MIND Technology, Inc. (MIND) Earnings Call Transcript & Summary

Good day, and welcome to the Iaccess Alpha Virtual Best Ideas Summer Investment Conference 2026. Our next presenting company is MINDS Technology Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Mr. Rob Capps, President and Chief Executive Officer with MINDS Technology Inc. Sir, please go ahead.

Thanks. Good morning, everyone, or perhaps good afternoon based on your location. Thanks for joining us today. I welcome our existing stockholders and some, hopefully, soon to be stockholders. . I think we have a pretty interesting and somewhat unique story to talk to you about today. So I look forward to this I'll forego the safe harbor and serve if you'll allow that. So let's give a little background just to -- for those of you who are new to the story. MIND participates in 3 blood markets in the marine environment, for which we produce seismic exploration equipment. And those 3 areas are exploration, which includes traditional energy, oil and gas exploration, but also some hard mineral exploration as well as research activity. Second is what we call survey which entails ocean bottom surveys for site surveys for underwater installations have all sorted, wind farms, offshore platforms, pipelines, things of that. And the third is what we call maritime security. We think our technology and the production capabilities that we have are really very well suited for the security and defense applications. Now this is not a part of our historical results, but we do think this could be a very interesting and lucrative area for us going forward. That's something we definitely have our eyes on. Just to summarize, as we start into this, we think we're a pretty unusual company for microcap. We have an ongoing business with some pretty compelling advantages as we'll see as we go forward. We were producing positive cash flow, and we have a pristine capital structure. We have no debt. We have only common stock outstanding, no warrants or other dilutive instruments other than some employee options. So again, pretty unique for mini micro code, if you will. So again, something we think is pretty unique in this environment. Now as many of you know, we have seen some recent softness in our order flow and backlog. And I'll talk more about that in some detail here in just a moment. But the longer-term outlook really is quite positive in our opinion. I mean, that's really supported by some of the information on this slide that we're looking at. I think it's safe to say that there's general consensus within the industry that the energy exploration activity is increasing. That's good for our customers. It's good for us. I think some of the recent activities in the Middle East really bring a home and that there really is a need to replace energy reserves and perhaps outside of the Middle East. So we believe, and many others believe that's going to drive a resurgence in energy exploration all around the globe, which again, is good for us. We're seeing some customers that are reporting increasing backlogs and prospects. Again, that's another very positive sign. Also, interestingly enough, we've seen continued activity within the survey market, again, the ocean bottom surveys for site surveys. That's notwithstanding the issues that we all are aware of with the wind farm projects in the United States. So again, that's a relatively new market area for us, 1 that is pretty interesting and I think can help fuel our future growth. Now over the past 3 years, and for those of you who are new to the story, we've taken pretty dramatic actions to reach the position that we enjoy today. Now I'm not going to rehash each of these steps over the past 3 years. You can look at this at your leisure. But these steps have allowed us to become profitable, create a clean, debt-free balance sheet and really create significant working capital and liquidity -- as I said earlier, we think this is a very unusual situation for a micro cap such as MIND. Now we do however recognize the challenges and costs that are associated with being a very small public company and we are committed to finding ways to expand the operation our operations and otherwise bring value to the stockholders. And these various opportunities or ways we can accomplish that include newly developed products, so things we develop internally, products or businesses that we may acquire from others or a combination with other organizations and we're open to any or all of these ideas and are actively pursuing each of these. And we have retained an investment bank, as you may know, to help us identify and evaluate any such opportunities as they arise. But our focus, our goal is stockholder value, and we see a variety of ways to accomplish that, and we believe that we have the flexibility and the structure to affect that as they arise. As I said, we've made some pretty dramatic changes over the last 3 years, and this chart gives you a picture of the improvement in our results that really were due to these changes, I believe these changes I talked about on the prior slide. Now these changes have allowed us to capitalize on opportunities that arose in the underlying business and also is allowing us to address new opportunities. Now as I did mention at the outset, we have seen some retreat from the very strong growth we saw had in fiscal 2025. And just as a side point, we are at January 31 and year-end. So we just finished our fiscal 26 last January. We're currently in fiscal '27. So just to keep you confused from that stand. So as I mentioned, we did see some some retreat from very strong growth in 2025. And as we've mentioned publicly, I think the current