Q4 2021 Mind Technology Inc Earnings Call

Yes animation reported on this call speaks only has up today Tuesday, April 13th, 2021 and therefore your advisor time sensitive information. We no longer be accurate as of the time. We replay listening or transcript 3D before we begin please 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 sent these forward-looking statements are based on Management's current expectations and include known and unknown risks uncertainties each other factors many of which the company is unable to predict or control that they called the company's actual future results or performance to materially differ from any future results or performance expressed or implied by the statements.

Please rest.

And uncertainties include the risk factors disclosed by the company from time to time and its filings with the SEC including its annual report on form 10-K for the year ended January 31st, 2021. 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 the birth caul were also covered by these statements. And now without further Ado. I'd like to turn the call and the guy bothered guy. Thanks Ken and good morning everyone. We would like to thank you for joining us for our fiscal 2021 fourth quarter and year-end conference call as you all will appreciate the last thirteen months have presented in 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. Let me highlight a few of those accomplishments off last summer after receiving shareholder approval. We initiated our rebranding by reincorporated from Texas to Delaware and renaming the company mine technology. This action took one sided with our decision to exit the Land leasing business and we think reflects an inflection point in the company's transformation.

What are the actions that it's 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.

Last July we estimated in Alliance that reflects one of our principal strategic initiatives.

That is the pursuit of non organic growth either through strategic strategic Partnerships or acquisitions.

In this case, we entered an agreement with a major European Defense Contractor to jointly upgrade existing technology to create the next generation of synthetic aperture sonar systems or same for both the Commercial and Military markets.

This technology is designed to meet the growing need for higher resolution sonar systems used in very demanding and critical functions such as mine countermeasures and higher-end package surveys.

Also last summer, we successfully demonstrated new sonar technology and systems tailored specifically for unmanned vehicle applications with the growth in the use of unmanned or uncross Vehicles. We think this is a very exciting Market opportunity to holds great promise.

From late fall through the winter. We began to see signs that demands and our marine exploration Market was improving as inquiry and bid activity increased wage only we have received a number of orders related to our line of energy source controllers and related products.

Last month we entered into a master service agreement with pgs for the provision of source controllers and related services this new framework expands our long-standing relationship with pgs and with us to efficiently service and supply Advanced Source controller technology to their Fleet over the coming years over all these orders suggested the Marine markets may be poised for grade levels of activity through the year.

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We're backlogged over $14 as of the end of the year vs. 8.2 million at the end of the third quarter and about eight point nine million at the beginning of the year seems to corroborate this and we think Jose indicator of an improving Outlook. Let me now turn the call over to Rob we will discuss our fourth quarter Financial results in more detail and add some closing comments before turning the call over for Q&A. Thanks. I'll be giving you a detailed review with the fourth quarter Financial results before making a few summarizing comments, but keep in mind that I'll be discussing are continuing operations, which are composed entirely Marine technology products a legacy leasing operations are classified as discontinued operations.

It's going to mention our past fiscal here is full of full of unprecedented challenges not only for us but also for our customers, we believe the disruptions and uncertainties arising from the COVID-19 demek had a significant impact on our results.

Revenue from continuing operations total 6.4 million and a quarter which is roughly flat sequentially vs. 6.5 million in the third quarter of fiscal 2021 Ford Edge from continuing operations with two point five million up from 2.3 million. This represents a gross profit margin of 40% which is which was up from the 35% in the office increase reflects changes in product mix between the periods. Whoever gross margins remained similar to press through the lower activity and the resulting unabsorbed manufacturing cost money for General administrative expenses or three point seven million for the fourth quarter of fiscal 2021, which was up 26% sequentially due primarily to legal and accounting fees as well as wage increased insurance cost.

Research and development experience was 926000 which was roughly flat with the third quarter of this year. I do to increase in activity on the Strategic initiatives. We are pursuing we seen these cost-wise this year a full year 2021 warranty expense. Was that more than 60% from fiscal 2020.

