MIND Technology (MIND) Q4 2026 Earnings Transcript

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DATE

Thursday, April 16, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Robert P. Capps
• Vice President and Chief Financial Officer — Mark Alan Cox

TAKEAWAYS

• Revenue -- $9.8 million for the quarter and $40.9 million for the full year, with the quarterly figure flat sequentially due to delayed order deliveries.
• Gross profit margin -- 46% for the year, improved from 45% the previous year, primarily due to a higher portion of aftermarket services and product mix.
• Aftermarket revenue mix -- About 60% of total revenues in the full year came from aftermarket activities, with fourth quarter aftermarket revenues estimated at 55%-60% of product sales.
• Backlog -- Backlog was $13.9 million at period-end, down slightly from $16.2 million a year ago, and included both new systems and aftermarket orders.
• New orders -- $9.5 million in orders received during the fourth quarter, with roughly half delivered and the remainder set for early next year.
• Adjusted EBITDA -- $1.1 million for the quarter and $5.3 million for the year.
• Net income -- Full-year net income was $750 thousand after $2.2 million in income tax expense; fourth quarter saw a net loss of $271 thousand after $471 thousand in income tax expense.
• R&D expense -- $389 thousand in the quarter, down sequentially and year over year, focused on streamer systems and source controller enhancements.
• General and administrative expenses -- $3.3 million for the year, rising both sequentially and year over year, mainly due to higher stock-based compensation.
• Liquidity -- $37 million in working capital, including $19.1 million of cash, and a debt-free balance sheet as of period-end.
• Order pipeline -- Potential order pipeline is "several times" the firm backlog, with active pursuit of large projects valued at $10 million or more.

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RISKS

• CEO Capps stated, "Given our current visibility, we expect our results for fiscal 2027 to be down when compared to fiscal 2026," signaling a likely revenue and earnings decline.
• Management cited continued delays in large system order commitments, with Capps noting, "it has slowed customer decision-making and delayed order commitments for larger systems."

SUMMARY

Management confirmed that about half of the anticipated $9.5 million in fourth quarter orders was not delivered, directly impacting reported revenues. MIND Technology (NASDAQ:MIND)’s substantial working capital and liquidity were presented as critical assets enabling operational flexibility and readiness for strategic transactions. Full-year gross margin improvement was attributed to increased contributions from higher-margin aftermarket sales, establishing a recurring revenue base less sensitive to large system orders. The company’s outlook for next year is tempered, with expectations of reduced revenue and a focus on sustaining positive cash flow despite order delays.

• CEO Capps explained that one or two large orders could quickly alter the outlook, highlighting high sensitivity to individual contract wins due to company size.
• MIND Technology highlighted its ability to add accretive scale through organic growth, acquisitions, and partnerships; the trade finance facility with HSBC was cited as instrumental in pursuing larger contracts.
• Capps said, "aftermarket business accounted for about 60% of our total revenues for the year," underscoring a growing reliance on recurring business.
• Potential orders from scientific research institutions and government agencies, each valued at $10 million or more, were discussed, though management indicated fulfillment timing makes full recognition this fiscal year unlikely.
• The company’s debt-free capital structure, lack of material contingent liabilities, and expanding manufacturing capacity were presented as differentiators supporting industry consolidation and growth initiatives.

INDUSTRY GLOSSARY

• Aftermarket activity: Revenue stream from the sale of spare parts, repairs, service, and support associated with existing product installations, distinct from initial system sales.
• Backlog: The sum of firm customer orders for products and services not yet delivered, including both system and aftermarket commitments.
• CMAP/CMAT: Company-defined product lines encompassing marine seismic, control, and positioning technologies; references to core MIND Technology offerings.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, further adjusted for specified non-cash or non-recurring items as explicitly described by management.

Full Conference Call Transcript

Robert P. Capps, President and Chief Executive Officer, and Mark Alan Cox, Vice President and Chief Financial Officer. Before I turn the call over to Robert P. Capps, 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 mine-technology.com or via recorded instant replay until April 23. Information on how to access the replay was provided in yesterday's earnings release.

