Q4 2024 MIND Technology Inc Earnings Call
Any future results or performance expressed or implied by those statements.
These 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 2024.
Zach: www.kendall.com These 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 31st, 2024. 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 our conference call this morning are covered by those statements. Now I would like to turn the call over to Mines CEO, Rob Capps.
Furthermore, as we start this call please.
Please also refer to the statement regarding forward looking statements incorporated in our press release issued yesterday and please note that the contents of our conference call. This morning are covered by those statements.
Now I would like to turn the call over to Mind's CEO, Rob Capps.
Robert P. Capps: Thanks, Zach, and thanks to all of you for joining us today. I'll start by discussing highlights from the quarter and the full year. Mark will then provide a more detailed update on our financials. And I'll return to wrap things up with some remarks about our outlook.
Robert P. Capps: Thanks, Zach and thank all of you for joining us today.
Robert P. Capps: I'll start by discussing highlights from the quarter and the full year.
Robert P. Capps: Mark will then provide a more detailed update on our financials and I'll return to wrap things up some remarks about our outlook.
Robert P. Capps: Our fiscal fourth quarter capped off a year of immense progress for mine and it was evident in our results.
Robert P. Capps: Our fiscal fourth quarter tapped off a year of immense progress for the mine, and it was evident in our results. We achieved positive adjusted EBITDA in the fourth quarter, and our continuing operations were profitable for both the fourth quarter and on a full-year basis. This was the first profitable year for mine since 2014, so needless to say, this is a significant milestone for the company and a reflection of the efforts we've made to strategically position the company for future growth. Furthering our transformation this year was our sale of Kline to General Oceans in the third quarter.
Robert P. Capps: We achieved positive adjusted EBITDA in the fourth quarter and our continuing operations were profitable for both the fourth quarter and on a full year basis.
Mark: This was our first profitable year for mind since 2014, so needless to say this is a significant milestone for the company and a reflection of the efforts we've made to strategically position the company for future growth.
Mark: Furthering our transformation. This year was our sale of client that general oceans, and the third quarter.
Robert P. Capps: This was a meaningful and necessary step towards streamlining our business and focusing our operations on the areas with the largest potential for growth and profitability. Our CMAQ product lines continue to gain traction and drive significant customer demand. The favorable macro environment, our narrowed focus, strong customer relationships, ever-increasing capabilities, and valuable partnerships have boosted our order flow. The framework agreement we entered into this past year, which resulted in the single largest order in CNAP's history, is evidence of this. We enter fiscal 2025 with a backlog that exceeds $38 million.
Mark: This was a meaningful and necessary step towards streamlining our business and focusing our operations on the areas with large potential for growth and profitability.
Mark: Our cement product lines continue to gain traction and drive significant customer demand.
Mark: The favorable macro environment, our narrowed focus strong customer relationships ever increasing capabilities and valuable partnerships and boosted our order flow.
Mark: The framework agreement, we entered into this past year, which resulted in the single largest order in <unk> history as evidence of this.
Mark: We enter fiscal 2025 with a backlog that exceeds $38 million.
Robert P. Capps: This represents another sequential increase over the end of the third quarter and 145% above where our backlog related to CMF stood at the beginning of fiscal 2024. This robust backlog means that we're entering fiscal 2025 with a substantial book of business, and that bodes well for continued favorable financial results. However, as is always the case, the timing of certain orders is subject to variability due to any number of challenges, unforeseen circumstances, or customer delivery requirements.
Mark: This represents another sequential increase over the end of the third quarter and up 145% above where our backlog related to <unk> stood at the beginning of fiscal 2024.
Mark: This robust backlog means that we're entering fiscal 2025 with a substantial book of business and that bodes well for continued favorable financial results.
Mark: However, as is always the case the timing of certain orders is subject to variability due to any number of challenges unforeseen circumstances or customer delivery requirements.
Robert P. Capps: I believe this unprecedented backlog is indicative of our specialized capabilities and differentiated product lines, and I'm encouraged by the implications for future results. Marine Technology Products revenues for the fiscal fourth quarter and full year 2024 are $13.4 million and $36.5 million, respectively. This annual revenue was the highest ever achieved by our CMAP business. Both periods were up significantly over the prior quarter and prior fiscal year. Our results for the full year are a direct representation of the strong customer engagement, macro tailwinds, and resulting order flow that we're experiencing.
Mark: I believe this unprecedented backlog is indicative of our specialized capabilities and differentiated product lines and I am encouraged by the implications for our future results.
Mark: Marine technology products revenues for the fiscal fourth quarter and full year 2024 for $13 4 million and $36 5 million respectfully.
Mark: This annual revenue was the highest ever achieved by our <unk> business in both periods were up significantly over the prior quarter and prior fiscal year respectively.
Mark: Our results for the full year are a direct representation of the strong customer engagement macro tailwind, resulting order flow that we're experiencing.
Mark: And while supply chain issues are much improved from a couple of years ago. There is still with us and can impact results in a particular period.
