Q4 2008 Earnings

Earnings Preview

Oplink Communications, Inc. (OPLK)  financial results fourth quarter ended June 30, 2008

Five analysts are predicting eps between $0.09 and $0.11, consensus of $0.10.

For those focused on eps this figure will compare poorly to last years $0.23.

Fast forward -> Results are now in and they’re great.

Good results, turnaround occurring, great upside potential in this well managed cash rich company.

The two main reasons I find oplk attractive are they make money and they mange that money well. Add in growth, OCP turnaround potential with proven management at helm

• Oplink Q4 2008 Transcript at Seeking Alpha
• Oplink Q4 2008 Results Press Release

• Oplink Investor Homepage

Press Release

Revenues of $37.3 million, as compared to $37.2 million reported for the fourth quarter of 2007. GAAP earnings loss was ($791,000), or ($0.04) per share, compared to $3.0 million, or $0.13 per diluted share in Q4 2007.

GAAP earnings would have been nice, but more importantly for the share price is the non-GAAP net income was $2.8 million, or $0.13 per diluted share. Beating consensus by $0.03.

Non-GAAP earnings excludes approximately:

• $891,000 of inventory adjustments
• $451,000 in transitional costs for contract manufacturing
• a benefit of $69,000 for impairment charge and other costs
• $1.4 million in stock-based compensation expense
• $961,000 in amortization of intangible assets.

Non-GAAP net income of $5.6 million, or $0.24 per diluted share, reported for the fourth quarter of fiscal 2007.

Most importantly Oplink continued its excellent cash flow generation. They generated $4.1 million in cash from operations and closed the fourth quarter with cash, cash equivalents and investments of $142.1 million, up from $138.3 million in Q3.

improved gross margins

A new repurchase program, up to $20 million of its common stock.

2008 Financial Year

Revenues $176.3 million, an increase from $107.5 million reported for fiscal year 2007 (which only included one month of financial results from Optical Communication Products, Inc. (”OCP”), of which Oplink acquired a majority stake in June 2007 and which became a 100% owned subsidiary in October 2007).

Consolidated GAAP net loss for fiscal 2008 was $6.8 million, or $(0.31) per basic and diluted share.

Consolidated non-GAAP net income for fiscal 2008 was $13.9 million, or $0.63 per diluted share, which excludes approximately $7.3 million of inventory adjustments, $2.3 million in transitional costs for contract manufacturing, $626,000 in impairment charge and other costs, $5.9 million in expenses incurred by OCP relating to Oplink’s acquisition of OCP, $7.9 million in stock-based compensation expense, $3.3 million in amortization of intangible assets, the benefit of $2.4 million gains on sale of assets, and the benefit of $4.2 million in minority interest.

Business Outlook

Next quarter Q1 2009. Revenue $38 - $42 million, net income per diluted share of approximately $0.02 - 0.06 on a GAAP basis. Non-GAAP eps $0.13 to $0.17.

Of Interest

• Recent Investor Presentation pdf file good overview of the company and financial metrics.
• Tom Jacobs from CGI Bangs the table

Looking Forward

The wise disdain on only looking forward one quarter and rightly so. However, as so many investor have the attention span of a ADHD kid supercharged on Coke, it doesn’t hurt to consider what they will be focusing on. The good news is they are now looking through rose tinted glasses. Cnsensus eps estimates for the September quarter have been rising steadily over the last 90 days, from .13 to .15 to now sit at .16 with management predicting .13-.17.

Technical Perspective

A quick look at the OPLK chart shows a company that has been on a scorching run. Since March OPLK is up 70%. For those keeping score OPLK has been underwater most of the time since Tom Jacobs recommended OPLK to Seeking Alpha readers. However, Tom has done much better for his subscribers at Complete Growth Investor. Hopefully, Tom doesn’t mind me telling you that he recommended subscribers buy more OPLK after the panicky selling in March. After more than twenty years of investing CGI is the best value newsletter I have ever subscribed to.

The 50 day MA is still below the 200 day, but with the price well above both that is of no concern and waiting for a golden cross (50dMA crossing above 200dMA) makes no sense. Momentum players will be starting to sniff around. Is the current OPLK story enough to make them jump on this; increasing earnings estimates, re-ignited share price and sure to contain many powerful technical signals ,with …[more later, maybe]

Conclusion

OPLK is in a stronger position now than a year ago when Tom Jacobs boldly predicted a double. Despite the recent price increases there is a good probability of excellent returns as the proven management appear to be turning the ship around and sorting out the OCP integration. If they reignite growth investors will be wishing they had loaded up at $14.

I own OPLK in a personal account.  I am not thinking of selling and more likely to buy i