Perceptron (PRCP) 11 Feb 202020 Q2 Earnings call transcript

Greetings and welcome to the Perceptron's Fiscal Second Quarter 2020 Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded.

pleasure your my Mr. now is to host, introduce It Financial Bill Chief Roeschlein, Interim Officer. you begin. you, may Thank sir,

Thank Good the quarter Freeland; CFO. XXXX our you, fiscal and and results Perceptron's Michelle. Chairman the conference morning I'm and Bill call. Company's CEO, Leading Interim call Roeschlein, are to today Jay welcome Interim second

would may may this a issued the second to of the reconciliation results. like nature I this management's Within after non-GAAP quarter provided of yesterday, commentary today's a questions in outside remind you control. to that statements their closed We and in include market by release and Company's responses the be measures which uncertain that release, call. call press are fiscal detailing discussed the forward-looking we our

current statements beliefs, Although are and may materially. management's on based expectations differ forward-looking results actual these

the filings some risk to could For quarterly and of of actual discussion section refer factors factors a please to the results with SEC. that the annual differ, latest of cause our

please press years historical discussed years, in and in to non-GAAP dollars, call reconciliations for during be June Unless our that financial the of the US you which Additionally, issued noted, comments ends measures today. references otherwise are can fiscal on XXth. will release find note

Today's of Freeland. Jay our begin open call conclusion line will for questions. with At prepared will the remarks from the remarks, we

the turn to Jay. over I'll call that With

Thank you, Bill. And joining welcome to today. those us

priorities. reset described a We be can for company. strategic second The leadership best the as transition. We the quarter reevaluated our announced major

has in for to Since of and in Interim becoming right we full near lowered financial over long-term. And November, been guidance. profitable place our processes have ensuring CEO realities the systems term the we Company's Perceptron business on people, the position growth given my focus the the year

most remains a metrology execution. now potential. significant with untapped Perceptron brand, Obviously, core global respected one critical highly what's is its At

margin have than meaningfully strong down, liked, On Our of many were earnings per share would were us down. as of gross sales lower was performance last plan. down quarter were top as orders was and that not

was the with expected multiple QX of during timing those potentially into which XXXX. QX of and delayed Perceptron. orders frustrating customer The fiscal everyone of into is not inside QX We some saw orders for as push quarter,

On delays the positive side, not these losses program cancellations. and competitive were or

a As the pipeline QX positive. is customer remains result, for and and QX feedback deep

which the performance, to company's In in greater create focusing felt by efficiency yield announced a will operate. of appropriate reduction we way global room the light in structure, our workforce. some Yesterday it in I on XX% our breathing turn, cost we

reduction savings a While $X.X million comes this the larger some force. of the per portion from from The in reduction annualized to expected be from is planned reduction attrition, approximately year. true comes

was departments. goal Each both to as primary of as the affected, the locations down for support of well our critical our while most were R&D, My to positions. any from most related unnecessary execution roles operations in removing costs as necessary streamline organization were program

leverage profitable Most and we reshape be on no we There us growth. will correlation every in how positioning quarters, as headcount to meaningful substantially sales growth will prepare sales achieve. operate, resume to direct we importantly, between we incremental dollar growth a subsequent longer

for table. to examine the best on continue for QX, the long-term Every options fiscal Looking we ahead option remains to strategic company. Perceptron the

five we're most in executing that critical the continue term. strategic like on near priorities to review, we As I'd the emphasize

in and growth, the stabilize technical Perceptron focused still innovation, performance. quarter. to the orders company's efficient enabling sales maximum No second structuring I for by is one at first our management. is cost efficiency, The Perceptron while am pleased financial on performance

there is in beginning on lifting order to for be to that remains believe demand close transactions. our done some we products to those While accelerate, heavy

of first reduction XX% the was company the commentary, taken reposition for earlier growth. to my in steps mentioned the workforce several As necessary in the global

our The priority technology to portfolio. enhance core second is strategic

we on generate business consider the and term. benefit drive in the most we potential focus refined programs will our most our that to the critical the on reduction, those near believe executed we As efforts to

yet Our aggressive, development achievable. timelines remain

Our programs from us flexibility This the the warranted. while will and gross needs leadership should deliver. address that our most maintain combination customers, simultaneously improving to our our product situations competitive if cost margins, important greater reducing also ensure while we giving position,

is priority third leading the position automotive extend to our within The market vertical.

