Adept Technology, Inc. (ADEP)

F3Q12 Earnings Call

May 2, 2012 5:00 PM ET


Lisa Cummins – SVP, Finance & CFO

John Dulchinos – President & CEO

John Boutsikaris – Senior VP of Sales and Marketing


Marko Rodriguez – Stonegate Securities

Mike Cikos – Sidoti & Company

Sam Bergman – Bayberry Asset Management

Frank Barresi – Ameriprise Financial



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Good day ladies and gentlemen. Thank you for standing by. Welcome to the Adept third quarter 2012 results conference call. During today's presentation, all parties are in a listen-only mode. Following the presentation the conference will be open for questions. (Operator instructions) This conference is being recorded today, May 2, 2012.

I now like to turn the conference over to Ms. Lisa Cummins, Chief Financial Officer. Please go ahead.

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Lisa Cummins

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, May 2, 2012.

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, 2011 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 third quarter 2012 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.

John Dulchinos

Thank you, Lisa, and good afternoon, everyone. The results in the third quarter were solid, with revenue growth of 37% year-over-year and 15% sequentially. The large jump in annual revenue reflects strength across our new and traditional products, as well as an increasing diversification in our revenue stream.

We saw particular strength in Europe, and specifically Germany, where demand for our traditional [inaudible] remained solid. As you recall, going into the quarter, we had concerns about the strength of our European markets, and are happy to report we saw solid increases in both Germany and France this quarter.

In addition, our recently acquired mobile robots and packaging solutions initiatives continue to gain traction, making up over 17% of our revenues for the quarter. We are also seeing a return to a modest growth cycle in the disk drive market, driven by what appears to be a loosening in the capital investment climate, and perhaps recovery from the floods in Thailand. We expect this trend to continue over the next couple of quarters.

Our gross margin declined to 41% in the quarter, driven almost entirely by a single large order from Germany that had a disproportionate mix of a low margin traditional product. Without this order, gross margins would have been close to 44%.

Revenues in the Americas were up 46% over last year. More importantly those revenues came from multiple markets and products, including traditional components for medicals and pharmaceuticals, as well as sales of our mobile solutions into the commercial market and our packaging solutions.

We continue to see beginning traction in China, where our new support centre is located. If you remember, China is rapidly becoming a major market for industrial robots, and we believe Adept’s Brand commands value in this market. Accumulating all these data points, component revenues were up year-over-year reflecting strength, growth and value in our traditional components business.

Now I will spend a few minutes on our exciting new business initiatives, packaging solutions and mobile robots, and how these initiatives support our long-term strategy to achieve sustainable revenue growth and consistent profitability. In our fiscal third quarter, we continued to recognize material revenues related to our packaging solutions, as we delivered 4 cells to Earthbound Farms, a leader in the FreshCut leafy greens, to automate their prewash produce packaging process.

This is a fast-growing segment in the natural foods market, and includes both bag products and clamshells, with many fruits and vegetables packaged this way. These products provide the consumer convenience and the grocer a better display, longer shelf life, and labor savings in shelf stocking. In the US, much of this market is located in the South East and in California near Adept’s corporate office.

Having a high visible, lead customer in close proximity to Adept’s corporate office is very valuable and a solid endorsement and validation of our unique technology. It also shows that in this market segment demand for new, more effective, flexible robotic solutions is very strong. While we have discussed on previous calls, the natural foods market is a largely untapped automation market that represents roughly one third of the entire food market.

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