Oclaro, Inc.
May 5, 2015

Oclaro Announces Third Quarter Fiscal Year 2015 Financial Results

SAN JOSE, Calif., May 5, 2015 /PRNewswire/ -- Oclaro, Inc. (Nasdaq: OCLR), a leading provider and innovator of optical communications solutions, today announced the financial results for its third quarter of fiscal year 2015, which ended March 28, 2015.

"Our March quarter results came in at the higher end of our guidance ranges despite the impact of the annual price declines inherent in the first calendar quarter of every year. During the quarter, we raised approximately $62 million to further strengthen our balance sheet and to support the expansion of our 100G product portfolio," said Greg Dougherty, Chief Executive Officer, Oclaro. "These results further demonstrate the continuing benefits that our cost management and portfolio improvement programs are having on our bottom line. In addition, we continue to be on track to achieve our Adjusted EBITDA breakeven objective this calendar year."

Results for the Third Quarter of Fiscal 2015

  • Revenues were $83.0 million for the third quarter of fiscal 2015, compared with revenues of $86.8 million in the second 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 of fiscal 2015.
  • GAAP gross margin was 15.3% for the third quarter of fiscal 2015, compared with a GAAP gross margin of 15.9% in the second quarter of fiscal 2015.
  • Non-GAAP gross margin was 15.8% for the third quarter of fiscal 2015, compared with a non-GAAP gross margin of 16.5% in the second quarter of fiscal 2015.
  • GAAP operating loss was $13.4 million for the third quarter of fiscal 2015. This compares with a GAAP operating loss of $3.8 million for the second quarter of fiscal 2015, which included a gain of $8.3 million resulting from the sale of the industrial and consumer business.
  • Non-GAAP operating loss was $9.5 million for the third quarter of fiscal 2015, compared with a non-GAAP operating loss of $9.8 million in the second quarter of fiscal 2015.
  • GAAP net loss for the third quarter of fiscal 2015 was $10.2 million. This compares with a GAAP net loss of $12.3 million in the second quarter of fiscal 2015.
  • Non-GAAP net loss for the third quarter of fiscal 2015 was $9.4 million. This compares with a non-GAAP net loss of $9.9 million in the second quarter of fiscal 2015.
  • Adjusted EBITDA was negative $5.3 million for the third quarter of fiscal 2015, compared with negative $5.5 million in the second quarter of fiscal 2015.
  • Cash, cash equivalents, restricted cash, and short-term investments were $123.9 million at March 28, 2015. On February 19, 2015, the Company completed a placement of $65.0 million of 6.00% Convertible Senior Notes Due 2020, for a net increase of approximately $61.6 million.

Fourth Quarter Fiscal Year 2015 Outlook

The guidance for the quarter ending June 27, 2015 is:

  • Revenues in the range of $77 million to $83 million.
  • Non-GAAP gross margin in the range of 15% to 19%.
  • Adjusted EBITDA in the range of negative $6 million to negative $2 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 third 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) 312-9325. A replay of the conference call will be available through May 19, 2015. To access the replay, dial (858) 384-5517. The passcode for the replay is 8325182. 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 www.oclaro.com or follow on Twitter at @OclaroInc.

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 US and other countries. All other trademarks are the property of their respective owners. Information in this release is subject to change without notice.

Safe Harbor Statement
This press release, in association with Oclaro's third 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 June 27, 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) Oclaro's ability to timely develop, commercialize and ramp the production of new products, (ii) Oclaro's ability to increase the percentage of sales associated with its new products, (iii) Oclaro's ability to respond to evolving technologies, customer requirements and demands, and product design challenges, (iv) Oclaro's dependence on a limited number of customers for a significant percentage of its revenues, (v) Oclaro's ability to maintain strong relationships with certain customers, (vi) the effects of fluctuating product mix on Oclaro's results, (vii) competition and pricing pressure, (viii) Oclaro's ability to effectively manage its inventory, (ix) Oclaro's ability to meet or exceed its gross margin expectations, (x) the effects of fluctuations in foreign currency exchange rates, (xi) Oclaro's ability to maintain or increase its cash reserves and obtain debt or equity-based financing on acceptable terms or at all, (xii) the future performance of Oclaro and its ability to effectively restructure its operations and business, (xiii) Oclaro's ability to effectively compete with companies that have greater name recognition, broader customer relationships and substantially greater financial, technical and marketing resources, (xiv) Oclaro's ability to timely capitalize on any increase in market demand, (xv) Oclaro's ability to service and repay its outstanding indebtedness pursuant to the terms of the applicable agreements, (xvi) the potential inability to realize the expected benefits of asset dispositions, (xvii) the sale of businesses which may or may not arise in connection with executing Oclaro's restructuring plans, (xviii) Oclaro's ability to reduce costs and operating expenses, (xix) increased costs related to downsizing and compliance with regulatory and legal requirements in connection with such downsizing, (xx) the risks associated with Oclaro's international operations, (xxi) the impact of continued uncertainty in world financial markets and any resulting reduction in demand for Oclaro's products, (xxii) the outcome of tax audits or similar proceedings, (xxiii) the outcome of pending litigation against Oclaro, and (xxiv) 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



March 28,

2015


December 27, 2014


March 29,

2014



(Thousands, except per share amounts)


