Eden Prairie, Minn.—MTS Systems Corp. (NASDAQ: MTSC) on Feb. 2 reported fiscal 2012 Q1 financial results.
“MTS continues to benefit from our leadership position in emerging geographies and our focus in technology application areas with promising growth potential” said interim CEO William V. Murray. “We posted record revenue and earnings per share during the first quarter of 2012 and, importantly, also realized a significant rise in base orders that are the core of our business. The prevailing global economic uncertainty requires vigilance, but I am pleased with the momentum we have sustained into fiscal 2012. Our order opportunity pipeline and backlog are healthy, our margins are in the historically high ranges, and near-term growth catalysts, such as technology evolution and regulatory mandates, remain strong.”
Q1 results
For the sixth quarter in a row, orders exceeded $115 million, totaling $134.8 million in the fiscal first quarter. Base orders rose 22%, reflecting continued growth in the Test business. There were no large orders ( >$5 million) in the quarter, while fiscal 2011 Q1 results included two large orders totaling approximately $29 million. Orders of that size can result in quarter-to-quarter fluctuations. Sensors orders increased 1%. Backlog is at a record high, increasing 18% compared to the prior year.
Revenue was $133.7 million, up 26% compared to the prior year, including 32% growth in Test, and a 7% gain in Sensors. Strong growth in Test standard products and higher beginning backlog drove the increase. The gross margin rate remained high at 43.9%, but was relatively flat compared to last year’s first quarter, reflecting a generally lower-margin product mix, offset by expense leverage from higher volume.
Income from operations totaled $23.5 million, up 27% compared to the prior year. The gain resulted from higher gross margin on increased volume. Operating expense as a percentage of revenue declined 1% from a year ago to 26%, but rose $7.0 million, principally due to planned investments in productivity initiatives and research and development.
Net earnings were $0.98 per share, compared to $0.86 per share in the prior year, reflecting higher income from operations, partially offset by a higher tax rate. The tax rate for the quarter rose to 33.4% from 26.6% primarily due to the benefit received from the enactment of favorable U.S. tax legislation in fiscal 2011 Q1.
Sensors segment results
Orders were $24.1 million, a 1% increase compared to the prior year. Mobile Hydraulics was up 34%, driven by demand in the Americas. Industrial market demand was down 4% primarily due to large customer order timing in Europe and Asia. Backlog decreased 4% to $16 million compared to the first quarter of fiscal 2011.
Revenue rose 7% to $25.1 million, as a result of shipments from backlog. Gross profit was $14.0 million, up $0.9 million, or 7%, and the gross margin rate was 55.9%, essentially flat. Income from operations was $5.8 million, an increase of 1%, the result of higher gross profit, partially offset by higher operating expenses.
Outlook
“Given the current global economic situation, we remain cautious as we move forward,” Murray said. “But as we look ahead, we must also consider our strong first quarter which includes record backlog and a robust order pipeline for both segments. I believe our financial performance over the past few quarters reflects the importance our customers place on the solutions and products we deliver and that MTS is well positioned to win these market opportunities. Furthermore, we have a strong track record of successfully managing through economic uncertainty. Therefore, we are raising our revenue growth outlook for fiscal 2012 to the mid- to high-teens compared to our previous forecast of low double-digit revenue growth. Growth in earnings per share is dependent on revenue volume, but it is expected to be in the low to mid-teens, as we continue to make important investments in our future.”

MTS Systems Corp.