PRESS RELEASES
Finisar Announces Second Quarter Fiscal 2018 Financial Results
COMMENTARY
"We experienced strong demand in our second fiscal quarter for our 100G QSFP28 transceivers for datacenters," said
FINANCIAL HIGHLIGHTS - Second Quarter Ended | |||
Summary GAAP Results | Second | First | |
Quarter | Quarter | ||
Ended | Ended | ||
(in thousands, except per share amounts) | |||
Revenues | |||
Gross margin | 29.0% | 33.7% | |
Operating expenses | |||
Operating income | |||
Operating margin | 2.8% | 8.8% | |
Net income |
| ||
Income per share-basic | |||
Income per share-diluted | |||
Basic shares | 113,960 | 112,544 | |
Diluted shares | 115,443 | 115,698 | |
Summary Non-GAAP Results (a) | Second | First
| |
Quarter | Quarter | ||
Ended | Ended | ||
(in thousands, except per share amounts) | |||
Revenues | |||
Non-GAAP Gross margin | 30.3% | 34.9% | |
Non-GAAP Operating expenses | |||
Non-GAAP Operating income | |||
Non-GAAP Operating margin | 7.8% | 13.5% | |
Non-GAAP Net income | 26,089 | 45,750 | |
Non-GAAP Income per share-basic | |||
Non-GAAP Income per share-diluted | |||
Basic shares | 113,960 | 112,544 | |
Diluted shares | 115,443 | 115,698 |
_____________
(a) In evaluating the operating performance of Finisar's business,
Financial Statement Highlights for the Second Quarter of Fiscal 2018:
- Sales of datacom products decreased by
$1.7 million , or (0.7)%, compared to the first quarter of fiscal 2018, primarily from lower demand for 10G and below transceivers, 40G QSFP transceivers, and 100G CFP ethernet transceivers. This was partially offset by an increase in sales of 100G QSFP28 transceivers as well as new revenues from VCSEL arrays for 3D sensing. - Sales of telecom products decreased by
$7.9 million , or (9.5)%, compared to the first quarter of fiscal 2018, primarily driven by lower revenues from our Chinese OEM customers. - GAAP gross margin was 29.0% compared to 33.7% in the first quarter of fiscal 2018, primarily due to lower revenue levels, unfavorable product mix, and under-absorption of manufacturing costs
at our
Allen, Texas VCSEL fab. This under-absorption was primarily due to our shipping production quantities of VCSEL arrays late in the quarter. - Non-GAAP gross margin was 30.3% compared to 34.9% in the first quarter of fiscal 2018.
- GAAP operating margin was 2.8% compared to 8.8% in the first quarter of fiscal 2018, primarily due to lower revenue levels and gross margins.
- Non-GAAP operating margin was 7.8% compared to 13.5% in the first quarter of fiscal 2018.
- GAAP income per fully diluted share was
$0.05 compared to$0.17 in the first quarter of fiscal 2018, primarily due to lower revenue levels and gross margin. - Non-GAAP income per fully diluted share was
$0.23 compared to$0.40 in the first quarter of fiscal 2018.
OUTLOOK
CONFERENCE CALL
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 61569772and 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.
ABOUT
FINISAR FINANCIAL STATEMENTS The following financial tables are presented in accordance with GAAP.
Consolidated Statements of Operations | |||||||||||||||||||
(Unaudited, in thousands, except per share data) | |||||||||||||||||||
Three Months Ended | Six Months Ended | Three Months Ended | |||||||||||||||||
Revenues | $ | 332,205 | $ | 369,863 | $ | 674,011 | $ | 711,188 | $ | 341,806 | |||||||||
Cost of revenues | 235,389 | 235,192 | 461,285 | 466,829 | 225,896 | ||||||||||||||
Amortization of acquired developed technology | 611 | 990 | 1,222 | 2,513 | 611 | ||||||||||||||
Gross profit | 96,205 | 133,681 | 211,504 | 241,846 | 115,299 | ||||||||||||||
Gross margin | 29.0% | 36.1% | 31.4% | 34.0% | 33.7% | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 60,560 | 53,242 | 118,600 | 104,250 | 58,040 | ||||||||||||||
Sales and marketing | 12,230 | 13,367 | 24,581 | 25,230 | 12,351 | ||||||||||||||
General and administrative | 13,282 | 13,576 | 27,571 | 29,891 | 14,289 | ||||||||||||||
Amortization of purchased intangibles | 666 | 668 | 1,373 | 1,336 | 707 | ||||||||||||||
Total operating expenses | 86,738 | 80,853 | 172,125 | 160,707 | 85,387 | ||||||||||||||
Income from operations | 9,467 | 52,828 | 39,379 | 81,139 | 29,912 | ||||||||||||||
