Q4 2020 Earnings Call

April 22, 2020

Thank you for calling income conferencing. The next available operator will be with you momentarily.

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Conference. May I have your name?

And your company, please?

And is this for Mitcham Industries?

Thank you.

Call trying to call over the morning when I had a few normal house People Details to run through you'd like to listen to a replay of today's call. It'll be available for 90 days. Going to the investor relations office for the company's website Mitchum industry or via reported instant replay until April 29th information on how to access the replay was provided me yesterday saying please.

information reported on

You calling about today vehicle at the 2020? And therefore you are advised that time-sensitive information May no longer be accurate as of the time of any replay listing or trash 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.

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Nissan statements are based on Management's current expectations and include my own and unknown risks and uncertainties and other factors near which the company is unable to predict or control the 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 took the risk factors disposed by the company from time to time and filings with the SEC including the general report on form 10-K for the year ended January 31st, 2020 program or long as we start this call, please also refer to the statement regarding forward-looking statements Incorporated and the company's press release issued yesterday, and please note that the contents of the conference call this morning are covered with these statements now, I'd like to turn the call over the time all of it.

Thursday

Greetings and welcome to the Mitcham Industries fourth quarter 2020 conference call at this time. All participants arnoldussen only mode a brief question-and-answer session will follow the formal presentation than anyone should require operator assistance during the conference, please press star zero on your telephone keypad, as a reminder. This conference is being recorded. It is now my pleasure to introduce your host the chat ended Art. Thank you. Mr. You may begin.

Thanks again and good morning everyone. We would like to thank you for joining us today for our fiscal 2020 fourth quarter and year-end conference call before I begin. I'd like to express our support and gratitude to all of our employees suppliers customers and stakeholders during such a difficult time. The covid-19 crisis has impacted all of our lives and our foremost concerns are for health and safety of our employees and their families as well as the broader Community as a whole

Thank you operator. Good morning, and welcome to the midterm industry since 2024. Conference call. We appreciate all of your journals today their hosts are locked at home and she can alter Lobster and got him all the lobster and inflicted a vice-president of marine systems.

Well, we continue to adapt to the challenging conditions and operational disruptions brought on by this crisis. We have had to work closely with our customers to uphold commitments and assure a high level of service and support while also looking for ways to reduce our expenses and capital outlays due to the heightened economic uncertainty brought on by this crisis.

Supposed to call over the morning when I have a few normal house People Details to run through like to listen to a replay of today's call. It'll be available for 90 days. Going to the investor relations office or the company's website at Mitcham industry or via recorded instant replay until April 29th information on how to access the replay was provided me yesterday saying, please

Maintaining this Balancing Act in the face of a pandemic Market uncertainty and volatile commodity prices has been extremely difficult but our operational flexibility and debt-free capital structure would have enabled us to whether unfavorable fundamentals in the past. So as we make our way through this extraordinary situation, I'd again like to draw on the strength and resilience of everyone in the Mitcham organization and express our thanks support and deepest gratitude to all of you for your hard work and perseverance through this difficult time.

Information reported on this call them today at the twenty-twenty. And therefore you are advised the time sensitive information May no longer be accurate as of the time of any thoughts or plans for 3D 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.

Fiscal 2020 was a year characterized by accelerating momentum in the development of a marine technology product segment as we made excellent progress in adding new Personnel development of new technologies and attaining new business in the pursuit of our strategic Vision to become a leading Global provider of marine technology products.

These phones were two statements are based on Management's expectation and includes known and unknown risks and uncertainties and other factors many of which the company is unable to predict or control the main 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 took the risk factors disclosed by the company from time to time and its filings with the SEC including the general report on form 10-K for the year ended January 31st, 2020 program or long as we start this call, please also refer to the statement regarding forward-looking statements Incorporated in the company's press release issued yesterday, and please note the contents of the topics call this morning are covered with these statements valid like to turn the call over the time all of it.

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Question, then we have that we have meaningfully reduced our dependence on traditional oil and gas activities since undertaking this transformation. We fully expect there to be additional events taking place in the near-term that will further solidify our foundation in the worldwide Marine technology Market.

Before I move on let me briefly highlight the many actions we've taken over the past year to both reposition Mitchum and seize upon new opportunities in the marketplace.

During fiscal 2020 we create a new positions in business development technology development and sales to drive the expansion of our marine offerings. Specifically. We now have a choice. She's technology officer as well as a director for our strategic hydrographic programs, both of whom are significant additions to our staff and who will be pivotal in expanding our product line as far as identifying and developing new opportunities.

Thanks again and good morning, everyone.

We would like to thank you for joining us today for our fiscal 2020 fourth quarter and year-end conference call before I begin. I'd like to express our support and gratitude to all of our employees suppliers customers and stakeholders during such a difficult time. The covid-19 crisis has impacted all of our lives and our foremost concerns are for the health and safety of our employees and their families as well as the broader Community as a whole

Earlier in the year. We also hired a chief Business Development officer and a new VP of sales for Sea map.

