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1 © 2018 Oclaro, Inc. | Confidential and Proprietary Raymond James & Associates’ 39th Annual Institutional Investors Conference Greg Dougherty – Chief Executive Officer March 7, 2018
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Page 1: Institutional Investors Conference

1© 2018 Oclaro, Inc. | Confidential and Proprietary

Raymond James & Associates’ 39th Annual Institutional Investors Conference

Greg Dougherty – Chief Executive Officer

March 7, 2018

Page 2: Institutional Investors Conference

2© 2018 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. Investors should not unduly rely on such forward-looking statements

These forward-looking statements include statements concerning financial guidance for Oclaro’s fiscal quarterending March 31, 2018, the anticipated growth of Oclaro’s 100G and beyond product revenues, the size of themarkets in which we operate, expected developments in China, our strategies and Oclaro’s future financialperformance and operating prospects. There are a number of risks and uncertainties that could cause actual resultsor events to differ materially from those indicated by such forward-looking statements, including those related toOclaro’s business and growth opportunities. For a discussion of those risk factors, please refer to the factorsdescribed under the caption “Risk Factors” and elsewhere in Oclaro’s most recent quarterly report on Form 10-Qand other documents it periodically files with the SEC. Oclaro assumes no obligation to update the information inthose documents or 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 February 5,2018 for the second quarter of fiscal 2018.

Disclaimer

Page 3: Institutional Investors Conference

3© 2018 Oclaro, Inc. | Confidential and Proprietary

Oclaro Key Highlights

Market LeadershipAt 100G And Beyond

StrongFinancials

ProvenManagement

Team

Technology Leadership

Well PositionedIn High Growth

Markets

Scale and InnovationThrough Vertical

Integration

Page 4: Institutional Investors Conference

4© 2018 Oclaro, Inc. | Confidential and Proprietary

$0

$15

$30

$45

$60

$75

$90

$105

$120

$135

$150

$165 154

162

149156

139

6167

62 63

54

36 40

41 35

24

Sales GM$ OP INC

22

%24

%

22

%

Non-GAAP P&L Quarterly Trend Calendar Year 2017 - Gross Margin 40% and Operating Income 22%

Q217 Q317 Q417 Q118 Q218

40

% 42

%

41

%

41

%

38

%

24

%

18

%

$M

Page 5: Institutional Investors Conference

5© 2018 Oclaro, Inc. | Confidential and Proprietary

• Q2 FY18 Revenue of $139.3 million, at midpoint of guidance

‒ 100G+ product portfolio sales of $105.4 million; 76% of total sales

‒ 3 customers accounting for greater than 10% of total revenue

• Non-GAAP gross margin of 38%

• Non-GAAP operating income of $24.5 million, or 18% of sales

• $290 million of cash and no debt at end of Q2 FY18

CY 2017 and Q2 FY18 Financial Recap

Calendar Year 2017 Revenue grows by 18%

with GAAP Operating Profit of 19%

Page 6: Institutional Investors Conference

6© 2018 Oclaro, Inc. | Confidential and Proprietary

Guidance & Outlook

Q3 FY18 Guidance Ranges*

Revenues $120 million - $128 million

Non-GAAP Gross Margin % 34% - 37%

Non-GAAP Operating Income $13 million - $17 million

*Guidance provided on February 5, 2018 for the quarter ending March 31, 2018** Ranges provided in SEC Form 8-K filed February 6, 2018

