MIND Technology Q1 2027 Earnings Report

MIND Technology EPS Results

• Actual EPS: -$0.05
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

MIND Technology Revenue Results

• Actual Revenue: $9.67 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

MIND Technology Announcement Details

• Quarter: Q1 2027
• Date: 6/10/2026
• Time: After Market Closes
• Conference Call Date: Thursday, June 11, 2026
• Conference Call Time: 9:00AM ET

MIND Technology (NASDAQ:MIND), together with its subsidiaries, provides technology to the oceanographic, hydrographic, defense, seismic, and maritime security industries worldwide. Its primary products include the GunLink seismic source acquisition and control systems that provide operators of marine seismic surveys with precise monitoring and control of energy sources; the BuoyLink RGPS tracking system, which is used to offer precise positioning of marine seismic energy sources and streamers; Sleeve Gun energy sources; SeaLink towed seismic streamer system; and Sea Serpent line of passive sonar arrays for maritime security and anti-submarine warfare applications. The company also provides streamer weight collars, depth and pressure transducers, air control valves, and source array systems; spare and replacement parts; and repair and engineering services, training and field service operations, and umbilical terminations. The company was formerly known as Mitcham Industries, Inc. MIND Technology, Inc. was incorporated in 1987 and is headquartered in The Woodlands, Texas.

MIND Technology Q1 2027 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: MIND reported first-quarter revenue of about $9.7 million and adjusted EBITDA of roughly $811,000, keeping results in line with expectations and in positive territory despite a soft ordering environment.
• Negative Sentiment: Management said near-term demand remains uncertain, with customers delaying equipment purchases and backlog falling to about $7.6 million from $13.9 million at the prior quarter-end.
• Positive Sentiment: The company highlighted its aftermarket business as a key stabilizer, now representing about 50% of revenue and providing recurring, higher-margin support through spare parts, repairs, and service.
• Positive Sentiment: MIND ended the quarter with a debt-free balance sheet, approximately $37.8 million of working capital, and $17.7 million in cash, giving it flexibility to pursue opportunities.
• Neutral Sentiment: Although fiscal 2027 revenue is expected to be below fiscal 2026, management still expects to be cash flow positive for the year and is evaluating organic growth, acquisitions, strategic partnerships, and even buybacks to improve shareholder value.

Presentation

[Operator]

Greetings, welcome to the MIND Technology first quarter 2027 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard, Investor Relations. Thank you, sir. You may begin.

[Ken Dennard, Founder and CEO at Dennard Lascar Investor Relations]

Operator, good morning, welcome to the MIND Technology Fiscal 2027 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'll be available via 90 days via webcast by going to the investor relations section of the company's website at mind-technology.com, or via instant replay feature until June 18th.

[Ken Dennard, Founder and CEO at Dennard Lascar Investor Relations]

Information on how to access the replay was provided in yesterday's earnings release. Information on this call speaks only as of today, Thursday, June 11th, 2026. 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.

[Ken Dennard, Founder and CEO at Dennard Lascar Investor Relations]

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 these statements. These risks and uncertainties include the risk factors disclosed by the company from time to time in its filings with the SEC, including the annual report on Form 10-K for the year ended January 31st, 2026.

[Ken Dennard, Founder and CEO at Dennard Lascar Investor Relations]

Furthermore, as we start this call, please refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday. Please note that the contents of our conference call this morning are covered by these statements. Now with that behind me, I'd like to turn the call over to Rob Capps. Rob.

[Rob Capps, President and CEO at MIND Technology]

Okay, thanks, Ken, and thank you all for joining us today. It's only been eight weeks since we last talked, and not much has fundamentally changed. There's not been a sea change in the market or our business. Much of what I say today will sound pretty familiar. Our results for the first quarter were essentially in line with our expectations and once again reflected positive adjusted EBITDA. During the quarter, we were able to deliver the remaining orders that had slipped past our fiscal year-end.

[Rob Capps, President and CEO at MIND Technology]

As usual, I'll touch on the results for the first quarter and provide an update on the current market environment. Mark will then provide a more detailed review of our financials, and I'll return to wrap things up with some remarks about our outlook. I think the near-term market can best be described as uncertain with less visibility than normal. There's a great deal of uncertainty in the world in terms of economics, politics, and security. As you'd expect, this causes companies and governments to be cautious in committing to exploration and survey projects.

