American Science & Engineering [ASEI]

1Q15               1Q14                          

Sales                            $35.5M            $43.1M

Net Inc.                       $1.5M, 0.18     $4.9M, 0.62

The top line fell 18% due primarily to lower sales from services and cargo scanning systems, which were partially offset by an increase in revenue from the company’s Z Backscatter Van mobile cargo systems. Service revenues were down due to the switch to a subcontractor role in war zone operations. Company officials say that sales and bookings were hampered by ongoing violence in parts of the Middle East, resulting in delayed shipments and orders. The regional volatility is expected to impact the company’s second quarter results as well, Chuck Dougherty, AS&E’s president and CEO, says on the earnings call. He adds that the business pipeline “remains substantial” and is growing. “We have our first significant cargo pipeline in Asia for the business,” he says. In the quarter, sales by category were: Cargo Systems, $9.1M; Mobile Cargo Systems, $11.6M; Parcel and Personnel Systems, $765K; Service, $12.8M; and Other, $1.8M. Net income fell 69% on the lower sales and higher research and development, and selling, general and administrative expenses. AS&E says the SG&A costs increased mainly due to marketing expenses related to the roll out of the handheld MINI Z backscatter system in higher incentive compensation expense. Dougherty says that the company has received its first orders for the MINI Z—although it is still essentially in demonstration mode—and will begin marketing it internationally during the next two quarters. He expects revenue contributions in the second half of the fiscal year and more meaningful contributions in FY ’16 from MINI Z. R&D costs were up on the continued focus on new product development and enhancements to existing products. Dougherty also says that the recent launch of public safety channel partners in North America is something the company wants to do internationally. Orders in the quarter were $22.3 million and backlog stood at $162.9 million, down 7% from $176.1 million at the end of the fourth quarter. Free cash flow was a negative $8.6 million. Galaznik says no stock was repurchased in the quarter under the company’s stock repurchase program.