2nd qtr conference call notes:
CEO Initial Comments:
• Still feels good about guidance that company will achieve an all time record revenue and operating income.
• Core Business at 6M per qtr is steady, 2nd qtr would have exceeded $6M per domestic qtr if there was no delay of components, wireless features of DVM 750.
• Delay resulted in $1M in backorders being filled in the 3rd qtr versus the 2nd qtr.
• Policy is to not ship to international customers without prepayment resulted in a delay of shipment of the $3.5M order from SA in Q2, expect prepayment soon and shipments to commence in 3rd qtr, be completed by 4th qtr.
• Record Revenue and Operating Income Projections Based upon:
$24M (6M Core Business per qtr times 4 qtrs) $3.5M South America Contract (Announced)
$5.0M Option to order an additional 1000 units = $32.5 M year without considering other international and domestic opportunities and without considering any impact from recent product launches (FirstVu and Laser Ally)
CFO Comments:
• Profit and Loss - $5.5M in Revenue reported, was not able to ship $3.5M SA order in the second qtr, will start shipping in the 3rd qtr. Domestic demand is steady at $6M per qtr.
• Received only $116,000 in Foreign Sales in the first 6 months but in my mind that is a delay and timing issue versus business going away. Expect to see an increase in international orders in the second half of 2010.
•Company initially declined one contract because of lack of prepayment, now renegotiating contract, expect order in the 3rd qtr.
•Should see quantum leaps in gross margins when top line revenue picks up in 3rd and 4th qtrs.
•Direct labor hours 3.5 per unit.
•End of Life products for several components which have been corrected did impact bottom and top line in 2nd qtr. Corrected - no issue in 3rd qtr.
• Dropped 7 head count since beginning of year because of improvements and efficiencies gained from several supply chain initiatives. Expect improvement in 3rd and 4th qtrs, added a lot of testing, seeing efficiency improvements.
• SG&A – R&D - improved cost ($350K cost from year ago) and results
• DD250 to be launched later in the year, probably in the 4th qtr.
• SG&A costs increased – promotion, Foreign trade shows. Expect to see investment translate into increased revenue in 3rd and 4th qtrs.
• Professional Fees & Expenses – less litigation (last year (L3) satisfactorily resolved, company concluded one litigation case without much cost, company received default judgment on supplier who went into bankruptcy – (hopefully can recover some dollars awarded to DGLY)
•Stock based compensation – company implementing restricted stock vs. options, will result in lower 2nd half stock based compensation
• Current Lease renegotiated at better rates
• Bottom Line – EBIT Loss $435k, first since 2009 qtr, have sales pipeline to fix in 3rd qtr
• Collected Turkey receivable, accounts receivables reduced by 50%, inventory up based upon shortfall in revenue, printed circuit boards – secured safety stock to ensure availability
• Company has no short term and long term debt, $14.6M in WC, over $1 per share in book value
• Stock buyback – trading window closed, no purchases made. Expect to be buying back shares as soon as window is open. (Certain restrictions / blocks of time prevented company from making purchases of common stock. May be able to start buying shares today (17 Aug) |
