Cimatron Ltd.
Q3/2012 Results Conference Call
November 7, 2012
Conference Coordinator:
Ladies and gentlemen, thank you for standing by.
Welcome to Cimatron's 3rd Quarter 2012 Results Conference Call.
All participants are at present in a listen-only mode.
Following management’s formal presentation, instructions will be given for the question
and answer session. For operator assistance during the conference, please press * 0.
If you have not received a copy of today’s earnings release and would like to do so, please
download it from the company’s website, www.cimatron.com, at the “Investors” page.
As a reminder, this conference is being recorded today - November 7th, 2012.
With us on the line today are: Mr. Danny Haran, Cimatron's President and CEO and Mr.
Ilan Erez, Cimatron's CFO.
Before I turn the call over to Mr. Danny Haran, I would like to remind everyone that
statements made during this conference call that are not historical facts contain forwardlooking information with respect to plans, projections, or future performance of Cimatron,
the occurrence of which involve certain risks and uncertainties, which could cause actual
results to differ materially from those currently anticipated. Such risks and uncertainties
include economic and political conditions globally and in Israel, the impact of competition,
supply constraints, as well as certain other risks and uncertainties which are detailed in
Cimatron's filings with the various securities authorities.
The results that will be presented on this call are on a non-GAAP basis, as Cimatron's
management believes that such results better represent the actual state of Cimatron's
business, and make comparisons to previous periods easier. Cimatron also publishes its
results on a GAAP basis, as well as reconciliation between results on a GAAP and nonGAAP basis, and those can be found in the press release issued earlier today. The term
“Constant Currency” relates to data, after eliminating from it the effect of exchange rate
fluctuations between comparable periods.
I would like to turn over the call to Mr. Danny Haran, Cimatron's president and CEO.
Mr. Haran, would you like to begin?
Danny Haran:
Good morning and welcome to Cimatron’s third quarter 2012 results Conference Call.
We are pleased to report another strong Q3 for Cimatron. While not record-breaking as
the previous two quarters had been, we continued to see solid business and strong
demand for our products and services.
As I often do, I would like to remind you of the strong seasonality in our business, where
the third quarter of each year is typically the weakest quarter of the year, mostly because
of the summer vacations in Europe and, to a lesser extent, in North America.
Nevertheless, it was a strong quarter, with small growth in our revenues on a constant
currency basis, and a solid $1.0M of non-GAAP operating profit, which equaled last year’s
Q3 operating profit. This is the twelfth consecutive quarter in which we have achieved
positive operating profit, following the global manufacturing crisis in 2009.
Overall, 2012 is shaping up as a very good year for our company. The first nine months
exhibit record revenues of $30M and record non-GAAP operating profit of $3.8M, as well
as record positive cash flow from operating activities of $5.1M. These nine-month results
surpass our results for the first nine months of any other year. We believe that Q4,
typically the strongest of each calendar year, will complete this record year to our
satisfaction.
Today we also announced a dividend of approximately one million dollars. This does not
yet come from the cash distribution of up to 10 million dollars from paid-in capital that we
announced back in November of last year, for which we are still working on certain
regulatory approvals. That distribution will also require board approval regarding specific
distribution amounts and dates of payment, if any.
Ilan Erez, our CFO, will now review the financial statements. Ilan, please:
Ilan Erez:
Thank you Danny. Hello everybody and thank you for joining us.
Revenues for the third quarter of 2012 were 9.5 million dollars, compared to 9.6 million
dollars in the third quarter of 2011, an increase of 3% on a constant currency basis.
In the first nine months of 2012, revenues were 30.0 million dollars, compared to 28.5
million dollars in the corresponding period of 2011, an increase of 9% on a constant
currency basis.
The revenue breakdown in Q3/12 was as follows – license revenues: 41%; maintenance
revenues: 54%; and other professional services revenues: 5%. The geographical revenue
breakdown for the quarter was as follows: Europe: 46%; North America: 34%; Asia Pacific:
15%; and Rest of the World: 5%.
Gross Margin for the third quarter was 89% of revenues, as compared to 88% in the
corresponding quarter of 2011.
For the first nine months of 2012, gross margin was 88% of revenues, the same as for the
first nine months of 2011.
Operating expenses in the third quarter amounted to 7.4 million dollars, compared to 7.5
million dollars in the third quarter of last year.
