edited transcript of alot earnings conference call or presentation 21-nov-18 2:00pm gmt

by:angelacrox     2020-07-10
The third quarter of December 27, 2018 was 2018 astoniva Inc.
Thomson StreetEvents)--
Wednesday, November 21, 2018, at 2:00:00 in the afternoon, an editorial record of astiniva Inc. Earnings Call or presentation
Merrill Lynch Associates. -
President David S.
SmithAstroNova, Inc. -
Chief Financial Officer and Treasurer * Gregory.
WoodsAstroNova, Inc. -
Conference call participant Christopher hillhillary roubaix Capital, LLC-
Richard Allen ryandoough & Company LLC, Research Department-
Vice President and senior researcher of industry * pan Henry BuschEverglades resources-
Founder and President = = = speech--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------
Hello everyone, welcome to the conference call for the financial results of fiscal 2019 in the third quarter of astoniva.
Today\'s meeting is being recorded.
At this time, I would like to transfer the call to Mr.
David Calusdian is an investment consultant from the company, Merrill Lynch staff salon.
Sir, please continue. Calusdian. --------------------------------------------------------------------------------David C.
Salon Merrill Lynch Associates Calusdian-President [2]--------------------------------------------------------------------------------
Thank you, Erica.
Good Morning, everyone. thank you for joining us.
This morning\'s meeting was hosted by Greg Woods, President and CEO of astoniva;
And Chief Financial Officer David Smith.
Greg will discuss the results of the company\'s operations.
David will show you the finances.
Greg will make some summary and then the management will be happy to answer your question.
So far, you should have received a copy of the earnings release released today.
If you do not have a copy, please go to the investor section of the astadeva website, www. astronovainc. com.
Please note that statements made at today\'s conference call that are not statements of historical facts are considered forward --
Outlook statement in the Private Securities Litigation Reform Act of 1934. These forward-
Forward-looking statements are based on some assumptions that may involve risk and uncertainty.
Therefore, there may be significant differences in actual results, except as required by law. Any forward-
As of today, the look statement will only speak on November 21, 2018.
The company is obliged to update these forwarding-
Look at the report.
More information about forwarding-
Looking at the report and the factors that may lead to the difference, see risk factors in astiniva\'s annual report on table 10
K and other documents submitted by the company to the Securities and Exchange Commission.
I\'m transferring the call to Greg now. --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director3]--------------------------------------------------------------------------------Thanks, David.
Good Morning, everyone. thank you for joining us.
This morning, we announced strong results for the third quarter of fiscal 2019, mainly reflecting the continued strong demand from the aerospace industry for our cockpit printers and related supplies.
In particular, the new contracts for Honeywell printer product line and ToughWriter brand printers are excellent.
The business\'s performance in fiscal 2019 highlighted our success in leveraging the elements of the astiniva operating system to drive long-term growth
Deliver long-term value to customers, shareholders and team members through innovative product development, superior quality and lean business processes.
We generated a record $34 revenue this quarter.
2 million, an increase of about 19% over the same period last year.
Our operating margin is 6.
9% of revenue, up 120 basis points from the third quarter of last year.
We report a diluted earnings per share of $0. 20.
David will provide more details on our financial results in a later call.
But first, let me start with product identification and provide some background on our results for the third quarter.
Geographically, we see a good acceleration of orders from the Americas and Asia, and we have added several new distributors in all regions to further strengthen our global channel building.
Revenue increased by 6% over the same period last year, with growth on both QuickLabel and TrojanLabel platforms.
In this quarter, we launched some new products and technical improvements at the Labelexpo Americas and pack expo international trade show in Chicago this year.
These exhibitions were very successful for us, had a strong Booth Attendance and recorded the clues that led us forward.
It\'s worth noting that we premiered Kiaro! QL-
120, our new narrow
Format the desktop color label printer we previously announced in q3.
