Oclaro, Inc. (OCLR)
Q1 2013 Earnings Call
November 5, 2012 4:30 pm ET
Jim Fanucchi - Summit IR Group
Alain Couder - Chairman of the Board and Chief Executive Officer
Jerry Turin - Chief Financial Officer
Kim Watkins - Morgan Stanley
Patrick Newton - Stifel Nicolaus
Kevin Dennean - Citigroup
Alex Henderson - Needham & Company
Hamed Khorsand - BWS Financials
Previous Statements by OCLR
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At this time, I would like to turn the call over to Jim Fanucchi of Summit IR Group. Please go ahead, sir.
Thank you, operator, and thanks to all of you for joining us today. Our speakers 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 statements concerning financial targets and expectations and progress toward our target business model, including financial guidance for the fiscal quarter ending December 29, 2012 regarding revenue, non-GAAP gross margin and adjusted EBITDA, expectations related to the integration of Opnext into Oclaro following the closing of the merger on July 23, 2012; and market conditions and our market position and future operating prospects, including customer reaction to our merger with Opnext.
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 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.
So, good afternoon, we have been the new Oclaro now for the past three months. In the past couple of months, I've traveled to Europe, to U.S., Japan and China, and all the customers I met are quite pleased with the merger and they have high expectation in terms of partnering with Oclaro. And, I will discuss that in further detail during this call. But first of all, as you already know, the first quarter of fiscal year 2013, well below expectations. Results were affected by our own execution issues and the intensive integration efforts during this quarter.
Later in the call, Jerry will go through all the detail, but just as a short recap, the revenue was approximately $149 million for first quarter close period. Combined total revenue for the quarter, $160 million, and non-GAAP gross margins 13% and adjusted EBITDA negative $20.6 million, so these disappointing results, you already knew about it through our prior announcement.
So, now, I would like to turn to the good news.
First of all, the new organization of the new Oclaro was in place day one. Our integration activities are on track and most integration actions are now behind us. Our transfers are also on track with Shenzhen moving to Venture in Malaysia and our Japan facility moving to Sagamihara, which is an earthquake-proof building and I will come back to that later on.
The primary focus has been to execute on our new product introduction with the two combined company improving our operational execution, completing our integration and plant synergy to strongly position us for the telecom business rebound. So, as a result of this we have a tangible and measurable result. We successfully accelerated our synergy as newly announced company and expect to reach $9 million in quarterly cost saving in the December quarter. This could mean a bottom line improvement of five points, so that was a tremendous effort, but we are quite pleased with the position we are in beginning this quarter and we expect as a result that I just mentioned.
Let me now switch to the market condition and customer. The telecom market right now is slow, North America is kind of flat. Europe is weak and China is slowing down, Japan is as well slow and therefore the lower demand for our products right now and it's also causing a delay in recovering from the loss business in the flood earlier this year, because the customer who gave the business to our competition during the flood don't have a need for a new supplier right now and I'll come back to that point later on.
We expect pricing also to be throughout the more changing level of historical ramps, because when demand is low, competition on pricing is higher as normal business condition. The customer feedback on the merger continues to be extremely positive. We are now considered as a preferred partner. And as such, we are getting opportunity to be involved in all the new design. We expect that this is going to increase a number of design wins and we believe that we are well positioned to regain the market share that we loss over the fall flood through those new product and new engagement with customer, so that's for the market and the customers.