Zhone Technologies, Inc. (

ZHNE

)

Q2 2011 Earnings Call

July 20, 2011 5:00 PM ET

Executives

Kirk Misaka – CFO

Mory Ejabat –Chairman and CEO

Analysts

George Tomsey – Scott Macon

David Lamond – Artis Capital

Ronald Mullins – Segmar

Joseph Beaulieu – Morningstar

Presentation

Operator

Compare to:
Previous Statements by ZHNE
» Zhone Technologies CEO Discusses Q1 2011 - Earnings Call Transcript
» Zhone Technologies CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Zhone CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Zhone Technologies, Inc. Q2 2010 Earnings Call Transcript

Good day and welcome to the second quarter 2011 Zhone Technologies Inc. conference call. I am Stacy and I will be your coordinator for today. At this time, all participants are on a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference.

(Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to introduce Kirk Misaka, Zhone’s Chief Financial Officer. Please proceed.

Kirk Misaka

Thank you, operator. Hello and welcome to the second quarter 2011 Zhone Technologies Inc. conference call. I am Kirk Misaka, Zhone’s Chief Financial Officer.

The purpose of this call is to discuss Zhone’s second quarter 2011 financial results as reported in our earnings release, which was distributed over Business Wire at the close of market today and has been posted on our website at www.zhone.com.

I am here today with Mory Ejabat, Zhone’s Chairman and Chief Executive Officer. Mory will begin by discussing the key financial results and business developments of the second quarter. Following Mory’s comments, I will discuss Zhone’s detailed financial results for the second quarter of 2011 and provide guidance for next quarter. After our prepared remarks, we will conclude with questions and answers.

As a reminder, this conference is being recorded for replay purposes and will be available for approximately one week. The dial-in instructions for the replay are available on our press release issued today. An audio webcast replay will also be available online at www.zhone.com following the call.

During the course of the conference call, we will make forward-looking statements, which reflect management’s judgment based on factors currently known. However, these statements involve risks and uncertainties, including those related to projections of financial performance; the anticipated growth and trends in our business; the development of new technologies and market acceptance of new products; and statements that express our plans, objectives and strategies for future operations.

We refer you to the risk factors contained in our SEC filings available at www.sec.gov, including our annual report on Form 10-K for the year ended December 31st, 2010, and our quarterly reports on Form 10-Q for the quarter ended March 31st, 2011.

We’d like to caution you that actual results could differ materially from those contemplated by the forward-looking statements and you should not place undue reliance on any forward-looking statements. We also undertake no obligation to update any forward-looking statements.

During the course of this call, we will also make reference to adjusted EBITDA and adjusted operating expenses. Non-GAAP measures we believe are appropriate to enhance an overall understanding of past financial performance and prospects for the future. These adjustments to our GAAP results are made with the intent of providing greater transparency to supplemental information used by management in its financial and operational decision making.

These non-GAAP results are among the primary indicators that management uses as a basis of making operating decisions, because they provide meaningful supplemental information regarding our operational performance and they facilitate management’s internal comparisons to the company’s historical operating results and comparisons to competitors’ operating results.

The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. We have provided GAAP reconciliation information for adjusted EBITDA within the press release, which as previously mentioned has been posted on our website at www.zhone.com.

With those comments in mind, I would now like to introduce Mory Ejabat, Zhone’s Chairman and Chief Executive Officer.

Mory Ejabat

Thank you, Kirk. Good afternoon and thank you for joining us today for our second quarter 2011 earnings call. The second quarter revenue increased by 6% to $31.3 million versus $29.6 million for the previous quarter. The increase was driven primarily by increase in international customer acquisition and a significant MXK competitive advantages overall competition.

Domestic growth remain on target largely delivered by MXK expansion by new and existing customer base and increased stimulus activity in the region. Some of our domestic customers experienced fiber storages which resulted in lower than expected results in North America.

Nonetheless as expected the MXK continued to drive new organic customer growth, sustained industry leadership and a strong customer acceptance. Kirk will give you more detail on our financial results later. I am also proud to announce that Zhone Technologies has been once again recognized by the industry leading technology analysts including the Infonetics

Research, Dittberner Associates, Ovum Research and IDC acknowledging Zhone’s growing momentum in the GPON and Ethernet FTTx markets in Q1, 2011.

Our last report reflected that the following results for Zhone, top three leadership for GPON in Caribbean and Latin America; top three leadership for GPON in Europe, Middle East and Africa, Top four market positions for GPON in North America. Top five market positions for GPON globally.

Zhone was also recognized as the number two market leader in North America for Ethernet FTTx. This is a significant milestone

for Zhone

as we

establish ourselves in leadership position in both GPON and Ethernet FTTx technologies around the globe.

Furthermore, Zhone established early market leadership in the fast paced VDSL2 market segment for instance in Latin America Zhone was rated as the number three player for DSL connectivity in Q1 2011 for Infonetics

Research and Dittberner Associates.

Read the rest of this transcript for free on seekingalpha.com