year fiscal 2027, we'll likely see some further softness. However, as I also said, we are very bullish on the longer-term trends and the opportunities and think we're well positioned to take advantage of that. Now it's something that's pretty interesting about our business and the components of our revenue and something we'll talk about a bit more later is what we call our aftermarket activity. And this consists of selling spare parts, replacement parts, repairs, training and other support activities. So things that aren't tied to selling a new system or a whole new installation, if you will. So as you might imagine, as our installed base of equipment has increased, the support business, our aftermarket business has increased as well. So this past quarter, there was about 50% of our business. And that's roughly where it's been trading recently. I think historically be around 40%. We've seen some periods where as 70% of our revenue that's come from the aftermarket, so again, a more stable and growing part of our business, we think. Now clearly, this still is somewhat dependent upon industry activity, but it is more predictable than the orders for full systems. -- for our customers, generally, these are operating costs as opposed to capital expenditures. Therefore, there's a bit more flexibility and frankly, a bit more need on an ongoing basis to spend these dollars. They have equipment and they're working, the equipment has to be repaired compound of time. This kit is deployed in a very harsh environment -- so it breaks a lot just by the nature of the operations. So it's something that's very important that they keep on top of, which is good again for our ongoing business other thing important about this is, oftentimes, these orders are a book-and-bill basis. So you really won't see them replace it in the backlog. Sometimes they are, but don't always Also, these orders tend to garner a bit of a better margin and they typically don't apply a discount from a normal selling price to these orders as you might for a large system, as you might imagine. So again, an important growing part of the business. As I mentioned earlier, our backlog of firm orders and for us, backlog means something that we have a signed purchase order or a signed contract. So it is truly firm. So that backlog is down from historical levels, as I mentioned. But our pipeline of other orders and prospects is, again, quite robust, as I said. Now some of these larger -- some of these projects in our pipeline are larger projects, some of which are $10 million each. So again, some larger projects that we're looking at today. So again, helps us support our belief that the long-term outlook is really quite bullish despite the softer backlog that we see right now. Now backlog is great, don't get me wrong. I love that backlog there have to not have it. but it doesn't tell the whole story all the time. As this indicates, our year-end backlog often is significantly above our beginning backlog -- beginning of the year backlog. So again, backlog is important, but it does I tell the whole story. So we often have book-and-bill business. We see order flow come on an intermittent basis during the year sometimes we'll see some ebbs and flows have a period of time, especially in the summer as some of the European companies are on vacation. Don't see a lot of order flow, which tends to pick back up in the fall and the winter. But again, just part of the story here. Well, let me step back for a moment and let's dive in a bit more detail about our primary products. And again, especially for people who are new to the story. Our operating unit is SMB. That's our subsidiaries and the primary operating unit, the operating new now, I should say. And Samat has 3 primary product lines. Gun Link, which is an energy or arrogance source controller, BuoyLink, which is a GNSS or GPS positioning system and SeaLink, which is a acoustic array or a streamer system. We sell these products to the owners and operators of seismic exploration and survey vessels. These include seismic and survey contractors vessel owners who've leased these vessels to the contractors and some government research organizations as well. So we design, manufacture, sell and support the equipment used in these marine surveys. We don't operate equipped. We sell the kit to those people who own the vessels that are used to conduct these surveys for a variety of purposes. Again, energy exploration, hard mineral exploration, ocean bottom, sites surveys, all sorts of different applications. We believe we have a very strong market position with each of these products. In fact, with the GunLink system, we have an overwhelmingly dominant position. So we almost monopoly in that particular area. We continue to look for new applications for this technology and enhancements to our existing technology to -- that are complementary to our existing business. A good example of that is something we've done with our SeaLink system. We reconfigured this system to be used in ocean bottom surveys, and therefore, have expanded the market for us, relatively new area for us, but 1 which holds great promise. I think what you'll see is for much of this agreement for the different applications you will use the same equipment that may be configured slightly differently. And therefore, by making some relatively minor changes that allows us to address other markets in larger markets in some cases. This next slide is maybe a bit difficult to follow. I might take some steady at your leisure. But what we're trying to show here is how these applications or these products rather are applied to how they're utilized often in conjunction with each other. So