Earnings News and Notes

American Science and Engineering [ASEI]

Record sales and per share earnings were bolstered by growth in all business areas and continued process improvements, driven by a doubling of sales in the cargo inspection products to $20.9M. Sales of Z Backscatter Vans (ZBV) and ZBV Military Trailers increased 21% to $34.2M, with Field Service up 13% to $23.1M, parcel and people screening up 23% to $1.4M and contract research and development up 19% to $1.1M. AS&E attributes the 37% boost in net income mainly to the higher cargo sales and to a lesser extent the gains at parcel systems with both product lines benefiting from improved manufacturing efficiencies that helped drive margins up. ZBV systems are typically high margin and likely helped with the spike in net income. Overall sales were up 32%. Company officials were excited about the margin gains given that sales and marketing costs as a percentage of revenues were up as AS&E continues to expand its sales footprint internationally. In addition to the record quarterly sales and EPS, AS&E reported record bookings of $116.2M, driven by a handsome $23M military order for its SmartCheck whole body imaging system from the U.S. military and record field service orders over $52M. Company officials say that their systems are gaining traction in the “cost conscious” Asia Pacific region due to the AS&E “value proposition.” The bookings included multiple Gemini parcel inspection systems and ZBVs. They also say that the critical infrastructure markets are choosing the backscatter inspection systems for explosives detection. In turn, the increased bookings drove a record $254M backlog. AS&E says its pipeline of opportunities continues to grow. On the product development front, AS&E has redesigned its OmniView Gantry container inspection system and is developing a robotic Z Backscatter module for a U.S. government agency to detect, diagnose and defeat improvised explosive devices. Analysts were pleased with AS&E’s quarter, particularly the strong bookings and earnings, which beat consensus estimates by 39 cents EPS. Free cash was a $600K outflow in the quarter.