Adept Technology Inc (ADEP)
F1Q10 (Qtr End 09/26/09) Earnings Call
November 4, 2009 5:00 pm ET
Lisa Cummins - CFO
John Dulchinos - President and CEO
John Nelson - State of Wisconsin Investment
Benjamin Burditt - Special Situations Fund
Gerard Cohen - JM Cohen and Company
Previous Statements by ADEP
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Good afternoon, everyone and thank you for joining us. As we begin today’s call, let me remind you that during the course of this conference call, we may make certain remarks regarding Adept’s expectations as to future events and future financial and operational performance, plans, and prospects of the company, all of which are based on the company’s position as of today, November, 4, 2009. Any such forward-looking statements involve a number of risks and uncertainties, and the company’s actual results could differ materially from those expressed in any of these forward-looking statements for a variety of reasons, including the risks described in our press release and in our Annual Report on 10-K for the fiscal year ended June 30, 2009, as well as the risks described in the company’s other SEC filings. No one should assume that any forward-looking statements made by the company remain consistent with our expectations after the date that the forward-looking statements are made.
Certain financial information that we review on today’s conference call is presented on a non-GAAP basis. The most directly comparable GAAP information and reconciliation between the non-GAAP and GAAP figures is provided in our fiscal first quarter 2010 press release, which has been furnished to the SEC on Form 8-K. The press release and all financial, statistical, or operational information referred to in this conference call, including the GAAP reconciliation and explanations discussed above, is available on the Investor Relations section of our website. Following our introductory comments, we will open the call to take your questions.
I would now like to turn the call over to John Dulchinos for some opening remarks.
Thank you, Lisa and good afternoon, everyone. Before we go through the financial results in detail, I will provide you with a brief update on the business during our first fiscal quarter. Revenues increased 36% on a sequential basis, driven by strength in our packaging and disc Drive businesses which grew substantially during the quarter.
In addition, we are seeing a return to our growth in our services segment, especially in Europe, reflecting increased factory utilization. Despite continued weakness in the global economy, we believe our first quarter results indicate increasing momentum in our business, validating our growth strategy and our ability to execute on that strategy.
The results of the quarter also demonstrate the leverage in our financial model and our ability to deliver improved financials as our revenues rebound. The 36% growth enabled us to improve gross margins from 31.7% to 45.5% reflecting increased absorption of factory expenses to return to adjusted EBITDA positive of $693,000 and excluding the temporary increase in accounts receivable which comes from increasing revenues, run the business to cash flow positive.
Operating expenses were reduced by an additional $0.5 million in the quarter as we realized the full effects of our major cost-cutting efforts put in place in fiscal 2009. While we are in the midst of our seasonally weaker half of the fiscal year, we continue to make strategic investments in order to drive revenue growth in the future. We are confident that we can achieve incremental improvements and leverage in the model throughout 2010.
Now, let me go through our key markets in a little more detail. Our packaging business continues to be our strongest market, growing 41% over last quarter. We continue to see solid demand for automated packaging solutions from the food handling and pharmaceutical industries, particularly in Europe. As the flu season approaches, the severity of which is compounded dramatically by the global pandemic of the H1N1 virus, sanitation has become an issue of critical importance. This is true whether in handling food or in pharmaceutical industry, where companies are moving towards automated packaging solutions as demand for vaccines across the globe is increasing dramatically.
During the quarter, we also announced the launch of our USDA product, the Quattro s650HS, which is a first for the food industry. It is the only parallel robot with USDA acceptance for primary food handling and provides us with exclusive access to the protein segment of the packaging market which includes meat, poultry and fish products. During the quarter, orders for our Quattro robot reached their highest level to-date, reflecting the continued market penetration we’re getting in packaging. The addition of our ACE PackXpert software which enables users to easily coordinate the efforts of an entire line of robots continues to be a key differentiator for Adept.
We are committed to securing a leading position in the packaging market as it represents an enormous opportunity for Adept and as such we continue to make strategic investments. For example, we have been demonstrating our products in multiple global industry conferences including Pack Expo, the largest US packaging event. The Japan International Packaging Machinery Show, Asia’s premier packaging event and FachPack 2009 in Germany.