AstroNova Inc (ALOT) 2015 Q2 法說會逐字稿

Good day and welcome to the Astro-Med's Q2 fiscal-year 2015 conference call.

Today's call is being recorded.

At this time, I would like to turn the conference over to Mr. David Calusdian.

Please go ahead.

Thank you and good morning, 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 statements during this call that are not statements of historical fact are considered 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 in the Company's annual report on Form 10-K and other filings Astro-Med makes with the Securities and Exchange Commission.

With that, I'll turn the call over to Greg Woods.

Thank you, David.

And welcome to our second-quarter fiscal 2015 conference call.

As you have seen in our release earlier today, we continued our excellent growth momentum in fiscal 2015, with a strong second-quarter performance.

We reported record quarterly revenues of $22.4 million, representing more than a 30% increase over the prior year, with both segments of our business also reporting record sales.

The increased revenue combined with a favorable product mix and the impact of some of our operational improvements resulted in net income for the quarter of $1.4 million, or $0.18 per diluted share, representing a year-over-year improvement of over 100%.

Orders received in the second quarter came in at $21.2 million, more than 16% higher than last year's second quarter.

We finished the quarter with a strong backlog of $14.7 million, up 4.6% from year end.

Q2 was another quarter of double-digit organic growth for Astro-Med on strong demand from both our QuickLabel Systems and Test and Measurement segments.

Our QuickLabel Systems segment grew 25.1%, aided by the continued strength of the Kiaro!

series of color label printers.

I should note that we are also starting to see a nice trend whereby our existing QLS customers are increasing the quantity of labels they are printing as they gain experience with our printers, which helps drive the growth of our consumables business.

Because of the flexibility of the Kiaro!

series, customers can easily print labels to fit a broader range of products, making increased customization cost effective.

By printing a wider variety of labels, much less expensively in-house, our customers are able to quickly penetrate new markets and grow their businesses.

For large label applications, our new wide format Kiaro!

200 printer continues to generate excellent response from customers, who are impressed by the quality and performance of the product.

We also introduced new software offerings and accessories for our products in Q2.

And in the fall, we expect to launch new printer products at a number of tradeshows.

Throughout the year, we've been steadily increasing our promotional efforts worldwide.

Together with new product development, aggressively marketing our products is a key component of our organic growth strategy.

Moving now to Test and Measurement, this segment also demonstrated excellent growth in the quarter, reporting a year-over-year sales increase of more than 42%.

Although some of that growth can be attributed to our acquisition of the Miltope aerospace printer business this January, we continued to see solid demand for our full range of ToughWriter aerospace printers and our high-speed data acquisition systems.

Test and Measurement represented 31.8% of net sales for the quarter compared with 29.1% for the second quarter of fiscal 2014.

With the Miltope acquisition, we gained our first access to a narrow format segment of the market.

A few weeks ago, we announced a new exciting product for this segment, the ToughWriter 640, a smaller format flight deck printer for narrow-body aircraft and smaller cockpits.

The 640 is the first product based on our new sixth-generation technology.

Astro-Med will now be able to offer a more advanced and lighter weight option to the high-volume narrow-body segment of the aviation marketplace.

The response to our expanding product line and Astro-Med's position in the market from the Tier One aviation manufacturers and airline companies themselves continues to be very positive.

Another factor that helped our growth this quarter was the further expansion of Astro-Med's global distribution channel.

We have experienced nice growth out of our Mexico facility as a result of the new office that we installed there in Monterrey.

As we move through the year, we expect the Monterrey office to continue to expand into Mexico and then to extend that sales expansion into the greater Latin American region.

We've also added to our sales forces in the United States, Canada, and Europe.

Our strategy of adding the right people in targeted underserved regions is starting to pay off in our top-line results overall as well as is in our penetration of international markets.

International sales represented 32% of our total revenue this past quarter, which is up from 29% from the second quarter of last year.

Along with Mexico, our European, Canadian -- both our European and Canadian businesses did extremely well in the quarter.

We are very encouraged that our efforts to extend the global reach of the Company are having such a positive effect on our overall growth.

As we said on our last call, we are also planning to expand into the direct presence into the Asian market as well.

We see this as an area for significant growth in the future.

Our plans are on track to have two offices in that region by the end of the year -- one based in Shanghai to cover China, and other in the Singapore and Malaysia area to cover the rest of the Asia Pacific region.

