Mitcham Industries Reports Fiscal 2020 Third 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)

October 31, 2019

January 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

4,650

$

9,389

Restricted cash

149

160

Accounts receivable, net of allowance for doubtful accounts of $2,069 and $2,113 at October 31, 2019 and January 31, 2019, respectively

12,947

12,082

Inventories, net

13,559

10,774

Prepaid expenses and other current assets

1,521

1,735

Assets held for sale

—

2,202

Total current assets

32,826

36,342

Seismic equipment lease pool and property and equipment, net

14,021

14,155

Operating lease right-of-use assets

2,455

—

Intangible assets, net

9,453

10,495

Goodwill

2,531

2,531

Deferred tax asset

68

68

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

—

712

Other assets

1,142

712

Long-term assets held for sale

—

286

Total assets

$

62,496

$

65,301

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

3,483

$

1,534

Deferred revenue

210

1,040

Accrued expenses and other current liabilities

5,174

3,738

Income taxes payable

65

224

Operating lease liabilities - current

367

—

Liabilities held for sale

—

892

Total current liabilities

9,299

7,428

Operating lease liabilities - non-current

2,088

—

Other non-current liabilities

1,031

1,195

Total liabilities

12,418

8,623

Shareholders' equity:

Preferred stock, at cost, $1.00 par value; 1,000 shares authorized; 928 and 830 shares issued and outstanding at October 31, 2019 and January 31, 2019, respectively

20,540

18,330

Common stock, $0.01 par value; 20,000 shares authorized; 14,097 and 14,049 shares issued at October 31, 2019, and January 31, 2019, respectively

141

140

Additional paid-in capital

123,721

123,085

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

(16,860)

(16,860)

Accumulated deficit

(73,044)

(63,973)

Accumulated other comprehensive loss

(4,420)

(4,044)

Total shareholders' equity

50,078

56,678

Total liabilities and shareholders' equity

$

62,496

$

65,301

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

For the Three Months Ended
October 31,

For the Nine Months Ended
October 31,

2019

2018

2019

2018

Revenues:

Sale of marine technology products

$

8,062

$

9,277

$

20,762

$

18,720

Equipment leasing

2,305

3,166

7,002

7,493

Sale of lease pool and other equipment

296

2,208

1,654

4,401

Total revenues

10,663

14,651

29,418

30,614

Cost of sales:

Sale of marine technology products

4,728

4,904

12,070

10,206

Equipment leasing (including lease pool depreciation)

1,833

3,296

6,124

10,120

Equipment sales

51

1,227

550

1,959

Total cost of sales

6,612

9,427

18,744

22,285

Gross profit

4,051

5,224

10,674

8,329

Operating expenses:

Selling, general and administrative

4,705

4,819

14,732

15,953

Research and development

629

175

1,442

857

Provision for doubtful accounts

—

—

—

200

Depreciation and amortization

646

579

1,947

1,816

Total operating expenses

5,980

5,573

18,121

18,826

Operating loss

(1,929)

(349)

(7,447)

(10,497)

Other income (expense):

Loss on sale (including $5,355 of net cumulative translation loss)

—

(4,905)

—

(4,905)

Interest (expense) income, net

(12)

12

(34)

47

Other, net

(27)

(198)

65

(57)

Total other (expense) income

(39)

(5,091)

31

(4,915)

Loss before income taxes

(1,968)

(5,440)

(7,416)

(15,412)

(Provision) benefit for income taxes

(60)

249

(163)

(273)

Net loss

$

(2,028)

$

(5,191)

$

(7,579)

$

(15,685)

Preferred stock dividends

(522)

(449)

(1,492)

(1,245)

Net loss attributable to common shareholders

$

(2,550)

$

(5,640)

$

(9,071)

$

(16,930)

Net loss per common share:

Basic

$

(0.21)

$

0.47

$

(0.75)

$

(1.40)

Diluted

$

(0.21)

$

0.47

$

(0.75)

$

(1.40)

Shares used in computing loss per common share:

Basic

12,158

12,119

12,135

12,100

Diluted

12,158

12,119

12,135

12,100

MITCHAM INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Nine Months Ended
October 31,

2019

2018

Cash flows from operating activities:

Net loss

$

(7,579)

$

(15,685)

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

Depreciation and amortization

5,806

9,184

Stock-based compensation

611

575

Provision for doubtful accounts, net of charge offs

—

200

Provision for inventory obsolescence

23

140

Gross profit from sale of lease pool equipment

(987)

(1,848)

Loss on sale of business

—

4,905

Deferred tax expense

135

(365)

Non-current prepaid income taxes

(157)

472

Changes in:

Accounts receivable

(1,020)

(878)

Unbilled revenue

(302)

(2,435)

Inventories

(2,835)

(1,304)

Prepaid expenses and other current assets

240

(1,158)

Accounts payable, accrued expenses and other current liabilities

(392)

(626)

Deferred revenue

1,979

527

Foreign exchange losses net of gains

230

336

Net cash used in operating activities

(4,248)

(7,960)

Cash flows from investing activities:

