Q4 2020 Perceptron Inc Earnings Call
Full year 2020 conference call at this time.
At this time all participants are in a listen only mode of course.
A question and answer session will follow the formal presentation.
If anyone should the current operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
At this time I'll turn the conference over to Bill Rush <unk> interim CFO Mr. Russell you may begin.
Thank you good morning, and welcome to Perceptrons Investor call and webcast to discuss the company's financial results for the fourth quarter of fiscal 2020.
My name is still rush line and I'm Perceptrons interim Chief Financial Officer, joining me on the call today is Jay Freeland Chairman of the board and interim Chief Executive Officer.
For the market opened today Perceptron issued its fourth quarter earnings release, which is available on its website at investors that Perceptron dot com.
We will begin the call with our prepared remarks, and then open the call to questions. However, before we begin today's call. It's my responsibility to inform you that some of the material that we will be discussing today constitutes forward looking information under the meaning of the private Securities Litigation Reform Act any forward looking statements that are based upon information believes to be true as of today.
Actual results may differ materially for a discussion of some of the factors that could cause actual results to differ please refer to the risk factors section of our latest annual and quarterly filings with the FCC. Additionally, please note that you can find a reconciliation of the historical non-GAAP financial measures discussed during our call in the press release issued today.
Unless otherwise noted comments or in U.S dollars and references to years will be fiscal years, which end on June Thirtyth I will now call turn it over to Jay.
Thanks, Bill and good morning, everybody before.
Before the market opened this morning, we issued two press releases, one announcing our fiscal fourth quarter results and the other announcing that Perceptron has entered into a definitive agreement to be acquired by Atlas copco for $7 a share the off.
The offer from Atlas represents a 71% premium to our closing price on Friday September 25th and a 192% premium from our low point during this calendar year.
Since our inception, nearly 40 years ago Perceptron has grown to become a leading metrology brands one recognized for its ability to provide advanced flexible automation and quality control solutions to a diverse mix of global customers.
For being appointed interim CEO in November of 2019, I, along with our interim CFO Bill Rush line and our board of directors invested significant time and resources to determine the best strategic path forward for Perceptron, whether as a standalone company or alternatively as part of a larger organization as we are.
As we assess the business landscape a couple of critical issues became clear.
First while Perceptron has a strong position in automated metrology in robot guidance, we knew that we needed to grow overtime to compete effectively versus better capitalized more efficient global competitors.
While the company has been highly successful historically or smaller size had become visible hurdle to long term sustainable growth.
Second it became clear that we needed to lessen our reliance on the automotive industry and expand into other industries that have a known and demonstrated need for the solutions. We are most known for that.
That type of expansion would take a meaningful investment of time and resources to ensure it was executed well over the next several years.
So when the opportunity arose for a business combination with a global strategic partner like Atlas Copco, who recognize the long term unrealized value evident our business as reflected by a compelling offer at a significant premium it became clear that the best possible outcome for Perceptron and its shareholders was to move forward with that.
Founded more than 150 years ago Atlas Copco is a global industrial technology leader based and.
Based in Stockholm, Sweden, they had approximately $11 billion in sales last year Atlas Copco is traded on the stock on stock exchange, where the market value of approximately $48 billion there.
Our recent acquisition of Israel vision, a global provider of machine vision solutions made the addition of Perceptron to broaden the portfolio compelling from both a market and a technical fit.
The deal subject recipients approval regulatory approval in certain European countries shareholder approval in the us and other customary closing conditions, we expect to close during the calendar fourth quarter of this year 2020, and I'm excited by the opportunities. This presents for the company and believe it is a great outcome for our employees and shareholders alike.
Switching gears now to our fiscal fourth quarter results. Despite the lingering impact of Cobiz 19, our performance exceeded our internal expectations.
Earnings in the quarter increased more than 62% on a sequential basis during the period driven by increased customer demand in Asia and Europe.
Operations in Asia had resumed by the start of the quarter and Europe was recovering from a covert 19 induced business slowdown.
As a result, we were able to capitalize on pent up customer demand a trend that continued into the fiscal first quarter and enabled us to grow total backlog in Q4 more than 16% sequentially.