Information reported on this call speaks only as of today, Thursday, 04/16/2026, and therefore, you are advised that any time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties, and other factors, many of which the company is unable to predict or control, that may cause the company's actual future results or performance to materially differ from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk 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 01/31/2026.

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 would like to turn the call over to Robert P. Capps.

Robert P. Capps: Hey. Thanks, Zach, and thank you all for joining us today. Today, I will touch on our results for the fourth quarter and the full year and discuss the current market environment. Mark will then provide a more detailed update on our financials and I will return to wrap things up with some remarks about our outlook. A lot has transpired since our last earnings call. As you all know, we are a global company. Our customers work all around the world. We have not experienced any material impact to our operations or prospects due to the current conflict in the Middle East. However, this is a situation that we are following closely.

Overall, our performance in fiscal 2026 reflects our ability to deliver resilient results despite the evolving and highly turbulent macro environment. All things considered, I am pleased to report another year of meaningful cash flow from operations and positive earnings and adjusted EBITDA. We are capitalizing on pockets of demand, maintaining our consistent execution, and benefiting from production efficiencies. There has been a good bit of uncertainty in the market for some time now, but our CMAP revenues remain elevated compared to historical levels and were essentially flat in the fourth quarter compared to the third quarter.

As we discussed last quarter, overall interest and engagement remains positive, but we have seen some customers defer new order commitments given commodity price volatility and the current state of geopolitical affairs. This is not uncommon in periods of broad economic uncertainty. However, as the password indicate, we continue to view this as a short-term disruption and expect that customers will resume normal activities once conditions stabilize. Our long-term growth trajectory and operational momentum are still intact, and our large pipeline of opportunities supports our optimism for the future. Our backlog of firm orders as of 01/31/2026 was approximately $13.9 million compared to $727.2 million as of 10/31/2025 and approximately $16.2 million as of 01/31/2025.

As a reminder, during the fourth quarter, we received long-anticipated orders totaling about $9.5 million. We were able to deliver roughly half of these orders during the fourth quarter and expect to make the remaining deliveries early in fiscal 2027. Our backlog is only down slightly year over year. We are finding that many customers, regardless of industry or end use, are taking a wait-and-see approach to larger system orders given the current climate. For the reasons I mentioned, this is not unexpected. However, there are signs of recovery, and the long-term outlook for exploration and survey work is trending in the right direction.

We believe this bodes well for additional orders in future periods as the geopolitical instability in the Middle East may well drive exploration activity in other parts of the world. We have yet to see any immediate impacts from the dramatic increase in oil prices. That is something our customers are monitoring closely and has the potential to drive incremental activity. As a reminder, aside from the protracted customer decision-making process stemming from macro uncertainty and geopolitical turmoil, it is also not uncommon to see pauses in order activity throughout the year in a normal environment.

We continue to monitor various external factors that might impact our business, but 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. Outside of our backlog, which is defined as orders for which we have a purchase order or a signed contract in hand, the pipeline of potential orders remains solid and is several times greater than our firm backlog. We are pursuing certain significant projects. Some of these opportunities involve new vessels for governmental organizations. These projects are often relatively large, $10 million or more to us, and require that successful bidders provide security bonds.

You may have noted that we recently entered into a trade finance facility with HSBC. This facility provides flexibility to help pursue these more significant projects. We remain cautiously optimistic in our ability to convert opportunities into firm orders in coming periods. Our backlog and pipeline of potential orders consist primarily of our three main product lines: FinLink source controllers, BuoyLink positioning systems, and CLINX streamer systems. However, our backlog also contains some aftermarket orders. Together, these services are the foundation for our business. As a whole, our CMAT business continues to enjoy a strong market position. We have worked hard to carve out a niche within the marine technology industry and have established strong relationships with our customers.

We also pride ourselves in finding innovative ways to capture demand. Growing contributions from our aftermarket activities are also providing a stable and recurring revenue stream that is supporting our overall results. This component of our business has become increasingly important. This aftermarket activity consists of spare parts, repairs, service, and other support activities. While this business is influenced to some degree by 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 Technology, Inc.

