Symmetricom, Inc. (SYMM)
F3Q10 (Qtr End 03/28/10) Earnings Call Transcript
May 4, 2010 4:30 pm ET
Dan Madden – VP, Finance & IR
Dave Côté – President and CEO
Justin Spencer – CFO
Mike Crawford – B. Riley & Company
Simon Leopold – Morgan Keegan
Jill Hanar [ph] – RBC Capital Markets
Previous Statements by SYMM
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Welcome and thank you for holding. All participants will be on a listen-only mode until the question-and-answer session of the conference. This conference is being recorded at the request of Symmetricom. If you have any objections, you may disconnect at this time. I would like to introduce the host of today's conference, Mr. Dan Madden, the Vice President of Finance and Investor Relations. Mr. Madden, you may begin.
Good afternoon. Welcome and thank you for attending Symmetricom's fiscal 2010 third quarter conference call. With me today are Dave Côté, Chief Executive Officer, and Justin Spencer, Chief Financial Officer. If you have not received today's news release, you may download it from our website.
I would like to remind everyone that statements made during the course of this call concerning Symmetricom's business outlook, the market acceptance of new products, the competitive environment, and financial performance expectations are forward looking statements that involve a number of risks and uncertainties.
Actual results could differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are contained in the company's Form 10-K for the year ended June 28, 2009 and subsequent filings with the SEC, as well as in today's news release.
I will now turn the call over to Dave.
Thank you, Dan, and good afternoon, everyone. In today's call, I will begin with a review of the third quarter highlights followed by a summary of our performance by business. Justin will then provide details on our financials and guidance, and I'll wrap up with a few concluding remarks before we take questions.
Let's get started with the third quarter results. Total revenue was $56.5 million, up slightly from the prior quarter. Improved gross margins drove strong non-GAAP earnings of $0.15 per share. And we had a very strong cash flow quarter, generating nearly $10 million in free cash flow and ending with over $133 million in cash and investments.
We are very pleased with a number of developments, including continuing traction with our new IEEE1588 packet timing products for Ethernet backhaul, including our new collaboration with Alcatel-Lucent. We signed a support contract with a large carrier, valued at $5 million over the next three years.
We made two significant new product announcements in the quarter. We introduced a family of Soft Client solutions for network equipment manufacturers to improve and accelerate their adoption of IEEE1588 in equipment they design and sell. Second, we launched a new commercial timescale system for countries seeking to develop a national time standard.
In addition, since our last call, we took important strategic actions to further our focus on growth and strengthen our overall competitiveness. We completed the sale of our quality of experience business to enable sharper focus on our core time and frequency business. We hired Juan Dewar as our new EVP of Worldwide Sales and Service and made key international hires in India and Japan to support our efforts in these markets.
And we are now in the process of transitioning our Puerto Rico manufacturing operations to Sanmina, which creates a more flexible and cost-effective supply chain and should lead to further cost savings. Outsourcing the activities performed by our Puerto Rico facility, which is currently our largest manufacturing plant, will remain a significant project for the balance of the calendar year.
Before getting to the results of our two businesses, I’d like to highlight several changes to the way we will refer to our business and product categories going forward. After a thorough review of the business since I came onboard, I concluded the changing our segments to more closely align with how we operate and invest in our business would be important. Here are the changes.
Beginning this quarter, we will use Government Business in place of the Timing, Test and Measurement Division to reflect the primary government orientation of this business. We will use the name Communications Business to refer to what we have historically called Telecom Solutions Division. We believe this name is much more representative of the broad range of customers served by this business.
We are also changing certain product categories within the Communications Business. We will use sync systems to refer to our core synchronization products under a single product category, eliminating the end customer distinctions between wireline and wireless. This better reflects the broad applicability of these products across a wide range of networks.
Products include, but are not limited to, TimeHub, SSU, TimeCesium, TimeProvider and TimeCreator. Secondly, software or hardware products, which we sell to network equipment manufacturers that are ultimately embedded into their systems, will now be referred to as embedded solutions. Our PacketTime products have both server and embedded client characteristics and are represented in both our embedded and sync systems product categories.
With that, let me turn to the results of our two businesses. Our Communications Business posted third quarter revenue of $35.2 million, up approximately 5% from $33.4 million in the prior year. Revenue from our sync system products was relatively steady in the quarter.