Mind Technology's Q2 2026: Contradictions in Revenue Projections, Market Conditions, and Offshore Wind Outlook

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 10, 2025

Financials Results

• Revenue: $13.6 million, up approximately 35% YOY
• Gross Margin: 50% for the quarter, improved sequentially and YOY due to favorable mix and higher volume
• Operating Margin: Approximately 20% (operating income $2.7M vs $1.4M prior year, up ~86% YOY)

Guidance:

• FY26 results expected to be similar to FY25; growth more consistent, not as strong as prior year.
• Expect positive adjusted EBITDA and profitability in each remaining quarter and for full-year FY26.
• Backlog $12.8M as of Jul 31, 2025; two imminent orders totaling ~$10M not yet in backlog.
• Aftermarket ~68% of 1H FY26 revenue; margins supported by mix; gross margins expected to remain favorable.
• Huntsville facility expansion ramping through 2H FY26 and into next year to support growth.
• Demand steady but next-year decisions cautious; deliveries may be lumpy due to timing.

Business Commentary:

• Revenue and Profitability Improvement:
• MIND Technology reported second quarter product revenues of $13.6 million, which was a 35% increase from the same period a year ago.

• The improvement was driven by increased CMIP revenues from system sales and growing aftermarket activities, helping them return to profitability after delivery delays in the first quarter.

• Aftermarket Business Growth:

• In the first six months of fiscal 2026, aftermarket revenue accounted for about 68% of the company's total revenues.

• Expansion and enhancement of the Huntsville, Texas, manufacturing and repair facility is expected to further support aftermarket growth and increase capacity for new products and services.

• Strong Product Backlog and Pipeline:

• As of July 31, 2025, the company's backlog of firm orders was approximately $12.8 million.

• Despite a pause in order activity, there are two orders totaling about $10 million expected to be received soon, emphasizing the strength of the product pipeline.

• Positive Cash Flow and Liquidity:

• MIND Technology had working capital of approximately $25.1 million, including $7.8 million of cash on hand, as of July 31, 2025.
• The clean, debt-free balance sheet and solid cash position provide flexibility for enhancing stockholder value and pursuing strategic actions.

Sentiment Analysis:

• Returned to profitability with revenue of $13.6M, up ~35% YOY. Gross margin 50%, improved sequentially and YOY. Operating income ~$2.7M vs $1.4M prior year; adjusted EBITDA $3.1M vs $1.8M. Management expects positive adjusted EBITDA and profitability in each remaining quarter and full-year FY26. Backlog $12.8M with ~$10M in imminent orders; aftermarket strength and Huntsville expansion support outlook despite some customer caution.

Q&A:

• Question from Tyson Bauer (KC Capital): Was parts and services revenue about $7M in Q2, and is that a sustainable run rate? Any catch-up from Huntsville delays?
  Response: No Huntsville catch-up; aftermarket is trending up but not a set run rate; Huntsville ramps through 2H and into next year.

• Question from Tyson Bauer (KC Capital): Why did backlog fall to $12.8M from $21.1M despite deliveries and a new $4M order—any cancellations or reclassifications?
  Response: No cancellations; some aftermarket orders flow through backlog and timing; the ~$7M aftermarket estimate is only approximate.

• Question from Tyson Bauer (KC Capital): Full-year FY26 outlook vs FY25 and needed system deliveries; does achieving targets require ~$20M of new orders including the $10M pending?
  Response: Outlook broadly similar to prior commentary; deliveries will be lumpy; pipeline includes two near-term orders and more systems pending, but timing is uncertain.

• Question from Tyson Bauer (KC Capital): Are large Scandinavian orders on their usual timetable or delayed by caution?
  Response: Market caution and temporary seismic softness are delaying some CapEx; long-term offshore activity remains bullish; timing is the issue.

• Question from Tyson Bauer (KC Capital): Policy headlines (offshore wind moratorium, rare earths, deep-sea mapping)—what’s real for your demand?
  Response: U.S. offshore wind has slowed, but activity continues elsewhere; policy uncertainty is causing caution, though long-term demand remains positive.

• Question from Ross Taylor (ARS Investment Partners): Rationale for simultaneously establishing an ATM and buyback, and what are acquisition parameters?
  Response: Seeking tuck-in, additive deals near core tech/customer base with lower risk; ATM provides optionality; disciplined on dilution and returns.

• Question from Ross Taylor (ARS Investment Partners): Progress on partnership with an innovative mapping newcomer and potential magnitude?
  Response: Project is progressing; fits existing customers; additive opportunity of a few million dollars, not transformative; low risk/investment.

• Question from Ross Taylor (ARS Investment Partners): Quarter-end cash balance?
  Response: Approximately $7.2 million.

• Question from Ross Taylor (ARS Investment Partners): What will the Huntsville expansion contribute and at what scale?
  Response: Expect meaningful contribution (~10%+ of annual revenue potential) via third-party repairs/manufacturing and CMAP support; enables U.S. security work and tax efficiency.

• Question from Ross Taylor (ARS Investment Partners): Is the implied revenue growth outlook high single digits to low double digits, albeit lumpy?
  Response: Yes, targeting high single-digit growth, but delivery timing can swing results between quarters.