You may have beat me to it, but here's my notes from CC as best as I could follow. I agree overall very positive. Some analysts seemed surprised at the improved outlook/visibility.
Tony Ley introduced everybody.
Robin Dickson gave a rundown of the 1Q financials. ATT purchased Metrolink/DWDM products and accounted for 22% of revenues. RCN, Time Warner, and Cox also were substantial customers.
QOQ improvement in int'l sales due largely to Canada, where last year there were ice problems and customers were repairing their networks, not upgrading.
50% rev. from fiber optic transmitters;
40% from receivers;
10% from digital products (Cyberstream), down slightly from last quarter, although major new customer in Europe.
Golden Channel - revenue will be delayed until 3Q due to political difficulties in Israel.
Gross margin up to 41%, up from 38% last quarter. Sees gradual increases but not sharp jumps upward.
R&D 12% of sales.
Provision for taxes of 20%. Accounts for all remaining operating losses?
$57 million proceeds from secondary offering.
Pro forma cash of $70 million.
Receivables - DSO at 62, up from 59, but pleased with around 60.
Inventory $231.2 million, down. Turns at 3.4, best in some time. Pleased with inventory controls.
Sees improving revenues and performance thru 1999. In good position with proceeds from secondary.
Tony Ley then gave a rundown of business areas.
Fiber optice/metrolink - 1st DWDM to market. ATT acceptance very important. Installed in Chicago, Denver, Reno, and Dallas. Comcast installed in Sarasota, FL. Adopted by others in select areas. Sees Harmonic as leader in DWDM, significant step forward in technology. In trials with other MSOs.
Sees node capacity as issue going forward. Most built with 500 homes/node. As traffic increases, this will need to go down to 250, or even 150/node. Powerblazer scalable nodes allows node to be easily subdivided. Shipped powerblazer to a number of MSOs and increasing production.
BellSouth - 1st telco application for Harmonic. Includes overlay for television.
Transcend Digital and Cyberstream - needed by cable operators as they go to digital cable and video-on-demand. Videotron, Canada's 2nd largest cable operator began offering their customers digital video/video-on-demand to their customers. Thri system passes 2.3 million households. They have a number of trials with customers.
Harmonic Data Systems - (formerly NMC) shipments to south Africa and Europe. Approval by Eutelsat, significant revenue for the first time.
Views AT&T decision to use DWDM as significant. Estimates of 0.5 million cable modems now to increase to 3-5 million next year.
MSOs are bundling systems - telephony, cable, internet, to improve customer service. HLIT in the right place at the right time.
Questions:
1. SG Cowan - backlog/visibility? And what is "significant" revenues/margins from Harmonic Data Systems? What about DWDM competition?
Answer - don't report backlog, but they had a positive book to bill. Visibility is improving as HFC is recognized as a successful way to deliver broadban to the house. This is helping with their production/inventory planning. Not a one-time spurt. On HDS, margins in line with overall business, revenues not significant impact on overall revenues, but $1 million this quarter (analyst seemed surprised with $1 million figure). On DWDM, they were first to market, ANTEC major supplier, while others claim to have it they believe others' shipments are modest.
2. CIBC Oppenheimer - int'l backlog? DWDM for new builds in Europe?
Answer - revenue gains across the board, but Canada big. Shipped Transcend product to wireless cable operator. Latin America - some improvement in Argentina; Asia - smaller business in Korea and Japan, lower sales to China due to timing of project build out (not overall conditions). Some improvement in continental Europe. Can't claim int'l recovery yet.
DWDM abroad - the rest of the world is watching re: modems and telephony. They are getting organized and DWDM will fit elsewhere.
3. Warburg Dillon Read - Transcend trials - hopes in US market?
Answer - 1-3 MSOs trying Transcend? Reasonable hopes for 2nd half.
4. Soundview - what happens if AT&T has questions about telephony via DWDM? Can they maintain double digit growth?
Answer - AT&T's objective is telephony over network. If telephony isn't needed, they would still need to upgrade network, but not as much.
Clarifies double-digit refers to 12% sequential growth. Answer - not an issue, can manage growth. Doesn't see slowdown in deployment. If anything, acceleration.
5. Standard and Poors - Operating exp. And R&D seem low compared to historical levels and need to maintain competitiveness in cutthroat industry?
Answer - re: R&D, walk tightrope, not comfortable with R&D below 12%. Sees R&D in the 12-13% range. Honestly, difficult to spend money when revenues are ramping so fast. Will reconsider R&D efforts in light of revenues to maintain competitiveness.
35% operating expense in line, perhaps drive it down slightly with higher revenues.
6. Warburg Dillon Read - success with Cyberstream satellite, but what about terrestrial systems (re Worldcom and Sprint MMDS)?
Answer - constraint, HLIT only has 1-way system back to telephone. Operators want 2-way. Not sure if they can participate because they don't quite have the right products.
7. Columbia Mgmt. - satellite version, can someone like Echostar use it or does it require modification?
Answer - the system is fully functional. Echostar has their own supplier, so don't see them as customer, but talking to major US satellite operators.
8. MHE Investments - Inventory breakout?
Answer - breakout will be in 10Q, reduction due largely to finished goods.
9. Gruntal - Powerblazer - what's buildout - he's heard 50 households/node?
Answer - most now have 500/node. Most talking about going to 250/node. But telephony operators are looking at it differntly (i.e., delivering personal video conferencing). This level of traffic requires 50 households/node, and some are looking at that.
10. CIBC Oppenheimer - BellSouth?
Answer - fiber-to-the-curb installation. Numbers not tremendously significant. BellSouth has done a lot of work to refine system. Don't see them putting it where they already have a network, but will use HLIT products if they replace the network. Bellsouth has an aggressive rollout plan on paper.
Golden Channel delay? Answer - political problems with issuing digital video licences. Won't report revenue until network is fully functional. Sees it booked in 3Q.
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