Emory Berry - EVP and CFO
Dan Mondor - President and CEO
Concurrent Computer Corp (CCUR) F3Q 2013 Earnings Call April 30, 2013 4:30 PM ET
Welcome to the Concurrent Earnings Conference Call for the 2013 Third Quarter Financial Results. This call is being recorded for replay purposes. If you have any objections, you may disconnect at this time. This call is also being webcast live via the Internet at www.ccur.com. After accessing the web page please press the Investors tab in the About section. This call will be a listen-only call as the Company will review its reported results.
I would now like to introduce Mr. Emory Berry, Chief Financial Officer and EVP of Operations. Sir, you may begin.
Thank you operator, and good afternoon everyone, and welcome to Concurrent’s fiscal third quarter earnings conference call for the period ended March 31, 2013. With me today is Dan Mondor, Concurrent’s President and Chief Executive Officer. Before we begin let me remind you that this conference call may include forward-looking statements such as beliefs, expects, estimates, anticipates, and other similar expressions.
These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Accordingly, the cautionary statements made in Concurrent’s 10-K and 10-Q filings with the Securities & Exchange Commission are incorporated here and by reference. The company’s actual results could differ materially from forward-looking information presented on this call.
The content of this webcast contains time sensitive information that is accurate only as of the date of this live broadcast, April 30, 2013. Any redistribution, retransmission, or rebroadcast of this call in any form without the expressed written consent of Concurrent is prohibited.
I caution you that any forward-looking statements made by the company are no guarantees of future performance and that a variety of factors could cause our Company’s actual results and experience to differ materially from the anticipated or projected results, which the company may discuss on this conference call.
You should all have a copy of the earnings release for Concurrent’s fiscal third quarter. If you have not received a copy, please contact Sandra Dover at 678-258-4112 and she will be happy to provide you with a copy. Alternatively, you may visit the company’s website at www.ccur.com and find a copy in the Investors section of the website under the About tab. Additionally, if you would like to arrange a call with management at any time to discuss the business, I invite you to contact Sandra
Dan Mondor will now provide an update on our business, Dan.
Thanks Emory. Good afternoon everybody and thanks for joining today’s call. We are pleased to report continued improvement in our business performance, coupled with positive market acceptance and customer adoption of our latest generation video, media data, and high performance real-time Linux solutions. All in all, it was another solid quarter for Concurrent.
The multi-screen video market remains highly dynamic and it continues to evolve as consumer demand for anytime anywhere access to video content grows. With increased competition from internet based over the top services, cable and Telco provider are expanding their classic TV services to new screens and introducing new services that change the way we view consumers' new content.
The goal is clear; to retain existing subscribers, attract new ones and drive additional usage by making more video content available on more devices so people can watch what they want, when and where they want it.
Concurrent is well positioned to help operators achieve these goals. We achieved a number of important milestones this quarter. First, we are reporting our fifth consecutive quarter of profitability and higher revenue, both sequentially and as compared to our third fiscal quarter of last year.
This is a result of improved operational efficiency and continued focus on wining new customers, better serving existing customers and expanding our deployment footprint worldwide. We recently announced the selection of our unified content delivery solution by Virgin Media in support of multi-screen Virgin TV anywhere service.
Virgin Media is the largest quad-play provider of broadband internet, television mobile and fixed line telephony services in the United Kingdom. So we are very pleased to have been awarded their business and we look forward to working with them to deploy the next generation IP video platform.
In addition to adding new customers like Virgin Media, we’ve been working with a variety of existing customers to expand their systems using our unified CDM technology. Since our software supports both classic VOD and multi-screen video delivery simultaneously, customers can expand the capacity of their existing DOD systems and take advantage of the same investment to deploy multi-screen TV everywhere services in the future.
In real-time, we delivered visual servers to KCI in Korea for the K series tank platoon stimulation program and iHawk systems to a major contractor for U.S. army program. I will comment on our product and solution directions, as well as additional milestones achieved after we review our financial results.
Now, I will turn the call over to Emory.
Thank you Dan. Our revenue in the fiscal third quarter was $16.9 million, compared with revenue of $16.6 million in the second quarter and a 4% increase as compared with the $16.3 million in the fiscal 2012 third quarter.
Turning to our product line revenue details, Concurrent's, video revenue which includes MDI was $9.8 million, representing approximately 58% of fiscal third quarter revenue, compared with $10.5 million or 65% of revenue in the comparable period of fiscal 2012.
In the preceding second quarter video revenue was $9.7 million, representing 59% of total revenue. The balance represents our real time revenue, which was $7.1 million for the fiscal third quarter of 2013 and $5.8 million in 2012 respectively. The real time revenue was $6.9 million in our second quarter fiscal 2013.
Gross margin for the fiscal third quarter was 59%, compared with 62% in the third quarter last year. Total operating expenses for the fiscal third quarter were $8.8 million, down 6% from the third quarter a year ago and up 1% from the second quarter of fiscal 2013.
For the third quarter of fiscal 2013, we reported operating income $1.233 million, which included non-cash expenses of $758,000 in depreciation and amortization and $224,000 of share based compensation, compared with operating income of $732,000 in the comparable period of fiscal 2012, which included non-cash expenses of $875,000 in depreciation and amortization, and a $127,000 of shared based compensation.
The Company reported an income tax provision of $67,000 during the quarter, equal to $0.01 per share. For the comparable period last year, the Company had an income tax provision of $131,000, equal to $0.02 per share. Net income was $937,000 for the third fiscal quarter of 201, equal to $0.11 per diluted share compared with net income of $337,000 or $0.04 per share in the comparable period last year.