We have established ourselves as a company that can do this kind of service and repair work quickly, efficiently, and reliably. Additionally, expenditures for aftermarket activity are generally operating costs, as opposed to capital expenditures. Therefore, customers will allocate funds for these activities differently than they might for a new system. Contribution of this activity as a percentage of revenue fluctuates from quarter to quarter based on product mix and the timing of larger system deliveries. However, in fiscal 2026, aftermarket business accounted for about 60% of our total revenues. Margins for this business also tend to be better than large system sales that might attract discounts.

The installed base of CMAP products continues to expand, and with it comes the prospect for increased aftermarket activity. Additionally, we continue to ramp up activity at our newly expanded Hessville facility. Additional floor space at this facility enables us to efficiently take on larger manufacturing and product repair projects. This increased capacity will be used to further support our existing CMAT products, newly developed products, and services to third parties. Turning to our results, marine technology product revenues for the fourth quarter and full year 2026 were $9.8 million and $40.9 million, respectively. Quarterly revenue was flat sequentially and slightly lower than our internal expectations due to delivery of a few orders being pushed into fiscal 2027.

But we continue to find ways to generate resilient results. I am pleased with our ability to navigate uncertainty within the market. We believe MIND Technology, Inc. remains well positioned to capitalize on opportunities in future periods to stimulate order flow and generate sustainable results. We have a differentiated approach, a best-in-class suite of products, and a unique aftermarket business that will continue to give us a competitive advantage and support our financial results for years to come. Now I will let Mark walk you through our fourth quarter and full year financial results in a bit more detail.

Mark Alan Cox: Thanks, Rob, and good morning, everyone. Revenues from marine technology product sales totaled approximately $9.8 million for the quarter. Full year revenue amounted to approximately $40.9 million. As Rob mentioned, the delivery of about half of the orders that we received in December were pushed into fiscal 2027, and this had an impact on our results for the quarter and full year. Despite this, and the general uncertainty that persists in the market, customer interest and engagement remain strong, and our aftermarket business continues to provide significant recurring revenue that is supporting our results. Full year gross profit was approximately $18.7 million. This represents a gross profit margin of 46% for the year compared to 45% for fiscal 2025.

The year-over-year margin improvement was primarily attributable to product mix, which included a greater proportion of spare parts and other aftermarket activity. 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 $3.3 million for 2026. This was up both sequentially and when compared to the same quarter a year ago. The sequential and year-over-year increases are due primarily to higher stock-based compensation. Our research and development expense for the fourth quarter was approximately $389 thousand, which was down both sequentially and compared to 2025.

Consistent with prior periods, these costs were largely directed toward the development and enhancement of our streamer systems and source controller offerings. Operating income for the fourth quarter and full year 2026 was approximately $78.0029 billion, respectively. Fourth quarter adjusted EBITDA was $1.1 million and full year adjusted EBITDA was $5.3 million. Net loss for the fourth quarter was approximately $271 thousand after income tax expense of $471 thousand. This resulted in net income for fiscal 2026 of approximately $750 thousand after income tax expense of $2.2 million. Our income tax expense results primarily from our operations in Singapore. As of January 31, 2026, we had significant working capital of approximately $37 million, including $19.1 million of cash on hand.

The company continues to maintain a clean, debt-free balance sheet with a simplified capital structure. We believe our solid footing, significant liquidity, and operational flexibility will allow us to make moves in the coming quarters that will enhance stockholder value in future periods. I will now pass it back over to Rob for some concluding comments.

Robert P. Capps: Thanks, Mark. We are operating in a complicated market environment that has fostered uncertainty. In some ways, that uncertainty creates opportunity for us going forward, but for now, it has slowed customer decision-making and delayed order commitments for larger systems. Despite this temporary pause in order activity, the underlying fundamentals for the marine technology industry remain intact. The long-term pipeline of opportunities continues to be very positive. Our prospects are plentiful; this presents compelling opportunities for MIND Technology, Inc. to address demand, capitalize on new areas of focus within the market, and deliver improved financial results. We remain very well positioned for the future, and I am optimistic that any near-term softness will abate in coming months.