Interest income | 3,746 | 1,021 | 7,186 | 1,747 | 3,440 | ||||||||||||||
Interest expense | (9,131 | ) | (3,025 | ) | (18,144 | ) | (6,011 | ) | (9,013 | ) | |||||||||
Other expenses | 1,111 | 795 | (1,583 | ) | 736 | (2,694 | ) | ||||||||||||
Income before income taxes | 5,193 | 51,619 | 26,838 | 77,611 | 21,645 | ||||||||||||||
Provision (benefit) for income taxes | (664 | ) | 2,854 | 1,122 | 4,897 | 1,786 | |||||||||||||
Net income | $ | 5,857 | $ | 48,765 | $ | 25,716 | $ | 72,714 | $ | 19,859 | |||||||||
Net income per share attributable to | |||||||||||||||||||
Basic | $ | 0.05 | $ | 0.44 | $ | 0.23 | $ | 0.66 | $ | 0.18 | |||||||||
Diluted | $ | 0.05 | $ | 0.43 | $ | 0.22 | $ | 0.65 | $ | 0.17 | |||||||||
Shares used in computing net income per share - basic | 113,960 | 110,407 | 113,252 | 109,614 | 112,544 | ||||||||||||||
Shares used in computing net income per share - diluted | 115,443 | 113,192 | 115,973 | 112,450 | 115,698 | ||||||||||||||
Consolidated Balance Sheets | |||||||||||||
(in thousands) | |||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 274,547 | $ | 278,826 | $ | 260,228 | |||||||
Short-term held-to-maturity investments | 958,216 | 954,026 | 976,595 | ||||||||||
Accounts receivable, net | 260,870 | 273,180 | 272,377 | ||||||||||
Inventories | 369,078 | 356,845 | 331,388 | ||||||||||
Other current assets | 61,517 | 63,629 | 68,269 | ||||||||||
Total current assets | 1,924,228 | 1,926,506 | 1,908,857 | ||||||||||
Property, equipment and improvements, net | 443,733 | 420,298 | 383,919 | ||||||||||
Purchased intangible assets, net | 10,424 | 11,700 | 13,019 | ||||||||||
106,735 | 106,735 | 106,735 | |||||||||||
Minority investments | 606 | 605 | 3,161 | ||||||||||
Other assets | 20,818 | 21,651 | 16,964 | ||||||||||
Deferred tax assets | 116,055 | 108,567 | 107,225 | ||||||||||
Total assets | $ | 2,622,599 | $ | 2,596,062 | $ | 2,539,880 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 152,047 | $ | 148,605 | $ | 140,568 | |||||||
Accrued compensation | 36,614 | 42,030 | 54,520 | ||||||||||
Other accrued liabilities | 40,130 | 46,648 | 43,697 | ||||||||||
Deferred revenue | 17,716 | 14,348 | 13,015 | ||||||||||
Total current liabilities | 246,507 | 251,631 | 251,800 | ||||||||||
Long-term liabilities: | |||||||||||||
Convertible notes | 723,784 | 715,722 | 707,782 | ||||||||||
Other non-current liabilities | 17,176 | 17,546 | 17,594 | ||||||||||
Total liabilities | 987,467 | 984,899 | 977,176 | ||||||||||
Stockholders' equity: | |||||||||||||
Common stock | 114 | 114 | 112 | ||||||||||
Additional paid-in capital | 2,814,713 | 2,799,118 | 2,784,204 | ||||||||||
Accumulated other comprehensive income (loss) | (41,664 | ) | (44,181 | ) | (57,865 | ) | |||||||
Accumulated deficit | (1,138,031 | ) | (1,143,888 | ) | (1,163,747 | ) | |||||||
Total stockholders' equity | 1,635,132 | 1,611,163 | 1,562,704 | ||||||||||
Total liabilities and stockholders' equity | $ | 2,622,599 | $ | 2,596,062 | $ | 2,539,880 | |||||||
Note - Balance sheet amounts as of | |||||||||||||
FINISAR NON-GAAP FINANCIAL MEASURES
In addition to reporting financial results in accordance with
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);
- Duplicate facility costs during facility move (non-core cash charges);
- Stock-based compensation expense (non-cash charges);
- Reduction in force costs (non-core cash charges); and
- Acquisition related retention payments (non-core 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:
- Litigation settlements and resolutions and related costs (non-core charges);
- Acquisition related costs (non-core cash charge) 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 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-cash losses and cash gains related to the periodic disposal of assets no longer required for current activities);
- Loss (gain) related to minority investment (non-core charges or benefits);
- 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:
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 | |||||||||||||||||
GAAP to non-GAAP reconciliation of gross profit: | |||||||||||||||||||
Gross profit - GAAP | $ | 96,205 | $ | 133,681 | $ | 211,504 | $ | 241,846 | $ | 115,299 | |||||||||
