Concurrent Computer Corporation (NASDAQ:CCUR)
F3Q2014 Results Earnings Conference Call
April 29, 2014 4:30 PM ET
Davina Furnish - General Counsel and Corporate Secretary
Dan Mondor - President and CEO
Emory Berry - EVP, Operations and CEO
Welcome to the Concurrent Earnings Conference Call for the 2014 Third 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 via the Internet at www.ccur.com. After accessing the webpage, please press the Investors tab in the About section.
I would now like to introduce Ms. Davina Furnish, General Counsel and Corporate Secretary. Madam, you may begin.
Thank you, Operator. Good afternoon. And welcome to Concurrent’s fiscal 2014 third quarter earnings conference call for the period ended March 31, 2014. Joining me today is Concurrent’s President and Chief Executive Officer, Dan Mondor; as well as Chief Financial Officer and EVP of Operations, Emory Berry.
Before we begin, let me remind you that this conference call may include forward-looking statements such as believes, expects, estimates, anticipate 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 presented on this call.
The content of this webcast contains time-sensitive information that is accurate only as of the date of the broadcast, April 29, 2014. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Concurrent is prohibited.
Beware that any forward-looking statements made by the company are no guarantee of future growth 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 2014 third quarter results. If you have not received a copy, please contact Sandra Dover at (678) 258-4112, or visit the company’s website at ccur.com, and find the copy in the Investor section of the site under the About tab. Additionally, please contact Sandra directly, if you would like to arrange a call with management.
Dan Mondor will now provide an update on our business.
Good afternoon, everyone. Thanks for joining us to discuss our fiscal 2014 third quarter results. We are pleased to report solid progress in the business. With healthy contribution for both our video and real-time solutions businesses, our Q3 revenue grew 8% versus the same quarter last year.
On a year-to-date basis, revenue has grown 10%, operating income is up 27% and net income is improved by $0.10 per share. We continue to win new business and new accounts on the merits of our next-generation multi-screen video and analytics products, as well as our latest innovations for the real-time solutions marketplace.
Notably, in the third quarter we added new video customers like Get, Norway's leading TV and broadband services provider, and we delivered our video solutions to two new top-tier service providers in Europe. We also continue to make strives in real-time with significant wins in the automotive, military and aerospace simulation markets.
The video market remains dynamic and is rapidly changing as consumer interest in viewing video content on any device grows. Online video and TV Everywhere services are booming.
According to a recent report from Comcast, viewership of TV Everywhere services during the Sochi Olympics reached record levels. Viewership was 160% higher than the 2010 Vancouver Winter Games and 8% higher than the 2012 London Summer Games.
Live streaming of the Men’s Ice Hockey Semi-Final between USA and Canada generated over 2 million unique viewers, the largest verified TV Everywhere streaming audience in U.S. history.
Service providers are investing heavily in their video infrastructure in order to take advantage of this growth and support a transition of core TV services for more flexible IP networks overtime. Concurrent is helping to fuel this transition by offering unique solutions that support today’s set-top box based video services and tomorrow’s OTT and Internet based TV Everywhere services from the same software solution.
In fact, we recently offered our customers a glimpse of Concurrent’s future products at the NAB Show in Las Vegas in early April, highlighting new solutions for over the top video delivery and discussing our vision of how video services will be delivered to the next-generation of viewers. We are excited about the future of video and are well positioned to benefit from the ongoing changes in the market.
It is clear that the video services marketplace is trending towards consolidation with larger companies like Comcast, Liberty Global, Charter and Vodafone bidding to acquire other service providers. Our products support this trend by centralizing critical content delivery functions providing cross service video monitoring tools and unifying the video network to support any viewing device from a common software architecture.
In addition to the uniqueness of our products, our agility and responsiveness are distinct competitive advantages given the changing landscape. Concurrent is flexible, lean and focused, allowing us to respond quickly to new customer requirements and accommodating fluctuating priorities. I will discussion some specific progress we have made in the multi-screen video market later in the call.
Turning to real time, we continue to see good market traction in the automotive, aerospace and defense markets for our advanced software applications, RedHawk operating system, iHawk in ImaGen platforms. In the third quarter, we released a variety of enhancements to our SIMulation Workbench application designed for the high performance SIMulation market.
We recently introduced support for the functional mock-up interface, otherwise known as FMI/FMU, an emerging standard for model-based systems development. We showcased our support for FMI/FMU at the Modelica Modeling Language User Conference in Sweden in partnership with Dassault, utilizing direct FMI/FMU support and SIMulation Workbench, Dassault's Dymola modeling environment achieves the fastest frame rates compared to other companies that rely on Simulink.
SIMulation Workbench now supports all of the leading multi-body stimulation packages concurrently. This enable user -- this enables users to run different models in parallel, saving time and money. In addition to our advancements in the automotive market, we recently shift the large ImaGen solution for U.S. Navy training program.
We are pleased with our improved operating results progress in our new product innovations and continued market momentum. I’ll be back to make additional comments after Emory discusses our financial results. Emory?
Thank you, Dan. Our revenue in this fiscal third quarter was $18.3 million compared with revenue of $17.8 million in the second quarter and $16.9 million in the prior year’s third quarter, which is an increase of 8%.
Turning to our product line revenue details, our Video revenue was $11 million, representing 60% of fiscal third quarter revenue in fiscal 2014 and $9.8 million or 58% in the same period last year.
