Full Press Release Details
Contact: Patrick Johnson, President & CEO
Matthew Hayden, Investor Relations
Hayden Communications, Inc.
PRO-DEX, INC. ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
SALES INCREASE 13% OVER PRIOR YEAR QUARTER
SANTA ANA, CA, November 14, 2005 - PRO-DEX, INC. (NASDAQ: PDEX), a
developer and manufacturer of embedded motion control and miniature rotary drive
systems, serving the medical, dental, factory automation, and scientific
research markets, today announced financial results for the fiscal first quarter
ending September 30, 2005.
Consolidated net sales for the first quarter were $3.8 million, up 13
percent compared to the $3.3 million reported for the first quarter last year.
Net income for the quarter was $262,000, or $0.03 per basic and diluted share,
as compared to a net income of $462,000 or $0.05 per basic and diluted share,
for the three months ended September 30, 2004. For purposes of calculating
diluted earnings per share, approximately 10 million shares were used for the
quarter ending September 30, 2005, compared to approximately 9.5 million shares
for the prior year. Despite the increase in sales year over year, net income
decreased primarily due to an unfavorable shift in product mix and increased
Commenting on the Company's financial performance, Pro-Dex's President
and CEO, Patrick Johnson said, "Given our product development efforts last year,
we were able to increase our core recurring revenue from approximately $3
million per quarter in the middle of last fiscal year to approximately $3.8
million today. At the same time, we were faced with product quality issues that
are a result of hyper-accelerated product launches and the unfavorable impact of
shifts in sales product mix, a risk and volatility that emanates from serving
three different end-markets. We ended the quarter with eight active product
development projects representing potential first year revenue of $6.8 million
compared to eight active projects last year which represented only $4.4 million
in potential first year revenue. However, despite having made several new
development proposals during the first quarter, we did not enter into any new
development agreements of significant size. We ended the quarter with $7.6
million in open orders deliverable in the subsequent twelve months, a
substantial improvement over the $4.3 million in open orders from the prior
year, but a slight decrease from the $7.9 million in open orders at the end of
the previous quarter. Finally, we generated $358,000 in cash from operations
during the quarter and received more than $500,000 from international
receivables during the first week of October, following the quarter-end,
reflecting our successful collection efforts made during the first quarter.
While coming in slightly below our internal revenue expectations, we
successfully overcame significant challenges and improved our underlying
For the three months ended September 30, 2005, the Company's
consolidated gross profit decreased 9 percent or $169,000 to $1.7 million
compared to the same three months in the previous year. Gross profit as a
percentage of sales decreased to 44.9 percent for the three months ended
September 30, 2005 compared to 55.8 percent for the three months ended September
30, 2004 and a gross margin percentage of 44.8 percent for the previous quarter.
The decrease in gross margin during the quarter was the result of a smaller
proportion of sales coming from higher margin factory automation products. Gross
margin was further diluted by approximately $107,000 in costs associated with
the repair and upgrade of product shipped during the fiscal year 2005 that
contained faulty vendor-supplied components. The Company may to incur similar
repair and upgrade costs in the second and early third quarter to fully address
this issue. In addition, the Company increased its reserve for slow moving
inventory related to legacy products, a non-recurring and non-cash cost.
Operating expenses for the quarter increased $121,000 or 10.4 percent
to $1.3 million for the three months ended September 30, 2005, compared to $1.2
million for the three months ended September 30, 2004. The increase was
primarily driven by a $55,000 increase in sales and marketing expenses and bad
debt reserve associated with the previously announced IntraVantage asset
acquisition, $38,000 in extra-ordinary expenses related to general M&A
activities and $24,000 in increased company-funded research and development. As
a percent of sales, operating expenses during the first quarter remained flat at
Addressing the Company's ongoing operations, Mr. Johnson noted, "One of
our key goals for fiscal year 2006 is to smooth out the pace of our sales and
operations, something we in fact accomplished during the first quarter and
continue into the second quarter. This goal is important to us as it will help
address the inherent volatility of our business model given our stated intention
to bid on and win incrementally larger development projects and effectively
produce the resulting manufacturing revenue streams. Nonetheless, quarter to
quarter, we expect that sales levels and the resulting profitability will cycle
correspondingly with the timing of new product launches stemming from our new
product development activities. We anticipate launching two new products in
second quarter and additional new products in the third quarter."
Commenting on the Company's near term prospects, Mr. Johnson said,
"Another key goal for fiscal year 2006 is for us to capitalize on growth
opportunities afforded via M&A activities. For more than a year, we have been
actively looking for acquisition candidates that would not only be accretive to
our profits, but also accretive to our business model, giving us capabilities
that will make us more attractive to current and future customers. Those efforts
have paid off in our recently announced asset acquisition of the dental business
of IntraVantage, Inc. This acquisition is indicative of what we've been looking
for in potential candidates, opportunities that fit seamlessly with our current
capabilities, a high value use of the profits and cash we have generated and an
extension of our business that does not bring corresponding increases in
operating expenses. We continue to evaluate additional opportunities while not
losing our focus on the organic growth of our current business."
Management is reaffirming revenue guidance and expects to report
full-year revenues in the range of $16.0 million to $18.0 million but lowering
earnings guidance to between $0.21 to $0.26 per share, compared to the previous
earnings guidance of $0.26 to $0.30. This does not however include the
contribution of future acquisitions, or new supply agreements yet to be signed,
and only includes new production agreements which are already included in the
Investors and all others are invited to listen to a conference call
discussing the first quarter and fiscal 2006 outlook, today at 4:30 p.m. Eastern
Time. The call will be broadcast over the Internet at www.pro-dex.com. An online
replay will be available for 30 days. Additionally, a telephone replay will be
available two hours after the call for 48-hours by dialing (800) 475-6701 for
domestic callers and (320) 365-3844 for international callers; conference ID#
Pro-Dex Inc., with operations in Santa Ana, California and Beaverton,