November 5, 2003
Conference Call Notes and Observations
9 Months ended September 30, 2003
please see Disclaimer at bottom of report
This report was last amended on November 6, 2003.
Corvis Corporation, and its consolidated subsidiary, Broadwing Communications, deliver innovative optical networking solutions that deliver voice, video and data solutions rapidly, flexibly and at the lowest total cost in the industry. Broadwing Communications is an innovative provider of data, voice and video solutions to carriers and large enterprises. Enabled by its one-of-a-kind, all-optical network and award-winning IP backbone, Broadwing offers a full suite of the highest quality communications products and services, with unparalleled customer focus and speed.
Corvis provides service providers and government agencies worldwide with scalable optical networking equipment that dramatically reduce the overall expenses associated with building and operating networks.
Corvis, Broadwing and the Corvis and Broadwing logos are trademarks and/or service marks of Corvis Corporation. All other trademarks are the property of their respective owners.
Notes From Conference Call
David Huber, President :
1. Business has new and promising position in telecom industry. This is the first quarter that encompasses Broadwing results.
2. Equipment business restructured to market realities.
3. 3rd Quarter had challenges. There was an announcement of work force restructuring. Reductions are almost exclusively in equipment business. Past several months have been as difficult as any in the equipment business. Corvis will be selective in customers and maintain existing customers. Expects to record OCS revenue in this coming quarter. Restructuring initiatives should save Corvis approximately $30 to $40M anually. Restructuring is primarily in the equipment business.
4. Claims that fast and flexible service positioning is what Broadwing offers. All optical network, powered by Corvis increases productivity and reduces costs. Communication services represents the major focus and growth activity of the company. Broadwing sells data, voice and video transport to major services providers.
5. Last week Broadwing announced it had extended optical core from Atlanta to Miami. They just lit 1200 miles along the east coast of Florida.
6. Broadwing’s penetration of Fortune 1000 enterprise customer’s grew by 36% year over year.
7. A Fortune 10 conglomerate just signed a large business unit with Broadwing. Broadwing was hired for provisioning speed, customer service and network quality.
8. Broadwing is invited to bid on other sections of business from existing customers. New customers are Discover Financial and Magellen Healthcare. Blue Cross / Blue Shield has extended contract with Broadwing. Year over year revenues for enterprise customers grew by 300%.
9. “Broadwing has momentum”. They continue to evaluate strategic alternatives. Experience to date is living up to Corvis expectations prior to purchase. Results of this quarter show the potential of Corvis in the future. Expects profitability in mid 2004.
Lynn Anderson – Chief Financial Officer
1. Driver for profitability expectation is Broadwing. There is not a specific revenue target for achieving profitability.
2. Cash impact of restructuring will occur in 4th Quarter 2003 and 1st quarter 2004. The expected savings is $3M to $6M in monthly savings.
3. 63% of total services revenue was from data and private line solutions or $90.2M. Retail and wholesale voice service revenues contributed 37% or $52.9M.
4. Headcount should be about 1200 by December.
5. Inflow of $73.5M for private placement was included in cash increase during the quarter. This inflow created a positive net change of cash.
6. Net of one time transactions, Corvis change in cash and equivalents was $49.6M.
7. end of year cash, equivalents and investment balance is expected to be between $275M to $300M
8. Lighting fiber in Florida enables greater opportunities.
Question and Answers
1. Feedback of sales force is the element of voice quality on voice. Feels there is price stabilization in voice and data pricing. Quality is becoming increasingly important, especially in enterprise sector. Large enterprise certainly has large pricing pressure. Challenge now is growing business within large enterprise existing customers. Greatest activity has been on data side of business.
2. Cash portion of restructuring will be between $10 to $15m in total over next few quarters.
3. There is a seasonality to business. There could be a lull in minutes per day during the November and December holidays. Perhaps a slight downtick in revenues in 4Q03.
Some “ back of the envelope” observations
Based on the lack of comparative information, including the forthcoming 10-Q and 8K, and the lack of guidance , we will hold off on making financial observations at this time. There are a few items we will identify below.
1. Conference call had no mention of Gig-Be (other than some slight Government mention) or Dorsal.
2. PLEASE CHECK BACK AT LATER DATE.
If you are a client of ours, and if you have questions regarding Corvis, please call our office. If you are not a client of Redfield, Blonsky & Co. LLC Investment Management Division and are reading this report, we urge you to do your own research. We will not be responsible for any person making an investment decision based on this report. This report is a “by-product” of our research. We are not responsible for the accuracy of this report. We are not responsible for errors that may occur in this report. Please do not rely on us to monitor or update this or any other report we may issue. In theory, we could come across some type of data or idea, which causes us to eliminate Corvis from our portfolios. This report may undergo revisions starting on November 6, 2003. We will not notify readers of future revisions. We are not responsible to keep readers of this report updated for changes or material errors or for any reason whatsoever. This report is dated November 6, 2003; it is possible that by November 6, 2003 we could have eliminated our entire Corvis position without giving notice to any reader of this report. We manage portfolios for clients, and those clients are our greatest concern as it relates to investing. Certain clients of Redfield, Blonsky & Co LLC may not have Corvis Corporation in their portfolios. There could be various reasons for this. Again, if you would like to discuss Corvis Corporation, please contact Ronald R. Redfield, CPA, PFS (partner in charge of investment management division).
Information herein is believed to be reliable, but its accuracy and completeness cannot be guaranteed. Opinions, estimates, and projections constitute our judgment and are subject to change without notice. This publication is provided to you for information purposes only and is not intended as an offer or solicitation. Redfield, Blonsky & Co. LLC and Ronald R Redfield, CPA, PFS, may hold a position or act as an advisor on any investments mentioned in a report or discussion.