again, they're deployed in the marine environment, offshore nearshore, deep ocean, different applications. But again, a very harsh environment and again, used in conjunction with each other, oftentimes as well as in conjunction with other equipment which is an important point as I'll talk about some of our opportunities to expand the business. So as I said earlier, the equipment can be and is used in different applications, but configure differently. Sometimes that takes some modification in our part from a production or an engineering standpoint, but it's a relatively easy lift to address some of the other applications such as the ocean bottom surveys with our -- what we call our 3D high-res streamer system. There are a number of ways to expand the business as we talk about here, we are always looking ways to take these -- take this technology into new applications into new markets, as I just talked about. Another important part of the expansion plans, as we talked about, is the aftermarket business as we continue to expand our installed base that is solves our aftermarket business, expands our recurring stream of business. Now another area and a couple of other areas, specifically where we think we can enhance the business and grow the business is taking our SeaLink streamer system and applying that to larger systems. Historically, we have focused on smaller systems, less dollars, less equipment, really for due to production reasons. By expanding our production capacity, which involves some design modification as well as some production changes we can really facially address much larger projects, and that's something we're in process with now and something that we're excited about. I mentioned earlier the application for maritime security and we think we can take the C-Cor we call CSR, which is our sealing technology, reconfigure it for these applications and address what we believe is a growing need within the world, not just in the U.S. but overseas, to dress maritime security and defense applications. Again, not something we've done historically, but something that we think holds promise for us. So these are a number of ways for us to expand our business. Again, we also look for ways to add products, either through internal development as we talk about here or maybe acquiring product lines or businesses from others. All those things are things we're looking at. Very important for us. Take a look here at our locations around the globe right now. We are a global company, and we serve a global market. We have very significant experience serving customers around the world and in operating in a number of foreign jurisdictions. And we see this as a key advantage for us. Not everyone can do that. To give you some color on that. This is our primary operating location in Singapore. Singapore is the primary operating location for our CMP unit most sales and shipments are made through this entity in Singapore. So activities here include manufacturing, assembly and testing, primarily of electronic components as well as engineering and field service and administrative services, as you might imagine. Our largest facility is in Malaysia, which is in close proximity to Singapore. It's a drive -- 45-minute drive from the Singapore facility. This facility, again, is much larger, allows us to take advantage of a much lower cost structure and better access to workers in Malaysia. So we've continued to move more and more of our manufacturing operations from Singapore into Malaysia to take advantage of those cost advantages. So as you can see here, in addition to our technology that we are that we control and we develop. We also have very significant manufacturing capacity and expertise. And we think this is another really key advantage, both currently and for future growth, something that's unique, not everyone can do that. We have a facility in the U.K. in the west of the U.K. in Somerset, west of London, which is primarily an engineering location but also our primary engineering functions are out of these locations, but also there are some field service as well as training and some sales support as well. Then our final location is in U.S. in Huntsville, Texas, which is north of Houston. We have recently expanded this facility in order to take advantage of some opportunities that we see for repairs only of our own products as well as products and others. So again, a new business avenue for us as well as some manufacturing support for Singapore as well as some ancillary manufacturing for third parties for streamer systems and other activities. So again, we believe having locations both in North America and in Asia is a -- gives us a real logistical advantage and something is very attractive to many of our customers. So just to summarize, once again, we do think that mine is a unique opportunity, as we not often seen with companies of our size. We have a strong ongoing business with some very unique capabilities and technology. We have a strong balance sheet and liquidity -- it's going to allow us to active on opportunities and frankly, to weather any ups and downs that you see in cyclical markets. So again, we think a very unique opportunity and 1 that we hope you'll find very interesting. So with that, I think we can take a few questions before we run out of time. So if you have any, I'll be happy to take your questions. I'm seeing a few questions here. Open questions about how to access more information about the company. Again, you can on our website. There is much information in the presentations or on the website, all of our filings and press releases are there as well as you can e-mail the IR side that's on the website and we can