[Rob Capps, President and CEO at MIND Technology]

As a result, our customers are reluctant to commit to equipment purchases, most notably larger system orders. The current conflict in the Middle East and the changing perceptions of its resolution exacerbate this uncertainty. The longer-term outlook, however, is much more positive, as there are definite signs of recovery. I'll talk more about this later. Our backlog of firm orders as of April 30th, 2026, was approximately $7.6 million, compared to $13.9 million as of January 31st, 2026, and $21 million as of April 30th, 2025.

[Rob Capps, President and CEO at MIND Technology]

As expected, we delivered certain orders that were unable to ship prior to the end of fiscal 2026. This, coupled with the protracted customer decision-making, contributed to the backlog decline. As we approach the summer months, I want to remind you that in a normal environment, new orders don't always arrive at a constant rate throughout the year. Variance in order flow is commonplace and not a cause for concern. Macro uncertainty has magnified these pauses as customers iron out their operational plans.

[Rob Capps, President and CEO at MIND Technology]

We maintain our belief that the long-term outlook in the marine exploration and survey industry is very positive, and an uptick in activity is inevitable. That's all of our backlog, which is defined as orders for which we have a purchase order or signed contract in hand. The pipeline of potential orders remains solid and is several times greater than our firm backlog. We are continuing to pursue certain significant projects, a few of which total $10 million or more each.

[Rob Capps, President and CEO at MIND Technology]

Some of these opportunities involve new vessels for governmental organizations and require successful bidders to provide security bonds, something we are now capable of doing. We've taken actions in recent months to strengthen our positioning and make our sales more competitive bidders. This provides us with optimism as we work to convert these opportunities into firm orders in coming periods. Turning to our results. MIND Technology product revenues for the first quarter fiscal 2027 were approximately $9.7 million.

[Rob Capps, President and CEO at MIND Technology]

Revenue was flat sequentially and improved from last year's first quarter. We once again produced positive adjusted EBITDA of approximately $811,000. Compared to $1.1 million in the fourth quarter and a loss of $179,000 in last year's first quarter. Our aftermarket activities are providing a stable and recurring revenue stream that is supporting our overall results. This component of our business is becoming increasingly important and represented about 50% of our revenues in the first quarter. As a reminder, this aftermarket activity consists of spare parts, repairs, service, and other support activities.

[Rob Capps, President and CEO at MIND Technology]

While this business is influenced to some degree by the general activity level within the industry, it is more recurring in nature than orders for new systems. Customers might be slow to purchase new systems, but their existing equipment will need maintenance to keep operating. This benefits MIND since expenditures for aftermarket activity are generally operating costs as opposed to capital expenditures. As our installed base of SeaMap products continues to expand, with it comes the prospect for increased aftermarket activity.

[Rob Capps, President and CEO at MIND Technology]

I'm pleased with the resilience of our results in the face of widespread uncertainty, and our aftermarket activity continues to be an important contributor to our consistency. I firmly believe MIND is well-positioned to capitalize on opportunities in future periods to stimulate order flow and generate sustainable results. I'll let Mark walk you through our first quarter financial results in a bit more detail.

[Mark Cox, VP and CFO at MIND Technology]

Thanks, Rob, and good morning everyone. Revenues from Marine Technology product sales totaled approximately $9.7 million for the quarter. As Rob mentioned, our first quarter results benefited from approximately $4 million of orders that slipped out of fiscal 2026. We also continue to see strong aftermarket activity that provides a solid foundation of recurring revenue. This activity supports our overall results and serves as a buffer in times of reduced large system order volume. First quarter gross profit was approximately $4.1 million.

[Mark Cox, VP and CFO at MIND Technology]

This represents a gross profit margin of 42% for the quarter, which was in line with the same period a year ago. The sustained margin strength was supported by product mix and reflects a greater contribution of spare parts and other aftermarket activity that generate favorable margins. We expect our cost structure optimization efforts and greater production efficiencies to help us maintain favorable margins in future periods. Our general and administrative expenses were approximately $3.5 million for the first quarter, fiscal 2027.

[Mark Cox, VP and CFO at MIND Technology]

This was up both sequentially and when compared to the same quarter a year ago. Sequential and year-over-year increases are primarily due to higher incentive compensation and stock-based compensation, with the latter being a non-cash item. Our research and development expense for the first quarter was approximately $310,000, which was down both sequentially and compared to the first quarter of fiscal 2026. Consistent with prior periods, these costs were largely directed toward the development and enhancement of our streamer systems and source controller offerings.

