Oclaro Announces Record Profitability in Fourth Quarter Fiscal 2010

SAN JOSE, Calif., July 29 /PRNewswire-FirstCall/ -- Oclaro, Inc. (Nasdaq: OCLR), a provider of optical components, modules and subsystems, today announced the financial results for its fourth quarter and fiscal year 2010, which ended July 3, 2010.  

“We are proud to have been profitable on a non-GAAP operating income basis for our first year as Oclaro, our adjusted EBITDA has increased each quarter, and our operating margins continue to trend upwards,” said Alain Couder, president and CEO of Oclaro.  “Our technology differentiation and product breadth are creating new opportunities for Oclaro; and so we believe our growth will continue through 2010 and that calendar 2011 is shaping up to be a strong growth year.”

Highlights for Fourth Quarter Fiscal 2010:

• GAAP revenues were $112.7 million for the fourth quarter of fiscal 2010, compared to $101.2 million in the third quarter of fiscal 2010.  Telecom revenues were up over 13% compared to the prior quarter.
• GAAP gross margin was 30% for the fourth quarter of fiscal 2010, compared to 28% in the third quarter of fiscal 2010.  
  • Non-GAAP gross margin was 31% for the fourth quarter of fiscal 2010, exceeding the 30% target announced during the April 2009 merger of Bookham, Inc. and Avanex Corporation. Non-GAAP gross margin was 28% in the third quarter of fiscal 2010.
• GAAP operating income was $8.6 million for the fourth quarter of fiscal 2010, compared to $33,000 in the third quarter of fiscal 2010.
  • Non-GAAP operating income was $9.6 million, or 8.5% of revenues, for the fourth quarter of fiscal 2010, exceeding the 5% of revenues target announced during the April 2009 merger of Bookham and Avanex. Non-GAAP operating income was $3.2 million, or 3.2% of revenues, in the third quarter of fiscal 2010.
• Adjusted EBITDA was $12.3 million for the fourth quarter of fiscal 2010, compared to $5.8 million in the third quarter of fiscal 2010, an increase of well over 100%.
• GAAP net income for the fourth quarter of fiscal 2010 was $10.6 million, compared $0.2 million in the third quarter of fiscal 2010.
  • Non-GAAP net income for the fourth quarter of fiscal 2010 was $11.5 million, compared to $3.4 million in the third quarter of fiscal 2010.
• Cash, cash equivalents, restricted cash and short-term investments were $111.6 million as of July 3, 2010. This includes $77.1 million received in the Company’s May follow-on offering of common stock.
• The Company acquired Mintera Corporation in a deal announced and closed July 21, 2010.  Oclaro has a target model for the high speed transmission business of Mintera of gross margins of 40% to 45% and non-GAAP operating margins of 20% to 25%.

Highlights for Fiscal Year 2010:

• GAAP revenues were $392.5 million for fiscal 2010, compared to $210.9 million in fiscal 2009.
• GAAP gross margin was 28% for fiscal 2010, compared to 22% in fiscal 2009. Non-GAAP gross margin was 28% for fiscal 2010, compared to 23.5% in fiscal 2009
• GAAP operating income was $4.8 million for fiscal 2010, compared to a GAAP operating loss of $34.8 million in fiscal 2009.
  • Non-GAAP operating income was $15.7 million for fiscal 2010, compared to a non-GAAP operating loss of $12.4 million in fiscal 2009.
• Adjusted EBITDA was $26.5 million for fiscal 2010, compared to negative $1.0 million in fiscal 2009.
• GAAP net income for fiscal 2010 was $12.4 million, compared to a GAAP net loss of $32.2 million in fiscal 2009.
  • Non-GAAP net income for fiscal 2010 was $16.5 million, compared to a non-GAAP net loss of $3.3 million in fiscal 2009.

First Quarter Fiscal 2011 Outlook

The results of Oclaro, Inc. for the first quarter of fiscal 2011, which ends October 2, 2010, are expected to be:

• Revenues in the range of $120 million to $126 million.  This includes approximately $3 million to $4 million of revenues from Mintera.
• Non-GAAP gross margin in the range of 31% to 33%.  
• Adjusted EBITDA in the range of $12.5 million to $15.5 million.

The foregoing guidance is based on current expectations.  These statements are forward looking, and actual results may differ materially.  Please see the Safe Harbor Statement in this earnings release for a description of certain important risk factors that could cause actual results to differ, and refer to Oclaro, Inc.’s most recent annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of the risks.  Furthermore, our outlook excludes items that may be required by GAAP, including, but not limited to, restructuring and related costs, acquisition or disposal related costs, expenses or income from certain legal actions, settlements and related costs outside our normal course of business, impairments of other long-lived assets, depreciation and amortization, extraordinary items, as well as the expensing of stock options and restricted stock grants.

Conference Call

Oclaro will hold a conference call to discuss financial results for the fourth quarter of fiscal 2010 today at 1:30 p.m. PT/4:30 p.m. ET.  To listen to the live conference call, please dial (480) 629-9714.  A replay of the conference call will be available through August 5, 2010.  To access the replay, dial (858) 384-5517.  The conference code for the replay is 4326725.  A webcast of this call will be available in the investors section of Oclaro's website at www.oclaro.com.

