SOURCE: Finisar

Finisar

December 05, 2013 16:00 ET

Finisar Announces Fifth Consecutive Quarter of Revenue Growth

SUNNYVALE, CA--(Marketwired - Dec 5, 2013) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second fiscal quarter ended October 27, 2013. 

COMMENTARY

"I am pleased to report second quarter revenues were $290.7 million, a new all-time record for Finisar. Revenues increased by $24.7 million, or 9.3%, over the first quarter and $58.7 million, or 25.3%, over the second quarter of the prior year. Revenues grew for the fifth consecutive quarter. This quarter's revenue growth came from both datacom and telecom products," said Jerry Rawls, Finisar's executive Chairman of the Board.

"During the quarter, we continued to make significant strides in new product development that we believe will drive future revenue growth. For example, we demonstrated our new 100Gbps CFP4 Ethernet transceiver for short reach datacom applications. This transceiver provides 75% greater face plate density and 80% less power consumption than our original CFP," said Eitan Gertel, Finisar's Chief Executive Officer.

   
FINANCIAL HIGHLIGHTS - SECOND QUARTER ENDED October 27, 2013  
   
Summary GAAP Results   Second     First  
Quarter     Quarter  
Ended     Ended  
    October 27, 2013     July 28, 2013  
   (in thousands, except per share amounts) 
                 
Revenues   $ 290,722     $ 266,068  
Gross margin     35.6 %     34.3 %
Operating expenses   $ 73,264     $ 64,270  
Operating income   $ 30,109     $ 27,103  
Operating margin     10.4 %     10.2 %
Net income   $ 29,965     $ 26,011  
Income per share-basic   $ 0.31     $ 0.27  
Income per share-diluted   $ 0.29     $ 0.26  
                 
Basic shares     95,941       94,609  
Diluted shares     103,696       101,125  
                 
Summary Non-GAAP Results (a)   Second     First  
Quarter     Quarter  
Ended     Ended  
    October 27, 2013     July 28, 2013  
   (in thousands, except per share amounts) 
                 
Revenues   $ 290,722     $ 266,068  
Gross margin     37.1 %     35.1 %
Operating expenses   $ 63,159     $ 60,903  
Operating income   $ 44,767     $ 32,397  
Operating margin     15.4 %     12.2 %
Net income   $ 43,767     $ 31,269  
Income per share-basic   $ 0.46     $ 0.33  
Income per share-diluted   $ 0.43     $ 0.31  
                 
Basic shares     95,941       94,609  
Diluted shares     103,696       101,125  
                 
(a) In evaluating the operating performance of Finisar's business, Finisar management utilizes financial measures that exclude certain charges and credits required by U.S. generally accepted accounting principles, or GAAP, that are considered by management to be outside Finisar's core operating results. A reconciliation of Finisar's non-GAAP financial measures to the most directly comparable GAAP measures, as well as additional related information, can be found under the heading "Finisar Non-GAAP Financial Measures" below.

Financial Statement Highlights for the second quarter of fiscal 2014:

  • Revenues increased to $290.7 million, up $24.7 million, or 9.3%, from $266.1 million in the preceding quarter.
  • The sale of products for datacom applications increased by $ 19.8 million, or 10.7%, over the preceding quarter, and the sale of products for telecom applications increased by $4.8 million, or 5.9%, over the preceding quarter
  • GAAP gross margin increased to 35.6% from 34.3% in the preceding quarter, primarily as the result of a favorable product mix.
  • Non-GAAP gross margin increased to 37.1% from 35.1% in the preceding quarter.
  • GAAP operating income increased $3.0 million to $30.1 million, or 10.4% of revenues, compared to $27.1 million, or 10.2%, of revenues in the preceding quarter.
  • Non-GAAP operating income increased $12.4 million to $44.8 million, or 15.4% of revenues, compared to $32.4 million, or 12.2% of revenues, in the preceding quarter.  
  • Cash and cash equivalents increased $28.1 million to $316.5 million at the end of the second quarter, compared to $288.4 million at the end of the preceding quarter.

