Bookham announces good news, bad news
OCTOBER 24, 2008 By Stephen Hardy UPDATED 5:15 PM -- Bookham announced record revenues for the first quarter of FY09 and profitability a quarter ahead of expectations. Unfortunately, thanks to the current economic crisis, the company doesn't expect the good times to carry over into the next quarter.
OCTOBER 24, 2008 By Stephen Hardy -- Bookham announced record revenues for the first quarter of FY09 and profitability a quarter ahead of expectations. Unfortunately, thanks to the current economic crisis, the company doesn't expect the good times to carry over into the next quarter.
Following GAAP, Bookham says it achieved revenue of $66.5 million, up 6 percent versus $62.6 million in the previous quarter and up 23 percent about the $54.3 million it enjoyed the first quarter of fiscal 2008. Gross margin for the quarter came in at 25 percent, an increase of 3 percent from the last quarter and 2 percent versus the same quarter last year. This put net income in the first quarter at $2.2 million, or $0.02 per share. This figure includes a non-cash gain of $6.5 million from the foreign currency translation of intercompany balances between the company's subsidiaries.
On a non-GAAP basis, adjusted EBITDA of $2.2 million represented a record high for Bookham, which was coming off an adjusted EBITDA of negative $0.7 million the previous quarter and negative $2.5 million in the first quarter of FY08.
The 26 percent non-GAAP gross margin, which excludes a stock compensation expense of $0.4 million and $0.5 million of one-time costs related to the transfer of some photonics operations from San Jose to Shenzhen, China, represented an increase from 23 percent over the previous quarter and 24 percent over the same quarter of last fiscal year.
The first quarter non-GAAP net income was $4.7 million, $0.05 per share. This compares with a non-GAAP net loss of $1.5 million ($0.01 per share), in the fourth quarter of FY08 and a non-GAAP net loss of $8.0 million ($0.10 per share), in the first quarter of FY08.
The Telecom business enjoyed a particularly good quarter. During the earnings call yesterday, a Bookham spokesman said that Telecom revenues increased 10% quarter on quarter and 28% year on year. Gross margin improvements in this business overcame margin losses in the company's non-telecom businesses.
However, happy days aren't finally here again. "The economic environment is reducing demand from some of our customers," according to Alain Couder, president and CEO of Bookham.
As a result, the company has reduced its estimates for the upcoming quarter, which will end this December. Bookham set revenue for the upcoming quarter in the range of $57 million to $62 million. Non-GAAP gross margin will fall between 21 percent and 26 percent, a range which will exclude stock compensation and one-time costs related to the transfer of San Jose photonics operations to Shenzhen. This leads to an adjusted EBITDA of negative $2 million to positive $2 million. The company has embarked on cost-cutting measures it believes will keep it "around breakeven" on an adjusted EBITDA basis.
"However, it is unlikely that we will achieve non-GAAP operating income breakeven in the December quarter," Jerry Turin, CFO conceded.
The "short-term correction," in the words of Turin, primarily will be the result of "inventory issues at certain of our customers" in telecom. Couder indicated in his remarks during the call that the customers are in the United States. "We believe the correction for this buildup [of inventory] will last no more than two quarters," he added.
Bookham's two largest customers in the quarter were Nortel at 18% (up 2% from the previous quarter) and Huawei, which composed 13% (the same as last quarter).
Nortel has announced its intention to sell its Metro Ethernet Networks (MEN) division, which includes the optical networking activities that represent Bookham's primary revenue source within the company. While this might appear to put Bookham's future in further doubt, Couder put a positive spin on the situation during an interview just before last month's European Conference on Optical Communications (ECOC) in Brussels.
"Yes, it's probably going to be sold," Couder conceded. "But it's better that it be sold to someone who has the means to continue to invest in the optical space, rather than be starved as part of a troubled company. I think the management of the optical division or the MEN division thinks the same way. And I think that is more of a plus than a negative as far as we're concerned because it's very important for us that the R&D investment at MEN Nortel continues."