automotive market. to capturing Perceptron for job we a need clear our to most a opportunities is the important need still sector, expand there better While beyond all do within

level of knows broader the manufacturing do array OEM this into well. chain. that supply automotive reaching The will good the and tier is team the operations extremely digging market X at by and our We a news X tier

So to broaden be the our presence very high. agile is our ability and space in

focusing at The represents focus fourth industry, long diversify heavy of on the succeeded sector, automotive Most notably aerospace. our annual construction has revenue growth critical markets: into by least area addressable for a is which to the base additional Perceptron opportunity. XX% time and

these and However, them be a represent already for in growth sales force, specialized there more will approach that Addressing our the including have Perceptron longer technology a impact and require so need attractive very making. verticals will provides. the markets redesigned focus

any and long-term revenue The company provide is the strategic the the in fifth our However, will select benefits the final lessening benefit leadership. Perceptron industry for priority and meaningful to of one base of to term. long broadening exposure visionary

Bill Obviously, I leaders. are and interim both

time if the in as treating vision how the in and for roles our them we company the will execute be forever. we are We

and term our and ensure the is company value and leaders for who the creation deserve. However, company long shareholders Perceptron permanent searching growth drive will the aggressively

and believe couple board, that navigating Perceptron. slower right We're are end with retain the the rest for we of for bottom we job. confident the leaders we of a quarters of closely the will out what Working the identify is

already we serve those the we company steps markets together next strengthen where taken growth and However, entire excited build in for look Perceptron coming to to and to we've the intend presence. for dedication the the success prepare the grateful investors by our with we with the the to company's visiting a team are market to of phase forward months. the I'm it in

I turn to Bill second review more of will detailed the over now quarter for results. our call a

Jay Thank you. during on that the strategic recent ahead Perceptron, fiscal performance, second with for shared the our his vision opportunities having will together lay thoughts results for our his With discuss financial quarter. now

company. recently the Jay As team enhance leadership our of referenced, designed senior to cost reduction forward of a activities enacted the go profitability series

for top-line global compete While the announced more effectively remains of us positioning the a for immediately over area term, focus significant reductions are team a growth business, to accretive a scale. on near cost

we of savings the costs. to realizing $XXX,XXX related of net cost reductions, XXXX, For anticipate fiscal restructuring

full cost XXXX, approximately $X.X savings the million. we fiscal For year anticipate annualized of

or $X.X sales sequential up and Total sales and and Americas basis in fiscal second in previous quarter geography, were $XXX,XXX prior X.X% from the $XX.X $XXX,XXX year. the Asia. from $X.X $X.X by sequentially On the quarter the declined of million or in down a respectively, million, million QX increased and XX.X% Europe million

for basis, $XXX,XXX lingering period China. quarter decline a of decline FX second from sales experienced year-over-year impact to the to approximately year of a issues The $X.X million related due the majority $X.X mainly sales with period the million year fiscal of trade over On decline came over in amounted XXXX. the which Asia,

For $XX and we million. between XXXX, sales fiscal million year expect be $XX to

and down and million sequentially the Americas quarter bookings second the QX a were Europe $X.X quarter million declined from $XXX,XXX previous in sequential XX.X% million prior $X.X and million or XX.X% $X.X from of bookings year. $XX.X Total basis the by down the geography, On fiscal or in respectively.

bookings While Asia increased in $X.X million. by

was decline quarter QX the On over XX percent was our a XX.X% second Europe, year points over experienced a the decline profit for sales year year up majority basis, basis bookings million Gross in as a of $X.X prior year. year. fiscal from over which the of

and a our point of restructuring, As we fiscal to fiscal XXXX XXX our XXXX. approximately improvement margin point basis to XXX in expect a result results year cost for basis XX our gross a benefit

