SOURCE: Finisar

Finisar Corporation

December 10, 2015 16:00 ET

Finisar Announces Second Fiscal Quarter 2016 Financial Results

SUNNYVALE, CA--(Marketwired - December 10, 2015) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second quarter of fiscal 2016, ended November 1, 2015.

COMMENTARY

"Revenues for our second fiscal quarter were $321.1 million compared to $314.0 million in the prior quarter; an increase of approximately 2.3%. This increase was primarily driven by growth in 100 gigabit Ethernet transceivers and 10 gigabit tunable transceivers and wavelength selective switches for telecom WDM applications," said Jerry Rawls, Finisar's Chief Executive Officer.

  
FINANCIAL HIGHLIGHTS - Second Quarter Ended November 1, 2015 
  
Summary GAAP Results  Second   First  
  Quarter   Quarter  
  Ended   Ended  
   November 1, 2015   August 2, 2015  
   (in thousands, except per share amounts)  
            
Revenues  $321,136   $314,030  
Gross margin   27.7 %  27.8 %
Operating expenses  $79,723   $80,316  
Operating income (loss)  $9,368   $7,061  
Operating margin   2.9 %  2.2 %
Net income (loss)  $6,644   $3,393  
Income per share-basic  $0.06   $0.03  
Income per share-diluted  $0.06   $0.03  
            
Basic shares   106,635    105,286  
Diluted shares   107,493    108,107  
            
Summary Non-GAAP Results (a)  Second   First  
  Quarter   Quarter  
  Ended   Ended  
   November 1, 2015   August 2, 2015  
   (in thousands, except per share amounts)  
          
Revenues  $321,136   $314,030  
Gross margin   30.0 %  30.2 %
Operating expenses  $68,025   $68,406  
Operating income  $28,274   $26,511  
Operating margin   8.8 %  8.4 %
Net income  $26,857   $24,532  
Income per share-basic  $0.25   $0.23  
Income per share-diluted  $0.25   $0.23  
            
Basic shares   106,635    105,286  
Diluted shares   107,493    108,107  
            

_____________

(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 2016:

  • Revenues increased to $321.1 million, an increase of $7.1 million, or 2.3%, from $314.0 million in the preceding quarter.
  • Sales of products for datacom applications increased by $0.5 million, or 0.2%, compared to the preceding quarter, primarily driven by growth in 100 gigabit transceivers offset by a decline in 40 gigabit transceivers, after a record quarter for 40 gigabit transceivers in the preceding quarter.
  • Sales of products for telecom applications increased by $6.6 million, or 8.2%, compared to the preceding quarter, primarily driven by growth in 10 gigabit tunable transceivers and wavelength selective switches.
  • GAAP gross margin was 27.7% compared to 27.8% in the preceding quarter.
  • Non-GAAP gross margin was 30.0% compared to 30.2% in the prior quarter.
  • GAAP operating expenses were $79.7 million compared to $80.3 million in the prior quarter.
  • Non-GAAP operating expenses were $68.0 million, or 21.2% of revenues compared to $68.4 million, or 21.8% of revenues, in the prior quarter.
  • GAAP operating income increased by $2.3 million, to $9.4 million or 2.9% of revenues, compared to $7.1 million or 2.2% of revenues in the preceding quarter, primarily due to the higher revenue level.
  • Non-GAAP operating income increased by $1.8 million to $28.2 million, or 8.8% of revenues, compared to $26.5 million, or 8.4% of revenues, in the preceding quarter.
  • Cash, cash equivalents and short term investments increased $25.1 million to $520.8 million at the end of the second quarter, compared to $495.7 million at the end of the preceding quarter.

OUTLOOK

The Company indicated that for the third quarter of fiscal 2016 it currently expects revenues in the range of $300 to $320 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 7.5% to 8.5%, and non-GAAP earnings per diluted share in the range of approximately $0.19 to $0.25.

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 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 800-500-0177 (domestic) or +1.719.457.2602 (international) and enter conference ID 1806814.

