Mynd Announces 2024 First Half Results

Published: August 29th, 2024

Gross Margins Increased 100 Basis Points to 27.3%; Adjusted EBITDA loss improved by $0.6 million

Seattle, WA., August 29, 2024 – Mynd.ai, Inc. (the “Company” or “Mynd”) (NYSE American: MYND) today announced financial results for the first half of 2024 (H1 2024).

H1 2024 Key Financial Milestones

  • Revenue of $166.0 million compared to $222.5 million for the same period in the prior year, with the decrease primarily driven by reduced spending by key customers due to uncertainty regarding future budget allocations
  • Gross profit of $45.4 million, a 22.4% decline from $58.5 million in the same period in the prior year, driven by the year-over-year reduction in revenue. Gross margins increased 100 basis points to 27.3% primarily as a result of increased operational efficiencies
  • Cash flow from operations improvement of $5.0 million compared to the same period in the prior year, with cash reserves of $69.4 million
  • Adjusted EBITDA loss of $5.6 million compared to a loss of $6.1 million for the same period in the prior year, primarily driven by lower sales volumes
  • Management continuing to implement cost saving measures to mitigate effects of education technology market headwinds

“We’ve observed a continued industry-wide softening demand trend throughout most of our key geographic markets primarily due to uncertainty around future budget allocations for many of our customers. After several years of unusually high funding as a result of COVID-related government relief programs, local education authorities are reacting to a broad normalization of budgets,” said Vin Riera, Chief Executive Officer. “Nevertheless, we are confident in our business model and are well positioned to prioritize and streamline our operations and navigate the market challenges, as evidenced by our margin improvement. As we continue to drive operational efficiencies and take further actions to reduce overhead costs, we seek to maintain our market leadership in interactive flat panel displays (“IFPDs”) within the global education market. We are dedicated to delivering hardware and software solutions with groundbreaking tools and new technologies for the education, business, and public sectors in line with our long-term strategic vision.”

The Company generated revenue of $166.0 million for H1 2024, a decrease of $56.5 million, from $222.5 million of revenue generated in the same period in the prior year, primarily due to reduced spending by customers due to uncertainty regarding future budget allocations leading to softer industry demand coupled with increased competition.

Gross profit was $45.4 million for H1 2024, a 22.4% decline from $58.5 million in the same period in the prior year driven by the year-over-year reduction in revenue. Gross margins increased 100 basis points to 27.3% resulting primarily from operational improvements and cost savings in a number of areas, including lower component material pricing, freight and duty savings as a result of transitioning the final assembly by our contract manufacturers of our U.S. ActivPanel inventory to Mexico. Warranty costs were reduced due to observed lower failure rates on our ActivPanel 9 and our ActivPanel LX models.

Net loss of $47.8 million for H1 2024 compared to a loss of $15.7 million in the same period in the prior year. The increase in net loss was primarily driven by the recording of a valuation allowance against United States deferred tax assets as a result of cumulative pre-tax losses in the United States in recent years and lower sales volumes across all key markets in the first six months of 2024. Adjusted EBITDA was a loss of $5.6 million for H1 2024 compared to a loss of $6.1 million in the same period in the prior year.

“Like many of  our competitors, we experienced headwinds stemming from the lower demand trends in the education technology sector, but we exited the period with $69.4 million in cash and incremental availability under our existing credit line. As we continue to pursue cost optimization initiatives and evaluate our capital allocation strategy, we believe we are competitively well positioned to continue as the market leader in this space,” commented Arthur Giterman, Chief Financial Officer.

Forward-Looking Statements

This press release contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements reflect Mynd’s current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” “optimistic,” and the negatives of these words and other similar expressions generally identify forward looking statements. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in Mynd’s Annual Report on Form 20-F, filed with the SEC on March 27, 2024, as such factors may be updated from time to time in Mynd’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including, but not limited to, the Company’s brand recognition and market reputation; student enrollment in the Company’s teaching facilities; the Company’s growth strategies and ability to build long-term relationships with schools and other key market participants; the Company’s future business development, results of operations and financial condition; trends and competition in the early childhood education markets in which the Company intends to operate; changes in its revenues and certain cost or expense items; the expected growth of the early childhood education market in the Company’s targeted addressable markets; governmental policies relating to the Company’s industry, including government funding of education opportunities, the Company’s ability to implement cost saving initiatives to mitigate market headwinds and general economic conditions in the markets in which the Company intends to operate. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Mynd’s filings with the SEC. While forward-looking statements reflect Mynd’s good faith beliefs, they are not guarantees of future performance. Mynd disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law.