[Mark Cox, VP and CFO at MIND Technology]

Operating income for the first quarter was approximately $14,000, compared to an operating loss of approximately $658,000 in the first quarter of fiscal 2026. First quarter adjusted EBITDA was approximately $811,000, compared to an adjusted EBITDA loss of $179,000 in the same quarter a year ago. Net loss for the first quarter was approximately $411,000, after income tax expense of $476,000. As a reminder, our income tax expense results primarily from our operations in Singapore.

[Mark Cox, VP and CFO at MIND Technology]

As of April 30th, 2026, we had significant working capital of approximately $37.8 million, including $17.7 million of cash on hand. The company continues to maintain a clean, debt-free balance sheet with a simplified capital structure. We expect our solid foundation, significant liquidity, and operational flexibility will allow us to pursue opportunities in the coming quarters to enhance stockholder value. I'll now pass it back over to Rob for some concluding comments.

[Rob Capps, President and CEO at MIND Technology]

Thanks, Mark. As I mentioned at the outset, macro uncertainty and geopolitical turbulence are causing customers to delay order commitments regardless of industry or end use. This is challenging our near-term visibility, and it is likely we will see some softness in our results. There are signs of recovery, and the longer-term outlook continues to be very positive. Conflict in the Middle East has served as a sobering reminder of how important energy security is for countries around the world.

[Rob Capps, President and CEO at MIND Technology]

As some have speculated, the Strait of Hormuz blockade triggered what may be the largest oil supply shock in history. We believe this bodes well for additional orders in future periods as geopolitical instability and long-term supply concerns will drive exploration activity in other parts of the world. There is an immediate need to replenish lost production and secure reliable energy supplies. Another near-term dynamic that has the potential to drive incremental activity is the rapid increase in oil prices.

[Rob Capps, President and CEO at MIND Technology]

This goes somewhat hand-in-hand with the need for energy security, but we find that customers are often more motivated to launch large programs when the economics are compelling. While we anticipate our customers ramping operations in the coming months to capture the benefits of an attractive pricing backdrop, we haven't yet seen the orders associated with this activity. Some of our customers have reported increasing backlogs, which is a very positive sign.

[Rob Capps, President and CEO at MIND Technology]

We also know that several industry commentators are predicting a resurgence in exploration and survey activity, something that we're monitoring very closely. The underlying dynamics within the marine technology industry remain intact, and our long-term pipeline of opportunities continues to be very positive. Our prospects are plentiful. There are emerging opportunities to capitalize on new areas of focus within the market. Uncertainty has clouded visibility for the past several months. We remain well-positioned for the future.

[Rob Capps, President and CEO at MIND Technology]

I'm confident that any near-term softness will dissipate in the coming months as markets stabilize and volatility becomes less severe. As a result of our efforts in recent years, MIND is nimble and operating efficiently. This positions us to more readily weather the storms that have historically challenged our business. Rather than sit idly by as customers hit pause, we've continued to innovate and expand our capabilities to address new opportunities. This gives us a competitive edge to capture orders and meet evolving needs in coming months.

[Rob Capps, President and CEO at MIND Technology]

Our customers are constantly looking to get ahead of the curve, operate more efficiently, and solve new problems. They want to partner with suppliers to do the same. Now turning to our outlook. Current visibility continues to indicate that our results for fiscal 2027 to be down when compared to fiscal 2026. Despite this view, we believe this will still be a positive year for MIND. As I noted on our last call, it will be difficult to replicate the system order volume that we've enjoyed over the past two years, given our recent customer discussions and the prevailing uncertainty.

[Rob Capps, President and CEO at MIND Technology]

However, we expect to be cash flow positive for the year, even with lower revenue. Our growing aftermarket business will provide us with a substantial stream of recurring revenue to buoy our results. We have meaningful cash on hand to make strategic moves and position the business for the future. As we've previously discussed, we continue to be aware of the challenges and limitations of being a small public company. Although we are uniquely positioned with a simple capital structure and a debt-free balance sheet, there is a need to add scale and enhance stockholder value.

