MIND Technology, Inc.
Q4 2021 Earnings Call Transcript

Published: 13 Apr 2021

[Operator:]

Greetings, and welcome to the MIND Technology Fiscal Fourth Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Ken Dennard. Please go ahead.

[Ken Dennard:]

Thank you, operator. Good morning, and welcome to the MIND Technology fiscal 2021 fourth quarter and year-end conference call. We appreciate all of you joining us today. Your hosts are Rob Capps, Co-Chief Executive Officer and Chief Financial Officer; and Guy Malden, Co-Chief Executive Officer and Executive Vice President of Marine Systems.

[Guy Malden:]

Thanks Ken, and good morning, everyone. We would like to thank you for joining us today for our fiscal 2021 fourth quarter and year-end conference call. As you all will appreciate, the last 13 months have presented an unprecedented challenge. Now those challenges notwithstanding, we accomplished a great deal this past year and believe we are well positioned for an improving business environment. Now, let me highlight a few of those accomplishments. Last summer after receiving shareholder approval, we initiated our rebranding by reincorporating from Texas to Delaware and renaming the company, MIND Technology. This action coincided with our decision to exit the land leasing business, and we think it reflects an inflection point in the company's transformation. One of the actions that has helped expedite this transformation is expansion of our human capital. We believe the additions we have made when combined with our existing personnel create a powerful team.

[Rob Capps:]

Thanks, Guy. I'll begin by giving you a detailed review of the fourth quarter financial results before making a few summarizing comments. So keep in mind that I'll be discussing our continuing operations, which were composed entirely of Marine Technology products. Our legacy leasing operations are classified as discontinued operations. As Guy mentioned, our past fiscal year was full of unprecedented challenges not only for us, but also for our customers. We believe the disruptions and uncertainties arising from the COVID-19 pandemic had a significant impact on our results.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question comes from the line of Tyson Bauer with KC Capital. Please proceed with your question.

[Tyson Bauer:]

Good morning, gentlemen.

[Guy Malden:]

Good morning, Tyson.

[Tyson Bauer:]

Can you give a little more color on, one, the timeline of the current backlog and how that correlates with the cash management needs going forward, whether that's on your working capital needs, the ability or the need to raise capital from various sources, so viewing the backlog and how that's going to roll through also with that cash management?

[Rob Capps:]

Sure. Sure, Tyson. We expect essentially all the backlog to be delivered this fiscal year, if not all of it. As far as, you know, we have a build plan in place in order to meet those schedules through -- throughout the balance of the year. And so, that's really factored into our working capital needs. And so, our comment about thinking we have the liquidity to execute on that with things on hand, I think we've contemplated the build plan and the working capital necessary for that. Luckily, we entered the year with a bit of working -- bit of inventory on hand, which will help serve those -- those orders. So, we don't have to go around – spend cash for all of that going forward. So, I think the capital needs, as far as additional capital, I think will be more towards growth opportunities that we see out there.

[Tyson Bauer:]

Okay. And do you see any requirement for utilizing the AMT and do you have availability on that still?

[Guy Malden:]

We certainly have availability, and it's just a matter of what the market looks like and what our other needs might arise, as we're not able to access that. The nice thing about the ATM is, it's there, so we can access it quickly, if need be.

[Tyson Bauer:]

And given the interest in orders and the time it takes to get an actual physical PO and then turnaround to build that and deliver and with payment, where do you think you need to be given what you know now in terms of backlog and what you've already recognized as revenue, say by the middle of this year?

[Guy Malden:]

I'm not quite sure I can answer that. I mean, I understand that backlog is important. I mean, backlog is good, but it doesn't tell the whole story. I mean, we're able to take orders and deliver within the fiscal year. So, if you look historically, these are rough numbers. But our -- beginning backlog has represented anywhere from, well, our annual revenues, I should say have been anywhere from 200% to 300% to 500% of our beginning backlogs. So, backlog is an indicator, but it doesn't tell the whole story. So, I don't think there is a number that we have in mind that we have to have backlog at a certain point in order to say we're on the right path.

[Tyson Bauer:]

Okay. You've given your financial target with the five-year timeline. Are we able to pinpoint an exact year on that, so we don't maintain a financial target, but the -- kind of the -- what tends to happen in ambiguous five-year plan, where five years take seven years?

