Veidan Conferencing Solutions
Cimatron Ltd.
Q1 2009 Results Conference Call
May 26th, 2009
Operator:
Ladies and Gentlemen, thank you for standing by. Welcome to the
Cimatron first quarter 2009 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 release and would like to do
so, please download it from the company website at the investor’s page at
www.cimatron.com. As a reminder this conference is being recorded
May 26th, 2009. With us online today is Mr. Danny Haran, Cimatron’s
president and CEO. 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
the company, the occurrence of which involves certain risks and
uncertainties which could cause actual results to differ materially from
those currently anticipated. Such risks and uncertainties include
dependence on economic and political conditions in Israel, the impact of
competition, supply constraints, as well as certain other risks and
uncertainties that are detailed in the company’s filings with the various
securities authorities. I would like to now turn the call over to Mr.
Danny Haran, Cimatron’s president and CEO. Mr. Haran would you like
to begin?
Danny Haran:
Yes, thank you. Good morning and welcome to Cimatron’s first
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quarter 2009 results conference call. Before we start let me apologize for
the absence of Mr. Ilan Erez, our CFO who is always on the call with us.
Ilan could not attend today because his wife is actually giving birth as we
speak pretty much. So, of course he is at her side, and we wish them a
smooth eventless birth giving. So I will do the presentation first and then
I will go over the numbers which Ilan used to do, and then you can ask
questions. The first quarter of 2009 has been challenging, as expected.
Our results reflect the depth and breadth of the global slowdown in
manufacturing.
Many of our customers are fully exposed to the weak
consumer market in areas such as automotive and consumer electronics.
Real business slowdown combined with uncertainty regarding the future
seriously decreases their propensity to invest in new software even in
cases where productivity and quality gains are very evident. The direct
result is a steep decline in our revenues from new software deals, down
37% from the same quarter in 2008.
We see fewer leads and
possibilities, but mostly we see prospects delaying their buying decisions.
We believe that other vendors suffer from similar if not higher declines.
It is encouraging to see that our revenues from maintenance have stayed
robust and even grew modestly compared to Q1 2008.
Existing
customers show confidence in the product and in our support and
continue to renew their maintenance contracts. In a few days, we expect
to release CimatronE version 9 which will fully reward our maintenance
customers for their continued support. With hundreds of improvements
throughout the product the new version will help our customers to be
more productive and more competitive, essential factors in today’s
market.
We believe that our continued investment in R&D and
continuous improvement and expansion of our product will help us
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sustain strong maintenance revenues in the future.
At this time we
cannot predict when the market will turn around. It depends on the
overall global economic situation and on our customers’ level of
confidence and will to invest in new technology. Loyal to our prudent
business practices we continue to maintain tight control over our budget,
reducing expenses where possible without hurting our software
development and marketing activity. I personally believe that the key
factors of success in this difficult period are perseverance and focused
execution of our long term product and market strategy.
I believe
Cimatron has the tools, the people, and the means to maintain our
customers’ satisfaction and gain market share; things that will translate to
better business success when the economy eventually turns around. We
will now review the financial statements, the thing that Ilan is usually
used to do.
The results we will present are on a non-GAAP basis, as we believe they
better reflect that actual state of our business and make comparisons to
previous periods easier. We have also published our results on a GAAP
basis as well as a reconciliation between results on a GAAP and nonGAAP basis, and those can be found in our press release issued earlier
today.
Revenues on a non-GAAP basis for the first quarter of 2009 were $7.8
million compared to $10.3 million in the first quarter of 2008. On a
constant currency basis, the revenues in Q1 ‘09, were down 18% from
Q1 ‘08, with a decrease of 37% in product revenue, an increase of 3% in
maintenance revenues and a decrease of 20% in other services revenues.
The revenue breakdown in the first quarter of 2009 on a non-GAAP basis
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was as follows: license revenues 34%, maintenance revenues 53%, other
professional services revenues 9% and hardware revenues 4%.
The
geographical revenue breakdown for the first quarter of 2009 was as
follows: Europe 54%, North America 29%, Asia Pacific 12% and rest of
the world, 5%.
Gross profit on a non-GAAP basis for the first quarter of 2009 was $6.5
million, or 83% of revenues, as compared to $8.4 million or 82% of
revenues in the same period in 2008.
R&D expenses in the first quarter of 2009 were $1.4 million, compared
to $1.8 million in the first quarter of 2008. Approximately half of the
decrease is attributed to the weakening Israeli shekel against the US
dollar, while the other half of the decrease reflects the expense control
measures that we took.
Sales and marketing and G&A expenses on a non-GAAP basis in the first
quarter of 2009 were $5.3 million compared with $6.4 million in the first
quarter of 2008. Approximately $400,000 of the decrease are attributed
to the weakening Euro and Israeli shekel against the US dollar, while the
remainder of the decrease reflects the expense control measures that we
took.
