Oclaro, Inc. (OCLR)

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Oclaro (OCLR)

F2Q 2013 Earnings Call

January 31, 2013 04:30 PM ET


Jim Fanucchi - Owner, Summit IR Group

Alain Couder - Chairman, President & CEO

Jerry Turin - CFO


Kevin Dennean - Citigroup

Patrick Newton - Stifel Nicolaus

Dave Kang - B. Riley & Company

Alex Anderson - Needham and Company



Good afternoon and welcome to the Oclaro Second Quarter Fiscal Year 2013 Financial Results Conference call. As a reminder, this conference call is being recorded for replay purposes through February 7, 2013.

At this time, I would like to turn the call over to Jim Fanucchi of the Summit IR Group. Please go ahead, sir.

Jim Fanucchi

Thank you operator, and thanks to all of you for joining us. Our speakers today are Alain Couder, Chairman and CEO; and Jerry Turin, Chief Financial Officer of Oclaro.

Statements about management's future expectations, plans or prospects of Oclaro and its business, including statements about future financial targets and financial guidance, Oclaro's plans for future operations, 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 but are not limited to statements concerning financial targets and expectations and progress toward our target business model, including financial guidance for the third quarter ending March 30th, 2012 regarding revenue, non-GAAP gross margin and adjusted EBITDA, expectations related to the integration of Opnext into Oclaro following the close of the merger on July 23, 2012; and our market conditions and our market position and future operating prospects, and our ongoing customer relationship. 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 risk factors described in Oclaro's most recent Annual Report on Form 10-K, most recent quarterly report on Form 10-Q, and other documents we periodically file with the SEC. The forward-looking statements discussed today represent Oclaro's views as of the date of this conference call and subsequent events and developments may cause Oclaro's view to change.

Accordingly, actual results may differ materially from those indicated by these forward looking statements. Oclaro does not intend and is not required to update any forward-looking statements as a result of future developments. In addition, today, we will be discussing non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

A table that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures is included in our earnings release, which we have filed with the SEC, and I refer investors to this release.

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

Alain Couder

Okay good afternoon. So regarding our second quarter results, we are pleased with the results in that quarter. We made significant progress in the merger and I think our results demonstrate that we have improved our execution. We delivered on revenue as the topline of the guidance that you probably read in the press release. We delivered to all the synergies that there were plans for the December quarter. And we still have more synergy to come mostly from inseed and Jerry would cover that more in detail. Jerry will also discuss the strengthening of our balance sheet which was quite successful in that same quarter.

So as a result of that I believe that Oclaro is at its pivot point. We have made great strides in spite the challenge of the past year. We executed off the merger and the subsequent integration of Opnext. We are outsourcing our backend manufacturing to Venture for great flexibility. And this activity has been executed while we were doing a massive effort to recover from the flood.

So, we have also continued to face an uncertain and changing markets and I will come back to this point later on in this afternoon. And our focus in the coming months will be to reduce our cost structure to lower the breakeven point of the company in line with what we believe are the current market situation.

These actions started and they require a few more assets to be sold to finance these action. By successfully (inaudible) Oclaro now to the current market position we expect to be well positioned for growth, when the (inaudible) spending picks up. We are a leader in the very large market who has huge potential, which is driven by this intense demand for more bandwidth and better latency.

We are a leader in key technology and widely recognized as a future of optical communication. They include a lasership technology and the ability to miniaturize and reduce power consumption through photonic integration. We also lead in the 40G under G module as one of only a couple of company with a combination of chip level photonic integration and vertical integration capability to stay off the entire market.

Altogether we have all the product and technology needed for the high goals to open market. And the customer relationship that secure our position as a strategic partner to the leader in the industry.

Let me now focus on current market condition, a product momentum and strategy moving forward. First of all, regarding the market, we are seeing a positive sign but still we are experiencing significant uncertainty. So the optical communication market in North America, we have a cautiously optimistic outlook based on the recent pickup.

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