EX-99.2 4 rimage031909_ex99-2.txt BERNARD ALDRICH REMARKS EXHIBIT 99.2 BERNARD ALDRICH REMARKS RIMAGE CORPORATION FIRST QUARTER 2003 CONFERENCE CALL APRIL 23, 2003 ================================================================================ * Good afternoon and thanks for taking the time to participate in our first quarter conference call. * Joining me today is Dave Suden, our chief technology officer, and Rob Wolf, our chief financial officer. * In keeping with Regulation FD, which prohibits us from providing an investor with any guidance unless it is also publicly released, we have provided financial guidance in our first quarter release. * Our guidance is subject to a number of risks, including the potential impact of weakness in the national economy on the computer data storage and computer peripherals market. * Other factors that could affect our performance are set forth in our filings with the Securities and Exchange Commission, which we urge you to review. * As evidenced by our strong first quarter results, Rimage is continuing to perform at a high level despite the sluggish global economy and uncertainty created by the Iraqi conflict. * Net income for the first quarter increased 33% to $1.5 million or $0.16 per diluted share, which exceeded our previously reported guidance for this period. * Revenues rose 17% to $11.5 million. * Our performance for this period was generated by the across-the-board strength of Rimage's operations. * No single customer accounted for a disproportionately large share of our first quarter sales. * Our four targeted markets, which include digital photography, medical imaging, banking and finance, and government, contributed a combined 56% to our first quarter sales total. * Our strong first quarter earnings were attained despite a 15% increase in SG&A expense. * This planned increase reflects a concerted effort to further penetrate our targeted markets by implementing a range of new sales and marketing programs. * SG&A expense is expected to remain at relatively high levels over the balance of 2003 in comparison to last year's expense levels. * Now, for the next few minutes, I would like to discuss two recent and important new product introductions. * This week, we will introduce our new Desktop publishing system, which incorporates enriched features and enhancements in comparison to the line it has replaced. * Equally important, our new Desktop system features an inkjet color printer that is the result of our strategic alliance with Hewlett-Packard. * In addition to providing customers with the confidence of using an HP-enabled product, this new printer is significant for another reason. * Our previous Desktop system included an inkjet printer that we purchased from another vendor. * As a result, we did not share in the recurring revenue stream generated by customer sales of replacement printer cartridges and other parts. * That changes with our new Desktop system, since we will be selling all after-market products to our customers. * We believe the recurring revenue stream generated by our new Desktop publishing system could become significant over the next few years. * Our second product introduction involves our new DiscLab publishing system. * The DiscLab system is designed specifically for the photo-finishing mini or one-hour labs found in tens of thousands of retail establishments. * This new system provides mini-labs with the same CD publishing and color label printing quality as found in the higher-volume systems that we sell to large wholesale labs. Moreover, DiscLab has been integrated into the photo-finishing mini-lab equipment sold by the industry's leading players to major retailers. * For this reason, DiscLab represents a key part of our strategy for participating in the conversion of retail mini-labs to digital capabilities, meaning publishing photos on CDs. * We are continuing to pursue a range of promising opportunities in this market segment, and we believe mini-lab sales should grow steadily over the balance of 2003. * We are also encouraged by the progress that we are making in the medical imaging market. * Sales into this market were strong in this year's first quarter, reflecting the growing effectiveness of our strategy of establishing strategic partnerships with industry-leading players. * Thus far, substantially all of our sales have been made into the after-market, where existing medical imaging installations are being converted to provide digital output on CD/DVD media, in addition to conventional analog film. * Industry sources estimate that approximately 80,000 to 100,000 worldwide applications in the medical imaging marketplace currently exist for our CD/DVD publishing systems. * These applications, which include all imaging modalities from CT and MRI to ultrasound and mammography, are found in approximately 20,000 hospitals and clinics around the world. * So, like digital photography, the medical imaging market represents another major opportunity for Rimage that we are aggressively pursuing. * I will conclude my remarks by reviewing the financial guidance included in our first quarter earnings release. * For the second quarter of 2003 ending June 30, we are forecasting earnings of $0.15 to $0.17 per diluted share on revenues of $12.0 million to $13.0 million. * At this point, we believe that our year-over-year comparisons will be affected by the $2 million one-time order that we booked with Eastman Kodak in last year's second quarter. * We are not anticipating an order of this size in the current quarter. * Instead, we believe that our outlook for strong sales and earnings will continue to be driven by the across-the-board strength of our ongoing operations. * As I indicated earlier, this pattern reflects the sustainable underlying strength of our business. * And it is why we are confident in our outlook for strong sales and earnings growth. * Thank you. Now, Rob Wolf will review our first quarter results in some detail. ROBERT J. WOLF REMARKS RIMAGE CORPORATION FIRST QUARTER 2003 CONFERENCE CALL APRIL 23, 2003 ================================================================================ * Thanks, Bernie * Reflecting the steady expansion of our worldwide installed base of CD/DVD publishing systems, sales of consumable supplies, including maintenance contracts, printer ribbons, media and parts, increased 34% in the first quarter from the year-earlier level. * Recurring revenues accounted for 32% of our total first quarter sales. * The expansion of Rimage's recurring revenue stream is providing us with a growing degree of predictability and consistency, and we expect this revenue component to continue growing. * Rimage's gross margin improved to 50% in this year's first quarter, from 48% in the first quarter of 2002, due primarily to improvements in our sales mix. * R&D expense of $849,000 was down slightly from the year-earlier level, but reflecting higher sales in the current quarter, R&D came to 7% of first quarter sales, compared to 9% a year ago. * Selling, general and administrative expense increased 15% in the first quarter from the year-earlier level, reflecting investments in sales and marketing programs aimed at strengthening Rimage's ability to penetrate its targeted markets. * SGA, which is expected to remain at relatively high levels for the next few quarters, came to 23% of revenues in the first quarters of both 2003 and 2002. * Our operating margin improved to 20% in this year's first quarter, from 16% in the year-earlier period. * In addition, our pre-tax margin rose to 21% in this year's first quarter, from 18% a year ago. * Finally, Rimage's effective tax rate was unchanged at 36.5% in the first quarter. * Turning now to the balance sheet, cash and investments totaled $37.1 million at March 31, 2003, up from $36.3 million at the end of 2002. * This rate of cash growth was below that of prior periods due to the approximately $900,000 increase in inventories in this year's first quarter. * Our increased inventories for this period resulted primarily from the delayed introduction of our new Desktop product line. * Now that shipments of this new product are scheduled to begin this week, we expect inventories to decline by the end of the second quarter. * Shareholders' equity improved to $43.7 million at the end of the first quarter, from $42.2 million at year-end 2002. * This put our return on equity at 25%, up from 21% a year ago. * That wraps up our formal remarks, and now I will turn the conference call back to the operator, who will poll you for any questions.