr. Vaughan, you may begin.

Thank you, operator. Good morning, and welcome to MIND Technology's Fiscal 2026 Second Quarter Earnings Conference Call. We appreciate all of you joining us today. With me are Rob Capps, President and Chief Executive Officer; and Mark Cox, Vice President and Chief Financial Officer. Before I turn the call over to Rob, I have a few items to cover. If you would like to listen to a replay of today's call, it will be available for 90 days via webcast by going to the Investor Relations section of the company's website at mind-technology.com or via a recorded instant replay until September 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, September 10, 2025, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties, and other factors, many of which the company is unable to predict or control that may cause the company's actual future financial 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.

Thanks, Zach, and thank you all 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 delivered strong results for the second quarter that were in line with our expectations. We were able to get back on track and return to profitability after certain delivery delays in the first quarter. We generated increased second quarter Seamap revenues, driven by system sales and the growing contributions from our aftermarket activities, which I'll touch on in more detail shortly. Our business continues to operate efficiently, and our execution is generating resilient results. Despite some economic uncertainty, we are finding ways to capitalize on pockets of demand, and our near-term visibility bodes well for the balance of this fiscal year. MIND remains strategically positioned for growth, favorable financial results, and continued profitability in the coming periods. Our backlog of firm orders as of July 31, 2025, was approximately $12.8 million, compared to $21.1 million as of April 30, 2025, and approximately $26 million as of July 31, 2024. Now, I'll remind you that it's not uncommon to see positives in order activity throughout the year, especially during the summer months and more specifically, our second quarter. Therefore, this lower sequential backlog is not unexpected after the substantial deliveries we made this quarter. 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. There are a number of pending orders in various stages that we are highly confident in. Let me give you a little color on that. There are two orders in particular, totaling about $10 million that we believe are imminent. We've been in almost constant contact with this customer finalizing technical specifications, which is necessary before the formal purchase orders are issued. These orders are not in our backlog, but we are highly confident that they will be received soon. Our pipeline of potential orders remains strong. We believe we will continue to convert these into firm orders. Within our backlog, our orders for MIND consist of three main product lines: GunLink source controllers, BuoyLink positioning systems, and SeaLink streamer systems. All three of these product lines provide the foundation for our business and will continue to drive our financial results going forward. As a whole, our Seamap business continues to enjoy a strong market position in each of its products, even a dominant position in some cases. As I mentioned earlier, another component that has meaningfully contributed to our improved financial results is our aftermarket business. This consists of spare parts, repair, service, and other support activities. Contribution as a percentage of revenue fluctuates from quarter to quarter based on product mix and the timing of larger system deliveries. However, in the first six months of this fiscal year, aftermarket revenue accounted for about 68% of our total revenues. I'm pleased that our aftermarket activity has continued to meaningfully support revenue. Additionally, this often carries higher margins since these orders normally do not attract discounts as might a full system order. As our installed base of Seamap products continues to expand, with it comes the prospect for increased aftermarket activity. Now, to address this growing aftermarket opportunity, and as I highlighted last quarter, we recently expanded our manufacturing and repair facility in Huntsville, Texas. This expansion provides us with additional floor space and other enhancements that will allow our MIND Maritime Acoustics unit to efficiently take on significantly larger manufacturing and product repair projects from that location. This increased capacity will be used to further support our existing Seamap products, newly developed products, and services to third parties. Now, turning to our results. Marine Technology product revenues for the second quarter of fiscal 2026 were $13.6 million. This was a healthy improvement from the same quarter last year. And despite the noise from the first quarter, we 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 favorable results. We will continue to capitalize on opportunities as they present themselves to stimulate order flow and generate improved returns in future periods. Although we are pleased with our results for the second quarter and maintain our near-term optimism, the current market and global economic environment remain impacted by various macro uncertainties that are limiting visibility into next year. General market conditions within the marine technology space continue to be good. However, at this stage, some customers are taking a more wait-and-see approach. This has caused some delays in purchase commitments. Despite this limited visibility, we remain encouraged by the favorable long-term market dynamics within the marine technology industry and expect customers to firm up their calendar 2026 plans in the coming months. I continue to believe that we have a differentiated approach and best-in-class suite of products that will give us a competitive advantage. To maintain this competitive 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, I'll let Mark walk you through our second quarter financial results in a bit more detail.

