Zhone Technologies' CEO Discusses 4Q2011 Results - Earnings Call Transcript

Zhone Technologies, Inc. ( ZHNE)

Q4 2011 Earnings Call

January 25, 2011 5:00 p.m. EST

Executives

Kirk Misaka – CFO, Corporate Treasurer, Secretary

Morteza Ejabat – Chairman and CEO

Analysts

Greg Mesniaeff – Kaufman Brothers

Donna Jaegers – D.A. Davidson

Mark Gomes – Pipeline Data

Presentation

Operator

Good day and welcome to the fourth quarter 2011 Zhone Technologies, Inc. conference call. I’m Melanie and I will be your coordinator for today.

(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

Welcome to the fourth quarter 2011 Zhone Technologies, Inc. earnings conference call. I'm Kirk Misaka, Zhone’s Chief Financial Officer.

The purpose of this call is to discuss Zhone’s fourth 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'm here today with Mori Ejabat, Zhone’s Chairman and Chief Executive Officer. Mori will begin by discussing the key financial results and business developments for the fourth quarter. Following Mori’s comments, I’ll discuss Zhone’s detailed financial results for the fourth 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, 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, 2010 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011.

We would 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’ll 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 for making operating decisions because they provide meaningful supplemental information regarding our operational performance and they facilitate management’s internal comparisons with 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, has been posted on our website at www.zhone.com.

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

Morteza Ejabat

Thanks, Kirk. Good afternoon and thank you for joining us for our fourth quarter 2011 earnings call. We are pleased to announce a strong revenue growth across all regions during the quarter.

Fourth quarter revenue of $33.4 million grew 11% sequentially over third quarter revenue of $30.2 million and 8% year over year as compared to last year’s fourth quarter revenue of $31 million. With this strong top line growth, we also achieved our other major financial objectives for the quarter and generated positive adjusted EBITDA. As expected, the MXK continued to drive new organic customer growth while sustaining industry leadership and a strong customer acceptance. We expect to continue this momentum into 2012. Kirk will discuss our financial results and guidance in greater detail later.

In late October, we announced the immediate availability of the new zNID 2400 GP optical network terminals, ONTs. The new active ethernet indoor ONTs, part of the zNID 2400 series indoor ONTs, provide a cost-efficient, high personalized solution for delivering high bandwidth services. As you’ll much recall, last quarter we announced the GPON version of the 2400 series zNID ONT. The 2400 has been a very successful line of ONTs for Zhone Technologies.

Also in October, we announced the expansion of our next-generation broadband access solution portfolio, Zhone FiberHome, with the immediate availability of the MXP-160/260 and MXP-180/280 1U SLMS platform. The new offering provides advanced multiplayer connectivity to global voice, data and video services, further expanding the reach of our global fiber base access solutions.

As we turned the corner into 2012, Zhone has experienced rapid FTTx customer growth at over 460% since inception. We continue to renew customers in each of our served markets. Now I would like to share a few examples of our exciting wins announced in the quarter.

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