[Rob Capps, President and CEO at MIND Technology]

We are actively pursuing opportunities. There are a few different ways we can achieve the desired scale. We can execute identified organic growth opportunities, we can acquire assets or businesses that are similar to our existing business, or we can combine with other organizations. We continue to identify and evaluate such opportunities. Fortunately, we have ample liquidity to carry out a transaction should the right opportunity arise. We will not jeopardize the immense progress that we've made at MIND to chase an opportunity that doesn't fit what we do.

[Rob Capps, President and CEO at MIND Technology]

Preserving and enhancing stockholder value will always be our primary focus. While we are motivated, we intend to be very disciplined in our approach to capital allocation, weighing the expected return with the cost of capital. Outside of strategic mergers and acquisitions, our capital allocation framework consists of investments in organic growth, such as expanding existing product lines and strategic alliances with industry partners. Each of these represents a tool we can use to generate or strengthen returns.

[Rob Capps, President and CEO at MIND Technology]

We can draw on any one of these or a combination thereof as market conditions permit and the return on investment meets our threshold for value creation. In summary, we have a differentiated approach, best-in-class suite of products, and a unique aftermarket business that will continue to support our financial results for years to come. We're focused on innovating, expanding our capabilities, adding scale, and partnering with customers that appreciate our technology.

[Rob Capps, President and CEO at MIND Technology]

As these customers prepare for increased activity, we plan to be ready to meet that demand. We're taking meaningful steps to strengthen the company, establishing a resilient platform on a solid foundation. Going forward, we will keep building on that foundation, improving our standing within the market, and sharpening our competitive advantage. All of which we believe will propel MIND into the next phase of growth. Our liquidity will prove advantageous as we expand. We intend to deploy this capital strategically to pursue new, attractive opportunities to meet the evolving needs of our customers.

[Rob Capps, President and CEO at MIND Technology]

As we execute these priorities, our focus remains, as it always has, on driving sustainable long-term value for our stockholders. With that, operator, I think we can open the call up for some questions.

[Operator]

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you.

[Operator]

Our first question comes from the line of Tyson Bauer with KC Capital. Please proceed with your question.

[Tyson Bauer, Senior Analyst at KC Capital]

Good morning, gentlemen.

[Rob Capps, President and CEO at MIND Technology]

Tyson.

[Tyson Bauer, Senior Analyst at KC Capital]

You ended with liquidity, let's talk about liquidity. You had an increase of $4 million on accounts receivable since the end of January to April. Given the pause button that you described for expectation for fiscal Q2, should we anticipate that your cash balance should be above $20 million by the time we have the next earnings call?

[Rob Capps, President and CEO at MIND Technology]

I'm not going to predict an exact amount, but I would expect us to start to convert receivables and inventory into cash. I would expect us to generate cash for the year. Where it hits, I'm not going to predict, but conceptually, you're in the right direction there.

[Tyson Bauer, Senior Analyst at KC Capital]

Okay. We're in a solid position of more than $2 a share in cash by the time we get to the end of this quarter.

[Rob Capps, President and CEO at MIND Technology]

Yep, I think it's fair to say. Working capital, $37 million. That's a solid working capital number.

[Tyson Bauer, Senior Analyst at KC Capital]

Which is $4 and you've got a $5 stock price. Your SG&A was up $250,000 year-over-year, primarily just due to incentive comp as all of that. Will that

[Rob Capps, President and CEO at MIND Technology]

Yeah. Primarily timing of that, actually. If you look year-over-year, the overall amount's not going to be that different, but just a matter of where it hit in the period is the bigger factor.

[Tyson Bauer, Senior Analyst at KC Capital]

Okay. Should we expect SG&A ongoing level to recede, or are we going to maintain this level?

[Rob Capps, President and CEO at MIND Technology]

I think we'll see it come down some. Typically, the first quarter's been higher just because of year-end activities, audits, things like that. I'd expect to see that coming down a bit.

[Tyson Bauer, Senior Analyst at KC Capital]

Are you willing to, at least in general, describe the composition of your backlog, the $7.6? Any large orders or systems within that, or are they all fairly small? Any timing or scheduled shipments?

[Rob Capps, President and CEO at MIND Technology]

It's a variety of things. There's no huge systems in there at this point. It's mostly smaller things. Some new orders, some new system activity, but some of the smaller size as well as after-market activity. Timing, I think we'll see most of that certainly this year. I can't tell you off the top of my head if it's all next quarter, some next. Obviously we have lots of book and build business as well. There's lots going on there. It's a mixed bag.

