Adept Technology, Inc. (ADEP)
F1Q2011 (Qtr End 09/25/10) Earnings Conference Call
November 4, 2010 5:00 PM ET
Lisa Cummins – VP, Finance & CFO
John Dulchinos – President & CEO
Chris Thomson – MindShare Capital
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Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded Thursday, November 4, 2010.
At this time I would like to turn the conference over to Lisa Cummins, Chief Financial Officer. Please go ahead.
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, 2010.
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, 2010, 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 2011 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. Q1 was a strong operational quarter for Adept, as we executed on a number of initiatives. Revenue for Q1 grew 25% annually, while orders grew 37% compared with the same period last year. Sequentially, revenues declined 12%, while orders remained flat compared with last quarter. This is in line with normal seasonal trends. Despite the seasonal softness in Q1 (packing) revenues were down only modestly from the previous quarter, and we saw an increase in bookings from the German industrial market, which indicates that the traditional market for Adept may be beginning to recover. A major highlight for the quarter was the integration of the Mobile Robots business, which we acquired at the end of June. We have quickly validated that there is very exciting synergy within market and among customers and have already identified several new opportunities in the logistics, medical, and consumer electronics industries, among many others. We believe there are multiple opportunities to deploy applications incorporating Mobile Robots technology with Adept’s (inaudible) into a variety of industries even beyond our traditional target market.
As a result of its size, Mobile Robots was at a disadvantage in gaining sales momentum with large commercial customers. We have begun to leverage our established national sales infrastructure and global customer base. We are confident we can accelerate adoption, acceptance by new and existing customers, and in particular OEMs demanding more comprehensive and flexible solutions in complex peopled environments.
OEM tends to be long term customers with larger and more stable order patterns. Over the long term, winning this type of business can ultimately reduce the seasonality of our typical lumpy revenue stream. Margins from this business are also higher than the corporate average, and with improved efficiency and increased sales in the coming years, will have a positive effect on our overall margins.
As expected, revenues from disk drive market declined somewhat, as this is a notoriously cyclical industry. The disk drive market is characterized by peaks and troughs. During the economic downturn, we monitored the market closely and subsequently locked up important design wins. As a result, we reaped the benefits by winning significant orders by some of the industry’s top manufacturers when the market turned. We will employ the same strategy during what we believe will be a two to three quarter slowdown, expecting the disk drive sales to return to growth at that time.
Gross margin improved during the quarter, given the change in product mix. Including the relative strength in our other verticals beyond disk drive, increased service revenues drove part of increase in margin, an indication that more of our equipment is being utilized out in the field. We believe margins will remain stable in Q2. In packaging, we experienced a typical summer slowdown, as much of our sales are in Europe. Quarter shorts were in line with expectations; we expect to see multiple opportunities for growth later this year.
We have built significant traction in the packaging industry over the past several quarters, and we’re supporting it with intensified marketing of our packaging solutions this year, which we expect to be a major growth driver going forward. In the last few days, we were at Pack Expo in Chicago, the industry’s largest packaging event of the year. We showcased our most advanced mobile platforms for the industry. Adept’s MT400 robot powered by both mobile robot motivity core controls and software and our newest automation cell dedicated to the packaging industry, the Adept Packaging Automation Cell, or Adept PAC. Response from customers was tremendous and provides strong validation of the pending convergence of packaging and logistics, a market that Adept is uniquely qualified to address.