BigBand Networks, Inc. (BBND)
Q1 2010 Earnings Call
May 6, 2010 5:00 pm ET
Erica Abrams – Investor Relations
Amir Bassan-Eskenazi – Chairman of the Board, President & Chief Executive Officer
Ravi Narula – Chief Financial Officer
[Uvek Aria] – Bank of America Merrill Lynch
Analyst for Blair King – Avondale Partners
Analyst for Simon Leopold – Morgan Keegan
Previous Statements by BBND
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Welcome to the BigBand Networks first quarter 2010 financial results conference call. During today’s presentation all parties will be in a listen only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Thursday May 6, 2010. I would now like to turn the conference over to Erica Abrams.
If you have not seen our first quarter earnings press release it can be found on the investor relations section of our website at
. Joining me on the call today are Amir Bassan-Eskenazi, CEO and Ravi Narula, CFO of BigBand Networks. We will discuss financial results for the first quarter ended March 31, 2010 as well as outline the company’s outlook for the second quarter and fiscal year 2010.
Before I turn the call over to Amir, let me remind you that the matters we will be discussing today may include projections and other forward-looking statements and as such are subject to the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements including those risks and uncertainties discussed in our report on Form 10K for the year ended December 31, 2009.
Now, I will turn the call over to Amir.
Thank you all for joining us on our first quarter 2010 earnings call. As you know from our press release revenue for the first quarter was $32.2 million which was slightly below our outlook that we provided last quarter. Our results in the first quarter were impacted by the timing of orders as well as product mix that negatively impacted gross margins and thus EPS. Customers continued to deploy our solutions. Our broadcast solutions remain strong. The momentum in our SDV solution continues and our SDV footprint has now grown to 35 million households deployed or in the process of being deployed. This marks another quarter of increased market penetration of this important technology.
In our edge QAM solution we have now shipped over 750,000 channels and we believe we have the largest deployed edge QAM solution in the market though we are seeing increased pricing pressure in this category. With respect to IP Video our MSP product and our VIP solution are in various customer trials. The opportunities for these solutions are in front of us and we’re excited about our offerings. However, both our telco and cable customers are focusing on ecosystem integration issues that will negatively impact the timing of revenue ramp from our IP based video solutions.
Additionally, we need to complete some product development and customer qualification processes before we reach commercial deployment. As a result, revenue for 2010 is now expected to be in the range of $115 to $125 million. In light of these factors and revised outlook, we took action earlier this week to more closely align our cost structure with our near term revenue. These actions are intended to refocus our development initiatives on strategic projects that are expected to drive significant growth in 2011 and beyond while tightly controlling our cash burn during 2010.
The steps we have taken today are expected to yield annualized cost savings of $7 million. While we are disappointed with our revised outlook for the year, we are also encouraged by customer responses to our offerings and with the progress we are making. The market drivers for video remain strong. HDTV, IPTV and increasing 3DTV, the common thread is the need for more bandwidth and advanced media processing to deliver ever increasing personal and quality viewing experiences.
BigBand has distinguished itself as a technology leader and an innovator in supporting this evolving video networking requirements. We’re optimistic about our long term opportunity in digital video networking and we believe we are the most innovative company in the market segment. Over the long term we expect to benefit greatly from our continued investment and capitalize on the opportunity in front of us.
Now, I will turn the call over to Ravi Narula for the financial review of the quarter and for some color on our expected revenues in fiscal year 2010. Before I do so, I want to take the opportunity to welcome Ravi as BigBand’s new Chief Financial Officer. Ravi has been with BigBand for the past four and a half years and has served in a number of positions including Chief Accounting Officer. At this time I would also like to thank Moe Castonguay, our previous CFO for his outstanding service during the past few years here at BigBand Networks.
I look forward to meeting with all of you over time. I’ll first review some of the details of our first quarter 2010 income statement and balance sheet and then I’ll provide you with the outlook for the second quarter and fiscal year 2010. I will provide financial results on a non-GAAP basis unless I specify otherwise. This means that the first quarter non-GAAP operating results will exclude stock-based compensation expense of $3.8 million.
For the first quarter of 2010 we reported revenues of $32.2 million as compared to $43.9 million in the same quarter one year ago. This decline was primarily due to delays in customer purchasing decisions especially on new technology and QAM orders contributing less. Three customers each accounted for greater than 10% of our revenues: Cox Communications; Time Warner Cable; and Verizon. Time Warner was the largest of the three customers in the first quarter 2010 and represented approximately 44% of our revenues. The top five customers represented 77% of our first quarter 2010 revenues as compared to 83% for the same period last year.