In the second quarter, Video revenue was $10.1 million, representing 57% of total revenue. The balance represents our Real-Time revenue, which was $7.3 million for the current quarter and $7.1 million last year. The Real-Time revenue was $7.7 million last quarter.
Gross margin for the fiscal third quarter 2014 was 56%, down from 59% in the prior year’s fiscal third quarter and 56% last quarter. The decrease in gross margin is primarily attributable to the mix of products and customers.
Total operating expenses for the fiscal third quarter were $9 million, up 3% from the third quarter a year ago and also up 2% from last quarter. We have increased our investment and research and development with additional personnel to support our product and strategic initiatives.
For the third quarter of fiscal 2014, we reported operating income of $1.26 million, which included non-cash expenses of $522,000 of depreciation and amortization and $254,000 of share-based compensation compared with operating income of $1.23 million in the comparable period last year, which included non-cash expenses of $758,000 in depreciation and amortization and $224,000 of share-based compensation.
Overall the company reported income tax provision of $140,000 during the quarter equal to approximately $0.02 per diluted share. For the comparable period last year, the company had an income tax provision of $67,000 equal to less than $0.01 per diluted share.
Overall net income was $1.1 million for the current quarter equal to $0.12 per diluted share compared with net income of $937,000 or $0.11 per share in the comparable period last year. Looking at our results for the first nine months of fiscal 2014, total revenue was $53.3 million compared with $48.5 million for the comparable period last fiscal year, reflecting an increased of approximately 10%.
Our Video revenue represents $31.3 million or 59% of total revenue compared with $28.4 million or 59% of our total revenue last fiscal year. The balance represents our Real-Time revenue which was $22 million year-to-date as compared to $20.1 million in the previous year.
Gross margin year-to-date was 56%, down from 58% in the prior year. The decrease in gross margin is primarily attributable to the mix of products and customers. Total operating expenses year-to-date were $26.5 million, up 3% from the prior year, a $25.8 million. As I mentioned earlier, we have increased our investment in research and development with additional personnel to support our product and strategic initiatives.
The company reported operating income of $3.2 million, which included non-cash expenses of $1.8 million in depreciation and amortization and $883,000 of share-based compensation, compared with $2.5 million which included non-cash expenses of $2.4 million in depreciation and amortization and $593,000 of share-based compensation.
Net income year-to-date was $2.9 million or $0.32 per diluted share, which included a tax provision of $160,000 or $0.02 per diluted share. This compares net income of $1.9 million or $0.22 per diluted share, which included a tax provision of $180,000 or $0.02 per diluted share for the same period last fiscal year.
And providing some highlights from our balance sheet, the company’s financial position remains strong with no debt. We finished the third quarter with cash of $22.5 million versus cash of $27.9 million at the end of last fiscal year.
We believe the decrease in cash is temporary and is the result of the recent increase in account receivable during the quarter. Also the company continued paying a quarterly dividend of $0.12 per share which we have paid each quarter this fiscal year. Lastly, we finished the quarter with $27.8 million in working capital which is consistent with the previous quarter.
Now I’d like to turn the meeting back over to Dan.
Thanks Emory. I would now like to provide additional highlights on key accomplishments in the third quarter. In early March, we announced we’ve been awarded Get’s multiscreen video business.
Get is one of the largest multichannel video service providers in Norway and leading innovator in the Nordic region. Get selected Concurrent’s unified content delivery solution to support the launch of multiscreen services to smartphone, PCs and other internet connected devices.
Concurrent is supplying Get with the full scale IP content delivery network that enables them to distribute video content and launch new revenue generating services to consumers throughout Norway. We are working closely with Get to address their specific market challenges, including the emergence of OTT players like Netflix who began offering services to the Norwegian market in late 2012. We are excited to add Get as well as the two aforementioned major European operators to our growing list of marquee customers. We look forward to continuing our collaboration with them as they roll out in services.
We’ve also announced the string of patent awards for a variety of core multiscreen video technologies. Our company like goals the faster innovation, extend our portfolio of intellectual property and to strengthen our thought leadership position in the markets reserved. As a result of our efforts we’ve been awarded four patents in the past nine months setting a record pace for the company.
In the third quarter, we announced that we’ve been awarded a U.S. patent for a method of positioning and intelligently managing content assets in a multi-tier video server network. More recently, we were awarded U.S. patent for a method of delivering multimedia content across distributed network. Both of these awards along with other patent support our market activities and enhance our leadership position as a multiscreen solutions provider.
In the third quarter, we also made progress in our channel partner activities. We’ve been developing relationships with a number of global system integrators in order to expand our geographical reach. In the third quarter we awarded multiscreen business with a Tier 1 European telco operator through one of our recently established global channel partners.
We are continuing to develop these new channel partnerships as a way of expanding our market presence and growing our customer base. In a real-time business, we had a variety of wins in the third quarter that contributed to our results. Our technology was selected by aerospace and automotive companies to power jet engines test fans, military aircraft simulators and commercial automotive simulators.
Our technologies are being employed in mission critical applications by many of the world’s leading companies and government agencies. We remain a preeminent resource for those seeking ultra high performance, hard real-time solutions for a wide range of applications, including simulation and testing, industrial process control, emissions guidance and solutions for the financial services market.
In conclusion, we are pleased with our progress in Q3 and the fiscal year-to-date. We appreciate your continued interest in our company and thank you again for joining us this afternoon. Operator, we’ll now conclude the call. Thank you.
And ladies and gentlemen, that does conclude our teleconference call for this evening. Thank you very much for your participation and for using the AT&T Executive Teleconference Service. You may now disconnect.
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