Com21 Q1 conference call, April 14, 2000
Excellent quarter. Customer wins, revenues, and other fronts, best ever quarter. Tremendous demand for DOCSIS and ComUnity market growing faster than we had anticipated. Sold 154,000 modems, up 52% q/q and more than half of all of 1999.
Revenues $41.6 million, up 116% y/y and 40% q/q. Net loss $2.4 million or (0.11), well ahead of concensus. [First Call concensus was minus .23]
Certified DoxPort 101 received @Home qualification. Now along with DoxPort 111 and 1010, 3 modems have Level II approval.
Three cable modems have received DOCSIS by CableLabs. DoxPort 111 is 1.1 up-gradable. All three rated in top of speed tests.
CMTS network unit will be in CableLabs wave 14 beginning in May. Will take more than one round to pass. Have added other new products, too.
VOX is first voice and data product over HFC. A next generation voice access product. Voice market is huge. Working in cooperation with TDSoft for V 5.2 network standard approval by European Standards. VOX server is a single converged network for voice and data. Will be $4.5 billion market by 2003.
This quarter saw global presence increase. New customers. Opened European development center. NeoTelecom ordered 18,000 modems for Korea Thrunet. This is the beginning of a large opportunity. Also won new customer in Canada, Westman Communications. Awards from CableCom, Comcast, ATT/BIS, CNC, Cox Communications, Cable Vision in Switzerland, MegaCable in Mexico.
More than $10 million in sales from 3 of 4 regions. Great global business. Latin America is increasing. International was more than 50% of sales.
Opened development center in Cork, Ireland. Close to needs of customers. Europe DVB standard. Group of 25 engineers in Ireland.
Dave Robertson, CFO:
1Q saw dramatic rise in DOCSIS revenues. 86% of revenues came from modems. 36% domestic, up 5% sequentially, 64% international, up 72% sequentially.
Top five customers: ATT, NeoNet, Philips, Siemens, and Furakawa.
Gross margins were 30.2%, same as last quarter. ASPs tracking as expected.
OpEx. $16.4 million, 39% of revenues, vs. 48% last quarter. Excellent growth in top line. Revenues were $632,000 per employee.
Cash $99 million, inventory turns 21, will be less going forward, DSOs 57 days vs. 58 last quarter.
Increased approved products. Asian market seeing great growth. In Japan 2.4 million homes passed.
Del Oro ranks CMTO 2nd in modem sales internationally, 3rd in North America. 15 million homes passed with proprietary systems.
New products in pipeline. VOX will ramp in Q3. Beginning of a great year. We are gaining market share as well as mind share.
I have to give employees credit. Also want to pay a tribute to our customers. We have 125 globally. On April 18, 1997 we shipped our first global products. We intend to keep earning your business.
Q&A
Q: Is VOX product VoIP, circuit switched, upgradeable?
A: VOX system is aimed at existing ATM proprietary system customers. It's VoATM, signal to gateway. Modem has slot for telephone card. Customers are all ready to rock and roll.
Q: Customers?
A: Beta in Europe now, ready for second site. Indications it will turn into order.
Q: Cost reduction program?
A: Will enter market Q3 and ramp in Q4. Impact from components not significant right now. Could have shipped more if we'd had more products.
Q: Linearity? Orders? What's driving sales? What about trials in MMDS? DVB?
A: Uptick in ATM will continue in current quarter. Bulk to existing customers. They've tried products and are expanding, adding additional sites. DVB --- have shipped early products. Evaluating now. It will get stronger in latter part of year. Strong in Q3 and Q4. Last quarter we shipped 40% of products in last month. MMDS --- coming more slowly than hoped. Test in Silicon Valley. Launching in San Joaquin Valley. Also talking to customers in Latin America and Europe. Lots of interest. It's not our technology that's holding up deployment. It's wireless providers trying to get better form factors.
Q: CableLabs relationship? Status of 1.2? Durope and competition in telephony? Why?
A: CableLabs relationship is good and has been for a long time. 1.1 keeps moving out because of lack of CMTS that are prepared to operate with various modems. Chip sets running late by weeks, not months. Sliding to Sept/Oct for 1.1. Dry runs going on now. More complex --- issues of latency. 1.2? There is no 1.2 so there's nothing to talk about. Adv Phy taking TDMA approach. That's what everyone's doing. If some other means were chosen, you'd have to add channels or drop customers. It would require changing out systems. Not attractive. Europe? Catching up quickly regarding on-line and broadband access. Germany is owned by Deutsche Telecom and they've been in no hurry to move cable until they get DSL off the ground. Most have bought with intention of ruining voice and data. Standards are ahead in ATM.