We also present our latest TrojanLabel products T4 and T2-
In these programs. The top-of-the-
Line Trojan T4 integrates advanced digital printing technology with powerful labeling systems to enable small and medium-sized businesses in the business sector to enter the professional high-end market
Production of digital label printing market. The T2-
C is also a big hit, especially among large brand owners who recognize the benefits of our compact, efficient, professional label printing machines and their high return on investment.
The system is designed with 3 customer groups in mind: brand owners and manufacturers who want to bring the label production requirements-
Label converters seeking flexible solutions to meet the needs of short label operation and professional printing plants. The C --the T2-
C is a valuable tool to attract new customers and improve profitability.
Perhaps the innovation we are most interested in is our new food.
The safe flexible packaging materials we introduced at the packaging Expo.
The material is designed for the entire range of TrojanLabel printers.
This breakthrough technology uses the unique ultra-thin polyester film specially developed to accept our waterbased inks.
The reason why this technology is so notable is because it is used in a wide range of packaging applications for our TrojanLabel printer, especially in fast-
The growing market for food, medicine and medicine.
More and more industries are transforming into flexible packaging to reduce material costs, reduce waste, increase consumer convenience and enhance brand difference.
Our TrojanLabel team is excited and we now have the way to get into this dynamic market.
Steering test and measurement part.
Third-quarter revenue rose 51% from the same period in fiscal 2018.
Our aerospace business is the main driver of this growth, reflecting the contribution of our cockpit printers, supplies and network systems.
Our data collection products have also experienced strong growth, especially the new Daxus and DDX product lines.
As a result, during the second quarter conference call in August, we continued to make steady progress in integration of Honeywell\'s aviation printer product line.
As I mentioned, with production now fully integrated in West Warwick, the final clean-up part of the transition relates to the direct transfer of many individual and client contracts to astoniva.
At the end of October, we managed to transition several larger contracts.
As more and more contracts are transferred to us, we are able to improve our responsiveness and profitability.
However, at the current pace, it is still expected to take several quarters to complete all tasks.
Let me make some comments on our data collection product line to close the discussion in this section.
The third quarter is a prominent quarter, including the addition of new dealers and the release of several product improvements.
Sales are performing well, many of our new products are attractive in both existing and new market areas, and we are satisfied with the progress of this business.
Before concluding, I would like to take this opportunity to publicly welcome Jean Bua, executive vice president and chief financial officer of Nasdaq-
List netscout systems as our fifth independent director.
We announced Jean\'s appointment yesterday and we are pleased that she has joined the board.
Jean has extensive experience in accounting policy, internal control and risk management.
She is the third independent director we have appointed in the past year, following the appointment of Dick valzara and Yvonne schlepi.
We look forward to benefiting from Jean\'s Financial Wisdom, corporate governance experience and technical background.
Now, let me transfer the call to David for more details of our financial results. --------------------------------------------------------------------------------David S.
Asturiva, Inc. Smith-
[Chief Financial Officer and Vice President of Finance4]--------------------------------------------------------------------------------
Thank you, Greg. good morning, everyone.
As Greg pointed out, third quarter revenue grew by 19% over the previous year, mainly reflecting another strong quarter of testing and measurement.
We also continue to show leverage on the operating expense line.
Domestic income is $21.
5 million, an increase of 19%, accounting for 63% of total income.
International income is $12.
7 million, up 19% year on yearon-
37% of total sales.
By Product Category
Consolidated supply revenue rose 19% in the third quarter from a year earlier, hardware revenue rose 39%, and services and other revenue rose 8. 5%.
Gross profit for the third quarter was $13.
9 million, an increase of 18% over $11.
The third quarter 8 million of 2018.
Gross margin fell by 30 basis points to 40 basis points. 7%.
Operating costs $11.
5 million rose by 13.
It was up 6% from the third quarter of last year.
But to remind customers
Amortization of related intangible assets obtained from Honeywell is sales expenses, accounting for the majority of the yearover-year increase.
