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September 6, 2018 at 4:01 PM EDT

Finisar Announces First Quarter of Fiscal 2019 Financial Results

SUNNYVALE, Calif., Sept. 06, 2018 (GLOBE NEWSWIRE) -- 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 2019, ended July 29, 2018. 

COMMENTARY

“Revenues grew over the prior quarter and exceeded the mid-point of our guidance range, primarily driven by strength in demand for our wavelength selective switches. Gross margin also improved over the prior quarter and exceeded our guidance range due to favorable product mix,” said Michael Hurlston, Finisar’s Chief Executive Officer. “In addition, we were able to accelerate the process of bringing more focus to our product development efforts, which allowed the company to reduce relative expense levels faster than expected. In combination, this led to better earnings per share, exceeding the high end of our guidance range.”

 
FINANCIAL HIGHLIGHTS – First Quarter Ended July 29, 2018
       
Summary GAAP Results First 
  Fourth
  Quarter 
  Quarter
  Ended 
  Ended
  July 29, 2018   April 29, 2018
  (in thousands, except per share amounts)
       
Revenues (a) $317,336   $310,069
Gross margin 25.4%   20.2%
Operating expenses $96,376   $89,330
Operating loss $(15,691)   $(26,737)
Operating margin (4.9)%   (8.6)%
Net loss $(18,489)   $(18,344)
Loss per share-basic $(0.16)   $(0.16)
Loss per share-diluted $(0.16)   $(0.16)
       
Basic shares 115,867   114,742
Diluted shares 115,867   114,742
       
       
Summary Non-GAAP Results (b) First
  Fourth
  Quarter
  Quarter
  Ended
  Ended
  July 29, 2018
  April 29, 2018
  (in thousands, except per share amounts)
   
   
Revenues (a) $317,336    $310,069 
Non-GAAP Gross margin  27.5%    24.7%
Non-GAAP Operating expenses $68,311    $72,029 
Non-GAAP Operating income $18,841    $4,573 
Non-GAAP Operating margin  5.9%    1.5%
Non-GAAP Net income  21,297     5,780 
Non-GAAP Income per share-basic $0.18    $0.05 
Non-GAAP Income per share-diluted $0.18    $0.05 
       
Basic shares  115,867     114,742 
Diluted shares  117,191     115,991 
 

_____________

(a) During the first quarter of fiscal 2019, Finisar recognized revenue based on the ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” but revenue for the three months ended April 29, 2018 was recognized based on Topic 605. Therefore, the periods are not directly comparable. For additional information on the impact of the new revenue recognition accounting standard, see refer to Note 2 in the notes to condensed consolidated financial statements in Finisar’s Form 10-Q for the first quarter of fiscal 2019.

(b) 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 of Finisar’s core ongoing operating resultsA 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.

OUTLOOK

Finisar indicated that for the second quarter of fiscal 2019 it currently expects revenues in the range of $315 to $335 million, non-GAAP gross margin of approximately 28%, non-GAAP operating margin of approximately 7-8%, and non-GAAP earnings per fully diluted share in the range of approximately $0.19 to $0.25.

Finisar has not provided a reconciliation of its second quarter outlook for non-GAAP gross margin, non-GAAP operating margin and non-GAAP earnings per fully diluted share because estimates of all of the reconciling items cannot be provided without unreasonable efforts. It is difficult to reasonably provide a forward-looking estimate of certain reconciling items between such non-GAAP forward-looking measures and the comparable forward-looking GAAP measures. Certain factors that are materially significant to Finisar’s ability to estimate these items are out of its control and/or cannot be reasonably predicted, including with respect to restructuring charges, litigation settlements and resolutions and related costs, and the timing of tax related adjustments. Accordingly, a reconciliation of such non-GAAP forward-looking measures to the comparable forward-looking GAAP measures are not available within a reasonable range of predictability. 

CONFERENCE CALL

Finisar will discuss its financial results for the first fiscal quarter of 2019 and current business outlook during its regular quarterly conference call scheduled for September 6, 2018, 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-(855) 473-9088 (domestic) or 1- (720) 405-0995 (international) and enter conference ID 9594409.

An audio replay will be available for two weeks following the call by dialing 1- (855) 859-2056 (domestic) or 1-404-537-3406 (international) and then following the prompts: enter conference ID 9594409 and provide your name, affiliation, and contact number. A replay of the webcast will be available shortly after the conclusion of the call on Finisar’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 16, 2017) and quarterly SEC filings.

ABOUT FINISAR

Finisar Corporation (NASDAQ: FNSR) is a global technology leader in optical communications, providing components and subsystems to networking equipment manufacturers, data center operators, telecom service providers, consumer electronics and automotive companies. Founded in 1988, Finisar designs products that meet the increasing demands for network bandwidth, data storage and 3D sensing subsystems. The company is headquartered in Sunnyvale, California, USA with R&D, manufacturing sites, and sales offices worldwide. Visit our website at www.finisar.com.

FINISAR FINANCIAL STATEMENTS The following financial tables are presented in accordance with GAAP.