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 1806814 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  Six Months Ended  Three Months Ended 
 Nov 01, 2015  October 26, 2014  Nov 01, 2015  October 26, 2014  Aug 02, 2015 
Revenues$321,136  $296,981  $635,166  $624,619  $314,030 
Cost of revenues 230,610   210,625   454,757   438,010   224,147 
Impairment of long-lived assets -   -   1,071   -   1,071 
Amortization of acquired developed technology 1,435   1,435   2,870   2,869   1,435 
Gross profit 89,091   84,921   176,468   183,740   87,377 
Gross margin 27.7%  28.6%  27.8%  29.4%  27.8%
Operating expenses:                   
 Research and development 50,972   51,184   103,380   102,190   52,408 
 Sales and marketing 11,897   11,487   23,099   23,452   11,202 
 General and administrative 16,186   28,772   31,394   43,491   15,208 
 Impairment of long-lived assets -   -   830   -   830 
 Amortization of purchased intangibles 668   737   1,336   1,498   668 
  Total operating expenses 79,723   92,180   160,039   170,631   80,316 
Income (loss) from operations 9,368   (7,259)  16,429   13,109   7,061 
Interest income 469   342   834   954   365 
Interest expense (2,917)  (2,867)  (5,800)  (6,001)  (2,883)
Other income (expenses), net 445   33   1,326   (1,993)  881 
Income (loss) before income taxes 7,365   (9,751)  12,789   6,069   5,424 
Provision for income taxes 721   1,610   2,752   3,187   2,031 
Net income (loss)$6,644  $(11,361) $10,037  $2,882  $3,393 
                    
Net income (loss) per share attributable to Finisar Corporation common stockholders:                   
                    
 Basic$0.06  $(0.11) $0.09  $0.03  $0.03 
 Diluted$0.06  $(0.11) $0.09  $0.03  $0.03 
                    
Shares used in computing net income per share - basic 106,635   99,621   105,961   98,931   105,286 
Shares used in computing net income per share - diluted
 107,493   99,621   108,238   102,390   108,107 
                    
                    
Finisar Corporation 
Consolidated Balance Sheets 
(in thousands) 
              
   Nov 01, 2015   Aug 02, 2015   May 03, 2015  
   (Unaudited)   (Unaudited)      
ASSETS                
Current assets:                
 Cash and cash equivalents  $258,270   $232,997   $197,443  
 Short-term held-to-maturity investments   262,500    262,695    292,748  
 Accounts receivable, net   230,065    234,798    213,234  
 Accounts receivable, other   39,982    40,807    40,650  
 Inventories   264,706    282,093    283,670  
 Prepaid expenses and other assets   20,538    22,649    36,518  
  Total current assets   1,076,061    1,076,039    1,064,263  
Property, equipment and improvements, net   344,695    322,043    315,777  
Purchased intangible assets, net   22,983    25,086    27,188  
Goodwill   106,735    106,735    106,735  
Minority investments   3,647    2,997    2,847  
Other assets   23,133    34,960    35,072  
  Total assets  $1,577,254   $1,567,860   $1,551,882  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
 Accounts payable  $133,220   $139,600   $131,510  
 Accrued compensation   31,680    26,392    24,918  
 Other accrued liabilities   43,301    39,753    39,238  
 Deferred revenue   12,438    11,480    9,850  
  Total current liabilities   220,639    217,225    205,516  
Long-term liabilities:                
 Convertible notes, net of current portion   226,151    223,760    221,406  
 Other non-current liabilities   23,195    21,545    21,167  
  Total liabilities   469,985    462,530    448,089  
Stockholders' equity:                
 Common stock   107    107    104  
 Additional paid-in capital   2,577,246    2,564,506    2,551,114  
 Accumulated other comprehensive income (loss)   (31,835 )  (14,390 )  861  
 Accumulated deficit   (1,438,249 )  (1,444,893 )  (1,448,286 )
  Total stockholders' equity   1,107,269    1,105,330    1,103,793  
Total liabilities and stockholders' equity  $1,577,254   $1,567,860   $1,551,882  
                 
Note - Balance sheet amounts as of May 3, 2015 ae derived from the auditd 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, non-GAAP income, non-GAAP income per share, and Non-GAAP EBITDA. 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. 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);
  • Impairment of long-lived assets (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);
  • Employee and employer tax liabilities related to the 2006 special investigation into our historical stock option granting practices (non-recurring cash charges);
  • Acquisition related costs (non-recurring cash charges);
  • Amortization of purchased intangibles (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);
  • 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); 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   Six Months Ended   Three Months Ended  
  Nov 01, 2015   October 26, 2014   Nov 01, 2015   October 26, 2014   Aug 02, 2015  
GAAP to non-GAAP reconciliation of gross profit:                         
Gross profit - GAAP $89,091   $84,921   $176,468   $183,740   $87,377  
Gross margin - GAAP  27.7 %  28.6 %  27.8 %  29.4 %  27.8 %
Adjustments:                         
Cost of revenues                         
 Change in excess and obsolete inventory valuation adjustments  2,402    2,048    3,832    3,769    1,430  
 Amortization of acquired technology  1,435    1,435    2,870    2,869    1,435  
 Duplicate facility costs during facility move  4    766    86    766    82  
 Stock compensation  2,922    2,588    5,614    4,864    2,692  
 Impairment of long-lived assets  -    124    1,282    124    1,282  
 Reduction in force costs  417    319    971    794    554  
 Acquisition related retention payment  28    89    93    207    65  
  Total cost of revenue adjustments  7,208    7,369    14,748    13,393    7,540  
Gross profit - non-GAAP  96,299    92,290    191,216    197,133    94,917  
Gross margin - non-GAAP  30.0 %  31.1 %  30.1 %  31.6 %  30.2 %
                          