[Tyson Bauer, Senior Analyst at KC Capital]

We walk into this fiscal second quarter with approximately $5 million recurring, some minor add-ons to there. We don't have the one system that landed in Q1. Q2 should be your low point, knock on wood, revenue-wise for this fiscal year.

[Rob Capps, President and CEO at MIND Technology]

That's probably right. That can change. We still have six weeks to go and lots of things can happen. That's probably right.

[Tyson Bauer, Senior Analyst at KC Capital]

When do we get to a point of backlog or order recognition where if we don't start to see that materialize, that could have an impact on the second half of this fiscal year where we start slipping quarters to the right of the calendar?

[Rob Capps, President and CEO at MIND Technology]

Yeah. It's hard to say, Tyson. It kind of depends on the nature of the order. Some things, we have enough visibility, we can start building before we have the order in hand. We've done some of that in the past. Some things turn more quickly than others. It just depends what the orders are. I don't think we hit that situation till much later in the year. Probably not until we get into the fourth quarter, frankly, or going into the fourth quarter.

[Tyson Bauer, Senior Analyst at KC Capital]

Okay. When we talk about, obviously you talk about pipeline projects you can build ahead even though you don't have the project in hand per se, couple $10 million each. Are there any timelines to those comments or catalyst events that allows those to be realized? Like is there a government budgetary passage or certain testing that needs to be completed by X date or an RFP? Any color on that side of it with the pipeline of projects?

[Rob Capps, President and CEO at MIND Technology]

Sure. The short answer is no. There's really no governmental deadlines, things of that nature. No hurdles we have to get over from a testing or a demonstration standpoint. It's more just going through the process. These are larger projects which involve more than just our equipment. They move at their own pace sometimes. Sometimes we're kind of the tail being wagged sometimes given the size of our kit compared to the overall project. It's just a matter of these things going through their process.

[Tyson Bauer, Senior Analyst at KC Capital]

Okay. Are you then teamed up with Tier 1 suppliers, especially on the military side or government contracts? You're the secondary contractor?

[Rob Capps, President and CEO at MIND Technology]

There's not an easy answer to that. We are certainly partnered with others for other parts of the kit. Typically we are dealing directly with the principal, if you will, and not going through an integrator or another integrator. We typically are the integrator for these projects. As it relates to our equipment.

[Tyson Bauer, Senior Analyst at KC Capital]

You somewhat control your own destiny in that regard.

[Rob Capps, President and CEO at MIND Technology]

Yeah. In that regard, yes. Again, these are larger projects, so there are other aspects to it that can have impact on schedule.

[Tyson Bauer, Senior Analyst at KC Capital]

A lot of comments about the Middle East. You do a lot of business with European contractors, a lot of activity in Asia. Some of these are non-petroleum or non-gas type end use or whether surveying and exploration, whether it's scientific, hydrographic, deep sea mining, renewable offshore, not in the U.S. now, but in other places. Why has that slowed down? It doesn't seem like that should have a lot to do with the Strait of Hormuz and those things. That if China wants to do deep sea mapping or we're doing deep mineral exploration off the east coast of Africa and those areas to be independent of what's going on in the Middle East.

[Tyson Bauer, Senior Analyst at KC Capital]

Why are we not seeing more activity in those regards?

[Rob Capps, President and CEO at MIND Technology]

Well, I think we are seeing activity there is the short answer. There is marginal activity that's in the Middle East area that's being impacted. I think the overall uncertainty, politically and economically, is causing people to be cautious in committing exploration dollars or capital dollars anywhere in the world. You don't know what the energy pricing environment's going to be. You don't know what the security environment's going to be. I think that just causes overall uncertainty and therefore overall caution all over the world, not just as it relates directly to the Middle East.

[Tyson Bauer, Senior Analyst at KC Capital]

Okay. Typically in this timeframe, we see some activity coming out of some of your bigger customers in Europe, especially Scandinavia. Is that still percolating and still there, just not realized, but you do expect something before the end of the year? What's the status of some of those bigger customers that have been repeat customers in years past?

[Rob Capps, President and CEO at MIND Technology]

Well, they have been cautious, as everyone else has been, in making commitments this year, in the last several months. I think they are very encouraged about what they're seeing in the future. I don't see that they're quite ready to pull the trigger on things and start to expand capacity. That's something we hope to see. I think, as my remarks said, people have been cautious given the uncertainty. They all, I believe, are feeling fairly optimistic about the future based on what they're seeing from their customers, and what they're seeing from their backlogs.