In addition to growing revenues organically, strategic acquisitions are an important part of our growth strategy and we are continuing to build our pipeline of acquisition candidates that meet our filter requirements.

The integration of our Miltope acquisition is nearing its final stages now.

We've transitioned most of the manufacturing for the Miltope aerospace printer line from Alabama to our manufacturing facility here in West Warwick, Rhode Island, during Q2.

We expect the transition to be finalized in the third quarter as planned.

Our ability to add all of the Miltope printer business into our existing West Warwick facility is the result of the work that we did earlier in the year in freeing up manufacturing space through our Lean and operational excellence initiatives.

We continued to advance our operational excellence initiatives in the second quarter, with the highlight being the appointment of Stephen Russo as our new Director of Operational Excellence.

We now have a high-caliber full-time leader dedicated specifically to this critical aspect of our growth strategy.

Having led operational excellence teams at some of the world's best manufacturing companies, Steve brings nearly 20 years of experience in manufacturing and transaction process improvements to Astro-Med.

Steve has familiarity with our QuickLabel Systems business as well as the aviation and test and measurement market, so he's ramping up very quickly.

To give you a feel for the types of improvements that we are deriving from our operational excellence programs, let me highlight a recent example.

Last month, we restructured a complete manufacturing process for one of our OEM printers.

Prior to the Kaizen events, this particular product took up quite a bit of floor space at multiple locations throughout the factory and the total turnaround time from order to shipment was a total of 515 hours.

Now, that same printer is manufactured in a single one-piece-flow work cell that requires only about a quarter of the previous floor space.

And more importantly, the turnaround time has been reduced to just two hours.

In summary, we have been making solid progress in executing on our growth strategy and the results of our efforts are clearly evident in our second-quarter financial results.

With that, I'll turn the call over to Joe for a detailed review of those results.

Thank you, Greg.

Good morning, everyone.

I'm very delighted to share with you Astro-Med's second-quarter fiscal 2015 financial results.

As Greg mentioned, net sales in the quarter were $22.4 million.

This is an increase of 30.1% from the second quarter of last year.

Sales to our domestic customers increased 25.7% from the prior year to $15.2 million, while our shipments to our international customers grew 40.4% year over year to $7.2 million.

Turning to the business segments, the Company's QuickLabel Systems product group with monochrome and color printer systems reported sales of $15.3 million, marking yet another new record in quarterly revenue and exceeding the prior year's second quarter by 25.1%.

Our Test and Measurement product group of ruggedized products and data acquisition systems also posted a record Quarter in sales at $7.1 million, representing a 42.2% increase from the year earlier.

International shipments accounted for 32% of Astro-Med's second-quarter revenue and again, represents a record level of quarterly sales.

Profiling the second quarter by product, consumables were $10.9 million.

That's up 18.7% from the second quarter of fiscal 2014, while our hardware sales increased 40% from a year ago to $9.9 million.

Our service parts and repairs revenues contributed another $1.5 million in quarterly sales and were up 67% from the prior-year second quarter.

Second-quarter sales generated $9.6 million in gross profit dollars, up 38.5% from the prior year.

Our gross profit margins at 42.9% compare favorably with the 40.3% in the second 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.

Our operating expenses total $7.4 million in the quarter, up -- or 33.2% of our net sales.

That's down 190 basis points from the last year's second quarter as a percentage of sales, but were up $1.4 million from the prior year in actual dollars.

The increase is primarily related to additional sales personnel, targeted marketing programs, and additional research and development initiatives aimed at growing the business.

Operating income in the quarter was $2.2 million, or an operating margin of 9.7%, compared with the operating income in the prior year's second quarter of $887,000 or 5.2% of sales.

Regarding the segment operating profit during the quarter, QuickLabel Systems earned $2.2 million in segment operating profit with a margin of 14.7%, while our Test and Measurement segment operating income of $1.4 million with a corresponding margin of 19.1%.

Sales volume, product mix, and our focus on Lean operational excellence were keys to our improved operating performance.

Our federal, state, and foreign tax provision in the quarter was $812,000, representing an effective tax rate of 36% as compared to the prior year's effective tax rate of (technical difficulty) in the second quarter of 38%.

Second-quarter net income of $1.4 million, or $0.18 per diluted share -- that compares with a net income of $696,000, or $0.09 per diluted share, in the year-ago quarter.

Turning to the balance sheet, our assets at August 2, 2014, were $79.1 million.