Robert P. Capps: While supply chain issues are much improved from a couple of years ago, they're still with us and can impact results for a particular period. We experienced this at times in fiscal 2024, and we anticipate that it may occur at times again in the future. As always, these orders are almost never lost but merely delayed.
Mark: We experienced this at times in fiscal 2024, and we anticipate that it may occur at times again in the future.
Mark: As always these orders are almost never lost but merely delayed.
Robert P. Capps: The magnitude of our backlog does give us better visibility and, therefore, a better ability to manage our procurement process. However, the increased level of activity also means increased capital requirements. We believe that growing demand for our CMAP product lines, such as GunLink source controllers, BuoyLink positioning systems, and C-Link streamer systems, is driving our robust backlog. Additionally, the benefits from our key customer partnerships and strength in the underlying market have contributed meaningfully to our positive order momentum.
Mark: The magnitude of our backlog does give us better visibility and therefore, a better ability to manage our procurement process. However, the increased level of activity also means increased capital requirements.
Mark: We believe that the growing demand for our <unk> product lines, such as Skylake source controllers, <unk> positioning systems and ceiling streamer systems is driving our robust backlog.
Mark: The benefits from our key customer partnerships and strength in the underlying market has contributed meaningfully to our positive order momentum.
Robert P. Capps: I remain confident that we're the partner of choice for companies looking to acquire high quality and versatile marine technology products. We continue to believe that the current market environment is advantageous for us. Each of the three key markets, exploration, defense, and survey, remain loaded with opportunities. In addition to now operating a more streamlined and focused suite of products, our team continues to develop new and innovative ways to adapt and implement our technologies to meet the evolving needs of our customers. Included in our backlog are orders for ultra-high-resolution survey systems that are often used to detect subsea boulders and other geohazards. These surveys assist in de-risking offshore installations such as wind farms and carbon capture facilities.
Mark: I remain confident that we are.
Mark: The partner of choice for companies looking to acquire high quality and versatile marine technology products.
Mark: We continue to believe that the current market environment is advantageous remind each of our three key markets exploration defense. The survey remained loaded with opportunity.
Mark: In addition to now operate in a more streamlined and focused suite of products. Our team continues to develop new and innovative ways to adapt and implement our technologies to meet the evolving needs of our customers.
Mark: Put it in our backlog or orders for Ultra high resolution survey systems. They are often used to detect subsea boulders in other geo hazards.
Mark: These surveys assistant derisking offshore installations, such as wind farms and carbon capture facilities.
Robert P. Capps: These are new markets for us and ones that we think bring great promise. There's also a growing opportunity for us to provide seismic streamer repair services, not only for ceiling streamers but also for products manufactured by others. Within the maritime defense and security markets, we continue to believe that our Sea Serpent Passive Array System, which is derived from our commercially developed sealing system, is a significant economical solution for various demanding applications.
Mark: These are new markets for us and ones that we think bring great promise.
Mark: There's also a growing opportunity for mind to provide seismic streamer repair services not only for sealing streamers, but also for products manufactured by others.
Mark: And then the maritime defense and security markets. We continue to believe that our C circuit passive array system, which is derived from our commercially developed ceiling system.
Mark: As a significant and economical solution for variance demanding applications.
Robert P. Capps: The current geopolitical tensions around the world are a great reminder of the ever-present demand for security-related technology. We are beginning to see some traction for our Spectral AI software suite through our collaboration agreement with General Oceans. This software is now being used by two NATO navies with several other promising prospects. While the contribution has been minimal to date, we are optimistic about its prospects and hope to find further applications for this technology. With that, I'll hand things over to Mark for a while. He'll walk you through the fourth quarter and full year financial results in a bit more detail.
Mark: The current geopolitical tensions around the world are Great reminder, the ever present demand for security related technologies.
Mark: We are beginning to see some traction for our spectral AI software suite through our collaboration agreement with general oceans.
Mark: This software is now being used by two NATO Navy's with several other promising prospects.
Mark: While the contribution has been minimal to date, we are optimistic about its prospects and hope to find further applications for this technology.
Speaker Change: With that let me hand things.
Mark: Things over to Mark for a while he'll walk through the fourth quarter and full year <unk>.
Mark: Actual results a bit more detail.
Mark: Mark.
Mark Alan Cox: Thanks, Rob. And good morning, everyone.
Mark: Thanks, Rob and good morning, everyone.
Mark: I'd like to remind everyone that with the sale of climb those operations have been treated as discontinued operations. Prior period results have been restated to reflect that.
Mark Alan Cox: I'd like to remind everyone that with the sale of Klein, those operations have been treated as discontinued operations, and prior period results have been restated to reflect that. Boringly, The results from continuing operations that we reported yesterday and are discussing here today, including prior period comparative data, do not include amounts related to Klein. They include only our ongoing business.
Mark: Accordingly.
Mark: The results from continuing operations that we reported yesterday and are discussing here today, including prior period comparative data do not include amounts related decline.
Mark: <unk> only our ongoing business.
Mark: As Rob mentioned earlier revenues from Marine technology product sales totaled approximately $13 4 million in the quarter.
