Mitcham Industries Reports Fiscal 2020 Second Quarter Results

Contacts:

Rob Capps, Co-CEO

Mitcham Industries, Inc.

936-291-2277

Ken Dennard / Zach Vaughan

Dennard Lascar Investor Relations

713-529-6600

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

July 31, 2019

January 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

7,489

$

9,389

Restricted cash

150

160

Accounts receivable, net of allowance for doubtful accounts of $2,073 and $2,113 at July 31, 2019 and January 31, 2019, respectively

10,649

12,082

Inventories, net

13,115

10,774

Prepaid expenses and other current assets

3,323

1,735

Assets held for sale

—

2,202

Total current assets

34,726

36,342

Seismic equipment lease pool and property and equipment, net

11,841

14,155

Operating lease right-of-use assets

2,738

—

Intangible assets, net

9,909

10,495

Goodwill

2,531

2,531

Deferred tax asset

68

68

Long-term receivables, net of allowance for doubtful accounts of $- at July 31, 2019 and January 31, 2019

90

712

Other assets

1,144

712

Long-term assets held for sale

—

286

Total assets

$

63,047

$

65,301

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,977

$

1,534

Deferred revenue

405

1,040

Accrued expenses and other current liabilities

4,650

3,738

Income taxes payable

177

224

Operating lease liabilities - current

720

—

Liabilities held for sale

—

892

Total current liabilities

7,929

7,428

Operating lease liabilities - non-current

2,018

—

Other non-current liabilities

1,086

1,195

Total liabilities

11,033

8,623

Shareholders' equity:

Preferred stock, at cost, $1.00 par value; 1,000 shares authorized; 917 and 830 shares issued and outstanding at July 31, 2019 and January 31, 2019, respectively

20,310

18,330

Common stock, $0.01 par value; 20,000 shares authorized; 14,058 and 14,049 shares issued at July 31, 2019, and January 31, 2019, respectively

141

140

Additional paid-in capital

123,452

123,085

Treasury stock, at cost (1,929 shares at July 31, 2019 and January 31, 2019)

(16,860)

(16,860)

Accumulated deficit

(70,494)

(63,973)

Accumulated other comprehensive loss

(4,535)

(4,044)

Total shareholders' equity

52,014

56,678

Total liabilities and shareholders' equity

$

63,047

$

65,301

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

For the Three Months Ended
 July 31,

For the Six Months Ended
July 31,

2019

2018

2019

2018

Revenues:

Sale of marine technology products

$

6,723

$

5,877

$

12,700

$

9,443

Equipment leasing

1,374

1,630

4,697

4,327

Sale of lease pool and other equipment

801

843

1,358

2,193

Total revenues

8,898

8,350

18,755

15,963

Cost of sales:

Sale of marine technology products

3,887

3,216

7,342

5,302

Equipment leasing (including lease pool depreciation)

1,880

3,242

4,291

6,824

Equipment sales

249

32

499

732

Total cost of sales

6,016

6,490

12,132

12,858

Gross profit

2,882

1,860

6,623

3,105

Operating expenses:

Selling, general and administrative

4,795

5,504

10,027

11,134

Research and development

498

312

813

682

Provision for doubtful accounts

—

—

—

200

Depreciation and amortization

651

620

1,301

1,237

Total operating expenses

5,944

6,436

12,141

13,253

Operating loss

(3,062)

(4,576)

(5,518)

(10,148)

Other income (expense):

Interest (expense) income, net

(11)

17

(22)

35

Other, net

(15)

55

92

141

Total other (expense) income

(26)

72

70

176

Loss before income taxes

(3,088)

(4,504)

(5,448)

(9,972)

Provision for income taxes

(48)

(85)

(103)

(522)

Net loss

$

(3,136)

$

(4,589)

$

(5,551)

$

(10,494)

Preferred stock dividends

(499)

(411)

(970)

(796)

Net loss attributable to common shareholders

$

(3,635)

