摩托羅拉 (MSI) 2002 Q1 法說會逐字稿

Ladies and gentlemen thank you for standing by.

Welcome to the Copper Mountain Networks first quarter 2002 earnings conference call.

During the presentation all participants will be in a listen only mode, afterwards we will conduct the question and answer session.

At that time if you have a question, please press the one followed by the four on your telephone.

As a remainder, this conference is being recorded, Thursday April 18th, 2002.

I would now like to turn the conference over to Ms. Wendy Holder Director of Corporate Communications, please go ahead, ma'am.

Coordinator could you please mute the participants first.

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: Hear me?

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You're hearing voices in the background,

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Thank you

: You're welcome.

Good afternoon, this is Wendy Holder, Copper Mountain

Corporate Communications.

Thank you for joining us for the Copper Mountain Networks first quarter 2002 conference call.

With us today is Rick Gilbert, Chairman and Chief Executive Officer, Mike Staiger Chief Financial Officer and Tony Ramos Vice President, Finance of Copper Mountain Networks.

This conference call is being broadcast live and will be recorded in archives on our web site for 14 days.

By now you should have received a copy of our news release via fax or e-mail.

If not received may be accessed from our web site.

Before I turn this call over to Rick, we want to remind you that portions of this conference call contains forward looking statements regarding future events based on current expectations and are subject to risks and uncertainties such as estimates or projections of Copper Mountains unproven operating plan and future financial performance, and statements regarding customer acceptance of Copper Mountain's Products.

Copper Mountain wishes to caution you that there are some factors that could cause actual results to differ materially from the results indicated by such statements.

These factors include, but are not limited to, the risks that are highlighted in today's earnings press release.

Perspective investors are cautioned not to place undue reliance on such forward looking statements.

Further, Copper Mountain expressly disclaims any obligation to update or revise any forward looking statements contained herein towards like future events or developments after the date hereof.

We refer you to the documents, Copper Mountain files from time to time with the Securities and Exchange Commission.

Specifically the section titled, risk factors in our entry part on Form 10K for the year ended December 31, 2001.

And other reports and filings made with the Securities and Exchange Commission.

I would now like to introduce Rick Gilbert, Chairman and CEO of Copper Mountains Networks.

Good afternoon and welcome to Copper Mountain Networks earnings conference call for the first quarter of our fiscal year 2002.

For those of you who have not yet seen our earnings press release, revenue for the first quarter was $3 million with a pro forma net loss of 11 cents for fully diluted shares, very similar to our results last quarter.

In addition, we maintained a relentless focus on expense control, reducing our cash burn in Q1 by 24 percent to $6.4 million, down from $8.4 last quarter.

To put these results into perspective, let's compare them with last years results for the same period.

Our Q1, 2002 pro forma loss of 11 cents per share was about one half of last years pro forma loss of 20 cents per share for the same period, and perhaps more important our cash burn was of $6.4 million was only about one-fifth as much as last years Q1 cash burn of $31 million.

This clearly demonstrates our commitments to the financial discipline necessary for the difficult market conditions of today.

Given the abysmal state of the telecom sector, this quarters performance is in line with our expectations.

And as I said in our last conference call these results are absolutely consistent with our ongoing strategic transition to the large carrier markets.

A chief component of that transition is our Vantage broadband services concentrator which remained on schedule for production release on June 18th.

Large carriers continued to express interest in the Vantage and we've made a great deal of progress since our last update including the following.

We have started a new Vantage lab trial with our first US ILEC.

We have signed a Vantage lab trial agreement with a major European PTT, and we except this lab trial to begin in the coming months.

We've received invitations to bid Vantage in response to multiple ILEC and IXE, RFPs, RFIs.

And the IXE lab trial we announced in our last call is progressing well.

In summary, Vantage remains on schedule and we are very encouraged by the positive feedback from the target large carrier customers.

With regards to our coverage to under product lines, we accomplished several key objectives during the first quarter.

In March, we shipped a new CopperEdge release as scheduled.

This new release contains significant CE200 enhancements for the European service providers and it is already driving new sales in that market.

In Q1 we also saw renewed interest from large scale service providers in certain features of the CopperEdge 200 product line, and have in fact started a new CopperEdge trial with one of the IXEs and also responded to an ILEC RFP with a CopperEdge 200 product.

Finally, we made excellent progress in the first quarter towards our goal of developing new distribution channels, which delivered CopperEdge products to the untapped US independent operating company markets.

On April 10th we announced the distribution contract with

and

.