Mark Alan Cox: As Rob mentioned earlier, revenues from marine technology product sales totaled approximately $13.4 million in the quarter, which was up about 51% from approximately 8.9 million in the same period a year ago. Full-year revenue amounted to $36.5 million, which was up approximately 46% over the previous year and represents the highest annual revenue ever reported by our CMAP business. Our fourth quarter results benefited from a little over 5 million orders that were delayed from the third quarter.
Mark: Which was up about 51% from approximately $8 9 million in the same period a year ago.
Mark: Full year revenue amounted to $36 5 million.
Mark: Which was up approximately 46% over the previous year and represents the highest annual revenue ever reported by our <unk> business.
Mark: Our fourth quarter results benefited from a little over $5 million of orders that were delayed from the third quarter.
Mark Alan Cox: But there were other orders pushed from the fourth quarter into fiscal 2025. The shifting of deliveries and the impact of that on quarterly revenues is just a fact of life for our business. We continue to believe in the strength we are seeing and all our key markets.
Mark: But there are other orders pushed from the fourth quarter into fiscal 2025.
Mark: The shifting of deliveries and the impact of that on quarterly revenues is just a fact of life for our business.
Mark: We continue to believe the strength we are seeing.
Mark: In all our key markets and.
Mark Alan Cox: And the growth in our backlog of orders positions us well for sustained high-level revenue in the coming quarters. Full year gross profit from continuing operations was approximately $16 million, which was up approximately 61% when compared to the prior year. This represents a gross profit margin of approximately 44%. This is an improvement from the 40% gross profit margin achieved in fiscal 2023. Incremental year-over-year revenue resulted in greater operating efficiency and overhead absorption and a much-improved gross profit margin.
Mark: And the growth in our backlog of orders positions us well for sustained high level revenue in the coming quarters.
Mark: Full year gross profit from continuing operations was approximately $16 million.
Mark: Which was up approximately 61% when compared to the prior year.
Mark: This represents a gross profit margin of approximately 44% for the year.
Mark: This is an improvement from the 40% gross profit margin achieved in fiscal 2023.
Mark: The incremental year over year revenue resulted in greater operating efficiency and overhead absorption and a much improved gross profit margin.
Mark: Our general and administrative expenses were approximately $3 million for the fourth quarter, which was roughly in line with the $2 9 million from the third quarter.
Mark Alan Cox: Our general and administrative expenses were approximately $3 million for the fourth quarter, which was roughly in line with the $2.9 million from the third quarter. As we mentioned in our last call, the sale of Klein is allowing us to streamline our operations and thereby reduce some costs.
Mark: As we mentioned in our last call.
Mark: L. A cline is allowing us to streamline our operations and thereby reduce some cost.
Mark: Important to note that we typically experience higher G&A spending levels in the fourth quarter associated with year end activities.
Mark Alan Cox: It's important to note that we typically experience higher G&A spending levels in the fourth quarter associated with year-end activity, which we believe masks a bit of the client-related savings achieved during the quarter. We do anticipate realizing additional cost savings benefits in fiscal 2025. Our research and development expense for the fourth quarter, which relates only to our continuing operations, was $654,000. That was up both sequentially and compared to the prior year period. These costs were largely directed toward the development of our next generation streamer system and continued development of our Spectral AI software suite.
Mark: We believe masked a bit of decline related savings achieved during the quarter.
Mark: We do and we do anticipate realizing additional cost savings benefits in fiscal 2025.
Mark: Our research and development expense for the fourth quarter, which relates only to our continuing operations was.
Mark: <unk> was 654000.
Mark: That was up both sequentially and compared to the prior year period.
Mark: These costs are largely directed toward the development of our next generation Streamer system and continued development of our spectral AI software suite.
Mark: Operating income for the fourth quarter was $2 3 million compared to an operating loss of approximately $1 5 million in the third quarter and operating income of 595.
Mark Alan Cox: Operating income for the fourth quarter was $2.3 million, compared to an operating loss of approximately $1.5 million in the third quarter and operating income of $595,000 in the fourth quarter of fiscal 2023. Our fourth quarter adjusted EBITDA from continuing operations was $2.6 million, compared to $1.5 million in the fourth quarter a year ago. Suggested EBITDA from continuing operations for fiscal 2024 was approximately $2.3 million compared to a loss of $3.4 million in fiscal 2023.
Mark: In the fourth quarter of fiscal 2023.
Mark: Our fourth quarter adjusted EBITDA from continuing operations was $2 6 million.
Mark: Compared to $1 5 million in the fourth quarter a year ago.
Mark: Adjusted EBITDA from continuing operations for fiscal 2024 was approximately $2 3 million compared to a loss of $3 4 million in fiscal 2023.
Mark: Net income for the fourth quarter was approximately $1 4 million, which was over 100% improvement from the 666000 reported in the fourth quarter of fiscal 2023.
Mark Alan Cox: That income for the fourth quarter was approximately $1.4 million, which was a 100% improvement from the 666,000 reported in the fourth quarter of fiscal 2023. Total net income for fiscal 2024 was $274,000 compared to a loss of $8.8 million in fiscal 2023. As Rob mentioned, we're pleased to have achieved profitability in fiscal 2024, something that hasn't been achieved in many years, and we hope to continue building on this momentum in future periods.
