PAR Technology Corp (PAR) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to PAR Technology's first quarter 2005 earnings release conference. My name is Katelan [ph] and I'll be your coordinator today. At this time all participants are in a listen only mode. We will facilitate a question and answer session at the end of today's conference. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder this conference call is being recorded for replay purposes. I would like to now turn the presentation to your host, the Director of Financial Relations, Mr. Chris Byrnes. Please go ahead, sir.

Thank you, Katelan, and good morning, ladies and gentlemen, and welcome to PAR Technology's first quarter earnings conference call. Earlier today we released PAR's Q1 results at 7:30 AM eastern time. On the call to day to discuss the Company's results are John Sammon, PAR's Chairman and CEO, Ron Casciano, the Company's CFOr, and Greg Cortese, CEO and President of PAR's largest subsidiary, PAR Tech Inc.

Before John begins his formal remarks I would like to take this opportunity to read our disclaimer. Certain Company information on this call may contain forward-looking statements. Any statements on this call that do not describe historical facts are deemed forward-looking. Forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. I now would like to introduce John Sammon to give his formal remarks.

Good morning. Today I will be presenting the results of our first quarter ending March 31st, 2005. First quarter revenues were 48.8 million a 28.7% increase from the 37.9 million reported for the same period a year ago. This represents the highest first quarter revenues in our history. Net income for the quarter was 1.3 million, an increase of 77.4% over the 736,000 reported last year. Earnings per share for the period were $0.14 per diluted share compared to $0.08 per diluted share reported last year.

Looking at the quarterly revenue breakdown product revenue for the quarter was 21 million, up 29.3% compared to the first quarter of 2004. This increase reflects the revenue contribution from Springer-Miller Systems in addition to a strong revenue growth from our traditional restaurant customers. Service revenue for the quarter was 13.4 million, up 30% compared to Q1 of last year. This increase resulted from a growing installed base in the restaurant sector in addition to the Springer-Miller contribution. Contract revenue was up 26.4% to 14.4 million for the quarter. This growth resulted primarily from our IT outsourcing segment and the restoration of government funding to our logistics management program.

Now moving to margins, product margins for the quarter were 38.7% versus 32% last year. This increase resulted from higher software content but was lowered somewhat as we continue a major account integration project, which carries a slightly lower margin. We are particularly pleased with this margin increase since it demonstrates some of the success of our strategic plan to improve margins through software sales. Service margins were 22% versus 13.2% a year ago. This significant increase also reflects the growth of software content in our hospitality business. Contract margins, or in our case pre-tax profits, were 5.5% compared to 7.2% last year. This result is in line with our traditional 5% to 6% pre-tax profit range. Last year's higher margin was derived from an exceptional award fee on a particular contract and a favorable contract modification.

Now turning to expenses SG&A expenses for the quarter were 7.4 million versus 5 million last year. This increase reflects the acquisition of Springer-Miller as well as increased commissions on restaurant sales. R&D expenses were 2.3 million versus 1.3 million last year reflecting the acquisition of Springer-Miller as well as increased investment in new product development.

Turning to some balance sheet highlights, our financial condition remains strong. Our receivable collection cycle remains very good. Our days outstanding for the hospitality business were 56.5 days and our government business is 57 days. Inventory turns continue to improve to 4.75 turns compared to 4.3 turns at the end of last year. We have reduced our short-term debt to 2.6 million at the end of the quarter as compared to 10.2 million at the end of the year. Cash flow from operations was 2.3 million for the first quarter of 2005.

In summary we are very pleased with our record first quarter performance. Both our government and our hospitality business has exceeded our internal plans and made this achievement possible. We are especially delighted with margin improvements in both products and services reflecting a substantial increase of software content in our hospitality business. While much of this derives from Springer-Miller acquisition, we are also experiencing an increase in our software sales in our restaurant sector. With a 29% revenue growth and substantial gross margin improvements we were able to grow EPS by 75% to $0.14 per share which is notably higher than the Street forecast of $0.10.

Results for this quarter are a reflection of the following facts. First, the hospitality market is very healthy both in restaurants and resorts. They are investing in an expansion in upgrades. Secondly, we have created and sustained long-term relationships with our hospitality customers which has allowed us to gain market share, not as a result of lowering prices but rather delivering value, which has resulted in excellent customer relations. This I consider to be a strategically important accomplishment as we serve some of the largest, most demanding companies in the hospitality sector. Through these long-term relationships our customers have benefited from the value we have provided. However, we have also benefited from these relationships by building a valuable infrastructure, which credibly creates, delivers and supports complex IT solutions for large, global accounts and it is this asset which we are now leveraging to expand our hospitality business. Third, while it's still too early to declare a success, we are nevertheless very pleased with the accretive results from our acquisition of Springer-Miller. This is the first example of our intended strategy of leveraging our considerable infrastructure to extend our hospitality business through strategic partnering with exemplary software companies. Fourth, our investments to increase software content is beginning to pay off. This can be seen in the quarter's improvement in margins and profits. Fifth, our government business continues to perform quite well with a 26% revenue growth this quarter. This marks the 145th consecutive profitable quarter for our government business and with a backlog of 104 million we are ensured of continuing strong government business.

Lastly, in addition to the growth in our IT outsourcing segment, we also benefited this quarter by the restoral of DOT funding to our logistics management program. While we expect continuation of government funding, we are also beginning to develop an embryonic commercial business. To date we've installed over 700 cargo made systems on chassis and mobile generator sets. While we are a long way from establishing a successful commercial business, we are nevertheless gratified by this small first step. Our strategy for this area is to continue to pursue government sponsored container security programs as a means to our end goal of establishing an information based commercial business.

We are off to a strong start in 2005 as represented by this quarter's performance. For the year we had forecasted revenue growth in the range of 15% to 20% with accelerated earnings. Based upon the results to date we feel that revenue will grow at the upper end of this range with corresponding acceleration and earnings. This completes my formal remarks and I now would like to open the session to questions.

[Operator Instructions] Corey Tobin of William Blair.

Congratulations on a nice quarter. A couple of quick questions for you more along the lines of housekeeping items for those of us who are new to the name. Can you just give us an estimate of the split in revenues between restaurants, government and the hotel business?

Hi, Corey, Ron Casciano here. Our hospitality revenue has been running around 72%, which includes restaurants and hotels. We don't break it out separately and our government business accounts for the balance, around 28%.

Okay great and then can you remind us again what your growth expectations are for on an organic basis for Springer-Miller for the remainder of the year?

Again, Corey, we're not talking separately about Springer-Miller. We're talking about our hospitality business in total and we had forecasted 20% growth in our hospitality business and we're comfortable with that range.

Okay great. Two last ones if I could please, the cap ex for the quarter-- what was the cap ex number for the quarter?

Cap ex was not significant, Corey. We're forecasting a cap ex of around 2 million for the year.

2 million for the full year. Okay, so free cash flow is pretty close to 2 million or so? Is that a safe assumption?

Yes, cash flow from operations was 2.3 million.

Okay, great. Okay, thank you.

[Operator Instructions] Mr. Byrnes, I'll hand the call back to you. That was the final question.

Okay, well thank you for joining us today. Obviously John, Ron and myself will be available for any additional questions you may have throughout the day and thank you for participating today. Bye, bye.

Ladies and gentlemen, that concludes your conference call. You may now disconnect.

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