Adept Technology, Inc. (ADEP)
F2Q2011 Earnings Call Transcript
February 2, 2011 5:00 pm ET
Lisa Cummins – CFO
John Dulchinos – President and CEO
Sam Burton – Berry Asset Management
John Nelson – State of Wisconsin Investment Board
Chris Thomson – Mindshare Capital
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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, February 2, 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 second 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. Q2 was a strong quarter for Adept, with annual revenue growth of 45%, while orders grew 23% compared with the same period last year. Sequentially, revenues declined 9%, which is largely in line with normal seasonal trends that we see in the first half of our fiscal year and perhaps exaggerated a bit by the expected decline in revenues from the disk drive space. However, orders increased 8% over last quarter and were the second strongest in two-and-a-half years.
We experienced a larger than expected decline in gross margin during the quarter driven primarily by under-absorption of labor into inventory, among other issues Lisa will discuss in a moment. We can now expect to see the same issue recurring at these levels in Q3 and are currently expecting an increase in gross margin in the current quarter. As a result of our recent acquisitions, we are identifying synergies that can improve and streamline operations, such as consolidation of duplicate functions and facilities. This will enable us to get to critical math in each of our locations, leveraging expertise and resources and moving towards a lower breakeven level. We are committed to maintain the successful cost cutting efforts we undertook over the past couple of years to increase the leverage in our model as revenues grow going forward.
Despite the seasonal softness in Q2, we continue to see a return to increased demand for some of our traditional markets including the industrial and automotive markets in Germany, as well as increasing activity in several markets in Asia, including packaging and solar.
Globally, we continue to build traction in the packaging industry and it’s underscored by our recent acquisition of InMoTx which I’ll discuss in a moment.
We believe packaging is going to be a major growth driver for Adept and further, that we are better positioned than any of peers to penetrate this still emerging market.
Customer (inaudible) Adept MT400 MobileRobot powered by mobile robot motivity continues to be strong, and we are beginning to see evidence of the pending convergence of packaging and logistics. This is validated at the recent (inaudible) packaging fair in Chicago and is a market that Adept is uniquely qualified to address. We received the first orders for Adept PAC USDA packaging cells launched in November. The Adept PAC incorporates our USDA accepted Quattro robot and the quick turn in orders is further a validation of our pending opportunity with InMoTx.
While the packaging industry continues away from manual labor and outdated packaging machinery, Adept is in a very strong position to benefit as the demand for high dexterity, flexible and affordable robotic solutions will continue to increase substantially. Excluding disk drive, activity in Asia continued to increase that we began to penetrate emerging new markets such as packaging and logistics. China is one of the fastest growing robotics markets in Asia and globally.
To address this opportunity and to support our growing customer base in the region, we will be opening a new sales office and service center in China. But in order to describe the declines in Q2 and given the cyclicality of this industry, we expect them to stay down for the next couple of quarters. However, as we did during the last spike-up, we will continue to monitor the market closely and pursue significant design wins for the next uptick in the business driving our return to growth in this space when the cycle turns.