Mark: Total net income for physical 2024 was $274000 compared to a loss of $8 8 million in fiscal 2023.
Speaker Change: As Rob mentioned, we're pleased to have achieved profitability in fiscal 2024, something that hasnt been done in many years and we hope to continue building on this momentum in future periods.
Speaker Change: As of January 31, 2024, we had working capital of approximately $18 1 million and approximately $5 3 million of cash on hand.
Mark Alan Cox: As of January 31st, 2024, we had working capital of approximately $18.1 million and approximately $5.3 million of cash on hand. Mine's liquidity position is significantly improved, and the balance sheet remained strong following the sale of Klein in August, which enabled the company to eliminate the outstanding high-cost debt. As of today, mine is debt-free. I'll now pass it back over to Rob for some concluding comments.
Speaker Change: <unk> liquidity position has significantly improved and the balance sheet remains strong following the sale of Klein in August which enabled the company to eliminate the outstanding high cost debt.
Speaker Change: As of today mind is debt free.
Mark: I'll now pass it back over to Rob for some concluding comments.
Robert P. Capps: Okay, thanks, Mark. My results for fiscal 2024 demonstrate the early benefits of our strategic transformation to streamline our business and focus on our CMAP operations. We've developed valuable partnerships and customer relationships that have enabled us to build a record backlog that continues to replenish itself as we execute and deliver orders. Our deliberate emphasis on growth and improving our bottom line throughout the year resulted in the mine achieving full-year profitability for the first time in about 10 years, and we're confident that the company is now able to sustain this positive momentum in future periods.
Robert P. Capps: Thanks Mark.
Robert P. Capps: Mine's results for fiscal 2024 demonstrate the early benefits of our strategic transformation to streaming streamline our business and focus on our <unk> operations.
Robert P. Capps: We have developed valuable partnerships and customer relationships have enabled us to build up record backlog that continues to replenish itself as we execute and deliver orders are.
Robert P. Capps: Our deliberate emphasis on growth and improving our bottom line throughout the year resulted in mind, achieving full year profitability for the first time in about 10 years and we're confident that the company is now built to sustain this positive momentum in future periods.
Robert P. Capps: Our marine technology products continue to penetrate in a variety of industries and markets, which I believe is a direct correlation to the work that our team has done to develop it to continually adapt our technology to meet the evolving needs of our customers.
Robert P. Capps: Our marine technology products continue to penetrate a variety of industries and markets, which I believe is a direct correlation to the work that our team has done to develop and continually adapt our technology to meet the evolving needs of our customers. Mark, the conditions remain favorable. We believe there are still notable opportunities for our CMAP unit and our other initiatives. We believe our significant customer engagement and order flow are indications of the market adoption of our product line. We're encouraged by the results for fiscal 2024 and the noteworthy improvements we've made to the business. However, our eyes remain fixed on the future.
Robert P. Capps: The market conditions remain favorable.
Robert P. Capps: We believe there is still notable opportunities for our <unk> unit and our other initiatives.
Robert P. Capps: We believe our significant customer engagement and order flow are indications of the market adoption of our product lines.
Robert P. Capps: We're encouraged by results in fiscal 2024, and the noteworthy in fragrance, we think to the business. However.
Robert P. Capps: Our eyes remain fixed on.
Robert P. Capps: In the future.
Robert P. Capps: We believe MIND is exceptionally well positioned with a strong foundation to capitalize on future opportunities. Nevertheless, despite these positive results and our optimism for the future, we continue to feel prudent to use our increased liquidity and capital from operations to fund future growth and execute on our record backlog rather than declare dividends on our preferred stock and pay the deferred dividends in arrears, although our operations are much improved.
Robert P. Capps: We believe mind is exceptionally well positioned with a strong foundation to capitalize on future opportunities.
Robert P. Capps: Despite these positive results and our optimism for the future. We continue to feel it prudent to use our increased liquidity and capital from operations.
Robert P. Capps: <unk> future growth and execute on our record backlog rather than declared dividends on our preferred stock and paid the deferred dividends in arrears.
Robert P. Capps: Although our operations are much improved they.
Robert P. Capps: They do not support the required growth in working capital and the payment of the preferred dividend. As you probably know, we did not declare a dividend on our preferred stock for both the fourth quarter of fiscal 2024 and the first quarter of fiscal 2025. As of today, there remains about $6.6 million of accumulated dividends from prior periods.
Robert P. Capps: They do not support the required growth in working capital and the payment of the preferred dividends.
Robert P. Capps: As you probably know we did not declare a dividend on our preferred stock for both the fourth quarter of fiscal 2024, and the first quarter of fiscal 2025.
Robert P. Capps: And as of today.
Robert P. Capps: <unk> is about $6 6 million of accumulated dividends from prior periods.