OUTLOOK

The Company indicated that it currently expects revenues for the third quarter of fiscal 2014 to be in the range of $290 to $305 million; GAAP operating margin to be approximately 11.5%; non-GAAP operating margin to be approximately 15.5% and non-GAAP earnings per diluted share to be in the range of approximately $0.43 to $0.47.

CONFERENCE CALL

Finisar will discuss its financial results for the second quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, December 5, 2013, at 2:00 pm PT (5:00 pm ET). To listen to the call you may connect through the Finisar investor relations page at http://investor.finisar.com/ or dial 1-877-719-9795 (domestic) or +1-719-325-4786 (international) and enter conference ID 5981213.

An audio replay will be available for two weeks following the call by dialing 1-888-203-1112 (domestic) or +1-719-457-0820 and then following the prompts: enter conference ID 5981213 and provide your name, affiliation, and contact number. A replay of the webcast will be available shortly after the conclusion of the call on the Company's website until the next regularly scheduled earnings conference call.

SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements included in this press release are based upon information available to Finisar as of the date hereof, and Finisar assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those projected. Examples of such risks include those associated with: the uncertainty of customer demand for Finisar's products; the rapidly evolving markets for Finisar's products and uncertainty regarding the development of these markets; Finisar's historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period; ongoing new product development and introduction of new and enhanced products; the challenges of rapid growth followed by periods of contraction; and intensive competition. Further information regarding these and other risks relating to Finisar's business is set forth in Finisar's annual report on Form 10-K (filed June 24, 2013) and quarterly SEC filings.

ABOUT FINISAR

Finisar Corporation (NASDAQ: FNSR) is a global technology leader for fiber optic subsystems and components that enable high-speed voice, video and data communications for telecommunications, networking, storage, wireless, and cable TV applications. For 25 years, Finisar has provided critical optics technologies to system manufacturers to meet the increasing demands for network bandwidth. Finisar is headquartered in Sunnyvale, California, USA with R&D, manufacturing sites, and sales offices worldwide. For additional information, visit www.finisar.com.

FINISAR FINANCIAL STATEMENTS

The following financial tables are presented in accordance with GAAP.

   
Finisar Corporation  
Consolidated Statements of Operations  
(in thousands, except per share data)  
                               
    Three Months Ended     Six Months Ended     Three Months Ended  
    October 27, 2013     October 28, 2012     October 27, 2013     October 28, 2012     July 28, 2013  
    (Unaudited)     (Unaudited)        
Revenues   $ 290,722     $ 232,041     $ 556,790     $ 452,567     $ 266,068  
Cost of revenues     186,168       166,167       359,270       327,624       173,102  
Amortization of acquired developed technology     1,181       2,000       2,774       3,272       1,593  
Gross profit     103,373       63,874       194,746       121,671       91,373  
Gross margin     35.6 %     27.5 %     35.0 %     26.9 %     34.3 %
Operating expenses:                                        
  Research and development     44,959       39,620       88,489       77,789       43,530  
  Sales and marketing     12,322       10,219       24,127       20,893       11,805  
  General and administrative     15,388       12,919       23,728       26,261       8,340  
  Amortization of purchased intangibles     595       1,062       1,190       1,871       595  
    Total operating expenses     73,264       63,820       137,534       126,814       64,270  
Income (loss) from operations     30,109       54       57,212       (5,143 )     27,103  
Interest income     282       162       499       358       217  
Interest expense     (367 )     (750 )     (919 )     (1,397 )     (552 )
Other income (expenses), net     495       (101 )     983       (20 )     488  
Income (loss) before income taxes and non-controlling interest     30,519       (635 )     57,775       (6,202 )     27,256  
Provision (benefits) for income taxes     568       (1,062 )     1,989       (420 )     1,421  
Income (loss) before non-controlling interest     29,951       427       55,786       (5,782 )     25,835  
Adjust for net (income) loss attributable to non-controlling interest     14       (156 )     190       (144 )     176  
Net income (loss) attributable to Finisar Corporation   $ 29,965     $ 271     $ 55,976     $ (5,926 )   $ 26,011  
                                         