Since the Americas Didnt reopen until around mid may they lagged the recovery in Europe and Asia. We are looking for that region to improve the growth rate to levels comparable to that of Europe and Asia. During the first half of fiscal 2021.
Global market conditions are improving despite headwinds from Covance 90, while we have seen a handful of project delays, we have not experienced any project cancellations.
As stated last quarter projects that were already funded appear to be moving forward as do those that have been partially funded we're close.
We are closely monitoring projects with funding targeted for the second half of our fiscal year 2021, but have not witnessed any changes to their status at this point, while we anticipate a continued recovery across our markets as fiscal 2021 unfolds, we have prepared the business for a variety of scenarios.
The proactive cost reductions we executed in February which included a reduction in force allowed us to take improved control over our cost structure in advance of the cobot related slowing in our business. This.
Fiscal Q4 was the first quarter that we received the full benefit of those actions driving material improvements in both our gross and operating margins.
The actions, we took will remain in effect for the foreseeable future and as a result, we anticipate continued strengthening of our organizational cost structure.
Likewise, when we implemented the reduction we executed it at the level, we thought was necessary to support the business over both the near and medium term. So we do not anticipate taking additional cost actions at this time.
Fortunately Unlike fiscal Q3, where we were focused on weather in the early stages of the Cobi crisis. The cost actions. We took in the last quarter allowed us to spend the fourth quarter, helping our customers during a transitional period, while pivoting back toward a focus on growth within both new and existing markets.
While no one can fully anticipate the lingering effects of cobot on the marketplace all indications for the coming quarters are favorable I am excited per account.
Im excited for our company with the pending acquisition by Atlas Copco, and I look forward to the successful closing of the transaction along with a successful integration of our two businesses and as always I want to thank the entire perceptron team for their hard work and diligence in navigating these unprecedented times I will now turn the call over to Bill.
Thanks Jay.
Total sales in the fiscal fourth quarter or $12.6 million close to flat sequentially from the previous quarter and down 5.6 million or 31% in Q4 of the prior year on a sequential basis by geography sales in Asia Rose 1.1 million sales in Europe growth point $3 million and sales in the Americas declined by 1.5 million.
As you May recall quarantine orders related to covered 19 were lifted much earlier in Asia than they were in the Americas region.
On a year over year basis.
Quarterly sales were down $5.6 million with the majority of the decline coming from the Americas down $2.6 million or 48% and Europe down 2.1 million or 23% total book.
Total bookings in the fiscal fourth quarter were 17.6 million up $6.7 million or 61% sequentially from the previous quarter and down $3.2 million or 15% from Q4 of the prior year on a sequential basis by geography bookings in Asia bounced back the strongest increasing $4.3 million.
Were 184%.
Europe increased $1.4 million, or 22% and Americas increased $1 million or 46% on a.
On a year over year basis Asia bookings increased 2.4 million Euro increased 0.1 million, while the Americas declined by 5.7 million.
Gross profit as a percent of sales for the fiscal fourth quarter were 37.5% up 270 basis points from the prior year and up 510 basis points from Q4 of the prior year on a sequential basis gross margin increased due in part to the Reclass of underutilized project engineer labor costs.
Of $800000 DNA as a result of the code is 19 shelter in place orders as well as lower ongoing fixed cost expenses, resulting from our restructuring in February 2020.
On a year over year basis gross margin increased due to both changes in revenue mix and lower fixed manufacturing costs, resulting from our restructuring and cost containment activities.
Turning to operating expenses engineering, and R&D expenses were $1.2 million in the fiscal fourth quarter, a decrease of approximately zero point threemillion compared to the previous quarter and a decrease of approximately 0.8 million from Q4 of the prior year.
The decline in both periods was primarily due to lower labor cost as a result of our third quarter restructuring.
Selling general and administrative expenses were $4.6 million in the quarter, an increase of 0.6 million from the previous quarter and a decrease of.
400000 from Q4 of the prior year, excluding the labor cost Reclass from cost of goods sold in the quarter expenses declined by 4.2 million is sequentially inline with expectations outlined in our last call.
Income taxes for the quarter were zero point $5 million reflective of an a well and other valuation allowances taken for certain geographies net.
