SOURCE: Finisar

Finisar Corporation

September 10, 2015 16:01 ET

Finisar Announces First Fiscal Quarter 2016 Financial Results

SUNNYVALE, CA--(Marketwired - September 10, 2015) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its first quarter of fiscal 2016, ended August 2, 2015.

COMMENTARY
"Revenues for our first fiscal quarter were $314.0 million compared to $320.0 million in the prior quarter; however, the prior quarter had the benefit of an additional week. Taking that into consideration, the first fiscal quarter had a higher average weekly revenue relative to the prior quarter," said Jerry Rawls, Finisar's executive Chairman of the Board. "Strength in revenue was primarily driven by 40 gigabit transceivers for datacom applications".

 
FINANCIAL HIGHLIGHTS - First Quarter Ended August 2, 2015
 
Summary GAAP Results First  Fourth 
  Quarter  Quarter 
  Ended  Ended 
  August 2, 2015  May 3, 2015 
  (in thousands, except per share amounts) 
          
Revenues  $314,030   $320,042  
Gross margin   27.8 %  27.9 %
Operating expenses  $80,316   $78,933  
Operating income (loss)  $7,061   $10,284  
Operating margin   2.2 %  3.2 %
Net income (loss)  $3,393   $7,327  
Income per share-basic  $0.03   $0.07  
Income per share-diluted  $0.03   $0.07  
            
Basic shares   105,286    104,005  
Diluted shares   108,107    107,535  
            
Summary Non-GAAP Results (a)  First   Fourth  
Quarter   Quarter  
Ended   Ended  
   August 2, 2015   May 3, 2015  
   (in thousands, except per share amounts)  
    
Revenues  $314,030   $320,042  
Gross margin   30.2 %  30.3 %
Operating expenses  $68,406   $68,167  
Operating income  $26,511   $28,831  
Operating margin   8.4 %  9.0 %
Net income  $24,532   $26,873  
Income per share-basic  $0.23   $0.26  
Income per share-diluted  $0.23   $0.25  
            
Basic shares   105,286    104,005  
Diluted shares   108,107    107,535  
         
             
 (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 First Quarter of Fiscal 2016:

  • Revenues decreased to $314.0 million, a decrease of $6.0 million, or (1.9)%, from $320.0 million in the preceding quarter, as the result of the impact of one fewer week than the prior quarter.
  • Sales of products for datacom applications decreased by $8.7 million, or (3.6)%, compared to the preceding quarter, primarily as the result of the impact of one fewer week than the prior quarter.
  • Sales of products for telecom applications increased by $2.7 million, or 3.4%, compared to the preceding quarter.
  • GAAP gross margin was 27.8% compared to 27.9% in the preceding quarter.
  • Non-GAAP gross margin was 30.2% compared to 30.3% in the prior quarter.
  • GAAP operating expenses were $80.3 million compared to $78.9 million in the prior quarter.
  • Non-GAAP operating expenses were $68.4 million compared to $68.2 million in the prior quarter.
  • GAAP operating income decreased by $3.2 million, to $7.1 million or 2.2% of revenues, compared to $10.3 million or 3.2% of revenues in the preceding quarter, primarily due to the lower revenue level.
  • Non-GAAP operating income decreased by $2.3 million to $26.5 million, or 8.4% of revenues, compared to $28.8 million, or 9.0% of revenues, in the preceding quarter.
  • Cash, cash equivalents and short term investments increased $5.5 million to $495.7 million at the end of the first quarter, compared to $490.2 million at the end of the preceding quarter.

OUTLOOK
The Company indicated that for the second quarter of fiscal 2016 it currently expects revenues in the range of $304 to $324 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 8% to 9%, and non-GAAP earnings per diluted share in the range of approximately $0.20 to $0.26.

CONFERENCE CALL
Finisar will discuss its financial results for the first quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, September 10, 2015, 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 877-741-4244 (domestic) or +719-325-4849 (international) and enter conference ID 8055566.