$

(5,000)

$

(6,521)

$

(11,290)

Net loss per common share:

Basic

$

(0.30)

$

(0.41)

$

(0.54)

$

(0.93)

Diluted

$

(0.30)

$

(0.41)

$

(0.54)

$

(0.93)

Shares used in computing loss per common share:

Basic

12,128

12,093

12,124

12,090

Diluted

12,128

12,093

12,124

12,090

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Six Months Ended
 July 31,

2019

2018

Cash flows from operating activities:

Net loss

$

(5,551)

$

(10,494)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

3,960

6,399

Stock-based compensation

341

368

Provision for doubtful accounts, net of charge offs

—

200

Provision for inventory obsolescence

—

115

Gross profit from sale of lease pool equipment

(780)

(1,246)

Deferred tax expense

135

(306)

Changes in:

Accounts receivable

100

2,227

Unbilled revenue

3

(341)

Inventories

(2,372)

(1,406)

Prepaid expenses and other current assets

(11)

(1,435)

Income taxes receivable and payable

(47)

665

Accounts payable, accrued expenses and other current liabilities

632

(1,551)

Deferred revenue

(50)

942

Foreign exchange losses net of gains

137

64

Net cash used in operating activities

(3,503)

(5,799)

Cash flows from investing activities:

Purchases of seismic equipment held for lease

(230)

(1386)

Acquisition of assets

—

(3,000)

Purchases of property and equipment

(573)

(487)

Sale of used lease pool equipment

1,186

2,792

Sale of business, net of cash sold

239

—

Net cash provided by (used in) investing activities

622

(2,081)

Cash flows from financing activities:

Proceeds from exercise of stock options

26

—

Net proceeds from preferred stock offering

1,980

5,450

Preferred stock dividends

(970)

(796)

Net cash provided by financing activities

1,036

4,654

Effect of changes in foreign exchange rates on cash, cash equivalents and restricted cash

(65)

189

Net decrease in cash, cash equivalents and restricted cash

(1,910)

(3,037)

Cash, cash equivalents and restricted cash, beginning of period

9,549

10,146

Cash, cash equivalents and restricted cash, end of period

$

7,639

$

7,109

MITCHAM INDUSTRIES, INC.

Reconciliation of Net Loss and Net Cash Provided by Operating Activities to EBITDA and

Adjusted EBITDA

(unaudited)

For the Three Months Ended
July 31,

For the Six Months Ended
July 31,

2019

2018

2019

2018

(in thousands)

(in thousands)

Reconciliation of Net loss to EBITDA and Adjusted EBITDA

Net loss

$

(3,136)

$

(4,589)

$

(5,551)

$

(10,494)

Interest expense (income), net

11

(17)

22

(35)

Depreciation and amortization

1,829

3,096

3,960

6,399

Provision for income taxes

48

85

103

522

EBITDA (1)

(1,248)

(1,425)

(1,466)

(3,608)

Non-cash foreign exchange losses

89

62

141

13

Stock-based compensation

169

242

341

368

Cost of lease pool sales

38

7

94

634

Adjusted EBITDA (1)

$

(952)

$

(1,114)

$

(890)

$

(2,593)

Reconciliation of Net cash provided by operating activities to EBITDA

Net cash used in operating activities

$

(1,652)

$

(2,433)

$

(3,503)

$

(5,799)

Stock-based compensation

(169)

(242)

(341)

(368)

Provision for doubtful accounts

—

—

—

(200)

Provision for inventory obsolescence

—

(115)

—

(115)

Changes in accounts receivable (current and long-term)

(27)

(398)

(103)

(1,886)

Interest paid

13

1

27

2

Taxes paid, net of refunds

85

222

182

268

Gross profit from sale of lease pool equipment

417

710

780

1,246

Changes in inventory

1,871

562

2,372

1,406

Changes in accounts payable, accrued expenses and other current liabilities and deferred revenue

(987)

875

(582)

609

Changes in prepaid expenses and other current assets

(661)

(85)

11

1,435

Foreign exchange losses, net

(153)

(48)

(137)

(64)

Other

15

(474)

(172)

(142)

EBITDA (1)

$

(1,248)

$

(1,425)

$

(1,466)

$

(3,608)

1.

