JDS Uniphase (JDSU)

Q2 2012 Earnings Call

February 01, 2012 5:00 pm ET

Executives

Michelle Levine Schwartz -

Thomas H. Waechter - Chief Executive Officer, President and Director

David W. Vellequette - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Alan S. Lowe - President of Communications & Commercial Optical Products and Executive Vice President

Analysts

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Natarajan Subrahmanyan - TheJudaGroup, Research Division

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

Kevin J. Dennean - Citigroup Inc, Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

James Kisner - Jefferies & Company, Inc., Research Division

William Stein - Crédit Suisse AG, Research Division

Todd K. Koffman - Raymond James & Associates, Inc., Research Division

Kimberly Watkins - Morgan Stanley, Research Division

Troy D. Jensen - Piper Jaffray Companies, Research Division

Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Compare to:
Previous Statements by JDSU
» JDS Uniphase Corporation - Shareholder/Analyst Call
» JDS Uniphase's CEO Discusses Q1 2012 Results - Earnings Call Transcript
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Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 JDSU Earnings Conference Call. My name is Jeremy, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Ms. Michelle Schwartz, Senior Director of Investor Relations. Please proceed.

Michelle Levine Schwartz

Thank you, operator, and welcome to JDSU's Fiscal 2012 Second Quarter Financial Results Conference Call. Joining me on the call today are Tom Waechter, Chief Executive Officer; Dave Vellequette, Chief Financial Officer; and Alan Lowe, President of CCOP.

Per your input, we will rotate the leaders of our business segments to participate on our earnings calls for the purpose of being available during the Q&A portion of the call. I'd like to remind you that this call will include forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to look at the company's most recent filings with the SEC, particularly this Risk Factors section of our annual report on Form 10-K filed on August 30, 2011. The forward-looking statements, including guidance, provided during this call, are valid only as of today's date, and JDSU undertakes no obligation to update these statements as they move through the quarter.

Please note that all numbers are non-GAAP unless otherwise stated. A detailed reconciliation of these non-GAAP results to our GAAP results, as well as a discussion of their usefulness and limitations, is included in today's news release announcing our results, which is available on our website at www.jdsu.com.

As a reminder, the quarterly earnings press release, supplementary slides and historical financial tables are posted at www.jdsu.com/investors under the Financial Information section.

Finally and as a reminder, this call is being recorded and will be available for replay from the Investors section of our website. I would now like to turn the call over to Tom.

Thomas H. Waechter

Thank you, Michelle, and good afternoon, everyone. JDSU delivered second quarter revenue of $413.1 million and operating margin of 9.6%, beating the high-end of our guidance range. I am pleased to report that we resumed full production of our products at Fabrinet's manufacturing facilities in Thailand more quickly than expected. Due to the outstanding efforts of our team and our partner, Fabrinet, the net revenue impact of the Thailand flooding was approximately $15 million, which was less than our original estimate.

Demand for our products improved over last quarter as book-to-bill was above 1 for each of our business segments. It was our highest bookings level in the past year. New product revenue remained strong with 62% of Optical Communications revenue and 56% of CommTest revenue being generated from products less than 2 years old.

Our financial strength continues to provide us with the necessary capital to fund our robust new product pipeline as cash generated from operations totaled more than $45 million.

Although broadband drivers remain strong and networks continue to be overloaded, spending by network service providers has been more mediocre. We believe this cautious spending reflects global macroeconomic uncertainty, delayed investment in the U.S. due to contemplated M&A activity. In fact, that service providers continue to refine their own business models.

Slower spending and more competitive bidding by service providers negatively impact pricing and margins in our optical business. We are confident these issues are not systemic or long term in nature and therefore, we will continue to execute against our strategic priorities to drive growth and profitability.

Our first strategic priority is collaborative innovation. JDSU was first to market with ROADMs, tunable XFPs and a number of key test products. We firmly believe that ongoing innovation is critical to providing differentiated solutions to our customers. We will continue to invest in filling our new product pipeline to maintain our technology leadership and further advance ourselves in the market place.

At our upcoming Analyst Day, we will showcase some recent results of our collaborative innovation, including some technology that will be introduced for the first time.

Second, we remained focused on profitable, strategic mergers and acquisitions. In January, we announced the acquisition of Dyaptive Systems, which provides mobile test solutions that support network capacity planning and quality by emulating thousands of mobile devices in the lab. We'll continue to pursue M&A opportunities where we can expand our portfolio and participate in market growth.

Third, we'll focus on expanding our global presence and deepening our penetration in high-growth markets such as Brazil, Russia, India, Indonesia and China. We have facilities in each of these markets and are well-positioned to grow our revenues in this fast-growing

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