Wegener Q1 2011 Earnings Call Transcript

Wegener (WGNR)

Q1 2011 Earnings Call

January 17, 2011 4:15 pm ET

Executives

C. Woodbury - Chief Executive Officer, President, Director, Chief Executive Officer of Wegener Communications Inc, President of Wegener Communications Inc, Chief Financial Officer of Wegener Communications Inc, Senior Vice President of Finance for Wegener Communications Inc and Treasurer of Wegener Communications Inc

James Traicoff - Chief Financial Officer, Principal Accounting Officer, Treasurer and Secretary

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Wegener Earnings Conference Call. My name is Yvette, and I will be your operator for today. [Operator Instructions] I would now like to turn the call over to Mr. Troy Woodbury, President and CEO. Please proceed, sir.

C. Woodbury

Thank you. Good afternoon. My name is Troy Woodbury. I'm the President and CEO of Wegener Corp. I would like to welcome everyone to today's call. With me today are Bob Placek, Chairman of Wegener Corporation; and Jim Traicoff, Treasurer and CFO of the company. Jim will present the financial results for the first quarter of 2011. Following Jim's discussion, I will comment on our business and the actions that are taking place within the company. Following my comments, we will answer questions from the participants.

Jim will now comment on our first quarter financial results.

James Traicoff

Thank you, Troy. Friday, we announced the operating results for our fiscal quarter of fiscal year 2011. That release has been posted on our company's website.

This call may contain forward-looking statements within the meaning of applicable security laws, including the Private Securities Litigation Reform Act of 1995, and the company intends that such forward-looking statements are subject to the Safe Harbors created thereby. Forward-looking statements include, for example, statements relating to expectations regarding future sale, income and cash flows and are thus prospective. Forward-looking statements are based upon the company's current expectations and assumptions, which are subject to a number of risks and uncertainties, many of which are beyond the company's ability to control. Discussion of these and other risks and uncertainties are provided in detail in the company's periodic filings with the SEC, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Since these statements involve risks and uncertainties and are subject to change at any time, the company's actual results could differ materially from expected results.

Revenues for the first quarter of fiscal 2011 increased $1,052,000 or 54.9% to $2,970,000 from $1,918,000 for the same period in fiscal 2010. The increase in revenues was due to an increase in shippable bookings for the quarter. First quarter revenues included our iPump 562 Media Server for an international satellite digital signage project, iPump 6400 Media Servers for an international health and education network and continued shipments of Encompass LE Audio Receivers for business music applications.

The operating results for the first quarter of fiscal 2011 were a net loss of $26,000 or less than $0.01 per share. That compares to a net loss of $990,000 or $0.08 per share for the same period in fiscal 2010.

During the first quarter of fiscal 2011, bookings were approximately $3.2 million compared to $1.8 million during the first quarter of fiscal 2010. During fiscal 2010 and fiscal 2009, bookings were $8.3 million and $5.5 million, respectively. These bookings, as well as our fiscal 2008 bookings, were well below our expectations, primarily as a result of customer delays in purchasing decisions, deferral of project expenditures and general adverse economic and credit conditions.

Our backlog scheduled to ship within 18 months was approximately $6.3 million at the end of the first quarter, compared to $6.0 million at the end of fiscal year 2010 and $4.2 million at the end of the first quarter of fiscal 2010. Two customers accounted for approximately 40.8% and 32.4%, respectively, of the backlog at December 3, 2010. Approximately $3.3 million of the December 3, 2010, backlog is scheduled to ship during the remainder of fiscal 2011.

Gross profit margin percentages were 38.9% for the first quarter of fiscal 2011 compared to 22.1% in the same period of fiscal 2010. Gross profit margin dollars increased $731,000 for the first quarter of fiscal 2011 compared to the same period of fiscal 2010. The increases in margin percentage and dollars were due to the increase in revenues, which resulted in lower unit fixed overhead costs.

Selling, general and administrative or SG&A expenses decreased to $160,000 or 16.7% to $801,000 in the first quarter of fiscal 2011 from $962,000 in the same period of fiscal 2010. Service expenses in the first quarter of fiscal 2011 decreased $147,000 to $24,000 from $171,000 in the same period of fiscal 2010. Additional decreases in SG&A expenses included professional fees of $59,000 and general overhead costs of $36,000. These expense reductions are offset by increase in the allowance for bad debt expense of $40,000 and in-house commission expense of $16,000. As a percentage of revenues, SG&A expenses were 27.0% for the first quarter of fiscal 2011 compared to 50.1% for the same period of fiscal 2010.

Research and development expenses were $292,000 or 9.8% of revenues in the first quarter of fiscal 2011 compared to $374,000 or 19.5% of revenues in the same period of fiscal 2010. The decrease in expenses was mainly due to lower salaries as a result of reduced headcount.

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