[Tyson Bauer, Senior Analyst at KC Capital]

Okay. Last question from me is, what are you hoping to accomplish or to see to show your shareholders before the next earnings call after Q2 is over and hopefully realize some of the stuff in your outlook that you're providing for the second half of the year? What are some things that shareholders can be watching for?

[Rob Capps, President and CEO at MIND Technology]

Sure. Obviously, we start to see order flow will be important, but I want to cautious everyone, timing is uncertain. Just because we don't get the order by a certain date doesn't mean things are fundamentally different. I think looking for order flow, we continue to look for opportunities to expand our offerings. That's something we are very actively pursuing right now. Those are the sort of things that we're looking at. Again, timing is uncertain on lots of these things.

[Tyson Bauer, Senior Analyst at KC Capital]

All right. Thank you, gentlemen.

[Rob Capps, President and CEO at MIND Technology]

You bet.

[Operator]

Our next question comes from the line of Ross Taylor with ARS Investment Partners. Please proceed with your question.

[Ross Taylor, Analyst at ARS Investment Partners]

Thank you. Ross. On these new areas, these $10 million+ potential contracts, what are the end markets that are being served?

[Rob Capps, President and CEO at MIND Technology]

Typically, these are quasi-governmental agencies who are building vessels or equipping vessels for a variety of scientific and exploration purposes. It's not directly energy-related necessarily, although there's an aspect of that. There are all sorts of other things they look to do. Deep sea mining, hydrographic survey work, things of that nature.

[Ross Taylor, Analyst at ARS Investment Partners]

The customers are generally governments, not corporations, for these big contracts?

[Rob Capps, President and CEO at MIND Technology]

Yeah, at least quasi-governmental. That's correct.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. Obviously, how many of them are ex-U.S., outside the U.S.?

[Rob Capps, President and CEO at MIND Technology]

I'd say all of them are.

[Ross Taylor, Analyst at ARS Investment Partners]

All of them are. How many do you have, do you think? Is it two? Is it four?

[Rob Capps, President and CEO at MIND Technology]

It's a small handful. I don't want to get too specific for some competitive reasons, but it's a small handful.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. You said, obviously, you indicated that it would be some draw on the balance sheet or the working capital side because of the need to provide security for these deals. How much is that going to end up being? If you have a $10 million deal, how much do you have to put up from your side because you're basically going to, I assume, buy some form of bond on that.

[Rob Capps, President and CEO at MIND Technology]

That's correct. Yeah. We put that facility in place with HSBC recently so we can do it in that manner. We don't have to post cash collateral at that point. It varies based on the contract, but you were talking about a couple million dollars maybe.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. If you have two, three, four of these, obviously, would we see that as an impact on cash, or would it not be an impact?

[Rob Capps, President and CEO at MIND Technology]

Should not be an impact on cash. Under this new facility, it should not be.

[Ross Taylor, Analyst at ARS Investment Partners]

Yeah. Okay. In looking at this situation, it does seem a little odd in many ways. The Chinese have aggressively been mapping pretty much everything inside every island chain they can find off their shores. It would seem that the U.S. and our allies need to do the same. Hopefully this will get going. When you see this, have you built inventory at this stage? Is there inventory on the balance sheet for any of these potential deals?

[Rob Capps, President and CEO at MIND Technology]

To some degree, yes, not a great deal. We haven't been building a large system to spec with our components that we tend to stock. Some of these components are also part of our aftermarket business. Things we sell as spare parts, we also are parts of new builds. We can kind of pursue both at the same time. It's not as though we've built a large system that's sitting on the shelf, there is some lead time involved.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. You expanded your facility, I think physically, certainly down in what, Texas? How is demand for that at this stage?

[Rob Capps, President and CEO at MIND Technology]

That is starting to ramp up. That we're starting to see improved results there, improved activity, we think that will continue to increase. We're pretty optimistic about that. It's not going to be $30 million a year, it can be meaningful for us.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. With that, as you see that move forward, would that change right now the $5.5 million per quarter you're doing on kind of maintenance and repair? Should we expect to see that? I think of that as a base and this new additional capacity being on top of that. Is that a correct way to see that?