Operating expenses in the third quarter as a percentage of revenue fell 150 basis points from the same period last year.
Revenue by market segment.
Due to increased sales of printer hardware and supplies, product identification increased by 6% over the previous year.
Testing and measurement increased by 51% over the same period last year.
The division operating profit margin with product identification of 9 has generated operating income of US $2 million.
Compared with $2, 3%.
The third quarter of last year was 7 million or 13%.
This difference is mainly related to investment in new products and growth plans this year.
Operating income from testing and measurement is $3.
Segment operating profit margin of 2 million to 25.
Compared to $1, 4%. 6 million or 18
Thanks to the benefits of Honeywell trading and better results in testing and measuring product lines, the previous year was 9%.
For the investors who made the request, we added a form in the press release with the details of this section.
Our other expenditures for the quarter were around $540,000, mainly related to interest payments and foreign exchange losses.
The income tax reserve for the third quarter was $407,000 and the effective tax rate was 22. 3%.
We expect the tax rate to be around 25% in the fourth quarter and around 27% for the whole year.
Turn to balance sheet.
We left the third quarter for about $19.
2 million of the debt, $7.
8 million in cash and net debtto-
The capital ratio is about 22%.
Normal operating capital expenditure for the third quarter was $99,000, bringing the total for the year to $882,000. to-date.
This year, we expect a total of approximately $2 million, in line with our normal annual business-related capital expenditures of $2 million to $2.
5 million ranges per year.
In addition, this year, with the implementation of our new ERP system, we expect to complete it early next year, and we will spend another $2. 3 million.
It has cost about $1 million so far. That ERP-
Before we go online early next year, related expenditures will appear in the construction and progress.
So the total capital investment this year is actually between $4 million and $4. Scope 5 million.
Non-cash charges are disclosed.
Depreciation for the quarter was $456,000 and amortization was $1.
1 million and stock-
The base compensation is $510,000.
We believe in improving together, higher returns on capital and increasing revenue for each player for $386,000 after a month-
All of this confirms that we are moving in the right direction as we seek to increase shareholder value.
Please note before I transfer the call back to Greg that we plan to attend and host-on-
A meeting at the LD Micro main event in the Los Angeles area next month.
The date and time of our presentation will be posted under \"events and Demos\" in the investor section of our website.
Now I\'m going to turn it back to Greg for his closing remarks. --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director5]--------------------------------------------------------------------------------Thanks, David.
All in all, we started the fourth quarter of fiscal 2019 with good momentum.
With the contributions of aerospace product lines such as Honeywell and ToughWriter, our testing and measurement business performed well.
New products and enhancements in our product identification field extend our capabilities and expand our business to new markets.
We continue to anticipate that revenue in product identification and test measurement will exceed that in the second half of this fiscal year.
The future of asturiva is bright.
Now we are happy to answer your question. Operator?
Questions and Answers--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------(
Operator instructions)
We answer the first question now. --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry2]--------------------------------------------------------------------------------Hello? --------------------------------------------------------------------------------Operator [3]--------------------------------------------------------------------------------Yes. Mr. Ryan. --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry4]--------------------------------------------------------------------------------Okay.
I\'m not sure if it\'s me.
Good quarter, guys.
Greg, you mentioned the acceleration of orders in the Americas and Europe in terms of product ID.
Can you give us more perspective? And is your --
Is investing in new technology centers helping to drive the order trends here? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director5]--------------------------------------------------------------------------------Yes, Dick.
In fact, I say America and Asia because of them. . . --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry6]--------------------------------------------------------------------------------Oh, Asia. Okay. --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director7]--------------------------------------------------------------------------------Yes. Those 2 areas.
Yes, we have added a number of innovative technology centers, as you know.
In the first quarter, we opened a store in the city of Mexico, which is definitely helpful in that area.
