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Smart Technologies (SMT)
Q1 2014 Earnings Call
August 07, 2013 4:30 pm ET
Neil Gaydon - Chief Executive Officer, President and Director
Kelly Lee Schmitt - Chief Financial Officer and Vice President of Finance
Kathryn L. Huberty - Morgan Stanley, Research Division
Paul Treiber - RBC Capital Markets, LLC, Research Division
Kiera Kilkowski - BofA Merrill Lynch, Research Division
Todd Coupland - CIBC World Markets Inc., Research Division
Chris Whitmore - Deutsche Bank AG, Research Division
» Smart Technologies Management Discusses Q3 2013 Results - Earnings Call Transcript
» EZchip Semiconductor's CEO Discusses Q2 2013 Results - Earnings Call Transcript
Thank you, operator. Good afternoon, and thank you for joining us today to review SMART Technologies' first quarter 2014 financial results. With me on the call today are Neil Gaydon, our President and CEO; Kelly Schmitt, our Vice President of Finance and CFO. Neil Gaydon will begin with a high-level review of our first quarter performance, followed by an operational update. Kelly will then discuss our financial results in more detail, and Neil will close the call with some final thoughts regarding our near-term outlook. We will open the call 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 statements concerning our performance outlook; our operating model and cost structure; our expectations regarding future product sales and Enterprise and Education performance; expected shipment dates of, and demand for our new products and their impact on sales; performance of our Components business; our strategy and our estimate for anticipated revenue decline. All such forward-looking statements are subject to known and unknown risks and uncertainties that 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 SEC on EDGAR and SEDAR filings, included in [indiscernible] on Form 20-F 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 any reason.
Additionally, today's presentation contains financial measures that are non-GAAP financial measures. Reconciliation of these non-GAAP measures to the GAAP equivalent is included in the Appendix to our earnings release, which is available on EDGAR, SEDAR and our website. As a reminder, there are supplemental slides for this call, which are available on the webcast and posted on the Investor portion of our website.
With that, I will turn the call over to Neil.
Thank you, Kim. Good afternoon, everyone, and thank you for joining us. We're pleased with the start to our fiscal 2014, where our total company performance exceeded our expectations. For the quarter, we generated revenues of $156 million, which was down 11% year-over-year. From a profitability perspective, we reported adjusted EBITDA of $27 million, which is up by 10%, and adjusted net income of $17 million or $0.13 per share, an increase of 33%. We managed our costs effectively and achieved our target cash operating expense run rate of $42 million, which was a reduction of 30% over the same period last year. Within our core operations, we are getting a grip on our Education business through tight sales discipline and narrower focus on a smaller number of key profitable markets and by working more closely with our channel.
The company's operating model is being rebuilt and recalibrated, which will be expanded and replicated in additional markets over time. Education performed in line with our expectations, with the results primarily driven by the sale of our interactive whiteboard products, as new products were ramping up and were not yet realizing their full effect.
Although revenue growth in Enterprise was moderate over the same quarter last year, it fell short of our expectations. However, pre-orders for our new SMART Room Systems are ahead of budget and growing, with shipments beginning in autumn. We expect to build more Enterprise momentum in the back half of the year as sales of our Room Systems and other new products ramp up.
In late May, Scott Brown joined SMART as President of our Enterprise business unit. Scott comes from Microsoft, where he oversaw the Lync global sales and partner strategy. His leadership and experience will be extremely valuable in driving the success of our Enterprise solutions.
I'd also like to highlight the success of our Components business in this quarter with Microsoft Win 8 certification, NextWindow, our New Zealand-based subsidiary, has signed contracts with some large PC manufacturers to supply optical touch components. For the quarter, NextWindow generated more than $20 million in revenue and contributed about $5 million in adjusted EBITDA. While also pleased with this contribution of this business to our results, this business tends to be lumpy and there is some uncertainty around the success of Microsoft's Win 8 and demand for touch-enabled PCs. Therefore, we don't have enough visibility to determine if this performance will be sustainable.
Turning to some operational highlights. In May, we completed the transaction to sell and lease-back our headquarters. And more recently, in July, we announced the refinancing of our long-term debt and the inception of a new revolving credit facility. We now have the liquidity and capital structure we need to confidently move forward and focus on improving our operational results. Kelly will provide more detail regarding the financing later in the call.