respond from that. There's a question here about impact on changes in seabed mining and exploration regulations on our business. As I said earlier, we have reconfigured some of the equipment to address some of these applications, site surveys and looking at lower horizons in the subsurface. Some of the regulations, particularly in the U.S., as you well know, have slowed some of the wind farm development and offshore development. But frankly, we've seen that activity continue elsewhere in the world, in Asia and in Europe. So it certainly has an impact. But I think we've been able to continue to expand that business despite that impact. I also think some of the activity in the North America is probably being encouraged as it relates to energy exploration. So I think that's good for us and good for our customers and therefore, good for us. So I think regulations do have some impact. That's something we monitor. But I think overall, the environment is still very positive. Here's a question about our aftermarket activity and asking about how we should think about the recurring nature and margins for that business. As I mentioned, about 50% of that came from the 5% of our revenue in the first quarter came in that aftermarket business. As I mentioned, it's more recurring. There is some activity demand, if you will, if the customers aren't working, they don't need the equipment, but if they're working, they need the equipment. So they don't have to buy new equipment to new systems. So that's the more recurring. And as we see them go to work, we see that demand for the aftermarket, the repairs and spare parts pick up. Margins tend to be a bit better here. As I mentioned, a large system will tend to maybe offer a discount as an incentive to get a $6 million or $7 million or $8 million order for $5 million or $1 million spares order, we're not going to do that. So it tends to be a bit better margin. Another question here I've mentioned -- talking about the larger projects in the $10 million range that I mentioned and asking what type of customers replications we're looking at here. typically think things of that size are related to a new build vessel where -- and oftentimes, it's a governmental agency that's building them initially at least that's the activity we're seeing most often right now, research organization at some point. So it will be a multipurpose vessel with the need for different types of equipment. So we're seeing opportunities to provide a great deal of RPT, really all the products we've talked about as well as supplying kit from others as well. So we might be an integrator or participate with another integrator in some of those projects. They don't go along every day, but they are something we've seen more and more of and think we're in a much better position today to address those type of opportunities that maybe we might have been in the past. Another question here about -- given our liquidity position, our cash position and the fact we have a shelf registration, so access to other capital. How we're thinking about allocation between organic growth, in terms of development acquisitions or even share repurchases, which we have said that we're something we've considered. So it's a function of what's the return on capital on each of these. And that can be a complex calculation as to what that really is, given the risk factor of the different projects the time factor involved. So it's not just as simple as once the spreadsheet save the best return on investment is. But it's something we're open to considering for all these cases, and all these opportunities and something that we do look at on an ongoing basis. It's important, we think, to increase our scale and grow the company and therefore, increase of return and value. But if we see our own stock is the best investment given the circumstances, then we'll do that. And we've said that we'll come in then we'll do that. So we look at the call. Yes, maybe 1 more question here. Ask as to -- since there are some newer people to the story, what's the most underappreciated aspect of our business. And that's a great question actually. The fact that I'm not sure everyone understands how the technology can be applied to so many different areas, and therefore, there are opportunities to expand the applications of the business. But I think even maybe as importantly is the fact that we have this infrastructure this production capacity, this global positioning enables us to operate very effectively and therefore, enables us to expand perhaps by acquiring other businesses or other product lines, very effectively and rolling that into our own facilities, our own operations on a very efficient basis. I think that's a real key and symptom that you don't see very often, especially in a company of our size. So I think that's something that maybe a lot of people miss. I'm not saying it's the most important, but it is important. And when I think a lot of people just don't see very well. So 1 last question. I think I can ask real quick -- I can answer real quickly. Talk about the Eville expansion is that for third-party products or not -- yes and no. So we actually are servicing some third parties and expect to serves more third parties in that location, but we also can do business for our own. We can again supplement our Singapore facility and also produce other products out of the House facility, just a bit about this answer to that. So I think with that, we are pretty much out of time, I believe. Thank you.

Ladies and gentlemen, that concludes the Mine Technology Inc. presentation. You may now disconnect. I'm pleased to consult the conference agenda for the next presenting company.