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1© 2017 Oclaro, Inc. | Confidential and Proprietary
Moving Networks Forward Faster
Nasdaq 36th Investor Program
Greg Dougherty, CEO
2© 2017 Oclaro, Inc. | Confidential and Proprietary
Forward Looking Statements
This presentation contains statements about management’s future expectations, plans or prospects of Oclaro andits business. These statements 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 of1995. These forward-looking statements include statements concerning financial guidance for Oclaro’s fiscalquarter ending July 1, 2017, the anticipated growth of Oclaro’s 100G and beyond product revenues, the size of themarkets in which we operate, our strategies and Oclaro’s future financial performance and operating prospects.There are a number of risks and uncertainties that could cause actual results or events to differ materially fromthose indicated by such forward-looking statements, including those related to Oclaro’s business and growthopportunities. For a discussion of those risk factors, please refer to Oclaro’s most recent annual report on Form 10-K, quarterly report on Form 10-Q and other interim documents it periodically files with the SEC. Oclaro assumes noobligation to update the information in this presentation, except as required by applicable law.
Non-GAAP Financial Measures
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financialperformance prepared in accordance with U.S. GAAP. For a reconciliation of these non-GAAP measures to the mostdirectly comparable GAAP measures, please see the table included with Oclaro’s earnings release dated May 2,2017 for the third quarter of fiscal 2017.
Disclaimer
3© 2017 Oclaro, Inc. | Confidential and Proprietary
Oclaro Key Highlights
Market Leadershipat 100G and Above
StrongFinancials
ProvenManagement
Team
Technology Leadership
Well Positionedin High Growth
Markets
Scale and InnovationThrough Vertical
Integration
4© 2017 Oclaro, Inc. | Confidential and Proprietary
Moving Networks Forward Faster: ~ It All Starts with Light ~
DataCenter
Metro
LongHaul
Global IP traffic expected to exceed 150 exabytes
per month by 202082% of this will be video(2)
Video
Smart phones and tablets expected to account for
two-thirds of all Internet traffic by 2020 (2)
Smart Phones& Tablets
Data Centers
Global data centerIP traffic projected to triple
over the next 5 years (1)
The number of devices connected to IP networks
projected to be 3 times the global population by 2020 (2)
IoT
(1) Cisco, “Global Cloud Index: Forecast and Methodology, 2014–2019 White Paper”, 2015.(2) Cisco, “The Zettabyte Era—Trends and Analysis”, July 2016.
5G Wireless
5© 2017 Oclaro, Inc. | Confidential and Proprietary
Growth Cycle: Market Drivers
100G 200G 400G
GPON NGPON
WDM PON
3G 4G 5G
10G/40G 100G 400G
100G 200G 400G
10G/40G 100G 200G
New Cloud Business Model
Data Center Upgrades/New Builds
Metro USA/Europe
China: Backbone, Metro, Provincial
5G Wireless
6© 2017 Oclaro, Inc. | Confidential and Proprietary
Global Presence
San Jose, CA
U.K.
Italy
Japan
China
• Headquarters: San Jose, CA
• Sales & Marketing
• High Speed Telecom Module Design
• System Level Test Bed
North America
• InP Fab: DML & EML Lasers, Photodetectors
• Data Center Transceiver Design
• Client Side Transceiver design
• Wireless Transceiver Design
Japan
• Telecom TOSA/ROSA Manufacturing
• Shared Service Center
China
• ~ 2000 Employees
• ~1200 Patents
• Founded 1988
• NASDAQ: OCLR
Europe
• UK: InP Fab: tunable lasers, modulators, receivers, photonic integrated circuits (PICs)
• Italy: Lithium Niobate Fab
• High Speed Telecom Component Package Design
• High Speed Telecom Module Design
Oclaro
7© 2017 Oclaro, Inc. | Confidential and Proprietary
Wafer Fabrication and Chip Design
Miniaturization and Advanced Packaging
ModuleIntegration
Vertical Integration Differentiation
▪ Higher density through integration: Photonic Integrated Circuits (PICs)
▪ Pluggability
▪ Reduced power consumption
Oclaro Focus:Higher Bandwidth(100G and Beyond)
8© 2017 Oclaro, Inc. | Confidential and Proprietary
100G & Beyond Product LeadershipSp
eed
(Gb
ps)
Dual mITLA
100/400G LiNbO3 Modulators
