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Concurrent Computer Corporation (NASDAQ:CCUR)

F1Q14 Earnings Call

October 29, 2013 4:30 PM ET

Executives

Emory Berry – CFO and EVP, Operations

Dan Mondor – President and CEO

Operator

Ladies and gentlemen thank you for standing by. Welcome to Concurrent’s Earnings Conference Call for the 2014 First Quarter 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.

I would now like to introduce Mr. Emory Berry, Chief Financial Officer and EVP of Operations. Sir, please begin.

Emory Berry

Thank you, operator, and good afternoon everyone, and welcome to Concurrent’s fiscal 2014 first quarter earnings conference call for the period ended September 30, 2013. Joining me today is Concurrent’s President and Chief Executive Officer, Dan Mondor.

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 and Exchange Commission are incorporated here and by reference. The company’s actual results could differ materially from the forward-looking information provided on this call.

The content of this webcast contains time sensitive information that is accurate only as of the date of this live broadcast, October 29, 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 have a copy of the earnings release outlining Concurrent’s fiscal 2014 first quarter results. 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, the release can be found on the company’s website at ccur.com on the Investors page under the About tab. Additionally, please contact Sandra if you would like to arrange a call with management.

Dan Mondor will now provide an update on the business. Dan?

Dan Mondor

Thanks, Emory. Good afternoon, and thanks for joining us today. We are pleased to report double-digit revenue growth and a doubling of net income over the same period last year. Our quarterly results reflect our market traction and reaffirm the benefits of the strengthened operating model we implemented and optimized over the past 18 months. We are encouraged by our results and are off to a good start to the fiscal year.

As we have previously highlighted Concurrent has implemented a number of steps to generate growth and profitability in the business. In addition to improving our operating results we are focused on innovation and have targeted our research and development investment towards delivering what’s next in both video and real-time markets. We continue to introduce new solutions through software innovation to meet the emerging needs of our customers. We’ve been hard at work in new product initiatives for the video services marketplace to address cable and telco service provider’s needs to deliver more video to more consumers on more devices than ever before.

Through recently introduced products like CDN Assisted VOD, Network DVR and CDN Analytics we are broadening our solutions portfolio to address wider array of customer’s needs and to serve new market segments. We are leveraging our core video assets and competencies to deliver we believe an unrivaled value proposition to our customers in these key areas of the market. A prime example of our latest innovation is our CDN Assisted VOD solution which is the next generation video-on-demand offering.

Cable and telco operators are experiencing an increase in the number of customers using on-demand services to gain instant access to movies and time shifted programming content. In a recent article in New York Times Comcast said they are seeing tremendous growth in VOD and broadcasters such as ABC highlight increases in VOD usage of 32% this season versus the same period last year. With the continued decline in DVD and Blue-ray sales content providers are eager to make more of their content available through video-on-demand than ever before leading to richer and more compelling content libraries. Concurrent’s CDN Assisted VOD solution is focused on this trend by making it easier for service providers to dramatically expand through on-demand service offering.

We are getting traction with our CDN Assisted VOD solution with both existing and new customers who want to supplement, modernize or place their prior generation platforms. As we noted in our press release our CDN Assisted VOD solution is being deployed with the new top tier North American MSO. We’re also seeing an increase in time-shifted TV services and Network DVR. According to a recent survey 78% of Americans have watched TV on their own schedule and 62% of those have watched multiple episodes of a TV show at a time. Service providers are launching Network DVR and catch-up TV services in an effort to address this trend towards time-shifted viewing enabling for example a full season of series episodes to be watched back-to-back.

Our recent announcement with ZON, Portugal’s leading pay TV operator and the country’s second largest Internet provider is to deploy Network DVR services to their 1.6 million customers. Concurrent’s Network DVR solution enable ZON to provide a compelling video service offering to their customers, help them address competitive pressure, and paves the way to lower CapEx and OpEx expenditures. We’re pleased to report that this system is deployed and operational and we look forward to working with ZON as they expand their Network DVR services. Concurrent’s advanced CDN analytics solution which is to deploy at another top tier North American MSO provides visibility into the performance of online and streaming services offering service providers the necessary insight to increase video revenues and improve customer’s quality of experience. Network operations teams use these analytics to manage network performance and capacity for multi-screen delivery to a variety of connected devices and formats while their counterparts in content programming and video sales use our audience analytics to interpret unique characteristics of content popularity and customer viewing trends.

In the real-time business we are seeing continued market traction with our high-performance real-time Linux based operating system as well as our market leading simulation applications. Our solutions are designed for machine critical environments that require ultra-fast low latency transactions which allow no room for compromising performance. For example our latest solutions are being used to support applications that include missile launch and guidance systems, next generation torpedo simulators, and imaging systems used to train jetfighter pilots and military tank platoons. Our technology is also being used extensively by global brands in the automotive industry. In addition to automobile manufacturers in North America, Europe and Asia we are also pleased to report that [indiscernible] Formula 1 teams have adopted Concurrent’s simulation technology.