In the first nine months of 2012, operating expenses were 22.7 million dollars, compared
to 22.1 million dollars in the corresponding period of 2011, reflecting our increased level of
activity that accompanied the greater demand for our products, as shown in our increased
revenues.
Operating profit in the third quarter was 1.0 million dollars, the same as in the
corresponding quarter of 2011.
During the first nine months of 2012 operating profit increased by 27% to 3.8 million
dollars, from 3.0 million dollars in the corresponding period of 2011.
Net profit for the third quarter was 700 thousand dollars, or 7 cents per diluted share,
compared to net profit of 800 thousand dollars, or 9 cents per diluted share recorded in the
corresponding quarter of 2011. In the first nine months of 2012, net profit was 2.7 million
dollars, or 29 cents per diluted share, compared to a net profit of 2.9 million dollars, or 31
cents per diluted share, in the first nine months of 2011.
The contrast between operating profit (which rose significantly in the first nine months of
2012 compared to the same period of 2011) and net profit (which slightly declined in the
first nine months of 2012 compared to the corresponding period of 2011) was mainly
attributable to an increase in income tax expense. Income tax expense was 26% of
income before taxes in the first nine months of 2012, causing a more significant reduction
in net profit, whereas it was only 3% of income before taxes in the first nine months of
2011. The main reason for the higher effective tax rate in 2012 is the Company’s having
completed the use of its remaining U.S. tax loss carry-forwards towards the end of 2011.
As of the end of Q3/2012, our cash and cash equivalents balance, net of short-term
bank credit, was 12.2 million dollars, representing approximately 1.31 dollars per
outstanding share. Our cash flow from operating activities in the first nine months of 2012,
excluding the one-time payment of 2.5 million dollars to the Office of Chief Scientist in the
Israeli Ministry of Industry, Trade and Labor, was 5.1 million Dollars, an increase of 1.0
million dollars, or 24%, compared to the same period of 2011.
We will now open the call for Questions and Answers. Operator, please.
Operator:
If you have a question please press star one. If you wish to cancel your
request, please press star two. If you are using speaker equipment, kindly
lift the handset before pressing the numbers. Your questions will be polled
in the order they are received. Please standby while we poll for your
questions. The first question is from Michael Brcic of Oppenheimer and
Company. Please go ahead.
Michael Brcic: Thank you. Congratulations once again.
Danny Haran: Thank you.
Michael Brcic: Couple of really quick questions. One is the usual question, how is the
environment out there at the moment, and two, on the 10 million possible
dividend you’re talking about, I guess another option, have you looked at it,
is a share buy-back, but then again, you got this lack of liquidity, so I guess
that would just make that part of it worse. I guess anything else on the
investor front of getting the word out. Anyway, thank you, though.
Danny Haran: With respect to the environment, I would say it is the same as it had been in
the last several quarters. Overall, business is good. We do not see any
softness in our own business. Papers remain iffy, but overall, we do not see
any significant change in the environment. We keep on exercising our
plans, and overall we see good results in most key territories. We’ll see how
Q4, the coming quarter is the most significant of each year, and we’re
looking to see how that will shape, so we can really see if there is any
change in the trend. So, overall, that is the answer on the environment.
With a respect to buy-back or the dividend, I really don’t think this is the
appropriate place or time to discuss. Obviously, we have an internal
discussion of how best to serve our shareholders and the decision of the
board, following the court approval, was to go with this capital distribution,
and again, there are still some issues where we look for regulatory
approvals, and as soon as we’ll have those, the board will have to convene
and approve and we’ll see how that goes. When we have more to add, of
course we will make that public. With respect to the – and really that’s
pretty much it – with respect to gain more public relations in the US, we
stand pretty much where we were. No major changes to that point.
Michael Brcic: All right, well, congratulations once again.
Danny Haran: Thank you.
Operator:
If there are any additional questions, please press star one. If you wish to
cancel your request, please press star two. Please stand by while we poll for
more questions. There are no further questions at this time. A replay of the
call will be available on Cimatron’s website www.cimatron.com starting
tomorrow. Mr. Haran, would you like to make your concluding statement?
Danny Haran:Thank you. Thank you again for joining us, and we look forward to meeting
you again next quarter. Thank you very much.
Operator:
Thank you. This concludes the Cimatron 3rd Quarter 2012 Results
Conference Call. Thank you for your participation, you may go ahead and
disconnect.
[End of conference call]