We remain focused on controlling what we can. In recent years, we have strategically structured the company so that we are operating lean and efficiently. This allows us to be more responsive to changing market conditions. As a reminder, it really does not take much to move our needle in a positive direction. As one or two large orders materialize, we can have a very different outlook. We continue to drive technological innovation and expand our capabilities to address new opportunities. We are also constantly evaluating ways to repurpose our existing technology for new applications. Given our current visibility, we expect 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 Technology, Inc. We may grow in other ways that may not immediately present themselves in our financial results. We recognize it will be difficult to replicate the systems order volume that we have enjoyed over the past two years given our recent customer discussions and their prevalent uncertainty. However, I believe we will be cash flow positive for the year even with lower revenue. We have built a better, more resilient business with a solid foundation and simplified capital structure that is equipped to weather periods of reduced order activity.

We have also meaningfully grown our installed base over the last few years, which lends itself to our aftermarket activity and provides a substantial stream of recurring revenue. We will use our enhanced liquidity to position the business for improved financial results as activity across our end market returns. For the last year or so, you have heard me talk about the need for MIND Technology, Inc. to add scale. We recognize that we are a small company and that this presents challenges. I firmly believe that we need to be bigger to realize our full potential and enhance shareholder value. That being said, there are different ways we can achieve this growth. We can execute identified organic growth opportunities.

We can acquire assets or businesses that are similar to our existing business. We can combine with other organizations. These are all options that we are considering and actively pursuing. While we are motivated to add scale and we have ample ability to act quickly and efficiently should an opportunity arise, we will not jeopardize the immense progress that we have made at MIND Technology, Inc. to chase an opportunity that does not fit with what we do. Our significant liquidity has broadened our opportunity set. However, we intend to be very disciplined in our approach to our capital allocation, weighing the expected return with the cost of capital. That brings me to our capital allocation strategy.

The goal of this strategy is to add accretive scale and expand our offerings in order to enhance our value to our shareholders. I have outlined the various levers for growth that we have at our disposal. These include mergers and acquisitions, investments in organic growth opportunities such as the expansion of existing product lines, and strategic alliances with other industry partners. These levers are intended to be tools that we can use to create or enhance value. We can lean on any of these or a combination thereof as market conditions permit and the return on investment meets our threshold for value creation. Our view is that the marine technology industry is highly fragmented.

This creates an opportunity for us to add products and services that fit MIND Technology, Inc.’s strategic capabilities and scale our business. We have a robust manufacturing footprint that is capable of producing sophisticated, technologically diverse products. This makes MIND Technology, Inc. a natural production partner or buyer for innovative technologies that can be sold alongside our existing suite of products. We continue to evaluate a number of such opportunities. We believe we are unique for a small public company. We have positive earnings and cash flow. We have no debt, and a simple streamlined capital structure and no material contingent liabilities. And we have liquidity.

We think this positions us well to weather any storm and take advantage of the opportunities ahead of us. In closing, we remain committed to positioning MIND Technology, Inc. for future success, taking steps to strengthen the company and build a resilient platform with a solid foundation and a growing opportunity set. Our differentiated and market-leading suite of products gives us a competitive advantage as we partner with our customers to address various demand trends, such as power generation, energy transition, and subsea exploration. Going forward, we intend to use our liquidity to augment our business through additional investments with a focus on developing the next generation of marine technology products to meet the evolving needs of our customers.

We also plan to be active participants in the industry consolidation, whether that be adding product lines or something more transformative. These efforts will help us realize meaningful financial improvement as market conditions normalize, which we expect to drive enhanced stockholder value. With that, operator, I think we can now open the call up for some questions.

Operator: Thank you. To ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. And for those using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, it is 1 on your telephone keypad to ask a question. Our first question is from Ross Taylor with ARS Investment Partners. Please proceed.

Ross Taylor: Talk to us about what you see, where the financing is coming from for your customers. You said you have seen kind of a push off, a delay. What do you think is really driving this? We are seeing a lot more interest in subsea mining. We are obviously seeing, with the Strait of Hormuz, the need for being able to detect mines and other items underwater and things like that. I read somewhere the Chinese have aggressively mapped around Guam, around Taiwan, around the Philippines, and the like, and I would assume the US Navy probably needs to do something similar. Where is the capital coming from?

