This call is a lovefest. I've never heard someone simply congratulate management WITHOUT bothering to ask a question. Don't know how it will effect price...but at least it seems clear that the analysts love the execution. Nice change of pace from Nortel.
You got that right! Analysts were effusive. And if Ken's at NextGen, it'll take everything I have not to give the guy a big hug. :)
Here's the goods:
NUFO conference call, October 25, 2000
Three press releases today:
biz.yahoo.com
corporate-ir.net
corporate-ir.net
Exceptional revenue growth. An acceleration in revenue growth. 3Q FO 14.9M 76% increase, seq; and 7X y/y. 3Q photonics tools 7.3M, up 22% seq, 57% y/y. GMs increased substantialls 22.5% from 9.7%.
Overall strategy: wealth of technical talent focused on select categories. We partner with network equip. partners. Operations focuses on mfg in high volumes at low cost. Will continue to fund product development and expand manufacturing.
Additional accomplishments:
· Secondary offering, $440M, end of Q. cash over 500M. Strong foundation.
· Operational strength. Vol. Up and yields up across all telecom products. Shipped sig. Out of 22K mfg in China. Second facility above expectations. China fully qualified by customers. Yields were comparable to US. 250K sq. ft. is ahead of plan. Rev. in 4Q. 700 people currently in China. Up to 1000 by end of year.
· Focusing on select relationships. We can respond to their needs and gives good visibility: Corning supply agreement for passives. Contract is for 2001. Rev. will exceed 20M. First vol. shipments to Ciena in 3Q. Will dev. further rev. with another new customer in 4Q.
* Tunable lasers sample in 1Q. Shipments in 01. Ship L-band in first half of 01. Can rapidly bring to market key component in Raman. Will ship in 4Q. Will increase yields in this product line. Polarization beam combiners.
· Three new passives being introduced. $150M expected in 2001. Double 2000. Current 120 to 130M estimated for 01.
· Breakeven in second half 01, vs. earlier first half 02.
· Two acquisitions (see press releases) --- both fit strategic direction. Accretive in first full quarter of combined operations. JCA --- from technology --- expertise in microelectronics and packaging. Strengthens capability in active components. High speed microelectronics. Continued strong revenue growth at JCA. Margins are already higher than NUFO’s for end of 01. fused fiber coupling machines. Pump multiplexers and fibers. . . GlobeY --- instruments for plant floor. Used in manufacturer of components. Profitable in first half 2000. Both are strategic and accretive in first full quarter of combined ops.
· Continue to invest aggressively.
Bill Potts, CFO:
Financials:
Rev. 22.2M, up from 14.5 y/y. Rev. by segment: 67% from telecom group, 33% from photonic tools. 59% / 41% in June. Year ago 30%/ 70%, a complete flip-flop.
Product category: Active 30%, passives 70%. 4.4M, 10.5M
By customer: 10% Corvis, 22.1% vs. 11.4% in June, Agilent 12.6 vs 15.6%, Corning 12 vs. 10.4%; ALA, slightly below 10%.
Receivables 44.8 days DSOs, Inventory levels, 20.9M up from 13.3M --- breakout is 9.1 in raw, 8.7 in whip, and 3.1 in finished goods. Indicative of production ramp we’re anticipating.
Cash --- appx. 29M negative; operating 11.5M neg. up from 9.5M; 12.6M in CapX. 26.5M total. 5.3 M in support of supply chain. Cash balance 504M. 1.1M depreciation.
Q&A:
Q: With all activity today with NT, what is your view of the component supply chain. Do you see inventory buffering with your customers?
A: We have not seen a slow-down in demand in products. We continue to see strong demand. [Paul:] Focusing on product areas that are hot: polarization beam combiners essential to Raman products --- growing faster than average for industry.
Q: How do you track whether customers double order?
A: We have close conversations with them, we have percent award guarantees, this gives us good visibility.
Q: Great quarter, guys! Gave trailing 9mos. On JCA, what is historical growth? What is bottom line guidance? Does it include acquisitions?
A: JCA – 9 mos 13.9, sept 5.5M; other: 4.8 in 9 mos vs 2.3 in sept. Bottom line is given on web. That model shows as we exit 4Q 2001, op margin will be in the zero to 6% positive range. Numbers are core business before acquisitions.
Q: Quantify yields on pvcs and circulators?
A: Have improved yields through quarter. Stated we had work yet to do and we’ve seen significant improvement in yields. Will continue to be focus. We haven’t gotten specific b/c of competitive reasons. Mix? Both good product areas.
Q: On acquisitions, management teams how will they be integrated? Trajectory on 9 mos versus Sept? Is that growth rate we can use for model?
A: Globe will be integrated. JCA, so. Cal and we will be working with team in providing financial support and expansion. Significant involvement with that company and they will operate as stand-alone subsidiary. Trajectory, solid backbone and very good pipeline of products. Expect them to have similar growth as we see currently. We’re happy with what we see as good strong growth.