Operating loss on a non-GAAP basis for the first quarter of ’09 was
$265,000, compared to an operating profit of $277,000 in the first quarter
of 2008.
Net loss on a non-GAAP basis for the first quarter of 2009 was $407,000,
or four cents per diluted share, compared to a net profit of $235,000, or
two cents per diluted share, recorded in the same quarter of 2008.
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In Q1 ’09 our financial expenses were higher than in Q1 ’08, mainly due
to the weakening Euro and Israeli shekel against the US dollar.
We will now open the call for questions and answers. Operator, please.
Operator:
Thank you.
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.
Operator:
The first question is from Don McKiernan of Landau Securities. Please
go ahead.
Don McKiernan:
Hello.
Danny Haran:
Hello.
Don McKiernan:
I'm just curious how things are going in China for you guys. I
know that was an area that I think you began moving into a year or two
ago.
Danny Haran:
Yes. In China, in the south of China, I think I mentioned it a few
times, that we have actually two quite different markets in China. One is
the commercial private sector in the South of China in the Guangzhou
area, and the other one is the government market, mostly around Beijing
and Chengdu. The South is the area where everything is made in China.
It is suffering badly today. There literally thousands of factories have
been closed in that area, and we definitely see a decline. Luckily, we
actually see some good numbers in the North, in the government sector,
which seems to be less affected, maybe even the opposite, as the Chinese
government is trying to stimulate the economy. So overall, China is
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holding up, but not, definitely not in the South right now, where the
economy is quite depressed, and mold and die makers truly suffer.
Don McKiernan:
And can you tell me who would be your top three competitors
worldwide for all of Cimatron?
Danny Haran:
Okay. We have several major competitors, not all of them we see
the same force, let's say, everywhere, and not all of them in the same
areas. But we can mention Delcam, a U.K.-based company, mostly
competing with us on the NC side, the CAM side of the market. We have
Missler, a French company, competing mostly on the CAD, and Visi,
Vero is actually the name of the company, also competes mostly on the
CAD side, on the mold design side, of our business. Of course we have a
few, the few large companies, namely Dassault and the CATIA product,
UG is today Siemens PLM, and their UG product line, and PTC with the
ProE product line. These companies are mostly PLM, product lifecycle
management companies, but they do have very large CAD/CAM activity,
and we see them pretty much everywhere, where they sell mostly to the
high-end part of the market. I think these are the key competitors that we
see worldwide. Maybe we should also mention Open Mind, a German
company in the high-end aerospace 5-axis manufacturing.
Don McKiernan:
And from a competitive standpoint and in securing your business,
are you holding your own, slipping a little bit, or gaining market share?
Any thoughts on that in general?
Danny Haran:
We're quite sure we are not losing market share. We do not see
any area where we feel weaker than before. Maybe the contrary in some
areas where we have introduced new products such as Die Design, we're
definitely strengthening our position in Die Design, because a year, two
years ago we did not have a dedicated vertical product for that segment,
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and today we actually have a very competitive offer. The same holds true
for 5-axis, the high-end aerospace discrete part manufacturing, which is
now like 2, 2 and a half years with a dedicated product. So definitely
we're holding our own, gaining some market share in some areas, and we
also see from some of the reports of our competitors that they see
reductions of new product sales in the same magnitude, even a little bit
higher than what we see. So overall, versus the competition, we feel
we're okay.
Don McKiernan:
And did you have a stock buy-back in place? I can't recall.
Danny Haran:
Yes, we have a stock buy-back plan right now. Because we're
following the Safe Harbor rules, we actually buy a very small amount of
shares according to what we're allowed. But yes, the board has approved
such a plan, and it's going on a regular basis. But again, on a relatively
low volume.
Don McKiernan:
I think you said in your comments that business wasn't being so
much canceled, but postponed. Is that correct?
Danny Haran:
Yes, that is correct.
Don McKiernan:
And when do you see that, any sense from your pipeline that
things might start to improve any time soon?
Danny Haran:
As I said before, no. We do not know when this, we do not see
yet signs for that. Again, there's like specific, it's not like there's no
orders are being placed. We do see orders. But as a trend, we see a great
concern and lack of confidence to go ahead and invest to the capital
investments that really drive our business. We see customers also
stopping or delaying their acquisitions of NC machines, even in a bigger
decrease than in software. And I cannot tell right now when this will turn
around.
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Don McKiernan:
Operator:
Thanks for answering my 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 statements?
Danny Haran:
Thank you. Thank you for joining Cimatron's conference call. I
hope to meet you all in the future. And just a note, if you have any
further questions that you would like to address directly to Ilan Erez, our
CFO, maybe some more questions regarding the specific numbers, please
contact him by the e-mail. The address is on the press release. Thank you
very much. Bye-bye.
Operator:
Thank you. This concludes the Cimatron first quarter 2009 results
conference call. Thank you for your participation. You may go ahead and
disconnect.
(End of conference call)
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