Oclaro management touts progress in second quarter of fiscal 2014

Having shed some assets, management at Oclaro, Inc. (NASDAQ: OCLR) said February 4 that its remaining businesses showed sequential revenue gains in the second quarter of fiscal 2014, which ended December 28, 2013. However, the current quarter isn’t likely to see a repeat of that scenario, the company predicted.

Oclaro quoted revenues $102.9 million for the quarter, the first since it shed its Zurich operations and its amplifier and micro-optics lines in separate transactions with II-VI (see “Oclaro sells GaAs laser diode business to II-VI” and “II-VI exercises option to buy Oclaro's amplifier and micro-optics businesses”). With those businesses, Oclaro had seen revenues of $138.9 million; however, comparing apples to apples, its remaining assets brought in $96.6 million in the quarter, so the optical component and subsystems vendor saw an improvement in 2Q14. Revenue for the quarter exceeded management’s guidance of $92 million to $102 million (see “Oclaro 1Q14 revenues climb but layoffs loom”).

GAAP gross margins also improved sequentially, reaching 16% for the recently completed quarter compared with 12% for 1Q14. GAAP operating loss was $25.3 million for 2Q14, again an improvement of the previous quarter, which saw a GAAP operating loss of $31.6 million.

Year on year, the picture wasn’t quite as rosy. Oclaro brought in about $9 million less than in 2Q13 and lost about $19 million more. However, the GAAP gross margin of 16% was better than the year-ago quarter’s 11%.

"The results for our fiscal second quarter demonstrate solid progress in our turnaround plan as revenue, gross margin and Adjusted EBITDA were better than expected," said Oclaro CEO Greg Dougherty via a press release. "Also, we enter 2014 with a much stronger balance sheet and are virtually debt free having retired our convertible notes in December. I would like to thank the Oclaro team for their tremendous effort in 2013 and their dedication to making Oclaro stronger in the future."

In a call with analysts February 4, Dougherty reported that the last step in the company’s planned layoffs was set in motion. Workforce reduction currently is ahead of schedule, he said, which made him confident that Oclaro will reach his goal of a 50% reduction in headcount (to approximately 1500) by this July. Similarly, Dougherty said reaching his goal of reducing the number of company sites by 50% also is on track.

Dougherty also reported that 40G sales were surprisingly strong and therefore he expects demand to last longer than he originally believed.

Later in the call, CFO Pete Mangan revealed the company had three 10% customer in the quarter, with Coriant the largest at 15%, followed by Cisco at 13% and Huawei at 10%.

Looking forward, company management forecasts revenues for the current quarter should range between $93 million and $103 million, implying that matching the revenue total of 2Q14 could be a challenge. Non-GAAP gross margin was forecasted in the range of 13% to 17% (it was 17% in the recently concluded quarter) with adjusted EBITDA in the range of negative $13 million to negative $9 million.

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