Revenues

$

83,023



$

86,820



$

95,398



Cost of revenues

70,323



73,054



84,298



Gross profit

12,700



13,766



11,100



Operating expenses:







Research and development

11,732



11,721



14,624



Selling, general and administrative

12,048



13,646



17,437



Amortization of other intangible assets

194



269



418



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

2,246



(8,038)



3,068



Flood related (income) expense





(1,657)



Gain on sale of property and equipment

(138)



(26)



(326)



Total operating expenses

26,082



17,572



33,564



Operating loss

(13,382)



(3,806)



(22,464)



Other income (expense):







Interest income (expense), net

(599)



(89)



(29)



Gain (loss) on foreign currency transactions, net

2,892



(675)



625



Other income (expense), net

366



329



(56)



Total other income (expense)

2,659



(435)



540



Loss from continuing operations before income taxes

(10,723)



(4,241)



(21,924)



Income tax provision (benefit)

(537)



(38)



745



Loss from continuing operations

(10,186)



(4,203)



(22,669)



Loss from discontinued operations, net of tax (2)



(8,080)



(252)



Net loss

$

(10,186)



$

(12,283)



$

(22,921)



Basic and diluted net loss per share:







Loss per share from continuing operations

$

(0.09)



$

(0.04)



$

(0.22)



Loss per share from discontinued operations



(0.07)





Basic and diluted net loss per share

$

(0.09)



$

(0.11)



$

(0.22)



Shares used in computing net loss per share:







Basic

108,357



107,849



105,487



Diluted

108,357



107,849



105,487



(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



March 28,

2015


December 27, 2014


March 29,

2014



(Thousands, except per share amounts)


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







GAAP gross profit

$

12,700



$

13,766



$

11,100



Outsource transition costs





353



Stock-based compensation in cost of revenues

434



576



244



Non-GAAP gross profit

$

13,134



$

14,342



$

11,697



GAAP gross margin rate

15.3

%


15.9

%


11.6

%


Non-GAAP gross margin rate

15.8

%


16.5

%


12.3

%


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







GAAP operating loss

$

(13,382)



$

(3,806)



$

(22,464)



Stock-based compensation

1,575



1,756



2,985



Amortization of intangible assets

194



269



418



Restructuring, acquisition and related costs (3)

2,246



(8,038)



3,068



Flood related (income) expense





(1,657)



Outsource transition costs





509



(Gain) loss on sales of property and equipment

(138)



(26)



(326)



Non-GAAP operating loss

$

(9,505)



$

(9,845)



$

(17,467)



Depreciation expense

4,209



4,329



5,142



Adjusted EBITDA

$

(5,296)



$

(5,516)



$

(12,325)



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







GAAP loss from continuing operations

$

(10,186)



$

(4,203)



$

(22,669)



Stock-based compensation

1,575



1,756



2,985



Amortization of intangible assets

194



269



418



Restructuring, acquisition and related costs (3)

2,246



(8,038)



3,068



Flood related (income) expense





(1,657)



Other (income) expense items, net

(366)



(329)



56



Outsource transition costs





509



(Gain) loss on foreign currency translation

(2,892)



675



(625)



Non-GAAP loss from continuing operations

$

(9,429)



$

(9,870)



$

(17,915)



Non-GAAP loss per share-continuing operations:







Basic

$

(0.09)



$

(0.09)



$

(0.17)



Diluted

$

(0.09)



$

(0.09)



$

(0.17)



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







Basic

108,357



107,849



105,487



Diluted

108,357



107,849



105,487



 


Three Months Ended



March 28, 2015


December 27, 2014


March 29, 2014



(Thousands, except per share amounts)


Stock-based compensation for the above included the following:







Cost of revenues

$

434



$

576



$

244



Research and development

396



410



249



Selling, general and administrative

745



770



2,492



Total

$

1,575



$

1,756



$

2,985










Outsource transition cost for the above included the following:







Cost of revenues

$



$



$

353



Research and development





156



Total

$



$



$

509



(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)










March 28, 2015


June 28, 2014


(Thousands, except par value)

ASSETS




Current assets:




Cash and cash equivalents

$

119,809



$

98,973


Restricted cash

4,101



5,055


Short-term investments



95


Accounts receivable, net

81,440



82,872


Inventories

65,346



71,099


Prepaid expenses and other current assets

24,322



45,275


Total current assets

295,018



303,369


Property and equipment, net

41,401



50,768


Other intangible assets, net

2,792



8,536


Other non-current assets

3,059



3,012


Total assets

$

342,270



$

365,685


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

57,757



$

71,283


Accrued expenses and other liabilities

36,260



51,492


Capital lease obligations, current

3,923



5,387


Total current liabilities

97,940



128,162


Deferred gain on sale-leasebacks

8,697



10,711


Convertible notes payable

61,673




Capital lease obligations, non-current

1,688



4,539


Other non-current liabilities

10,346



14,345


Total liabilities

180,344



157,757


Stockholders' equity:




Preferred stock




Common stock

1,098



1,077


Additional paid-in capital

1,463,016



1,458,487


Accumulated other comprehensive income

38,135



45,864


Accumulated deficit

(1,340,323)



(1,297,500)


Total stockholders' equity

161,926



207,928


Total liabilities and stockholders' equity

$

342,270



$

365,685


 

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