In addition, we have now signed a similar contract with another major equipment distributor which we expect to announce shortly.

We feel these relationships further validate our value proposition of our intelligent broadband access solutions and show that well positioned distribution partners in this industry share that vision.

In summary, I am very satisfied with our progress over the past several quarters, especially given the difficult telecom environment.

We're tracking to our plan of transitioning the company from dependence on a narrow list of select customers to a much more robust set of large scale network service providers.

And although large carrier sales cycles are long and unpredictable, we continue to see the kind of progress which validates both our strategy and our product plans.

Now, at this point , I will turn to call over to Mike Staiger, our Chief Financial Officer for further comments on the results and current financial outlook, Mike.

Thanks Rick, I'll begin by summarizing our financial results for the first quarter of 2002, and then I'll describe- discuss guidance.

When discussing pro forma net income and earnings per share, I'll be referring to income and earning figures which exclude the effects of special charges and certain noncash items and which are fully taxed at 42 percent.

As Rick said, our net revenue for the first quarter was $3.0 million, compared to $3.1 million in the previous quarter.

Gross margin for the quarter was 32 percent which was flat compared to Q4.

During the quarter, three customers individually accounted for 10 percent or more of our revenue,

for 18 percent, Versatile for 14 percent, and

for 12 percent.

We continue to except sales to individual customers to fluctuate in any given quarter due to the inconsistency of our customers ordering patterns, including the impact of taxes at 42 percent and excluding other items, I'll describe in a minute, pro forma net loss for Q1 was $6.0 million or 11 cents per share versus a pro forma net loss of $5.9 million or 11 cents per share in the prior quarter and a pro forma net loss of $10.7 million or 20 cents per share in Q1 of 2001.

Excluded from these pro forma numbers are one charge and two credit items booked in Q1 which add up to a net charge of $0.5 million, broken down as follows.

A $2.2 million noncash stock based compensation charge, a $0.7 million credit related to the recovery of bad debt expense, and a $1.0 quarter million credit related to the recovery of a charge previously taken against an investment in commercial paper of Southern California Adison.

During the quarter Southern California Adison paid up the entire principle due on in this investment as well all accrued interest, resulting in a reversal of the remaining charges we'd previously recorded for this asset.

On a GAAP basis which includes risk charge and credits, and excludes the affect of taxes at 42 percent, our Q1 net loss with $10.7 million or a loss of 20 cents per share.

This loss compares to a net loss of $12.0 million or 23 cents per share in the prior quarter and a net loss of $66.9 million or one dollar and 27 cents per share in Q1 of 2001.

Turning to the operating expenses, our spending on research and development for the quarter was $7.3 million compared to $7.2 million in the prior quarter.

Sales and marketing expenses for the quarter were $1.8 million compared to $2.0 million in Q4.

General and administrative expenses were flat at $2.4 million compared to the prior quarter.

Total Q1 pro forma operating expenses excluding the noncash and nonrecurring items described earlier, were $11.5 million compared to $11.6 million in the prior quarter.

The resulting pro forma operating loss was $6.0 million in the quarter compared to 5.9 million in the prior quarter.

We finished the quarter with 187 employees.

Turning to the balance sheet, we finished Q1 with approximately $66.5 million in cash and short-term investments.

As Rick mentioned, we are pleased to report that our cash burn rate of $6.4 million in Q1 declined by approximately 24 percent compared to Q4, and by approximately 80 percent year over year.

I will provide more detail on this improvement and our future cash burn expectations when I discuss guidance in a few minutes.

Net account receivable was $0.5 million at the end of the quarter and DSO was 16 days down from 46 days at the end of Q4.

Finally, inventory was $6.4 million net reserves compared to $7.5 million in Q4.

Now, I would like to discuss our performance relative to the limited Q1 guidance we provided in our last conference call and then I will provide guidance for Q2.

First, we indicated that Q1 revenue could be flat or down from the $3.1 million we recorded in Q4.

Our $3.0 million Q1 revenue was consistent with that guidance.

Regarding cash burn, we indicated that our cash burn would fall in the range of $8 million to $12 million per quarter in 2002.

Our cash burn of 6.4 million in Q1 was significantly better than the low end of that guidance.

This sequential decline in cash burn was due to tight expense controls, reduced spending on capax and inventory and miscellaneous other items.

Regarding revenue, limited visibility continues to make it difficulty for us to provide more specific revenue guidance than we provided last quarter.

So, we will reiterate last quarter's guidance for revenue to be flat to down again in Q2.

