AstroNova Inc (ALOT) 2015 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Astro-Med first-quarter fiscal year 2015 financial results conference call.

(Operator Instructions).

I would like to remind everyone that this conference is being recorded today and I will now turn the call over to David Calusdian of Sharon Merrill.

Please go ahead.

Thank you, Calvin, and good afternoon, everyone.

Hosting today's call are Astro-Med Chief Executive Officer, Greg Woods, and Chief Financial Officer, Joe O'Connell.

Greg will begin today's call by reviewing the Company's operating highlights and business outlook.

Joe will then take you through the financials, Greg will make some closing comments and then management will be happy to take your questions.

By now you should have received a copy of the news release which was issued earlier today.

If you have not received a copy please go to the investor section of the Company's website, www.Astro-medinc.com.

Before we begin please note that any statements during this call that are not statements of historical fact are forward-looking statements within the meaning of the Securities and Exchange Act of 1934.

These forward-looking statements are based on a number of assumptions that could involve risk and uncertainty.

Accordingly, actual results could differ materially.

Such forward-looking statements speak only as of the date made.

Except as required by law, the Company undertakes no obligation to update these forward-looking statements.

For further information regarding the forward-looking statements and the factors that may cause differences please see the Company's risk factors and the Company's annual report on Form 10-K and other filings Astro-Med makes with the Securities and Exchange Commission.

With that I will turn the call over to Greg Woods.

Thank you, David, and welcome to our first-quarter fiscal 2015 conference call.

Even though we are only one-third of the way through our three-year strategic plan results we obtained in the first quarter demonstrate the excellent progress we have already achieved in growing the topline and strengthening the day-to-day operations of the Company.

Orders received in the first quarter came in at a record $23.5 million, more than 42% higher than last year's first quarter with both the QuickLabel Systems and Test & Measurement segments reporting strong double-digit increases.

I'm also pleased to report that we exited the quarter with a backlog of $16.2 million.

This is more than $2 million higher than our backlog at the end of the fourth quarter which is also a record.

Astro-Med posted double-digit organic growth for the quarter and net sales increased to 34% on robust demand in both segments of our business.

QuickLabel Systems segment grew 26.6%.

Our QLS printers, particularly the Kiaro!

Series color label printers are benefiting from a targeted marketing program that is continuing to attract new customers across a broad array of end markets and geographies.

In recent weeks we have attended a number of industry tradeshows including Interpack 2014 in Dusseldorf, Germany.

Interpack is always one of the packaging technology industry's premier event and this year was no different.

The show drew an estimated 175,000 visitors representing 120 nations.

Interestingly a record 66% of the attendees were from outside Germany underscoring the global interest in this market.

With our complete lineup of Kiaro!

Printers on hand including our new wide format Kiaro!

200, we had a terrific presence at the Interpack and a high volume of traffic at our booth throughout the event.

It was exciting to hear so many current and prospective Kiaro!

customers talk about how impressed they are with the speed of the printer and the color fidelity of the labels.

In my conversations with customers one of the consistent themes is the degree to which our products add value.

Whether the labels are for food and beverage, chemicals, plumbing products, pharmaceuticals or scores of other applications, the Kiaro!

inkjet family is an ideal solution for businesses that are seeking an in-house on-demand solution that enables an extraordinary high level of product customization.

We are also experiencing excellent growth in our Test & Measurement segment which posted sales increase of more than 55% in the quarter.

A portion of that growth can be attributed to our acquisition of the Miltope ruggedized aerospace printer business this January.

But we also saw solid demand for our ToughWriter aerospace printers and our high-speed data acquisition systems, our TMX and TMX 18 products in particular.

Test & Measurement represented about 31% of net sales for the quarter compared with 26% for the first quarter of 2014 fiscal year.

Our integration of the Miltope product line remains on plan.

Production is still on schedule to fully transition from Alabama to our manufacturing line here in West Warwick in the third quarter of fiscal 2015.

Consolidating the manufacturing here will create synergies that we believe will enable us to grow the business efficiently and profitably particularly in light of our lean transformation program.

We continue to advance our operational excellence initiatives.

In recent weeks we conducted additional kaizen events focusing primarily on improving processes associated with the production of labels and other consumables used in our printers.

On the distribution front, we continue to focus on expanding our global sales channel to complement our direct sales in the United States, Canada and Western Europe.

In the first quarter, we added salespeople in both North America and Europe.

We kicked off our direct foreign office expansion initiative last year with the opening of our office in Monterrey, Mexico which will concentrate primarily on sales to Mexico and Latin America.

This year our plan calls for us to establish a direct presence in Asia where we will significantly improve our opportunities for growth in that region.