A loss from continuing operations for fourth quarter of this year is 3.3 million is compared to an operating loss of one point five million in the sequential quarter of this year.

Adjusted ebitda from continuing operations was a loss of one point eight billion compared to a loss of one point five million in Q3 of this year.

We continue to make progress on the disposal of the land leasing distance despite the incident economic conditions. We sold assets totaling roughly $800,000 during the fourth quarter and about 1.5 million since the decision in July to exit this business. We continue to pursue a number of opportunities to monetize these assets.

Lance capital structure and equality remains solid at the end of the quarter we had about 19 million of working capital that included cash and cash equivalents of over four point six million and Thursday. We have no funded debt as our governmental Assistance or PPP loans had been forgiven thus with a lean flexible structure as well as proceeds from the continuing sale of our language. Yes. Yes, we believe we are well-positioned to handle the challenges return environment and to exploit the opportunities before us.

Despite the continued to probe it overhang.

We're nonetheless seeing increasing levels of customer interest in our product offerings. It's got touched on starting to the latter half of our 2021 fiscal year. We saw an uptick in inquiries and requests. This resulted in a pronounced influx of orders for a Galaxy 4 controllers and upgrades.

Is this the beginning of this new fiscal year our backlog amounted to 14.3 million? This is the highest our backlog has ever been. Is that more than 70% from the eight point two million backlog at the end of the third quarter.

Well this certainly both wheels for our business. Keep in mind that the future order flow can be sporadic do the host of factors are given everything backlog and the perceived increase in general activity that we do expect performance to improve in fiscal 2022. However, due to granddaughter sizes and delivery schedules. The improvements may not be straight equally across all quarters.

As I said before, even if the recovery is delayed we remain ready to make further adjustments to our operations and cost structure are clean balance sheet also allows us the necessary flexibility wage raise additional Capital Health undergrowth should the need arise.

We remain committed to the transformation of the company and convinced that were on the right path as we've said publicly before our goal is to reach annual revenues of $140 off the next five years with the maple. Margin in excess of 20%

We envision a tiny this in the following three ways first our existing products and markets such as gunlink Blue Link sealink and Max second new products suck Verizon from our strategic initiatives such as sensor systems tailored for unmanned Marine Vehicles sass products with our partner and application of our towed streamer and hydrophilic technology package time security applications, and then finally in a position of new technology and products either through outright purchase or other partnering Arrangements.

Trans closing. We remain excited about the future of that by technology would like to end by thanking our stakeholder for their continued support their employees for the dedication and valuable contributions to the verge Moltres and challenging time that concludes the formal comments. The operator will take some questions down.

Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad will indicate your home. You may press start to if you'd like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key off. Our first question comes from the line of ties and our with Casey Capitol. Please proceed with your question. Hey, good morning gentlemen.

Can you give a little more color on one the timeline of the current backlog and how that relates with the cash manager may need to go on forward whether that's on your working capital needs the ability or the need to raise capital from various sources. So viewing the backlog is going to roll through also with that cash management.

Sure. Sure Classen, we expect essentially all the backlog to be delivered this fiscal year. If not all of it. As far as Thursday. We have a a bill 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 cap on the so Thursday our our comment about you know, thinking we have the liquidity to you know, execute on that, you know with things in hand. I think we've contemplated the bill plan and the working capital necessary for that, you know. Luckily we enter the year with a bit of working inventory on hand, which will help serve those those orders so we don't have that in cash for all of that going forward. So I think you have the capital needs as far as additional capital. I think even more towards, you know growth opportunities that we see out there.

Okay, and do you see any requirement for utilizing and do you have availability on that still?

You certainly have availability and it's just a matter of what the market looks like. And what are our other needs might arise is what that we access that you know, the thing about the ATM is there so we can access a quickly if need be.

