SONS CC Oct 11:
Rev 40.3 mil, loss 6 cent
-telecom industry broke down more in Q3, not unique to SONS
- focus on profitability, reducing general op ex, let go 150 employees
- review achievements in Q
customers Q, BLS, GX, Time Warner migrating to packet voice
- new acheivement in SONS in voice revolution 1 billion per month now running over SONS equipment wolrd wide
- some customer expect to run 1 billion minutes themselves alone
- 13 customers total, 3 new LVLT, BLS, Xorio???
-LVLT 10 percent customer, 16,000 KM networks, initial contract for trunking
- XOXO 10 percent customer in Q
- Intl business, Q3 create a Japan subsidary
- SONS leader in carrier packet voice, in rev and ports shipped.
-Investing in support and services, continuing to increase scalability and interoperability.
- Momentum with new and existing customer give us confidence in future
-150 partners in partnership consortium
-responded quickly to changing market conditions
Financials:
Rev 40.3 mil down from 52.6 last Q, but up 2 times Y-Y
Intl rev 3 percent in Q, 21 percent for last 3 Q's
3 ten percent customers GX, LVLT, XOXO
15 customers in total in Q
mix: bulk voice related
Deferred rev 18.9 mil,flat with last Q, deferred rev are payments received but not recognized yet, some Q contribution
GM down to 55 percent from 57.8 percent, due to reduced volumes
price point stable
Op Ex grew 34.7 mil vers Q2
-past week, re-sized business, looking for 5 mil saving per Q, expect major savings in Q2
- Engineering 1/2 of head count, most software engineers
- Amortization 36 mil
- Expect 5 mil per Q going forward
- Re-structuring charge of 25.8 mil.
-no write off of inventory
-Int income 1.2 mil vers 1.4 mil last Q
-137.4 mil in Q
- expect cash to be above 100 mil rest of year
- DSO 16 days, unusually low, normal range 45 to 60 days
- turn 3 vers 3.8 time last Q
- most inventory finished goods
-inventory, slight decrease to 26 mil
Guidance:
Rev 170 to 180 mil for year(300 percent Y-Y growth)
GM up over next few Q's, looking for 57 to 58 percent
R&D 40 to 42 percent, long term 12 percent
S&M 31 percent this Q reduced to 25 to 28 percent in Q4, long term 16 to 18 percent
G&A down to 6 to 8 percent
Int income $500,000
No taxes to be paid this year
Share count: due to loss, 177.3 mil, lower than 210 mil in previous guidance
6 cent using 177.3 mil, 5 cent if using 210 mil due to treatment of losses
up 3 mil per q going forward
Q: Sense of trial activties? Usually one new customer per Q. Will it continue?
A: Trial activity very strong across all carriers. Expect new customer per Q.
Q: Service up? Hardware down?
A: No change in mix. Service up each Q , but not large change.
Q: Rev from TTI product, any other customers except Q?
A: TTI Product integrated into broader product suite. Q still main customer. Most of Q revenue in deferred rev.
Q: OSMINE compliant? BLS still only customers demanding that? How progressing.
A: Achieve some components as OSMINE compliant. Will be seeing more of that. OSMINE compliance not on critical path.
Q: Telica VZ win. Affect class 4 win for SONS?
A: SONS on focuses on business that will translated into voice business. VZ win not one of our focus. Does not affect potential for SONS win at VZ
Q: Meaningful rev from 15 customers. Clarify?
A: 10 percent customers usually 75 percent of rev.
Q: voice vers PRI?
A: Majority sales voice. Compete for PRI business, but only to win more voice business
Q: Top line when cash flow positive?
A: Break even at high 40 mil range. Cash flow would flow that.
Q: Nortel and Q announced agreement. Impact?
A: Unrelated to SONS/Q relationship. NT and Q business going on for 3 years, from US West days. News refers to older equipment in old US West network.
Q: Facilities closed?
A: Most to Texas operation. Was a 7 year lease. Did not take lease, Nothing closed. In MA, closed a satallite office. No overseas offices closed.
Q: Next leg of adoption will come from where? Cap and grow ILEC's. Green field?
A: Trial based has broad base of carriers. When see adoption from all types of carriers. No defined pivot point. Early adopter are not ILEC's. Have reach the stage that ILEC's are coming on board.
Q: Big driver cost contaiment or chance to drive new rev?
A: Depends on carrier. On small network, will not buy old equipment. Most concentrating on new services. Cap and grow, cost containment and service velocity drivers.
Q: Intl opportunities? China? Japan?
A: Significant activity in asia. Japan win. Growth in China is large given low penetration rates. Potential end customers large. Europe market like US market. Focus more on services in earliers stage.
Q: China, have you qualified to TU2 signalling standard.
A: Several standards. Few trials in China. SS& in Japan and Europe and Latin Amer.
Q: BLS, gateway behind and in front of class 5 switch?
A: Internet off load sits behind the switch. With 3.3 release, can sit in front of 5 and can even replace 5.
Q: Cap Ex. Cash flow?
A: Cap Ex 4.7 mil. Cash flow loss of 11 mil due to loss, positive 12 mil due to long term re-structure
Q: NT announcement with Q. Nature of SONS Q deployment. On Q fiber side for customers or US west older network?
A: SONS on national wide Q network. Mainly in core. Also some migration of US West side.
Q: How many systems shipped?
A: No comment?
Q: Fusion? Deployments. Lumpy going forward?
A: Lumpy like most customers.
A: Initial foot print deployed and continues to grow. 700,000 subscribers, 6 mil minutes per day. Subscribers up sharply, should be 1 mil by Q1. Minutes used up per subscriber. Network turn up in April. Initial 100,000 users.
Now 700,000 users.
Q: BLS on schedule? Color?
A: BLS has a deployment plan. Installing by their plan. Not public. Rev next Q on this.
Q: GM will be up over next few Q`s. Going to normal 58 to 62 percent range?
A: Yes. Current 55 percent. Next term higher near term. Longer term 58 to 62.
Q: For SONS to see visibility, does you need economy to recover or are there more opportunities?
A: Not in situation that prevent guidance. Have good visibility till end of year. Q4 will give guidance for 2002. Expect a lot of business out there still. Expect longer sales cycles though.
Q: Insight into access market. Will IXC 's deploy SONS products?
A: Access important market. Focus on first applications. Should be dry line activities. Expect to see pilot and trials in last half of this year. No rev till next year. 18 to 24 months behind trunking. IXC's could be customers as people moving from trunking to access.
Q: Regulatory issues for IXC's?
A: In bundling of service. Most barriers have been removed.
Q: JNPR relationship?
A: Value added relationship. SONS takes JNPR sales staff into accounts to bid on networks. Fusion is an example.
Q: Cash flow? Break up of cash and securities. Op Ex guidance. Cap Ex 55 mil??? Future funding?
A: Go forward basis. Cash added 1 mil. Re-structuring negated that. Going foward, Q1 will see 5 mil cash saving.
Need 40 mil to break even. Cash 12 mil. Securities 125 mil.
Cash flow positive 2H 2002.
Q: Will you need to raise cash? Debt burden?
A: Don't see need to raise cash to fund business.
Q: 1 billiom customers per month. Largest customers?
A: Later.
Q: Added Debt in Q?
A: Did not add debt. In long term liability, had 12.7 mil. Was related to leases we won't us.
Q: Deferred rev due to Q?
A: Mostly from US West long distance older network. |