Discussion of non-GAAP Financial Measures

We believe that providing the non-GAAP (“Generally Accepted Accounting Principles”) information to investors, in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors not only to better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP information included in this press release should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis, in addition to GAAP, and actual results on a non-GAAP basis are assessed against the non-GAAP annual financial plan. In addition, and as a consequence of the importance of these measures in managing the business, we use non-GAAP measures and results in the evaluation process to establish management’s compensation. For example, our annual bonus program payments are based in part upon the achievement of consolidated revenue and Adjusted EBITDA targets.

Reconciliations with respect to the Non-GAAP figures included in this press release to such Non-GAAP figure’s most comparable GAAP figure are included in the financial tables below.

About Mynd.ai, Inc.

Seattle-based Mynd is a global leader in interactive technology offering best-in-class hardware and software solutions that help organizations create and deliver dynamic content; simplify and streamline teaching, learning, and communication; and facilitate real-time collaboration. Our award-winning interactive displays and software can be found in more than 1 million learning and training spaces across 126 countries. Our global distribution network of more than 4,000 reseller partners and our dedicated sales and support teams around the world enable us to deliver the highest level of service to our customers.

For investor and media inquiries, please contact:

Investor Relations – Mynd.ai, Inc.
E-mail: investorrelations@mynd.ai

Arthur Giterman
Chief Financial Officer
officeoftheCFO@mynd.ai
Tel: (206) 393-4493

Financial Tables Follow

Mynd.ai, Inc.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

 

 

June 30, 2024

 

December 31, 2023

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$            69,377

 

$                 91,784

Accounts receivable, net of allowance for credit losses of $1,617 and $2,599, respectively

 

              67,660

 

                   63,865

Inventories

 

              33,662

 

                   53,098

Prepaid expenses and other current assets

 

              12,432

 

                   14,666

Due from related parties

 

               2,319

 

                    2,759

Total current assets

 

            185,450

 

                 226,172

 

 

 

 

 

Non-current assets:

 

 

 

 

Goodwill

 

              45,545

 

                   46,924

Property, plant, and equipment, net

 

              14,896

 

                   11,878

Intangible assets, net

 

              48,647

 

                   51,450

Right-of-use assets

 

               7,882

 

                    7,491

Deferred tax assets, net

 

              16,659

 

                   56,381

Other non-current assets

 

               4,684

 

                    4,094

Total non-current assets

 

            138,313

 

                 178,218

Total assets

 

            323,763

 

                 404,390

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

              52,177

 

                   59,595

Accrued expenses and other current liabilities

 

              37,243

 

                   45,389

Loans payable, current

 

              21,292

 

                   31,942

Contract liabilities

 

              16,107

 

                   14,110

Accrued warranties

 

              15,449

 

                   17,871

Lease liabilities, current

 

               4,011

 

                    4,412

Due to related parties

 

               6,107

 

                    5,080

Current liabilities of discontinued operations

 

                    —

 

                       163

Total current liabilities

 

            152,386

 

                 178,562

 

 

 

 

 

Non-current liabilities:

 

 

 

 

Loans payable, non-current

 

              57,741

 

                   64,859

Loans payable, related parties, non-current

 

               4,715

 

                    4,670

Contract liabilities, non-current

 

              21,054

 

                   21,762

Lease liabilities, non-current

 

               3,986

 

                    3,412

Deferred tax liabilities

 

               1,197

 

                    1,317

Other non-current liabilities

 

               3,814

 

                    4,250

Total non-current liabilities

 

              92,507

 

                 100,270

Total liabilities

 

            244,893

 

                 278,832

Commitments and contingencies

 

 

 

 

Shareholders’ equity:

 

 

 

 

Ordinary shares par value of $0.001; 990,000,000 shares authorized, 456,477,820 shares issued and outstanding as of both June 30, 2024 and December 31, 2023. 10,000,000 shares, $0.001 par value, without designation.

