Oclaro, Inc.
Feb 3, 2015

Oclaro Announces Second Quarter Fiscal Year 2015 Financial Results

SAN JOSE, Calif., Feb. 3, 2015 /PRNewswire/ -- Oclaro, Inc. (Nasdaq: OCLR), a leading provider and innovator of optical communications solutions, today announced the financial results for its second quarter of fiscal year 2015, which ended December 27, 2014.

"Our second quarter financial results benefited from strong 100G revenue growth. Adjusted EBITDA for the quarter was better than our previously announced guidance range, and both gross margin and revenue were at the higher end of our guidance. Our recent results demonstrate that we are steadily making progress in achieving our financial and business objectives," said Greg Dougherty, Chief Executive Officer, Oclaro. "Market demand for 100G in both telecom and datacom continues to build and we expect to leverage our products and technology to drive future revenue growth."

Results for the Second Quarter of Fiscal 2015

  • Revenues were $86.8 million for the second quarter of fiscal 2015, compared with revenues of $89.2 million in the first quarter of fiscal 2015. The Company's industrial and consumer business, which was sold on October 27, 2014, contributed $1.8 million of revenue in the second quarter and $7.5 million in the first quarter of fiscal 2015.
  • GAAP gross margin was 15.9% for the second quarter of fiscal 2015, compared with a GAAP gross margin of 16.1% in the first quarter of fiscal 2015.
  • Non-GAAP gross margin was 16.5% for the second quarter of fiscal 2015, compared with a non-GAAP gross margin of 16.5% in the first quarter of fiscal 2015.
  • GAAP operating loss was $3.8 million for the second quarter of fiscal 2015. This compares with a GAAP operating loss of $17.5 million for the first quarter of fiscal 2015.
  • Non-GAAP operating loss was $9.8 million for the second quarter of fiscal 2015, compared with a non-GAAP operating loss of $13.6 million in the first quarter of fiscal 2015.
  • GAAP net loss for the second quarter of fiscal 2015 was $12.3 million. This compares with a GAAP net loss of $20.4 million in the first quarter of fiscal 2015.
  • Non-GAAP net loss for the second quarter of fiscal 2015 was $9.9 million. This compares with a non-GAAP net loss of $15.1 million in the first quarter of fiscal 2015.
  • Adjusted EBITDA was negative $5.5 million for the second quarter of fiscal 2015, compared with negative $8.9 million in the first quarter of fiscal 2015.
  • Cash, cash equivalents, restricted cash, and short-term investments were $79.0 million at December 27, 2014.

Third Quarter Fiscal Year 2015 Outlook
The guidance for the quarter ending March 28, 2015 is:

  • Revenues in the range of $78 million to $85 million.
  • Non-GAAP gross margin in the range of 13% to 17%.
  • Adjusted EBITDA in the range of negative $9 million to negative $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's most recent annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of these 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. We do not intend to update this guidance as a result of developments occurring after the date of this release.

Conference Call
Oclaro will hold a conference call to discuss financial results for the second quarter of fiscal year 2015 today at 2:00 p.m. PT/5:00 p.m. ET. To listen to the live conference call, please dial (913) 312-0823. A replay of the conference call will be available through February 17, 2015. To access the replay, dial (858) 384-5517. The passcode for the replay is 8625897. A webcast of this call and a supplemental presentation will be available in the investor section of Oclaro's website at www.oclaro.com.

About Oclaro
Oclaro, Inc. (Nasdaq: OCLR), is a leader in optical components, modules and subsystems for the core optical, enterprise and data center markets. Leveraging more than three decades of laser technology innovation, photonics integration, and subsystem design, Oclaro's solutions are at the heart of the fast optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, voice over IP and other bandwidth-intensive and high-speed applications. For more information, visit http://www.oclaro.com.

