Cimatron Ltd.
Q1/2012 Results Conference Call
May 17, 2012
Conference Coordinator:
Ladies and gentlemen, thank you for standing by.
Welcome to Cimatron's 1st 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 website, www.cimatron.com, at the “Investors”
page.
As a reminder, this conference is being recorded, May 17th, 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 contained in this conference call which are not historical facts contain
forward-looking 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
non-GAAP basis, and those can be found in the press release issued earlier today.
I would like to turn over the call to Mr. Danny Haran, Cimatron's president and CEO.
Mr. Haran, would you like to begin?
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Danny Haran:
Thank you. Good morning and welcome to Cimatron’s first quarter 2012 results
conference call.
We are happy to report yet another strong quarter for Cimatron. As you all probably
know, the CAD/CAM business is characterized by strong seasonality, where the last
quarter of each year is typically the strongest. The last quarter of 2011 was no
exception. For that reason, we always measure year-over-year performance (both in
comparing years and in comparing corresponding quarters of different years) rather
than compare consecutive quarters. Q1 of 2012 practically shines when compared to
Q1/2011, with strong 17% period-over-period growth in new license revenues on a
constant-currency basis, and impressive 69% period-over-period growth in non-GAAP
operating profit. In fact, this is our best-ever first quarter of any year in terms of nonGAAP operating and net profit, at $1.1M and $1.0M respectively.
Looking at all these numbers, as well as the positive cash flow from operating activities
of $2.4M, we can be satisfied with the beginning of 2012. Of course, visibility is still low,
and uncertainties remain, especially in Europe, but as we have stated in the past – this
high level of uncertainty is probably here to stay for some time. Cimatron will continue
to manage its operations and business as planned, taking advantage of the
opportunities presented by the market, while paying close attention to possible threats
that may materialize.
Following our strong results, we declared today a cash dividend of approximately 20
cents per share, representing a total dividend payment of approximately 1.9 million
dollars, payable on June 25, 2012 to shareholders of record at the close of business on
June 4, 2012. This dividend will be paid from our Distributable Earnings, as defined
under Israeli law, and is not part of the potential capital distribution discussed in recent
public announcements. As you may recall, on April 18 of this year we announced the
Israeli court approval for the cash distribution to Cimatron shareholders of up to US$10
million, from Additional Paid-in Capital. That was really not a big surprise, in light of our
strong balance sheet and cash position. That potential distribution may be effected
over the course of a 12 month period following the approval of the court, subject to
subsequent Board approvals of specific payments out of the total potential distribution
amount. We are also in the process of seeking a ruling from the Israeli Tax Authority
with respect to withholding on any such future distributions, but to date this process is
not yet concluded.
Ilan Erez, our CFO, will now review the financial statements. Ilan, please:
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Ilan Erez:
Thank you Danny. Hello everybody and thank you for joining us.
Revenues for the first quarter of 2012 increased by 11%, to 9.9 million dollars,
compared to 8.9 million dollars in the first quarter of 2011.
On a constant currency basis, new licenses revenues increased by 17% and recurring
maintenance revenues increased by 8% in Q1/12 from Q1/11, reflecting the continuing
momentum in our target markets.
The revenue breakdown in Q1/12 was as follows – license revenues: 44%;
maintenance revenues: 47%; and other professional services revenues: 9%. The
geographical revenue breakdown for the quarter was as follows: Europe: 49%; North
America: 33%; Asia Pacific: 14%; and Rest of the World: 4%.
Gross Margin for the first quarter was 87% of revenues, the same as in the first
quarter of 2011.
Operating expenses in the quarter amounted to 7.5 million dollars, compared to 7.0
million dollars in the first quarter of last year. The increase in expenses in Q1/12 was
attributable to the increased level of activity that accompanied the greater demand for
our products, as shown in our increased revenues.
Operating profit in the quarter increased by 69% to 1.1 million dollars, compared to an
operating profit of 700 thousand dollars in the corresponding quarter of 2011.
Net profit for the quarter was 1.0 million dollars, or 11 cents per diluted share,
compared to a net profit of 800 thousand dollars, or 8 cents per diluted share recorded
in the corresponding quarter of 2011. In Q1/12 income tax expense constituted 21% of
income before taxes, while in Q1/11 it was 7% of income before taxes. The main
reason for the higher effective tax rate is higher US tax liability due to our having
completed our use of the remaining US loss carry-forwards towards the end of 2011.
As of the end of Q1/12, our cash and cash equivalents balance, net of short term
bank credit, was 14.2 million dollars, representing approximately 1.52 dollars per
share, with positive cash flow from operating activities of 2.4 million dollars in the
quarter.
We will now open the call for Questions and Answers. Operator, please.
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Operator:
Ladies and gentlemen, at this time we will begin the question-and-answer
session. If you have a question, please press *1. If you wish to cancel
your request please press *2. 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 stand by while we poll for
your questions. I repeat if you have a question please press *1. The first
question is from Don McKiernan of Landolt Securities. Please go ahead.