R&D the of QX second approximately decrease Turning a from approximately million fiscal the quarter, $X.X quarter, compared the and decrease expenses in to and engineering off year. operating $XXX,XXX previous to a were prior of $XXX,XXX expenses,

As million an range fiscal of in expenses administrative and restructuring, the in result Sales, a and million general cost R&D QX engineering be for previous and from $XXX,XXX decrease $X million. to $XXX,XXX increase $X.X the total of the quarter, of our $X.X a were we of to quarter, expenses of from expect year. XXXX the prior

and cost and the $XX.X compared we As million. quarter of in million fiscal million impairment expect a range were restructuring, of $X.X XXXX be to total million, the fiscal Severance, for result second XXXX. a $XX.X $X.X of of to credit in the quarter for charges other our costs SG&A

cost the prior the second for As relates a true-up settlement. reminder, quarter a the to year the in the of legal credit of

fiscal severance expenses our CEO. the the costs associated quarter While second to of the current relate with in former year

in XXXX expect of than As a year. other was We diluted income the share expense result and or QX prior fiscal for $XXXk. charges $X.XX to quarter or severance, share net the prior million tax million. $X.XX we share, be $X.XX income approximately of $X.X Net had $X.X the with less in diluted quarter of per impairment our the compared $X.X or diluted costs million for per restructuring, per million of quarter and $X.X

X.X to between to As income restructuring, XXXX fiscal breakeven from range to we a million. zero expect based $X.X $X.X or and on Adjusted expected of $X.XX net the million for million shares diluted EBITDA outstanding. year cents cost share the per range result to million $X.X is

had and debt-free growing lending actions availability take investment on As of return summary, of we've quarter necessary to credit, begun and In cash the in high million reduce on growth end, and in while organic we no costs to borrowings cash our total outstanding our equivalents opportunities. with targeted facility. remain line $XX.X

call to for balance operator open positive will focus while will now With over questions. We to maintaining who significant free on that, turn your the optionality. call generating back sheet flow, the cash I continue the

session. with now Craig you. your question. Instructions] from Will answer the [Operator with first conducting proceed Palm Greg Please be comes of question question Our and Hallum. line Thank a

kind more I visibility the visibility, Jay, positive in year 'XX. trends market. second fiscal I around this seeing starting, your half the kind on is and there all point? good the mean of out mentioned of little this in maybe how Good morning, But guess for terms thanks what of in of you a helpful maybe bit in the at the some you're commentary P&L. just

Greg. third visibility which thanks, three usually we That's fade have. the for it for quarter, obviously get two of good of outside that scope unusual kind is the bit. Perceptron. the you is not The to a next off to starts quarters when So very And

of all are looking launches, programs, have new are launches, The execute at that good they when feel on for upon now we're when we new making right now line decision those dependent things vehicle customer new scheduled. a

becomes, do or losses, delays. or market. not question a are was the like seen conditions The cause saw any major we've or competitive not that said, we missing standpoint to delay technology where any cancellations. shift And We seeing lacking those. I there something that customer some in any market concerned from solution be we're would we clearly the And

favorable. about how again much may, So to like what there's right now QX we for what And looks But been the reality we full. again. will company. and pipeline like well. feel is how either as the good very what delay good Obviously, move some and looks The much or about that's see QX always case is very close

vehicles. relates the What's it right launch autonomous than the The It's manufacturers, release cycle? where the developing as area with not what's right is we're one lacking the to contact time electric themselves. that's us even the right manufacturers What's schedule? and where more it's still determining; OEMs And path? visibility one

And us they more to they're so They're see that have. plenty ability of and it's on. always access our giving what visibility of than working as

I that happened resume customer. and telling auto of investment about see that mean, to new mean, impact biggest external customers vehicles? what's schedule sort or the what mean, I there? think you are they have really your you out launch And as I core the to automotive want

Yes.

