SDL, Inc. 2Q conference call, July 20, 2000
Don Scifres, CEO:
Thrilled with our second quarter results. We had 50% or better sequential growth, better than most have in a year. 242% increase y/y in fiber optics products, 3.4 times higher than a year ago. Bookings are at record levels. Many new customers. Gross margins were up 4.7 pts sequentially. Record volumes. New acquisitions did well. 72%sequential growth in pro forma operating income.
Mike Foster, CFO
We exceeded revised estimates in all areas --- revenues, margins, and earnings.
Revs of $110.5 million, up 155% y/y, 53% seq. FO. products up 60% sequentially, 3.4X y/y, representing 86% of total revenues. This numbers include Queensgate and Veritech for 3 months, and PIRI for 4 weeks. Without acquisitions, growth was 36% sequential, and 180% y/y.
Terrestrial revenues were up 81% sequentially, 214% y/y; undersea were up 29% sequentially and 5X y/y, representing 26% of total revenues.
Geographical breakdown: international up 58% sequentially, 291% y/y, representing 56% of total revenues.
Customers: 3 over 10% --- Alcatel, Corning, and JDS Uniphase. Nine are over $4 million.
Gross margins were 52.6%, up 4.7 pts sequentially, and 10.5 y/y. 57% was due to mix, volumes, yields, and efficiencies. Rest was due to strong margins at Veritech and PIRI.
R&D was up 28% sequentiall and 77% y/y.
11.4% SG&A vs. 9.2% in Q1, up 89% sequentially, and 98% y/y.
$38m pro forma, OpX. Margins up 72% or 3.9 pts sequentially, and 402% or 16.9 pts y/y.
To reach effective tax rate of 36.5% we used 36.8% in Q2.
Pro forma earnings were $27.2 million, or $0.33 cents per share on 83.5 million diluted shares. Up 267% y/y.
$379 Million in cash and cash equivalents. $413 M in working capital. $77.4 million cash from operations. $10.4 million in expenditures.
DSOs at 55 down from 63 in Q1. Inventory turns 5.0 from 4.4 in Q1.
Highlights: Strong revenues in terrestrial and undersea. Higher margins. Major improvements in cash flow.
Guidance: 25% growth or better next quarter; gross margins the same or higher.
Don Scifres:
Fiber optics continue to expand both internall and through acquisitions. [Lists products]
Many of these lead the industry and are spring-boards for next generation modules --- higher channel counts, higher data rates, all optical networks, longer distances before op/elec converstion.
Our goal is to provide customer-friendly modules. Over 50% of f.o revenues in Q2 were modules. 244% growth y/y. Broadening this segment. Nine customers over $4 million this quarter vs. 4 last quarter.
New and emerging players are showing up. A lot of divergent companies.
Also growth in global suppliers: Siemens this quarter for 10 gigbit drivers and modules, JDSU, and GLW, the latter locked in through 2001. Increasing diversity is good for business.
Near-term we're seeing record orders, surpassing expectations by a "healthy margin."
Manufacturing capacity goal is to increase facilities 5X over the next 12 to 18 months. [Later explained this was for all mfg. facilities.] In British Columbia pump modules are still expanding --- will add both equipment and people, plus see efficiencies of new designs. We have more orders than capacity.
Raman expanding rapidly, will ramp in 2001. Will add 60% more floor space by end of 2000. We also bought the contingency space from Queensgate, bringing total cost of acq to $200 million. Will meet new customers' needs.
Closed PIRI --- exceeded expectations in last weeks. Long term potential in production on silicon --- added 80% more manufacturing space and added shifts. Greg Dougherty has been managing integration, aligning organization around product lines. We've also added new transmission division with John Wyatt as head. This includes lithium niobate products, including Veritech.
JDS Merger:
This will allow us to serve our customers better. By merging technologies we will have more advanced modules. Both transmission and amplifier modules, EDFA plus Raman, will bring these and other modules to market more quickly. Will manufacture more products at lower costs, making us a better partner for our customers. Customer satisfaction is our goal.
HSR (Hart Scott Rodino)
Merger should be complete by the end of December. Products of two companies are complimentary. JDS is our largest customer for 980nm pumps. They don't manufacture their own. Others have these products. We will cooperate with DOJ. We are at earliest stages and it's not appropriate to comment further.
Q&A coming up. . . |