GAAP to non-GAAP reconciliation of operating income:                         
Operating income (loss) - GAAP  9,368    (7,259 )  16,429    13,109    7,061  
Operating margin - GAAP  2.9 %  -2.4 %  2.6 %  2.1 %  2.2 %
Adjustments:                         
Total cost of revenue adjustments  7,208    7,369    14,748    13,393    7,540  
Research and development                         
 Reduction in force costs  -    353    288    685    288  
 Duplicate facility costs during facility move  49    767    270    767    221  
 Acquisition related retention payment  67    166    158    359    91  
 Stock compensation  4,970    4,727    9,808    9,163    4,838  
 Impairment of long-lived assets  -    -    287    -    287  
Sales and marketing                         
 Reduction in force costs  117    -    180    -    63  
 Acquisition related retention payment  3    9    13    29    10  
 Stock compensation  1,718    1,625    3,425    3,154    1,707  
General and administrative                         
 Reduction in force costs  963    59    1,315    54    352  
 Duplicate facility costs  8    116    17    116    9  
 Acquisition related retention payment  -    (55 )  (5 )  (39 )  (5 )
 Stock compensation  2,757    2,617    5,517    5,429    2,760  
 Payroll taxes related to options investigation  -    17    -    17    -  
 Acquisition related costs  378    8    396    238    18  
 Litigation settlements and resolutions and related costs  -    13,728    16    12,416    16  
Amortization of purchased intangibles  668    737    1,336    1,498    668  
Impairment of long-lived assets  -    -    587    -    587  
  Total cost of revenue and operating expense adjustments  18,906    32,243    38,356    47,279    19,450  
Operating income - non-GAAP  28,274    24,984    54,785    60,388    26,511  
Operating margin - non-GAAP  8.8 %  8.4 %  8.6 %  9.7 %  8.4 %
                          
GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation:                         
Net income (loss) attributable to Finisar Corporation - GAAP  6,644    (11,361 )  10,037    2,882    3,393  
Adjustments:                         
Total cost of revenue and operating expense adjustments  18,906    32,243    38,356    47,279    19,450  
Non-cash imputed interest expenses on convertible debt  2,391    2,279    4,745    4,522    2,354  
Imputed interest related to restructuring  44    50    89    101    45  
Other (income) expense, net                         
 Loss (gain) on sale of assets  85    (27 )  (100 )  211    (185 )
 Other miscellaneous income  (120 )  (10 )  (137 )  (11 )  (17 )
 Foreign exchange transaction (gain) or loss  51    327    (642 )  2,318    (693 )
 Amortization of debt issuance cost  154    154    308    308    154  
Provision for income taxes                         
 Income tax provision adjustments  (1,298 )  (190 )  (1,267 )  (813 )  31  
Total adjustments  20,213    34,826    41,352    53,915    21,139  
Net income attributable to Finisar Corporation - non-GAAP $26,857   $23,465   $51,389   $56,797   $24,532  
                          
Non-GAAP income attributable to Finisar Corporation $26,857   $23,465   $51,389   $56,797   $24,532  
Add: interest expense for dilutive convertible notes  -    533    -    1,072    -  
Adjusted non-GAAP income attributable to Finisar Corporation $26,857   $23,998   $51,389   $57,869   $24,532  
                          
Non-GAAP income per share attributable to Finisar Corporation common stockholders                         
 Basic $0.25   $0.24   $0.48   $0.57   $0.23  
 Diluted $0.25   $0.23   $0.47   $0.55   $0.23  
Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders                         
 Basic  106,635    99,621    105,961    98,931    105,286  
 Diluted  107,493    105,340    108,238    106,133    108,107  
                          
Non-GAAP EBITDA                         
Non-GAAP income attributable to Finisar Corporation  26,857    23,465    51,389    56,797    24,532  
Depreciation expense  20,989    20,915    42,354    40,563    21,365  
Amortization  -    33    -    72    -  
Interest expense  (141 )  196    (176 )  424    (35 )
Income tax expense  2,019    1,800    4,019    4,000    2,000  
Non-GAAP EBITDA $49,724   $46,409   $97,586   $101,856   $47,862  

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