Analyst Conference Summary

robotics

conference date: August 28, 2013 @ 8:00 AM Pacific Time
for quarter ending: June 30, 2013 (Q4 fiscal 2013)

(at the time this is written)
Forward-looking statements

Overview: Recovery quarter.

Basic data (GAAP):

Revenue was $13.7 million, up 25% sequentially from $10.9 million, but down 19% from $17.0 million in the year-earlier quarter.

Net income was $157 thousand, improved sequentially from negative $1.8 million, and also improved from negative $358 thousand year-earlier.

Diluted Earnings Per Share (EPS) were $0.00, up sequentially from negative $0.17, and up from negative $0.04 year-earlier.

Guidance:

Not given.

Conference Highlights:

Adept Technologies made progress with food handling robots and the mobile product family. Adept also received a significant order from an Asian semiconductor company, an initial order from a European watch manufacturer, and major orders for SCARA robots for electronics manufacturing. "A step in the right direction as compared to previous quarters," but much work remains.

There was an operating loss of over $0.2 million, but net income, because of a $0.5 million income tax benefit.

Key executives were added to the team in the quarter. [WPM: means likely higher operating costs going forward.]

Adept now has an installed base of more than 57,000 automation systems. Four new EPLC products were launched in the quarter. Will reduce more connectivity and ease of use products in fiscal Q1.

Mobile robotics orders include 10 units to GlobalFoundries to ship to Europe in first half of new fiscal year; each handler is over $100,000; this is follow-on business. A new U.S. pharmaceutical customer ordered a Lynx.

Two tier-one food new clients will be using Adept robots in the future. One is for chicken processing and one for complex assembly.

Has set in place an improved services program that contacts customers more frequently. Will introduce new services going forward.

Gross margin expanded to 46.0% sequentially from 42.7%.

Adjusted EBITDA was $186 thousand, up sequentially from negative $1.1 million and up from negative $341 thousand year-earlier.

Cash and equivalents balance ended at $6.3 million, down sequentially from $6.7 million. There is no debt. Inventories increased sequentially to $8.3 million. Accounts receivable increased sequentially to $10.8 million. Does not anticipate the need to draw on its line of credit.

Cost of revenue was $7.4 million. Gross margin $6.3 million. Operating expenses were $6.5 million, consisting of: research and development $1.75 million; selling, general and administrative $4.7 million; restructuring $0.05 million; amortization $0.09 million. Leading to an operating profit of negative $0.2 million. Interest and other income and expense was was negative $0.1 million. Income tax benefit $0.5 million.

Q&A:

Update on cost reduction initiatives? You have seen the uptick in margins, which were from cost reduction in the supply chain and improved product mix. We have reduced fix costs but have more work to do. We are reducing facilities costs in Germany, France, and California. We are aiming for savings from IT as well.

Services revenue? We don't break it out, but we do track it by offering internally. We are happy with where it is going.

In sales, we are focusing on higher-volume industrial customers. Our new EPLC products are a good selling point.

Integrator partnerships? We are planning for an integrator conference. We are listening to their current and future product needs.

Sales pipeline? The quality of the pipeline has improved. We are looking for volume and visibility. The backlog is critical, and the quality of it has improved. We track the margins on each order.

We cannot rely on a single country or customer. We serve a variety of markets that are all looking to automate.

Logistics customer unit use? Those two units are to be used in a warehouse space in a goods-to-man arrangement.

Semiconductor space moving forward. No specific guidance. We hired a specific salesman for the 200 mm wafer space. We can provide a real value add for the fabs. We are not currently targeting 300 mm wafer space because those facilities tend to be built in a more automated fashion. Our robots add productivity in the less-automated 200 mm space.

Medical space opportunities? Those are large opportunities. Our France manager is talking to a potential customer. But medical in general is not as ready for robotics as the other spaces we are in.

Orders going into Q1 or book to bill? We don't give guidance, but we are working to further sales in Asia and Europe.

Vegetable and fruit packing market? We are in front of a lot of those customers, "I think you will see that mature over time." But those customers are cautious about making changes in their established processes.

Mobile robots vs. competitors? Lynx is seamless and intuitive, works with small flexible applications that our competitors cannot handle. Our robots can move around a fluid environment with a minimal amount of teaching.

Europe has been about 60% of revenues, but has been trending down as Asian market has trended up. The U.S. is also trending up.

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