And you said you are seeing a pullback on your buyers and it seems like the demand should be growing meaningfully given what is happening around the world right now.

Robert P. Capps: I think that is right, Ross, in that what our customers have been doing—the people who have been buying from us recently—they have certainly been impacted. The pause last year in the energy markets or the uncertainty in the energy markets had an impact. And therefore, there was some M&A activity in the market as well. So some companies were consolidating and, frankly, looking to conserve cash just from a fiscally conservative basis. In talking to them now, they are seeing improvements in activity. For a while, they saw their customers were not placing orders. They were not entering new projects—just being more cautious. Some of the uncertainty in the wind markets caused some of that.

That seems to be returning a bit, especially outside of North America. So I think it was, again, a pause for them trying to be fiscally conservative and fiscally responsible. But they see that on a longer-term basis, there is that need. That is the reason we think that as they see their pricing improve, they see their prospects improve, they are going to be coming back to us for the fixed-vane capacity. We see new entrants into the market, some new vessels as we alluded to earlier, which is a bit unusual for these past few years. So, again, I think longer term it looks pretty darn positive.

But, again, if you go back to the energy side of it, ironically, the situation in the Middle East is probably a positive in that a lot of people think this is going to drive increased exploration activity outside of the Middle East, which is a positive for our customers and for us. As it goes into the military and maritime security side, that has less direct impact on us today, but I think that is also starting to expand the opportunities for our technology being used more and more for ocean-bottom survey and not just for exploration activity.

It is tough to say when this hits, but I think if you look from a macro standpoint, it has got to turn around. Does that happen in two months or six months or nine months? I do not know the answer to that for sure. I do not think anyone does. Everyone I talk to in the industry is pretty bullish long term, but cautious in the near term.

Ross Taylor: A couple different things. Looking at—you talk about having a year that is going to be somewhat under what you saw last year. I assume that is assuming that you do not see any of the improvements in any of the things that are kind of prospects become backlog.

Robert P. Capps: Correct. That is right.

Ross Taylor: You are talking about being able to generate free cash flow during the course of the year. Am I correct in that assumption that you said you will obviously be able to have EBITDA, but we should expect cash flow to be positive in the year?

Robert P. Capps: We do expect that, yes.

Ross Taylor: With your acquisition or your strategy to enhance value, it strikes me as one of the natural things is finding a division of a public company or something, and in essence, almost them using the MIND Technology, Inc. platform as a way to get public to gain value out of it—an acquisition that would effectively be able to pay for itself given its economics. Is that the type of thing that we should be looking to see out of you as we look ahead? And then also comment on, because you mentioned, some of what you are thinking about doing is building for others. What are the economics when you build for someone else as opposed to for yourself?

Robert P. Capps: Sure. Let me take those in reverse order. Being a contract manufacturer—those margins are not very good historically. But if we can partner with someone and have more of an impact and more of an input into the technology itself, so we are bringing more to the table, that is the sort of thing we are looking for from a partnership standpoint—where we can sell to our customer base, produce out of our facilities, things like that. We are also looking at whether we can acquire technology or product lines from someone. That might entail actually acquiring an entity—the company—maybe a one- or two-product company, or it might entail acquiring just the technology from someone.

So we are looking at all of those. But the key there is things that are close to what we do now that we can lever our existing capabilities and get those economies of scale and really drive the return on that. That is really important to us. We do not want to do something where we have to do a step-out and replicate production facilities somewhere else. That is not the sort of thing we are looking for. To the first point you raised, we are a bit of a unicorn for small public companies. As I said in my comments, we forecast positive results. We have no debt. We have a pristine capital structure and balance sheet.

That enables us to do some things that I think make us an attractive vehicle for some entities to monetize what they have. Maybe there is a venture capital firm who has an investment they would like to monetize and this is a way they could do that. So I think there are some opportunities there. That is the sort of thing that we are looking to do.