 

                  456

 

                       456

Additional paid-in capital

 

            474,501

 

                 473,590

Accumulated other comprehensive income

 

               3,724

 

                    3,513

Accumulated deficit

 

           (401,630)

 

               (353,890)

Total Mynd.ai, Inc. shareholders’ equity

 

              77,051

 

                 123,669

Non-controlling interest

 

               1,819

 

                    1,889

Total shareholders’ equity

 

              78,870

 

                 125,558

Total liabilities and shareholders’ equity

 

$          323,763

 

$               404,390

Mynd.ai, Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

 

Six months ended June 30

 

 

2024

 

2023

Revenue

 

$            165,983

 

$            222,497

Cost of sales

 

              120,607

 

              164,036

Gross profit

 

               45,376

 

               58,461

Operating expenses:

 

 

 

 

General and administrative

 

               20,217

 

               18,313

Research and development

 

               13,413

 

               18,508

Sales and marketing

 

               22,497

 

               30,315

Transaction related costs

 

                   125

 

                 8,472

Restructuring

 

                 1,218

 

                 2,170

Total operating expenses

 

               57,470

 

               77,778

 

 

 

 

 

Operating loss

 

              (12,094)

 

              (19,317)

Other income (expense):

 

 

 

 

Interest expense

 

               (5,518)

 

               (2,366)

Interest income

 

                 1,314

 

                       6

Gain on embedded derivative

 

                 9,249

 

                     —

Other income (expense), net

 

               (1,066)

 

                 1,294

Total other income (expense)

 

                 3,979

 

               (1,066)

 

 

 

 

 

Net loss from continuing operations, before income taxes

 

                (8,115)

 

              (20,383)

Income tax benefit (expense)

 

              (39,631)

 

                 5,143

Net loss from continuing operations

 

              (47,746)

 

              (15,240)

Loss from discontinued operations, net of tax

 

                    (64)

 

                  (431)

Net loss

 

$            (47,810)

 

$            (15,671)

 

 

 

 

 

Net loss from continuing operations attributable to non-controlling interest

 

$                  (70)

 

$                   — 

Net loss attributable to ordinary shareholders of Mynd.ai, Inc. from continuing operations

 

              (47,676)

 

              (15,240)

Net loss attributable to ordinary shareholders of Mynd.ai, Inc.

 

              (47,740)

 

              (15,671)

 

 

 

 

 

Basic and Diluted

 

 

 

 

Net loss per share attributable to ordinary shareholders of Mynd.ai, Inc. from continuing operations

 

$               (0.10)

 

$               (0.04)

Net loss per share attributable to ordinary shareholders of Mynd.ai, Inc. from discontinued operations

 

                     — 

 

                     — 

Net loss per share attributable to ordinary shareholders of Mynd.ai, Inc.

 

                 (0.10)

 

                 (0.04)

Weighted average shares outstanding used in calculating net loss per share

 

        456,477,820

 

        426,422,220

 

 

Mynd.ai. Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

 

 

Six months ended June 30

 

 

June 30, 2024

 

June 30, 2023

Net loss

 

$            (47,810)

 

$            (15,671)

Change in foreign currency translation adjustments

 

                   211

 

               (1,920)

Total comprehensive loss

 

              (47,599)

 

              (17,591)

Less: comprehensive loss attributable to non-controlling interest

 

                    (70)

 

                     —

Comprehensive loss attributable to Mynd.ai Inc.