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 8055566 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
This press release contains forward-looking statement concerning Finisar's expected financial performance. These statements are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on our current expectations, estimates, assumptions and projections about our business and industry, and the markets and customers we serve, and they are subject to numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate. 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 19, 2015) 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 
(Unaudited, in thousands, except per share data) 
          
  Three Months Ended 
  Aug 02, 2015  July 27, 2014  May 03, 2015 
Revenues $314,030  $327,638  $320,042 
Cost of revenues  224,147   227,385   229,390 
Impairment of long-lived assets  1,071   -   - 
Amortization of acquired developed technology  1,435   1,434   1,435 
Gross profit  87,377   98,819   89,217 
Gross margin  27.8%  30.2%  27.9%
Operating expenses:            
 Research and development  52,408   51,006   51,117 
 Sales and marketing  11,202   11,965   11,800 
 General and administrative  15,208   14,719   15,303 
 Impairment of long-lived assets  830   -   - 
 Amortization of purchased intangibles  668   761   713 
  Total operating expenses  80,316   78,451   78,933 
Income from operations  7,061   20,368   10,284 
Interest income  365   612   536 
Interest expense  (2,883)  (3,134)  (3,335)
Other income (expenses), net  881   (2,026)  4,041 
Income before income taxes  5,424   15,820   11,526 
Provision for income taxes  2,031   1,577   4,199 
Net income $3,393  $14,243  $7,327 
             
Net income per share attributable to Finisar Corporation common stockholders:            
             
 Basic $0.03  $0.14  $0.07 
 Diluted $0.03  $0.14  $0.07 
             
Shares used in computing net income per share - basic  105,286   98,241   104,005 
Shares used in computing net income per share - diluted  108,107   102,287   107,535
 
             
  
Finisar Corporation 
Consolidated Balance Sheets 
(in thousands) 
          
   Aug 02, 2015   May 03, 2015  
   (Unaudited)      
ASSETS         
Current assets:           
 Cash and cash equivalents  $232,997   $197,443  
 Short-term held-to-maturity investments   262,695    292,748  
 Accounts receivable, net   234,798    213,234  
 Accounts receivable, other   40,807    40,650  
 Inventories   282,093    283,670  
 Prepaid expenses and other assets   22,649    36,518  
  Total current assets   1,076,039    1,064,263  
Property, equipment and improvements, net   322,043    315,777  
Purchased intangible assets, net   25,086    27,188  
Goodwill   106,735    106,735  
Minority investments   2,997    2,847  
Other assets   34,960    35,072  
  Total assets  $1,567,860   $1,551,882  
            
LIABILITIES AND STOCKHOLDERS' EQUITY           
Current liabilities:           
 Accounts payable  $139,600   $131,510  
 Accrued compensation   26,392    24,918  
 Other accrued liabilities   39,753    39,238  
 Deferred revenue   11,480    9,850  
  Total current liabilities   217,225    205,516  
Long-term liabilities:           
 Convertible notes, net of current portion   223,760    221,406  
 Other non-current liabilities   21,545    21,167  
  Total liabilities   462,530    448,089  
Stockholders' equity:           
 Common stock   107    104  
 Additional paid-in capital   2,564,506    2,551,114  
 Accumulated other comprehensive income   (14,390 )  861  
 Accumulated deficit   (1,444,893 )  (1,448,286 )
  Total stockholders' equity   1,105,330    1,103,793  
Total liabilities and stockholders' equity  $1,567,860   $1,551,882  
            
Note - Balance sheet amounts as of May 3, 2015 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 the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: non-GAAP gross profit, non-GAAP operating income and non-GAAP income per share. These non-GAAP financial measures are 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 in this release:

  • 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);
  • Duplicate facilities costs during facilities move (non-recurring cash charges)
  • Stock-based compensation expense (non-cash charges);
  • Abandonment of fixed assets (non-recurring non-cash charges);
  • Impairment of long-lived assets (non-recurring non-cash charges);
  • Acquisition method accounting adjustment for sale of acquired inventory (non-recurring non-cash charges);
  • Reduction in force costs (non-recurring cash charges); and
  • Acquisition related retention payments (non-recurring cash 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 in this release:

  • 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 charges 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);
  • Impairment of acquired R&D reimbursement receivable (non-recurring non-cash charges);
  • Amortization of purchased intangibles (non-cash charges);
  • Abandonment of fixed assets (non-cash charges); and
  • Impairment of long-lived assets (non-recurring 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 in this release:

  • Imputed interest expenses on convertible debt (non-cash charges);
  • Imputed interest related to restructuring (non-cash charges);
  • Gains and losses on sales of assets (non-recurring and/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);
  • Amortization of debt issuance costs (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.