Net income (loss) per share attributable to Finisar Corporation common stockholders:                                        
                                         
  Basic   $ 0.31     $ 0.00     $ 0.59     $ (0.06 )   $ 0.27  
  Diluted   $ 0.29     $ 0.00     $ 0.56     $ (0.06 )   $ 0.26  
                                         
Shares used in computing net income (loss) per share - basic     95,941       92,780       95,275       92,386       94,609  
Shares used in computing net income (loss) per share - diluted     103,696       94,735       102,771       92,386       101,125  
                                         
                                         
                                         
Finisar Corporation  
Consolidated Balance Sheets  
(in thousands)  
                   
    October 27, 2013     July 28, 2013     April 28, 2013  
    (Unaudited)     (Unaudited)        
ASSETS                        
Current assets:                        
  Cash and cash equivalents   $ 316,488     $ 288,433     $ 289,076  
  Accounts receivable, net     186,486       171,823       149,612  
  Accounts receivable, other     25,890       34,386       16,538  
  Inventories     231,235       207,029       200,670  
  Prepaid expenses     20,902       19,533       18,402  
    Total current assets     781,001       721,204       674,298  
Property, equipment and improvements, net     231,022       213,044       201,442  
Purchased intangible assets, net     23,587       25,416       30,457  
Goodwill     90,986       90,986       90,986  
Minority investments     1,841       1,711       884  
Other assets     16,946       12,954       9,780  
    Total assets   $ 1,145,383     $ 1,065,315     $ 1,007,847  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY                        
Current liabilities:                        
  Accounts payable   $ 98,220     $ 90,488     $ 77,630  
  Accrued compensation     48,182       32,001       31,492  
  Other accrued liabilities     32,943       31,542       23,533  
  Deferred revenue     14,235       12,582       9,182  
  Short term debt     4,700       -       -  
  Current portion of convertible notes     40,015       -       -  
    Total current liabilities     238,295       166,613       141,837  
Long-term liabilities:                        
  Convertible notes, net of current portion     -       40,015       40,015  
  Other non-current liabilities     12,756       12,908       13,480  
    Total liabilities     251,051       219,536       195,332  
Stockholders' equity:                        
  Common stock     96       96       94  
  Additional paid-in capital     2,377,198       2,363,514       2,350,146  
  Accumulated other comprehensive income     27,315       22,397       28,525  
  Accumulated deficit     (1,515,984 )     (1,545,949 )     (1,571,960 )
    Finisar Corporation stockholders' equity     888,625       840,058       806,805  
  Non-controlling interest     5,707       5,721       5,710  
    Total stockholders' equity     894,332       845,779       812,515  
Total liabilities and stockholders' equity   $ 1,145,383     $ 1,065,315     $ 1,007,847  
                         
Note - Balance sheet amounts as of April 28, 2013 are derived from the audited consolidated financial statements as of the date.  
                         

FINISAR NON-GAAP FINANCIAL MEASURES

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides supplemental information regarding the Company's operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or which occur relatively infrequently and which management considers to be outside our core operating results. Some of these non-GAAP measures also exclude the ongoing impact of historical business decisions made in different business and economic environments. Management believes that tracking non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and non-GAAP net income per share provides management and the investment community with valuable insight into our current operations, our ability to generate cash and the underlying business trends which are affecting our performance. These non-GAAP measures are used by both management and our Board of Directors, along with the comparable GAAP information, in evaluating our current performance and planning our future business activities. In particular, management finds it useful to exclude non-cash charges in order to better correlate our operating activities with our ability to generate cash from operations and to exclude certain cash charges as a means of more accurately predicting our liquidity requirements. We believe that these non-GAAP measures, when used in conjunction with our GAAP financial information, also allow investors to better evaluate our financial performance in comparison to other periods and to other companies in our industry.