A few weeks ago I visited China to meet with a number of new customers especially those that we gained through the Miltope acquisition and to explore expansion opportunities.

We expect to have an office up and running by the end of the fiscal year to serve customers in China and Southeast Asia.

Finally, before I turn it over to Joe for the financial details, I wanted to let you know that this morning our Board of Directors declared a regular quarterly cash dividend of $0.07 per common share or $0.28 per share on an annualized basis.

The dividend which is payable July 1, 2014 to shareholders of record as of June 13 is the Company's 91st consecutive dividend dating back to 1992.

Now let me turn the call over to Joe for the financial review.

Thank you, Greg.

Good afternoon, everyone.

I am delighted to share with you Astro-Med's first-quarter fiscal 2015 financial results.

Net sales in the quarter as you heard reached $20.8 million.

That is an increase of 34.2% from the first quarter of a year ago.

Sales to our domestic customers increased 36.7% from the prior year to $14.6 million while sales in our international customers grew 28.4% year-over-year to $6.2 million.

Turning to the business segments, the Company's QuickLabel Systems product group with monochrome and color printer systems reported sales of $14.4 million, marking a new record in quarterly revenue and exceeding the prior year's first quarter by 26.6%.

Our Test & Measurement product group of ruggedized products and data acquisition systems posted sales of $6.4 million in the quarter representing a 55.3% increase from a year earlier.

Profiling the first quarter by product, consumables were at $10.8 million, that is up 21.7% from the first quarter of fiscal 2014 while hardware sales increased 51.8% from a year ago to $8.6 million while our service parts repairs contributed another $1.4 million in quarterly sales, that being up 45.3% from the prior year first quarter.

First-quarter sales generated $8.6 million in gross profit dollars.

That is up some 69.1% from the prior year's first quarter.

Our gross profit margins of 41.6% compare favorably with 33.0% in the first quarter of fiscal 2014.

The increase in gross margin from a year ago was primarily attributable to the higher revenue, the improved product mix and the ongoing success of Astro-Med's lean manufacturing initiatives.

However if we exclude the reserve established in the prior year to address the noncompliant component and the limited population of ruggedized printers, the prior year's non-GAAP gross profit margin was 37.3%.

Our operating expenses totaled $6.9 million in the quarter or 33.4% of net sales.

That is down as a percentage of sales from last year's first quarter but up about $1 million from the prior year actual dollars.

The increase is primarily related or traceable to targeted marketing programs and additional research and development investments aimed at continuing to grow the business.

Operating income in the quarter was $1.7 million or an operating margin of 8.2% compared with an operating loss in the prior year's first quarter of $722,000.

Regarding the segment operating profit during the quarter, QuickLabel Systems earned $2.2 million in segment operating profit with a margin of 15.2% while our T&M segment had operating income of $700,000 with a corresponding margin of 10.9%.

Our federal, state foreign tax provision in the quarter was $449,000 representing an effective tax rate of 28.5%.

First-quarter net income was $1.1 million representing some $0.14 per diluted share.

That compares with a net loss of $449,000 or $0.06 per diluted share in the year ago quarter.

Turning to the balance sheet, our total assets at the end of May 1 -- May 3, rather 2014, were $78.3 million.

Our equity balance was $68.1 million representing a book value of $8.87 per share.

Our cash and marketable security position was $28.6 million compared to $27.1 million at the end of fiscal 2014.

Our accounts receivable from continuing operations was $13.9 million.

That represents some 51 days sales outstanding, a slight decline from the year in days sales outstanding of 54 days.

Inventory levels at the end of the year were $17.5 million representing 120 days.

That compares nicely with the slight increase in the number of days from the year-end number of days on hand of 113 days.

Our capital expenditures for the quarter were $292,000; spending was primarily related to investment technology, machinery and equipment, building and improvement.

Our dividends in the first quarter of fiscal 2015 were 533,000 representing $0.07 per share.

Our employee population at the end of the quarter was 316 folks.

That represents an increase of approximately 12 folks from the year-end fiscal 2014.

We made improvements in our sales per employee, an increase of $232,000 from $219,000 on a year-over-year basis.

With strong customer demand and a healthy $16.2 million backlog to start the second quarter, Astro-Med remains extremely well positioned for continued growth in fiscal 2015.

Now let me turn it back to Greg for closing comments.

Thank you, Joe.

In the year ahead, Astro-Med will focus on continuing to gain market share in each of its three product growth engines, color label printers and supplies, ruggedized printers for the aviation market, and data acquisition systems.

We expect to accomplish this growth both organically and through strategic add-on acquisitions.

The M&A market remains very active and we continue to evaluate several opportunities.

While investing in R&D and new product development play a key role in our strategy, our focus is on continuing to generate strong cash flow to support our growth objectives.