In the Asian region, it has more to do with the ongoing business we are developing, and in the region of the world, this relationship is starting to accelerate as the order level increases and orders increase. --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry8]--------------------------------------------------------------------------------Okay.
At this point, does the tariff issue have any adverse effects on you? --------------------------------------------------------------------------------David S.
Asturiva, Inc. Smith-
[Chief Financial Officer and Vice President of Finance9]--------------------------------------------------------------------------------Yes.
This is not a big factor for our business as we have not made and imported a lot from areas hit by tariffs.
So that\'s what we focus on, but it doesn\'t make sense at this point.
We do not expect it to have a significant impact on the future. --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry10]--------------------------------------------------------------------------------Okay.
In terms of testing and measurement, the printer.
Do you ship directly to any end customer?
Or is this still a work that Honeywell is working on? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director11]--------------------------------------------------------------------------------No.
We are doing this and that is what I mean by a contract transfer to those who don\'t know until we actually transfer it to the direct shipping mode and we actually still ship it through Honeywell, of course, they charged us for the service.
So at the end of October, we had some pretty good agreements that actually moved to direct shipping.
So in the last few weeks of October, we got a little bit of benefit.
But of course, these will continue, and we will continue to add more as we move forward. --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry12]--------------------------------------------------------------------------------
Is there a way to quantify what resistance is at this point? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director13]--------------------------------------------------------------------------------Yes. We can\'t --
We do not allow this under the terms of the agreement.
But when we can avoid doubling the service charge per printer, this is a reasonable increase in profitability. --------------------------------------------------------------------------------
Research Department, Richard Allen Ryan, Doherty, LLC-
Vice President and senior research analyst of industry14]--------------------------------------------------------------------------------Sure.
How far did you go in the process?
I may have missed it.
Is this the case for the next few quarters?
But I mean, do you have most of the big customers right now?
Or what is the profile? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director15]--------------------------------------------------------------------------------
It is difficult to quantify it accurately.
What I want to say is that we have more than 1/3 people in it now. But it\'s --
Small and big.
So, in terms of dollar value, it\'s hard to know exactly where it\'s going to be affected.
But some of them just--
In China, for example, it may take longer to actually transfer a contract.
But we will keep working. -
As more and more of these things enter our column, we should see a steady increase in profitability. --------------------------------------------------------------------------------Operator [16]--------------------------------------------------------------------------------
The next question is Steve Busch from Everglades resources. --------------------------------------------------------------------------------
Steven Henry Busch, Everglades Resources Limited-
[Founder and president]17]--------------------------------------------------------------------------------
So there are only a few questions.
What is the realistic addressable market size for new flexible food label packaging products?
Can you reveal some size? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director18]--------------------------------------------------------------------------------Yes. I mean, the --
It\'s hard to quantify what that part of us is. I mean, if --
Only know the general statistics of production-
In terms of the packaging market, flexible packaging is still more than $30 billion.
But that includes all the equipment to make these plastic bags.
It\'s something--
Think about your snacks or things that have flexible packaging, so there are no labels on these flexible bags.
So this allows us to print on the film, which becomes a bag of food or medical products, no matter where they are. So this is a brand. Our new field.
So, in a sense, it\'s a technological breakthrough because you heat-seal these packages so we can\'t print them out with this material that can be used on these machines.
So we can\'t even get into this market until this big breakthrough. So --
We will know more as we move forward.
But what I can say is that the trade show this fall has attracted a lot of interest.
People have not seen it before.
We actually have a TrojanLabel machine that goes straight into the vertical table filling and sealing machine that makes plastic bags, which is very impressive for those who come to the booth. --------------------------------------------------------------------------------
Steven Henry Busch, Everglades Resources Limited-
[Founder and president]19]--------------------------------------------------------------------------------Right.
Sounds interesting. Okay.
I mean, do you have any goals in your first year?
Or do you just feel your way? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director20]--------------------------------------------------------------------------------Yes.