Most recently and as we announced yesterday, we have added an experienced Chief Operating Officer whose initial Focus will be on our sonar and Military business.

These Personnel additions will go a long way towards helping us to drive product penetration and greater awareness of our technological prowess.

About a year ago our climb Marine systems subsidiary introduced the new and crucial line of products that has become one of the true cornerstones of our marine technology line Max representing a generation of side-scan sonar Max combines the benefits of both Superior image quality and greatly enhanced efficiency bringing a highly compelling value proposition to both military commercial operators in the seafloor Imaging Market.

Max demonstrated its Effectiveness in a number of successful field trials and both Commercial and Military customers have expressed enthusiasm for the new technology.

Fiscal 2020 was a year characterized by accelerating momentum in the development of a marine technology product segment as we made excellent progress in adding new Personnel develop new technologies and obtaining new business in the pursuit of our strategic Vision to become a leading Global provider of marine technology products.

As you now know after a fast-tracked internally funded development. We just recently made the system delivery in support of the US Navy's evaluation of a next-generation underwater vehicle.

Well, there's little question. Then we have that we have meaningfully reduced our dependence on traditional oil and gas activities since undertaking this transformation. We fully expect there to be additional events taking place in the near-term that will further solidify our foundation in the worldwide Marine technology Market.

Our new system called Micromax is the first in a series of new Imaging products based on Klein's Max technology and offers reduce size and power consumption making it ideal for growing autonomous underwater vehicle Market, although Micromax is designed for both Commercial and Military unmanned Vehicles its ability to render high-quality imagery in an efficient and cost-effective manner makes it particularly. Well suited for military applications. We are excited about having the Navy as a reference customer and the enhanced potential to gain increased product of birth and Traction in the autonomous underwater vehicle Market.

Before I move on let me briefly highlight the many actions we've taken over the past year to both reposition Mitchum and seize upon new opportunities in the marketplace.

During fiscal 2020 we create a new positions in business development technology development and sales to drive the expansion of our marine offerings specifically, we now have or she said she's technology officer as well as a director for our strategic hydrographic programs, both of whom are significant additions to our staff and who will be pivotal in expanding our product line as well as identifying and developing new opportunities.

I had a good year with deliveries of our Blue Link for DX our GPS system and ceiling towed streamer system exceeding our initial expectations.

The boiling 40x greatly enhances the precise surface our GPS positioning capabilities for streamers and seismic sources that are necessary for 3D and 4D surveys.

Earlier in the year. We also hired a chief Business Development officer and a new VP of sales for Sea map.

Most recently and as we announced yesterday, we have added an experienced Chief Operating Officer whose initial Focus will be on our sonar and Military business.

S such it continues to gain greater awareness among operators of seismic exploration and Survey vessels.

Finally, we relocated our corporate headquarters from Huntsville Texas to the Woodlands Texas. This move made. Our office is significantly more accessible to our customers the investment community and not living in Houston metropolitan area and given our strategic shift towards Marine technology as well as the need for a fresh new corporate identity to Mark our new Direction the move made a great deal of time with that. Let me now make a few observations about the fourth quarter.

These Personnel additions will go a long way towards helping us to drive product penetration and greater awareness of our technological prowess.

About a year ago our climb Marine systems subsidiary introduced a new and crucial line of products that has become one of the true cornerstones of our marine technology line Max representing the Next Generation a side-scan sonar Max combines the benefits of both Superior image quality and greatly enhanced efficiency bringing a highly compelling value proposition to both Military and Commercial operators in the seafloor Imaging Market Max demonstrated its Effectiveness in a number of successful field trials and both Commercial and Military customers have expressed enthusiasm off the new technology.

On a sequential basis revenues were up 24% from the third quarter with strong contributions coming from see math and the equipment leasing business.

The seismic leasing business seasonal uptick with a land project in Europe getting underway during the fourth quarter.

For the Marine technology product segments of the bulk of the increase as we delivered both the bully link and sealing system during the quarter. There was a roughly 2 million dollar delivery that was pushed into the correct here due to a customer revising the requirements nonetheless. We've been pleased with the order flow and expect the segment to continue to perform solidly. The covid-19 wage has certainly had a negative impact on our operations as there have been government-mandated temporary closures of our facilities in both Malaysia and Singapore reduced productivity due to stay at home directives disruptions experienced by our customers and suppliers.

Initial deliveries from Max began in November and shortly thereafter. We received the contract award from a leading autonomous underwater Vehicle Manufacturer to install Max on one of its next-generation systems. As you now know after a fast-tracked internally funded development. We just recently made the system delivery in support of the US Navy's evaluation of a next-generation underwater vehicle. Our new system called Micromax is the first in a series of new Imaging products based on clients Max technology and offers reduce size and power consumption off making it ideal for the rapidly-growing autonomous underwater vehicle Market, although Micromax is designed for both Commercial and Military unmanned Vehicles its ability to render high-quality imagery in an efficient and cost-effective manner makes it particularly well suited for military applications.

