Zhone Technologies CEO Discusses Q4 2010 Results - Earnings Call Transcript

Zhone Technologies, Inc. ( ZHNE)

Q4 2010 Earnings Conference Call

January 26, 2011 5:00 PM EST

Executives

Kirk Misaka – CFO

Mory Ejabat – Chairman and CEO

Analysts

Jayakumar [ph] – Mittal Funds [ph]

Joseph Beaulieu – Morningstar

Harry Levin [ph]

Wayne Linman [ph]

George Tomsey [ph]

Presentation

Operator

Good day and welcome to the Fourth Quarter 2010 Zhone Technologies Incorporated Conference Call.

I am Shenelle 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 like to introduce Kirk Misaka, Zhone's Chief Financial Officer. Please proceed.

Kirk Misaka

Thank you, operator. Hello and welcome to the fourth quarter 2010 Zhone Technologies, Inc. conference call. I am Kirk Misaka, Zhone's Chief Financial Officer.

Purpose of this call is to discuss Zhone's fourth quarter 2010 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 fourth quarter. Following Mory's comments, I will discuss Zhone's detailed financial results for the fourth quarter 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 31 st, 2009, and our quarterly reports on Form 10-Q for the quarter ended March 31 st, 2010, June 30, 2010, and September 30, 2010.

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.

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 fourth quarter 2010 earnings call. We continue to see a strong growth attributable to our MXK multi-service solutions, so surpassing a new company affairs [ph], 1000 MXKs shipped in 2010.

Additionally, the fourth quarter marked our third consecutive quarter receiving top industry rankings by the leading research analysts, IDC, Infonetics, Dittberner, broadbandtrends, and Ovum. We also continued industry-leading GPON growth globally in the key European, Middle Eastern and Latin American markets.

Among other highlights for the fourth quarter, we launched several new products expanding the already aggressive MXK product portfolio. First, as a commitment to the fiber-to-the-node, fiber-to-the-home, and fiber-to-the-building market segments introduced two new high-density VDSL2 cards for the MXK, which is the first in a series of powerful launches that we will continue next month further expanding or FTTx solution.

We also announced the first of an entire new zNID 9108 Multiple Dwelling Unit Optical Network Terminal or MDU ONT, available in both outdoor Gigabit Active Ethernet and Gigabit Passive Optical Networking or GPON solutions. This latest addition to the zNID portfolio delivers best-in-class effort for even the most demanding FTTx applications.

Lastly we announced that a formidable addition to our management and provisioning capability for MXK, by adding Zhone EZ Touch Provisioning, simplifying initial and ongoing configuration and management of the end-to-end Zhone solutions.

Other noteworthy news and a company affairs [ph], Zhone was awarded entry into the famous Gartner Magic Quadrant Report. We are extremely proud to announce that we were recognized and awarded with a visionary ranking which is an outstanding accomplishment for Zhone Technologies and in this new classification and ranking.

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