Amerigon Incorporated (ARGN)

Q2 2010 Earnings Call Transcript

August 4, 2010 11:30 am ET

Executives

Jill Bertotti – Allen & Caron

Dan Coker – President and CEO

Barry Steele – CFO

Analysts

Brett Hoselton – KeyBanc Capital Markets

Steve Dyer – Craig-Hallum

Rick Hoss – Roth Capital Partners

Tyson Bauer – Wealth Monitors

Daniel Kornblatt – Witter Asset Management

Presentation

Operator

Welcome to the Amerigon Incorporated 2010 second quarter and six months results conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator instructions) I would now like to turn the conference over to Jill Bertotti of Allen & Caron. Please go ahead.

Jill Bertotti

Good morning and thank you everyone for joining us today for the Amerigon Incorporated second quarter and six month results conference call. Before we start this morning’s call there are a few items I would like to cover with you. First, in addition to disseminating through peer newswire this morning’s news release announcing Amerigon’s results, an email copy of the release was also sent to a number of conference call participants. If any of you need a copy of the news release, you may download a copy from either the Amerigon website, at www.amerigon.com, or the Allen & Caron website, at www.allencaron.com. Additionally, a replay of this conference call will be available via a link provided on the events page of the Investors section of Amerigon’s website.

Finally, I have been asked to make the following statements. Certain matters discussed on this conference call are forward-looking statements that involve risks and uncertainties and our actual results may be different. Important factors that could cause the company’s actual results to differ materially from its expectations on this call are risks that sales may not significantly increase; additional financing, if necessary may not be available; new competitors may arise; and adverse conditions in the automotive industry may negatively affect its results. The liquidity and trading price of its common stock may be negatively affected by these and other factors. Please also refer to Amerigon’s Securities and Exchange Commission filings and reports, including but not limited to its Form 10-Q for the period ending June 30, 2010 and its Form 10-K for the year ended December 31, 2009.

On the call today from Amerigon we have Dan Coker, President and CEO; and Barry Steele, Chief Financial Officer. Management will provide a review of the results, after which there will be a question-and-answer period.

I now like to turn the call over to Dan. Good morning, Dan.

Dan Coker

Good morning Jill and thank you to everyone for joining us again for another Amerigon conference call. I think everyone probably saw the release this morning. We had a pretty good quarter in the second quarter. It was the fourth record quarter in a row for Amerigon, and we’re very pleased with how the results turned out.

We are going to follow the same basic format we’ve tried in the past few quarters, where we will give a very high level summary of overview of operations, and then we will open the floor for questions.

So, at this moment I think we will turn over to Barry, our CFO, and he will review the highlights for the quarter.

Barry Steele

Thank you Dan. The second quarter of 2010 turned in results for product revenue of $28.8 million. This was a very significant increase from the prior year quarter, which was $10.7 million. That is $18.7 dollar increase or 169%. We also have shown increases from the prior quarter, the sequential prior quarter from Q1, which was where we had product revenues of $24.2 million, an increase of $4.6 million or 19%.

The significant increases from the prior year are primarily driven by both volume in the marketplace, by volume in the automotive marketplace, as well as impact from the new models that were launched since the second quarter of the prior year. Just to know, the US production increased during the second quarter of 2010 versus the prior year second quarter by 73%, and also the Japanese and Korea market segment production increased by about 32%. So, a lot of our increases are coming from increased volume and the improvement in automotive production worldwide.

The increases from the prior quarter, the first quarter of 2010, are primarily due to new model launches that occurred during the first and second quarter. Gross margin, we have seen improvements here for the quarter. Our gross margin percentage for the second quarter of 2010 was 30.2%. That compares to 23.6% for the prior year, and 27.5% for the first quarter of 2010, improvements of 6.6% over the prior year, and 2.7% over the first quarter of 2010. This is driven by primarily improved cost mix, fixed cost coverage on the higher revenue level, as well as some reduced material costs, primarily for Tellurium, as compared to the prior year.

Moving on, our research and development expenses also saw a pretty big increase for the quarter. In the second quarter of 2010, research and development net spending was $2.9 million that represented $1.3 million or 81% increase over the prior year second quarter, and a $1.1 million or 58.6% increase over the first quarter of 2010. Much of this increase is due to the purchase of the interests of ZT Plus, where we are bearing for the expenses for that research entity for the full quarter, which was only partial in the first quarter this year, and almost nothing for the prior year.

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