Q2 2022 Mind Technology Inc Earnings Call

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Greetings and welcome to the main technologies second quarter 2022.

Your conference call at this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded its now my pleasure to introduce your host Mr. Ken Dennard.

Thank you operator, good morning, and welcome to the main technology fiscal 2022 second quarter Conference call.

We appreciate all of you joining us today.

Our hosts are Rob Katz and Guy Malden.

Before I turn the call over to management of a few items to cover.

If you'd like to listen to a replay of today's call it'll be available for 90 days via webcast by.

By going to the Investor Relations section of the company's website at mine Dash technology Dot com.

Or a recorded instant replay until September 16th.

Information on how to access the replays.

Were provided in yesterday's earnings release.

Information reported on this call speaks only as of today Thursday September nine 2021, and therefore, you're advised that time sensitive information.

No longer be accurate as of the time of any replay listening or transcript reading.

And 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.

These forward looking statements are based on management's current expectations and include known and unknown risks uncertainties and other factors many of which the company is unable to predict or control that may cause the company's actual future results or performance to materially differ from any future results or performance expressed or.

Or implied by these statements.

Risks and uncertainties include the risk factors disclosed by the company from time to time in its filings with the SEC, including in its annual report on Form 10-K for the year ended January 31, 2021. Furthermore, as we start this call. Please also refer to the statement regarding forward looking statements incorporated in our press.

Please issued yesterday and please note that the contents of our conference call. This morning are covered by these statements now with that behind me I'd like to turn the call over to Rob Katz Rob.

Okay. Thanks.

So I'd like to make some overall comments regarding our progress before guy provides a bit more color and some detail.

Although the general business and operating environment remains challenging we continue to make progress towards our longer term growth goals.

We saw a significant increase in revenues over the first quarter a trend we think will continue into the second half of the year.

We believe there's a clear trend is increasing inquiries and order activity across most of our markets.

We continued to make good progress on our strategic initiatives to address trends in the marine technology market.

Progress on the disposal of assets from our legacy leasing business continues with the recent agreement for the sale of a significant portion of the remaining assets.

So with that now I'd like to hand things over to Guy to provide some more detail I will then come back in a bit was the financial results and address our general market outlook guidance.

Thanks, Rob and good morning, everyone.

The second quarter of fiscal 2022 was characterized by noticed noticeable improvement over Q1.

Although most of the challenges that we experienced during the first quarter remain intact and impacted our results to varying degrees.

Namely the continuing turbulence due to an overstretched supply chain as well as the negative impact of the Covid Delta variant continues to limit our ability to travel to many customer sites. The limitation is particularly pronounced in Asia Pacific.

Looking at our second quarter results revenues were up on a year over year basis with consolidated revenue is up by nearly 34%.

On a sequential basis consolidated revenues were up 62%.

Our backlog remains roughly even with Q1 at $18.0 million.

And this is inclusive of the $5.0 million in cement orders announced in July, which we expect to be delivered in the second half.

Yeah.

Our first question is from Tyson Bauer with KC capital. Please proceed.

Good morning, gentlemen.

Hey, Tyson.

Just a couple of quick housekeeping questions first.

Given the current backlog and your expectation that it will be delivered in whole in second half of this year.

What is the delivery schedule looking if you're forecasting a better second half than the first half.

That must imply some pretty good order intake to be.

Bill and what you work off in Q3.

I mean, that's right we do expect additional orders.

Our book to Bill varies based on what the product is it can be as quick as a week or as long as six months or very large systems.

So there is things that come in and go out during the quarter during any periods. There are some fairly significant orders.

Indicated and we are expecting.

Okay.

Your backlog composition.

Is that primarily a full systems or the partial parts that are coming up.

Just give us an idea of what that competition is right now.

It's all of the above so there are full systems.

Seismic as well as sonar systems.

There are parts orders, there is bits and pieces and whats all labor.

Okay, and then second quarter revenue how much of that was this year.

Hate them.

Normal, but parts and services and suffer a reoccurring each quarter.

The number in front of me, but it's going to be.

Half anyway is going to be that sort of stuff is kind of aftermarket overall aftermarket. Okay. So when we go forward returns.

We're looking at $3 million to $4 million a quarter basically that's more or less reoccurring in parts services those things that.

Don't necessarily go into backlog, but have historically been present to each and every quarter.

Yes.

I would say it is things that have quick turn that our book to Bill and so may not be in our backlog at the beginning of the period, but they certainly get.

Booked and shipped during the period.

Okay. Thanks.

The same thing.

Is it fair to say that $11 million in backlog you could have an additional six plus million. That's your normal reoccurring aspect that would be above and beyond so we're really looking at $17 million spread across the two quarters.

I don't want to get into specifics other than we do see certainly improvement from the second quarter.

Exactly when things can shift is a bit of a.

Uncertainty, sometimes especially in this environment.

We are confident that over the back half of the year, we will get all of this stuff out and stuff on top of that.

Okay, So Q3 better than Q2 Q4 better than Q3.

Yes.

Okay.

For the first half.

Tradeshow schedule coming up the big one in the UK is that one we have the official coming out party with yourselves and your European partner.

Not necessarily.

So even though you have deliveries before the end of the year, it's still kind of under a veil.