We have however been allowed limited access to the closed facilities to receive and make shipments and maintain equipment and Malaysia has been reopened at a reduced Staffing level as of yesterday. So despite all the near-term turmoil and uncertainty there has been no change to our longer-term Outlook and we remain very optimistic about the Strategic direction of the company.

We are excited about having the Navy as a reference customer and the enhanced potential to gain increased product awareness and Traction in the autonomous underwater vehicle Market.

Finally, I'd like to comment and an important step we've taken to expedite our expansion in the Marine technology markets. The addition of Dennis Morris is our Chief Operating Officer. Dennis has very extensive background in engineering Manufacturing Systems, having accumulated twenty-five years of global experience with companies such as BAE Systems and L-3 Harris Technologies his background and the design and development of complex systems and processes as well as his wealth of experience in the maritime industry both as a US Navy submarine officer. And as a corporate executive make him a package deal addition to the Mitcham team we welcome Dennis and are proud to have him aboard with that. Let me now turn the call over to Route. Thanks Guy. I'll begin by giving them more detailed view of the same results. Then I'll make some comments about our views on current market conditions.

I had a good year with deliveries of our Blue Link for our GPS system and ceiling towed streamer system exceeding our initial expectations.

The Blue Link for TX greatly enhances the precise surface our GPS positioning capabilities for streamers and seismic sources that are necessary for 3D and 4D surveys.

S such it continues to gain greater awareness among operators of seismic exploration and Survey vessels.

Finally, we relocated our corporate headquarters from Huntsville Texas to the Woodlands Texas. This move made. Our office is significantly more accessible to our customers the investment community and those lived in Houston metropolitan area and given our strategic shift towards Marine technology as well as the need for a fresh new corporate identity to Mark our new Direction the move made a great deal of sense.

Let me start with the Marine technology product segment.

Quarter that's 30% from 6.7 million in the fourth quarter a year ago and have 9% from 8.1 million the third quarter of this year.

Was that let me now make a few observations about the fourth quarter.

On a sequential basis revenues were up 24% from the third quarter with strong contributions coming from see map and the equipment leasing business the size of leasing business seasonal uptick was a land project in Europe getting underway during the fourth quarter.

Cemex revenues here Rose you over here to 7.1 million and a quarter from 4.9 million in the fourth quarter of fiscal 2019. And is that 25% sequentially?

She met revenues include the deliveries and both a Blue Link and the ceiling system during the quarter guy said we had expected it even better for Porter cmap. However, due to a customer requested modifications am unable to complete a two-million-dollar order scheduled for the fourth quarter and due to the impact of the covid-19 pandemic. It is likely that this order will now be delayed until the second quarter of fiscal two thousand twenty one month.

for the Marine

LG products segment of the bulk of the increase as we delivered both a Bowie link and sealing system during the court.

There was a roughly 2 million dollar delivery that was pushed into the current year due to a customer revising the requirements and nonetheless. We've been pleased with the order flow and expect the segment to continue to perform solid liquid.

First quarter revenues from Klein or 1.7 million an increase from 1.3 million a year ago, but down 29% sequentially and Equipment segment revenues decreased to 4.5 million in the quarter compared to five point five million in the fourth quarter a year ago. The revenue decline was limited to other Equipment Sales and Lease School sales rep as leasing revenues roughly 7% from a year ago, but we did have a size of a $1000000 least at least pool sale to an Asian customer. It was to be completed before your end. But easier to the erratic macroeconomic environment. This has been delayed I can report have her that we recently concluded a similar transaction with a North American customer indicating Off the Mark or such transactions remains viable wage.

The covid-19 virus has certainly had a negative impact on our operations as there have been government-mandated temporary closures of our facilities in both Malaysia and Singapore reduced productivity due to stay at home actives and disruptions experienced by our customers and suppliers. We have however been allowed limited access to the closed facilities to receive and make shipments and maintain equipment package and Malaysia has been reopened at a reduced Staffing level as of yesterday. So despite all the near-term turmoil and uncertainty there has been no change to our longer-term Outlook and off Main very optimistic about the Strategic direction of the company.

Finally, I'd like to comment and another important step we've taken to expedite our expansion in the Marine technology markets. The addition of Dennis Morris is our Chief Operating Officer. Dennis had extensive background in engineering Manufacturing Systems, having accumulated twenty-five years of global experience with companies such as BAE Systems and L-3 Harris Technologies off his background in the design and development of complex systems and processes as well as his wealth of experience in the maritime industry both as a US Navy submarine officer. And as a corporate Executives make him an ideal addition to the midterm team we welcome Dennis and are proud to have him aboard with that. Let me now turn the call over to Route. Thanks Guy. I'll begin by giving them more detailed view of the financial results. Then I'll make some comments about our views on current market conditions month.

Sequential basis the segment was up 71% driven almost entirely by seasonal gains and leasing activity.

Fourth-quarter gross profit for marine technology product segment was 4.4 million, which was up from 2.2 million a year ago and up from 3.3 million and see three of this year.

