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Accelrys, Inc. (ACCL)

F1Q09 Earnings Call

August 5, 2008 5:00 pm ET

Executives

Mark J. Emkjer - President, Chief Executive Officer and Director

Rick E. Russo - Chief Financial Officer and Senior Vice President

Analysts

Steven C. DeLuca - Spinner Asset Management

Sean Boyd - Westcliff Capital Management

Chad Bennett - Northland Securities

Krishna Kangella - Private Investor

James F. McAree - David J. Greene & Company, LLC

Presentation

Operator

Welcome to the Accelrys first quarter fiscal 2009 conference call. (Operator Instructions) Speaking today will be Mark Emkjer, Accelrys’ President and Chief Executive Officer, and Rick Russo, Accelrys’ Chief Financial Officer.

Before they begin, I’d like to remind you that the following discussion, including the company’s responses to questions at the end of the formal remarks, contains forward-looking statements relate to the company's or management's intentions, hopes, beliefs, expectations or predictions of the future. Such statements include statements relating to the company’s future financial results and strategic plans and opportunities, including future orders, revenues, profits and expense, growth initiatives, new products, product capabilities, future markets and customers, and need and demand of existing and future customers.

These forward-looking statements are subject to a number of risks and uncertainties. Such risks and uncertainties include, without limitation, risks relating to the timely successful release and customer acceptance of new products, demand for the company’s new and existing products, successful execution of the company’s strategic plans and growth initiatives, and the impact of macroeconomic conditions. As a result of these risks and uncertainties, the company’s actual results could differ materially from those projected in these forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially from these forward-looking statements is contained in the company’s SEC filings, including the company’s annual report on Form 10-K for the fiscal year ended March 31, 2008, quarterly report on Form 10-Q and current report on Form 8-K. The company disclaims any intention or obligation to revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Now, I hand the call to Mark.

Mark J. Emkjer

Thank you for joining Rick and me as we reflect on our first quarter of fiscal year. And Q1 was a very good quarter for Accelrys, from my perspective.

Compared to last year’s fiscal first quarter, we grew our order intake, our revenue, our operating income and cash. I will return later to give you more insight into the quarter and comment on the year ahead. At this time, Rick Russo, our Chief Financial Officer, will review the financial results.

Rick E. Russo

I would like to thank all of you for spending a few minutes with us today and allowing me to tell you about the financial performance of Accelrys in our first quarter of fiscal year 2009. At the conclusion of our prepared remarks, both Mark and I will be available to address any questions you may have.

First, I’d like to point out that in the press release issued earlier today, references were made to both GAAP and non-GAAP financial measures relating to operating income, net income, and earnings per share.

The GAAP income statement includes in the listed expenses cost related to restructuring amortization of purchase intangibles and stock compensation expense, which are excluded from the non-GAAP financial measures. As a result, we have provided in the press release and in the Investor section of our website complete reconciliation of these non-GAAP financial measures to the applicable GAAP measures.

Although not a substitute for GAAP presentation, we feel that the non-GAAP information allows for meaningful year over year comparisons and fairly identifies the actual operating results of the company. It is this non-GAAP information that we use internally to monitor our financial performance. As a result, I’ll be referring to the non-GAAP financial measures for the rest of this call but will be happy to answer any questions you may have relating to our GAAP numbers during the Question and Answer portion that will follow.

Q1 was a good quarter for Accelrys. We met our internal financial goals and for the third consecutive quarter, we had higher orders in the quarter than we recorded a year ago, which includes a significant growth in our platform and materials science products. For those of you who are new to Accelrys, the majority of our orders once our obligations are fulfilled, are generally recognized as revenue on a ratable basis usually over 12 months. As a result, the impact from fluctuations in order age generally do not have an impact on that quarter’s revenues but rather are recognized over the following quarters. As a result of this ratable recognition, year over year revenue comparison will take into account the net change in order intake over the prior four quarters.

So typically, revenues in the first quarter were $20.3 million, which was $200,000 above prior year revenues. Consistent with prior quarters, we have continued to experience growth in our scientific operating platform. In addition, we had a strong growth quarter in our materials science product line. This growth was partially offset by expected reductions from the products that have been stunt over the past two years. As a portion of our overall revenue, these stunts of products declined from $11 million in fiscal year 2006 to $8 million in fiscal 2007. They represented about $5 million of our revenue in 2008. We estimate a similar $3 million decrease in our fiscal year 2009 as the phase out of these products continue.

Read the rest of this transcript for free on seekingalpha.com