Thanks, Rob, and good morning, everyone. As Rob mentioned earlier, revenues from marine technology product sales totaled $13.6 million for the quarter, which was up approximately 35% from the same period a year ago. We are continuing to see strength in all our key markets, and the current favorable customer demand environment and our backlog give us confidence for solid results in the second half of fiscal 2026. Second quarter gross profit was $6.8 million. This represents a gross profit margin of 50% for the quarter. These metrics improved both sequentially and year-over-year due primarily to product mix, which included a greater proportion of spare parts and other aftermarket activity. Additionally, higher revenue in the quarter helped absorb overhead costs. 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 $3.6 million for the second quarter 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, such as incentive and stock-based compensation. Our research and development expense for the second quarter was $311,000, which was down slightly compared to the same quarter a year ago. Consistent with prior periods, these costs were largely directed toward the development and enhancement of our streamer and source controller arm. Operating income for the second quarter was approximately $2.7 million, which represents an increase of approximately 86% when compared to operating income of $1.4 million in the same quarter a year ago. Second quarter adjusted EBITDA was approximately $3.1 million compared to adjusted EBITDA of $1.8 million in the second quarter a year ago. Net income for the second quarter was approximately $1.9 million compared to net income of $798,000 in the same quarter a year ago. As of July 31, 2025, we had working capital of approximately $25.1 million, including $7.8 million of cash on hand. Liquidity is impacted by the timing of receipts and expenditures as well as our operational requirements, such as acquiring inventory and executing on our backlog of orders. 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 well positioned for long-term success, and we are focused on enhancing and maximizing stockholder value. We've taken necessary steps to strategically position the company to realize its full potential. We intend to evaluate all suitable opportunities with the goal of maintaining financial flexibility, preserving our balance sheet, adding scale, expanding offerings, and growing existing product lines. This proactive approach should enable us to strengthen MIND and improve its standing within the market for the benefit of all stockholders. Operationally, we have a streamlined footprint, but our technological innovation allows us to expand our capabilities and address new opportunities. We are constantly evaluating unique ways to repurpose our existing technology for new applications. I'm excited to pursue these new opportunities in the coming periods. We look forward to providing an update as we strive for growth. Given our current visibility, we remain optimistic about the balance of this fiscal year. Customer interest and engagement related to our Seamap product lines remain steady. However, the prevalent uncertainty within the market has slowed some customer decision-making for the next year. Despite this, the current strength of our existing backlog and pipeline of orders gives us optimism for favorable financial performance in the coming quarters. We expect customers to solidify their plans for next year in the coming months, and I look forward to sharing updates as our longer-term pipeline takes shape. Now, let me take a moment to address our recent actions to establish an at-the-market (ATM) program and the stock buyback program. I know some of you have questioned these steps or at least the timing of these steps. We believe that these preparatory actions are entirely consistent with and supportive of our stated objective of enhancing stockholder value by whatever means available. The ATM facility enables us to raise capital if and when we believe circumstances dictate and in amounts we think appropriate. By having the program in place in advance, we can act quickly and efficiently to take advantage of opportunities. These opportunities could include acquisitions of businesses or product lines to help grow our business. We intend to be very disciplined in our approach to this, weighing the expected return against the cost of capital. The cost of additional capital, essentially the price of our stock at the time, will always be an important consideration. Conversely, market conditions and our view of the prospects for our business might indicate that buying our own stock is the best use of our capital. By establishing the buyback program now, we can react quickly and efficiently should circumstances dictate. There's always a chance that timing issues or customer delivery delays, like the ones we experienced earlier this year, could impact our results in any given period. However, our current belief is that our results for fiscal 2026 will look similar to that of fiscal 2025. Our marine technology products continue to penetrate a variety of industries and markets. We believe our backlog of firm orders and the pipeline of pending orders and other prospects reflects strong demand and market adoption of our product lines. As a result, we have visibility that gives us confidence for continued favorable financial results in the near future. Barring any unforeseen circumstances, we expect to achieve positive adjusted EBITDA and profitability in each of the remaining quarters of fiscal 2026 and on a full-year basis. Looking forward, we are encouraged by the setup for the back half of this year. With a solid existing backlog and pipeline of pending and highly qualified orders, we believe this will prove advantageous as we aim to deliver consistently favorable financial results. We are also pursuing several new opportunities within our current and future markets, which I'm confident will yield positive results. We will remain focused on controlling what we can control, which includes optimizing our operations and efficiently managing our costs. Customer delivery requirements and other factors may impact future periods, but we are doing everything in our power to mitigate these impacts on our financial results. We have a differentiated and market-leading suite of products, a favorable market environment, and a clean capital structure. We look forward to sharing updates on our strategic actions in the coming periods as we strive to enhance stockholder value. With that, operator, I think we can now open the call up for some questions.

Our first question is from Tyson Bauer with KC Capital.

