Analyst Conference Summary

robotics

conference date: August 25, 2014 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2014 (Q4 fiscal 2014)

But I did own ADEP starting 11/05/2012 and ending 2/10/2014.
Forward-looking statements

Overview: Basically stalled in no-growth mode.

Basic data (GAAP):

Revenue was $14.3 million, down 5% sequentially from $15.1 million and up 4% from $13.7 million year-earlier.

Net income was negative $0.4 million, down sequentially from $0.0 million and also down from negative $0.1 million in the year-earlier quarter.

Diluted Earnings Per Share (EPS) were negative $0.03, down sequentially from $0.00 and down from negative $0.01 year-earlier.

Guidance:

none given

Conference Highlights:

"I am very pleased with the initial orders we received from new mobile customers in the quarter, some of which have the potential to turn into very large opportunities for us" said Rob Cain, CEO, but added that the fixed robot business in the U.S. "declined significantly in the quarter." Still trying to position Adept for long-term, profitable growth.

Continues to see strong order activity for every region except North America. 4 key mobile customers placed orders in the quarter; they are proof of concept orders.

Released a new product, Acuity, for localization for mobile robots.

Believes target market is $4 billion over a market cycle. Will need to make investments to scale to a higher level. In some quarter investments for future growth may exceed revenue growth.

27% growth in European market revenue. Seeing great opportunities in Europe. Asian sales declined y/y. U.S. revenue was up 5% y/y, on mobile growth offset by fixed decline.

Gross margin was 46.3%, up sequentially from 45.7%

Adjusted EBITDA was $0.3 million, down sequentially from $1.2 million but up from $0.2 million year-earlier.

Cash and equivalents balance ended at $7.6 million, up sequentially from $6.6 million. There is no debt, but a $10 million line of credit is available. Preferred stock was all converted to common stock during the year.

Cost of revenue was $7.7 million. Gross margin $6.6 million. Operating expenses were $7.1 million, consisting of: research and development $1.6 million; selling, general and administrative $5.3 million; amortization $61 thousand, and $159 thousand for a legal settlement. Leading to an operating loss of $0.5 million. Foreign currency gain $0.1 million. Interest and other income and expense was was $0.0 million. Income tax $0.04 million. Redeemable convertible preferred stock accretion and allocated dividends accretion $0.04 million.

Service revenue was relatively flat y/y.

152 employees, up y/y.

For the full fiscal year revenue was $57.5 million vs. $46.8 year-earlier, up 23%.

Q&A:

Is the weakness in the U.S. just 1 quarter? In the U.S. market a lot of orders are pushing out, including with our integrators. It is mainly the fixed robot integrators. New integrators have been launched in the Canada and Mexico. We are seeing growth in the food business. We don't know how long the trends will continue. We are trying to reach broader markets for the long term.

European market strength? About 1 year ago we launched a market vertical strategy. In Europe we have 5 verticals, and all are growing nicely, notably automotive, flexible electronics.

In Asia our strategy is the same as Europe, but the market is extremely different. The orders tend to be larger.

Sales cycle? The seed planting side is about getting demos in front of people. The larger orders come when we are able to demonstrate the ROI within their actual operations. That takes 2 to 3 quarters in semiconductors, maybe more in the warehouse space.

4 new mobile orders in the quarter mentioned? In semiconductors those were 2 brand new customers, 1 was Taiwan, 1 North America, both initial orders to prove out the concept. They are larger 200 mm semiconductor companies. The other new customer was at the top of the logistics vertical, but at low quantity in North America to test out. Several mobile robots were placed in the manufacturing space, some with different features and options to test out.

Follow on activity from Global Foundries? They are still our lead account. They have 39 devices there.

Acuity allows the robot to see based on sensors for lights in the unit plus lights in the ceiling. It allows the robot to get to its goal at the end of path. It is an add-on product; in some cases you don't need it, but it helps in large open spaces like warehouses.

Mobile revenue in the quarter? We don't give out revenue by segment, but it remained in the 10% to 15% range of total sales. We have a mobile backlog going into Q1 and Q2, and a fixed backlog as well.

U.S. changes, and restructuring charges from that? No.

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