New Focus Q4 and year-end conference call, January 30, 2001
Strong 4Q results. Solid sequential growth. Gross margins up 9% q/q to 31.3% from 22.5%. Improvements in manufacturing, especially in telecommunications area. 4Q revenues were $33.9M, up 52% sequentially, (vs. $22.2). Fiber optics were $25.3M, up 70% q/q (vs $14.9), and up 9X y/y (vs $2.5m). Photonics tools were $8.6M, up 17% seq (vs. $7.3M), and up 100% y/y.
For 12 months revenues were $80.4M, 3X growth (vs $22.8M).
Actives are growing --- more tunable lasers for test and measurment than anyone in world. JCA will help drive high-speed products.
Passives --- close to number one in circulators. Two new customers are taking quantity shipments. PBC line increasing, making very good progress.
Customers: We work closely with a select number. This helps visibility. $20M with GLW for 2001 --- reflects current business, not any that could be announced. CIEN showing strong growth. 2 new design wins with volume shipments in Q1.
JCA new design wins --- 3 new customers shipping now, expect more in 2001.
New products --- second generation PBC in Q4 – good yields. On track with tunable lasers, with samples to customers in Mar/April time frame. Initial shipments in Q4/01.
JCA new product family --- broadband data drivers for amplifiers, also clock drivers for amplifiers (?) – for OC-48 and OC-192.
Execution: We have higher unit output. Full utilization of China facility. Now in 250,000 sq. ft facility --- and accelerating fit-out of second half of facility. JCA increasing several fold this year. Moving from 45,000 sq. ft facility to new 145,000 sq. ft facility this summer.
2001 --- confident we will be stronger than before. Revenue growth from diverse product line. Profitable in operating income in 2H/01. Raising guidance from $150M to $240M. 2001 revenues will be 3X 2000. This takes into account positives and negatives.
We are raising gross margins from an earlier range of 40 - 45% to a new estimate of 43 - 48%. Positive op income in Q3/01. If revenues improve in first half, that could bring profitability into the first half.
[See press statement for financials]
Product mix: 33% actives vs 30% in previous Q; passives 67% vs. 70%.
Customer mix: over 10% customers were Corvis at 17.1% vs. 22.1%, Agilent 15.6% vs. 12.0%, and GLW 10.5% vs. 12.0%. Two more were in high single-digits.
Geographical breakdown: 68% domestic vs. 71% in prior Q; and 32% international vs. 29%.
Receivables: DSOs 39 days vs 41 days; inventory up $9.5M to $30.4M --- 15.2M in raw materials, 10.2M in “whip”, and 4.9M in finished goods. Part of buildup was due to staging production in China.
Cash: $7.2 operations, $25.3 spent on CapX, and 52M for year. Free cash flow at $19M, for a total of $485M in bank.
Q&A:
Q: What is expected linearity, is year back-end loaded?
A: Business is linear, driven by capacity as it’s brought on. No back-end loading. JCA did $13. M in first 9 months, and $6.6M in Q4. Shows ramp. Their growth rate is similar to parent.
Q: Percentage from new products in 2001?
A: 20 to 25%
Q: Corvis was down slightly, why?
A: They’ve been reasonably steady. We enable their Raman. Strong there.
Q: External cavity products, how vs. DBR?
A: Moving well. Samples in late Mar/ early April. Revs at end of year. DBR and Iolon external cavity --- we expect further activity. We target ultra long-haul. Iolon validates this approach.
Q: Book to bill?
A: Don’t give that.
Q: What about lead-times in passives?
A: Two to three months.
Q: You said you had 2 new design wins. Does this include the one announced in December?
A: No. We have two apart from Dec. announcement.
Q: Comment on acceleration and deceleration of orders and whether you’ve had cancellations.
A: We are close to customers and have multiple design wins in any one account. Some change b/c of component shortages. Some see slow down in some areas and not in others. On balance where one slows down, the other picks up. We have had no order cancellations.
Q: What segments are strongest?
A: Raman is strong. New players are stronger than incumbents.
Q: Yields in China plant? Actives vs. passives?
A: Circulators in China, yields are similar to U.S. Polarization beam combiners --- very good yields. Actives vs. passives is important question. JCA plus tunables is moving us to a better balance between them.
Q: Target for telecom and photonic tools in ’01?
A: Haven’t provided that. Tools have been at 17% seq growth for 3Qs. That may slow down. More selling into telecom-based customers – and will sustain growth. Probably 10% or less per Q --- a rough guess.
Q: JCA design wins?
A: Clock and data drivers (drive modulators).
Q: Pricing pressures?
A: No change. Normal reductions but nothing beyond what’s expected.
Q: Transceiver products?
A: 10 gig is active. Combined with capability at JCA. Interleaver products by end of year.
Q: Total head count? How about square footage?
A: Over 1800 total: 1000 in China, 225 at JCA, and 600 here in San Jose. In China we have 2 facilities at 270,000 sq. ft. total, and in San Jose we have 130,000 sq. ft for headquarters and tunable lasers, and another with 100,000 sq. ft. here in the Bay area.
Q: Does guidance of $240M include JCA?
A: Yes.
Q: March guidance?
A: We haven’t given that.
Q: PBC, any new customers, what about competition?
A: Ramping to bring on new customers. Sampling to large number now. Serious volumes into new accounts. Fused fiber --- PBC handles Raman better. Power handling is great.
Q: Customers?
A: At capacity on PBC I, and sampling on PBC II. Expect design wins.
Q: Ramp of tunable lasers --- is there material revenue in guidance?
A: Based on over-all guidance, no, they won’t be material. Ken: tunable lasers --- our target is long haul and ultra long-haul. We don’t comment on specific passives --- but will advise as necessary.
Q: Update on interest in tunables?
A: Much larger group in talks. We can choose which companies to work closely with. We have 3 to 5 we’ve targeted. And this is at our discretion.
Q: Customer concentration?
A: Three 10% customers and 2 in high single digits. As far as dominance, we want to bring on more. We see lots of movement. Always looking for multiple design wins in each account.
Q: Are majority multiple designs?
A: Yes, they are or soon will be.
Closing remarks: Clearly we’re excited. Will see 3X growth in 2001. We’re driving towards profitability. We have exciting revenue streams and a diversified product base.
[All errors mine.]
BTW, I haven't seen this sort of ramp since SDLI in fall of '98. <ggg>
Pat Mudge |