Just a couple of clarifications on some of the numbers. The parts and services revenue, given you're at 68% for the full year, so that was roughly about $7 million in the quarter.

That's probably about right. I don't have the number in front of me, but that's in the ballpark.

All right. No, that's how the math works. Does that include any catch-up from Huntsville, where you had kind of the delays until you got that capital project done? Or is that $7 million from what we've seen in the first quarter, second quarter, a fairly good run rate as we go through the second half of the year?

Yes, there’s really no catch-up from Huntsville as the first answer. I’m hesitant to label that as a run rate. I believe it indicates the direction of the trend. Could it be less next quarter? Yes, it could, because there will still be some fluctuations. However, it's clear that that line is trending upward and is expected to become more consistent as we move forward.

And should we see a boost given the expansion in Huntsville at some point going forward?

I think we will. We'll be ramping up that operation for the balance of this year and into next year. So I think we'll see that start to increase.

Okay. You had a $4.5 million delayed order in Q1 that hit in Q2, at least that was what was related to us on the last conference call. Given the $7 million, that leaves about $2 million in new activity in the quarter to hit your revenue level, which I find interesting with your backlog because you ended April with $21.1 million, you had a $4 million order on June 10, a GunLink system. So if you deliver that $4.5 million, you had $2 million in new activity, backlog looks like it should be closer to $18 million, ended up $12.8 million. Were there a cancellation? Were there a reclassification? Just kind of where is that variance of $6 million.

Yes. So a couple of things. There's no cancellations for sure. Some of the aftermarket business will be in backlog. So we'll get an order for spare parts that will be in backlog at some point in time. So that's part of it. And I'm not sure the $7 million is exactly the number for the quarter. Again, I don't have that in front of me. So I think the combination of those things makes up that difference.

Okay. As we go forward, you made a comment that fiscal '26 should be now similar to fiscal '25, which is a little different. We are almost like the Fed speak here. Previously, you said that fiscal '25. So you have a little bit of an adjustment there. The implication is with your expectation of parts and services, that's about basically two or three more full systems delivered before year-end to hit those numbers. Does that sound about right? And if we're going to get $10 million immediately on new orders, it almost seems like we need to get another $10 million just to feel comfortable that that's achievable for the second half of the year.

Yes. The timing of some of these orders influences when we can fulfill them, and there’s some uncertainty regarding when we will receive the new orders and their delivery dates. We do have more systems planned, including the two orders we mentioned earlier. We are trying to give a clear perspective, and I think it aligns with what we’ve communicated previously. Essentially, we are maintaining a similar outlook, but I want to clarify that the growth this fiscal year may not match what we experienced before. We anticipate a more stable growth rate, and that trend seems to be holding. There could be fluctuations of $2 million to $4 million between quarters due to delivery schedules, as we experienced in the first quarter. Overall, our outlook for the year remains consistent with our previous statements.

Okay. This is the time of the year where you typically have received a large annual order from our Scandinavian friends, companies over there. Are they still in that time schedule? Or are they cautious also?

I think there is some cautiousness in the marketplace. There has been some softening in the seismic market at least, at least temporarily. So I think there's some caution there. I think people have been careful about CapEx commitments right now. So I think, again, that's what we're trying to indicate. And the one reason I think we've seen the backlog down a bit from where it had been. But I think, again, the long-term prospects, the overall activity, offshore exploration is very bullish. So I think it's just a matter of timing from that standpoint. So again, people are just being cautious about making those commitments until they have their business in hand. I think it's across the board. That's just not Scandinavia; that's across the board.

Okay. I have one last question before I let others address your capital topics. Considering the statements coming from the administration, could you clarify what is substantiated and what is merely sensationalism? There seems to be a moratorium on offshore wind projects that casts a negative light on wind energy, particularly offshore initiatives. However, there's also a push for more rare earth resources and deep-sea mapping. It appears that some of these initiatives might be more aspirational than practical at this stage. Could you clarify what is accurate and what is misleading in these headlines concerning these issues that impact your business?

I wish I had all the answers; if I did, I wouldn’t need to work. What we're observing is that we're selling to individuals involved in various types of survey work, including energy exploration, wind farm installations, carbon capture projects, and rare earth exploration. They are engaged in many different activities, and we don't always know the specific purposes for which they are purchasing our equipment. While sometimes we can infer this from the configuration, it's not always clear. It's true there has been a slowdown in offshore wind activity in the U.S. However, we are witnessing ongoing activity in other parts of the world, making it a good market for us. I believe that the current market cautiousness is related to uncertainties about the macroeconomic situation and the actions of this administration. Therefore, it's challenging to accurately predict future developments. Nevertheless, I am optimistic that these issues will eventually resolve in the long run, and the outlook remains positive.

