Oclaro achieves positive adjusted EBITDA, non-GAAP operating income in FY1Q16

Optical component and module vendor Oclaro, Inc. (NASDAQ: OCLR) reported a pair of milestones in its quest to claw its way to profitability. The company reported it had achieved adjusted EBITDA of $4.2 million and non-GAAP operating income of $0.4 million for the first quarter of fiscal 2016, which ended September 26, 2015.

"I am very pleased with our first quarter results and would like to recognize and thank the entire Oclaro team for their accomplishments," said Greg Dougherty, Oclaro's CEO, via a press release. "These accomplishments resulted primarily from planned cost reductions, operational improvements, and strong growth across our 100G product portfolio over the past two years. We now believe that the foundation is in place to further grow our 100G product revenues and enable continued financial improvement."

The company showed sequential results improvement across the board in the first quarter of the fiscal year. Revenues were $87.5 million (at the high end of the company's guidance), compared with $82.2 million in 4Q15; GAAP gross margin was 25.9% versus last quarter's 19.3%; and non-GAAP gross margin was 26.4% for the recently concluded quarter, coming off of 19.9% non-GAAP gross margin in the previous quarter.

Even the bad news wasn't as bad. GAAP operating loss shrank to $2.0 million from $10.8 million, GAAP net loss was $3.5 million versus $13.9 million, and non-GAAP net loss for the quarter came in at $1.8 million, much better than the prior quarter's $6.6 million.

In an analyst call November 3, Dougherty reported that 10-Gbps end-of-life products sold better than expected, pairing with the strength of 100-Gbps products, which Dougherty said now compose 47% of the company's sales. Revenues from line-side 40-Gbps products slipped sequentially, but Dougherty predicted they would stabilize quickly.

Dougherty also revealed that Oclaro's CFP2 Analog Coherent Optics optical transceivers have completed qualification at the company's UK plant and have begun shipping to customers (see "Oclaro shows off coherent CFP2 at 200 Gbps"). He reported that demand exceeds current production capacity; the company is racing to get its Asian production lines qualified to make up the shortfall.

Meanwhile, Oclaro also has begun sampling QSFP28 optical modules. Dougherty said he expects to see revenue from production devices in the first half of calendar 2016.

He also mentioned that technology from demand from China has picked up, perhaps in anticipation of 100-Gbps systems buys from China Mobile and China Telecom.

The company expects the positive momentum to continue through the current quarter, which ends December 26. Management forecasted revenues of $88 million to $94 million, non-GAAP gross margin in the range of 24% to 27%, and adjusted EBITDA in the range of $3 million to $7 million.

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