Don McKiernan: Yeah, thank you. Well, congratulations on a great first quarter and
what looks to be a good start to the year. Can you give us an idea of how
business trends are right now, you know, for the second quarter and for
the balance of the year?
Danny Haran: Well, it's a bit early to say for the second quarter, and definitely for the
year. So far so good as far as we can tell from the major territories. But
you know, as we look around, there's always an option that something
bad will happen in Europe and maybe from Europe to other places. But
so far, from what we see in Q2, we think we're okay.
Don McKiernan: Well, my sense is that you wouldn't be paying out this 20 cent
dividend and also the upwards of a dollar per share dividend unless you
were pretty optimistic about your business going forward. Would that be
a correct statement?
Danny Haran: Well, in general, as we said before, we are optimistic and looking
forwards we think we're in a good position as long as the markets stay
healthy. The capital distribution has not yet been decided by the board.
We just looked, got the court approval to do this up to $10 million
dollars, $1 per share, roughly, if and when the board of directors will
decide to do so. So I don't know if we can really relate one to the other.
But overall, everything you said is fairly correct. We were, we think
we're in a good position.
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Don McKiernan: And it's probably been about 8 to 9 months since you announced that
one, you know, the $10 million dividend. Is that about right?
Ilan Erez:
We announced the application to the court in November 2011. So it took
us like 5 months to get the court approval. It's not 9 months. And in any
case, we are still in the process of getting some approvals from the tax
authority. So the process is not over yet.
Don McKiernan: Okay. And how is the, that what's that product in a box called? I can't
remember the name.
Danny Haran: Superbox.
Don McKiernan: Superbox. How is that going?
Danny Haran: It's going slower than we expected. There are some rentals. Not as, a
little bit lower than what we thought. Varying by territory. Again, not a
huge effect on revenues, but overall we think it's a good addition to our
portfolio.
Don McKiernan: Okay. And my last question, and you kind of touched on it at the
beginning, there's some seasonality in your business, right?
Danny Haran: Yes.
Don McKiernan: From quarter to quarter. What are you strongest quarters and
typically your weakest quarters?
Danny Haran: The strongest is by far the last quarter of the year, Q4. The weakest,
typically, is Q3, mostly because of the summer vacation in Europe and
some other places. And Q1 and Q2, sometimes one is better than the
other, but they are quite equivalent, somewhere in between the strong Q4
and the much weaker Q3. But this is like a typical year pattern.
Don McKiernan: Yeah. Well, I hope you guys have a record year on all fronts, and
thanks for taking my questions.
Danny Haran: Thank you.
Operator:
The next question is from David Cohen of Minerva Advisors. Please go
ahead.
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David Cohen: Good afternoon, guys. Could you talk a little about your product release
calendar for the year and whether you think that will have any impact on
how the revenues are distributed over the next 12 months?
Danny Haran: We do not usually publish it so much ahead. We do expect to have the
next version of CimatronE towards the end of the year, Q4. But quite
frankly, I don't think this will have a significant impact on revenues. Our
customers and the market know that we release versions of CimatronE
and of GibbsCAM every year, sometimes it will be more than one year,
up to 18 months, and they take it into consideration. And it's not that we
see a significant impact, because this is just a periodic cycle that goes on
and on forever. And we do see some impact with respect to training. So
like in the next one or two quarters following a new major release, we
can expect the training revenues to go up slightly. But in general, training
revenues constitute no more than 5-6% of the overall revenues. So the
overall impact is not significant. So I don't know that we can, you know,
based on the release schedules, actually have some kind of inference or
conclusions with respect to revenues.
David Cohen: Got it. Thanks a lot.
Danny Haran: You're welcome.
Operator:
If there are any additional questions, please press *1. If you wish to
cancel your request, please press *2. Please stand by while we poll for
more questions. The next question is from Michael Brcic of
Oppenheimer. Please go ahead.
Michael Brcic: Hi guys. I just wanted to say congratulations. You guys are doing a
good job.
Ilan Erez: Thank you.
Michael Brcic: And is there any trends that you see out there? It seems like from your
press release, it's across the board. There's nothing that stands out up or
down. Would that be right?
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Danny Haran: Yeah. Overall it is across the board. Nothing really, no nothing of
significance. I don't know, maybe I can mention just an anecdote that
Italy is doing very well, and it's not like in line with what you read in the
newspapers. But that could be just a bleep. We don't know. Overall,
things seem to be consistent over all territories.
Michael Brcic: Thank you.
Danny Haran: You're welcome.
Operator:
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, please go ahead with your concluding statement.
Danny Haran: I just want to thank you for participating and looking forward to seeing
you in our future conference calls. Thank you very much.
Operator:
Thank you. This concludes the Cimatron first quarter 2012 results
conference call. Thank you for your participation. You may go ahead and
disconnect.
(End of conference call)
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