Continued Strong Financial Model

• June quarter revenue expected to be up ~5%

• CY 18 expected GM in the high 30s and double digit OI

Income Tax Provision** GAAP Non-GAAP

FY 18 15% - 20% 5% - 10%

FY 19 20% - 25% 20% - 25%

Page 7: Institutional Investors Conference

7© 2018 Oclaro, Inc. | Confidential and Proprietary

Growth Cycle: Market Drivers

New Cloud Business Model

Data Center Upgrades/New Builds100G & 400G

Metro USA/Europe

China: Backbone, Metro, Provincial

5G Wireless

Cable: Deep Fiber Networks

Page 8: Institutional Investors Conference

8© 2018 Oclaro, Inc. | Confidential and Proprietary

Oclaro Moving Networks Forward Faster

CFP2-ACO (DCI)QSFP56DDDML and EML Lasers

LN ModulatorsTunable LasersICT/ICRLR4 Client

10G/100G LineCFP2-ACOLR4 ClientTunable XFP and SFP+

Discrete 10G/25Gcomponents Lasers /

Detectors

Tunable SFP+

SFP+28

Page 9: Institutional Investors Conference

9© 2018 Oclaro, Inc. | Confidential and Proprietary

Oclaro Driving Networks Forward, Faster With Coherent Optics

400Gb/s pluggables

CFP2 DCO100-200Gb/s

Add driver

TT-NLL

LinearMZ-SOA

DualRx PIC

Folded MZ-SOA

HighBW

2 x 600Gb/s DCO

64GBd ICT

64GBd ICR

1Tb/s

Terabit

Gen 1 - 43GBd Gen 2 - 64GBd Gen 3 >100GBd

HighBW

HighBW

DualRx PIC

Page 10: Institutional Investors Conference

10© 2018 Oclaro, Inc. | Confidential and Proprietary

Full Suite Of 400G+ Components

Products– Developing full suite of components for 400G/600G applications

– Tunable Laser Source, 400G+ Integrated Coherent Receiver, 400G + LiNbO3 or InP modulators for linecards– Integrated coherent transmitter and receiver components for DCO daughter cards– Small form factor fully integrated coherent transmitter / receiver components for pluggable digital Coherent

optics

Applications– High-speed long haul, flexible rate metro, ultra compact DCI solutions

64G TOSA

64G ROSA

64G TROSA

64G ROSA

100kHz micro-iTLA

64G ROSA

100kHz micro-iTLA

400G LiNbO3 Mod

HB-CDM(InP Mod)

Page 11: Institutional Investors Conference

11© 2018 Oclaro, Inc. | Confidential and Proprietary

Today

Technology Elements Higher Bandwidth modulator

Integrated High BW Rx

Lower Linewidth laser

Compact InP structures

Higher levels of integration

TROSAs

Integrated VOAs and filters

L band option

Oclaro Moving From 200G To 1.2Tb

CFP2 ACO100-250Gb/s

Oclaro InP 25GHzMZ and 300kHz Laser chips

Oclaro InP I/Q 32Gb Rx chips

Oclaro InP 45GHz MZ and 100kHz Laser chips

Oclaro InP I/Q 64Gb Rx chips

2 x 600G DCO

Tomorrow

32 Gbaud ICT 32Gbaud ICR 64Gbaud ICT 64Gbaud ICR

Page 12: Institutional Investors Conference

12© 2018 Oclaro, Inc. | Confidential and Proprietary

What Goes In A DCO In China?

InPuICR

Receiver

InPuITLA

Tunable Laser

LiNb03Modulator

InPICT

Tunable Laser +

Modulator

InPICR

Receiver

InPuITLA

Si PhotonicsRx + Modulator

GaAs + ErbiumAmplifier

TunableFilter

DSP

Oclaro Opportunity

DSPDSP

Line CardOr

InP DCO

TomorrowToday

Si PhotonicsDCO

InP DCO

Page 13: Institutional Investors Conference

13© 2018 Oclaro, Inc. | Confidential and Proprietary

Oclaro supplying coherent components for 100G/200G DCO solutions CFP and CFP2 – predominantly in the China Market