Net loss for the quarter was $1.4 million or 15 cents per diluted share compared with a net loss of $8.4 million or 87 cents per diluted share in Q4 of the prior year Ajay.
Adjusted net loss for the quarter, which excludes the impact of severance impairment and other charges was $1.4 million or 15 cents per diluted share compared with $8.8 million or eight cents per fully diluted share in the prior year comparable period.
As of quarter end, we had $4.8 million in borrowings outstanding and $10.6 million in total cash and cash equivalents globally incur.
Included in our borrowings is a $2.5 million PPP loan and we intend to submit our loan forgiveness application related to this loan in the current quarter wood.
With that I would now like to turn the call over to the operator, who will be it will open the call for your questions.
Thank you well now be conducting a question and answer session.
I would like to ask a question. Please press star one on your telephone keypad and the confirmation tone indicate your lines in the question queue.
You May press Star two if you like to remove your question from the Q4.
Participants that are using speaker equipment may be necessary to pick up your handset before pressing the star key.
One moment, please let me pull for questions.
Thank you and our first question is from the line of Greg Palm with Craig Hallum Capital. Please proceed with your question.
Yes, thanks, guys congrats on.
The announcement here I'm not sure what all you can say at this point I know eventually we'll get some more detailed but in terms of the transaction can you give us a little bit more detail on maybe maybe the backbone of the profit.
I guess really specifically, what what I'm interested in and I think others or were there any interest other interested parties in here.
Yes, Hey, good morning, Greg So there.
There I'll start I'll go in reverse order there were other interested parties, which would not be a surprise given the technology portfolio that we have and I think.
As we made transition into my interim role and bills there.
Some parties, who look at it and said will perhaps there is an opportunity here for.
A good combination with Jay and Bill sitting in the in the leadership seats right now and so I did there were several parties who are interested in it in the <unk>.
In the company.
Well ill say that they were all interested parties.
For me and for the rest of the board Atlas made a very compelling cash offer at a significant premium.
For us we have a great leadership position.
The strong position and automated metrology in robot guidance, but we certainly needed to create some more scale for the company right. We were a bit of a niche player. It's a industry that.
Very quickly becoming.
Managed by multiple large players and so that made it difficult for us and I think we wanted to get access to additional end markets for sure. Yes, as we've talked before we had this heavy reliance on automotive and diversification was going to be a key to doing so in your Atlas is.
Is in all of these spaces that were currently and as well as the ones that we were.
Driving the business towards even as a standalone entity and so when we looked at we did a pretty thorough strategic view as a board we put together what we thought was a compelling strategic path forward as a standalone entity, but the path offered by Atlas was more compelling and I think it's a it's a really strong tie up with our technology.
Into their business their recent acquisition of.
Is Europe is a good logical connection there's very little overlap between the two companies do but commonality in terms of the types of customers and where in the facilities, we are selling and operating and so the combination of all of those items may.
Made this a really good path forward and a great solution for the company longer term.
The third quarter.
It does sound like they're kind of building out.
Somewhat of a new vertical here with a couple acquisitions, you know regulatory approvals I mean, you would envision any any any years, you're going to I don't think Israel competes with Perceptron really at all but any regulatory approval concerns on your end or not really.
There are not.
Really the three you're going to be doing the syphilis approval. There is some regulatory approval in a couple of European countries that we need to go through and then obviously the shareholder approval here in the U.S.
After the transaction itself.
You know, we obviously have looked at it very carefully we feel very confident as those outlets in the ability of those approvals to be granted and they did just go through this with Atlas.
Having with I'm sorry, Israel.
And you're right. There is so little overlap between the two businesses that from our perspective, this should be pretty straightforward and it's one of the many reasons, we think that there's a there's a reasonable chance more than reasonable chance that this is going to be closed by the end of the calendar year.
Got it all right I'll leave.
Thanks.
Thanks, Greg.
Thank you at this time I will turn the floor back to Jay Freeland for additional remarks.
Okay, well, thanks, everybody for participating on the call. This morning, we will look forward to keeping everybody updated as the closing process continues and as always I'd like to thank all of you for for joining us I'd like to thank everybody for their support and of course, one last time, thank the perceptron team for for everything they do.
Thanks, very much everybody have a good day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.