In calculating non-GAAP gross profit in this release, we have excluded the following items from cost of revenues in applicable periods:

  • Changes in excess and obsolete inventory reserve (predominantly non-cash charges or non-cash benefits);
  • Amortization of acquired technology (non-cash charges related to technology obtained in acquisitions);
  • Stock-based compensation expense (non-cash charges);
  • Acquisition method accounting adjustment for sale of acquired inventory (non-cash charges);
  • Reduction in force costs (non-recurring cash charges); and
  • Acquisition related retention payments (non-recurring charges). 

In calculating non-GAAP operating income in this release, we have excluded the same items to the extent they are classified as operating expenses, and have also excluded the following items in applicable periods:

  • Gain or loss on litigation settlements and resolutions and related costs (non-recurring cash charges or benefits);
  • Shareholder class action and derivative litigation costs (non-recurring cash expenses associated with the derivative litigation related to our historical stock option granting practices and related to the class action and derivative litigation related to our March 8, 2011 earnings announcement);
  • Acquisition related costs (non-recurring cash charges); and
  • Amortization of purchased intangibles (non-cash charges).

In calculating non-GAAP income and non-GAAP income per share in this release, we have also excluded the following items in applicable periods:

  • Gains and losses on sales of assets (non-recurring or non-cash losses and cash gains related to the periodic disposal of assets no longer required for current activities);
  • Gains and losses related to minority investments (non-cash or non-recurring benefits or charges);
  • Other miscellaneous expenses (income) (non-recurring charges or benefits);
  • Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits);
  • Debt extinguishment loss (non-cash charges);
  • Non-controlling interest non-GAAP adjustment (non-cash and/or non-recurring charges or benefits attributable to the non-controlling interest in majority-controlled subsidiaries); and
  • Differences between cash payable for income taxes and the provision for income taxes in accordance with GAAP, less discrete items.

In calculating non-GAAP income per share in this release, we have included the shares issuable upon conversion of our outstanding convertible notes and excluded the interest expenses associated with such notes in such periods where such treatment is dilutive to non-GAAP income (loss) per share.

A reconciliation of this non-GAAP financial information to the corresponding GAAP information is set forth below:

   
Finisar Corporation  
Reconciliation of Results of Operations under GAAP and non-GAAP  
(Unaudited, in thousands, except per share data)  
                               
    Three Months Ended     Six Months Ended     Three Months Ended  
    October 27, 2013     October 28, 2012     October 27, 2013     October 28, 2012     July 28, 2013  
GAAP to non-GAAP reconciliation of gross profit:                                        
Gross profit - GAAP   $ 103,373     $ 63,874     $ 194,746     $ 121,671     $ 91,373  
Gross margin - GAAP     35.6 %     27.5 %     35.0 %     26.9 %     34.3 %
Adjustments:                                        
Cost of revenues                                        
  Change in excess and obsolete inventory reserve     1,199       2,003       (329 )     6,869       (1,528 )
  Amortization of acquired technology     1,181       2,000       2,774       3,272       1,593  
  Stock compensation     2,056       1,876       3,833       3,362       1,777  
  Acquisition method accounting adjustment for sale of acquired inventory     -       722       -       1,363       -  
  Reduction in force costs     47       136       70       784       23  
  Acquisition related retention payment     70       73       132       73       62  
    Total cost of revenue adjustments     4,553       6,810       6,480       15,723       1,927  
Gross profit - non-GAAP     107,926       70,684       201,226       137,394       93,300  
Gross margin - non-GAAP     37.1 %     30.5 %     36.1 %     30.4 %     35.1 %
                                         