Ross Taylor: That would fit with how I would think—a big part of what I would be thinking—an acquisition that basically pays for itself and you allow an exit strategy, but also a way of that entity perhaps going public.

Robert P. Capps: Exactly right.

Ross Taylor: Obviously, at this stage, difficult outlook as we push ahead. Can you talk about—you have talked about having a number of these very large prospects. Could you talk a little bit more? Give us what is for you a very large prospect, and how long lead time do you need to fill it?

Robert P. Capps: Call it $10 million-plus as a large prospect. We have done several $5 million to $6 million orders, but $10 million is large for us. From receipt of order to delivery, call it 16 to 24 weeks, something like that. Frankly, the process from when the bid is let until actually getting the award can be a longer process. You can very well chase these things for a year and a half before you actually make delivery. I would not expect that we would win and deliver a project of that size in this fiscal year. Possible, but it would have to happen pretty quickly.

Ross Taylor: So you could win it this year, but given the other factors, it is unlikely that you would be able to fulfill it fully this year.

Robert P. Capps: Right. Not impossible, but unlikely at this stage.

Ross Taylor: And at what price in the stock do you actually consider the company itself to be a worthy investment?

Robert P. Capps: I am not going to touch that. That is something we think about, and certainly we have said publicly, if our stock is the best use of capital, that will be our use of capital. But I do not think I want to touch that point.

Ross Taylor: Okay. I will pass it on to others. Thank you. Good luck.

Operator: Our next question is from Tyson Lee Bauer with Casey Capital. Please proceed.

Tyson Lee Bauer: Good morning, gentlemen. Interesting that you had talked about new vessels possibly for government entities that could be up to $10 million. Would that be more scientific, or what portion of a government structure would that be geared toward? And that $10 million number seems rather large given that 40% of your overall revenues in fiscal 2026—$16 million of that—was system sales. One order could account for 60% of what you did the prior fiscal year. Were you hopeful that you may have something in place before this call? Did you expect it? Is there something in the hopper that may or may not materialize?

Robert P. Capps: That is right. To answer your direct question, this is more scientific research-type institutes that we are looking at. That is the type of vessel and entity that is involved. They are multipurpose vessels and do lots of different things, so we are delivering lots of different stuff beyond just standard streamer systems and gun control systems for these things. You are exactly right—those are large—and as I said in my comments, it does not take a lot to move our needle. I am always hopeful, Tyson. I did not expect it, though. These things do take some time. They happen when they happen. There are more than one opportunities active right now that may or may not materialize.

Tyson Lee Bauer: On the deals or potential deals, how important is your tax-loss carryforward asset in consideration as far as the payback of doing a deal or somebody with a related business being able to utilize that? Is the fact that you are US-domiciled a benefit in some of these assets that may want to have that location as opposed to maybe a foreign entity that may want to enter the US market?

Robert P. Capps: It really depends on the nature of the counterparty and the structure of the deal, but it could be meaningful, and you could have a tax-neutral transaction fairly easily, I think. But, as you will appreciate, that is a complex situation which may or may not work out, but it potentially could have significant value. I would say being US-domiciled is probably a net positive for a couple of reasons. Number one, the US capital markets are available to us, so that is attractive to people as opposed to other capital markets. From an export or control standpoint, it is probably a positive overall. So I think it is a net positive for sure.

Tyson Lee Bauer: In the quarter, of that $9.8 million, what percentage was parts, services, and repair versus system delivery? You are trending around that $6.0–$6.5 million per quarter—obviously can have some lumpiness—but is that recurring base revenue as we go forward? And given your comments before the Q&A, it sounds like $4 million or $5 million may have gotten pushed into fiscal 2027. Is the current backlog that you disclose made up entirely of systems?

Robert P. Capps: Off the top of my head, it would have been probably 55%–60% aftermarket. I do not have the exact number in front of me, but it is in that ballpark. We have seen over the last year—really the last five quarters—that trend pick up, so I think that is right. Of course, the caveat is that can always switch a bit. Spares orders can be lumpy too, so that can switch, but it has definitely been trending up, and it makes sense as the installed base has been going up. On the push, yes, that is about right—about half of that large order we got in the fourth quarter did not get out the door.

