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JDS Uniphase Corp. (JDSU)

F2Q10 Earnings Call

February 02, 2010 5:00 pm ET


Tom Waechter - Chief Executive Officer

Dave Vellequette - Chief Financial Officer

Michelle Levine - Director of Investor Relations


Mark Sue - RBC Capital Markets

Jeff Evenson - Sanford Bernstein

Kevin Dennean - Citi

Paul Bonenfant - Morgan Keegan

Todd Koffman - Raymond James

Michael Genovese - Soleil Securities

Ajit Pai - Thomas Weisel Partners

Dave Kang - B. Riley

Joel Achramowicz - Blaylock Robert Van



Good day, ladies and gentlemen, and welcome to the second quarter 2010, JDSU earnings conference call. My name is Louisa, and I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions)

I would now like to turn the call over to Ms. Michelle Levine, Director of Investor Relations; please proceed.

Michelle Levine

Thank you, operator and welcome to JDSU fiscal 2010 second quarter financial results conference call. Joining me on the call today are Tom Waechter, Chief Executive Officer; and Dave Vellequette, Chief Financial Officer. I would like to remind you that this call is likely to 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 report on Form 10-K filed August 24, 2009, and 10-Q filed November 12, 2009.

The forward-looking statements, including guidance provided during this 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 discussion of their usefulness and limitations, is included in today’s news release announcing our results, which is available on our website at

In addition, our current and historical financial tables are posted in the Investor portion of our website at\investors under the Financial Information section. Finally, and as a reminder, this call is being recorded and will be available for replay on the Investor section of our website.

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

Tom Waechter

Thank you, Michelle and good afternoon everyone. I would like to begin by providing a brief summary of our fiscal second quarter results. JDSU’s revenue of $343.8 million and operating profit of 8.2% came in at the high end of our guidance. These results reflect increasing customer demand and the leverage in our operating model. Our book-to-bill for the quarter was greater than one.

Our balance sheet and working capital structure continue to strengthen. In Q2, when compared to Q1, we generated over $27 million of free cash flow, decreased our inventory by $11 million, resulting in inventory turns above six, which historically is the highest level for the company, and reduced our day’s sales outstanding to 60. These results evidence our continued focus to improve our operating model.

Now let’s move on to our individual business segments. First, the Communications Test & Measurement segment, fiscal Q2 revenues grew 23% compared to last quarter and book-to-bill was greater than one. This is the third consecutive quarter of growth as we continue to see customer demand improve. All geographies grew quarter-over-quarter, with particular strength in North America and EMEA.

We had one of our strongest quarters for fiber optics test in North America and Q2 was the largest quarter ever for shipments of the T-BERD 6000, one of our modular field optical test solutions. Other areas of strength in this region were wireless backhaul, 100 Gig, 40 Gig and cable. Europe grew over 45% compared to Q1, where recovery is underway in Western Europe.

Asia grew more than 10%, as we saw increased demand in the region. We saw strength in Hong Kong, Japan, Malaysia, Korea, Australia, the Philippines and India. Build out of fiber plants for transport and FTTx continues to present good opportunities across the region. Our bookings growth in China and India mirrored the positive economic growth in these two countries.

As you can see, we continue to strengthen our leader market position in Test and Measurement across all of our addressable markets. On a year-over-year basis JDSU grew faster than the market, with particular strength in North America and our Test and Measurement business maintains the leading market position worldwide for field test in Ethernet, fiber field, DSL and cable networking markets, as well as storage network tests for the lab and production market.

This quarter JDSU was awarded the Frost & Sullivan 2009 worldwide growth strategy award for capturing the highest annual compound growth rate for the last three years for our portfolio of Gigabit Ethernet test equipment. Our portfolio provides the industry’s deepest set of test features, providing end-to-end testing for carrier Ethernet, products and services, including lab and service verification, development and production, installation and maintenance, troubleshooting and overall service assurance.

JDSU continues to support our customers with a portfolio of technology that is aligned with key market trends. For example, this quarter we experienced strong growth in Ethernet backhaul and monitoring tests for wireless service providers. I mentioned earlier that we had our largest quarter ever shipping T-BERD 6000 and in fact, a large percentage of these were for Ethernet backhaul applications. Bookings related to Ethernet backhaul projects for Tier 1 North American operators were particularly strong this quarter.

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