This represents a gross profit margin of 50% compared to 33% in last year's fourth quarter and 41% in the prior quarter.

Expanded margins are results of better absorption of fixed costs due to higher revenues and changes in product mix.

And our equipment leasing business depreciation expense in the fourth quarter was down to one point two million from one point nine billion a year ago, and it was roughly flat sequentially.

Let me start with the Marine technology product segment.

Most profit in segments for the fourth quarter was 1.6 million vs. 1.2 million and a comprable year ago. And 738000 in the third quarter of this year.

Revenues for the segment total 8.8 million and a quarter up 30% from 6.7 million in the fourth quarter a year ago and up 9% from 8.1 million in the third quarter of this year.

Our general and administrative expenses were $5 for the fourth quarter of fiscal 2020, which was flat with last year's fourth-quarter and up slightly for four point seven million in this year's third quarter.

Cemex revenues your rose you over here to seven point 1 million in the quarter from 4.9 million in the fourth quarter of fiscal 2019. And is that 25% sequentially off cement revenues include the deliveries and both a Blue Link and the ceiling system during the quarter now a guy said we had expected and even better for Porter cmap. However, due to a customer requested modifications off or unable to complete a two-million-dollar order scheduled for the fourth quarter and due to the impact of the covid-19 pandemic. It is likely that this order will now be delayed until the second quarter of fiscal 2021 Toyota RAV4 Klein or 1.7 million an increase from 1.3 million a year ago, but down 29% sequentially.

Our research and development expense was $408,000 this quarter compared to 300. Mm spent during last year's fourth quarter and $629,000 last quarter.

These Investments are largely due to delivery of Micromax that will continue to be a significant as we progress in developing our technology and initiatives in response to customer requirements.

They're also

Continuing to pursue a number of initiatives to partner with others to expand our technology and product offerings.

revenues for the segment total 8.8 million in

The unprecedented recent disruptions and the global economy and energy markets caused us to re-evaluate potential issues with collections from customers as a result of this. We felt it prudent to move further provision for uncollectible accounts receivable of two million dollars in the quarter for many of the same reasons. We recorded an impairment of $760,000 related to certain intangible assets off.

and Equipment leasing segment Revenue

Please decrease to 4.5 million and a quarter compared to five point five million in the fourth quarter a year ago. The revenue decline was limited to other equipment sales at least Google sales as leasing revenues roughly 7% from a year ago, but we did have a size of a $1000000 least at least pool sale to an Asian customer. It was to be completed before year-end but do the drug addict macroeconomic environment. This has been delayed I can report however that we recently concluded a similar transaction with a North American customer indicating that the market for such transactions remains viable.

Our overall operating loss for the fourth quarter of this year was 2.9 Million as compared to an operating loss of two point five million posted in the year-ago quarter, but without the impact of the two fourth-quarter Justice, I just mentioned the fourth quarter operating loss would have been about $168,000 combined these with the aforementioned previously anticipated sales. You can see that we were well on track to deliver a much stronger for court as it was our fourth quarter adjusted ebitda oil was $124,000 compared to 111,000 last year's fourth-quarter and 108000 during Q3 of this year again, without the impact of the fourth quarter adjustments. I just mentioned adjusted ebitda for the quarter was approximately two point 1 million dollars.

Sequential basis the segment was up 71% driven almost entirely by seasonal gains at leasing activity fourth-quarter gross profit for marine technology product of was 4.4 million, which was up from 2.2 million a year ago and up from 3.3 million in Q3 of this year.

This represents a gross profit margin of 50% compared to 33% in last year's fourth quarter and 41% in the prior quarter. The expanded margins a result of better absorption of fixed costs due to higher revenues and changes in product mix.

Midterms capital structure is debt-free and liquidity remains good at the end of the quarter we had about twenty two point two million of working capital that included cash and cash equivalents of approximately 3.1 million or Capital cost structures are Advanced there an advantage to us in these uncertain environment. The absence of looming Financial Obligations are restrictive covenants provides us with much off the building our cost or to a large degree variable which allows us to adjust relatively quickly to changes in demand and activity.

And our equipment leasing business depreciation expense in the fourth quarter was down to one point two million from one point nine billion a year ago, and it was roughly flat sequentially.

Most profit in segments for the fourth quarter was 1.6 million vs. 1.2 million and a comprable year ago. And 738000 the third quarter of this year.

Well, given all the disruption and uncertainty in the world today. It's difficult to project the impact to our business, especially in the short-term. However, we are confident that we have the people the assets and the financial things to whether these difficult times but there are a number of factors that drive our confidence in our ability to cope with these challenges. We have no debt or looming Financial Obligations with restrictive covenants.

Our general and administrative expenses or $5 for the fourth quarter of fiscal 2020, which was flat with last year's fourth-quarter and up slightly from four point seven million in this year's third quarter.

Our research and development expense was $408,000 this quarter compared to 300. Mm spent during last year's fourth quarter and $629,000 last quarter.