And given the interest in orders the time it takes to get an actual physical Po and then turn around to build that and deliver and with payment page. 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.

I'm not quite sure how to answer that. I mean, I understand that your backlog important. In fact, it's good, but it doesn't tell the whole story. I mean we're able to take orders of Labor within the fiscal year. So if you look at story Klee, these are rough numbers, but you know are beginning backlog is represented anywhere from home. Well our Angel revenues I should say have been anywhere from two hundred to three hundred five hundred percent of our beginning backlogs. So backlog is an indicator for this month till the whole story. So I don't think there is a number that we have in mind that we have to have backlog in a certain points in order to you know, say we're on the right path.

Okay, you've given your financial Target with the five-year time line. Are we able to pinpoint an exact year on that wage? So we don't maintain a financial Target, but the kind of the what tends to happen and ambiguous five year plan where five years takes seven years.

I guess we're kind of wanted to hear one of that plan. Totally answered your question. I think as far as you know, is that a steady growth is a you know, there's one year which we have this huge here. That's a big big job. I think we see it more steady growth and I'm saying there are some opportunities that could you know the owner to out there. I think we see this more as a steady growth over that time. So there's not, you know, one year out here three years out. We we've got to have something to write happen. That's not necessarily the case wage the loss of a competitor and the benefit from that was the pgs. Was that a new contract or is that taking over their existing contract?

It's a new contract and how do you seen a lot of increase activities since their departure from the industry?

Yes, definitely completely exit. There's certainly less competitive and not supporting the direct system that competes with us. But uh, yeah, we're seeing it's certainly an uptick in activity because of that. Remember we had an agreement with pgs a number of years ago that we bought so we need to a competitive situation, uh to re-tender. We we were we were chosen based on technical capability thumb and we've successfully signed that agreement look up the last one for me. Try not to monopolize European developments with the certain kind of the timeline on that name product. When a product would be commercially available that along with your testing protocols as hopefully COVID-19 allows more wage.

Lasting more in the water on-site capabilities just for some of the benchmarks there some of the developments we should keep an eye on.

I guess I can say that we we believe we're on Target on scheduling schedule for that project and later this year will start to ask some deliveries initial aspects of that wage type system, but we're really looking at next year like I think a gentleman.

Thank you, please just a reminder. If you'd like to join the question to you, please press star one on your telephone keypad life Partners. Please proceed with your question just a couple quick questions has backlog done in the first quarter versus end of the month. It's roughly the same we've delivered a bit against it so far. That's roughly the same. Okay, and it's not over yet wage. That is true and things come in late second the regard to be in a can you give us an idea of what kind of run rate being a could be this year with all the one-time expenses bit less door saying in the fourth quarter again, just to see the higher.

Yeah, cuz of audits and things like that as well as we have some legal fees.

Installed in there from somewhere activities during the year. So I'll see you back in all set a bit. It's only get a specific Target at this point. I don't see it being the same run right that we're seeing right now.

Okay, and so that would be helpful in order to be able to at least if you can give us an idea process up to the first quarter. It would be you're talking about shooting for a hundred forty million in revenues at a 20% ebitda margins inside of five years looking at that any comment that we're well-positioned right now. How long 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.

Not that far. I mean we we will be at that point. Well before we get to those those Target levels if you kind of kind of do the math month and it's going to go back to you know, the physical nineteen is kind of more the you know where we're starting from if you will cuz I see this past Year's a bit of the anomaly because that it was starting from about thirty million top-line Revenue don't have to be too far from that in order to you know be at a, you know, tested positive and affected operating that kind of policy.

Okay. Okay. Well, you know the faster you can get there. I think you'll take a lot of pressure off both your stock and your investors small. Thank you guys very much money. I understand that for sure. I'll see you.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to management for any final comment. Thank you for joining us today. I appreciate your time and look forward to talking to you after our first quarter results here at 50 few weeks. Thanks very much. Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect your lines.