OCLR

Oclaro, Inc. (OCLR)

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Oclaro, Inc. (OCLR)

F2Q2012 (Qtr End 10/01/2011) Earnings Call

November 09, 2011 05:00 pm ET

Executives

Jim Fanucchi - Summit IR Group

Alain Couder - Chairman & CEO

Jerry Turin - CFO

Analysts

Kevin Dennean - Citi

Ajit Pai - Stifel Nicolas

Alex Henderson - Miller Tabak

Dave King - B. Riley & Company

Hamed Khorsand - BWS Financial

Nathan Johnsen - Pacific Crest Securities

Chris Glancy - Avondale Partners

Presentation

Operator

Good afternoon and welcome to the Oclaro first quarter fiscal year 2012 financial results conference call. As a reminder, this conference is being recorded for replay purposes through November 16, 2011. In addition please refer to the supplemental presentation that has been provided in the investor section of the Oclaro website. At this time, I’d now like to turn the call over to Jim Fanucchi at 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 of management’s future expectations, plans, or prospects for Oclaro and its business including statements about future financial targets and financial guidance and Oclaro’s plans for future operations and any assumptions underlying these statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995. 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 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 views to change. Although Oclaro may choose to update to certain forward-looking statements based on subsequent events and developments, Oclaro was not require to and does not undertake any obligation to update any forward-looking statements as a result of future developments.

In addition, 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 the release. I would now like to turn the call over to Alain.

Alain Couder

Okay good afternoon and thank you for joining our call. Thank you for your patience as well as because as you noticed, we delayed the call in order to give you and as concretes as possible assessment of the situation that resulted from the flooding in Thailand. So in our discussion today I will start with a review of our first quarter results and then I will provide you the context for the impact of the Thailand flood and our view on the situation.

Then I plan to discuss our plan to reduce our breakeven threshold. And after that we ask Jerry to get into the financial details. So let’s talk about the September quarter results. So the result been executed as expected. Our revenue is within guidance. The gross margin and EBITDA throughout the high end of the guidance and that’s something that has happened despite the soft market condition that led to expected sequential decline in revenue. These results demonstrate in fact that our cost reduction initiative on which we’ve been working now for several months are starting to produce result.

In September quarter we shipped a record number of high powered laser, $16 million and that’s also demonstrate that the transfer of the fab from Houston to Europe is now behind us and thus we do our full capacity to produce our power laser for our customer. We’re also pleased to see that our revenue is basically flat in the September quarter as several of our competitors saw a decline.

The other point we believe is important because we have been discussing it for quite a long time is our new product momentum. I think in the September quarter, we had measurable result. It was flat with 40G. As a result of the Mintera acquisition we were able to ship more than 10 million of our DPSK transponders and that’s something we see the big number and very much in line with the business plan.

In addition to the portfolio we have in DPSK and DQPSK, we believe we’ve been able to position us as a leader in high bit rate component and module for the Coherent Solution that we also call PMDPSK and which is a very critical technology for the deployment of high bit rate network meaning 40-G and above you know. And for example, in term of 40-G current module, we started to shipping volume and we generated more than 2.4 million of revenue in the September quarter. We’re also very pleased with the momentum. We are been confident. We have been shipping the volume as 40G modulator. We have also started to ship our 100G modulator and we have been adding 100G coherent receiver and this receiver is the smallest of the market at this point in time and quite cost effective. So coherent addition is a very important element of the future and I think we do have some leading edge product and a very good position there.

Let me switch to 10G. 10G in October is the flat market but it’s not as big as the 40G market right now, and our strength in tunable transponder, pluggable, and laser continued. The September quarter, we started to ship in volumes, the tunable XFP and we ship in particular to one of the top two telecom OEM and to one of the top service provider. So we are already shipping to the top customer with this product. But an important thing to notice is that if you look at the 10G transponder market, half of the market is done by a modulation technique that is called [zero-chirp] while the XFP that we have been shipping so far, and our competition has been shipping is a negative [chirp]. And so we introduce and probably our first to market a new version of the XFP called [zero-chirp] and we have start to sampling this one and this could give us a very strong position in the pluggable 10G devices.

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