These Investments are largely due to the delivery of Micromax that will continue to be a significant as we progress in developing their technology and initiatives in response to customer requirements are also, I need to pursue a number of initiatives to partner with others to expand our technology and product offerings.

We exited physical twenty-twenty with more than twenty two million in working capital business activity continues, even in this environment, we continue to interact with our customers receive an order to respond to your inquiry. It mentally at a reduced rate. However, and we continue collect on our accounts receivable from customers. As I said, our cost structure is largely variable in nature meaning we can adjust off it should reduce business activity dictate and have done already done. So in some instances

The unprecedented recent disruptions in the global economy and energy markets caused us to re-evaluate potential issues with collections from customers as a result of this. We felt it prudent to take further provision for uncollectible accounts receivable of two million dollars in the quarter for many of the same reasons. We recorded an impairment of $760,000 related to certain intangible assets.

We have access to various governmental Aid programs in the US and in some foreign locations.

We believe they're further opportunities to redeploy Capital such as by selling certainly School equipment in short. Our long-term outlook for Mitcham is unfazed with that. Let me turn the call back by 4 closing comments before we get questions. Thanks for having as outlined earlier. We've come a long way over the last year in adding to mitchem's capabilities going forward. We should leave this trend will continue as we will put more resources personnel and emphasis on building out the Marine technology product segment both domestically and abroad there are a number of specific areas of opportunity for us in the coming months and years including the following.

Our overall operating loss for the fourth quarter of this year was 2.9 Million as compared to an operating loss of two point five million posted in the year-ago quarter without the impact of the two fourth-quarter just as I just mentioned the fourth quarter operating loss would have been about $168,000 combined these with the aforementioned previously anticipated sales. You can see that we were well on track to deliver a much stronger for court as it was our fourth quarter adjusted ebitda oil was $124,000 compared to 111,000 last year's fourth-quarter and 138,000 during Q3 of this year again, without the impact of the fourth quarter adjustments. I just mentioned adjusted ebitda for the quarter was approximately two point 1 million dollars.

continued acceptance

of our Max technology

application of our Micromax technology in the growing uuv Market

development of enhanced sonar capabilities opening new markets

Midterms capital structure is debt-free and liquidity remains good at the end of the quarter we had about twenty two point two million of working capital that included cash and cash equivalents of approximately 3.1 million months. Our Capital cost structures are Advanced there an advantage to us in these uncertain environment. The absence of looming Financial Obligations are restrictive covenants provides us with much flexibility with our cost or to a large degree variable, which allows us to adjust relatively quickly to changes in demand and activity.

introduction of new asymmetry subsystems for the hydrographic industry

continued acceptance of our ceiling towed streamer system into scientific and Survey capabilities application of our streamer and acoustic technology into watersports security and passive acoustic array systems.

Continued penetration of our industry-leading gun link and boiling products.

Because of all this we remain confident that we are on the right path and are more optimistic than ever about missions future. Now that concludes our formal remarks will be happy to take any questions now.

Well, given all the disruption and uncertainty in the world today. It's difficult to project the impact to our business, especially in the short-term. However, we are confident that we have the people the assets and the financial strength to whether these difficult times but there are a number of factors that drive our confidence in our ability to cope with these challenges. We have no debt or looming Financial Obligations with restrictive covenants.

Phone keypad a confirmation total indicate your line as in the question queue. You may press star to if you would like to remove your question from the Q4 participants using speaker equipment and maybe necessary to pick up your car before pressing the star keys.

We exited physical twenty-twenty with more than twenty two million in working capital business activity continues, even in this environment, we continue to interact with our customers receive an order for responding to inquire it mentally and I produce trade however, and we continue collect on our accounts receivable from customers. As I said, our cost structure is largely variable the nature meaning we can adjust thought we should reduce business activity dictate and have done already done. So in some instances

Once again, that's star one to register questions at this time. Our first question is coming from Tyson power of K C Capital, please go ahead.

Can you hear me? Yeah, there we go. Just doing some back-of-the-napkin adding. You suck. It didn't happen. So you can't count it. But the two million order delay the extra million and Equipment sale, if you that $2000000 order was the 50% off and that we saw for the composite overall foresee map the puts your op income on a pro-forma basis, excluding your uncollectibles roughly around a million. Do you ever take a little and actually produces a close to break even if not a positive number down below now, all of this is fine and dandy and playing with the numbers, but that's kind of what you were looking at at the end of the Q3 going into this quarter. Was it not? Yeah, that's exactly right. Yeah. That's exactly right. Okay, so going forward.

We have access to various governmental Aid programs in the US and in some foreign locations.

We believe they're further opportunities to redeploy Capital such as by selling certainly School equipment in short. Our long-term outlook for Mitcham is unfazed with that. Let me turn the call back a guy for a few closing comments before we get questions. Thanks for having as outlined earlier. We've come a long way over the last year in adding to mitchem's capabilities going forward. We should leave this trend will continue as we will put more resources personnel and emphasis on building out the Marine technology product segment both domestically and abroad there are a number of specific areas of opportunity for us in the coming months and years including the following.