[Guy Malden:]

Well, again, I guess, I'd say, we're kind of going into year one of that plan if that partly answers your question. I think, as far as you know, is that a steady growth, is it -- there is one year, which we have this huge year. That's the big jump. I think we see more steady growth. I'm not saying, there are some opportunities that could be a home run or two out there, but I think we see this more as a steady growth over that time period. So, there is not one year out there, three years out, we – we’ve got to have something happen. That's not necessarily the case.

[Tyson Bauer:]

The loss of a competitor and the benefit from that, was the PGS -- is that a new contract or is that taking over their existing contract?

[Guy Malden:]

That's a new contract, yes.

[Tyson Bauer:]

And have you seen a lot of increased activity since their departure from the industry?

[Guy Malden:]

There has been some, yes. There is definitely some.

[Rob Capps:]

They are not completely -- they didn't completely exit. They are certainly less competitive, and they are not supporting the direct system that competes with us. But yes, we're seeing certainly an uptick in activity because of that. Remember, we had an agreement with PGS a number of years ago that we fulfilled, went into a competitive situation to re-tender. We were chosen based on technical capability, and we've successfully signed that agreement.

[Tyson Bauer:]

Okay. And last one for me try not to monopolize. European developments with the -- kind of the timeline on that naming of product, when a product would be commercially available, that along with your testing protocols as hopefully COVID allows more US testing, more in the water onsite capabilities, just some of the benchmarks there and some of the developments we should keep an eye on?

[Guy Malden:]

All right. I guess, I can say that we believe we're on target. We're on schedule…

[Rob Capps:]

Yes. We're on schedule.

[Guy Malden:]

For that project. And later this year, we'll start to have some deliveries of initial aspects of that.

[Rob Capps:]

Yes, prototype system, but we're really looking at next year.

[Tyson Bauer:]

All right, okay. Thank you, gentlemen.

[Guy Malden:]

Okay. Thanks, Tyson.

[Operator:]

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

[Ross Taylor:]

Thank you. Just a couple quick questions. One, what has backlog done in the first quarter versus end of the year?

[Guy Malden:]

Roughly the same. We've delivered a bit against it so far. That's roughly the same.

[Ross Taylor:]

Okay.

[Guy Malden:]

And the quarter is not over yet. Understand that.

[Ross Taylor:]

That is true, and things come in late. Second, with regard to G&A. Can you give us an idea of what kind of run rate G&A could be this year without all the one-time expenses?

[Guy Malden:]

Yes. I think it would be a bit less than we're seeing in the fourth quarter. Again, just -- fourth quarter tends to be really higher because of audits and things like that, as well as we have some legal fees fall in there from some of our activities during the year. So, I'll see it backing off that a bit. I don't want to give a specific target at this point. But I don't see it being at the same run rate that we're seeing right now.

[Ross Taylor:]

Okay. And so yes, it would be helpful going forward if you gave us -- or at least, if you can give us an idea perhaps after the first quarter what the run rate would be? You're talking about shooting for a $140 million in revenues at a 20% EBITDA margin inside of five years. Looking at that, then you comment that you're well positioned right now? How long do those -- those two factors take to get us to where we actually start to generate free cash flow and positive earnings per share?

[Rob Capps:]

Not that far. I mean, we'll be at that point well before we get to those -- those target levels. If you kind of do the math, and you kind of go back to the fiscal '19 is kind of more of the -- kind of where we're starting from, if you will because I see this past year as a bit of anomaly due to COIVD starting from our $30 million of top line revenue. You don't have to be too far from that in order to be at a cash flow positive, and frankly, at operating income positive point.

[Ross Taylor:]

Okay, good. Well, the faster you can get there, I think you'll take a lot of pressure off both your stock and your investors mind . Well, thank you guys very much. Keep up the good work.

[Guy Malden:]

Understand that for sure, Ross. You bet.

[Ross Taylor:]

Take care.

[Operator:]

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to management for any final comments.

[Guy Malden:]

Okay. Thanks everyone for joining us today. I appreciate your time and look forward to talking to you after our first quarter results here in just a few weeks. Thanks very much.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect your lines.