 
Finisar Corporation
Consolidated Balance Sheets 
 (in thousands)
       
  Jul 29, 2018   Apr 29, 2018
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 326,189     $ 312,257  
Short-term held-to-maturity investments   832,681       884,838  
Accounts receivable, net   248,138       233,529  
Inventories   325,846       348,527  
Other current assets   54,863       56,001  
Total current assets   1,787,717       1,835,152  
Property, equipment and improvements, net   587,203       520,849  
Purchased intangible assets, net   6,742       7,878  
Goodwill   106,735       106,735  
Other assets   25,179       31,721  
Deferred tax assets   85,873       80,850  
Total assets $ 2,599,449     $ 2,583,185  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 149,876     $ 132,161  
Accrued compensation   35,349       32,525  
Other accrued liabilities   50,944       32,824  
Deferred revenue   -       9,535  
Current portion of convertible notes   254,150       251,278  
Total current liabilities   490,319       458,323  
Long-term liabilities:      
Convertible notes   494,316       488,877  
Other non-current liabilities   11,366       12,368  
Total liabilities   996,001       959,568  
Stockholders' equity:      
Common stock   117       115  
Additional paid-in capital   2,869,657       2,850,195  
Accumulated other comprehensive income (loss)   (44,356 )     (14,659 )
Accumulated deficit   (1,221,970 )     (1,212,034 )
Total stockholders' equity   1,603,448       1,623,617  
Total liabilities and stockholders' equity $ 2,599,449     $ 2,583,185  
       
Note - Balance sheet amounts as of April 29, 2018 are derived from the audited consolidated financial statements as of that date.
       


 
Finisar Corporation
Consolidated Statements of Operations
 (Unaudited, in thousands, except per share data) 
           
  Three Months Ended   Three Months Ended
  Jul 29, 2018   Jul 30, 2017   Apr 29, 2018
Revenues $ 317,336     $ 341,806     $ 310,069  
Cost of revenues   236,155       225,896       246,501  
Amortization of acquired developed technology   496       611       604  
Impairment of long-lived assets   -       -       371  
Gross profit   80,685       115,299       62,593  
Gross margin   25.4 %     33.7 %     20.2 %
Operating expenses:        
Research and development   62,874       58,040       60,520  
Sales and marketing   12,480       12,351       12,530  
General and administrative   12,643       14,289       12,207  
Startup costs   7,553       -       2,897  
Amortization of purchased intangibles   640       707       666  
Impairment of long-lived assets   186       -       510  
Total operating expenses   96,376       85,387       89,330  
Income (loss) from operations   (15,691 )     29,912       (26,737 )
Interest income   5,155       3,440       4,904  
Interest expense   (9,386 )     (9,013 )     (9,322 )
Other income (expenses), net   (1,789 )     (2,694 )     1,097  
Income (loss) before income taxes   (21,711 )     21,645       (30,058 )
Provision (benefit) for income taxes   (3,222 )     1,786       (11,714 )
Net income (loss) $ (18,489 )   $ 19,859     $ (18,344 )
           
Net income (loss) per share:      
           
Basic $ (0.16 )   $ 0.18     $ (0.16 )
Diluted $ (0.16 )   $ 0.17     $ (0.16 )
           
Shares used in computing net income (loss) per share - basic   115,867       112,544       114,742  
Shares used in computing net income (loss) per share - diluted   115,867       115,698       114,742  
           

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 and non-GAAP net income per share. These non-GAAP financial measures are supplemental information regarding Finisar’s operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be outside of our ongoing core operating results. Management believes that tracking non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and non-GAAP net income per share provides management and the investment community with valuable insight into our ongoing core current operations, our ability to generate cash and the underlying business trends that 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:

  • Amortization of acquired technology (non-cash charges related to technology obtained in acquisitions);
  • Stock-based compensation expense (non-cash charges);
  • Impairment of long-lived/intangible assets (non-cash charges);
  • Reduction in force costs and other restructuring charges (non-core cash charges);
  • Acquisition related retention payments (non-core cash charges); and
  • Inventory write-off related to discontinued products (non-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:

  • Discontinued product services fee (non-core cash charges);
  • Duplicate facilities cost during facility move (non-core cash charges);
  • Acquisition related costs (non-core cash charges);
  • Litigation settlements and resolutions and related costs (non-core cash charges);
  • Amortization of purchased intangibles (non-cash charges); and
  • Start-up cash costs related to our Sherman VCSEL fab until we begin commercial production.

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);
  • Other miscellaneous income (non-core benefits);
  • Gains and losses on sales of assets (non-cash losses and cash gains related to the periodic disposal of assets no longer required for current activities);
  • Loss related to impairment of minority investment (non-core charges);
  • Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits); and
  • Amortization of debt issuance costs (non-cash charges).

In addition, in this release we have adjusted non-GAAP income and non-GAAP income per share for the difference between GAAP income taxes and non-GAAP income.

