Earnings Labs

MIND Technology, Inc. (MIND)

Q1 2016 Earnings Call· Wed, Jun 3, 2015

$6.25

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Transcript

Operator

Operator

Greetings and welcome to the Mitcham Industries’ First Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Jenny Zhou. Please go ahead.

Jenny Zhou

Analyst

Thank you, Kevin. Good morning and welcome to the Mitcham Industries' fiscal 2016 first quarter conference call. We appreciate all of you joining us today. Your host today is Rob Capps, Executive Vice President and Chief Financial Officer and Co-Chief Operating Officer. Before I turn the call over to management, I have a few items to cover. If you would like to listen to a replay of today's call, it will be available for 90 days via webcast by going to the Investor Relations section of the Company’s Web site at mitchamindustries.com, or via recorded instant replay until June 17th. Information on how to access the replay was provided in yesterday's earnings release. Information reported on this call speaks only as of today, Wednesday, June 3, 2015; and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay. 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 different from 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, 2015. 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 these statements. Now, I'd like to turn the call over to Rob Capps.

Rob Capps

Analyst

Thanks, Jenny. Good morning, everybody. We would like to thank you for joining us today for our fiscal 2016 first quarter conference call. I will start by making some general comments about the quarter before moving on to discuss our financial results in more detail. I'll then conclude with a review of our market outlook before we open up for questions. Our first quarter results were largely in line with how we anticipated and discussed on our last conference call less than two months ago. Our core equipment leasing revenue showed sequential improvement over the fourth quarter of last year, this was largely due to our previously mentioned sizable project in Alaska. We mentioned that this project would likely lessen some of the negative impact of our first quarter results and it did. However, even with the benefit of this project, our equipment leasing revenues were below last year's first quarter, primarily due to large declines in activity in Canada and Latin America. Both these markets were marginal contributors to our leasing revenues during the quarter. In over 48 states of the U.S. land leasing activity continued to be very weak. Excess capacity continues to be an issue, in the marketplace and activity remains squarely focused on production related services rather than exploration, as E&P companies focus our cash flows, expense management and returns. As we've discussed before, activity in Canada for this winter season was significantly below historical levels. As a result, there is no seasonal uptick in Canada. Leasing revenues there in the first quarter contracted further from the fourth quarter and are a fraction of revenues from a year ago. Our visibility remains limited; there are some pending projects in North America that could have a positive impact later in the year. In Russia, we saw very…

Operator

Operator

Thank you. At this time we'll be conducting a question-and-answer session. [Operator Instruction]. Our first question today is coming from Georg Venturatos from Johnson Rice. Please proceed with your question.

Georg Venturatos

Analyst

Rob one of the things you had talk about some of the rationalization efforts in lease pool side. Can you maybe speak a little bit further to that just in terms of details about what you're looking for equipment wise in terms of rationalization efforts and then also obviously we're looking at minor amount of equipment this year. But maybe talk about what you're focusing on there in this environment as well.

Rob Capps

Analyst

Sure when we talk on rationalization yield that means looking at things that are producing the rental now or we don’t think there is as much ongoing demand and looking to sell that equipment from time to time. As you might imagine in this environment, there is much demand and there is more equipment for sale. But from time to time you do see opportunities for you can take some older equipment and start to sell it and then re-deploy that capital as appropriate. So that’s a sort of thing we're looking at. As far as additions this year what we're really looking to do this year what we've done so far this year is really limit our purchases to items which would enhance or facilitate the rental of existing equipments. So there is some sort of ancillary equipment that will enable us to get our existing equipment out better or in better price that’s a sort of thing that we're looking to buy and kind of limit to that. Beyond that we really don’t really have any clear plans as to what sort of sets we'll add if things come back, I think it really depends on what the market tells us as to what the demand is and what specific products we'll look for.

Georg Venturatos

Analyst

And then on the balance sheet side obviously generating some pretty nice operating and free cash flow in this environment certainly in last quarter paid down from debt again subsequent to quarter. Where do you looking forward want that cash that balance kind it to be in a perfect world and kind of what should we expect to do with future cash was I guess right now.

