Blaming a longer-than-expected transition to its new family of 2-D machine vision systems, PPT Vision Inc. today reported "disappointing" Q4 and year-end 2005 financial results, which, combined with ongoing liquidity issues, could require the company to seek new debt or equity financing.
For the quarter ended October 31, the Minneapolis company reported a net loss from continuing operations of $601,000, nearly three times the $219,000 in red ink recorded in the like period last year. Revenues in the fourth quarter fell 41% to $1.2 million from last year's same period.
For the fiscal year, PPT Vision posted a net loss from continuing operations of $2.3 million, more than twice the $1 million recorded in fiscal 2004. Revenues shrank 35% to $5.65 million compared with $8.7 million posted last fiscal year, due primarily to the company's discontinued Passport/Scout product lines.
Approximately $2 million of revenues evaporated when an OEM account in Japan opted not to migrate from Passport/Scout to the company's Impact product, PPV said in a prepared statement.
The reported results cover PPT Vision's 2-D business only, the company said. Factoring in discontinued operations, and its 3-D vision systems product line -- sold in October 2004 to Semiconductor Europe, SA. -- the company lost over $1 million in the fiscal fourth quarter of 2004 and $1.9 million for the year, the company said. Discontinued operations accounted for only $55,000 of this fiscal year's net loss of $2.4 million; there was no loss from discontinued operations in the fourth quarter, the company said.
Meanwhile, PPT Vision CEO Joe Christenson said the company faces liquidity concerns. As of the end of fiscal 2005, PPT Vision had cash and equivalent assets on hand of $778,000, down considerably from the $2.6 million it had at the same time last year. Christenson told analysts during a conference call to discuss the company's fiscal 2005 results that in order to meet liquidity requirements for publicly held companies, PPT Vision might need new bank or equity financing.
Pursuing either of these options would be made easier by the fact that the company has no debt, as long as the company makes gains against fiscal 2006 operational goals, he noted.
Management is closely monitoring the company's progress, Christenson said, and "is prepared to take whatever action needs to be taken to meet liquidity requirements."
Christenson called fiscal 2005 "a year of transition." In addition to phasing out its older product line (for which it took $150,000 charge in the fourth quarter) and betting exclusively on its Impact family, the company shifted from a direct selling model to one in which it is working exclusively with resellers and systems integrators, a segue that is taking longer to master than originally considered.
Moreover, PPT Vision recently completed a restructuring that resulted in the closure of its Michigan office, and a significant reduction in head count and headquarters space, which lowered its monthly lease to $35,000 from $75,000 (the company, however, is carrying a short-term liability on its balance sheet of $140,000 for back rent, which it is paying in monthly installments through May).
As a result, the company has reduced its operating expenses in the fourth quarter by 22%. And until it reaches profitability, the company doesn't anticipate adding materially to its operating expenses, Christenson said. To break even, PPT Vision needs quarterly revenues of $1.8 million, he told analysts, which is $600,000 more than it generated in the fourth quarter.
Christenson did not say when the company expected to achieve profitability, nor did he provide guidance for the coming fiscal year.
PPT Vision is hoping its Impact product line resonates in its largest markets, electronic components manufacturing and automotive parts, as well as the consumer packaged goods and medical device businesses, two other major market segments in which it competes, Christenson said.
Growth, he explained, should accelerate as PPT Vision increases its support and training of the distribution channel, but he cautioned analysts against expecting a big boom. "There's no one thing or homerun," he said. "It will be a series of singles."
The company also expects to increase its competitiveness by incrementally extending its Impact product line. For instance, the company recently added two new smart cameras to the Impact family, sporting on-board image processors as well as real-time I/O and Ethernet communications. The new Impact T28, PPT Vision said, is the highest resolution color intelligent camera available on the market, owing to its 1600 x 1200 pixel resolution. The Impact T24, meanwhile, is an entry-level color model the company said is designed for high-speed applications requiring lower resolution imaging (1024 x 768 pixels).
Ramp up of the Impact family will also help the company improve its bottom line, Christenson said. For example, the product family is easier and less expensive to assemble, which means the company can more confidently outsource production while keeping headcount expansion to a minimum as volumes expand, he pointed out.
Compared with PPT Vision's discontinued product line, which had average gross profit margins in the mid 50% range, the Impact line is expected to carry gross profit margins in the low to mid 60% range, Christenson said. "We have not realized this on a reported basis yet because sales of the old product line are intermixed with [Impact] and since [Impact] volumes have been pretty low so far," he explained.
Despite the challenges, Christenson is optimistic that PPT Vision's operational and product line restructuring will soon begin paying dividends in a market that has reportedly resumed growth after a couple of barren years. "The transition has taken longer than we would like but I firmly believe the company is on the right path," he concluded.