About Oclaro

Oclaro, Inc., with headquarters in San Jose, Calif., is a tier-one provider of high-performance optical components, modules and subsystems to the telecommunications market, and is one of the largest providers to metro and long-haul network applications.  The Company, formed on April 27, 2009 following the combination of Bookham, Inc. and Avanex Corporation, leverages proprietary core technologies and vertically integrated product development to provide its customers with cost-effective and innovative optical devices, modules and subsystems.  Oclaro serves a broad customer base, combining in-house and outsourced manufacturing to maximize flexibility and drive improved gross margin. Its photonic technologies also serve selected high-growth markets, including industrial, defense, life sciences, medical and scientific, with diversification providing both significant revenue streams and strategic technological advantage.  The Company also provides a complete family of wavelength selective switches (WSS) capable of powering reconfigurable optical add/drop multiplexer (ROADM) applications over the entire optical network, from the edge to the core.

Oclaro is a global company, with cutting-edge chip fabrication facilities in the U.K., Switzerland and Italy, and manufacturing sites in the U.S., Thailand, China and South Korea.

Safe Harbor Statement

This press release and the statements made by management contain statements about management’s future expectations, plans or prospects of Oclaro, Inc. and its business, and the assumptions underlying these statements, constitute forward-looking statements for the purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995.  These forward-looking statements include statements concerning (i) financial targets and expectations, including financial targets and expectations related to revenue; non-GAAP gross margin; non-GAAP operating margin; Adjusted EBITDA and progress toward our targeted business model, (ii) financial guidance for the fiscal quarter ending October 2, 2010, including guidance regarding revenue, non-GAAP gross margin and adjusted EBITDA, (iii) the impact of the acquisitions of Avanex Corporation, Xtellus Inc. and Mintera Corporation and the Spectra-Physics asset swap on the combined entity’s gross margin, (iv) sources for improvement of gross margin and operating expenses, including supply chain synergies, optimizing mix of product offerings, transition to higher margin product offerings, benefits of combined R&D and sales organizations and single public company costs, including statements regarding the expectation of further synergies, (v) opportunities to grow in adjacent markets and (vi) statements containing the words “target,” "believe," "plan," "anticipate," "expect," "estimate," "will," "should," "ongoing," “shaping up” and similar expressions.  There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including the impact of continued uncertainty in world financial markets and any resulting reduction in demand for our products, the future performance of Oclaro, Inc. following the closing of the mergers with Avanex Corporation, Xtellus Inc. and Mintera Corporation and the Spectra-Physics asset swap, the potential inability to realize the expected benefits and synergies as a result of the of the mergers with Avanex Corporation, Xtellus Inc. and Mintera Corporation and the Spectra-Physics asset swap, increased costs related to downsizing and compliance with regulatory compliance in connection with such downsizing,  the potential lack of availability of credit or opportunity for equity based financing, as well as the factors described in Oclaro's most recent annual report on Form 10-K, most recent quarterly reports on Form 10-Q and other documents we periodically file with the SEC.  The forward-looking statements included in this announcement represent Oclaro's view as of the date of this presentation.  Oclaro anticipates that subsequent events and developments may cause Oclaro’s views and expectations to change.  However, Oclaro specifically disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this release.

Non-GAAP Financial Measures

The Company provides certain supplemental non-GAAP financial measures to its investors as a complement to the most comparable GAAP measures.  The GAAP measure most directly comparable to non-GAAP revenues is revenues.  The GAAP measure most directly comparable to non-GAAP gross margin rate is gross margin rate.  The GAAP measure most directly comparable to non-GAAP operating income/loss is operating income/loss.  The GAAP measure most directly comparable to non-GAAP net income/loss is net income/loss.  The GAAP measure most directly comparable to Adjusted EBITDA is net income/loss. An explanation and reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below.

The Company believes that providing these non-GAAP measures to its investors, in addition to corresponding income statement measures, provides investors the benefit of viewing the Company’s performance using the same financial metrics that the management team uses in making many key decisions and understanding how the Company’s “core operating performance” and its results of operations may look in the future . The Company believes that providing this information allows the Company’s investors greater transparency and a better understanding of the Company’s core financial performance.  The Company believes its “core operating performance” represents the Company’s on-going performance in the ordinary course of its operations.  Management excludes from “core operating performance” those items, such as impairment charges, income taxes, restructuring and severance programs and costs relating to specific major projects which are non-recurring, expenses or income from certain legal actions, settlements and related costs, as well as non-cash compensation related to stock and options.  Management does not believe these items, including recurring non-cash items, are reflective of the Company’s ongoing operations and accordingly excludes those items from non-GAAP gross margin rate, non-GAAP operating income/loss and non-GAAP net income/loss.  Additionally, each non-GAAP measure has historically been presented by the Company as a complement to its most comparable GAAP measure, and the Company believes that the continuation of this practice increases the consistency and comparability of the Company’s earnings releases.  The non-GAAP adjustments, and the basis for excluding them, are discussed further below.

Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States of America.  Non-GAAP measures should not be considered in isolation from or as a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.

Pro Forma Revenues

GAAP revenues of $112.7 million for the fourth quarter of fiscal 2010 increased 44% over pro forma revenues of $78.1 million for the fourth quarter of fiscal 2009, which represent the full quarter results of Oclaro and Avanex, including GAAP revenues of $72.0 million and Avanex revenues of $6.1 million for the period prior to our April 27, 2009 merger.  We have presented a comparison of fiscal 2010 revenues with pro forma revenues for the fourth quarter of fiscal 2009 because the operations reflected by these two measures are more closely related than those reflected by GAAP revenues.  Pro forma revenues for the fourth quarter of fiscal year 2009 should not be considered in isolation from or as a substitute for GAAP revenues for the same period.  

Non-GAAP Revenues

Non-GAAP revenues include the revenues of the Company’s former New Focus business, which is treated as a discontinued operation in our GAAP financial statements.  Management uses this non-GAAP measure to evaluate its performance relative to its previously established financial targets.  Specifically, the Company previously reported New Focus in its revenues.  The Company believes providing non-GAAP revenues to its investors, in addition to corresponding income statement measures, allows investors to evaluate the Company’s results of operations compared to its previous financial results.

Non-GAAP Gross Margin Rate

Non-GAAP gross margin rate is calculated as gross margin rate as determined in accordance with GAAP (gross profit as a percentage of revenues) excluding non-cash compensation related to stock and options specifically identified in the non-GAAP reconciliation schedules set forth below.  The Company evaluates its performance using non-GAAP gross margin rate to assess the Company’s historical and prospective operating financial performance, as well as its operating performance relative to its competitors.  Specifically, management uses this non-GAAP measure to further understand the Company’s “core operating performance.”  The Company believes its “core operating performance” represents the Company’s on-going performance in the ordinary course of its operations.  Accordingly, the Company excludes from “core operating performance” those items such as non-cash compensation related to stock and options; and certain other significant non-recurring one-time charges and credits specifically identified.  Management does not believe these items, including recurring non-cash items, are reflective of the Company’s ongoing operations and accordingly excludes those items from non-GAAP gross margin rate.

Non-GAAP Operating Income/Loss

Non-GAAP operating income/loss is calculated as operating income/loss as determined in accordance with GAAP excluding the impact of amortization of intangible assets, restructuring, merger and related costs, non-cash compensation related to stock and options granted to employees and directors, and certain other one-time charges and credits specifically identified in the non-GAAP reconciliation schedules set forth below.  The Company evaluates its performance using, among other things, non-GAAP operating income/loss in evaluating the Company’s historical and prospective operating financial performance, as well as its operating performance relative to its competitors.  Specifically, management uses this non-GAAP measure to further understand the Company’s “core operating performance.”  The Company believes its “core operating performance” represents the Company’s on-going performance in the ordinary course of its operations.  Accordingly, the Company excludes from “core operating performance” those items such as restructuring and severance programs and costs relating to specific major projects which are non-recurring, expenses or income from certain legal actions, settlements and related costs outside our normal course of business, impairment charges, as well as non-cash compensation related to stock and options. Management does not believe these items are reflective of the Company’s ongoing operations and accordingly excludes those items from non-GAAP operating loss.

Non-GAAP Net Income/Loss

Non-GAAP net income/loss is calculated as net income/loss excluding the impact of restructuring, merger and related costs, non-cash compensation related to stock and options granted to employees and directors, the impact of amortization of intangible assets and certain other one-time charges and credits specifically identified in the non-GAAP reconciliation schedules set forth below.  The Company uses non-GAAP net income/loss in evaluating the Company’s historical and prospective operating financial performance, as well as its operating performance relative to its competitors. Specifically, management uses this non-GAAP measure to further understand the Company’s “core operating performance.”

Adjusted EBITDA

Adjusted EBITDA is calculated as net income/loss excluding the impact of income taxes, net interest income/expense, depreciation and amortization, net foreign currency translation gains/losses, as well as restructuring, merger and related costs, impairment, non-cash compensation related to stock and options, expenses or income from certain legal actions, settlements and related costs outside our normal course of business, and certain other one-time charges and credits specifically identified in the non-GAAP reconciliation schedules set forth below.  The Company uses Adjusted EBITDA in evaluating the Company’s historical and prospective cash usage, as well as its cash usage relative to its competitors.  Specifically, management uses this non-GAAP measure to further understand and analyze the cash used in/generated from the Company’s core operations.  The Company believes that by excluding these non-cash and non-recurring charges, more accurate expectations of its future cash needs can be assessed in addition to providing a better understanding of the actual cash used in or generated from core operations for the periods presented.  The Company further believes that providing this information allows the Company’s investors greater transparency and a better understanding of the Company’s core cash position.

SOURCE Oclaro, Inc.