GAAP to non-GAAP reconciliation of operating income:                                        
Operating income (loss) - GAAP     30,109       54       57,212       (5,143 )     27,103  
Operating margin - GAAP     10.4 %     0.0 %     10.3 %     -1.1 %     10.2 %
Adjustments:                                        
Total cost of revenue adjustments     4,553       6,810       6,480       15,723       1,927  
Research and development                                        
  Reduction in force costs     16       -       28       177       12  
  Acquisition related retention payment     190       222       381       222       191  
  Stock compensation     4,069       3,353       7,594       6,339       3,525  
Sales and marketing                                        
  Acquisition related retention payment     17       20       34       20       17  
  Stock compensation     1,382       1,002       2,566       2,079       1,184  
General and administrative                                        
  Reduction in force costs     173       54       240       69       67  
  Acquisition related retention payment     830       253       1,047       253       217  
  Stock compensation     2,663       2,956       5,086       5,785       2,423  
  Acquisition related costs     124       96       349       421       225  
  Litigation settlements and resolutions and related costs     -       (10 )     5       13       5  
  Shareholder class action and derivative litigation costs     46       (34 )     (5,048 )     9       (5,094 )
Amortization of purchased intangibles     595       1,062       1,190       1,871       595  
    Total cost of revenue and operating expense adjustments     14,658       15,784       19,952       32,981       5,294  
Operating income - non-GAAP     44,767       15,838       77,164       27,838       32,397  
Operating margin - non-GAAP     15.4 %     6.8 %     13.9 %     6.2 %     12.2 %
                                         
GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation:                                        
Net income (loss) attributable to Finisar Corporation - GAAP     29,965       271       55,976       (5,926 )     26,011  
Adjustments:                                        
Total cost of revenue and operating expense adjustments     14,658       15,784       19,952       32,981       5,294  
Imputed interest related to restructuring     56       164       113       226       57  
Other (income) expense, net                                        
  Gain on sale of assets     5       (170 )     (105 )     (189 )     (110 )
  Gain related to minority investments     -       -       (743 )     -       (743 )
  Other miscellaneous income     (2 )     -       (2 )     (160 )     -  
  Foreign exchange transaction (gain) or loss     (208 )     (607 )     359       (611 )     567  
  Debt extinguishment loss     -       573       -       573       -  
Provision for income taxes                                        
  Income tax provision adjustments     (832 )     (1,810 )     (706 )     (1,818 )     126  
Non-controlling interest non-GAAP adjustment     125       -       192       -       67  
Total adjustments     13,802       13,934       19,060       31,002       5,258  
Net income attributable to Finisar Corporation - non-GAAP   $ 43,767     $ 14,205     $ 75,036     $ 25,076     $ 31,269  
                                         
Non-GAAP income attributable to Finisar Corporation   $ 43,767     $ 14,205     $ 75,036     $ 25,076     $ 31,269  
Add: interest expense for dilutive convertible notes     539       539       1,078       -       539  
Adjusted non-GAAP income attributable to Finisar Corporation   $ 44,306     $ 14,744     $ 76,114     $ 25,076     $ 31,808  
                                         
Non-GAAP income per share attributable to Finisar Corporation common stockholders                                        
  Basic   $ 0.46     $ 0.15     $ 0.79     $ 0.27     $ 0.33  
  Diluted   $ 0.43     $ 0.15     $ 0.74     $ 0.26     $ 0.31  
Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders                                        
  Basic     95,941       92,780       95,275       92,386       94,609  
  Diluted     103,696       98,483       102,771       94,780       101,125  
                                         
Non-GAAP EBITDA                                        
Non-GAAP income attributable to Finisar Corporation   $ 43,767     $ 14,205     $ 75,036     $ 25,076     $ 31,269  
Depreciation expense     14,621       13,106       28,548       25,817       13,927  
Amortization     94       237       188       473       94  
Interest expense     29       424       307       813       278  
Income tax expense     1,400       748       2,695       1,398       1,295  
Non-GAAP EBITDA   $ 59,911     $ 28,720     $ 106,774     $ 53,577     $ 46,863  
                                         

Finisar-F

Contact Information

  • Investor Contact:
    Kurt Adzema
    Chief Financial Officer
    408-542-5050
    Investor.relations@finisar.com

    Press contact:
    Victoria McDonald
    Director, Corporate Communications
    408-542-4261