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  
   Aug 02, 2015   July 27, 2014   May 03, 2015  
GAAP to non-GAAP reconciliation of gross profit:                
Gross profit - GAAP  $87,377   $98,819   $89,217  
Gross margin - GAAP   27.8 %  30.2 %  27.9 %
Adjustments:                
Cost of revenues                
 Change in excess and obsolete inventory reserve   1,430    1,721    2,752  
 Amortization of acquired technology   1,435    1,434    1,435  
 Duplicate facility costs related to facility move   82    -    4  
 Stock compensation   2,692    2,276    2,692  
 Impairment of long-lived assets   1,282    -    420  
 Reduction in force costs   554    475    406  
 Acquisition related retention payment   65    118    72  
  Total cost of revenue adjustments   7,540    6,024    7,781  
Gross profit - non-GAAP   94,917    104,843    96,998  
Gross margin - non-GAAP   30.2 %  32.0 %  30.3 %
                 
GAAP to non-GAAP reconciliation of operating income:                
Operating income - GAAP   7,061    20,368    10,284  
Operating margin - GAAP   2.2 %  6.2 %  3.2 %
Adjustments:                
Total cost of revenue adjustments   7,540    6,024    7,781  
Research and development                
 Reduction in force costs   288    332    82  
 Acquisition related retention payment   91    193    104  
 Stock compensation   4,838    4,436    5,084  
 Duplicate facility costs related to facility move   221    -    143  
 Impairment of long-lived assets   287    -    -  
 Impairment of acquired R&D reimbursement receivable   -    -    87  
Sales and marketing                
 Reduction in force costs   63    -    -  
 Acquisition related retention payment   10    20    12  
 Stock compensation   1,707    1,529    1,749  
General and administrative                
 Reduction in force costs   352    (5 )  -  
 Duplicate facility costs related to facility move   9    -    -  
 Acquisition related retention payment   (5 )  16    8  
 Stock compensation   2,760    2,812    2,894  
 Acquisition related costs   18    230    18  
 Litigation settlements and resolutions and related costs (benefits)   16    (1,312 )  (6 )
 Shareholder class action and derivative litigation costs (benefits)   -    -    (121 )
Amortization of purchased intangibles   668    761    713  
Impairment of long-lived assets   587    -    (1 )
  Total cost of revenue and operating expense adjustments   19,450    15,036    18,547  
Operating income - non-GAAP   26,511    35,404    28,831  
Operating margin - non-GAAP   8.4 %  10.8 %  9.0 %
                 
GAAP to non-GAAP reconciliation of income:                
Net income - GAAP   3,393    14,243    7,327  
Adjustments:                
Total cost of revenue and operating expense adjustments   19,450    15,036    18,547  
Non-cash imputed interest expenses on convertible debt   2,354    2,243    2,334  
Imputed interest related to restructuring   45    51    47  
Other (income) expense, net                
 Loss (gain) on sale of assets   (185 )  238    (559 )
 Gain related to minority investments   -    -    (1,470 )
 Other miscellaneous income   (17 )  (1 )  (850 )
 Foreign exchange transaction (gain) or loss   (693 )  1,991    (607 )
 Amortization of debt issuance costs   154    154    154  
Provision for income taxes                
 Income tax provision (benefits) adjustments   31    (623 )  1,950  
Total adjustments   21,139    19,089    19,546  
Net income - non-GAAP  $24,532   $33,332   $26,873  
                 
Non-GAAP income  $24,532   $33,332   $26,873  
Add: interest expense for dilutive convertible notes   -    539    -  
Adjusted non-GAAP income  $24,532   $33,871   $26,873  
                 
Non-GAAP income per share common stockholders                
 Basic  $0.23   $0.34   $0.26  
 Diluted  $0.23   $0.32   $0.25  
Shares used in computing non-GAAP income per share common stockholders                
 Basic   105,286    98,241    104,005  
 Diluted   108,107    106,036    107,535  
                 
Non-GAAP EBITDA                
Non-GAAP income  $24,532   $33,332   $26,873  
Depreciation expense   21,365    19,648    20,488  
Amortization   -    39    -  
Interest expense (income)   (35 )  228    (197 )
Income tax expense   2,000    2,200    2,249  
Non-GAAP EBITDA  $47,862   $55,447   $49,413  
             

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