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Smart Technologies (SMT)
Q4 2013 Earnings Call
May 16, 2013 4:30 pm ET
Neil Gaydon - Chief Executive Officer, President and Director
Kelly Lee Schmitt - Chief Financial Officer and Vice President of Finance
Todd Coupland - CIBC World Markets Inc., Research Division
Paul Treiber - RBC Capital Markets, LLC, Research Division
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Thank you, operator. Welcome to SMART's Fourth Quarter and Full Year Fiscal 2013 Earnings Conference Call. With me on the call today are Neil Gaydon, our President and CEO; and Kelly Schmitt, our Vice President of Finance and CFO. Neil will begin with an overview of our fourth quarter and full year performance. Kelly will then discuss our financial results in more detail. Neil will conclude the call by discussing our 3 year strategy, and the call will be open for questions afterward.
Please note that during today's presentation, we may make forward-looking statements within the meaning of U.S. Federal and Canadian securities laws, including, without limitation, statements concerning our performance outlook, including specifically our 3 year revenue growth outlook, our view of industry trends, expected cost savings associated with our restructuring, our ability to leverage our existing market position and effectively introduce and monetize new products, growth expectations for our enterprise and education products, and our ability to effectively execute on our 3 year strategy. All such forward-looking statements are subject to known and unknown risks and uncertainties the could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our securities filings available on EDGAR and SEDAR, including our Management's Discussion and Analysis for the fiscal year ended March 31, 2013. Any forward-looking statements made are based on information currently available to us, and we do not intend and undertake no duty to update these statements for many reason. Additionally, today's presentation contains financial measures that are non-GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP equivalent is included in the appendix to our earnings release, which is available on our EDGAR, SEDAR and our website. As a reminder, there are supplemental slides for this call, which are available on the webcast posted on the investor portion of our webpage. With that, I will turn the call over to Neil.
Thank you, Kim. Thank you all of us for joining us on today's call. I'll begin by reviewing a few of the organization's areas of focus over the past quarter. We continue to implement the final components of the restructuring that was announced in December 2012, and with our business units now established, we continue to work on transforming the culture of the organization. Over the past several months, we put a great deal of time and effort into the development of our 3 year strategy, which I will share our high level view with you later in the call. I'm pleased to say that SMART entered fiscal 2014 in a position to execute its long-term growth strategy, as we continue to focus on driving innovation and building on our leadership position in the global interactive display category. In regard to our results, we continue to face challenges in our core markets, and we are experiencing the effects of macroeconomic conditions across all of our geographic segments. In addition, tablets and other technologies are competing with SMART for budgets in schools, and this is affecting demand for our products. This led to the company generating revenues of $589 million, an adjusted EBITDAR of $49 million in fiscal 2013, down 21% and 62% respectively, year-over-year. Whilst we continue to expect the trends in education to persist in the near-term, I am pleased with the progress we've made in the enterprise market, where we experienced growth during fiscal 2013. With our newly announced products, we believe we are well-positioned to build on the traction we are gaining in the enterprise market.
Now, I'll turn to some fourth quarter highlights. We completed the major components of our restructuring announced in December 2012, which primarily involves some changes to our international infrastructure. We expect to realize a total of approximately $40 million in annual cost savings beginning in fiscal 2014, as a result of the cost-reduction measures implemented over our third and fourth quarter of fiscal 2013. I'd also like to provide you with an update on how we're doing in terms of transforming our internal organization and the way we conduct business as a company. This will hopefully set a backdrop that explains what is changing within the organization, to gear us properly for the execution of our strategy, and ultimately, to drive improvement in our results. Since the last quarter, our executive team has been reshaped and improved to lead the business. As part of these changes, we now have 2 Presidents, who are directly responsible for results in each of our education and enterprise units. This new senior management structure is already improving our ability to sharpen focus on each of our customer groups in education and enterprise, and drive innovation. Through our new customer-centric culture, we are reprogramming the company to think differently, from product design across our channel and through to our customer service, all elements of how we conduct our business must lead to customers and channel partners that are delighted by the experience they have with SMART. Accountability is an essential attribute of successful companies, and we are now placing a much greater emphasis on accountability at all levels in the organization. We have a system of clear and focused initiatives, with concrete deliverables that are now attached to teams and individuals. Compensation will be more appropriately aligned with key metrics and the accomplishment of these strategic objectives. In addition, we are transitioning the company -- the culture of the organization to one of continually driving for greater efficiency, and looking for optimal ways to invest our resources. We have enabled a more efficient and cost-effective product development and launch process that has improved our ability to introduce products on time, at the budgeted margin and meeting our new heightened quality standards. The speed and efficiency of getting products to market has a significant effect on our results, and the changes already made in this area have reflected through the success of our latest products. We recently announced launch of several new and exciting solutions under the new development methodology were delivered according to plan. I'll highlight a few of them. For education customers, we announced our new SMART Table, which is the most advanced education table in the market, with the most comprehensive set of learning resources that are growing in number. We will -- launched our new table in mid-April, and was on time and to schedule. During the fourth quarter, we began shipping our LightRaise 60wi projector, which is the world's first fully integrated touch enabled interactive projector. Order volume to date is already exceeding our expectations, and it, again, was a product delivered to schedule. The last of the education products I will highlight is related to the beginnings of our new software solution for education, that glue the disparate devices together in a classroom. One of the products launched was a beta version of the SMART Notebook Web, which enables teaching and learning with SMART Notebook software anywhere, using any mobile device with an Internet connection. In March, we also announced our SMART Room System for Microsoft Lync, which is already gathering lots of interest from potential enterprise customers. SMART worked with Microsoft to develop a solution that improves the efficiency of meetings by simplifying the process of sharing real-time video, voice and data. The SMART Room System is a complete complement of SMART designed and manufactured products. It includes 1 or more interactive displays, an ultra wide high-definition camera, speakers, microphones and a room control console display that work together seamlessly. The systems are also exceptionally easy and quick to install, which significantly drives down installation cost. The system was unveiled at Enterprise Connect Orlando in March, and since then, they have been appearing on stages around the world either with Microsoft presenting Lync 13, or at other events. SMART has been introducing world-class education and enterprise solutions to market, and the reaction of the channel and our customers has been so far, extremely positive. We are committed to innovation and I'll speak more about the future direction of our products as part of the strategy portion of the call, where we will provide a high-level overview. With that, let me turn the call over to our CFO, Kelly.