EBITDA is defined as net income before (a) interest income and interest expense, (b) provision for (or benefit from) income taxes and (c) depreciation and amortization. Adjusted EBITDA excludes non-cash foreign exchange gains and losses, non-cash costs of lease pool equipment sales, stock-based compensation and other non-cash tax related items. We consider EBITDA and Adjusted EBITDA to be important indicators for the performance of our business, but not measures of performance or liquidity calculated in accordance with GAAP. We have included these non-GAAP financial measures because management utilizes this information for assessing our performance and liquidity, and as indicators of our ability to make capital expenditures and finance working capital requirements and. We believe that EBITDA and Adjusted EBITDA are measurements that are commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us. In particular, we believe that it is useful to our analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities.  We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP and should not be considered in isolation or as alternatives to cash flow from operating activities or as alternatives to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. In evaluating our performance as measured by EBITDA, management recognizes and considers the limitations of this measurement. EBITDA and Adjusted EBITDA do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of the measurements that management utilizes.   Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do and EBITDA and Adjusted EBITDA may not be comparable with similarly titled measures reported by other companies. 

Mitcham Industries, Inc.

Segment Operating Results

(in thousands)

(unaudited)

For the Three Months Ended
July 31,

For the Six Months Ended
July 31,

2019

2018

2019

2018

Revenues:

Marine technology products

$

6,745

$

6,012

$

12,727

$

9,720

Equipment leasing

2,175

2,473

6,110

6,520

Inter-segment sales

(22)

(135)

(82)

(277)

Total revenues

8,898

8,350

18,755

15,963

Cost of sales:

Marine technology products

3,909

3,351

7,424

5,579

Equipment leasing

2,129

3,274

4,790

7,556

Inter-segment costs

(22)

(135)

(82)

(277)

Total cost of sales

6,016

6,490

12,132

12,858

Gross profit

2,882

1,860

6,623

3,105

Operating expenses:

Selling, general and administrative

4,795

5,504

10,027

11,134

Research and development

498

312

813

682

Provision for doubtful accounts

—

—

—

200

Depreciation and amortization

651

620

1,301

1,237

Total operating expenses

5,944

6,436

12,141

13,253

Operating loss

$

(3,062)

$

(4,576)

$

(5,518)

$

(10,148)

Marine Technology Products Segment:

Revenues:

Seamap

$

4,904

$

3,814

$

9,228

$

5,566

Klein

1,841

1,591

3,402

3,103

SAP

—

797

101

1,277

Intra-segment sales

—

(190)

(4)

(226)

6,745

6,012

12,727

9,720

Cost of sales:

Seamap

2,307

1,785

4,630

2,629

Klein

1,602

1,090

2,703

2,126

SAP

—

666

95

1,064

Intra-segment sales

—

(190)

(4)

(240)

3,909

3,351

7,424

5,579

Gross profit

$

2,836

$

2,661

$

5,303

$

4,141

Gross profit margin

42

%

44

%

42

%

43

%

Equipment Leasing Segment:

Revenue:

Equipment leasing

$

1,373

$

1,630

$

4,751

$

4,327

Lease pool equipment sales

455

718

874

1,881

Other equipment sales

347

125

485

312

2,175

2,473

6,110

6,520

Cost of sales:

Direct costs-equipment leasing

737

797

1,702

1,725

Lease pool depreciation

1,143

2,445

2,589

5,099

Cost of lease pool equipment sales

38

7

94

634

Cost of other equipment sales

211

25

405

98

2,129

3,274

4,790

7,556

Gross profit (loss)

$

46

$

(801)

$

1,320

$

(1,036)