While it is possible that our revenue could increase in Q2, this will require an

in capital spending among our remaining select customer or a faster than expected ramp up of our new distribution channels.

As Rick mentioned earlier, we expect to release vantage shortly before the end of Q2, and therefore, we do not expect vantage to contribute to Q2 revenue.

Our guidance for cash burn continues to be $8 million to $12 million per quarter for the remainder of 2002 with an expected average of $10 million per quarter.

Please note that this guidance excludes the potential effects of further expense reductions, inflows or outflows related to our dispute with the contract manufacturer, and any cash inflow which might result from lease or equity financing.

This concludes our prepared remarks about our Q1 result and our limited guidance for 2002.

I would like to remind all listeners that any statement we make regarding guidance, our future events or financial estimates are forward looking statements.

And our ability to meet those estimates is subject to risks described during this call and in our public files.

At this point, I will turn the call back over to Rick.

Thanks Mike.

At this point, Mike and I will be happy to answer questions.

Tammy.

Thank you.

Ladies and gentlemen, if you would like to register a question, please press the one followed by the four on your telephone.

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One moment please for the first question.

Our first question comes from Todd Koffman with Raymond James and Associates.

Please proceed with your question.

Hi this is Chris Fischer for Todd Koffman.

Quickly, I had just a couple of questions.

First, on sort of the housekeeping item, in accrued liabilities, is the accrued restructuring costs still within that item, on your numbers that you released today?

Yes.

Certain portion is still in accrued liabilities.

OK.

How do you sort of see that flowing out off the balance sheet for the remainder of the year, and is that built in to your assumptions of cash burn?

It is built into the assumption of cash and that amount will be paid over a long period of time.

It is related to some excess facility costs.

OK.

So it is likely to not go down very much per quarter?

That is correct.

Hey Chris, this is Mike Staiger, that was - those are related to longer term lease obligations, and so, the differential between whatever rent we are collecting of sublease versus what is due to the landlord would be paid out overtime over the life of that lease.

OK.

And these are, you know, five-year leases or three-year leases?

They vary.

OK.

Great.

And then accounts payable actually increased a little bit in the quarter.

Is that mainly for inventory or, what was that related to?

Yeah.

I think it is probably is related to, some of the acquisition's related to the vantage product as well as just our ability to stretch out our payments.

OK.

OK.

And then I guess, Rick, just looking at the strategy you've, you know, you are refocusing the company to target these large carriers.

I am just curious the number and sort of the size of the commitment that a large carrier would entail, and then what would the plan for the company be to scale your business to meet that commitment?

First of all, I mean, when we talk about large carriers, we are talking about 10 or 12 very large carriers including the US ILECs, some of the Canadian firms, and then the large European PTTs as our initial targets.

Also the IXEs, which can be significant business.

You know, secondly, in terms of sizing the deals, there is a large range, because as you know, the vantage product can have an instantiation that's either an aggregator or a DSLAM, and so, if it is a DSLAM deal, and by the way, the ILEC trial that we announced here today is a DSLAM deal.

And that can be a larger deal.

All right, because you have a lot more DSLAM's.

In terms of the aggregators, there are fewer of those, obviously, there is typically one in the central office.

So I am sorry, I can't give you a generalization of the size, but obviously, you can look at the number of DSL ports going in some of these large carriers and getting part of that business would be significant even for a single carrier.

So we like that area.

Secondly, in terms of scaling the business, one of the things we have already done obviously is put a lot of emphasis on the development of vantage program, that is where lot of our engineering cost has been.

At this point, as the product is completed, we have been putting more investment into the sales and marketing teams, hiring the kinds of peoples that are used to selling

to large carriers, and we are actually in pretty good shape at this point in putting that infrastructure into place, and so, you won't see significant ramping of expenses until we start actually seeing deals.

All right, so, we are pretty much where we expect to be.

Does that answer your question Chris?

How about on the manufacturing side, through Flextronics, I guess?

No.

Right now we are doing it through

, and they are doing a great job for us.

Obviously, you always match up your turnkey manufacturing partner with the size of the manufacturing going on and we are getting in a lot of attention from

.

They are doing a great job and we will, you know, as we ramp up sales, we'll continue to revisit, who we do our turnkey manufacturing and we will probably have a couple of people we are working with.

Thank you Rick.

Thank you Mike.

Thanks, Chris.

Ladies and gentleman, as a reminder to register for a question, press the one, four.

I am showing no additional questions at this time.

Please continue.

OK.

Well, thank you very much for joining us.

We will see you next quarter.

That's the end of the call.

Ladies and gentleman, that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your line.