[Rob Capps, President and CEO at MIND Technology]

That's a good way to see that. That's exactly right. That should be fairly recurring and fairly predictable. That's why we're encouraged by that.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. What we can see is in here is that as we push forward, even if you're not getting new orders, that you should see the maintenance and repair part of your business move forward and grow.

[Rob Capps, President and CEO at MIND Technology]

That's correct.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. You talked a lot about the various and sundry options you have to scale up the company. What kind of financial hurdles, benchmarks are you having in place for making that decision? Is it something that needs to be additive to earnings, additive to free cash flow, EBITDA needs to have a 20%, 15%, whatever? You talked about having a discipline with it. Have you laid down metrics? If so, what are some of those metrics?

[Rob Capps, President and CEO at MIND Technology]

Yeah, I don't want to get too specific at this point, but anything we do, we want to be accretive, without a doubt. There's some non-financial metrics that we want to look at as well, which really involve risk around a transaction. We want to make sure it's something that we understand and can manage well. Just because we see something that, on a spreadsheet, has some great metrics, great returns, that doesn't mean there's not risk involved in that. That's the other aspect we're trying to evaluate in these various opportunities.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. When you're looking, what do you feel MIND's core competency is? Therefore, when you're looking at these deals, how are you seeing the reach of them?

[Rob Capps, President and CEO at MIND Technology]

Sure. Obviously we have some specific project, products rather, sorry, that are some unique technology that we can add other things to. The ability to, in a very economic way, add additional products, additional capability is a strength of ours. We have ability to build things very effectively and very efficiently, through our facilities, both here in the U.S. and in Asia. I think that gives us an advantage in taking in other additional products that perhaps we can build more efficiently and therefore garner more margin.

[Rob Capps, President and CEO at MIND Technology]

I think that's two our core competencies, and we do have some unique technology that we think we can build from as well. I think those are the key aspects of us.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. I would be remiss if I didn't note that you issued stock at $11, and currently your stock is selling basically at $5. At some point in there, it would strike me as it would be hard to ignore the fact that you have a chance to actually buy back some of what you issued to reduce the dilution and still leave a fair amount of cash on the balance sheet.

[Rob Capps, President and CEO at MIND Technology]

Yeah. That's true. As we've said before, we put that in place, to give this opportunity, and if we think that's the best use of our capital at a certain point in time, that's what we'll do. Obviously, I'm not going to predict or indicate what our intentions are. That is an option for us.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. Just generally, when you're looking at going back to your potential order book, how many of these are kind of new prospects or new uses, and how many of them are, as Tyson was referring to, kind of repeat buyers?

[Rob Capps, President and CEO at MIND Technology]

I'm thinking through. They are a combination. I'm pausing because I'm thinking through the list. There certainly are some new customers in this list, as well as some repeat customers who are expanding capacity.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. Well, obviously we're in a period of struggle, as Tyson noted, that your current working capital at about $4 a share puts very little value on the business. Hopefully we'll be able to get some of this stuff turned around in the near future and get some value reattached to it.

[Rob Capps, President and CEO at MIND Technology]

Yeah.

[Ross Taylor, Analyst at ARS Investment Partners]

Okay. Thank you very much. Good luck.

[Rob Capps, President and CEO at MIND Technology]

Thanks, Ross.

[Operator]

Our next question comes from the line of Howard Root with Fairhope Capital. Please proceed with your question.

[Howard Root, Analyst at Fairhope Capital]

Good morning. Thanks for taking my call.

[Rob Capps, President and CEO at MIND Technology]

Good, Howard.

[Howard Root, Analyst at Fairhope Capital]

A quick question on the income taxes. The $476,000 seemed like a huge number. I understand it's international. Is that an aberration? Is there a way of getting that down? What's the cause of that?

[Rob Capps, President and CEO at MIND Technology]

Well, again, we are profitable overseas, in Singapore primarily. We pay taxes in Singapore. We have losses in the U.S. that we can't apply against that. Basically you have taxable income that's not sheltered by an untaxable losses, if you will. That's the reason for that. There are some things that we are doing to try to mitigate that. Fundamentally, as long as we're making money there and not making money here, we're going to see that sort of aberration. Now, one thing we are doing is trying to generate more income in the U.S. through our repair activities in our Texas facility.

