After leadership additions, Adept shows positive signs

Adept Chart

After suffering through what Motley Fool has termed a “dismal performance” over the previous five years involving a negative 44 percent return for those maintaining an investment over that period, industrial robotics manufacturer Adept Technology is beginning to show significant signs of a turnaround. Following its financial report this week, Adept saw a jump in stock value of over 25 percent on Wednesday, closing at $4.15 after a 52-week low of $2.38. This is, in context, down from a high above $8 in 2008.

Adept, self-described as “a global, leading provider of intelligent vision-guided robotics systems and services” with an installation base of “57,000 automation systems worldwide in a broad spectrum of high-growth markets” is among the largest manufacturers of industrial robotics in the U.S. Now in its thirtieth year of operation, it offers a range of robots intended for “high-speed, precision manufacturing, packaging, and factory automation,” as well as a mobile robotic platform and a variety of other software and hardware. Adept is, however, several years removed from the height of its success, with the past 12 months in particular much troubled by the type of global cut-backs in corporate capital spending identified in a recent report from Standard & Poors.

With a decrease in year-on-year annual revenue from $66.2 million in 2012 to $46.8 million in 2013, the grounds for investor concern over Adept’s financial status are clear. That gap in earnings represents a steady quarterly decline in orders and revenue since early in fiscal 2012 through Q3 2013 that has only been exacerbated by a reputedly inefficient corporate structure that was inattentive to customer wishes, a problem that the company has implicitly acknowledged through the appointment earlier this month of four new executives each tasked with streamlining a significant corporate division.

It’s a positive sign, then, that in their financial results for fiscal Q4 2013 ending June 30, Adept was able to revise this negative portrait to a marked degree through a blend of promising (though still limited) financial results and a sense of significant reorganization in the company’s upper echelons. Q4 revenues were $13.7 million, up from $10 million in Q3, though down year-on-year from $17.0 million — a trajectory that accurately represents the steady slide in orders that finally appears to be turning around, and one that CEO Rob Cain suggested would be continued under the guidance of the recent management hires, each described as bringing “a record of success in growing mid-tier companies; and their combined depth and experience will help drive Adept’s product strategy, execute on our mobile initiatives and grow market share in our key geographies.”

Cain’s statement contributed to this feeling of renewal in a broader sense as well, calling the fiscal year 2013 “a year of transition for Adept, in which we embarked on a major restructuring. Our efforts have yielded initial favorable results, as we begin to stabilize and grow the business. By partnering with our key suppliers on a cost reduction program as well as focusing on higher margin products and services, we increased fourth quarter revenue, gross margins, adjusted EBITDA and our net operating results on a sequential basis.”

While these results are obviously limited, and any sense of Adept having achieved a complete transformation perhaps premature, the blend of increasing sales, immediate investor confidence, and evident corporate willingness to actively restructure has been well received thus far. Given its relative degree of prominence in the increasingly significant industrial robotics sector, the ability of Adept to show initial signs of successfully executing so significant a turnaround is not only a positive for Adept itself, but a sign of the vitality inherent in industrial robotics more generally.

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