100G/200G Coherent Components For China DCO Market

Oclaro Tx Oclaro Rx Oclaro 43G TROSA

CFP DCO

CFP2 DCO

Page 14: Institutional Investors Conference

14© 2018 Oclaro, Inc. | Confidential and Proprietary

100G+ Coherent Market – Market DefinitionLONG HAUL > 600km

• Most of volume so far

• 100G moving to 200G

• Adopting higher baud rates and modulations

• Most flex-coherent ports will be used in this market

• Shipments dominated by vertically integrated vendors

METRO < 600km

• ~30% of volume to date

• New lower cost hardware boosts market in 2017

• 200G used in most applications

• Single DSP designed for Metro and Long-Haul applications

EDGE < 100km

• DCI market ramps in 2017

• 100G/400G pluggables take over by 2021

Market SaturatedMassive deployments in ChinaPorts now grow <30% per year

Ramped in 2017Led by 200G deployments

100G in China

Ramp began in 2017 with Direct Detect & 200G DCI

Next inflection is 2019/2020 with 100G/400G ZR coherent

Cignal AI – Optical Applications 1H’17 – September 2017

Page 15: Institutional Investors Conference

15© 2018 Oclaro, Inc. | Confidential and Proprietary

Metro 200G started to ramp in CY 2017

– DCI hardware drives demand

– Deployment outside China accelerates versus 2016

– 100G Metro stops growing

Edge coherent starts 2020

– Expect 400G ZR to make this market happen

– Entire market, not just DCI

– Pluggables eliminate standalone DCI equipment market < 80km

100G+ Coherent Market Segmentation

Cignal AI – Optical Applications 1H’17 – September 2017

100G+ Physical Ports Forecast by Technology

Metro 100G squeezed by 200G

Direct Detect squeezed by coherent starting 2019 Ed

geLo

ng

Hau

lM

etro

Page 16: Institutional Investors Conference

16© 2018 Oclaro, Inc. | Confidential and Proprietary

275k ports shipped in CY 2016

– China accounted for 55% of market and 100% of the growth in 2016

– China represented 30% of the growth in 2017

– China growth dominated by 100G CFP-DCO

164k ports shipped 1HCY 2017

– Total market is up 20% YoY

– Chinese vendors up 12%

– All other vendors up 31%

Forecast for CY 2017 is 360k

– +30% YoY growth

– Assumes 45% Western and 20% Chinese vendor growth

100G+ Coherent Ports Market Share 1HCY 2017

Huawei62020

Ciena 22904

ZTE 19200

Infinera 15050Nokia 12356 Cisco

9000Fiberhome

6500

ADVA 6314

Fujitsu 5604

Acacia 2300

Coriant 1500

NEC 790

Other 450

Other 10644

Cignal AI – Optical Applications 1H’17 – September 2017

Page 17: Institutional Investors Conference

17© 2018 Oclaro, Inc. | Confidential and Proprietary

-

200

400

600

800

1,000

1,200

CY2016 CY2017 CY2018 CY2019

100G 10 km

100G 2 km

DataCenter Market View - 100G

• Single-mode duplex fiber dominating 100G intra-DC connections

• 4x25G Indium Phosphide lasers used for 2km CWDM4 /10km LR4

• Migration to 1x100G EML with PAM4 starting in CY19• Silicon Photonics limited to 500m PSM4 market to-date• PSM market shrinking

$156M

$587M

$1.0B

$1.1B

QSFP28 LR4• Leading solution for cross-platform

interoperability IEEE standard

• Used both in high-end routers/switches at edge of datacenter and optical transport

• Expected to replace CFPx in China starting in CY18

QSFP28 CWDM4• Replacing QSFP 40G and 100G LR4 as

leading solution for intra-DC on proprietary switch / white boxes

• Relaxed specification vs. LR4 to enable lower cost components

Data is a combination of LightCounting report 10/17, Ovum report 4/17 and company estimates