Robert P. Capps: As a result, in recent months, we proposed an amendment to the terms of our preferred stock that would convert the preferred stock into common stock. As you also probably know, a special meeting of stockholders had been scheduled for April 25. It has been postponed. We will provide more information on this very soon. However, in order to comply with proxy rules, we will not make any further comments regarding this beyond those contained in the press release we issued last Wednesday afternoon.
Robert P. Capps: As a result in recent months, we proposed amendment to the terms of our preferred stock it would convert the preferred stock into common stock.
Robert P. Capps: As you also probably know especial meeting for stockholders had been scheduled for April 25 that has been postponed.
Robert P. Capps: We will provide more information on this very soon however in order to comply with proxy rules, we will not make any further comments regarding this beyond those contained in the press release, we issued last Wednesday afternoon.
Robert P. Capps: Additionally, we would like to entertain any questions regarding this in the Q&A section. It's always important to remind everyone that you should expect some fluctuations in revenue from quarter to quarter, as we saw at times in fiscal 2024 and in other periods in recent years. There will likely be quarterly revenue variation due to a variety of challenges and unforeseen circumstances or simple customer delivery requirements. However, as we illustrated in fiscal 2024, these orders may shift to the right, but they're not lost.
Robert P. Capps: Additionally, we will not entertain any questions regarding this in the Q&A session.
Robert P. Capps: That's always important to remind everyone that you should expect some fluctuations in revenue from quarter to quarter.
Robert P. Capps: As you saw at times in fiscal 2024 and in other periods in recent years, there will likely be quarterly revenue variation due to a variety of challenges and unforeseen circumstances or simple customer delivery requirements.
Robert P. Capps: However, as we illustrated in fiscal 2020 for these orders may shift to the right, but they are not lost.
Robert P. Capps: We'll continue to maintain our belief that the general trend is one of sustainably higher levels of revenue in fiscal 2025 and beyond. Looking forward, our current visibility. Healthy customer engagement, strong backlog, and favorable macro tailwinds give us confidence that we'll see revenue growth and positive adjusted EBITDA in fiscal 2025, and we anticipate another profitable year from mine. We believe our differentiated and market-leading suite of products is uniquely positioned to capitalize on customer demand in future periods, and we intend to build on the positive momentum from last year to drive increased shareholder value in fiscal 2025. With that, operator, I think we can now open the call for questions.
Robert P. Capps: We've continued to maintain our belief that the general trend was one a sustainably higher level revenue in fiscal 2025 and beyond.
Robert P. Capps: Looking forward our current visibility.
Robert P. Capps: Healthy customer engagement strong backlog and favorable macro tailwind give us confidence that we'll see revenue growth and positive adjusted EBITDA in fiscal 2025 and <unk>.
Robert P. Capps: We anticipate another profitable year for mind.
Robert P. Capps: We believe our differentiated and market leading suite of products is uniquely positioned to capitalize on customer demand in future periods and we intend to build on the positive momentum from last year to drive increased shareholder value in fiscal 2025.
Speaker Change: With that operator, I think we can now open the call offers questions.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Ladies and gentlemen, we will wait for a moment while we poll you for questions. Our first question is from the line of Tyson Bauer with KC Capital. Please go ahead. Good morning, gentlemen.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star and one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Robert P. Capps: You May press Star two if you would like to remove your question from the queue.
Robert P. Capps: All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: Our first question is from the line of Tyson Bauer with KC capital. Please go ahead, hey, good morning, gentlemen.
Tyson Lee Bauer: I'm glad he threw in the second part because I wasn't going to touch it with the 10 foot fall to begin with. Well, we'll stick to the business questions, at least on my part. We had five million rollover from third quarter to fourth quarter. We're at a stage that the rolling 12 months or the run rate is basically set where we're going to always have those timing issues. But we've really elevated the company to a new range of operating results as these things roll forward, especially with maintaining the backlog that you have, if that is how you are seeing this.
Robert P. Capps: Lynn.
Tyson Lee Bauer: Hi, Tyson.
Tyson Lee Bauer: I'm glad you through in the second part because I wasn't going to touch it with a 10 foot fall to begin with.
Tyson Lee Bauer: Well I'll stick to the business questions at least on my part.
Tyson Lee Bauer: Okay.
Tyson Lee Bauer: We have 5 million rollover from third quarter to fourth quarter, we had some orders rolo from fourth quarter to first quarter. It seems like.
Tyson Lee Bauer: We're to a stage that the rolling 12 months or the run rate is basically set where.
Tyson Lee Bauer: We're going to always have those timing issues.
Tyson Lee Bauer: We've really elevated the company to a new.
Tyson Lee Bauer: Range of operating our results as these things roll forward, especially with maintaining the backlog that you have.
Tyson Lee Bauer: If that is how you are seeing this.
Tyson Lee Bauer: What kind of working capital needs are you anticipating for this fiscal year if we've reached that level of just rolling forward, and we should see similar results to what we just had as we go through the quarters with some obvious variations?
Tyson Lee Bauer: What kind of working capital needs are you anticipating for this fiscal year. If we've reached that level of just rolling forward and we should see similar results to what we've just had as we go through the quarters with some obvious variations.
Tyson Lee Bauer: Sure.
