SDLI Conference Call, January 31, 2000
Thrilled with 4Q results. Continue to gain market share. Fiber Optics grew 44% sequentially and 179% y/y. Exceeded competitors as we took market share in DWDM systems. Undersea growth strong. Ramped for 2nd major customer. Constraints in several lines. Look to further growth in 2000 and beyond. Will discuss growth and direction more later.
Mike Foster:
Another record-breaking quarter. Exceeding estimates in all areas. [refer to press release]
$58.7 million revs, up 92% y/y, 24% sequentially. Fiber optics sales increased 44% sequentially. Revs of 187 mllion were up 66% y/y. Fiber optics were up 179% y/y.
ALA largest customer. And second undersea customer was second. Corning and JDSU over 10%. 12 customers were over $1 million versus 8 a year ago.
Demand for higher channel count terrestrial products grew 43% seq. 78% y/y
Undersea 30% of total revenues. Up over 20X y/y, 47% seq --- led by 908 nm sales.. Cable and metro customers up 44% seq. 81% y/y. Terrestrial up 81% y/y, 100% seq.
Intl 49% seq 229% y/y
GM 45.5% in Q. increase of 0.6 pts seq, and 4.5 pts. y/y.
GMs for year 43% up 8.7 pts. y/y. Due to larger mix of undersea chips. Offset by costs of new capacity.
Well positioned for benefits in future periods.
R&D 9.8%, up 9% seq, 73% y/y.
SGA 13.7% [didn't catch comparisons]
Q4 SGA incl 800,000 non-cash stock option grants. Otherwise would have been 12.3% of revs.
Opx $12.4m , up 26.6% and 1.5 pt. sequentially, 240% y/y. 21.4% excluding acquisition charges.
Operating income $33.9 m, 18.1%, up 341% y/y, $16.4m before taxes, 27.9% of sales, 73% seq, 367% y/y.
Net income $12. m, 20.4% of sales, eps diluted, .08 to .30, or 275% increase.
$314 million in cash and cash equivalents. Working cap. $355 million. $26.5 m. cash from operations. $8.5m spent on cap expenditures.
DSOs 64 days, from 82 in Sept, and 73 in June.
Inventory, $22.1m. increase.
Turns 4.1 vs. 3.6 in Q3.
Q4 significant revenue growth --- significant cash flow --- operating margins benefits due to 1) yields and utilization of fixed costs, 2) change in mix to more high-margin fiber optics communications, especially pumps lasers for undersea market.
Expecting 12 to 15% growth in Q1, with further margin improvements.
Pleased with 47% sequential growth in shipments to undersea fiber communications markeets. 43% sequential growth in terrestrial communications business, including pumps, light modules, and drivers.
Review of four key strategies:
I -- Differentiation through technical leadership:
* In feb. we received "Best New Product" award from major industry journal for 980 nm. pump module. We are leader in high channel count DWDM grating stablized pump modules. Have at least 50% market share. (Probably substantially more.) Announced shipments of 160-channel count shows how fast market is moving to high channels. Is fastest growing part of DWDM market. Have received design wins from new equipment companeis. 4Q production was constrained. Continue adding capacity. Volume shipments in 2H2000. Benefitting from high channel count demand. Market needs high chanel counts and high data rates. Also apparent in undersea fiber optics market. Our 980 nm. allowed us to capture large long-term contracts. Undersea was 30% of total revenue. We're moving into higher levels of integration in advanced modules, including 10 gig lithium niobate light modulators and light drivers.
II --- Technical differentiaation ---
At upcoming OFC we will introduce ten new products, including the new 980 nm. product announced in joint Alcatel press release. Laser chip operates at 700 mw kink-free versus competition running at 300 mw. 2X power of current product. We're ahead of market. Both for undersea and terrestrial. First shipments in Q1, full production in Q3. Great start on 1450 nm, 1 1/2 w. RAMAN pump laser named "Best Product in 1999. . . shipped to 10 customers for terrestrial and undersea testing. Will double production in Q1. RAMAN is leading contendor in next generation 40-gig systems.
III --- Patents ---
In 1999 we received over 50 new patents and have filed an additional 45, bringing total to over 200 with 100 pending. We have strong technical team. In 1999 we announced 4-year contract with ALA. New contract extends that to 5th year, going through 20032. LU, NT, Corning, JDSU, Pirelli, Fujitsu, continue to be key customers. Have 4 10% customers: ALA, Corning, JDSU, and 2nd undersea customers.
Contracts through 2000 with all and are in negotiations or have signed longer contracts with all.
329% increase in international revenues, to over 50% of sales. Pump laser contract with second undersea customer is ramping, now have production orders from third customer. First shipments in Q2 for third customers. As production capacity ramps, we could get up to 70 or 80% of this market (980nm DWDM laser pumps for undersea). Increased interest from long haul and metro markets. Shipments to Metro and cable grew over 40% sequentially. Broadening customer base to new markets and building key customer relationships.
IV -- Enhancing manufacturing capacity. Expanded in BC and Santa Clara for 980 and orders still ahead of us. Expect to remain constrained in Q1. In 2000 adding 20,000 sq. feet of manf. for 10 gig modulators and specialty fiber lines.
V -- (not sure where 5th pt. came from) --- Strategic acquisitions --- will continue to pursue --- with focus on technologies that allow differentiation and vertical growth. . . .
>>>>
All errors mine. . . I'm late.. . . gotta run. . .
Pat |