With a strong balance sheet and a healthy backlog we believe that we are well positioned for the future.

We will continue to execute on our growth strategy and focus on growing shareholder value.

Finally, turning to guidance for fiscal year 2015, we expect net sales in a range of $80 million to $85 million which at the midpoint of our forecast represents a year-over-year growth of 20% and on the bottom line we expect full-year EPS of $0.55 to $0.60 per share.

With that, Joe and I will be happy to take your questions.

Operator?

(Operator Instructions).

Anya Shelekhin, Sidoti.

Thanks for taking the questions.

So first of all could you talk a little bit more about your international growth and where are you seeing the best opportunities right now?

Sure.

So it is really coming from a wide variety of areas, international for us versus outside the US.

So our traditional areas where we have been for many years, Canada and Western Europe continue to be strong and we expanded that by adding sales people actually in both of those regions.

And then beyond that, we opened up the office really only a few months ago in Mexico and even in those few months we have started to see some nice breakthroughs really from having -- it is from the distributors that are already in those areas.

They are kind of reinvigorated because you've got a direct native speaker in the area so showing more focus and so even the distributors that we have had there, we are seeing a nice upturn in business from them.

And of course we will continue with our direct results as well there.

And then beyond that, we are expanding that dealer channel in the other countries of the world.

Interesting thing, Anya, we are seeing the double-digit growth both from our branch operations [from our employee's] estimates as well as from our dealer population.

The receipt or the reception of the products has been very positive.

Okay.

What percent of total sales did international sales make up this quarter?

Of the total, they are basically about

Close to 30.

(multiple speakers) It is a little less than that -- I think we are closer to (inaudible)

It was what?

Sorry.

It's about 29.6.

I said 30.

Sorry.

Okay.

And where are you at this point in your talks with Miltope's airline customers to sell directly to them?

How are those going?

It is going well so I have been out to visit most of the major customers and [Tom Karl], who is the general manager of that business unit, has seen many of the others.

So we haven't got a chance to see all of them yet but we have seen the lion's share of them at this point.

They are all happy with the progress we are making.

We are obviously in communications with them as well as the FAA and other regulatory bodies that might be involved in the transition and that all is going fairly smoothly.

So we still expect as I said to have that acquisition fully integrated on schedule.

Okay.

Are you seeing those -- the talks with the airline customers -- are using those concentrated in any specific region or is it across?

You mentioned China if I recall.

That is unique in the sense that we didn't have direct airline customers with our own estimate business so the acquisition gave us that channel.

So we acquired customers in China as part of that acquisition.

So that is really kind of the new piece for us is to have those direct customers there.

And then as I mentioned, we will be opening up an office there as soon as we can find the right people.

We have the location, now it is a matter of making the right hires there to have the direct presence.

Okay.

Why did the tax rate improve this quarter and could you provide any guidance for a tax rate going forward?

Sure.

We had an opportunity for some what they call FIN 42 and it is a result of certain provisions we had put away a couple of years ago.

The statute of limitation expired on those so we were able to bring those back into the first quarter.

For purposes of going forward, I think we are probably looking at 36% as an effective tax rate for fiscal 2015.

Okay, sounds good.

Thanks.

That is all for me.

(Operator Instructions).

Steve Busch, Southpaw Investments.

Good afternoon, Greg and Joe.

Great quarter.

So a few questions for you.

In the past we have talked about this bookings number or I'm not sure how you guys want to call that -- the rather large number over several years -- (multiple speakers) contract numbers, yes.

What is that number now?

I would say it is still in the same range.

We have said before it is close to $200 million and again we don't take that as actual backlog until the orders are actually released but if you add up the contract values that we have and the projected number of aircraft over that time period, that is how we come up with that number.

And is that all just airline?

I would say it is mostly not airline.

The airline business tends to be short-term orders.

We do get some long-term orders from the airlines but the long-term orders tend to come from the Tier 1 suppliers, for example the Honeywells of the world and then you also have the OEM manufacturers following Airbus for example.

Right.

But I guess what I am saying is it all cockpit printers or is it also test and measurement?

Those contracts are aviation printers so whether it is in the cockpit or somewhere else in the aircraft, that's (inaudible).

Right.

Okay.

So what percentage of our Test & Measurement sales this quarter came out of those contracts that maybe had been existing for the last couple of years?

We really don't divulge that.

We don't break it down to that level of detail.

Right -- I mean is it -- (multiple speakers)?

It is for competitive reasons that we don't do that.

So we don't want to alert others.

So yes, we don't give more detail on that.

Okay, okay.

Are you guys involved with the -- I don't if you can even answer this, the new Comac regional jets from (inaudible)?

Can't answer that.

Okay.