 

$            (47,529)

 

$            (17,591)

Mynd.ai, Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Six months ended June 30

 

 

2024

 

2023

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$            (47,810)

 

$            (15,671)

Loss from discontinued operations, net of tax

 

                     64

 

                   431

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

 

 

 

 

Depreciation and amortization

 

                 4,044

 

                 2,526

Deferred taxes

 

               39,480

 

               (5,143)

Non-cash lease expense

 

                 2,894

 

                   960

Non-cash interest expenses

 

                 2,290

 

                     —

Amortization of RDEC credit

 

                  (588)

 

                  (372)

Gain on embedded derivative

 

               (9,249)

 

                     —

Share-based compensation

 

                 1,131

 

                     —

Change in fair value of earn out liabilities

 

                     36

 

                     79

Loss on disposal of property, plant and equipment

 

                     44

 

                     —

Change in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

                (4,411)

 

              (23,078)

Inventories

 

               19,531

 

               36,578

Prepaid expenses and other assets

 

                 2,558

 

                  (300)

Prepaid subscriptions

 

                     —

 

                 1,424

Due from related parties

 

                   409

 

                 1,345

Accounts payable

 

               (6,221)

 

               (8,367)

Accrued expenses and other liabilities

 

               (8,495)

 

               (8,408)

Accrued warranties

 

               (2,378)

 

                 3,148

Due to related parties

 

                 1,028

 

               (1,409)

Contract liabilities

 

                 1,397

 

                 5,484

Lease obligations – operating leases

 

               (3,042)

 

               (1,148)

Net cash used in operating activities – continuing operations

 

               (7,288)

 

              (11,921)

Net cash used in operating activities – discontinued operations

 

                    (64)

 

                  (429)

Net cash used in operating activities

 

               (7,352)

 

              (12,350)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Acquisition of property, plant and equipment

 

               (1,084)

 

                  (236)

Internal-use software development costs

 

               (3,499)

 

               (1,556)

 Repayment of loan receivable, related party

 

                     —

 

                 8,019

Net cash (used in) provided by investing activities

 

               (4,583)

 

                 6,227

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Repayment of Revolver

 

              (16,770)

 

              (29,000)

Proceeds from Revolver

 

                 6,000

 

               28,000

Contingent consideration payments

 

                     —

 

                  (716)

Repayment of Paycheck Protection Program Loan

 

                    (96)

 

                   (96)

Proceeds from NetDragon group loans

 

                     —

 

                   119

Net cash used in financing activities

 

              (10,866)

 

               (1,693)

 

 

 

 

 

Net change in cash and cash equivalents

 

              (22,801)

 

               (7,816)

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

               91,784

 

               29,312

Exchange rate effects

 

                   394

 

                  (268)

Cash and cash equivalents, end of period

 

$              69,377

 

$             21,228

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities transactions:

 

 

 

 

Convertible notes issued in exchange for accrued PIK interest

 

$                  1,643

 

$                  —

Decrease in goodwill due to measurement period adjustments relating to
business acquisition, net

 

$                  1,228

 

$                  —

Lease assets acquired in exchange for lease liabilities

 

$                  3,555

 

$                  550

 

 

 

 

 

Supplemental disclosure of cash transactions:

 

 

 

 

Cash paid for interest

 

$                  2,730

 

$                  —

Cash refund, net of cash paid for taxes

 

$                  967

 

$                  678

 

Mynd.ai. Inc.

SUPPLEMENTAL FINANCIAL INFORMATION

Reconciliation of Net Income to Adjusted EBITDA

(in thousands)

 

Six months ended June 30,

 

2024

 

2023

Net loss

$               (47,810)

 

$               (15,671)

Loss from discontinued operations

                        64

 

                       431

Interest expense

                    5,518

 

                    2,366

Interest income

                   (1,314)

 

                         (6)

Income tax expense (benefit)

                   39,631

 

                   (5,143)

Depreciation and amortization

                    4,044

 

                    2,526

Share-based compensation

                    1,131

 

                        —

Other income (expense), net

                    1,066

 

                   (1,294)

Gain on embedded derivative

                   (9,249)

 

                        —

Transaction related costs1

                       125

 

                    8,472

Restructuring costs2

                    1,218

 

                    2,170

Adjusted EBITDA

$                 (5,576)

 

$                 (6,149)

(1) Transaction related costs are one-time non-recurring costs related to acquisition and disposal of businesses.

(2) Restructuring costs relate to employee severance costs, contract termination costs, facility restructuring, and business restructuring efforts undertaken by management.