Page 18: Institutional Investors Conference

18© 2018 Oclaro, Inc. | Confidential and Proprietary

-

100

200

300

400

500

600

700

800

CY2018 CY2019 CY2020

$81

$31

$300M

Data Center Market View - 400G Single-Mode Market

• Single-mode duplex fiber dominating 400G intra-DC connections

• 4 x 100G PAM4 lasers and ICs required

• EML key technology to deliver bandwidth complemented by PAM4 DSPs

• Silicon Photonics likely to be limited to 500m or below

$287M

$720M

Data is a combination of LightCounting report 10/17, Ovum report 4/17 and company estimates

NRZ modulation PAM4 modulation

0→

1→

00→01→10→11→

$56M

QSFP-DD/OSFP

Page 19: Institutional Investors Conference

19© 2018 Oclaro, Inc. | Confidential and Proprietary

Emerging Opportunities in Converged AccessFebruary 2018

Page 20: Institutional Investors Conference

20© 2018 Oclaro, Inc. | Confidential and Proprietary

Wireless Fronthaul Technologies

RRH: Remote Radio HeadEquipment which convert RF signal through RF/COAX cables from Antenna to CPRI signal. Optics are installed in RRH. Industrial Temperature range required for uncontrolled/ remote applications

BBU: Base Band UnitEquipment which transfers CPRI signal to backhaul by modulating to IP signal.

D-RAN

C-RAN

RRHBBU

Backhaul

Backhaul

Fronthaul

Fronthaul

microwave

Distributed Radio Access Network

Centralized Radio Access Network

X2

Fiber Txcrs

Page 21: Institutional Investors Conference

21© 2018 Oclaro, Inc. | Confidential and Proprietary

>10G Transceivers In Wireless Fronthaul And Backhaul

5G Wireless Schedule:

– Field Trials – 2017; Pre-Commercial - 2018-2019; Commercial Launch - 2020

25G SFP28 transceivers to be used in Point to Point Fronthaul from BBU to cell tower.

10G DWDM Tunable transceivers used in Point to Point Fronthaul applications where fiber plant is scarce.

Oclaro leads the market with 25G SFP28 and 10G DWDM Tunable SFP+ I-Temp solutions

258% CAGR

66% CAGR

-4% CAGR

Lightcounting April 2017

Page 22: Institutional Investors Conference

22© 2018 Oclaro, Inc. | Confidential and Proprietary

New Cable Remote PHY / Fiber Deep Architecture

18% CAGR

11% CAGR

-2% CAGR

Lightcounting, April 2017

Page 23: Institutional Investors Conference

23© 2018 Oclaro, Inc. | Confidential and Proprietary

Continued Profitable Execution

Foundation For Sustained Growth

Market And Technology Leadership At 100G And Beyond Speeds

Strong Cash Flow And Overall Balance Sheet

Multiple Market Drivers Continue: Data Center, Metro, China, 5G Wireless

Page 24: Institutional Investors Conference

24

Thank You

For more information, visit us at www.oclaro.com.

Follow us on @OclaroInc and LinkedIn.

© 2017 Oclaro, Inc. | Confidential and Proprietary

Page 25: Institutional Investors Conference

25© 2018 Oclaro, Inc. | Confidential and Proprietary

Non-GAAP Financial Results

$ in Millions (except per share amounts) Q217 Q118 Q218

Total Revenues 153.9 155.6 139.3

Gross Profit (non-GAAP) (1) 61.2 63.1 53.6

Gross Margin % 39.8% 40.6% 38.4%

R&D (non-GAAP) 13.2 15.6 14.5

SG&A (non-GAAP) 11.8 13.0 14.6

Non-GAAP Operating Income 36.2 34.6 24.5

Non-GAAP Net Income 36.3 34.5 23.1

Non-GAAP EPS (diluted) 0.21 0.20 0.14

(1) See reconciliation to comparable GAAP numbers in financial tables of press release dated February 5, 2018.