Do you think going forward by the end of this fiscal year or next fiscal year we will be at the same kind of percentage split between Test & Measurement and QuickLabel or we will be trending since the growth is growing a little bit faster on the Test & Measurement side now, will be trending more toward a 50-50 mix in business or is it you think QuickLabel will still be pretty much the tipping point?

QuickLabel will be bigger.

As you saw, the gap closed a little bit this quarter so it is a little bit hard to call there.

Either one of them could surge ahead but Test & Measurement is definitely catching up.

I think it is 70/30 this quarter here.

I think you will see that perhaps move as Greg said probably closer to maybe 65 but I don't think you will see it at least in the foreseeable future at a 50-50 profile.

Okay.

Perfect.

Great job, guys.

Joe Furst, Furst Associates.

Congratulations, gentlemen.

You are finally getting a reasonable degree of profitability which I am very pleased to see.

And the previous caller answered my question which was again talking about the backlog and the aviation area, the $200 million contract that is what I wanted to find out also.

So keep up the good work.

We appreciate it.

Thank you.

Thank you.

Dennis Scannell, Rutabaga Capital.

(Operator Instructions).

Yes, good afternoon.

I will just echo the kudos.

Wonderful quarter.

Really, really nice to see the sales come through and the incremental margins come through.

Just a couple of quick things for me.

So Miltope added how much to sales in dollar amounts or percentage terms?

Pretty much what we disclosed, it is an $8 million run rate on an annual basis.

So $2 million in the quarter?

That is right, Dennis.

About $2.2 million to be precise.

Okay, okay.

So we didn't see as much organic growth on the T&M side but did we see growth in both the data acquisition as well as the ruggedized printers?

We don't tend to break those out as you say.

It has always been a challenge for us.

We are trying to protect a certain amount of proprietary information.

But I think that we did see -- certainly saw some growth in ruggedized and certainly T&M with -- I think we mentioned this before -- the TMX product continues to have strong demand so we are kind of pleased I guess, Dennis, the best way to characterize the performance from the components of the Test & Measurement group.

Okay, great.

And then in terms of the sales offices, so in fiscal 2014 we opened the office in Monterrey, and Greg, I'm not sure I got -- for fiscal 2015, we are looking to establish a presence in Asia.

Is that opening an office in China or are there other locations that you are looking at?

We are looking at both in China and out of China so for the customer set that we have, we really need a dedicated group that services just China and then another group that will focus on the rest of Asia primarily.

That may be in Singapore or some other place in the region that makes sense that can geographically cover that wide area.

And we would expect both offices to be opened in fiscal 2015?

That is what we are hoping to do.

It is really more a function of the people.

So if we can find the right people in the right time that is what we will do.

Okay, okay.

And then when we actually bring the production of the Miltope printers into our Rhode Island plant, so we will be capturing then a manufacturing margin so we should see a better margin on the $2 million plus of Miltope sales that we are now consolidating?

Is that the way to think of that?

It is going to be a little tough, Dennis, because it will be integrated with the business as you say.

It will be just a different line.

Obviously we've got to honor the contracts that they already have but the nice part about is, we have talked about this before, is the fact that we will pick up some nice absorption on the products moving through the factories.

So the expectation is the Company will start to see some improved profitability in terms of gross margins as a result of the additional throughput.

Okay.

Okay.

Maybe I've got the numbers wrong but I am looking at the EBIT margin of Test & Measurement that shook out just under 11%.

Definitely up versus what we saw in the first quarter of fiscal 2014 but a little bit lower than what we saw in the rest of the fiscal year.

I'm wondering can they get back to the midteens margins that we have seen in the past or is there something kind of structural that might keep that -- make that more challenging?

No.

I think, Dennis, your point is a valid one.

I think the expectation is that we would return -- eventually that is the goal is to get back up to the double-digit percentage -- segment operating profit that you see for Test & Measurement.

We think that certainly is going to happen with that particular segment.

But being able to manufacture the Miltope printers, wouldn't that help though?

Yes, it will help sure.

Absolutely right.

(multiple speakers) Bu you have the data acquisition products also in there as well so that is -- you will also see a benefit as a result of the additional production.

Got it.

Got it.

Okay, great.

Again excellent job and look forward to seeing solid execution for the rest of the fiscal year.

Nice job.

Thanks, Dennis.

Thanks, Dennis.

There are no more questions at this time.

I would like to turn the call back over to management for any closing remarks.

Thank you, everyone, for joining us on today's call.

Joe and I look forward to keeping you updated on Astro-Med's progress as we move forward and have a good day.

We will talk to you again in August.

Bye now.

Thank you, ladies and gentlemen.

This does conclude the Astro-Med's first-quarter conference call.

You may now disconnect.