It\'s too early to say.
I mean, mainly a breakthrough in R & D technology, trying to find a way.
We have been studying for about a year.
5 years how to actually do this and materials.
It\'s actually chemistry, material science.
We have it now.
This is a question of meeting and entering the market with packaging companies and brand owners.
But with such a big market, we expect it to have a good impact.
But these things take time. --------------------------------------------------------------------------------
Steven Henry Busch, Everglades Resources Limited-
[Founder and president]21]--------------------------------------------------------------------------------Right. Right. Okay. And do you --
So we have some good growth in hardware sales.
Do you expect our consumables to grow at a higher rate? Or. . . --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director22]--------------------------------------------------------------------------------Yes.
This is of course our goal.
Yes, we have. -
As we mentioned earlier on the phone, we have Toner
The product based is still decreasing, which is a bit of a hassle.
Whether it\'s a label or an ink, we still see a steady increase in inkjet.
So this is still a very good upward trend. And the toner-
We stopped these products about 4 years ago.
It is therefore not too surprising to see this continue to decrease. --------------------------------------------------------------------------------Operator [23]--------------------------------------------------------------------------------(
Operator instructions)
The next question comes from Christopher Hillary, the capital of luberwa. --------------------------------------------------------------------------------
Christopher Edmund Hillary, Roubaix Capital, LLC-
CEO and portfolio manager24]--------------------------------------------------------------------------------
I just wanted to ask if you would like to share some comments on how you see the results today related to your longer period of time
Term target, especially your operating profit. --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director25]--------------------------------------------------------------------------------Yes.
Well, as you can see, it\'s--
Profit margins are indeed increasing year by yearover-
A year or even a quarterover-quarter.
So we\'re watching--
Move steadily in that direction.
We have already carried out a number of initiatives in terms of gross margin as well as operating expense leverage, which we expect will continue to drive us in that direction our goal--------------------------------------------------------------------------------
Christopher Edmund Hillary, Roubaix Capital, LLC-
CEO and portfolio manager26]--------------------------------------------------------------------------------Okay.
And maybe just--
Do you have any color on how you see the M & A pipeline?
In the past few months, there have been some changes in this background, how big is this change? --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director27]--------------------------------------------------------------------------------
Do you mean something special or--
What does background mean? --------------------------------------------------------------------------------
Christopher Edmund Hillary, Roubaix Capital, LLC-
CEO and portfolio manager28]--------------------------------------------------------------------------------
It\'s just whether you feel the opportunity set has improved or remains the same. . . --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director29]--------------------------------------------------------------------------------It stays --
As you might have guessed, the name will change.
But yes, we all have a fair amount of goods in these three businesses.
Obviously, there is nothing we can discuss in detail.
But in fact, we see more opportunities in the aerospace sector. So --
But product identification, testing, and data collection, we usually see 20, 25 opportunities at any given time.
Usually 3 or 4 of them are relatively serious.
But you might think-
If you look at it--
I believe that if you start with a set of 100 at the beginning of the year, most people do not reach the level of serious consideration, whether it is due diligence, price or other issues we have developed, we will find out when we do our due diligence. --------------------------------------------------------------------------------Operator [30]--------------------------------------------------------------------------------
This is the end of today\'s problem. and-answer session. Mr.
Gregory Woods, at this point in time, I would like to turn the meeting back to your concluding remarks. --------------------------------------------------------------------------------Gregory A.
Woods, asturiva, Inc. -
President, CEO and director31]--------------------------------------------------------------------------------Okay. Thank you.
Well, thank you all for participating and for your time and interest in astadeva today.
We look forward to keeping you updated on our progress.
Have a wonderful Thanksgiving with everyone. Bye now. --------------------------------------------------------------------------------Operator [32]--------------------------------------------------------------------------------
This is the end of today\'s call.
Thank you for your participation.
Happy Thanksgiving to you and now you can disconnect.
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