I’ll discuss some additional business highlights, after Emory has reviewed our financial results for the first quarter. Emory?

Emory Berry

Thank you, Dan. Our revenue in the fiscal first quarter was $17.2 million, an increase of 15% when compared with revenue of $14.9 million in the fourth quarter and 14% as compared with $15 million of revenue generated in the prior year’s first quarter.

Turning to our product line revenue details, Concurrent’s video solution revenue was $10.1 million representing 59% of fiscal 2014 first quarter revenue compared to $8.9 million or 59% of total revenue in the same period last year. In the preceding fourth quarter video revenue was $8.6 million representing 58% of total revenue. The balance represents our real-time revenue which was $7.1 million for the fiscal first quarter of 2014 and $6.1 million in the same period last year. The real-time revenue was $6.3 million in our fourth quarter fiscal 2013.

Gross margin for the fiscal first quarter 2014 was 55% down from 59% in the prior fiscal first quarter and 57% in the prior year’s fourth quarter primarily due to the mix of products and services sold. Total operating expenses for the fiscal first quarter were $8.7 million up 4% from the first quarter a year ago primarily reflecting an increase in non-cash share-based compensation. For the first quarter of fiscal 2014 we reported operating income of $800,000 including non-cash expenses of $727,000 of depreciation and amortization and $391,000 of share-based compensation. That compares with operating income of $413,000 in the comparable period of fiscal 2013, which included non-cash expenses of $856,000 in depreciation and amortization and $168,000 of share-based compensation.

Overall the company reported income tax provision of $39,000 during the quarter equal to less than $0.01 per diluted share. For the comparable period last year the company had an income tax provision of $107,000 equal to $0.01 per diluted share. Overall net income was $734,000 for the fiscal first quarter of 2014 equal to $0.08 per diluted share compared with net income of $325,000 or $0.04 in the comparable period last year.

In providing some highlights from Concurrent’s balance sheet, the Company’s financial position remains strong with no debt. We finished the first quarter with cash of $25.5 million versus cash of $27.9 million at June 30, 2013. The company continued paying a quarterly dividend of $0.12 per share in the first quarter. In addition we finished the recent quarter with over $27.2 million in working capital.

Now I’d like to turn the meeting back over to Dan.

Dan Mondor

Thanks, Emory. Concurrent’s focus is on innovating in software which has yielded a number of new feature-rich products for both video and real-time markets. I would like to take a few minutes to discuss our latest generation solutions in greater detail. Concurrent’s CDN Assisted VOD solution embeds Internet content distribution software which enables cost effective extension of the storage capacity of current generation video-on-demand systems. With more video content available to service providers for VOD and competitors like Netflix offering larger content libraries service providers are aggressively expanding the capacity of their existing VOD systems to meet growing content storage requirements.

For most operators expanding storage capacity means a complex deployment across the distributed network infrastructure consisting of dozens of independent sites. Concurrent’s CDN Assisted VOD solution is a game-changer by enabling centralized storage and content to be distributed more intelligently across the national network. Our technology dramatically improves the efficiency and effectiveness for service providers to expand video-on-demand libraries to 100,000 video titles and beyond. Another of our newly announced software capabilities enable service providers to stream content from cloud hosted video libraries.

In other words Concurrent is making it easier than ever for consumers to access any video, any time, on any device on-demand. Notably our CDN-Assisted VOD solution recently received four diamonds from Broadband Technology Reports Diamond Technology Review, based on amongst other factors uniqueness of this solution, ease-of-use, efficiency and reliability. Additionally in the past quarter independent research firm Current Analysis once again ranked Concurrent as a leader in their on-demand-video server’s product assessment.

Turning to our real-time business we’ve continued to add innovator software capabilities to our market leading simulation applications, SIMulation Workbench enabling us to capture new opportunities in the automotive industry. When paired with our RedHawk’s Linux operating system we deliver the hard real-time performance needed to satisfy the requirements of the most demanding simulation, design, and testing applications. We received new orders in the first quarter for our SIMulation Workbench solution from several leading automotive companies as I mentioned in my earlier remarks.

We also shipped our GPU Workbench product to a government research center for design and analysis of their next generation torpedoes and our RedHawk’s software and iHawk systems to a major defense contractor for a foreign holistic missile defense program. And finally as further evidence of our progress in innovation we’re awarded two U.S. patents in the first quarter one for demand-based edge cashing of video content and one for targeted video advertising in electronic program guidance.

Overall we are encouraged by the positive strides in the business. We continue to bring innovative new products to market and we’re seeing good market acceptance. Both of which is being confirmed by continued industry recognition and awards. Thank you again for joining us this afternoon and for your support and interest in Concurrent.

Operator, we will now conclude the call. Thank you.

Operator

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

Question-and-Answer Session

[No Q&A session for this event]

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