Continued acceptance of our Max technology.

Now you've got three million a cash on the balance sheet. You just experienced a six-million-dollar burn in nineteen, you're paying two million and preferred dividends and a year off and in regards to that. What was the decision to pay the cash dividend week ago?

application of our Micromax technology in the growing uuv Market

development of enhanced sonar capabilities opening new markets

introduction of new asymmetry subsystems for the hydrographic industry

What a lot of gas. Yeah, we we do this we do intend to pay, you know, we just looked at our liquidity situation. We felt we can do it. We think it's important to show that confidence, you know to the investment. I need to the to the holders. Obviously, it's not that we if things change we can look at that going forward, but you know, we just felt it was prudent thing to do. Okay, so you and your estimation off you've got plenty of liquidity and the means to access liquidity for what the for this full year.

continued acceptance of our ceiling towed streamer system into scientific and Survey capabilities.

Application of our streamer and acoustic technology into Waterside security and passive acoustic array systems.

Continued penetration of our industry-leading gun link and Bowie link products.

Obviously, it's an uncertain.

Thank you. The floor is now open for 5. If you would like to ask a question, please press star one on your telephone keypad life with your question from the Q4 participants using speaker equipment and maybe necessary to pick up your handset before pressing the star keys.

Tyson at something we're looking at on a on a look at day today, you know, but as I said in the comments, you know, we we got some confidence and we think we have flexibility with other people don't have. Okay. You only made one point nine million in sales of your lease pool equipment.

Out of that, which a lot of that is fully depreciated. Why why were you was the market not there or was that a cognizant decision not to make sure your sales from the lease pool and you've already suggested that you're making some of those sales now, do you anticipate getting that lease pool level down to a certain amount? You have that cash influx?

Once again, that's star one to register questions at this time. Our first question is coming from Tyson power of K C Capital, please go ahead.

Can you hear me? Yeah, there you go. Just doing some back-of-the-napkin adding, you know, it didn't happen so you can take it but the two million ordered delay the extra million and Equipment sale, if you that $2000000 order was the 50% margin that we saw for the composite overall force up the puts your op income on a pro-forma basis, excluding your uncollectibles roughly around a million, give or take a little and a club is like close to break even if not a positive number down below now all this is fine and dandy and playing with the numbers but that's kind of what you were looking at at the end of the Q3 going into this quarter. Was it not? Yeah, that's exactly right. Yeah. That's exactly right.

Yeah, it's something we always look to do and you know as far as last year, it's really as opportunities arise and we kind of look at what the opportunities are what we can do with the leasing leasing those assets. You know, it's it's a fluctuating Market Place obviously, so it's something we look to do but we do think there are opportunities as I said, you know, we completed the sale just recently bought, you know about, you know about a million dollars. So we think you know, those things are certainly still out there. Although it's you know, not something you can do every day. You have to pick and choose and you know be active in the market wage and we we feel we can do that.

Have you run numbers to see where you could get that least pulled number down to and still be an effective participant in that market? It's that's a really tough number to give em, even, you know depreciated assets. Uh, so I really haven't tried to look at it from that standpoint that you reference US Navy doing the preliminary testing and faith in ischl. I guess not necessarily an order, but it is in order to run the test. Are we getting closer to those tests being completed and seeing a hand that you'll be able to announce?

Okay, so going forward now, you've got three million a cash on the balance sheet. You just experienced a six-million-dollar burn in nineteen, you're paying a million and preferred dividends in a year and in regards to that. What was the decision to pay the cash dividend week ago when a lot of money? Yeah. Yeah. We we do we do intend to pay, you know, we just looked at our liquidity situation. We felt we can do it. We think it's important to show that confidence, you know to the investment Community to the to the holders office. Obviously, it's not that we if things change we can look at that going forward, but you know, we just felt a certain thing to do. Okay, so you and your estimation you've got plenty of liquidity and the means they're access to liquidity for what the for this full year.

No, the PO is not imminent. The the the new system has been installed on the vehicle. And now it's back. It's going to be in the Navy's hands to to do their qualifying testing. That's a little bit of a you know, a bit of a you know, Target Target dates are a little bit difficult there just because you know the US Navy's going to catch all that. Yeah, plus, you know, the global situation of impacts that obviously they're they're impacted as well. So it's it's hard to dictate or indicate exactly when all that's going to be done. Yeah the numbers and the Mirage technology side really driven still by Sea map and and not Klein Klein was basically flat which gives us another year that we're trying to get that push forward of being in the future for Mitcham.

Obviously, it's an uncertain situation Tyson. It's something we're looking at on a on a look at day-to-day, you know, but as I said in the comments, you know, we we have some confidence and we think we have flexibility other people don't have okay. You only made one point nine million in sales of your lease pool equipment.

Are the expectations to get Klein going? Obviously, that's what you want to do, but we're still relying on.