CFP2 CFP4CFP QSFP28CFP2-ACO
mITLA
QSFP 56DD
Intra Data Center2-10 km
Edge/DCI<120 km
Metro<600 km
Long Haul<2,000 km
Ultra Long Haul10K km+
1.2T
600G
400G
200G
100G In Production
In Production
In Production
Under Development
In Production
Under Development
In Production
In Production
In Production
Under Development
In Production In Production
Under Development
Under Development
Under Development
Tunable TOSA/ROSA TSFP+
Under Development
9© 2017 Oclaro, Inc. | Confidential and Proprietary
DataCenter Metro Long
Haul
Technology Leadership In High Growth Segments
10© 2017 Oclaro, Inc. | Confidential and Proprietary
Client Side: Total 100G Market (All Products)
Fro
nt
pan
el b
and
wid
th (
bit
/s)
Network Evolution
$0
$500
$1,000
$1,500
$2,000
$2,500
CY2015 CY2016 CY2017 CY2018 CY2019 CY2020
TAM Revenues ($M)
CFPx QSFP28 QSFP-SR
QSFP28 CY16-CY20: 35% CAGR
➢ CFP Family - $500M market in CY17
➢ QSFP28-LR4 & CWDM - $350M market in CY17
• CY16-CY20: 35% CAGR
➢ Preparing for evolution from 100G to 400G
Source: LightCounting September 2016; Company Estimates
11© 2017 Oclaro, Inc. | Confidential and Proprietary
Data Center Interconnect (DCI) Market
Source: Optical Equipment - DCI Hardware; Cignal AI, 2017
#1 Market ShareBest Optical Performance With All DSPs
Multi-year Contracts With Largest Customers
Chips
Transmitters & Receivers
CFP2-ACO Module
$0
$200
$400
$600
$800
$1,000
$1,200
2016 2017 2018 2019 2020
CY16-CY20: 47% CAGR
12© 2017 Oclaro, Inc. | Confidential and Proprietary
100G & Beyond Coherent DWDM Market Leader
Source: Cignal AI, 100G+ Coherent Optical Ports – September 2016
Metro 100G/200G CY16-CY20: 32% CAGR
Long Haul CY16-CY20: 19% CAGR
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2016 2017 2018 2019 2020
Long Haul Coherent 100G Ports
Metro 100G/200G Coherent Ports
• Long Haul Metro Market Still 2/3 of Total Port Count
• Long Haul Market Mostly Discrete Components
• Pluggables Penetrating Metro CFP2-ACO, TSFP+
Port
s
13
Financial Summary
14© 2017 Oclaro, Inc. | Confidential and Proprietary
$0
$20
$40
$60
$80
$100
$120
$140
$160
101
125
135
154162
27
4147
61
67
5
15 21
36 40
42
%
34
%
32
%
27
%
40
%
Non-GAAP P&L Quarterly Trend
Q316 Q416 Q117 Q217 Q31714wks
$M
12
%
25
%
24
%
16
%
Sales GM Op. Inc.
15© 2017 Oclaro, Inc. | Confidential and Proprietary
Q217Q416 Q317
Strong Balance Sheet
97
243255
91104
118
6581
100
(68)
(4) (4)(19) (17) (17)
167
408
452
Cash WC* PP&E Debt LT Liability Net Worth
(*) WC includes Trade AR, Inventory, Prepaids, Other Assets, AP, and Accrued Liabilities
Raised ~$135M Sept. 16Convertible Debt Retired Aug.16
16© 2017 Oclaro, Inc. | Confidential and Proprietary
Guidance & Outlook
Q4FY17 Guidance Ranges
Revenues $144 million - $152 million
Non-GAAP Gross Margin % 38% - 41%
Non-GAAP Operating Income $27 million - $31 million
Projected guidance provided on May 2, 2017 for the quarter ending July 1, 2017
• CY2017 revenue projected to increase ~20% over CY2016
• Multiple growth drivers: CFP2-ACO; QSFP28; tunable lasers
• Revenue from China expected to be flat to down sequentially in CY2017
• Gross Margin to remain in the upper 30% to 40% range
• Operating Income to remain in the high teens to low 20% range
17© 2017 Oclaro, Inc. | Confidential and Proprietary
Track Record of Profitable Execution
Foundation For Sustained Growth
Market And Technology Leadership At 100G And Beyond Speeds
Strong Overall Balance Sheet And Cash Flow
Multiple Market Drivers Continue: Data Center, Metro, China, 5G Wireless
18
Thank You
For more information, visit us at www.oclaro.com.
Follow us on @OclaroInc and LinkedIn.
© 2017 Oclaro, Inc. | Confidential and Proprietary
19© 2017 Oclaro, Inc. | Confidential and Proprietary
Non-GAAP Financial Results
$ in Millions (except per share amounts) Q316 Q217 Q317
Total Revenues 101.1 153.9 162.2
Gross Profit (non-GAAP) (1) 27.5 61.2 67.4
Gross Margin % 27.2% 39.8% 41.6%
R&D (non-GAAP) 10.9 13.2 13.9
SG&A (non-GAAP) 12.0 11.8 13.1
Non-GAAP Operating Income 4.6 36.2 40.5
Non-GAAP Net Income 3.3 36.3 39.9
Non-GAAP EPS (diluted) 0.03 0.21 0.23
(1) See reconciliation to comparable GAAP numbers in financial tables of press release dated May 2, 2017.
