Cimatron Limited's CEO Discusses Q1 2013 Results - Earnings Call Transcript

May.13.13 | About: Cimatron, Limited (CIMT)

Cimatron Limited (NASDAQ:CIMT)

Q1 2013 Earnings Conference Call

May 13, 2013 9:00 a.m. ET

Executive

Danny Haran – President and Chief Executive Officer

Ilan Erez – Chief Financial Officer

Operator

Welcome to Cimatron's First Quarter 2013 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. (Operator Instructions)

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, May 13, 2013. 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 contains forward-looking information with respect to plans, projections, or future performance of Cimatron, 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 economic and political conditions globally and in Israel, the impact of competition, supply constraints, exchange rate fluctuations, as well as certain other risks and uncertainties that are detailed in Cimatron's filings with the US Securities and Exchange Commission.

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. 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

Thank you. Good morning and welcome to Cimatron’s First Quarter 2013 Results Conference Call. We are pleased to report another solid first quarter with record license and record maintenance revenues for the first quarter of any calendar year. The strong 6% growth in maintenance revenues is very satisfying, while the modest 2% growth in license revenues is below our expectations.

However, that figure is mostly the result of revenue recognition considerations, and we believe we will be able to recognize those revenues later this year. Furthermore, we expect enhanced momentum in growth and product and services revenues as the year progresses, as the new product versions are more widely adapted in all territory.

We have continued our efforts in the additive manufacturing, or additives better known as 3D printing market. But as we said before, this is a long-term effort and we do not see meaningful revenues yet. We continue to explore partnerships and the many opportunities in product development directions for this market.

Just to be clear on the M&A side, we are looking for mature companies with revenues and profit that possess technology that is relevant to additive manufacturing. In parallel, we continue to invest more in sales and marketing in regions, where we believe these efforts will enable us to increase our first sales in the coming quarters.

Ilan Erez, our CFO, will now review the financial statement. Ilan, please.

Ilan Erez

Of course. Thank you, Danny. Hello, everybody, and thank you for joining us. Revenues for the first quarter of 2013 was $10.2 million, compared to $9.9 million in the first quarter of 2012.

The revenue breakdown down in Q1 '14 was as follows – license revenues, 44%; maintenance revenues, 49%, and other professional services revenues, 7%. The geographical revenue breakdown for the quarter was as follows – Europe, 49%; North America, 30%; Asia Pacific, 16%; and the rest of the world, 5%.

Gross margin for the first quarter was 88% of revenue, as compared to 87% in the first quarter of 2012. Operating expenses in the first quarter amounted to $8 million, compared to $7.5 million in the first quarter of last year. The increase mainly reflects our increased investment in sales and marketing, as Danny mentioned earlier. Operating profit in the first quarter was $1 million, compared to $1.1 million in the corresponding quarter of 2012.

Net profit for the first quarter was $713,000 or $0.08 per diluted share, compared to net profit of $986,000 or $0.11 per diluted share recorded in the corresponding quarter of last year.

Income tax expense was 28% of income before taxes in the first quarter of 2013, compared to 21% of income before taxes in the first quarter of 2012. We expect income tax expense in full 2013 to be around 25% of income before taxes.

As of the end of March 2013, our cash and cash equivalents balance, net of short-term bank credit was $3.7 million. Due to the typical seasonality in our cash flow, we usually show the highest cash balance by the end of June of each year. As of today, our net cash balance has already increased by $1.5 million from the end of Q1 to approximately $5.2 million.

We will now open the call for questions and answers. Operator, please.

Question-and-Answer Session

Operator

Thank you, Sir. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. (Operator Instructions)

The first question is from (Anya Shoertin from Sidoti). Please, go ahead.

Unidentified Speaker

Hi. I'd like to know would it be possible for you to give us your expected revenue growth numbers for over the next quarter and over the next year? And could you break it down by a segment?

Ilan Erez

Well, basically, we do not provide guidance, so we cannot discuss any specific revenue of our expectations. Typically, we could say that our maintenance revenues are around 50% of our total revenues, somewhere between 48% to 50%. License revenues were around 44% to 45%; and the rest is other professional services, mainly training that we provide, together with licenses that we track.

Unidentified Speaker

Okay. Thank you.

Operator

(Operator Instructions) The next question is from (Lawrence Atkins), please go ahead.

Unidentified Speaker

Thank you for taking my question. Are there any expectations of dividends for the next quarter?

Ilan Erez

Well, the dividend that we paid in the last two years were always special cash dividend subject to the board of directors resolution. So, we do not have a fixed dividend payment policy. (inaudible) dividends will be down, they will be based on further board resolution.

Unidentified Speaker

Thank you.

Operator

There are no further questions at this time. Mr. Haran, would you like to make a concluding statement?

Danny Haran

Thank you. Well, on behalf of the management, I would like to thank you for your continued interest and long-term support of our business. I do look forward to speaking with you and update you, greeting you again next quarter. Thank you and have a good day.

Operator

Thank you. This concludes the Cimatron First Quarter 2013 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.

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