Q: Tunable laser sampling, sounds like you want to incorporate customer feed-back before sampling. What is comfort level of sampling?
A: We feel really good about that. Feedback is excellent. Have high-powered tunable with wide range with high purity. It will be unique for future. We’re on track internally and customer feedback is excellent.
Q: Congratulations on quarter. When will acquisition close? 10% customers at either?
A: JCA in 4Q. Globe in early Jan’01. Customers at JCA --- OC-48 and OC-192 products shipping now, ALA, Corvis, as well as new customers who are complementary who are sampling and working to win designs. Margins --- part of what we will do is expand their operations. Will put in infrastructure for long-term success. Even so margins will be very strong.
Q: JCA, wondering about integration plans with existing portfolio.
A: we have not gone into detail in terms of products. They will be center of high-speed optoelectronics for us. They are data drivers. As such they serve the same segment in high-speed IP. Microcircuit and packaging can work well with our microelectronics.
Q: Congratulations. Ciena win, could you talk about it? Is it a percentage win similar to others where you’re in the drivers seat?
A: As we were on our secondary road show we set expectations. We thought we’d close a couple additional customers. Ciena is the first of that. We have begun volume shipments. Many customers don’t want us to talk about exact numbers.
Q: China facility ramp? Percentage shipping by year end?
A: Appx. 70% in Q3 were out of China. 100% of circulators will be out of China in 4Q. ?combiners in US for one more quarter.
Q: Tunable laser sampling timing? Q1? Are customers looking at is as DFB replacement?
A: We did narrow to Q1. In general seeing customers not taking tunables just for sparing. It’s an important application but makes sense to be a DFB replacement.
Q: Three new passive products? Isolator array, coupler and interleaver, feedback from customers?
A: Great feed-back. Significant realignment based on customer feedback --- we’ve shipped product we hadn’t anticipated earlier. Other products still in the pipe.
Q: Congratulations on an awesome quarter. Little more light on L-band product? A lot of demand for L-Band?
A: L-Band product is swept wave-length system for L-band testing. Seeing quite a bit of demand. As the amount of WDM components grows in the L-band there is equal amt of growth in test instrumentation. Heck of a lot of demand there. Plays to our strength.
Q: Comment on btob in Q?
A: No. We must have seen pretty good bookings or we wouldn’t have raised estimates, but we haven’t published our bookings.
Q: JCA contributions in ’01?
A: We will close acquisition and then re-do model and get that out as quickly as we can. Probably not till late Nov., early Dec.
Q: Amazed at your revenue over-shoot and that you can grow your margins 18% in 80 days. Overwhelmed.
A: Thank you, appreciate that.
Q: Revisit the macro issue, you don’t see downturn but maybe others are. Are there pockets where there are double-ordering. Also chatter about customer spending. . what are you hearing?
A: Let me give perspective: When we think about capital spending we see bricks and mortar and copper systems, they are not getting as much attention. Go to the other end of the system --- next gen optical systems --- just not seeing let-up in demand. The fact we’ve raised our forecast explains that. Question of double order, our strategy --- we partner closely with customers. We talk to all levels of management. We have great visibility. We have high level of confidence there is not double ordering. Under supply of capacity in the areas we focus on. Raman has exploded. Demand far exceeds capacity. We focus on those hot areas. That’s what carries us forward.
Q: Congratulations on a great Q. Welcome relief. Thank you for that. On tunable lasers at Telcordia?
A: Testing subsystems. Process for certification is a long one. But we are testing sub-assemblies that go into that so we get a running start on full qualification that will begin next year.
Q: Tunable lasers for other purposes other than sparing, where do you see first application?
A: It’s interesting we have conversations with many many system houses with every one of those (list of possible uses). Once you have tunable device you can put it in slot in network and whether it reconfigures or drives tunable transmissions to some extent is decoupled from what we do. We are seeing interest in all those areas.
Q: Remind us again what is tuning range?
A: across entire C-band, 35nm. Now we have L-band. We don’t tune across both bands. One rack handles C and one handles L. In terms of speeds, people are not looking at protection time tuning but provisioning time tuning. Tuning speed is a couple seconds. No issue with this.
Q: Pricing?
A: We price to market. Based on trajectory we are going to be way out in front. Try not to leave money on table if we don’t have to.
Q: S&M gone down to 7% from 9%. How are you doing there?
A: We’re hiring --- flat in dollars. Need to add more people as business is scaling more rapidly than we thought. Ken: look at all-optical space there is tremendous amt of selling, given we have select set of customers we need good compliment of sales but it’s an efficient model.
Q: No need to push sales because of great demand?
A: We have operations guys pushing pretty hard. Does that answer your questions? (Relieved laughter.)
Working hard to provide a good Q4. |
