Adept Technology, Inc. (ADEP)
FQ3 2011 Earnings Call
April 27, 2011 5:00 p.m. ET
Lisa Cummins – CFO
John Dulchinos – President and CEO
Frank Verasi [ph] – Stifel Nicolaus
Sam Bergman – Bayberry Asset Management
John Nelson – State of Wisconsin Investment Board
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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, April 27, 2011.
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 third 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. Before Lisa reviews our financial performance, let me take a moment to review our progress and our strategic road map. As you read from our earnings release earlier today, Q3 is a mixed quarter and our financial results don’t accurately represent the progress the company has made during the period.
Revenues were down both sequentially and annually though gross margin returned to normal levels. The revenue decline is results of the growth and market share increases we were able to achieve during the last upturn of the disk drive market, which is now hitting its bottom resulting in very modest revenue from this segment during the quarter. More on this in a moment.
However, this did not accurately reflect and characterize the progress we are making in our businesses and on our core initiatives. Excluding disk drive and a recent acquisition, revenues are up 17% year over year as our traditional European business continues to gain traction and build momentum, and 28% when we include revenue from MobileRobot.
Solar revenues is also gaining strength and is approaching pre-recession highs as it continues to make progress in developing and OEM supplier base to deliver our robots into the rapidly growing China solar-cell market. Whereas we’re also positive for the second quarter in a row, all this points to a stronger and more stable business as the year progresses.
Operationally, much of our focus during the third quarter with integrating and combining the technologies, customer bases, and organizations as a result of our acquisition into InMoTx and MobileRobots.
InMoTx combined with our USDA approved Quattro Robot as well as our Adept PAC packaging sales provides us with a distinct advantage over the competition. Our combined offering will accelerate our ability to penetrate the packaging market for meat, poultry, seafood, dairy, fruits, and vegetables which in the industry is referred to as natural or organic products, and represents about 75,000 or 1/3 of all packaging lines.
In addition, because in InMoTx has such a broad portfolio of intellectual property, dedicated to inspecting, sorting, grading, and hygienically packaging unwrapped natural foods safely, while eliminating the risk and contaminations produced by manual handling the barrier to entering into this niche is vertically untapped, yet high-volume market are very high.
Customers are very receptive and excited about new offering since no other solution currently exist to solve this problem.
As a refresher, natural products are primarily packaged by manual labor because of the variability of the product, and the flexibility required in the package configuration. The challenge with this approach is cost, 40% of the cost of the product in a supermarket shelf is labor. Contamination, cleaning and hygiene in the primarily cause of spread of bacteria within the food production facility, and turnover, it’s common for food packaging line to have over 40% annual turnover of labor.
To date, the only alternative to manual labor is inflexible, slow, and complex solutions offer by standard machinery builders, which aren’t even as competitive as the existing manual labor. Our solution combines the flexibility of manual labor and the efficiency and cleanliness of machinery at a lower cost.