Looking at our results for the first nine months of fiscal 2013, total revenue was $48.5 million, compared with $45.6 million in the first nine months fiscal 2012. Our video revenue represented 59% of our total revenue for the first nine months of the current fiscal year versus 60% of total revenue a year ago. Gross margin for the first nine months of fiscal 2013 were 58%, compared with 58% in the first nine months of the prior year.
Total operating expenses for the fiscal first nine months in 2013 were $25.8 million, compared with $28.5 million in the first nine months of the prior fiscal year, reflecting the improvements in our operating model.
The company reported operating income of $2.5 million, which included $2.4 million in depreciation and amortization and $593,000 of share based compensation, compared with an operating loss of $2.2 million in the comparable period of fiscal 2012, which included non-cash expenses of $2.7 million in depreciation and amortization and 583,000 of shared based compensation.
Net income for the nine month period was $1.9 million or $0.22 per diluted share, which included a tax provision of $180,000 or $0.02 per share. This compares with a net loss of $3.1 million or $0.36 per share for this same period last fiscal year.
And providing some highlights from Concurrent’s balance sheet, the Company’s financial position remains strong with no debt. We finished the third quarter with cash of $22.4 million, versus cash of $29.6 million at June 30th and $24.6 million at the end of the second quarter.
During fiscal 2013, the company began paying quarterly dividends of $0.06 per share. The company has paid four $0.06 dividends during the current fiscal, year as well as a special dividend of $0.50 per share. Overall, the company has paid out dividends of $6.5 million. In addition, we finished the recent quarter with $25.7 million in working capital, also reflecting a healthy balance sheet.
Now, I’d like to turn the meeting back over to Dan.
Thanks Emory. As I mentioned earlier, our video and media data solutions are designed to reduce the complexity associated with watching new multi-screen video services. Our ability to simultaneously deliver video to any screen from a common software solution and to gather media data intelligence across screens we believe is unique in the industry.
By integrating support for classic VOD and IP video services into one solution, we provide our customers a seamless migration path and a set of future proof solutions that meet the needs of a rapidly evolving industry.
I would like to spend a few minutes on our product direction. Our video solutions business is focused on three main product areas, content delivery solutions, dynamic content adaptation and media data intelligence.
Our content delivery solutions are designed for delivery of high quality video to consumers on every device. Increased competition from over the top providers has compelled traditional service providers to respond by launching their own multi-screen service offerings. Operators are investing in next-generation content delivery network solutions that can support HTTP adaptive bit rate streaming formats with a goal of streaming live and on-demand video to consumer devices.
In addition, growth and the availability of high definition content and a desire to increase video on-demand catalog sizes has helped to drive expansion requirements for classic VOD. Concurrent’s unified CDM solution uniquely addresses these market drivers by combining IPCDM functionality with support for classic services like VOD into a single software platform.
Dynamic content adaptation solutions are a recent and exciting new opportunity for Concurrent, with an increasingly diverse array of video enabled consumer devices, content sources and multi-screen service applications, operators are faced with an array of new requirements, many of which are device application and circumstance specific.
In short operators are looking for ways to infuse intelligence into their CDMs to automate the content workflow process. Concurrent’s dynamic content adaptation solutions are designed to support these needs by adjusting content on a fly to satisfy individual stream requirements.
We believe our software-based approach is unique in the industry in that it allows operators the flexibility to either build new networks or to seamlessly infuse our technology into their pre-existing content delivery networks.
Concurrent’s media data intelligence solutions are focused on improving operator’s understanding of how consumers purchase and interact with content. Our MDI solutions bridge across multiple sources gathering data from content delivery networks, classic VOD systems, linear broadcast systems and back office systems to provide a dashboard for analyzing system and business performance.
With the introduction of CDMs and new multi-screen services, operators are keenly interested in understanding how consumers are responding to new multi-screen service offerings. By spanning both traditional and next-generation video delivery systems, our media data intelligence solutions provide a unique capability for understanding how the video landscape is evolving. In summary, we believe our video solution portfolio is very well positioned in the market.
Turning to real time, the aerospace, defense and automotive markets have high performance simulation requirements that require open software solutions and powerful simulation packages to meet the needs of specific applications, fundamental requirements to run on commercial off the shelf hardware, rather than proprietary solutions that are difficult to manage and upgrade.
Our RedHawk real time Linux operating system is open software and provides ultra-high performance on commercial off the shelf hardware. Our simulation workbench software works with industry standard modeling packages and provides an easy to use interface that supports multiple modeling packages simultaneously.
Working with a variety of partners, these modeling packages have enhanced our competitive position, notably in the automotive markets. This has provided us increased traction with Japanese and European automotive companies, and we continue to win business in new markets with our real time Linux operating system.
For example we have gained traction in the financial market for high speed trading applications, and we recently delivered RedHawk to a global entertainment company to support their real time needs for rides and Animations. In summary our real time products are well aligned with the application needs of our target markets.
As I mentioned in my opening remarks, we achieved a number of important milestones in the past quarter that highlight the progress we're making. The Virgin Media deal is a great opportunity for us to showcase our IPCDN technology and in February we announced a nationwide deployment of our CDN solution to a top five cable operator for VOD content expansion.
Whether a customer is launching a pure IP video solution like Virgin Media or a large scale classic VOD solution we have the technology required to meet their needs. In addition as further proof of our market leadership last quarter we were again recognized by independent analyst firm Current Analysis. Current Analysis compared our unified CDN solution to competing solutions available from Cisco, Edgeware, Aris, and Harmonic and once again named us the market leader for on-demand video servers.
In conclusion we are encouraged by our recent wins, the competitive position of our products and solutions and continued progress in our financial performance. Thank you for participating in today's call and have a great afternoon.
Thank you, ladies and gentlemen this will conclude our conference call for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.
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