[Rob Capps, President and CEO at MIND Technology]

That will help reduce the appearance of that, because we will start to generate taxable income in the U.S. which we'll be able to shelter from our existing loss carry-forwards.

[Howard Root, Analyst at Fairhope Capital]

Wow. Obviously, there's a lot of ways to shelter that. When it's a controlled subsidiary, you shouldn't be having that much income in a subsidiary when the parent isn't making that much. Is there any action to kind of minimize that? Because that is a huge number based on last quarter. Is that going to continue at that level?

[Rob Capps, President and CEO at MIND Technology]

There are limitations on what you can do, your transfer pricing rules between all the countries. There are some limitations as to how aggressive you can be. We look at on a continuous basis.

[Howard Root, Analyst at Fairhope Capital]

Do we figure that's a going number? If we do the same number in revenue next quarter, it's going to be the same amount of income taxes?

[Rob Capps, President and CEO at MIND Technology]

It's hard to predict because it depends exactly what revenue hits in a particular quarter. That could be a bit more, it could be a bit less. It can vary because you're kind of on the margin right now. A small change can have a big percentage impact.

[Howard Root, Analyst at Fairhope Capital]

Okay. On backlog in prior quarters, you gave us an update if there were any material contracts since the quarter end. Has there been any new material orders added to the backlog since April 30th?

[Rob Capps, President and CEO at MIND Technology]

Not material, or we would've said so. No.

[Howard Root, Analyst at Fairhope Capital]

Okay.

[Rob Capps, President and CEO at MIND Technology]

A lot of orders.

[Howard Root, Analyst at Fairhope Capital]

The stock.

[Rob Capps, President and CEO at MIND Technology]

Nothing large.

[Howard Root, Analyst at Fairhope Capital]

Right. Can you give us any update on the backlog at the end of May or in the end of last week from that $7.6 million level?

[Rob Capps, President and CEO at MIND Technology]

Yeah, I really don't want to get into that. Again, if we have a significant change in backlog, we'll announce that. Other than that.

[Howard Root, Analyst at Fairhope Capital]

Okay.

[Rob Capps, President and CEO at MIND Technology]

I don't want to get too specific.

[Howard Root, Analyst at Fairhope Capital]

The stock repurchase plan. Obviously, you haven't filed your 10-Q, I would request that you do that at the same time you do your press release going forward so we can get all the details to be able to ask these questions. I'm assuming that you have not purchased any shares under the stock repurchase plan to date?

[Rob Capps, President and CEO at MIND Technology]

That's correct.

[Howard Root, Analyst at Fairhope Capital]

My last question then, and kind of last question I got to this. The $40 million net tangible book value and really the working capital primarily from really well timing the ATM stock sale, $4.40 per share. That leaves only at today's price, basically $0.50 or $0.60 per share of residual value on the market value. Is the company looking at the opposite? Because you're talking about maximizing stockholder value as in you guys acquiring something else. Why isn't it maximizing shareholder value, either buying your stock or having someone buying this and giving us the value for this business rather than basically one quarter of price to sales ratio?

[Rob Capps, President and CEO at MIND Technology]

That's an option. That certainly is an option that we're looking at, and that's the reason we put the buyback program in place, so we'd have that option. Again, I don't want to telegraph what our intentions are or what we may or may not do because it's a function of other factors as well. That is certainly an option for us.

[Howard Root, Analyst at Fairhope Capital]

Finally, at what point in time in the future do we look at this isn't working, we need to do something different, more of an aggressive change? Is it end of this year?

[Rob Capps, President and CEO at MIND Technology]

I think we've got a long runway there. I think there's enough progress and enough opportunity. I think we've got a long way to go on that.

[Howard Root, Analyst at Fairhope Capital]

Okay. Well, thanks for taking the questions.

[Rob Capps, President and CEO at MIND Technology]

You bet.

[Operator]

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

[Rob Capps, President and CEO at MIND Technology]

Okay. Thanks everyone for joining us this morning. I look forward to talking to you again in a few weeks, few months, for our second quarter results. Thanks.

[Operator]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Participants

Executives

• Mark Cox, VP and CFO
• Rob Capps, President and CEO

Analysts

• Howard Root, Analyst at Fairhope Capital
• Ken Dennard, Founder and CEO at Dennard Lascar Investor Relations
• Ross Taylor, Analyst at ARS Investment Partners
• Tyson Bauer, Senior Analyst at KC Capital