Robert P. Capps: Sure, I mean that's a tough question because, you know, working capital is dictated by the exact timing of shipments, collection activities, terms, what our requirements are from vendors as far as payments, sometimes advanced payments, do we need to buy materials in advance, so it's a complicated calculus. I will say we do believe that we can fund that from our existing operations to create the working capital we need, but I think you need to be careful if you look at the cash on the balance sheet. It's January, and Ken Dennard, Mark Cox, Ken Dennard, Mitcham Industries Inc. So that's the reason we think it's very prudent and would be imprudent not to, you know, maintain that flexibility such that we do have the So again, I don't have a number for you, but certainly, you know, things will improve, but if the business continues to expand, that's going to increase their working capital requirements.
Speaker Change: Tough question because working capital.
Speaker Change: As dictated by <unk>.
Robert P. Capps: Exact timing of shipments collection activities terms, what our requirements are from vendors as far as payments, sometimes advanced payments.
Speaker Change: Do we need to buy material in advance of theirs.
Robert P. Capps: Complicated calculus.
Speaker Change: I will say, we do believe that we can.
Robert P. Capps: But that from our existing operations that create to working capital we need.
Robert P. Capps: But I think you need to be careful if you look at the cash on the balance sheet at January.
Speaker Change: Five 7 million.
Robert P. Capps: You assume thats excess cash sitting around but that's not necessarily the case, that's going to help fund those working capital requirements as we go through the year and handle those.
Robert P. Capps: Ups and downs.
Mark Cox: So thats the reason, we think it's very prudent.
Robert P. Capps: And would be imprudent not to.
Robert P. Capps: Maintain that flexibility such we such that we do have the ability to fund those requirements as they arise and sometimes there are unforeseen so.
Speaker Change: We don't have a number for you.
Robert P. Capps: But certainly things, we think things will improve but the.
Robert P. Capps: The business continues to expand that's going to expand their working capital requirements.
Robert P. Capps: So you are anticipating growth off of the fourth quarter run rate then.
Tyson Lee Bauer: So you are anticipating growth off of the fourth quarter run rate, then?
Robert P. Capps: I wouldn't say that. I think that's a bit aggressive, you know, given the way orders flowed in from the third quarter.
Speaker Change: I wouldn't say that I think that's a bit aggressive.
Robert P. Capps: Given we had the orders flow in from the third quarter.
Tyson Lee Bauer: Well, you threw me a softball. I thought I might try to hit it out of the park for you. Nice try.
Speaker Change: You threw me a softball, I thought I'd try to hit it out of the park for you.
Robert P. Capps: Obviously, the end of the quarter is today. Are you willing or able to give us any kind of insight on how we've progressed, to where the backlog should end up, or where you're kind of standing cash wise at the end of April?
Tyson Lee Bauer: Nice try.
Robert P. Capps: Obviously, the end of the quarter is today.
Robert P. Capps: Are you willing or able to give us any kind of insight on how we progress.
Robert P. Capps: To where backlog.
Robert P. Capps: Or where you are kind of standing cash wise at the end of April.
Tyson Lee Bauer: You know, I don't want to get into that. It's really dangerous to try to project financial results on the last day of the quarter before we close the books. That's really bad.
Speaker Change: I don't want to get into that that's fairly dangerous to try to project financial results on the last day of the quarter before we close the books, that's really dangerous I'll, just say that we're pleased about the way the businesses.
Robert P. Capps: I'll just say that we're pleased about the way the business is progressing. I think we're consistent with what we talked about here today and just leave it at that.
Robert P. Capps: Progressing.
Robert P. Capps: I think we're consistent with what we've talked about here today.
Robert P. Capps: And just leave it at that.
Tyson Lee Bauer: Okay, but you are pleased with your backlog and how it's progressed thus far.
Speaker Change: Okay, but you are pleased with your backlog and how that's progressed thus far.
Robert P. Capps: Sure, sure. That backlog is always going to go up and down. There'll be a period, I'm sure, in the future where it goes down a bit and then it'll go back up. It's just, you know, we have large orders that tend to come in batches, so...
Speaker Change: Sure sure no backlog is always going to go up and down.
Robert P. Capps: There will be a period I'm sure in the future where backlog it was down a bit and then I will go back up.
Robert P. Capps: We have large orders that tend to come in and batches. So.
Tyson Lee Bauer: And when you have systems, obviously, that can skew the timing of revenue recognition, receipt, and accounts receivable. How would you give us a little sense of the composition of the backlog as far as how many are like whole systems that are X millions of dollars as opposed to partials that may be a little more, you know, under a million or a million versus say a four or five million dollar system?
Robert P. Capps: No.
Robert P. Capps: And when you have systems, obviously that can skew timing of revenue recognition received.
Tyson Lee Bauer: Accounts receivable.
Tyson Lee Bauer: Hi.
Tyson Lee Bauer: You give us a little sense of the composition of the backlog.
Tyson Lee Bauer: As far as how many are like whole systems that are X millions of dollars as opposed to parcels that may be a little more.
Tyson Lee Bauer: Under $1 million a $1 million.