Q: How many employees?
A: 262.
Q: Architecture and DOCSIS for CMTS? Cisco dominates and we're now seeing other players. What are factors for breaking Cisco's lock? What about Layer II termination going to node level? ATT talking about this?
A: In competitive landscape, Cisco was first with UBR. Good for getting footprint. Market is evolving to mini-fiber nodes. Fiber closer to homes. CMTS blade into mini-fiber node. Digital from that point. Cuts down on maintenance. We're involved in lining up partners. There is another approach: Big Iron. Broadband Access, among others. Our approach is not "big iron" or mini-fiber nodes but voice. Want horsepower where you need it, but there are bigger issues. Customers want multi vendors. No one will capturre all the market.
Q: For advanced physical, non-TDMA would require additional channels. Could you please elaborate?
A: CDMA is a different physical layer. Is a different modulation scheme. You could run on one or the other. Would require two channels, one for each. In greenfield settings you could have CDMA. It would be your choice. A lot less bandwidth available downstream. If plant is noisy, you must slow down the speed. Not dynamically feasible. Not as much interest in CDMA as for wireless.
Q: Any new customers in Europe? Growth in Q1 vs Q2? Q1 is generally seasonally weak. . .
A: In Europe we sell through systems integrators. Have new customer in Russia through Palma. In Netherlands market is advancing --- through UPC and TeleCable. France Telecom is adding. Spanish --- RetaCal and other markets. In some cases they're filling out systems and in others adding new locations. Having good luck in Mexico. MegaCabo --- they took significant deliveries. They're the second largest in that area.
The market is doing a nice job of taking off. We'll grow as fast as the over-all market. There's an awful lot of strong demand.
Q: Non-US markets have different standards. What do operators intend? Any trend to one emerging as winner/
A: Concensus --- operators have opportunity to grab customers. They take whatever they can grap. ATM helps them get customers. Euro-DOCSIS or DVB? Depends on relations with US operators. If they don't have them, they go to dVB. Standards-based will split between Euro-DOCSIS and DVB. Concensus is to grab market share from telephone companies.
Q: Home networking solutions, what is time line?
A: I'd like to have a crystal ball. Making bet on network interface unit. Voice/data/video. Have team from a number of companies to build that product. They're working on this. Talking to potential partners. They have components for other solutions, i.e., set-top box with wireless. Phone type cable owners want NIU outside, some want inside. Over-builders want it outside house. Modem can be gateway. Set-top box problem: if technology moves faster, do you want to trade out everything? NIU is modular and can be updated easily.
Q: What type of partner is needed?
A: Enclosure itself is important. Gets technical. Deals with heat without having fans. Also bugs that can get inside. [Think they're talking creepy-crawlies. . .] NT, LU, ERICY and ADC do well in this market. Componentry is not as difficult. Working with Broadcom.
Q: CMTS and homes passed --- more head-ends installed but homes passed didn't increase in proportion.
A: Strong increase on head-end controllers. 1) operator starts deployment and needs more controllers, 2) we only count homes passed when operator has commissioned operation. We want to be absolutely factual in our numbers and expectations.
Q: Pricing?
A: No price change on head-ends. We do have different configurations --- 4/6/12. . . Can order receiver cards and have capital expenses timed to deployments.
Q: Any gross margin differences in new versus add-on deployments?
A: No. There isn't.
Q: Competitive landscape --- who are you seeing?
A: Depends on which products. We see Terayon on occasion but not broadly. Grazline in Europe, New com in DOCSIS; GI, COMS, Samsung (don't see as much as before), Thomson, Toshiba.
Q: When will you break-even?
A: The market is growing. We're seeing good revenue growth. Investing in R&D and S&M. Not break-even till first half 2001.
Q: Pricing plan in general? Cost of manufacturing moving down?
A: Cost-reduction program. We have our Buel (?) product. Will see some in Q3 and significant benefit in Q4. Design modifications --- product mix means flat to downward. Cost reduction in second half. Will help margins. We don't talk about pricing. Same pricing focus as a year ago.
Thanks to everyone for joining call. Now, we'll go out and celebrate -- it was a great quarter. |