Copyright 2015. All rights reserved. Oclaro, the Oclaro logo, and certain other Oclaro trademarks and logos are trademarks and/or registered trademarks of Oclaro, Inc. or its subsidiaries in the U.S. and other countries. Information in this release is subject to change without notice.

Safe Harbor Statement
This press release, in association with Oclaro's second quarter fiscal year 2015 financial results conference call, contains statements about management's future expectations, plans or prospects of Oclaro and its business, and together with 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 and progress toward Oclaro's target business model, including financial guidance for the fiscal quarter ending March 28, 2015 regarding revenue, non-GAAP gross margin and Adjusted EBITDA, (ii) market interest in Oclaro's 100G products, (iii) the impact of the recent acquisition by Ushio Opto of Oclaro's industrial and consumer business and (iv) Oclaro's future financial performance and operating prospects. Such statements can be identified by the fact that they do not relate strictly to historical or current facts and may contain words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will," "should," "outlook," "could," "target," "model," and other words and terms of similar meaning in connection with any discussion of future operations or financial performance. 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 (i) our dependence on a limited number of customers for a significant percentage of our revenues, (ii) our ability to maintain strong relationships with certain customers, (iii) the effects of fluctuating product mix on our results, (iv) our ability to timely develop and commercialize new products, (v) competition and pricing pressure, (vi) our ability to meet or exceed our gross margin expectations, (vii) Oclaro's ability to maintain or increase its cash reserves and obtain debt or equity-based financing on terms acceptable to it or at all, (viii) the future performance of Oclaro and its ability to effectively restructure its operations and business, (ix) our ability to respond to evolving technologies and customer requirements and demands, (x) our ability to effectively compete with companies that have greater name recognition, broader customer relationships and substantially greater financial, technical and marketing resources than we do, (xi) our ability to timely capitalize on any increase in market demand, (xii) the potential inability to realize the expected benefits of asset dispositions, (xiii) the sale of businesses which may or may not arise in connection with executing our restructuring plans, (xiv) our ability to reduce costs and operating expenses, (xv) increased costs related to downsizing and compliance with regulatory and legal requirements in connection with such downsizing, (xvi) the risks associated with our international operations, (xvii) the impact of continued uncertainty in world financial markets and any resulting reduction in demand for our products, (xviii) the outcome of tax audits or similar proceedings, (xix) the outcome of pending litigation against the company, and (xx) other factors described in Oclaro's most recent annual report on Form 10-K, quarterly report on Form 10-Q and other documents it periodically files with the SEC. The forward-looking statements included in this announcement represent Oclaro's view as of the date of this announcement. Oclaro anticipates that subsequent events and developments may cause Oclaro's views and expectations to change. Oclaro specifically disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

Non-GAAP Financial Measures
Oclaro 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 gross margin rate is gross margin rate. The GAAP measure most directly comparable to non-GAAP operating income/loss and Adjusted EBITDA is operating income/loss. The GAAP measure most directly comparable to non-GAAP net income/loss is net income/loss. An explanation and reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below.

Oclaro believes that providing these non-GAAP measures to its investors, in addition to corresponding income statement measures, provides investors the benefit of viewing Oclaro's performance using the same financial metrics that the management team uses in making many key decisions and evaluating how Oclaro's "core operating performance" and its results of operations may look in the future. Oclaro defines "core operating performance" as its ongoing performance in the ordinary course of its operations. Items that are non-recurring or do not involve cash expenditures, such as impairment charges, income taxes, restructuring and severance programs, costs relating to specific major projects (such as acquisitions), non-cash compensation related to stock and options and certain income, purchase accounting adjustments related to the fair market value of acquired inventories, costs to outsource our back-end manufacturing activities, write-offs and expenses related to flooding in Thailand, including advance payments received from insurers, impairment of fixed assets and inventory and related expenses, are not included in Oclaro's view of "core operating performance." Management does not believe these items are reflective of Oclaro's ongoing core operations and accordingly excludes those items from non-GAAP gross margin rate, non-GAAP operating income/loss, non-GAAP net income/loss and Adjusted EBITDA. Additionally, each non-GAAP measure has historically been presented by Oclaro as a complement to its most comparable GAAP measure, and Oclaro believes that the continuation of this practice increases the consistency and comparability of Oclaro's earnings releases.

