Presstek, Inc. (NASDAQ: PRST) announced net income of $1.9 million or $0.05 per diluted share for the first quarter of 2004. This compares to $1.8 and $0.05 per diluted share for the same period last year. First quarter earnings reflect a reversal of $296,000 of special charges, which were originally recorded over the past two years. Revenue for the first 3 months was $23.3 million as compared to $22.5 million in Q1 2003. The company feels they will continue to see growth in all market segments that will deliver solid results.
Editor's Note: It is clear that Presstek is attempting to wait and see what clarity emerges from industry leader Heidelberg, in determining their QMDI strategy. They are making great strides in establishing themselves as an OEM company by partnering with KPG, KBA and Ryobi. The new Applause, processless plate, should get great traction from medium to large offset printers once its merits start to be recognized. The only question that seems to prevail is how long they will maintain their commitment to Lasertel. While they announced a large contract for diodes in 2004, this division is clearly dragging profits, with questionable upside potential. Presstek with many of their new technology announcements like Dimension Excel, Profire Excel, SureFire and Applause plates should receive rave reviews at Drupa.
Topics of this summary:
- First Quarter Performance
- Lasertel
- Business Update
- Q & A
First Quarter Performance
Presstek continues to deliver increased revenues and earnings under challenging conditions.
- Equipment revenue for Q1, $9.7 million up 35% from same quarter in 2003
- Consumable revenue for Q1 was $13.0 million down from $13.6 in corresponding 2003 quarter
- New technology revenue (non-Heidelberg platform products) was up 57%
- CTP revenue for new equipment and consumables grew 60% from Q1 2003 to Q1 2004
- Gross margins declined from comparable year to year quarters, 2004 to 38% from 42%. This is primarily attributed to lower absorption of inventory of old technology laser diodes
- Company generated $3.1 million cash from operations in Q1, total cash position $31.6 million up from $20.6 million in Q1 2003
- Shipped 53 new CTP devices in quarter
Lasertel
Lasertel, the company's subsidiary that produces laser diodes, reported a net operating loss of $1.4 million for the quarter. Presstek reported a large purchase order was issued by an unnamed source for approximately $1 million in new diodes for 2004. This should favorable impact revenues for the division for the remainder of 2004. The company anticipates the division will return to more normal revenue and production efficiencies in the balance of 2004 under their new division head.
Business Update
President and Chief Executive Officer, Mr. Edward Marino, enthusiastically spoke of new business opportunities. Drupa, which should cost the company in Q2 $800,000 to $1 million, should afford the company an opportunity to showcase many of their new offerings with companies like KBA, A.B.Dick and their own new products. While weak sales of overstocked QMDI kits negatively impacted overall revenue, it is anticipated that the new technology segments products will more than offset that decrease. The CTP business is well positioned with plates like Applause, the new next generation Dimension series plus the new SureFire platesetter line for small print organizations. Presstek is also excited about the two new Ryobi DI press models to be exhibited at Drupa
Q & A
- Consumable sales for QMDI presses are down from $2.6 million in Q1 2003 to $1.8 million in current quarter.
- Gross margins heavily impacted by Lasertel.
- Lasertel's target is for breakeven within the calendar year. There will be variations within quarters but should show a growth trend.
- It is anticipated that during Q2 the surplus of QMDI kits will be exhausted. Presstek is not expecting any major revenue boost from Heidelberg sales however they do expect ProSpot conversions to start in Q2.
- Margins on consumable have been steady with the only increases in cost of aluminum. Presstek has witnessed some competitive price pressure.
- Royalties are becoming smaller due to decrease in QMDI kit sales and the ending of a Xerox contract.
- The company believes the current Lasertel drag on company performance is short term and is very confident this is a good investment for the future growth of company. Lasertel should be cash neutral for 2004 and should contribute 75% to margin going forward.
- SureFire is aimed at the largest market segment of small print companies and in-house operations. This is an entirely new market for Presstek.
- Presstek expects to see improved revenue for 2004 from both KBA and KPG.