Page 26: Institutional Investors Conference

26© 2018 Oclaro, Inc. | Confidential and Proprietary

GAAP To Non-GAAP Reconciliation

($ Thousands) Q117 Q217 Q317 Q417

YTD

Total Q118 Q218

Reconciliation of GAAP operating income to non-GAAP operating income:

GAAP operating income 17,939$ 33,402$ 37,740$ 29,887$ 118,968$ 31,229$ 19,255$

Stock-based compensation 2,443 2,589 2,890 3,273 11,195 3,199 3,939

Amortization of intangible assets 244 241 150 151 786 152 154

Restructuring, acquisition and related costs 311 82 (301) (32) 60 - 969

Loss (gain) on sales of property and equipment (37) (74) (16) (3) (130) 22 169

Non-GAAP operating income 20,900 36,240 40,463 33,276 130,879 34,602 24,486

Depreciation expense 4,748 4,935 5,042 6,032 20,757 6,195 7,344

Adjusted EBITDA 25,648 41,175 45,505 39,308 151,636 40,797 31,830

Reconciliation of GAAP Income to non-GAAP income:

GAAP income 3,351$ 30,267$ 38,214$ 56,027$ 127,859$ 26,489$ 18,737$

Stock-based compensation 2,443 2,589 2,890 3,273 11,195 3,199 3,939

Amortization of intangible assets 244 241 150 151 786 152 154

Payments related to the interest make-whole

charge and induced conversion expense on the

convertible notes 13,250 - - - 13,250 - -

Restructuring, acquisition and related costs 311 82 (301) (32) 60 - 969

Other (income) expense items, net (194) (156) (233) (227) (810) (574) (936)

Loss (gain) on sales of property and equipment (37) (74) (16) (3) (130) 22 169

(Gain) loss on foreign currency translation 518 3,324 (687) 497 3,652 (489) (1,599)

Income tax effect 105 22 (125) (25,756) (25,754) 5,664 1,687

Non-GAAP income 19,991 36,295 39,892 33,930 130,108 34,463 23,120

Page 27: Institutional Investors Conference

27© 2018 Oclaro, Inc. | Confidential and Proprietary

Revenue By Product Group

$ in Millions Q217 Q317 Q417 Q118 Q218

100G+ Transmission 113.8 125.8 120.6 125.6 105.4

40G & Lower Transmission 40.1 36.4 28.8 30.0 34.0

Total Revenues 153.9 162.2 149.4 155.6 139.3

Percent of Total

100G+ Transmission 74% 78% 81% 81% 76%

40G & Lower Transmission 26% 22% 19% 19% 24%

$ in Millions Q217 Q317 Q417 Q118 Q218

Datacom/Client Side 69.8 75.8 72.6 75.1 64.9

Telecom/Line Side 84.1 86.4 76.8 80.5 74.4

Total Revenues 153.9 162.2 149.4 155.6 139.3

Percent of Total

Datacom/Client Side 45% 47% 49% 48% 47%

Telecom/Line Side 55% 53% 51% 52% 53%

Numbers may not foot due to rounding

Page 28: Institutional Investors Conference

28© 2018 Oclaro, Inc. | Confidential and Proprietary

Trended Revenue By Geography

$139.3$153.9M $149.4M$162.2M $155.6M

$63.9

$57.9

$47.3

$41.4

$51.4

$31.6

$45.8

$57.6

$72.4

$44.4

$15.9$19.5

$14.9 $15.8

$23.1

$40.6

$35.1

$27.3$23.9

$18.9

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18

China Americas EMEA South East Asia

21%

28%

39%

47%

10%

12%

10% 10%15%

18%

22%26%

* Sales in Japan account for remainder

42%

36%

32%

27%

37%

32%

17%

14%

Page 29: Institutional Investors Conference

29© 2018 Oclaro, Inc. | Confidential and Proprietary

Raymond James & Associates’ 39th Annual Institutional Investors Conference

Greg Dougherty – Chief Executive Officer

March 7, 2018


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