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.

Adjusted EBITDA
Adjusted EBITDA is calculated as operating income/loss excluding the impact of depreciation and amortization, restructuring, acquisition and related costs, non-cash compensation related to stock and options, purchase accounting adjustments related to the fair market value of acquired inventories, impairment of intangible assets and goodwill and certain other one-time charges and credits, including flood related advance payments received from insurers, impairment of fixed assets and inventory and related expenses, specifically identified in the non-GAAP reconciliation schedules set forth below. Oclaro uses Adjusted EBITDA in evaluating Oclaro'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 Oclaro's core operations. Oclaro 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. Oclaro further believes that providing this information allows Oclaro's investors greater transparency and a better understanding of Oclaro's core cash position.

Oclaro, Inc. Contact 


Investor Contact 

Pete Mangan


Jim Fanucchi

Chief Financial Officer


Darrow Associates, Inc.

(408) 383-1400


(408) 404-5400

ir@oclaro.com


ir@oclaro.com

 

OCLARO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)














Three Months Ended


December 27, 2014


September 27, 2014


December 28, 2013


(Thousands, except per share amounts)

Revenues

$

86,820



$

89,241



$

102,914


Cost of revenues

73,054



74,832



86,001


Gross profit

13,766



14,409



16,913


Operating expenses:






Research and development

11,721



13,913



16,424


Selling, general and administrative

13,646



15,414



18,557


Amortization of other intangible assets

269



418



417


Restructuring, acquisition and related (income) expense, net (1)

(8,038)



1,730



6,721


Flood related (income) expense





(140)


Gain (loss) on sale of property and equipment

(26)



397



205


Total operating expenses

17,572



31,872



42,184


Operating loss

(3,806)



(17,463)



(25,271)


Other income (expense):






Interest income (expense), net

(89)



(104)



(8,532)


Gain (loss) on foreign currency transactions, net

(675)



(2,010)



(2,848)


Other income (expense), net

329



555



28


Total other income (expense)

(435)



(1,559)



(11,352)


Loss from continuing operations before income taxes

(4,241)



(19,022)



(36,623)


Income tax provision (benefit)

(38)



954



1,424


Loss from continuing operations

(4,203)



(19,976)



(38,047)


Income (loss) from discontinued operations, net of tax (2)

(8,080)



(378)



69,538


Net income (loss)

$

(12,283)



$

(20,354)



$

31,491


Basic and diluted net income (loss) per share:






Loss per share from continuing operations

$

(0.04)



$

(0.19)



$

(0.41)


Income (loss) per share from discontinued operations

(0.07)





0.75


Basic and diluted net income (loss) per share

$

(0.11)



$

(0.19)



$

0.34


Shares used in computing net income (loss) per share:






Basic

107,849



107,249



93,204


Diluted

107,849



107,249



93,204



(1) The three month period ending December 27, 2014 contains a gain of approximately $8.3 million relating to the sale of the Company's industrial and consumer business on October 27, 2014.

(2) The three month period ending December 27, 2014 contains a charge of approximately $7.7 million relating to the release of amounts originally held back at the time of sale of our Amplifier and Zurich Businesses, as part of a Settlement Agreement with II-VI, Inc. on December 30, 2014.

