Oclaro, Inc. (OCLR)
F4Q10 (Qtr End 07/03/10) Earnings Call Transcript
July 29, 2010 4:30 pm ET
Jim Fanucchi – IR
Jerry Turin – CFO
Alain Couder – President and CEO
Alex Henderson – Miller Tabak
Kevin Dennean – Citi Investment Research
Paul Bonenfant – Morgan Keegan
Subu Subrahmanyan – Sanders Morris
Hamed Khorsand – BWS Financial
Good afternoon and welcome to the Oclaro fourth quarter fiscal year 2010 financial results conference call. As a reminder, this conference call is being recorded for replay purposes through August 5, 2010. At this time, I would like to turn the call over to Jim Fanucchi of the Summit IR Group. Please go head, sir.
Thank you, operator. And thanks to all of you for joining us. Our speakers today are Alain Couder, President and CEO, and Jerry Turin, Chief Financial Officer of Oclaro.
Today's statements made about management's future expectations, plans or prospects of Oclaro and its business, including statements concerning future financial targets and financial guidance, potential merger-related synergies and cost savings and Oclaro's plans, objectives, expectations and intentions with respect to future operations, financial objectives, products and growth opportunities and any 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.
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 impact of continued uncertainty in world financial markets and the resulting reduction in demand for our products, competition in the market for Oclaro’s products and services, the future performance of Oclaro following the closing of the mergers with Avanex Corporation, Xtellus Incorporated and Mintera Corporation and the Spectra-Physics asset swap, the inability to realize the expected benefits and synergies as a result of the mergers with Avanex, Xtellus and Mintera and the Spectra-Physics asset swap, increased costs related to downsizing and compliance with regulatory compliance in connection with such downsizing, the lack of availability of credit or opportunity for equity-based financings, as well as the factors described in Oclaro's most recent annual report on Form 10-K, most recent quarterly reports on Form 10-Q, and other documents we periodically file with the SEC.
The forward-looking statements discussed today represent Oclaro's view as of the date of this conference call. Oclaro anticipates that subsequent events and developments may cause Oclaro's views and expectations to change. However, Oclaro specifically disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after today's date. Those forward-looking statements should not be relied upon as representing Oclaro's views as of any date subsequent to the date of this call.
In addition, during this call, we will be referring to Oclaro's non-GAAP financial measures. With respect to any of these non-GAAP measures, directly comparable Generally Accepted Accounting Principle measures are set forth in a reconciliation of GAAP to non-GAAP measures and included in our earnings release, which is available in the Investors section of Oclaro's website.
I would now like to turn the call over to Jerry.
Thanks, Jim. Before getting into the financial details for the quarter, let me first speak about our business model accomplishments. Since the April 2009 merger of Bookham and Avanex by highlighting our results over the last fiscal year, which has just ended July 3, 2010. Our revenues in the quarter ended July 3, 2010 were 44% higher than our pro forma combined revenues for the quarter ended June 2009.
Our non-GAAP gross margin this quarter was 31%, up from 23% pro forma Bookham plus Avanex in last year’s June fiscal quarter. This exceeds the original one year merger target of 30% that isn't set for this quarter at that time. Our scale on operating leverage is beginning to translate to the bottom line.
Our non-GAAP operating income for this quarter was $9.6 million, up almost $12 million when compared to a $2 million non-GAAP operating loss for the June fiscal 2009 quarter. You could look at this $12 million year-over-year quarterly improvement as almost $50 million on an annualized basis. These results correspond to a non-GAAP operating income margin of 8.5%. This is significantly higher than our one year merger target of 5% operating income margin. Later, at the end of this call, I will update our operating margin target models.
Now, on to the details for this quarter ended July 3, 2010, our revenues this quarter were $112.7 million, up 11.4% from $101.2 million in the prior quarter. Telecom revenues for the quarter were up over 13% to $98.5 million from $87.0 million in the prior quarter. Revenues from our Advanced Photonics Solutions business were relatively flat this quarter at $14.3 million versus $14.1 million last quarter. We continue to see a strong demand environment for APS and expect to see significant ramps of new market opportunities for APS later in fiscal 2011.
Looking back to the second half of this fiscal year that just ended, APS revenues were up over 40% compared to the first six months of the fiscal year. The transition of our APS production from the former Newport fab in Tucson to our other facilities rose fabs in back end is relatively on track and on schedule.
However, our production plans for APS during this transition will be from calendar 2009 demand environment assumption. Clearly, demand is much higher than those assumed levels. As a result, we are currently concentrating first on supporting our established customer base while qualifying and ramping our new lines, which may limit APS growth for another quarter.