Our equity balance was $69.2 million, representing a book value of $8.97 a share.

Our cash and marketable securities position was $28 million compared with $27.1 million at the end of fiscal 2014.

Relative to our working capital, our accounts receivables were $14.8 million.

That represents 53 days sales outstanding and that's a decline from the year-end days of 54 days sales outstanding.

Inventory levels at the end of the second quarter were $17.5 million, representing 112 days on hand.

This is a slight decrease from the 113 days on hand at year end.

Improving our working capital performance continues to be a focus for the Company.

Our capital expenditures in the quarter -- of year to date were $874,000 and spending was primarily related to investments in technology, machinery and equipment, and building improvements.

Our dividends in the second quarter of fiscal 2015 were $542,000], representing $0.07 per share.

Our employee population at the end of the quarter represented 326 folks.

This represents an increase of 7% from the year-end fiscal 2014.

We made improvements in our sales per employee, which increased to $248,000 from $219,000 on a year-over-year basis.

With strong customer demand and a healthy $14.7 million backlog to start the third quarter, Astro-Med remains well positioned for continued growth into fiscal 2015.

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

Thank you, Joe.

In closing, we continue to build momentum in executing on our growth strategy as we enter into the second half of fiscal 2015.

We are focusing on growing our topline, both organically and through strategic add-on acquisitions.

On the organic side, we are expanding our distribution channels, we are investing in R&D, and we are launching innovative new products.

We also plan to grow through acquisitions by identifying complementary companies that enable us to expand the breadth of our products and our markets.

Looking at the bottom line, our Lean transformation is going well and we are starting to see the results of our operational excellence efforts in our financial performance.

We have new leadership in this area and plan to make even more progress in the second half of the year.

Finally, turning to guidance, for fiscal 2015, based on the positive results of the first half, we show that we are well positioned to meet or exceed the upper end of our revenue guidance of $80 million to $85 million and our net earnings guidance of $0.55 to $0.60 per share.

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 increasing shareholder value.

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

(Operator Instructions)

Hi, this is Joe Furst from Furst Associates.

My questions had to do with the backlog in the ruggedized printer area for the airplanes.

I know you had a multi-year orders.

I wonder are they starting to kick in, because they've been around for quite a while.

Are they starting to kick in on a greater basis?

Yes, this is Greg speaking.

Hi, Joe.

Yes, we are starting to see that in a variety of -- both the Miltope acquisition that we brought on board, but also our existing backlog, so of course we brought the Miltope backlog as well.

So we are starting to see that.

And that is obviously evidenced in the growth in that area.

Those orders take typically quite a while to generate.

And you are starting to see those ramp up now.

Right.

And I know you don't count that in the backlog, but in the past, you've mentioned about the number of potential orders that you have, I guess.

I don't know how you would categorize it, but I remember at one point, it was like $40 million or something like that.

Is it still in that range?

No, no.

It's up over $100 million.

That's up $100 million?

Yes.

Good.

And congratulations on the good work.

You are doing a good job at getting this Company more profitable and that's what we needed to do.

Thank you.

(Operator Instructions) Daniel Nall, Aristides Capital.

Good morning.

This is actually Chris Brown on for Daniel.

I was just curious if you could tell us basically what percentage of your revenue, roughly, would you say comes from recurring sorts of revenue?

For example, printer supplies, that sort of thing?

It's generally -- Chris, it's about 50%.

It's both the total revenues that we realized.

Okay, great.

And then, if you look at your backlog number, is the backlog -- does that trend towards more nonrecurring revenue sorts of products or is 50% of that of the recurring nature as well?

Yes, it's pretty close.

It's a blend, Chris.

It's got some consumables in it, but it also has some hardware orders in there as well.

Okay, great.

Thank you very much.

Joe Furst, Furst Associates.

As far on the acquisition front, do you have anything that is more than just looking right now or anything that's potentially in the works or could close in the next six months or so?

Yes, we have, of course, a number of things in the works, but there's nothing that we can comment on that we don't comment on the acquisitions until we are ready to make an announcement.

But yes, there are several that are -- we are not just looking at names, we're actually talking to people and have ongoing negotiations.

Good.

And that's what I was getting at.

Thank you.

And we have no further questions at this time.

Okay.

Well, that -- I will thank you all for joining us here today.

We look forward to speaking with you on our next call.

And have a good day.

Bye now.

Bye now.

And that concludes today's call.

Thank you for your participation.