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OPLINK REPORTS SECOND QUARTER FISCAL 2010 FINANCIAL RESULTS

FREMONT, Calif., Jan 28, 2010 (BUSINESS WIRE) -- Oplink Communications, Inc. (Nasdaq: OPLK), a leading provider of design, integration and optical manufacturing solutions (OMS) for optical networking components, modules and subsystems, today reported its financial results for its fiscal 2010 second quarter, ended December 31, 2009.

Revenues for the quarter were $32.7 million, compared to $33.6 million reported for the first quarter of fiscal 2010. GAAP net income for the second quarter of fiscal 2010 increased to $3.1 million, or $0.14 per diluted share, compared to a GAAP net income of $1.8 million, or $0.09 per diluted share, reported for the first quarter of fiscal 2010.

Non-GAAP net income for the second quarter of fiscal 2010 increased to $5.7 million, or $0.26 per diluted share, compared to non-GAAP net income of $4.4 million, or $0.21 per diluted share, reported for the first quarter of fiscal 2010. Second quarter of fiscal 2010 non-GAAP results exclude $1.6 million in stock compensation and $945,000 in amortization of intangible assets. First quarter of fiscal 2010 non-GAAP results exclude $1.6 million in stock compensation and $946,000 in amortization of intangibles.

Oplink generated $8.5 million in cash from operations during the second quarter, and closed the period with cash, cash equivalents and investments of $188.8 million.

"We are pleased with our second quarter performance and execution, especially considering ongoing macroeconomic conditions," commented Joe Liu, President and CEO of Oplink. "We reported solid gross margins while continuing to manage operating costs. In the coming quarter, we expect telecommunications spending to continue to be constrained and will experience some seasonality and the impact of a shorter manufacturing period, including the Chinese New Year. We remain committed to providing customers with the highest-quality design, integration and manufacturing of optical components and expect to achieve market share gains as carrier spending normalizes."

Business Outlook for the Quarter Ending March 31, 2010

The Company expects to report revenues in the range of $30 million and $34 million and GAAP net income per diluted share in the range of $0.05 to $0.11. On a non-GAAP basis, excluding stock compensation, amortization of intangible assets and other non-cash or non-recurring charges, Oplink expects earnings per diluted share for the period to be in the range of $0.16 to $0.22.

Conference Call Information

The Company will host a conference call and live webcast at 2:00 p.m. Pacific Time today, January 28, 2010. To access the conference call, dial 877-941-8416 or 480-629-9808 (outside the U.S. and Canada). The webcast will be available live on the Investor Relations section of the Company's corporate website at http://investor.oplink.com and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 5:00 p.m. Pacific Time on January 28, 2010 until 11:59 p.m. Pacific Time on February 4, 2010, by dialing 800-406-7325 or 303-590-3030 (outside the U.S. and Canada) and entering pass code 4199755#.

Non-GAAP Financial Measures

In this earnings release and during the earnings conference call and webcast as described above, Oplink will discuss certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A reconciliation between non-GAAP and GAAP measures can be found in the accompanying tables. Oplink believes that, while these non-GAAP measures are not a substitute for GAAP results, they provide a basis for evaluating the Company's cash requirements for ongoing operating activities. These non-GAAP measures have been reconciled to the nearest GAAP measure as required under Securities and Exchange Commission rules.

About Oplink

Incorporated in 1995, Oplink is a leading provider of design, integration and optical manufacturing solutions (OMS) for optical networking components, modules and subsystems. Oplink offers advanced and cost-effective optical-electrical components and subsystem manufacturing through its facilities in Zhuhai and Shanghai, China. In addition, Oplink maintains optical-centric front-end design, application, and customer service functions at its offices in Fremont and Calabasas, California and has research facilities in Zhuhai and Wuhan, China and Hsinchu Science-Based Industrial Park in Taiwan. Oplink's customers include telecommunications, data communications and cable TV equipment manufacturers around the globe. Oplink is committed to providing fully customized, photonic foundry services incorporating its subsystems manufacturing capabilities. To learn more about Oplink, visit its web site at: http://www.oplink.com/.

Cautionary Statement

This news release contains forward-looking statements, including without limitation the guidance given for anticipated results for the third quarter of fiscal year 2010 and the expected normalization of carrier spending, that involve risks and uncertainties that may cause results to differ substantially from expectations. These risks include, but are not limited to, the potential for a sustained continuation and/or worsening of the current downturn in the telecommunications industry or the overall economy in the United States and other parts of the world, possible reductions in customer orders, Oplink's reliance upon third parties to supply components and materials for its products, intense competition in Oplink's target markets and potential pricing pressure that may arise from changing supply or demand conditions in the industry, and other risks detailed from time to time in Oplink's periodic reports filed with the Securities and Exchange Commission, including the Company's latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