Rob Capps

Analyst

In the near-term we're still going to continue to reduce the revolver balance and maintain that liquidity. But there revolver balance is less than 2 million right now and I'll expect to pay that down more in the near-term. As we see that getting lower and actually seeing where we have visibility where we know we can retire that, we'll then start to look to some other deployments of capital. Obviously we have a repurchase program in place, stock is very, very interactive right now obviously and we just want to balance the liquidity needs and the uncertainty in the market place with what is the very attractive used capital and in the stock.

Georg Venturatos

Analyst

Last one on from me on the Seamap side some margins dip into low 40s this quarter. You talked about the 4Q sale basically transfer into the first quarter impacting margins there. Do you think we can -- is it appropriate to think we can get back to kind of that 50 percentage type run rate that we've seen previously particularly with the orders that we see coming online in the next few quarters.

Rob Capps

Analyst

I think it was hard approach that. We may not get exactly there right away, but I think we'll certainly to approach that. I think that’s one more we had a pretty big impact on the negative side from a margin standpoint. So yes I think we'll start to take back to that area.

Operator

Operator

Our next question today is coming from Ken Sill from Global Hunter. Please proceed with your question.

Ken Sill

Analyst

I'm curious on the inquires on the marine stuff. It sounds like it's pretty preliminary but it's a positive enough data point that you are willing to talk about it. I guess I've got two questions. What would be the typical timing of increased inquiries translating into orders for more rental equipment?

Rob Capps

Analyst

Ken it can really vary, I mean it can as quickly as a week. But I think the worse thing of things are more likely two, three, four months out what we think.

Ken Sill

Analyst

And that’s kind of what I was getting at it, I mean trying to figure out whether was something that could possibly come in the back half of this year and that sounds like that’s possible.

Rob Capps

Analyst

Yes.

Ken Sill

Analyst

And then what do you need to see to kind of gain confidence? What do you need to see to gain confidence that these inquiries are going to actually start turning into orders? Or is it really just people are talking but it's not an order until it's an order?

Rob Capps

Analyst

And it's not order still it's an order, throughout this downturn projects were scheduled but were cancelled about overcome just the last minute. So that’s the sort of thing we want to guard against. So I think once the orders and years out the door, that’s when we see order.

Ken Sill

Analyst

And I am assuming that the project cancellation wave is pretty much behind us you're not seeing anything like that happening anymore?

Rob Capps

Analyst

Yes certainly it's slowdown, I think people will have a chance to kind of rationalize your budget and know what you're going to do.

Ken Sill

Analyst

And then if the business starts improving. You guys have done a really good job of controlling costs. So it's really just a matter of ramping up to labor hours and the CapEx is not going to be a difficult thing to rebound activity wise?

Rob Capps

Analyst

No not at all, it might be very easy to do.

Operator

Operator

Our next question today is coming from Veny Aleksandrov from FIG Partners. Please proceed with your question.

Veny Aleksandrov

Analyst

My first question on Russia. You said next winter looks okay. What are you basing this on inquires or talks with clients or contracts that you get from this year that are going to continue next year?

Rob Capps

Analyst

Talk our current discussions with our customers. So we've said that recently and had a serious discussion and based on their plans to expect to have activities from us next year comparable to part of this past year has done a bit higher.

Veny Aleksandrov

Analyst

And now that you're thinking about some exchange currency risk hedging. Have you done anything in that direction?

Rob Capps

Analyst

We're still working on strategies there and still very difficult thing to do with the ruble in the market to for various reasons some are sanction related those transactions are very difficult to effect right now we are still looking into them.

Veny Aleksandrov

Analyst

And Canada is now very early I now that the season doesn’t shape up until late in the summer. But any idea what people are looking at for next year after the fall season this year?

Rob Capps

Analyst

There have been some early inquires some early indications but Veny -- it is very, very early. So I would not too much talk on it.

Operator

Operator

Thank you. We've reach end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

Rob Capps

Analyst

Thank you Kevin. Once again we just like to thank you for joining us at our conference call today and your interest in Mitcham Industries. And look forward to talking to you at second quarter conference call. Thank you very much.

Operator

Operator

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.