 

OCLARO, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

CONTINUING OPERATIONS

(Unaudited)















Three Months Ended


December 27, 2014


September 27, 2014


December 28,
2013


(Thousands, except per share amounts)

Reconciliation of GAAP gross margin rate to non-GAAP gross margin rate:






GAAP gross profit

$

13,766



$

14,409



$

16,913


Outsource transition costs





236


Stock-based compensation in cost of revenues

576



330



250


Non-GAAP gross profit

$

14,342



$

14,739



$

17,399


GAAP gross margin rate

15.9%



16.1%



16.4%


Non-GAAP gross margin rate

16.5%



16.5%



16.9%


Reconciliation of GAAP operating loss to non-GAAP operating loss and adjusted EBITDA:






GAAP operating loss

$

(3,806)



$

(17,463)



$

(25,271)


Stock-based compensation

1,756



1,286



846


Amortization of intangible assets

269



418



417


Restructuring, acquisition and related costs (3)

(8,038)



1,730



6,721


Flood related (income) expense





(140)


Outsource transition costs





419


(Gain) loss on sales of property and equipment

(26)



397



205


Non-GAAP operating loss

$

(9,845)



$

(13,632)



$

(16,803)


Depreciation expense

4,329



4,704



6,089


Adjusted EBITDA

$

(5,516)



$

(8,928)



$

(10,714)


Reconciliation of GAAP loss to non-GAAP loss from continuing operations:






GAAP loss from continuing operations

$

(4,203)



$

(19,976)



$

(38,047)


Stock-based compensation

1,756



1,286



846


Amortization of intangible assets

269



418



417


Restructuring, acquisition and related costs (3)

(8,038)



1,730



6,721


Flood related (income) expense





(140)


Other (income) expense items, net

(329)



(555)



(28)


Outsource transition costs





419


(Gain) loss on foreign currency translation

675



2,010



2,848


Non-GAAP loss from continuing operations

$

(9,870)



$

(15,087)



$

(26,964)


Non-GAAP loss per share-continuing operations:






Basic

$

(0.09)



$

(0.14)



$

(0.29)


Diluted

$

(0.09)



$

(0.14)



$

(0.29)


Shares used in computing Non-GAAP loss per share-continuing operations:






Basic

107,849



107,249



93,204


Diluted

107,849



107,249



93,204


















Three Months Ended



December 27, 2014


September 27, 2014


December 28, 2013



(Thousands, except per share amounts)


Stock-based compensation for the above included the following:







Cost of revenues

$

576



$

330



$

250



Research and development

410



332



206



Selling, general and administrative

770



624



390



Restructuring





33



Total

$

1,756



$

1,286



$

879










Outsource transition cost for the above included the following:







Cost of revenues

$



$



$

236



Research and development





177



Selling, general and administrative





6



Total

$



$



$

419


















(3) The three month period ending December 27, 2014 contains a gain of approximately $8.3 million relating to the sale of the Company's industrial and consumer business on October 27, 2014.

 

OCLARO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)










December 27, 2014


June 28, 2014


(Thousands, except par value)

ASSETS




Current assets:




Cash and cash equivalents

$

74,537



$

98,973

Restricted cash

4,362



5,055

Short-term investments

81



95

Accounts receivable, net

82,649



82,872

Inventories

65,798



71,099

Prepaid expenses and other current assets

22,290



45,275

Total current assets

249,717



303,369

Property and equipment, net

41,746



50,768

Other intangible assets, net

3,020



8,536

Other non-current assets

2,929



3,012

Total assets

$

297,412



$

365,685

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

57,517



$

71,283

Accrued expenses and other liabilities

38,185



51,492

Capital lease obligations, current

4,075



5,387

Total current liabilities

99,777



128,162

Deferred gain on sale-leasebacks

9,330



10,711

Capital lease obligations, non-current

2,235



4,539

Other non-current liabilities

10,834



14,345

Total liabilities

122,176



157,757

Stockholders' equity:




Preferred stock




Common stock

1,090



1,077

Additional paid-in capital

1,461,438



1,458,487

Accumulated other comprehensive income

42,845



45,864

Accumulated deficit

(1,330,137)



(1,297,500)

Total stockholders' equity

175,236



207,928

Total liabilities and stockholders' equity

$

297,412



$

365,685





 

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