Analogic Corp (NASDAQ:ALOG) Q1 2018 Earnings Conference Call Transcript

Dec 06, 2017 • 05:00 pm ET

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Analogic Corp (NASDAQ:ALOG) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good afternoon, and welcome to Analogic Corporation's First Quarter Conference Call for Fiscal 2018. I'd like to remind everyone that a supplementary presentation will be used during today's call, which can be downloaded from the company's IR website at investor.analogic.com.

Now I'd like to turn the call over to Mark Namaroff, Senior Director of IR.

Executive
Mark Namaroff

Good afternoon everyone and welcome to Analogic's First Quarter Conference Call for Fiscal 2018. Joining me on the call today is Fred Parks, President and CEO; Michael Bourque, VP, CFO and Treasurer; Jim Ryan, SVP, General Manager of our Security Detection and Power Technologies Business; and John Fry, SVP and General Counsel.

Earlier today, after the market closed, we issued a press release describing the financial results for our first quarter. If you have not yet downloaded the press release, please do so via our website at investor.analogic.com.

(Forward-Looking Cautionary Statements)

And now I'd like to turn the call over to Fred for opening comments.

Executive
Fred Parks

Thank you Mark and thank you Victoria. Good afternoon to the audience. We've spent a good portion of last year analyzing our business, deciding which activities had the potential to create profits rather than just revenue. Our focus was in Ultrasound, where investment and diversification have been significant. From this analysis, we committed to initiatives with revenues that would deliver profit over a reasonable time frame. Many of our diversification efforts in Ultrasound were deferred indefinitely or eliminated. The results of Q1 fiscal 2018 support this revised ultrasound strategy to focus on profitable revenue. Also evident was a more productive cost structure for both Ultrasound and the entire company.

Our primary markets, perhaps all markets, demand frugality with our resources, and that emphasis is never over. Balancing that ever-present attention is the need to refresh our technology. Surely, the current year R&D of almost 13% of projected '18 revenue is at least sufficient for our growth aspirations and perhaps with some future room to spare.

Simultaneous with the Ultrasound correction, our security detection is gaining traction for a strong second half 2018. Many of you read the recent announcement of the $4 million contract with TSA. To let you better understand the acceleration of revenue forecasted for the second half '18 in Security Detection, we have invited Jim Ryan to join us on this telecom. Jim is Senior VP in Security Detection, and will follow my remarks with commentary on the Security business.

Despite some adverse customer-sourcing decisions carried over from FY '16 and '17, there remain bright spots in Medical Imaging. Specifically, motion control and mammography delivered good profit quarters. Our approach in Medical CT to focus on the Asia, China opportunities and deliver systems rather than just components remains encouraging. Clearly, Q1 was a good start to FY '18, and results allow us to lift the lower end of our guidance and thus the midrange.

We are reporting Q1 non-GAAP earnings at 25% of our total year guidance, well ahead of prior year. However, we remain subdued, recognizing that