Part I:
SDLI Q3 Conference Call, October 19, 2000
Opening remarks by Don Scifres, CEO
Thrilled with 3Q performance which easily beat expectations. (Credits employees.) Rev of $300,000 per employee, annualized, a record for SDL.
Total rev. 3X a year ago. Pro forma EPS up 4X. The best in the industry. Behind performance is our ability to grow revenue from fiber optics line. FO up 38% seq. 332% y/y. Customer base more diverse. Design wins with newer cust. Began ramping. 90% came from commercial fo products. Record unit volumes in every division. GMs improved 4 pts. seq.
Pro forma eps up 36% seq. Outstanding quarter in all respects. Will update products and merger later in call. First details on financials from Mike Foster.
Financials: (see press release)
Details: 146.5M in revs. 208% y/y; 33% seq. growth. FO products up 332% y/y and 38% seq. 90% of revenues. Strong growth in terrestrial and undersea. Higher channel and faster data rate systems up 42% and 430%. Undersea up 28% and was 25% of total revenue. Up over 3X last year.
5 --- over 10% customers this quarter. One with over 11M. GM up 13 pts from a year ago. 4 pts. sequentially. Strong margins at PIRI. R&D up 32%.
26M in cashflow. 112M ytd DSOs decreased to 51 from 55 in June. Turns at 5.0, level.
Growth in both sectors, higher margins and continued strong positive cash flow.
Q4 growth of 15% or better with similar margins as Q3. Similar guidance we’ve given all year. Possible that tax rate may increase to 37 in Q4. We estimate 2001 revenues will increase 100%. Op margins low to mid 30s. No updates possible until the next conference call except via press releases.
Don:
SDL’s market position has never been stronger.
Highlights:
· 90% rev from FO products. Versus 65 % a year ago and 38% in 1998. We are in the sweet spot of the industry. Added many new product lines with strong potential. (lists products) Many exhibit the world’s best technical solutions. Customers driving performance to higher speeds at lower costs. We anticipate trends: higher channel counts higher data rates, all optical. We can achieve lofty goals going forward. Several examples:
· First large orders for new product --- comb of RAMAN and EDFA, that optimize transmission. Orders will ship in Q4. (Customer not named but a major operator.) RAMAN is the latest rage. Predicted to reach 2 billion by 2003, on top of ? EDFA product chosen b/c of superior technical performance. Result of long design and test cycle. Expanding Santa Clara by 50K Sq. ft for Raman and EDFAs. For this customer and for others we’re working with. Will also ship first InP RAMAN pump, for 1400 band. Market could equal 980 nm market in a few years.
· AWG line also growing. This is from PIRI. Sizeable orders from Hiuai (?). We expect to extend this contract significantly. Strong orders. Three new customer programs in Q3. Will expand facilities by 3 over the next 6 mos. Just completed 24K expansion and purchased 47K sq. adjacent to current facility. Working on L-Band AWGs. Began shipping in Q3. Also adding greater functionality by integrating new optical devices onto wafer. Testing with VOAs in each channel. AWGs integrated with Interleavers also under development. Will open new markets and new capabilities in higher systems. High-growth opportunity. Excited about this product line.
· Growth opportunities at Veritech. Leader in high-speed receivers and modulator drivers. Large new contract with leading supplier to undersea market. Will supply contract with tens of millions of dollars over next 24 months. Also expect to firm up contracts with similar value with two key customers in Q4. Expanding NJ facility from 18K sq. to 130K sq. ft. The first 70K sq. ft. For Q1 of 2001. Rapidly adding new staff and equipment. Production rates 5X more than today over next 12 to 18 mos.
· Queensgate --- network monitors are just beginning to be installed. Market for all optical will increase their market. New sales force opening up opportunities in C and L band monitors. 2 orders and 4 potential new design wins. ?
· LiN doing well. 2 new orders this quarter. Growing over 30% per quarter going forward.
· 980 nm pump lines --- continually amazed by success in this area. New 300 mW 980 grating stabilized pump module. Used in high channel-count systems. Beginning volume production in Q4. Demand for all 980s are strong. Expanding BC facility. 23K sq. added this year. And presently planning 100K sq. ft additional. Up to 5X in 12 to 18 mo.
· Undersea also growing --- new higher power undersea chip ramping. Over 200mW available. Factor of 2 above today’s modules. Raising power requirements rapidly. Our products will enable this.
Will be over $1billion in 2001. Might be able to do significantly better than that. We expect to be part of JDSU by then.
Update: completed majority of document requests. Will finish all submittals in next month. Believe it will compete in Dec. and close before year end. DOJ discussions are on-going, so can’t elaborate further. |