my in driver. primary the sales opinion, say thing, market I still team think demand our the same So and think, I is would

particularly So we that flat will a expect would demand. production start to again, demand electric some relatively manufacturers of as of was, there across broad into year-over-year. and I a the last the see mainstream vehicles increase believe, array some come year, more return And acceleration again and --

the both there's so the surprisingly, issue. very issue a trade as to more Not now, war at of coronavirus moment near-term but the relates is the less war, a it trade near-term

Wuhan large possibly. that We it are probably the out a a timing in -- in delay, American has a does delay very of of or two pulled workers heard month planned the implementation the by near-term you contingent could just news of GM that

already we in as issue automotive, place travel while a a to are in create depending chain is and that lay that moving -- enough we're longer near-term hearing pipe. restrictions worker supply across delays certainly other and well as the customers from shelf could The enough that much in was the certain they on shipping the keep and that standpoint, seeing route, on from how potentially the standpoint standpoint refill a and there

Many are keep themselves OEMs dependent lean obviously efficient. relatively of inventory the and run on to upon that schedules

So sales this have bit but there, of a little is we a we oh any see god, is nothing of substantial my our impact may -- that near-term this issue. yet a people said,

book business supply disruptions. it chains China in terms relates as that in Anything worries supply your of from parts in specifically I you? And to mean, procuring of chain

Nothing on side. our

of then that the And seeing? in any volatility change ongoing light landscape this sort competitive your softness of in markets Okay. you're in

major. Nothing

cause are in to the I against feel compete good standpoint eyebrows think would development with seen not a who what's or be raise us that we in now. familiar We or pipeline concerned. marketplace. solution right we about technology anything very from the We've

technology initial We're in installations active in a -- our our is of is the change a the middle meaningful site, which marketplace. opinion the in new of

additional we feedback as so that And opportunity get obviously there, creates downstream.

cause programs important say from standpoint. there's that competitive I right are we've that would seen those a us would So anything not But now. for concern

questions, back in hop and queue. the Okay. I'll the Thanks for right. All

Thanks, Greg.

Thank you.

next comes of question. FBR. Chris Please B the proceed with Riley with Our from line Horn question your Van

everyone. Thanks Good morning, call. Hi. for my taking

Chris. Morning,

morning Chris. Good

$X.X takes end us range higher net income gets on what Could So, here. there? to thanks the you that million for And and the of kind puts breakeven guidance side. the go through mentioned you of to and the

have the million we It $XX is as primarily revenue at driven range.

XXX in lower driver it'd bottom the some be points end higher impact is the is what a line. to That kind points range. of biggest margin Our we of that primarily because to overhead XX.X% comes going manufacturing couple the lower the At basis fixed have. that's

million an Yes, $XX not strong. add is Backlog sure. is that expecting obviously still and say is the I'll in Chris to from million for in we second see standpoint, and what I'll that, what still have We lower order the were normally -- backlog. than quarter we $XX the

if and orders the in did is getting if the I was more getting I so favorable. their sales ability sales for be from And QX to lighter, then from was the the return feedback or pipeline that But feedback QX meaningfully our typical organization they concerned. levels, team volume confidence not we're the to would have

end that would the higher we looks through And QX QX we obviously be the QX, so having towards of in assuming in that number, gives us that in creates backlog should number QX work comfort that that what like. And hit to the confidence into which revenue range. orders translate

the were increase Got in lighter it. you year, Could product it. of volumes, was the kind driving product able give more year of And what you then detail during light gross margin that side on see on you over mix? quarter, us mix. an got to Okay, any cited

A in. the a projects and that lot they're they to the that lot down of it in phases more are the stages comes

in early shipping primary with two equipment, is that a to had piece. margin would are in margins. so later have installation which the difference we of phases the And project, that be the we the labor And tends a higher more than phases which

Okay.

bit of element, timing correct? So little a

a installation place acceptance. equipment, and from shipment period all It's a our the time of the as of definitely sales to a over actual timing take element

talked on what can to into manufacturers. and initiatives, diversifying And apply I non-auto obviously, how you side Okay. markets. do automotive about see some And synergies then, the with those the you would other in it

there display And in are of someone? see you just does I'm you out? that to could about competitive? Could sure being play there's And markets Are you of how dynamics? programs online a competitive overlap. those have lot new Do share winning number or coming that that, a yourself the talk like

