MIND Technology(MIND) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - The company reported a net income of approximately $568,000 for Q3 2024, driven by a gain of$2.4 million from the sale of Klein [9] - Adjusted EBITDA from continuing operations was a loss of $1.1 million, compared to a loss of$2.4 million in the same quarter last year [9] - Working capital stood at approximately $16.5 million, with$5.6 million in cash on hand as of October 31, 2023 [10] - Gross profit for Q3 was $2.3 million, up from$862,000 in the prior-year period, with a gross profit margin of 45% [38] - Operating loss improved by nearly 50% to $1.5 million, compared to a loss of$2.9 million in Q3 2023 [41] Business Line Performance - Marine Technology Products revenue was approximately $5 million in Q3, significantly lower than expected due to component delivery delays [28] - The backlog for Marine Technology Products reached a record$37.4 million, more than double the $17 million backlog at the end of July [26][22] - The company expects a significant revenue increase in Q4 as delayed orders are completed and delivered [30] Market Performance - The company's Marine Technology Products are penetrating various industries, with strong demand in exploration, defense, and survey markets [32] - A new supply agreement with a major international seismic contractor is expected to drive additional orders in Q4 and beyond [27] - The backlog includes over$5 million related to SeaLink ultra-high resolution 3-D seismic streamer systems for offshore wind farms and green energy projects [33] Strategic Direction and Industry Competition - The company has streamlined operations by selling Klein, which has improved liquidity and eliminated high-cost debt [10][25] - The focus is on profitability and leveraging the growing backlog to achieve sustainable revenue growth [12][17] - The company is well-positioned to capitalize on favorable market dynamics, particularly in the maritime technology sector [14][32] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's future, citing a record backlog and favorable market conditions [12][14] - Supply chain issues, while improved, continue to impact results, but delayed orders are expected to be fulfilled in Q4 [29] - The company anticipates meaningful financial improvements in Q4 and fiscal 2025 as the backlog converts to revenue [17] Other Important Information - The company declared and paid a dividend on preferred stock for Q3 but does not expect to declare further dividends in the foreseeable future due to capital needs for business growth [15] - General and administrative expenses decreased slightly to $2.9 million, with further cost reductions expected in Q4 and fiscal 2025 [39] - Research and development expenses were$508,000, focused on next-generation streamer systems and Spectral Ai Software Suite development [40] Q&A Session Summary Question: Backlog and Revenue Realization - The backlog increased to $37.4 million, with$5-6 million deferred from Q3 expected to be realized in Q4 [22][23] - Component delays pushed some shipments to Q4, but the company expects to catch up by the end of the calendar year [23] Question: Working Capital and Dividend Policy - The company is cautious about reinitiating dividends due to increased working capital requirements from growing business [7][15] - Management emphasized the need to prioritize business execution over dividend payments [62] Question: Inventory and Cash Flow - Inventories increased by approximately $3 million over the last six months, with cash flow expected to improve as inventory is sold [83][84] Question: Preferred Stock and Capital Strategy - The company is exploring alternatives to manage the preferred stock dividend burden, including potential capital-raising strategies [72][86] - Management acknowledged the need to balance business growth with shareholder value creation [87]