Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MIND Technology Inc (MIND, Financial) delivered positive results in the second quarter, in line with expectations, demonstrating progress on several fronts.
- The company generated positive cash flow from operations, improving liquidity and achieving another quarter of positive adjusted EBITDA and profitability.
- MIND Technology Inc (MIND) has a strong backlog of approximately $26 million, with additional orders of more than $6 million received subsequent to July 31.
- The conversion of preferred stock into common stock has simplified the capital structure, eliminating all outstanding preferred stock and associated accrued dividends.
- Gross profit for the second quarter was approximately $4.8 million, up 62% from the same period last year, with a gross profit margin of approximately 48%.
Negative Points
- The backlog at the end of the quarter was down sequentially, although it was more than 50% higher than the same time last year.
- Supply chain issues, although improved, still persist and could impact future results.
- General and administrative expenses were $2.8 million for the second quarter, flat sequentially and only slightly down from the previous year.
- The company has built up inventory in recent months to accommodate pending and upcoming orders, which could impact cash flow.
- The market has not yet adjusted to the positive changes in the company's capital structure, with selling pressure from recent preferred stock conversions affecting stock price.
Q & A Highlights
Q: Do you look at that as kind of now we've hit that benchmark level where other than maybe some unique timing issues, we should be at that $10 million-plus going forward?
A: (Robert Capps, CEO) I think normally, you're correct, just understanding that when a particular order falls from one week to the next could have an impact on a given quarter. So if we look up by $9.8 million a quarter. I would not be panicking just as though WCR, because there's a $12 million a quarter.
Q: Is that mainly from that operating leverage or is that just that pricing that's coming through or kind of a combination?
A: (Robert Capps, CEO) It's a combination of certainly the operating leverage helps a lot in a relatable to buy more rationally and product mix has an impact. So there are all sorts of things that go into that calculus. But we are very pleased about that. And that's something we've really been trying to focus on and we hope we can continue that going forward.
Q: Are we expected them to work down a little bit of that inventory or is that going to be kind of a sustained? And what is your net working capital outlook the second half?
A: (Robert Capps, CEO) Yeah, I would hope and expect that we'll be able to work that down a bit. And therefore, we're starting to see the cash flow turn a bit collecting receivables from things we've shipped. Again, we pre-bought inventory in some cases trying to work some of that down and maybe you don't have to do be quite as aggressive a future with that.
Q: What are your looking at your book value post conversion?
A: (Robert Capps, CEO) Tyson, I don't have the number in front of me. So I'd hate to just do something profit, I think you will be out this evening. I think you can do the math on that pretty closely, but I don't have a timing issue. I don't want missed out on that.
Q: Are you a little surprised that we haven't seen an adjustment to your market valuation just based on those numbers alone?
A: (Robert Capps, CEO) You know, frankly, not really in that you kind of think about the natural arbitrage that's been in place and there's no there's not been demand by the common recently. People will be buying the preferred instead. Obviously, there are some people who bought the preferred who intended to unload immediately.
Q: What were inventory levels at quarter end?
A: (Robert Capps, CEO) Yeah, $20 million-odd.
Q: What kind of run rate G&A should we expect to see going forward either annually or on a quarter basis?
A: (Robert Capps, CEO) So we're too late at this quarter. I would like to see that down a little bit no and 1,000 or so not geographically, but it was just a point where we're starting to tweak things a bit and just headcounts in some places.
Q: Is there anything in the first half of the year that was uniquely one-time that we should be backing out to get that base level before we add back the preferred dividend?
A: (Robert Capps, CEO) I don't think there's nothing really unusual. I again there's some seasonality in some of our costs, some G&A costs that we've talked about that in the past. So nothing out of the ordinary.
Q: Will you throw out some more color on how you see that value being realized?
A: (Robert Capps, CEO) Sure there's a couple of aspects to that, Ross. Certainly there's just the math of it or the corporate financing aspects of it that you'd alluded to and that I think that was my opinion, I think that people didn't really understand how to value or had it's been quite calculus to use and determine what's the impact of the preferred on the comment so I think taking that uncertainty away clarifies things.
Q: I wonder if you could give us a little color on what's going on there.
A: (Robert Capps, CEO) Sure. That's something we developed in connection with our client operation initially at [grocery] so that we retain that IP and in the transaction, but then had some license that back to while in General oceans, the buyer as it relates to certain applications, specifically (Inaudible).
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