20© 2017 Oclaro, Inc. | Confidential and Proprietary
100G and Above Speed Sales Growth
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
Q415 Q116 Q216 Q316 Q416 (14wk)
Q117 Q217 Q317 Q417 MPG
10G
40G
100G
$MQ417 Guidance$144M-$152M
$36.4M
Mid-PointGuidance
High$20M range
$125.8M
Guidance provided on May 2, 2017 for the quarter ending July 1, 2017
21© 2017 Oclaro, Inc. | Confidential and Proprietary
Revenue By Product Group
$ in Millions Q316 Q416* Q117 Q217 Q317
100G+ Transmission 58.6 79.7 97.8 113.8 125.8
40G & Lower Transmission 42.5 45.5 37.7 40.1 36.4
Total Revenues 101.1 125.2 135.5 153.9 162.2
Percent of Total
100G+ Transmission 58% 64% 72% 74% 78%
40G & Lower Transmission 42% 36% 28% 26% 22%
$ in Millions Q316 Q416* Q117 Q217 Q317
Datacom/Client Side 53.4 65.5 68.4 69.8 75.8
Telecom/Line Side 47.7 59.7 67.1 84.1 86.4
Total Revenues 101.1 125.2 135.5 153.9 162.2
Percent of Total
Datacom/Client Side 53% 52% 50% 45% 47%
Telecom/Line Side 47% 48% 50% 55% 53%
* Q416 was a 14 week quarter
22© 2017 Oclaro, Inc. | Confidential and Proprietary
GAAP to Non-GAAP Reconciliation
($ Thousands) Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
Reconciliation of GAAP operating income to non-GAAP operating income:
GAAP operating income 2,459$ 12,803$ 17,939$ 33,402$ 37,740$
Stock-based compensation 2,073 1,761 2,443 2,589 2,890
Amortization of intangible assets 247 247 244 241 150
Restructuring, acquisition and related costs (59) 46 311 82 (301)
Loss on sales of property and equipment (145) 10 (37) (74) (16)
Non-GAAP operating income 4,575 14,867 20,900 36,240 40,463
Depreciation expense 3,910 4,309 4,748 4,935 5,042
Adjusted EBITDA 8,485 19,176 25,648 41,175 45,505
Reconciliation of GAAP Income to non-GAAP income:
GAAP income 89$ 11,844$ 3,351$ 30,267$ 38,214$
Stock-based compensation 2,073 1,761 2,443 2,589 2,890
Amortization of intangible assets 247 247 244 241 150
Payments related to the interest make-
whole charge and induced conversion
expense on the convertible notes - - 13,250 - -
Restructuring, acquisition and related costs (59) 46 311 82 (301)
Other (income) expense items, net (174) (291) (194) (156) (233)
Loss on sales of property and equipment (145) 10 (37) (74) (16)
(Gain) loss on foreign currency translation 865 1,501 518 3,324 (687)
Income tax effect 425 (709) 105 22 (125)
Non-GAAP income 3,321 14,409 19,991 36,295 39,892
23© 2017 Oclaro, Inc. | Confidential and Proprietary
InP Enables Integration and PerformanceUsing Indium Phosphide – CFP2-ACO
Silicon PIC
CFP2-ACO
Silicon PIC
Analog Electrical
DSP
ModulatorModulatorDriver
Tunablefilter
Optical Amplifier
NLW Tunable
Laser
Coherent RX TIA’s
▪ ACO based on Silicon modulator/receiver requires external InP based laser, optical amplifier and tuneable filter
▪ Complex system with multiple discrete external components
Indium Phosphide PIC
CFP2-ACO
DSP
Analog Electrical
Laser and Modulator
Driver
IntegratedInP SOA
Laser/Modulator
Coherent RX +TIA’s
▪ Oclaro ACO integrates all of the optical functions into tiny InP integrated components which eliminates the need for external amplifiers or lasers
▪ Higher signal fidelity of InP based devices increases reach and capacity in core optical networks
24© 2017 Oclaro, Inc. | Confidential and Proprietary
Oclaro Moving Networks Forward Faster
100G/200G LineCFP2-ACO
QSFP28 – CWDM4 Client
100G/200G LineLN ModulatorsTunable Lasers
CFPx – LR4 Client
10G/100G LineTunable XFP and SFP+CFP2-ACO
CFPx – LR4 Client
Discrete 10G/25Gcomponents Lasers /
Detectors
SFP+28 Xcvrs
25© 2017 Oclaro, Inc. | Confidential and Proprietary
Evolution of Data Center Technology
Data Center Interconnect /Transport Network
SERVERS
QSFP28 CWDM4, LR4
QSFP28 LR4CFPx LR4
CORE / TRANSPORT
SPINE
LEAF
CFP2-ACO
• Market shifting quickly to 100G and single mode fiber
• QSFP28 for LR4 (10km) and CWDM4 (2km)
• CWDM4 applications gaining over PSM4
• Market will move to 400G when 56G PAM4 DSP technology available – likely 2019
• Data Center Interconnect requires high density 200G+ Coherent ACO