Tyson Lee Bauer: Versus say $4 million to $5 million system.
Robert P. Capps: Oh gosh, um... I'm doing some internal math here. The majority of it is going to be systems because, obviously, just because they're bigger, they're going to dominate. You know, so there are a... A handful of full systems in the backlog, the balance being, you know, spare parts and
Speaker Change: Oh gosh.
Robert P. Capps: Oh, gosh.
Robert P. Capps: I'm doing some internal math here.
Robert P. Capps: The majority of it's going to be systems, because obviously, just because they are bigger they were going to die.
Robert P. Capps: Nominate.
Robert P. Capps: So there are a.
Robert P. Capps: A handful of full systems in the backlog the balance being youll spare parts.
Robert P. Capps: Things of that nature.
Tyson Lee Bauer: Okay, and the delivery timeline for that backlog that you disclosed should all be recognized in fiscal 25?
Speaker Change: Okay, and the delivery timeline of that backlog that you disclose should all be recognized in fiscal 'twenty five.
Robert P. Capps: Most of it. I can't say all of it. Some of them might slide into the next year, but there'll be other orders that come in as well.
Speaker Change: Most of I can't say all of it to some of my slide into the next year, but there'll be other orders are coming in as well.
Tyson Lee Bauer: Okay, and the backlog does not include what you anticipate in servicing and parts, which is typically about 10% of what you generate in the top line.
Robert P. Capps: Okay.
Robert P. Capps: Backlog does not include what you anticipate in servicing and parts, which is typically in any given year about 10% of what you generate topline.
Robert P. Capps: Yeah, I mean, there may be some spare orders that we've already received, but those again happen throughout the year. So, there'll be more of those sort of things. Okay.
Speaker Change: Yeah, I mean, there may be some spare orders, we've already received but those happen throughout the year. So it will be more of those sort of things okay.
Tyson Lee Bauer: Okay. You talked about AI used by a couple of navies, global navies, with your partnership. What exactly is being utilized with that AI system and your part in that relationship?
Robert P. Capps: You talked about AI use by a couple of Navy's Global Navy so with your partnership.
Tyson Lee Bauer: What exactly is being utilized with that AI is the sell in and your part.
Tyson Lee Bauer: In that relationship.
Tyson Lee Bauer: So AI is a data handling and automatic target recognition enabling system.
Robert P. Capps: So, Spherical AI is a data handling and automatic Target Recognition enabling system. There are different aspects to it. So, simply put, when used with, in this case, side-scan sonars, but it could be other sensor systems. It facilitates the handling and annotation of the data, and therefore, then the application of the... Thank you. Primarily being used in a survey application right now or survey applications right now.
Robert P. Capps: There's different aspects to it.
Robert P. Capps: So simply put when used with in this case side scan sonar.
Robert P. Capps: Other sensor systems.
Robert P. Capps: <unk>.
Robert P. Capps: The.
Robert P. Capps: The handling and annotation of the data and therefore, then the application of that.
Robert P. Capps: Automatic target recognition algorithm to it so it takes it.
Robert P. Capps: Take some of the labor out of the process.
Robert P. Capps: It's primarily being used in a survey.
Robert P. Capps: Application right now are serving applications right now.
Robert P. Capps: You know, these navies have their own survey operations, so we're encouraged by that. We're getting good feedback, we think, as far as the... efficacy of the program and, you know, making a few tweaks to it.
Robert P. Capps: These Navy Navy have their own survey.
Robert P. Capps: Operations.
Robert P. Capps: <unk>.
Robert P. Capps: So we're encouraged by that and we're getting good feedback we think as far as the.
Robert P. Capps: <unk>.
Robert P. Capps: Efficacy program, and making a few tweaks to it.
Tyson Lee Bauer: Our arrangement is we still own that IP. We have licensed it to General Ocean, and then as they sell it or license it to their customers, we retain a sub-license fee. And this relates to side-scan sonars. So what we would hope to do in the future is take this same technology and apply it directly to other sensor systems. But that's something for the future.
Robert P. Capps: Our arrangement is we still own that IP.
Tyson Lee Bauer: We have licensed it to general oceans, and then as they sell it or license it to their customers we retain a.
Tyson Lee Bauer: Sublicense fee.
Tyson Lee Bauer: And this is relates to side scan sonar. So what we would hope to do in the future is then take this same technology towards other sensor systems.
Tyson Lee Bauer: And do it directly but that's something for the future.
Robert P. Capps: Okay, so currently, it's primarily utilized with your own hardware and software that you provide. But you're trying to make it so it's universal, that it'll work with a variety of different systems, even those not manufactured by yourself. And the licensing fee you get is pretty much just pure profit.
Speaker Change: Okay. So currently it's primarily utilized with your own hardware and software that you provide but you are trying to make it. So it's universal that will work with <unk>.
Robert P. Capps: A variety of different systems, even those not manufactured by yourself.
Robert P. Capps: In the licensing fee you get is pretty much just pure profit.