Purchases of seismic equipment held for lease

(1,939)

(1,424)

Acquisition of assets

—

(3,000)

Purchases of property and equipment

(893)

(696)

Sale of used lease pool equipment

1,415

4,124

Sale of business, net of cash sold

239

(147)

Net cash used in investing activities

(1,178)

(1,143)

Cash flows from financing activities:

Proceeds from exercise of stock options

25

—

Net proceeds from preferred stock offering

2,211

6,135

Preferred stock dividends

(1,492)

(1,245)

Net cash provided by financing activities

744

4,890

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

(68)

(314)

Net decrease in cash, cash equivalents and restricted cash

(4,750)

(4,527)

Cash, cash equivalents and restricted cash, beginning of period

9,549

10,146

Cash, cash equivalents and restricted cash, end of period

$

4,799

$

5,619

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
October 31,

For the Nine Months Ended
October 31,

2019

2018

2019

2018

(in thousands)

(in thousands)

Reconciliation of Net loss to EBITDA and Adjusted EBITDA

Net loss

$

(2,028)

$

(5,191)

$

(7,579)

$

(15,685)

Interest expense (income), net

12

(12)

34

(47)

Depreciation and amortization

1,846

2,785

5,806

9,184

Provision (benefit) for income taxes

60

(249)

163

273

EBITDA (1)

(110)

(2,667)

(1,576)

(6,275)

Non-cash foreign exchange losses

15

5,605

156

5,618

Stock-based compensation

270

207

611

575

Cost of lease pool sales

23

265

117

899

Adjusted EBITDA (1)

$

198

$

3,410

$

(692)

$

817

Reconciliation of Net cash provided by operating activities to EBITDA

Net cash used in operating activities

$

(745)

$

(2,161)

$

(4,248)

$

(7,960)

Stock-based compensation

(270)

(207)

(611)

(575)

Provision for doubtful accounts

—

—

—

(200)

Provision for inventory obsolescence

(23)

(25)

(23)

(140)

Changes in accounts receivable (current and long-term)

1,425

5,199

1,322

3,313

Interest paid

13

—

40

2

Taxes paid, net of refunds

143

146

325

414

Gross profit from sale of lease pool equipment

207

602

987

1,848

Loss on sale of subsidiaries

—

(4,905)

—

(4,905)

Changes in inventory

463

(102)

2,835

1,304

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

(1,005)

(511)

(1,587)

98

Changes in prepaid expenses and other current assets

(251)

(277)

(240)

1,158

Foreign exchange losses, net

(93)

(272)

(230)

(336)

Other

26

(154)

(146)

(296)

EBITDA (1)

$

(110)

$

(2,667)

$

(1,576)

$

(6,275)

(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. These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, 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

October 31,

For the Nine Months Ended

October 31,

2019

2018

2019

2018

Revenues:

Marine technology products

$

8,065

$

9,305

$

20,792

$

19,025

Equipment leasing

2,622

5,386

8,732

11,906

Inter-segment sales

(24)

(40)

(106)

(317)

Total revenues

10,663

14,651

29,418

30,614

Cost of sales:

Marine technology products

4,752

4,918

12,176

10,497

Equipment leasing

1,884

4,535

6,674

12,091

Inter-segment costs

(24)

(26)

(106)

(303)

Total cost of sales

6,612

9,427

18,744

22,285

Gross profit

4,051

5,224

10,674

8,329

Operating expenses:

Selling, general and administrative

4,705

4,819

14,732

15,953

Research and development

629

175

1,442

857

Provision for doubtful accounts

—

—

—

200

Depreciation and amortization

646

579

1,947

1,816

Total operating expenses

5,980

5,573

18,121

18,826

Operating loss

$

(1,929)

$

(349)

$

(7,447)

$

(10,497)

Marine Technology Products Segment:

Revenues:

Seamap

$

5,684

$

5,537

$

14,912

$

11,103

Klein

2,381

3,092

5,783

6,195

SAP

—

1,085

101

2,362

Intra-segment sales

—

(409)

(4)

(635)

8,065

9,305

20,792

19,025

Cost of sales:

Seamap

3,177

2,869

7,807

5,498

Klein

1,575

1,553

4,278

3,679

SAP

—

905

95

1,969

Intra-segment sales

—

(409)

(4)

(649)

4,752

4,918

12,176

10,497

Gross profit

$

3,313

$

4,387

$

8,616

$

8,528

Gross profit margin

41

%

47

%

41

%

45

%

Equipment Leasing Segment:

Revenue:

Equipment leasing

$

2,326

$

3,178

$

7,077

$

7,505

Lease pool equipment sales

230

867

1,104

2,748

Other equipment sales

66

1,341

551

1,653

2,622

5,386

8,732

11,906

Cost of sales:

Direct costs-equipment leasing

665

1,132

2,367

2,857

Lease pool depreciation

1,168

2,176

3,757

7,275

Cost of lease pool equipment sales

23

265

117

899

Cost of other equipment sales

28

962

433

1,060

1,884

4,535

6,674

12,091

Gross profit (loss)

$

738

$

851

$

2,058