Planar Systems Inc. (PLNR)
F2Q10 (Qtr End 03/26/10) Earnings Call
April 27, 2010 05:00 am ET
Gerry Perkel - President and CEO
Scott Hildebrandt - VP and CFO
Jim Ricchiuti - Needham & Company
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I would now like to turn the conference over to your host for today Mr. Gerry Perkel, President and Chief Executive Officer, you may proceed.
Good afternoon and thank you for joining us for Planar’s second quarter earnings conference call.
With me this afternoon is Scott Hildebrandt, Planar’s Chief financial officer. Before I begin, I do need to say that the press release we issue today contain forward-looking statements. On this conference, we will comment on our strategic business and financial outlook to make every forward looking statements based on our current expectations estimates assumptions and projections. Words such as expects, anticipates, intends, plans, believes, sees, estimates and variations of such words and similar expressions are intended to identify such forward-looking statements.
All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. I refer you to the press release we issued earlier today and to our periodic filings with the SEC for a description of factors that could cause actual results to differ materially from the results described in the forward-looking statements.
The forward-looking statements, we make today speak only as of today and we do not undertake any obligation to update any such statements to reflect events or circumstances occurring after today.
With that behind us let me start of by saying that while it was good to see year-on-year revenue growth in the second quarter we’d actually expected the growth to be more robust. While we continue to see some signs that market conditions are improving, predicting the pace of that improvement is a challenge. However, we continue to work on developing new initiatives to grow our revenues as market conditions improve.
While, we experienced 9% sales growth in total, the results across our various product lines were somewhat mixed. We continue to see growth from our new matrix LCD video wall systems across a number of applications. This product which began shipping in the first quarter has enabled us to access and expand its set of video wall customers.
We also experienced improved demand for our custom digital signage products as well as touch capable displays. These areas of growth are partially offset by slower demand for projection cube as we believe cube sales are being negatively impacted by product technology transitions and overall market softness in the US and Europe where our operations are focused.
Additionally, while response to our new LED home theater projectors has been good. Overall, demand for high-end home solutions has continued to week and we believe is still being impacted by the macro economic slow down especially as it relates to housing construction.
As a result, we believe sales of high end home products will be slower to recover in some of our other end markets.
With that, I’ll now turn the call over to Scott who will review our financial performance and forward looking estimates in a bit more detail, Scott.
Thanks Gerry, let me start with the income statement. As you are aware, we reported a non-GAAP loss per share of $0.09 earlier today for the second quarter of 2010. Non-GAAP gross margins were 23.7% in the second quarter of 2010, down from the 25.4% in the second quarter of 2009. The decrease in gross margin per sale was primarily due to an unfavorable product mix, resulting from lower sales of higher margin, command and control room rear-projection cubes as well as lower estimates of existing inventory value as these products transition from lamp-based platforms to LED-based platforms.
Non-GAAP operating expenses increased 8% in the second quarter of 2010, compared with the same quarter a year ago. We have been investing in a number of new initiatives and product development as well as sales and marketing in an attempt to drive future revenue growth.
In addition, we expect total operating expenses to increase approximately $500,000 in the third quarter, compared to the second quarter, again to support specific initiatives targeting future revenue growth opportunities.
Our non-GAAP effective tax rate was approximately 37.5% in the second quarter of fiscal 2010. As we have discussed previously for fiscal 2010, we expect to have an effective rate of 10% and quarters where we have non-GAAP profit before tax and 37.5% in quarters where we have reported a loss.
Turning to our balance sheet, cash decreased $1.9 million sequentially to $32.4 million at the end of the second quarter; compared to the cash balance at the end of the first quarter and we continue to have no borrowings outstanding on our existing line of credit. Cash decrease during the quarter due to the operating loss incurred and the timing of working capital items.
Looking forward, as we have mentioned earlier we believe some of our end markets and demand for our product offerings are still being impacted negatively by a variety of factors. In addition to product transition issues associated with our rear projection cubes.