JDS Uniphase Management Discusses Q4 2012 Results - Earnings Call Transcript

JDS Uniphase (JDSU)

Q4 2012 Earnings Call

August 14, 2012 5:00 pm ET

Executives

Cherryl Valenzuela

Thomas H. Waechter - Chief Executive Officer, President and Director

David W. Vellequette - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Alan S. Lowe - President of Communications & Commercial Optical Products and Executive Vice President

Analysts

Kevin J. Dennean - Citigroup Inc, Research Division

Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division

James Kisner - Jefferies & Company, Inc., Research Division

Amitabh Passi - UBS Investment Bank, Research Division

Kent Schofield - Goldman Sachs Group Inc., Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

Georgios Kyriakopoulos

Ehud A. Gelblum - Morgan Stanley, Research Division

Alexander B. Henderson - Needham & Company, LLC, Research Division

Natarajan Subrahmanyan - TheJudaGroup, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 JDSU Earnings Conference Call. My name is Deanna, and I'll be the operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now turn the call over to your host for today, Ms. Cherryl Valenzuela, Senior Manager of Investor Relations. Please proceed.

Cherryl Valenzuela

Thank you, Deanna, and welcome, everyone, to JDSU's Fiscal 2012 Fourth Quarter and Year End Financial Results Conference Call. Joining me on the call today are Tom Waechter, Chief Executive Officer; and Dave Vellequette, Chief Financial Officer. Tom will provide an overview of our June results and strategic execution before handing the call to Dave for a more detailed discussion of our financial results. We will follow that with Q&A where Alan Lowe, President of the COP business segment, will join us today.

I'd like to remind you that this call will include forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to look at the company's most recent filings with the SEC, particularly the Risk Factors section of our Annual Report on Form 10-K filed on August 30, 2011.

The forward-looking statements, including guidance, provided during the call are valid only as of today's date, and JDSU undertakes no obligation to update these statements as we move through the quarter.

Please note that all numbers are non-GAAP unless otherwise stated. A detailed reconciliation of these non-GAAP results to our GAAP results, as well as a discussion of their usefulness and limitations is included in today's news release announcing our results, which is available on our website along with supplementary slides and historical financial tables. Finally and as a reminder, this call is being recorded, and the replay will also be available shortly on our website.

I would now like to turn the call over to Tom.

Thomas H. Waechter

Thank you, Cherryl, and good afternoon, everyone. JDSU delivered solid fourth quarter results in a challenging macroeconomic environment. Revenue of $439 million topped our guidance and operating margin was 8.7%, on the high end of our forecast range. Book-to-bill was greater than 1 for the company overall and for 2 of our 3 business segments. Cash from operations was $38 million, further contributing to our healthy balance sheet.

Our steady execution on our strategic priorities has enabled JDSU to outperform despite difficult market conditions, further differentiating ourselves from competitors and increasing our leadership in the markets we serve. Our latest financial results reflect market share gain and our financial leverage stemming from our commitment to this priority.

We continue excellent forward momentum with our technological innovation. New products accounted for 58% of revenue in core network market, consisting of Optical Communications and communications test and measurement.

CommTest in particular had a strong quarter, reporting a record high 62% of revenue from new products in fiscal Q4. We are seeing broad-based growth from our diverse product portfolio, covering high-speed access, wireless, Ethernet and 40G, 100G transport.

One of the areas of accelerated growth for CommTest is software. We recently announced PacketPortal and PacketInsight, 2 new solutions that provide carriers with greater intelligence and visibility into their networks and allows them to conduct real-time analysis and troubleshooting of network issues. We are seeing good traction with both products. We started shipping PacketPortal in February, and we now have 3 customer orders, 15 trials completed and 6 trials in progress.

We are also off to a solid start with our PacketInsight appliance, where we have already shipped 10 units to a large tier-1, North American carrier. Initial feedback from this customer has been very favorable. Trials are either planned for presently taking place with 10 additional customers.

Another key growth driver for CommTest is wireless. Today we announced the signing of an agreement to acquire GenComm, a provider of test and measurement solutions for wireless base stations and repeaters based in Seoul, South Korea. JDSU is GenComm's exclusive reseller outside of Korea. Revenue from GenComm products was more than $7.5 million of CommTest revenue in fiscal 2012.

From a strategic perspective, acquiring GenComm brings our wireless engineering talent in-house to JDSU and further expands our competitive presence in the fast-growing Asia-Pacific region.

Dyaptive, our capacity testing business acquired earlier this year, is also driving wireless test momentum for JDSU as it delivered record revenue in the June quarter. The integration into JDSU is complete, and we are leveraging our global sales team to rapidly grow its customer base.

These recent acquisitions continued JDSU's expansion into wireless that began with the NSD acquisition 2 years ago. GenComm and Dyaptive complement our already broad and market-leading set of wireless test solutions, including network protocol analyzer, drive test systems and service assurance systems.

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