FEI Company (NASDAQ:FEIC) Q1 2015 Earnings Conference Call - Final Transcript

Apr 28, 2015 • 05:00 pm ET

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FEI Company (NASDAQ:FEIC) Q1 2015 Earnings Conference Call - Final Transcript

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Presentation
Executive
Anthony Trunzo

organic basis, as strong growth in North America was largely offset by slower activity in Europe and Asia. North American Science product revenue was up over 40% compared to Q1 2014. In many emerging markets, however, our Science business was impacted by changes in procurement processes, macro-economic uncertainty and currency volatility.

Our Industry segment reported revenue of $112 million and organic revenue growth of 7.5% despite a 10% decline in North American revenue. The results reflect strong contributions from several large Asian semiconductor customers as well as smaller regional accounts.

Gross margin in the quarter was 47.7% compared with 47% a year ago. The increase largely reflects currency benefit as stronger Science margins and lower Industry margins effectively netted out.

Operating expenses for Q1 were $69 million, $6.4 million below year ago level. Operating expenses benefited from restructuring activities undertaken during 2014 as well as the weaker euro and Czech koruna. Operating income was $36 million in Q1, up 17% from Q1 2014. Operating margin was 16.4%, up 280 basis points from a year ago, and our tax rate was 21% for the quarter. We expect the rate for the second quarter and for the full year to be around 20%.

Cash flow from operating activities was $23 million in Q1 and we ended the quarter with $471 million of cash and investments. During the quarter, we paid dividends of $10 million, invested $5.2 million in plant and equipment, and repurchased 134,000 shares at an average price of $75.16. Subsequent to the end of Q1, we've repurchased an additional 173,000 shares at an average price of $74.90. We currently have 1 million shares remaining on our share repurchase authorization.

With that, I'll turn the call over to Don for his comments.

Executive
Donald Kania

Thank you, Tony, and good afternoon, everyone.

Before moving on to the discussion, I would like to welcome Tony on board. We are excited he has chosen to join the FEI team. He brings tremendous experience to the organization and he will take an active role in shaping our strategy and helping to drive the next phase of growth at FEI.

In quarter one, we delivered organic revenue growth in line with our expectations despite the backdrop of currency volatility and macro-economic instability in a number of geographies. In our Science business, these macro challenges negatively impacted the pace of customer orders in a number of emerging markets.

Within our Industry group, record product orders from electronics customers highlight the strength of our offering and the importance of our workflows to product development and manufacturing of new products.

Bookings in Q1 were $216 million, down 10% on an organic basis from a year ago, resulting from weakness in Science orders. This is a reversal of the order dynamic in Q4 where Science led with record orders and Industry lagged.

For the quarter, new products accounted for over 70% of total product orders. We expect that as products age, we will begin to see a fall-off from this high level