RPC Inc. (RES)

Q2 2010 Earnings Conference Call

July 28, 2010 05:00 am ET

Executives

Mike Sund - VP, IR

David Schramm - President and CEO

Kevin Royal - SVP, CFO

Analysts

Steve Sanders - Stephens

Brian Kremer - Roth Capital Partners

Michael Horwitz - Baird

Dilip Warrier - Stifel Nicolaus

Jin-Ming - Ardour Capital

Matthew Crews - Noble Financial Group

Presentation

Operator

Good day, everyone, and welcome to today’s Maxwell Technologies Second Quarter 2010 Financial Results Conference Call. At this time all participants are in a listen only mode. (Operator Instructions). It is now my pleasure to turn the conference over to Mr. Mike Sund, Vice President of Investor Relations. Please go ahead, sir.

Mike Sund

Good afternoon. In a few moments you’ll hear from David Schramm, Maxwell’s President and CEO and Kevin Royal, our Chief Financial Officer. First I need to advise you that the following discussion will include forward looking statements that are based on our current expectations and assumptions, which are subject to numerous risks and uncertainties. Actual results could differ materially because of factors such as Maxwell’s history of losses reduced credit availability demand for OEM products reaching anticipated levels general economic conditions in the markets we serve cost effective manufacturing and the success of outsourced assembly, the impact of competitive products and pricing, risks and uncertainties involved in foreign operations including the impact of currency fluctuations, and product liability or warranty claims in excess of our reserves.

For further information regarding risks and uncertainties associated with Maxwell’s business, please refer to the MD&A and Risk Factors sections of our SEC filings, including our most recent Form 10-Q and our annual report on Form 10-K. Electronic copies of these filings may be accessed by visiting the Investors section of our website www.maxwell.com and hard copies may be obtained by contacting the company.

Some of you are listening to this call via the Internet and an archived replay of the call will be available at our website. All information in today’s call is as of July 29, 2010. We undertake no duty to update our forward-looking statements to confirm the statements to actual results or changes in the company’s expectations.

Finally, we will presenting at an Investor Conference in Southern California on August 17. Details on the live and archived webcast can be found in the Investors section of our website.

It is now my pleasure to introduce David Schramm, Maxwell’s President and CEO.

David Schramm

Thanks, Mike and good afternoon, everybody. We are pleased to report that Maxwell recorded total revenue of $29.6 million for the second quarter ended June 30, 2010. That’s up 19% from the $24.8 million reported in the same period a year ago. That growth was driven by strong ultracapacitor sales of $15.9 million up 48% from Q2 of ‘09.

Sales of our more mature Microelectronics and high-voltage capacitor products were down about 2% versus last year’s second quarter, but increased by 7% sequentially from Q1 of this year, and both continued to make significant contributions to the bottom line. Gross margins for the quarter came in at 40%.

Along with strong ultracapacitor sales growth came continuing costs in efficiency improvements, and we were able to generate nearly $0.5 million of cash from operations in Q2. That’s the fourth time in the past five quarters, we’ve managed to do that. We believe it’s something our business can sustain going forward.

Perhaps more remarkably if you read our press release, you would have seen that on a non-GAAP basis, excluding an accrual for anticipated SCPA settlement and stock based compensation, Maxwell turned a profit at the operating income line. After more than a decade of operating losses that feels like a giant step in the right direction. Kevin will provide more details on that and other financial items in a few minutes. Also noted in our press release, we are delivering ultracapacitors in production quantities for our first automotive design in with Continental AG.

It’s for a micro hybrid stop start and voltage stabilization system that a major European automaker will have in showrooms in a few months. As we have said in the past, electrification and hybridization of cars, trucks, buses and other heavy vehicles, represents an enormous opportunity for our products. So this start of production is another very significant milestone for Maxwell.

As we all know, consumers and governments around the world are demanding greener, more efficient, personal, commercial and public transit vehicles. Obviously, safe, reliable, cost effective energy storage solutions are an essential enabling technology to support the innovation sweeping across the transportation industry.

Legislative and regulatory initiatives are also driving significant changes in how the world generates and uses energy and ultracapacitors are also gaining broad acceptance as a key enabling technology for renewable energy sources, such as wind and solar.

Sales of Maxwell ultracapacitors to provide efficient, reliable, cost effective energy storage for recuperative breaking systems, with low emission, hybrid electric transit buses and zero emission electric rail vehicles continue to be a major driver of ultracapacitor sales growth.

The three major Chinese bus OEM customers that we announced last year are on pace to meet or exceed last year’s consumption of our 48 volt modules. We learned recently that the Chinese government is now targeting more than 30 major cities, rather than the initial announcement of 10 with subsidies for hybrid and electric public transit vehicles. So demand should increase and continue well into the future.

We are also continuing to deliver ultracapacitor cells and modules to heavy vehicle OEMS and drive train integrators in Europe and North America. And we estimate that nearly 2,000 hybrid and electric transit vehicles using Maxwell products are now in daily operation around the world.

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

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