And see map when do we flip the switch?

Well, I guess we we get that's the current situation makes that difficult to give you a date of quarter when that happens, you know, but I think all the things we've been doing the things we introduced last year or you know, some of the new initiatives that were pursuing now, you know, we can see the the light is end of the tunnel are you know, is it you know two quarters down 3/4 out it's hard to say Tyson Thursday. We we do see the way to the most definitely. Okay and last question. I'll get back in queue in case there's somebody else there the as far as access to Capital. You don't have a credit line. You do have the ability to sell some of your lease pool equipment to generate cash. You have the ability to cut expenses if needed the preferred dividends. You can pick em, what other sources of capital or what other avenues do you have? Should you need to use them this year?

Yes.

Something we we always look to do and you know as far as last year, it's really as opportunities arise and we kind of look at what the opportunities are what we can do with the leasing leasing those assets. Uh, you know, it's it's a fluctuating Market Place obviously, so it's something we look to do but we do think there are opportunities as I said, you know, we deleted the sale just recently, you know of about a million dollars. So we think you know, those things are certainly still out there. Although it's you know, not something you can do every day. You have to pick and choose and you know be active in the market to do it, but we we can do that.

Have you run numbers to see where you could get that least pulled number down to and still be an effective participant in that market? It's that's a really tough number to give em, even, you know depreciated assets. Uh, so I really haven't tried to look at it from that standpoint that you reference US Navy doing the preliminary testing and Thursday in Nashville. I guess not necessarily an order, but it is in order to run the test. Are we getting closer to those tests being completed and seeing a in hand that you'll be able to announce?

Well, we are some of the government programs. Do you think I mentioned? Excuse me? Sorry about that. You know, there's also potentially other Capital available Market. Yeah, we're looking at, you know, we don't see the need for it right now. But we think there are are potential other mechanisms out. There should should need arise.

No, the PO is not imminent. The the the new system has been installed on the vehicle. And now it's back. It's going to be in the Navy's hands to to do their qualifying testing. That's a little bit of a you know, a bit of a you know, Target Target dates are a little bit difficult there just because you know the US Navy's going to crash that. Yeah plus, you know, the global situation of impacts that obviously they're they're impacted as well. So it's it's hard to dictate or indicate exactly when all that's going to be done. Yeah the numbers in them technology side really driven still by Sea map and and not Klein Klein was basically flat which gives us another year that we're trying to get that push forward of being in the future for Mitcham.

Okay. Thank you. Gentlemen. Yep.

Thank you. Once again, that is star one to register questions at this time. Our next question is coming from Ross Taylor of ARS, please go ahead.

Thank you. Gentlemen, Tyson asked most of the questions cuz I was most concerned with the ability to generate Capital because obviously the markets pricing Mitchum shares right now as though it's not going out of business and there's not much value in them given that you have no debt in the like it's a little striking but also the Navy in the Pentagon rather appeared to be accelerating trying to accelerate payments to help suppliers. Is that one of the types of programs you're talking about possibly having access to not not really not really our our our Arrangement is due it a prime contractor at this point. So realistically that's not a big impact to us at this point. So the Navy doesn't really look at you as a contractor or subcontractor. They like they're just looking to people you're working with. For that not that program. There are other programs where we do deal directly with the Navy been off of that program. Okay. Okay, and then dead.

Are the expectations to get Klein going? Obviously, that's what you want to do. But we're still relying on C map one. Do we flip the switch?

Well, I guess we that's the the current situation makes that difficult to give you, you know a day 2/4 when that happens, you know, but I think all the things we've been doing the things we introduced last year, you know some of the new initiatives that were pursuing now, you know, we can see the the light is into the tunnel there, you know, is it you know two quarters down 3/4 out it's hard to say Tyson, uh home, you know, we we do see the way to it. Most definitely okay and last question. I'll get back in queue in case there's somebody else there the as far as access to Capital you don't have a credit line. You do have the ability to sell some of your lease pool equipment to generate cash. You have the ability to cut expenses if needed the preferred dividends. You can pick off what other sources of capital or what other avenues do you have should you need to use them this year?

Talk about basically you you kind of indicated that you're seeing this crossover out a couple of quarters 3/4 if this, you know, you obviously off the wild card but are the pieces in place. Are you seeing, you know, the demand for things like undersea mapping of obviously, the energy space has been pretty heavily hit home, but have the other segments that make use of that type of Technology seen pullbacks.

Not as much I mean a lot of our activity on the traditional seismic products the signal products for lack of a better term are really not oil and gas-related education's the other survey companies or is a research institutes governmental research institutes. Uh, so a lot of what we've been doing recently a lot of the pending orders. We have our own no gas exploration related. So certainly not impact to a greater degree and going forward. We're seeing we're seeing that segment may be a lot more stable than the traditional seismic on the oil and gas side. The other thing with Cement Products. We've got a tremendous install base and regardless of how how long how the industry shrinks down the active Halls of the active operations are still going to need parts service and support. So there's a there's a base there that that will continue on the cmap sign off.