At this point correct.

Okay is that buy their wishes.

I think it's our mutual agreement.

Okay.

On the cash flow statement the PPP, what you had in the first quarter also the 850000.

Is that the portion which is roughly what half that was fully forgiven and the rest has to be repaid or is it still the portion that is waiting for classification of whether or not it'll be fully forgiven or not.

That's all been fully forgiven, they're half was forgiven last year enhancing in the first quarter.

Okay.

<unk>.

Cash sources cash management, obviously, we have the.

And then at the end of the first quarter assets held for sale was $6.0 million you sold a significant portion for over $4 million. It looks like we'll have a game than in Q3 what is left.

Does that math work out we will have roughly 700000 or greater gain in the third quarter.

The accounting.

The GAAP accounting on that is a bit tricky because of some tax and some deferred.

Currency adjustments that go into that.

Insulation so.

Thank you don't want to speculate on what a gain or loss might be on that.

The remaining assets that we have some <unk>.

Some equipment remaining.

Different types of equipment that remain and we're continuing to pursue.

At the same magnitude as the thing the transaction, we just completed.

Also have some receivables that will continue to collect under some extended terms.

Yes.

Do you have an approximate evaluation on what you think that market value is as far as being a future source of cash.

Well I would just say that it's not to the same magnitude of the transaction. We just completed our just announced.

But it's still fairly significant.

Okay, and given that your outlook on the financial operations.

You are comfortable that even if you did get large orders and had a need for working capital you have the liquidity and flexibility in place to be able to accomplish.

Deliver on those orders.

That's a good question I think it depends we are confident we can operate and we can execute on what we see coming.

As circumstances change Tyson, that's something we'll have to.

React too.

Fly chain issues or something.

<unk>.

And that could require us to be even more aggressive on working capital.

But we're confident we can have access to it.

<unk> and the resources to take care of them.

Okay did they cancel the order from Q1 come back in this quarter or is that still something that is.

Still out there potentially to come into your backlog.

Its still out there yeah, that's future.

Okay.

That's another opportunity that exists that.

Maybe on incremental to what you are seeing currently.

Yes unlikely we'd see that delivered in this year, though given where we are in the calendar.

Okay. So its tectum.

Technically it cancelled, but yet you are still eyeballing. It does say is something that will occur and be delivered.

Yes, I mean that customer continues to be a customer continue to have needs and so.

That requirement may look a bit different.

We're confident this is going to come back at some point.

Okay and last question or comment for me.

Not significant but the meaningful insider buying during the quarter.

Was that a concerted effort together to send the market a statement.

Just a what.

What youre seeing you felt that you are comfortable with.

Obviously, you can only speak for your own purchases and not the others, but.

What was the mindset there that all of a sudden we saw group have you started to do insider buying.

I think we all speaking for myself and I think I can speak for others. We all our <unk> are confident that we are again on the right track.

<unk> saw an opportunity and have some liquidity personally and we're able to take advantage of it. So we believe what we're doing.

We believe in it.

Sounds great and Guy if this is your last call.

It's been a pleasure working with you and talking to you through the years.

Thanks Tyson.

Not sure I might have one more than me, but I appreciate it.

Im looking forward to the certainly next chapter in my life.

Retirement, thanks, a lot gentlemen.

Okay you bet.

Thank you. Our next question is from Ross Taylor with Ari's investment partners. Please proceed.

Thank you gentlemen, obviously behind Tech type.

There are two questions left and then.

Yeah.

But could you give us a little bit of color on the.

Potential market size.

Check size that you have bids out for right now.

Both commercial and securities.

It's been an awesome team.

About has there been any gray.

The impact from the fact that the U S.

Yes.

The budget at this point in time, so as a result.

Many of them are looking at.

Finance.

That's been an issue.

Yeah, I think overall government budget issues have not been a big factor for us kind of given where we are in the.

In the scheme of things.

We're not Lockheed Martin So it's done is important for us from a macro standpoint.

As far as size of projects I mean, gosh, they're all over the board.

Im reluctant.

To be.

The two specific there for obvious reasons that.

We have a few hundred thousand dollar projects.

Projects to a few million dollars projects that we're pursuing.

Kind of all across the board and it can be one project can be.

A series of orders of varying sizes as well.

Yes.

If you look at your bids outstanding at this point in time.

Do you have an aggregate amount.

Currently are.

In the process of trying to secure.

We do and Thats not something I would like to share at this point, but most definitely it's something we track on a regular basis.

It is at a number that's big enough that if you realize if you win it you standard.

Or slightly improve great.

To get to free cash flow breakeven in absolutely.

Can you do that in 12 months I mean, we looked at guidance.

So you can yes, yes, we can't answer is yes.

Okay. I appreciate that I think that obviously getting to that point would be a positive.

I understand that completely.

Okay cool thank you very much.

I just wanted to come back in and ask any more.

Okay. Thanks, Matt.

Take care.

Thank you.

This concludes today's question and answer session I would like to turn the call back to management for any closing remarks.

Okay I'd just like to thank everyone for joining us today and for your interest in mind look forward to talk to you again at the conclusion of our third quarter. Thanks very much.

This.

Today's conference.

You may disconnect your lines at this time. Thank you very much for your participation and have a great day.