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

First, great quarter. I will admit I was somewhat surprised. I've been in this business for a little over 40 years, and I've never seen an ATM and a buyback announced in the same press release, but it's always good to learn. I'd like you to discuss your acquisition strategy. What makes the most sense for utilizing the ATM if an interesting acquisition arises? What are you looking for? Are you focused on products that fit into your current structure, or are you seeking something additive? Additionally, what are your thoughts on dilution? You've mentioned the importance of doing right by shareholders and concerns about share price. Have you considered what parameters you would set for any acquisition you might pursue?

Yes. What we're primarily seeking are opportunities that enhance what we already do. We prefer not to make significant leaps or take on new clients that aren't aligned with our existing business. We're focused on pursuits that can be seamlessly integrated into our operations, rather than embarking on a large-scale acquisition of another company. We're interested in initiatives that connect with our customer base and leverage technologies we already understand, as these carry a lower risk. Every acquisition involves some risk, but the more familiar we are with it and the closer it aligns with our current activities, the less that risk tends to be. That's the type of opportunity we're aiming for.

Okay. So products or small divisions of other companies, things of that nature is what you'd be looking to do?

Yes, that's the ideal situation for us.

Okay. Last quarter, we talked about a deal with a company that's an innovative newcomer into the mapping space and the like. Has there been any progress with that?

There has been progress. That project is ongoing right now, and we are currently in the middle of it. I can't share any details at the moment for proprietary reasons, but it is progressing well.

Looking ahead to one, two, or three years from now, what kind of opportunities do you envision?

In that deal specifically? Yes. Again, I think I don't want to get too specific on that. I think, again, that is a product that would be used by our existing customer base, so it will be easy for us to sell in partnership with the other company. So it's an easy step-out for us. It's a technology that's very familiar to us. Is it going to double the company? No. But is it additive? Can it add a few million dollars? Yes. That's that sort of magnitude, just to give you a sense of it. So again, relatively low risk, relatively low investment at this point. So that's the ideal situation for us.

I might have missed it, but did you mention what cash was at the end of the quarter?

I think it's about $7.2 million.

Yes.

$7.2 million.

Can you discuss the opportunities related to Huntsville? What role will Huntsville play, and what business opportunities do you foresee arising from it? Will this be significant? By significant, do you anticipate it could contribute around 10% or more to annual revenues, or is the impact likely to be less than that?

Well, I think it's in that magnitude if not a little bit more, frankly. So what we are doing is we are repairing products that have been manufactured by others, so third-party products. We're doing some repair work, and not just one customer. We are doing some ancillary work for Seamap in Singapore. There are some things that we can do here effectively or efficiently that help expand their capacity. So it's new products as well as some support activities as well. We also, in some cases, are doing some manufacturing for third parties of their designs. So it's not our IP; it's their IP that we're building for them. So it's really a combination of those things. The other thing that's interesting is if we're able to move our technology into the maritime security space, as we've talked about, and again, it's still very early days there, being able to do that in the United States is a real plus for security reasons. So that's another reason we want to expand that still.

And also for tax and cash flow reasons then, right?

Absolutely right. For cash flow, for sure. We don't have to bring money back from overseas. Obviously, we have tax loss carry forward. So if we can generate U.S. income, we can shelter that very efficiently. You're exactly right about that.

That would be significant as well. Regarding your comments about this year and last year, the top line grew by approximately 29%. This year, it has been growing at around a 9% rate. Listening to you and Tyson, I get the impression that you might not want to fully commit, but it seems like you are aiming for a similar continuation of growth in the second half as in the first half, possibly in the high single digits or low double digits range. Am I misunderstanding that?

No, you're not wrong. What I'm trying to emphasize is that, based on what we experienced in the first quarter, that situation could happen again, which could significantly affect our growth rate. Overall, we're observing opportunities for perhaps a single-digit to high single-digit growth rate. However, it's challenging to say with certainty whether that will occur within this time frame. That’s why I want everyone to exercise caution.

Yes. So it's lumpy, but the trends are there. And if it's not made, it's likely it's going to be seen in the backlog if you're not able to get it because...

That's right. Okay. We're confident in Tyson's numbers. I don’t usually drink early in the morning, but sometimes I do. It's great work, and I think you should keep pushing forward. I appreciate the explanation about the overlapping ATM and share buyback, which left me a bit puzzled. Other than that, thank you and keep it up. Thanks, Ross. Appreciate it.

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

Okay. Thanks, everyone, for joining us today, and I look forward to getting with you again here in just a few months after we report our third quarter in early December. Thanks very much.

This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.