We had hoped at one point that we would be able to, but it did not come in soon enough, and there were lots of factors as to when the customer could pick it up and things like that. So we just did not get it out the door. The current backlog is not entirely systems—there is some aftermarket stuff in there too. Again, I do not have the breakdown in front of me, but it is a combination.

Tyson Lee Bauer: SG&A—obviously we had stock comp of $714 thousand a quarter. You typically have some additional professional fees to start the year. Is a level closer to $2.08 million going to be a good modeling number as we go forward?

Robert P. Capps: Probably ballpark, again, with some variations from quarter to quarter. The stock-based comp is going to continue for a while and then start to trend off over the coming quarters. We did have some unusual things last year early in the year which skewed the full-year amounts—some tax analysis, some franchise tax adjustments—things like that, which will not be recurring. So I think if you factor out the stock-based comp, you will see things stabilize and maybe trend down just a bit.

Tyson Lee Bauer: Order timing—typically, capital budgets are set at the end of calendar years and then are gradually released the following year. Are those what give you cause for concern, or is it that the capital budgets have been allocated or they are not appropriated and you do not know if they will get fully appropriated as we go through this fiscal year?

Robert P. Capps: I would caution that the budgets are not set in stone and then done. In this environment, you see things change during the course of a year. Capital budgets can go up or down. We certainly saw them go down last year during the year, so they can go both directions. Also, as we are dealing with some of these governmental agencies, they work on a different calendar than we do—often not the natural calendar year—so I would be cautious to put too much into that. Having said that, the general trend I am seeing is an uptick in inquiries and interest in additional equipment.

What is uncertain to us right now—we have tried to emphasize—is how quickly those opportunities materialize. Does it happen next month, or is that nine months down the road? Hard to say right now. I think everyone is being cautious still, but I think they are making some preparations to maybe turn things loose a bit when things are a bit more certain.

Tyson Lee Bauer: One thing I find interesting when you talked about the possibility of new vessels is, given your competitive dominance in certain niches of the industry, new vessels require long lead times and dry dock space. If you are the only game in town for some of these technologies or systems for those vessels, to procure it is almost a function of when, not if, for those orders. Am I framing that scenario correctly?

Robert P. Capps: To a point, you are correct that there are certain aspects of the technology that are unique to us, so we are going to get that business almost certainly. There are other parts of those projects that we pursue that we do have some competition on, so those are not a foregone conclusion. Also, especially with foreign governmental entities, there sometimes are contractual requirements that we may not find palatable, so we may walk away from an opportunity because we just do not like the terms—they are too onerous. So you are right in that to some degree, if a project happens, we are going to get it, but not necessarily to the same magnitude of a $10 million order.

Tyson Lee Bauer: Are you able to work directly with Chinese customers, or do you have to work with intermediaries such that the ultimate end does not really impact where your product ultimately ends up?

Robert P. Capps: There are some things we cannot sell to the Chinese. There are some things where we have to limit the capabilities of what we sell to the Chinese. Other things, there are no limits at all. But yes, we deal directly with Chinese customers.

Tyson Lee Bauer: The last question—probably the most important question for shareholders—is, how do we keep 2027 from becoming a lost year for shareholders? You may have expectations as of today of a lower fiscal 2027 compared to fiscal 2026 on financials, but if you grow the backlog throughout the year or if you do other activities that are favorable for shareholder value, obviously the investor community will look forward, which would give us a return and a reason to basically wait out this pause that you are seeing currently. Are you seeing that scenario where you are not saying that fiscal 2027 is a lost year for shareholders?

You are, at this point, saying that financials look like they will be down, but as we progress through the year, we are going to see that your value proposition is actually growing as we traverse fiscal 2027?

Robert P. Capps: Tyson, that is absolutely correct. We tried to allude to that—that there may be some things that happen that just do not reflect themselves in the financials right away. But I think there are lots of opportunities for us to create value, and that is what we are all about.

Operator: We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Robert P. Capps: I would like to thank everyone for joining us today and look forward to talking to you again at the end of our first quarter in a few weeks. Thanks very much.

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

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