The foregoing information represents Oplink's outlook only as of the date of this press release, and Oplink undertakes no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,June 30,
20092009
(Unaudited)(1)
ASSETS
Current assets:
Cash and cash equivalents $ 57,815 $ 49,702
Short-term investments 120,992 115,774
Accounts receivable, net 25,374 29,023
Inventories 10,308 10,031
Prepaid expenses and other current assets 3,982 2,648
Total current assets 218,471 207,178
Long-term investments 10,000 3,180
Property, plant and equipment, net 28,060 30,318
Intangible assets, net 6,957 8,848
Other assets 418 423
Total assets $ 263,906 $ 249,947
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,623 $ 7,580
Accrued liabilities and other current liabilities 10,568 10,688
Accrued transitional costs for contract manufacturing 160 160
Total current liabilities 20,351 18,428
Non-current liabilities 3,903 3,492
Total liabilities 24,254 21,920
Stockholders' equity 239,652 228,027
Total liabilities and stockholders' equity $ 263,906 $ 249,947
(1) The June 30, 2009 condensed consolidated balance sheet has been derived from audited consolidated financial statements at that date.
OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months EndedSix Months Ended
December 31,September 30,December 31,December 31,December 31,
20092009200820092008
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenues $ 32,743 $ 33,565 $ 37,611 $ 66,308 $ 80,563
Cost of revenues:
Cost of revenues 21,643 23,634 28,939 45,277 65,584
Stock compensation expense 88 99 126 187 244
Total cost of revenues 21,731 23,733 29,065 45,464 65,828
Gross profit 11,012 9,832 8,546 20,844 14,735
Operating expenses:
Research and development 2,268 2,225 2,785 4,493 6,067
Sales and marketing 1,923 2,086 1,945 4,009 4,202
General and administrative 1,810 1,721 2,702 3,531 5,368
Stock compensation expense 1,520 1,547 1,242 3,067 2,691
Impairment charges and other costs - - 10,829 - 10,829
Amortization of intangible and other assets 403 404 412 807 824
Total operating expenses 7,924 7,983 19,915 15,907 29,981
Income (loss) from operations 3,088 1,849 (11,369 ) 4,937 (15,246 )
Interest and other income, net 193 274 1,300 467 2,340
Gain (loss) on sale/disposal of assets 214 124 (492 ) 338 (611 )
Income (loss) before provision for income taxes 3,495 2,247 (10,561 ) 5,742 (13,517 )
Provision for income taxes (358 ) (438 ) 15 (796 ) (441 )
Net income (loss) $ 3,137 $ 1,809 $ (10,546 ) $ 4,946 $ (13,958 )
Net income (loss) per share:
Basic $ 0.15 $ 0.09 $ (0.51 ) $ 0.24 $ (0.67 )
Diluted $ 0.14 $ 0.09 $ (0.51 ) $ 0.23 $ (0.67 )
Shares used in per share calculation:
Basic 20,797 20,566 20,686 20,686 20,721
Diluted 21,694 21,173 20,686 21,452 20,721
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except per share amounts)
Three Months EndedSix Months Ended
December 31,September 30,December 31,December 31,December 31,
Reconciliation of GAAP net income (loss) to20092009 200820092008
non-GAAP net income:
Net income (loss), GAAP $ 3,137 $ 1,809 $ (10,546 ) $ 4,946 $ (13,958 )
Adjustments to measure non-GAAP:
Related to cost of revenues:
Provision for excess and obsolete inventory - - - - 4,065
Stock compensation expense 88 99 126 187 244
Amortization of intangible and other assets 542 542 542 1,084 1,084
Total related to cost of revenues 630 641 668 1,271 5,393
Related to operating expenses:
Stock compensation expense 1,520 1,547 1,242 3,067 2,691
Impairment charges and other costs - - 10,829 - 10,829
Amortization of intangible and other assets 403 404 412 807 824
Total related to operating expenses 1,923 1,951 12,483 3,874 14,344
Total related to net income (loss) 2,553 2,592 13,151 5,145 19,737
Non-GAAP net income $ 5,690 $ 4,401 $ 2,605 $ 10,091 $ 5,779
Net income per share, non-GAAP:
Basic $ 0.27 $ 0.21 $ 0.13 $ 0.49 $ 0.28
Diluted $ 0.26 $ 0.21 $ 0.12 $ 0.47 $ 0.27
Shares used in per share calculation:
Basic 20,797 20,566 20,686 20,686 20,721
Diluted 21,694 21,173 21,016 21,452 21,150
Reconciliation of GAAP gross profit
to non-GAAP gross profit:
GAAP gross profit $ 11,012 $ 9,832 $ 8,546 $ 20,844 $ 14,735
Provision for excess and obsolete inventory
included in cost of revenues - - - - 4,065
Stock compensation expense included
in cost of revenues 88 99 126 187 244
Amortization of intangible and other assets
included in cost of revenues 542 542 542 1,084 1,084
Non-GAAP gross profit $ 11,642 $ 10,473 $ 9,214 $ 22,115 $ 20,128
GAAP gross margin rate 33.6 % 29.3 % 22.7 % 31.4 % 18.3 %
Non-GAAP gross margin rate 35.6 % 31.2 % 24.5 % 33.4 % 25.0 %
OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
December 31,
20092008
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ 4,946 $ (13,958 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 3,341 3,817
Inventory adjustments - 4,065
Impairment charge and other costs - 10,829
Amortization of intangible and other assets 1,891 1,908
Stock compensation expense 3,254 2,935
(Gain) loss on sale/disposal of assets (338 ) 611
Other 113 (792 )
Change in assets and liabilities 4,403 (1,676 )
Net cash provided by operating activities 17,610 7,739
Cash flows from investing activities:
Net (purchases) sales of investments (12,072 ) 7,774
Net (purchases) sales of property and equipment (851 ) (1,359 )
Net cash (used in) provided by investing activities (12,923 ) 6,415
Cash flows from financing activities:
Proceeds from issuance of common stock 3,406 846
Repurchase of common stock - (2,293 )
Net cash provided by (used in) financing activities 3,406 (1,447 )
Effect of exchange rate changes on cash and cash equivalents 20 (410 )
Net increase in cash and cash equivalents 8,113 12,297
Cash and cash equivalents, beginning of period 49,702 72,001
Cash and cash equivalents, end of period $ 57,815 $ 84,298

SOURCE: Oplink Communications, Inc.

for Oplink Communications, Inc.
Investor Relations:
Erica Abrams, 415-217-5864
erica@blueshirtgroup.com
Matthew Hunt, 415-489-2194
matt@blueshirtgroup.com

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