Tyson Lee Bauer: Yeah, so let's clarify. It's with Klein Sonar. So Sonar, at this point, is not our equipment. It's Klein equipment, so General Oceans equipment. But yeah, so we've retained that license fee, and we do hope to move that to other sensor systems in the future. Okay.
Speaker Change: Yes, So let me just clarify with Klein sonar so it's on our.
Tyson Lee Bauer: At this point it is not our equipment its client equipment, so general oceans equipment.
Tyson Lee Bauer: Yeah. So it's.
Tyson Lee Bauer: We've retained that license fee and we would do would help them to get another sensor systems in the future.
Tyson Lee Bauer: Okay.
Robert P. Capps: Last question, and I'll let the others get on if there are others there. Are we anticipating a strong start then, or is this more of a back-half-weighted fiscal 25? As we go through this, obviously timing, we know those disclaimers that you have, but you have a general sense that we started out this quarter with a very strong backlog number, very reminiscent of what we had at the end of Q3 and what you were able to produce. And you kind of have a sense of what the timing of that backlog is as far as system deliveries throughout the year.
Speaker Change: Last question and I'll, let.
Tyson Lee Bauer: Others get honest, they or others there.
Robert P. Capps: Anticipating a strong start then or is this more of a backfill such a back half weighted fiscal 'twenty five.
Robert P. Capps: As we go through and obviously timing we know those disclaimers that you have but you have a general sense that we started out this quarter with a very strong backlog number very reminiscent of what we had at the end of Q3, and what you were able produce and you kind of have a sense of what timing of that backlog is as far as system deliveries throughout the year.
Tyson Lee Bauer: Nice try. I mean, I'll just say that we think it's going to be a solid start and just leave it from there. Again, I don't want to get too... Okay. All right. Thank you, gentlemen.
Speaker Change: Nice try.
Speaker Change: Let me pass I will just say, we think it's going to be a solid start.
Speaker Change: And leave it from there again I don't want get too specific.
Speaker Change: Alright, Thank you gentlemen.
Tyson Lee Bauer: Okay.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and 1. Our next question comes from the line of Sam Schwartz with Caliber Management. Please go ahead.
Speaker Change: Ladies and gentlemen, a reminder, if you wish to ask a question. Please press star and one.
Operator: Our next question comes from the line of Sam Schwartz with caliber management. Please go ahead.
Sam Schwartz: Yes, hi, good morning, congratulations on a significant change in quarter and performance. My question is, is there a military application for your AI software as far as targeting is concerned?
Sam Schwartz: Yes, hi, good morning, congratulations on a significant change in quarter and performance. My question is regarding.
Sam Schwartz: Is there an application military application.
Sam Schwartz: For your AI software.
Sam Schwartz: As far as targeting is concerned.
Robert P. Capps: Yeah, well, that's a... Yes, but it's not something that we would provide. Let me expand on that.
Sam Schwartz: Yes.
Sam Schwartz: <unk>.
Sam Schwartz: Yes, but.
Robert P. Capps: The SPARQL AI can be used, again, in the data handling aspects of it, but typically, any military application, the military and the navies are going to apply their own ATR or model to it. They have, while we have an ATR model that can be provided, typically, the navies of the world want to provide their own model. So we kind of provide the front end, and they put in the back end, if you will. And there's a regulatory reason for that, too. If we were to provide the model itself, then it would become much more export-controlled, much more export-controlled. And therefore, it's something we prefer to stay away from.
Robert P. Capps: It's not something that we would provide and let me see let me expand on that.
Robert P. Capps: Specialty <unk> can be used.
Robert P. Capps: Again in the data handling data handling aspects of it but typically in a military application.
Robert P. Capps: <unk>.
Robert P. Capps: The military or the Navy's are going to apply their own.
Robert P. Capps: ATR model to it.
Robert P. Capps: They have well we have an ATR model that can be provided typically the navies of the world want to provide their own model. So we kind of provide the front end and they put in the back end if you will.
Robert P. Capps: And there is a regulatory reason of that too if we will provide the model itself.
Robert P. Capps: It's much more export.
Robert P. Capps: Controls mixed moments, where export control and therefore, it's something we'd prefer to stay away from.
Speaker Change: Thank you.
Robert P. Capps: Yes, yes.
Speaker Change: Thank you.
Robert P. Capps: Ladies and gentlemen, this concludes our question and answer session. I would now hand the conference over to Robert Capps for any closing comments.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session.
Robert P. Capps: I'll now hand, the conference silver to Rob Katz for any closing comments.
Robert P. Capps: Well again, thank you everyone for joining us today. I look forward to talking to you again in a very few weeks after our first quarter. Thanks very much.
Robert P. Capps: Well again, thank you everyone for joining us today.
Robert P. Capps: I look forward to talk to your unit in a very few weeks after our first quarter. Thanks very much.
Operator: The MIME Technology conference has now concluded. Thank you for your participation. You may now disconnect your lines.
Robert P. Capps: Yes.
Operator: ??
Speaker Change: Conference of mine Technology has now concluded. Thank you for your participation you may now disconnect your lines.
Operator: [music].
Operator: Yeah.
Operator: [music].