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Ditech Networks, Inc. F4Q10 (Qtr End 04/30/10) Earnings Call Transcript

Ditech Networks, Inc. F4Q10 (Qtr End 04/30/10) Earnings Call Transcript

Ditech Networks, Inc. (DITC)

F4Q10 (Qtr End 04/30/10) Earnings Call Transcript

May 27, 2010 4:30 pm ET


Bill Tamblyn – CFO and EVP

Todd Simpson – President and CEO



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Ladies and gentlemen, thank you for standing by. Welcome to the Ditech Networks' fourth quarter fiscal year 2010 conference call. At this time, all participants are in a listen-only mode. (Operator instructions) And as a reminder, this conference is being recorded.

I would now like to turn the conference over to Bill Tamblyn, Chief Financial Officer. Please go ahead.

Bill Tamblyn

Thank you very much. Good afternoon, everyone. This is Bill Tamblyn, the Chief Financial Officer of Ditech Networks. Thank you for joining us on this conference call today, and we will cover Ditech’s announcement of the results for its fiscal 2010 fourth quarter ended April 30


, 2010.

Today’s conference call will cover our financial results for the quarter and we will also provide our outlook for the first half of fiscal 2011. Todd Simpson, Ditech’s President and CEO, will provide the business and strategic analysis and I will provide a more detailed analysis on the financials. Before we begin, let me state that this conference call is being held on May 27


, 2010. Any sound recording or republishing of the contents of this conference call is expressly forbidden without the written approval of Ditech Networks.

Also, we must point out that there are as with similar presentations, the following discussion contains forward-looking statements and in particular, the financial projections of our first half of fiscal 2011 that involve risks and uncertainties. Our actual results may differ materially from those discussed here. We will attempt to identify such forward-looking statements with qualifying words such as we intend, plan, believe, estimate or predict, or we may, could, should or will or other comparable language.

Factors that could cause results to differ include factors discussed today in this conference call and in our press release today, as well as those detailed in the section entitled future growth and operating results subject to risk in Ditech’s Form 10-Q for the third fiscal quarter ended January 31st, 2010 filed March 16th, 2010 with the Securities and Exchange Commission.

We assume no obligation to update these projections or other forward-looking statements. Additionally, let me comment on our approach to governance and the SEC compliance. Please allow me to mention that we comply with all effective SEC and NASDAQ requirements related to audit committee compliance and independence. Today's announcement was released over the wire this afternoon in a press release and you may also read it on Ditech's Website by going to the investors section of the Website at

Non-GAAP financial measures will be discussed on the call and a reconciliation of the GAAP and non-GAAP financial measures is disclosed in our press release of today as well as in our press release of February 25, 2010 with respect to our Q3 numbers, both of which are located on the Ditech Networks’ Website,

With that, I would like to turn the call over to Todd to comment on the announcement and our strategy going forward. Todd?

Todd Simpson

Thanks, Bill. Good afternoon everyone. For Q4 of our 2010 fiscal year, we had $7.3 million in revenue, and we ended the quarter with a little bit more cash than when we started, namely $34.5 million. Because we had some revenue carryover from our Q3 to Q4, we believe that may be more relevant to look at the last six months where we had $11.6 million in revenue.

The last fiscal year was a time of investment for us, investment in both product and business model diversification. We strove to extend our product lines and to add recurring revenues, both of which we made headway on. In undertaking this investment, we did use some of our cash, in line with what we had indicated in our investor calls over the last year.

We also used some inventory throughout the year, which helped our bottom line. We still have significant inventory, although our product mix is such that we will need to bring in some inventory as we move through fiscal year 2011. With the investments we have made, we believe we have a more diversified product portfolio and better potential for growth. Therefore for the current fiscal year, we have a clear goal of pushing towards cash breakeven and a return to profitability.

As our investors know however, our underlying VQA business is still difficult to project on a quarter-by-quarter basis and will probably show some ups and downs. As the recurring revenue from our new initiatives grow, we believe we can smooth out and then better predict our quarters. As a case in point, the current quarter, we have several opportunities that we believe are time to close to the quarter-end, which makes it difficult to provide projections.

Thus, instead we are looking at a six-month window and are projecting that our revenues for the first half of fiscal 2011 will be in the $13 million to $14 million range. As our cash collections can trail orders by several months, we expect to use cash in Q1, but then regain ground in Q2 and later. Bill will as always be discussing our financials in greater detail later on the call.

So, let me now touch on each of our product lines and their status. Our VQA platforms are maturing robust and outside of continually improving the core algorithms, they don’t require a significant platform investment. We have focused our efforts on TDM applications for VQA in developing markets, which have high wireless growth rates, and we concentrated on Voice-over-IP applications in the mature markets.

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