Mind Technology Inc: Overlooked, Transformed Tech Stock Has HUGE Potential

Mind Technology Stock Poised for Massive Growth

Mind Technology Inc (NASDAQ:MIND) has been around for more than 50 years, but in 2020, it revamped and rebranded its operations. That move has given it access to new, fast-growing markets. For MIND stock investors, this strategy presents the potential for higher returns on investment.

MIND Technology Inc’s new strategy should do wonders for the company’s share price, which hasn’t moved much since 2016. In fact, the only real moves Mind Technology stock has made since then were to the downside during the March 2020 stock market crash.

MIND stock hasn’t recovered all of its losses associated with the March 2020 sell-off; it still needs to climb by more than 60% to do that.

Trading near a $2.00 support level as of this writing, Mind Technology stock is:

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  • Down by 19.3% over the last three months
  • Down by 10.2% over the last six months
  • Down by 13.8% year-to-date
  • Down by 29.5% year-over-year
  • Up by 175% since bottoming in April 2020

Chart courtesy of StockCharts.com

Admittedly, 2020 probably wasn’t the best year for MIND Technology Inc to embark on a transformational strategy. Hopefully though, the company’s financial results over the coming quarters will do all the speaking.

MIND Stock Overview

MIND Technology used to be a short-term lessor of land seismic equipment for oil and gas exploration, but it has evolved into a leading provider of advanced marine technology for commercial and military applications. (Source: “Investor Presentation,” MIND Technology Inc, May 4, 2021.)

As a result of this change, the company now operates in one business segment: marine technology products. This strategic repositioning provides access to new, fast-growing markets beyond oil and gas exploration, such as hydrographic, oceanographic, defense, and maritime security.

Some of the applications MIND Technology Inc now addresses are:

  • Marine seismic
  • Construction survey
  • Renewable energy survey
  • Search and recovery
  • Hydrographic survey
  • Mine countermeasure
  • Anti-submarine warfare
  • Waterside security

As part of the company’s 2020 rebranding effort, the company changed its name from Mitcham Industries, Inc. to MIND Technology Inc and reincorporated to Delaware from Texas.

MIND Technology also increased its common stock from 20 million to 40 million shares and preferred stock from one million to two million shares. This was done in anticipation of future transactions to facilitate growth.

Furthermore, management announced that the company would exit the seismic leasing business entirely and seek to sell or dispose of those operations and related assets over the ensuing 12 months.

Investors haven’t jumped on board MIND Technology stock yet, but the industry has taken notice.

Recently, MIND Technology Inc was awarded a contract to install a new type of sonar system on an autonomous underwater vehicle for evaluation by the U.S. Navy. This next-generation technology, known as micromax, is the first in a series of new imaging products based on the company’s “MA-X” system and is designed for both the commercial and military unmanned vehicle markets.

It should go without saying that a contract with the U.S. Navy is a significant milestone in the acceptance and growth of the company’s technology.

MIND Technology has also inked partnership and supply agreements with other major defense contractors and unnamed parties.

5-Year Growth Plan

MIND Technology Inc’s five-year growth plan includes:

  • Revenue growth to $140.0 million
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of more than 20%
  • Organic growth and strategic initiatives to more than double its base business from $30.0 to $100.0 million
  • Non-organic growth of more than $30.0 million through strategic partnerships and acquisitions

The company expects to achieve these targets through initiatives to expand, add new technology, and take advantage of new market trends. By pursuing new opportunities, MIND Technology Inc has been able to increase its estimated serviceable market to $1.3 billion.

That includes the exploration sector, which has an estimated serviceable market of $440.0 million per year; the survey sector, which has an estimated annual addressable market of $150.0 million; and the defense sector, which has an estimated annual serviceable market of $750.0 million.

These numbers might sound small, but they’re big for a company that currently has a market cap of just $26.5 million.

There’s also lots of room for growth. For example, the unmanned surface vehicle market is estimated to grow to $2.4 billion over the next five years. The autonomous underwater vehicle market is forecast to grow by 21% from $638.0 million to $1.6 billion over the next five years.

When it comes to working with the military and global defense contractors, it’s all about who you know. MIND Technology Inc’s well-connected management team includes:

  • Willy Hilarides, board director: Vice Admiral (Retired), United States Navy
  • Dennis Morris, chief operating officer: L3Harris Technologies, Inc., BAE Systems, and United States Navy
  • Thomas Meurling, chief business development officer: Teledyne Technologies Incorporated, RESON, FMV, and Royal Swedish Navy
  • Mike Williams, general manager of Klein unit: Lockheed Martin Corporation

Decent Q1 Results, Large Backlog

In June, MIND Technology announced its financial results for the first quarter of fiscal 2022 (ended April 30, 2021). Its revenue came in at $4.2 million, a 34% drop from the first-quarter-2021 revenue of $6.4 million. (Source: “Mind Technology, Inc. Reports Fiscal 2022 First Quarter Results,” MIND Technology Inc, June 2, 2021.)

The company reported a net loss from continuing operations for the first quarter of fiscal 2022 of approximately $3.7 million ($0.33 loss per share), compared to a net loss of $3.3 million ($0.30 loss per share) in the fourth quarter of fiscal 2021 and a net loss of $6.4 million ($0.59 loss per share) in the first quarter of fiscal 2021.

MIND Technology Inc’s adjusted EBITDA from continuing operations in the first quarter of fiscal 2022 was a loss of approximately $3.0 million, compared to a loss of $2.5 million in the first quarter of fiscal 2021.

The company ended the first quarter with a backlog of approximately $11.0 million, compared to $14.2 million as of January 31, 2020; $8.2 million as of October 31, 2020; and $8.9 million as of January 31, 2020. 

Rob Capps, MIND Technology Inc’s co-CEO, stated,

During the first quarter of fiscal 2022, we started to experience the impact of the disruptions to the global supply chain that have been widely reported. In some cases, customers did not receive ancillary items from third parties, causing them to delay deliveries from us. Additionally, we and our customers have experienced longer shipping times, particularly with ocean freight. As a result of these factors, our first quarter results were less than we had anticipated. We have taken steps to address these issues and expect significant improvement in following quarters.

(Source: Ibid.)

Capps added, “We are continuing to experience an increase in inquiries for marine exploration applications, particularly for our source controllers, and related components, and expect to receive a couple of significant orders, totaling more than $5.0 million, in the second quarter of fiscal 2022.”

Analyst Take

Mind Technology Inc is a transformed company with a new vision. It has a significant international footprint and a healthy balance sheet with zero debt. Moreover, the company has been making inroads in new, fast-growing markets.

As previously stated, over the next five years, the company’s goal is to increase its annual revenue to $140.0 million and generate an EBITDA margin of more than 20%.

The company will no doubt experience growing pains, but given MIND Technology’s good reputation and new contracts, it’s well on its way to achieving its five-year business plan.