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   Three Months Ended
  Jul 29, 2018   Jul 30, 2017   Apr 29, 2018
GAAP to non-GAAP reconciliation of gross profit:                      
Gross profit - GAAP $ 80,685     $ 115,299     $ 62,593  
Gross margin - GAAP   25.4 %     33.7 %     20.2 %
Adjustments:        
Cost of revenues        
Amortization of acquired technology   496       611       604  
Stock compensation   3,806       2,570       3,453  
Impairment of long-lived/intangible assets   -       -       371  
Reduction in force costs   482       634       556  
Acquisition related retention payment   12       41       30  
Write off of discontinued product inventory   1,671       -       8,995  
Total cost of revenues adjustments   6,467       3,856       14,009  
Gross profit - non-GAAP   87,152       119,155       76,602  
Gross margin - non-GAAP   27.5 %     34.9 %     24.7 %
    -          
GAAP to non-GAAP reconciliation of operating income (loss):
Operating income (loss) - GAAP   (15,691 )     29,912       (26,737 )
Operating margin - GAAP   -4.9 %     8.8 %     -8.6 %
Adjustments:        
Total cost of revenues adjustments   6,467       3,856       14,009  
Total operating expense adjustments    
Operating expenses - GAAP   96,376       85,387       89,330  
Research and development      
Reduction in force costs and other restructuring   7,024       93       1,505  
Acquisition related retention payment   29       32       32  
Stock compensation   6,175       6,082       6,034  
Discontinued product service fees   313       -       185  
Sales and marketing        
Reduction in force costs   402       (12 )     335  
Acquisition related retention payment   -       (2 )     -  
Stock compensation   2,146       2,044       1,956  
General and administrative      
Reduction in force costs   493       37       145  
Duplicate facility costs during facility move   26       183       129  
Stock compensation   3,017       3,069       2,233  
Acquisition related costs   (2 )     4       127  
Litigation settlements and resolutions and related costs   63       -       551  
Amortization of purchased intangibles   640       707       666  
Startup costs   7,553       -       2,897  
Impairment of long-lived assets/intangible assets   186       -       506  
Total operating expense adjustments   28,065       12,237       17,301  
Operating expenses - non-GAAP   68,311       73,150       72,029  
Operating income - non-GAAP   18,841       46,005       4,573  
Operating margin - non-GAAP   5.9 %     13.5 %     1.5 %
           
GAAP to non-GAAP reconciliation of income (loss) before income taxes:          
Income (loss) before income taxes - GAAP   (21,711 )     21,645       (30,058 )
Adjustments:        
Total cost of revenues adjustments   6,467       3,856       14,009  
Total operating expense adjustments   28,065       12,237       17,301  
Non-cash imputed interest expenses on convertible debt   7,927       7,555       7,863  
Imputed interest related to restructuring   20       30       23  
Other (income) expense, net      
Gain on sale of assets   (57 )     (113 )     (157 )
Loss related to impairment of minority investments   -       2,347       -  
Other miscellaneous income   (20 )     (4 )     -  
Foreign exchange transaction (gain) or loss   1,921       463       (936 )
Amortization of debt issuance cost   385       385       385  
Total interest and other adjustments   10,176       10,663       7,178  
Income before income taxes - non-GAAP   22,997       48,401       8,430  
           
GAAP to non-GAAP reconciliation of net income (loss):          
Net income (loss) - GAAP   (18,489 )     19,859       (18,344 )
Total cost of revenues adjustments   6,467       3,856       14,009  
Total operating expense adjustments   28,065       12,237       17,301  
Total interest and other adjustments   10,176       10,663       7,178  
Income tax provision adjustments   (4,922 )     (865 )     (14,364 )
Total adjustments   39,786       25,891       24,124  
Net income - non-GAAP $ 21,297     $ 45,750     $ 5,780  
           
Non-GAAP net income for diluted earnings per share calculation
Non-GAAP net income $ 21,297     $ 45,750     $ 5,780  
Add: interest expense for dilutive convertible notes   -       -       -  
Adjusted non-GAAP income $ 21,297     $ 45,750     $ 5,780  
           
Basic non-GAAP income per share           
GAAP earnings per share $ (0.16 )   $ 0.18     $ (0.16 )
Impact of all non-GAAP adjustments $ 0.34     $ 0.23     $ 0.21  
Non-GAAP earnings per share $ 0.18     $ 0.41     $ 0.05  
           
Diluted non-GAAP income per share           
GAAP earnings per share $ (0.16 )   $ 0.17     $ (0.16 )
Impact of all non-GAAP adjustments $ 0.34     $ 0.23     $ 0.21  
Non-GAAP earnings per share $ 0.18     $ 0.40     $ 0.05  
           
Shares used in computing non-GAAP income per share          
Basic   115,867       112,544       114,742  
Diluted   117,191       115,698       115,991  
                       

Finisar-F

Investor Contact:
Kurt Adzema
Chief Financial Officer
408-542-5050 or Investor.relations@finisar.com
    Press contact:
Victoria McDonald
Director, Corporate Communications408-542-4261

finisar_logo_color.jpg

Source: Finisar Corporation