Oclaro Announces First Quarter Fiscal Year 2019 Financial Results

SAN JOSE, Calif., Nov. 8, 2018

"I am once again pleased with the results that the Oclaro team delivered for our first quarter of fiscal year 2019.  Revenue grew nine percent sequentially over the prior quarter to $132 million, primarily driven by the recovery of shipments to ZTE.  Despite this revenue growth, our gross margin declined in the quarter, primarily due to a weaker product mix driven by increased sales of certain 100G Datacom modules that we are winding down.  Even so, we delivered strong operating results and generated $19 million in cash," said Greg Dougherty, CEO of Oclaro.  "While we wait for the Lumentum merger to close, which we believe remains on track to occur in calendar year 2018, we remain a leading innovator of new products.  We recently announced several new products for next generation deployments, including 600G components, DCO modules at 100G and 200G, and 400G PAM4 data center transceivers," said Mr. Dougherty.

Results for the First Quarter of Fiscal 2019

• Revenues were $131.7 million for the first quarter of fiscal 2019. This compares with revenues of $120.9 million in the fourth quarter of fiscal 2018, and revenues of $155.6 million in the first quarter of fiscal 2018.
• GAAP gross margin was 34.6% for the first quarter of fiscal 2019. This compares with GAAP gross margin of 37.0% in the fourth quarter of fiscal 2018, and GAAP gross margin of 40.3% in the first quarter of fiscal 2018.
• Non-GAAP gross margin was 34.9% for the first quarter of fiscal 2019. This compares with non-GAAP gross margin of 37.7% in the fourth quarter of fiscal 2018, and non-GAAP gross margin of 40.6% in the first quarter of fiscal 2018.
• GAAP operating income was $11.4 million for the first quarter of fiscal 2019. This compares with GAAP operating income of $8.9 million in the fourth quarter of fiscal 2018, and GAAP operating income of $31.2 million in the first quarter of fiscal 2018.
• Non-GAAP operating income was $16.8 million for the first quarter of fiscal 2019. This compares with non-GAAP operating income of $15.7 million in the fourth quarter of fiscal 2018, and non-GAAP operating income of $34.6 million in the first quarter of fiscal 2018.
• GAAP net income for the first quarter of fiscal 2019 was $10.2 million. This compares with GAAP net income of $6.4 million in the fourth quarter of fiscal 2018, and GAAP net income of $26.5 million in the first quarter of fiscal 2018.
• Non-GAAP net income for the first quarter of fiscal 2019 was $14.4 million. This compares with non-GAAP net income of $14.6 million in the fourth quarter of fiscal 2018, and non-GAAP net income of $34.5 million in the first quarter of fiscal 2018.
• GAAP earnings per diluted share for the first quarter of fiscal 2019 were $0.06. This compares with GAAP earnings per diluted share of $0.04 in the fourth quarter of fiscal 2018, and GAAP earnings per diluted share of $0.16 in the first quarter of fiscal 2018.
• Non-GAAP earnings per diluted share for the first quarter of fiscal 2019 were $0.08. This compares with non-GAAP earnings per diluted share of $0.08 in the fourth quarter of fiscal 2018, and non-GAAP earnings per diluted share of $0.20 in the first quarter of fiscal 2018.
• Cash, cash equivalents, and short-term investments were $341.9 million at September 29, 2018.

About Oclaro
Oclaro, Inc. (NASDAQ: OCLR), is a leader in optical components and modules for the long-haul, metro and data center markets. Leveraging more than three decades of laser technology innovation and photonics integration, Oclaro provides differentiated solutions for optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications. For more information, visit www.oclaro.com or follow on Twitter at @OclaroInc.

Copyright 2018. All rights reserved. Oclaro, the Oclaro logo, and certain other Oclaro trademarks and logos are trademarks and/or registered trademarks of Oclaro, Inc. or its subsidiaries in the U.S. and other countries. All other trademarks are the property of their respective owners. Information in this release is subject to change without notice.

Safe Harbor Statement
This press release contains statements about management's future expectations regarding the plans or prospects of Oclaro and its business, and 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. Investors should not unduly rely on such forward-looking statements. These forward-looking statements include statements concerning (i) the timing of the closing of our pending merger with Lumentum, (ii) Oclaro's future financial performance and operating prospects and (iii) the statements in our CEO's quote. Such statements can be identified by the fact that they do not relate strictly to historical or current facts and may contain words such as "anticipate," "estimate," "expect," "forecast," "project," "intend," "plan," "believe," "will," "should," "outlook," "could," "target," "model," "objective," and other words and terms of similar meaning in connection with any discussion of future operations or financial performance. There are a number of important factors that could cause our actual results or events to differ materially from those indicated by such forward-looking statements, including (i) the risk that our pending merger with Lumentum Holdings Inc. does not close, due to the failure of one or more conditions to closing, (ii) disruption from the merger making it more difficult to maintain our customer, supplier, key personnel and other strategic relationships, (iii) uncertainty as to the market value of the Lumentum merger consideration to be paid in the merger, (iv) the risk that required governmental approvals of the merger (including China antitrust approval) will not be obtained or that such approvals will be delayed beyond current expectations, (v) the risk of litigation in respect of either Oclaro or Lumentum or the merger, (vi) our dependence on a limited number of customers for a significant percentage of our revenues, (vii) competition and pricing pressure, (viii) our ability to effectively manage our inventory, (ix) the absence of long-term purchase commitments from many of our long-term customers, (x) our ability to meet or exceed our gross margin expectations, (xi) our ability to grow our revenues in the future by increasing the percentage of sales associated with new products, (xii) the effects of fluctuations in foreign currency exchange rates, (xiii) our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses, (xiv) our ability to timely develop, commercialize and ramp the production of new products to customer required volumes, (xv) the effect of tariffs or other restrictions on trade between the U.S. and China, (xvi) our ability to respond to evolving technologies, customer requirements and demands, and product design challenges, (xvii) our dependence on a limited number of suppliers and key contract manufacturers, (xviii) the impact of additional restructuring charges we may take in the future, (xix) the risks associated with delays, disruptions or quality control problems in manufacturing, (xx) our manufacturing yields, (xxi) our ability to conclude agreements with our customers on favorable terms, (xxii) our ability to maintain effective internal controls over financial reporting, (xxiii) fluctuations in our revenues, growth rates and operating results, (xxiv) changes in our effective tax rates or outcomes of tax audits or similar proceedings, (xxv) the impact of financial market and general economic conditions in the industries in which we operate and any resulting reduction in demand for our products, (xxvi) potential operating or reporting disruptions that could result from the implementation of our new enterprise resource planning system, and (xxvii) other factors described under the caption "Risk Factors" and elsewhere in the documents we periodically file with the SEC.

Non-GAAP Financial Measures
Oclaro provides certain supplemental non-GAAP financial measures to its investors as a complement to the most comparable GAAP measures. The GAAP measure most directly comparable to non-GAAP gross margin rate is gross margin rate. The GAAP measure most directly comparable to non-GAAP operating income/loss is operating income/loss. The GAAP measure most directly comparable to Adjusted EBITDA is net income/loss. The GAAP measure most directly comparable to non-GAAP net income/loss is net income/loss. An explanation and reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below.