Yes.

is both. little Chris, gut, my and So a it's the feedback that of bit initial is that

sector competitive is various sure They blind. are running For not Obviously that are levels. they are there some at using displacement. companies technology in

and always the fair, all bit I to people see And that advanced is amazing. to one item most pretty automotive say automobile a most be of the leader mean technically has to for people, really that a takes And when the you been it lever there. time an on. I amazing build of what most is

needs and in at the maybe that size penetrate our in same level opportunity leaning other scale to direction. The of They're in given is different. the right at aerospace Aerospace the the just kind needs type different in aerospace are the tier than So, of level, in bucket. OEM are for manufacturers technology are the our field. more of and product

a there'll being tolerances programs of different part share what be bit So, here's the an and of what sheet definitely of automotive, do example from to stamping to how it be would of knowing the Take you and it in may and form part would able displacement. and need be industry. metal it right. be we examples industry of, Obviously, and new

actual amount the fit metal components in their with FBO the And in it to impact minute is line cost meaningful customer. a because same. is associated of The the every down at need for the the same. have to productivity that productivity they is But is a the down that don't loss customer sheet impact

have experience I where sales lies. is we in What in to need certain, those for will who that's will say opportunity though industries. that the people So some bring

there. why in Our knowledgeable unbelievably automotive and folks we're experts successful that's and so are

such share deep customers public the why process. Perceptron. get schedules into where have And And until with why and deep, launch the cycles deep, things program there not out many relationships on they that do so and we shared openly rely that’s deep they're

need we ability some we have the serve other where add level of same verticals. so those in obviously that's to and to that competency So additional expertise

I for Okay, great. Thanks on last the for vehicles. me, think autonomous caller that. then And previous and touched EV

needed us, going measurement that needed is maybe bit complex lower to little I there's higher detail growth you tolerances a be? and Just or more for secular lot. could just a that is tolerances all remind more there more and This and expenses believe more forward line [indiscernible] theme how and on a

right still we interesting. that flush Yeah, and comes of the requirements is so and what similar now at you gap of they're and bounce and be years XX it's some see very it tolerances obviously What leaps it probably certainly end capable will when five have this body years even where demand to is manufacturers. developing to ago, and in of there automotive already What was and is they what ago. higher today, already ahead

One with there that the block engine the question to is that had that of be And same was, and the necessarily think concerned the changes as as would use don't parts. engine the needs, itself vehicles, the you historically areas example an move the been because all dramatically. have company moving you just I electric same

The traditional able of just I'll and shut as assembly more changes as one and of one continue of any example, you assembly, to line you effective scrap rework. the if Like and to additional The manufacturers, not today. for tray respect, battery the OEMs is not The in part for accurate tray. yes in or one opportunity and the impact if rework you answer this of vehicle other but impactful avoiding down then any itself. have mess things. precision if up down is, to being shut there's the as battery it some produce the a just there required use created downstream

needs are, In we identical. there would -- those identify So will possible we slightly the be to different, sure have that some with not customers. for serve, needs be tolerance I'm would the opportunities, a they higher I we it's at in ability deal But think part, a areas. that once least capability will that the be slightly have tolerance they be will And that's the perfect yet.

you Thank and color the great. Okay, much the so for appreciate time.

Yes. Thanks, Chris.

There I'd questions turn to call you. back closing to the further Freeland this time. are Mr. like any at no remarks. for Thank over

And operator. thanks, everybody, participating Great. Thanks, for today.

forward questions, Vallum or can If you you he you again partner, who's reach everybody and Noel of And reached any can to can our the Ryan, at company QX. out be obviously at Investor updating look to have additional out to Advisors, end investors@perceptron.com. reach Relations the we

This Thank today's you. concludes teleconference.

a at time. you have your day. and You for your wonderful Thank may lines disconnect this participation