Release Date: June 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MIND Technology Inc (MIND, Financial) reported another quarter of positive adjusted EBITDA and overall profitability.
- The company has a strong backlog of approximately $31 million, which is over 70% higher than the end of last year's first quarter.
- MIND Technology Inc (MIND) has taken steps to improve its cost structure, enhancing profitability despite ongoing supply chain challenges.
- The company has developed valuable partnerships and customer relationships, contributing to a robust order flow.
- MIND Technology Inc (MIND) remains debt-free following the sale of Klein, which has strengthened its balance sheet.
Negative Points
- Revenues from marine technology product sales were down about 9% from the same period a year ago.
- The company utilized liquidity to fund working capital requirements, impacting cash on hand.
- Supply chain issues, although improved, still pose challenges and can impact results in particular periods.
- The company continues to defer dividends on its preferred stock due to the need to retain capital for operations.
- There is variability in the timing of orders and deliveries, which can cause fluctuations in quarterly revenue.
Q & A Highlights
Q: You mentioned building off Q1 results going forward. Is Q1 the foundation for the next three quarters? Should we consider $0.12 per share as a baseline?
A: We expect improvements later in the year based on our backlog. Revenue for the year should be higher than annualizing Q1. There will be variability due to delivery schedules, but generally, revenue will be higher. As for EPS, we prefer not to project, but our cost structure is in line, and higher revenues should improve margins slightly.
Q: Can you provide insight into working capital relief and cash cycle management?
A: We expect some relief and operating cash generation as we progress. While growth will continue to absorb working capital, we don't anticipate dramatic changes in the near term. We aim to be self-sustaining without requiring additional capital.
Q: Are your order flows mainly from repeat customers, and what are the sizes and lead times of these orders?
A: We have a mix of repeat and new customers. Order sizes vary from a few hundred thousand to several million dollars. Lead times can be up to a year, with good visibility on potential orders within that period.
Q: How do you feel about the current quarter's POs, backlog, and cash situation compared to 45 days ago?
A: Things are progressing as anticipated, and we are satisfied with the current state.
Q: Are there strategies to monetize US tax loss carryforwards?
A: Monetizing tax loss carryforwards is challenging due to regulatory limitations. We are exploring ways to be more tax-efficient, as we currently pay taxes in foreign jurisdictions.
Q: Can you discuss the potential for further reductions in SG&A expenses?
A: There is room for further reductions, especially after the sale of Klein. We aim to streamline operations further, but as a public company, there are limits to how much we can reduce.
Q: What is the typical time horizon for converting inventories to cash?
A: Lead times for components have increased, requiring more aggressive inventory purchasing. We don't anticipate needing to increase inventory levels further unless we experience significant growth.
Q: How do you protect against cost increases for key components when pricing new business?
A: We buy components in advance and adjust pricing annually to manage costs. This strategy helps mitigate the impact of cost increases.
Q: Can you elaborate on the market opportunity for your NATO business and how you are compensated?
A: Our spectral AI software suite is marketed through General Oceans, generating recurring annual license fees. While not a major revenue source yet, it has the potential to grow and expand into other areas.
Q: Are any sectors outperforming or underperforming your expectations?
A: Traditional energy-related markets are performing well, and we see growth in alternative energy markets. No sectors are currently underperforming.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