Well, we'd are some of the government programs, excuse me

No mentions, excuse me. Sorry about that. You know, there's also a potentially other Capital available in the market, you know, we're looking at you know, we don't see the need for right now, but we think there are are potential other mechanisms out there should should the need arise.

Okay. Thank you. Gentlemen. Yep.

Thank you. Once again, that is star one to register questions at this time. Our next question is coming from Ross Taylor of ARS, please go ahead.

Thank you. Gentlemen, Tyson asked most of the questions cuz I was most concerned with the ability to generate Capital because obviously the markets pricing Mitchum shares right now as though it's not going out of business and there's not much value in them given that you have no debt in the like it's a little striking but also the Navy in the Pentagon rather appeared to be accelerating trying to accelerate payments to help suppliers. Is that one of the types of programs you're talking about possibly having access to not really it's not really our our our Arrangement is due it a prime contractor at this point. So realistically that's not a big impact to us at this point. So the Navy doesn't really look at you as a month contract or subcontractor. They like they're just looking to people you're working with not for that not for that program. There are other programs where we do deal directly with the Navy been off of that program. Okay. Okay, and then dead.

Okay. And will you talk about the technological advantages it strikes me you guys have what appears to be a significant technological advantage in your in this space off with your new technology new capabilities your side scan, you know gapless and things of that nature and It just strikes me as this company is a lot more valuable than what it's trading at them. Wondering at what point do you look at it and say if the market is not going to recognize it you pick up the phone and call one of the bigger players bigger systems players and the like in the space and you know starts off about enhancing shareholder value as the euphemism goes cuz it's clear shareholders. Don't appreciate what you guys are doing.

Oh Ross. I mean we we just need to run the company and and you know deliver results. It's I think a lot of the market reaction now is is not necessarily specific to us at least in my opinion. That's my personal opinion. I mean, look at all micro-caps, um, especially any we have better than energy tank to them and hit pretty hard. So I think there's some of that that's just some of the hangover so like our Focus now is the you know is the to operate and to deliver on our results.

Talk about basically you you kind of indicated that you're seeing this crossover out a couple of quarters 3/4 if this, you know, you obviously suck is a wild card but are the pieces in place. Are you seeing, you know, the demand for things like undersea mapping of obviously, the energy space has been pretty heavily hit home, but have the other segments that make use of that type of Technology seen pullbacks.

Okay. Well if someone knocks on your door, you know besides offer you fair value, I would definitely suggest that you look at it cuz I'm not quite sure how we're going to get investors to appreciate what you guys are doing. It seems like you made a lot of progress this quarter in many ways particularly when you back out some of the adjustments was a lot better than I thought it could be and obviously than the street was pricing in.

Not as much I mean a lot of our activity on the traditional seismic products the signal products for lack of a better term are really not willing just related applications, you know, they're survey companies or is that research institutes governmental research institutes. Uh, so a lot of what we've been doing recently a lot of depending on Thursday. We have our non oil and gas exploration related. So certainly not impact to to a greater degree and going forward. We're seeing we're seeing that segment of the business would be a lot more stable than the traditional seismic and the oil and gas side the other thing the cmap products. We've got a tremendous install base and regardless of how about how the industry shrinks down the active Halls of the active operations are still going to need parts service and support so there's a there's a base there that that will continue age.

Got you.

Thank you, Joanna. Okay. Thank you Ross.

Thank you.

This brings us to the end of the Q&A session. I would like to transfer back over to management for any final comments.

I'm just like to thank everyone for joining us today, and I hope everyone stays safe and takes care of yourself your family. So we look forward to talking to you after they are first Court. Thank you.

Ladies and gentlemen, thank you for your participation. You may disconnect your lines at this time and have a wonderful day off off off.

The cement side and will you talk about the technological advantages? It strikes me you guys.

Have what appears to be a significant technological advantage in your in this the space with your new technologies you new capabilities your side scan, you know gapless sonar and things of that nature and It just strikes me as this company is a lot more valuable than what it's trading at and I'm wondering at what point do you look at it and say if the markets not going to recognize it you pick up the phone call one of the bigger players bigger systems players in the like in the space and you know start talks about enhancing shareholder value as the euphemism goes cuz it's clear shareholders. Just appreciate what you guys are doing.

Oh Ross. I mean we we just need to run the company and and you know deliver deliver results. It's I think a lot of the market reaction now is is not necessarily specific to Iraq in my opinion. That's my personal opinion. I mean, look at all micro-caps, especially any who have a bit of an energy tank to them and hit pretty hard. So I think there's some of that is some of that hangover so like our Focus now is the you know is the to operate and to deliver on our results.

Got you.

Thank you, Okay. Thank you Ross.

And just like to thank everyone for joining us today, and I hope everyone stays safe and take care of yourself your family. So we look forward to talking to you after they are first quarter. Thank you.

Ladies and gentlemen, thank you for your participation. You may disconnect your lines at this time and have a wonderful day off off off.

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