Gross margin - GAAP | 29.0% | 36.1% | 31.4% | 34.0% | 33.7% | ||||||||||||||
Adjustments: | |||||||||||||||||||
Cost of revenues | |||||||||||||||||||
Amortization of acquired technology | 611 | 990 | 1,222 | 2,513 | 611 | ||||||||||||||
Duplicate facility costs during facility move | - | 8 | - | 16 | - | ||||||||||||||
Stock compensation | 3,724 | 2,949 | 6,294 | 5,996 | 2,570 | ||||||||||||||
Reduction in force costs | (9 | ) | 14 | 625 | 116 | 634 | |||||||||||||
Acquisition related retention payment | 26 | 26 | 67 | 45 | 41 | ||||||||||||||
Total cost of revenue adjustments | 4,352 | 3,987 | 8,208 | 8,686 | 3,856 | ||||||||||||||
Gross profit - non-GAAP | 100,557 | 137,668 | 219,712 | 250,532 | 119,155 | ||||||||||||||
Gross margin - non-GAAP | 30.3% | 37.2% | 32.6% | 35.2% | 34.9% | ||||||||||||||
GAAP to non-GAAP reconciliation of operating income: | |||||||||||||||||||
Operating income - GAAP | 9,467 | 52,828 | 39,379 | 81,139 | 29,912 | ||||||||||||||
Operating margin - GAAP | 2.8% | 14.3% | 5.8% | 11.4% | 8.8% | ||||||||||||||
Adjustments: | |||||||||||||||||||
Total cost of revenue adjustments | 4,352 | 3,987 | 8,208 | 8,686 | 3,856 | ||||||||||||||
Total operating expense adjustments | |||||||||||||||||||
Operating expenses - GAAP | 86,738 | 80,853 | 172,125 | 160,707 | 85,387 | ||||||||||||||
Research and development | |||||||||||||||||||
Reduction in force costs | 22 | 88 | 115 | 262 | 93 | ||||||||||||||
Duplicate facility costs during facility move | - | 7 | - | 14 | - | ||||||||||||||
Acquisition related retention payment | 32 | 32 | 64 | 64 | 32 | ||||||||||||||
Stock compensation | 6,147 | 5,552 | 12,229 | 10,663 | 6,082 | ||||||||||||||
Sales and marketing | |||||||||||||||||||
Reduction in force costs | - | - | (12 | ) | 29 | (12 | ) | ||||||||||||
Acquisition related retention payment | - | - | (2 | ) | - | (2 | ) | ||||||||||||
Stock compensation | 2,039 | 1,877 | 4,083 | 3,628 | 2,044 | ||||||||||||||
General and administrative | |||||||||||||||||||
Reduction in force costs | 13 | 20 | 50 | 33 | 37 | ||||||||||||||
Duplicate facility costs during facility move | 137 | 154 | 320 | 297 | 183 | ||||||||||||||
Acquisition related retention payment | - | - | - | (2 | ) | - | |||||||||||||
Stock compensation | 2,999 | 2,989 | 6,068 | 5,542 | 3,069 | ||||||||||||||
Acquisition related costs | 40 | 2 | 44 | 33 | 4 | ||||||||||||||
Litigation settlements and resolutions and related costs | - | 46 | - | 46 | - | ||||||||||||||
Amortization of purchased intangibles | 666 | 668 | 1,373 | 1,336 | 707 | ||||||||||||||
Total operating expense adjustments | 12,095 | 11,435 | 24,332 | 21,945 | 12,237 | ||||||||||||||
Operating expenses - non-GAAP | 74,643 | 69,418 | 147,793 | 138,762 | 73,150 | ||||||||||||||
Operating income - non-GAAP | 25,914 | 68,250 | 71,919 | 111,770 | 46,005 | ||||||||||||||
Operating margin - non-GAAP | 7.8% | 18.5% | 10.7% | 15.7% | 13.5% | ||||||||||||||
GAAP to non-GAAP reconciliation of income before income taxes: | |||||||||||||||||||
Income before income taxes - GAAP | 5,193 | 51,619 | 26,838 | 77,611 | 21,645 | ||||||||||||||
Adjustments: | |||||||||||||||||||
Total cost of revenue adjustments | 4,352 | 3,987 | 8,208 | 8,686 | 3,856 | ||||||||||||||
Total operating expense adjustments | 12,095 | 11,435 | 24,332 | 21,945 | 12,237 | ||||||||||||||
Non-cash imputed interest expenses on convertible debt | 7,676 | 2,509 | 15,231 | 4,978 | 7,555 | ||||||||||||||
Imputed interest related to restructuring | 28 | 37 | 58 | 75 | 30 | ||||||||||||||
Other (income) expense, net | |||||||||||||||||||
Loss (gain) on assets | 38 | (17 | ) | (79 | ) | (25 | ) | (117 | ) | ||||||||||
Loss related to impairment of minority investments | - | - | 2,347 | - | 2,347 | ||||||||||||||
Foreign exchange transaction (gain) or loss | (1,478 | ) | (970 | ) | (1,016 | ) | (999 | ) | 463 | ||||||||||
Amortization of debt issuance cost | 385 | 154 | 770 | 308 | 385 | ||||||||||||||
Total Interest and other adjustments | 6,649 | 1,713 | 17,311 | 4,337 | 10,663 | ||||||||||||||
Income before income taxes - non-GAAP | 28,289 | 68,754 | 76,689 | 112,579 | 48,401 | ||||||||||||||
GAAP to non-GAAP reconciliation of net income: | |||||||||||||||||||
Net income - GAAP | 5,857 | 48,765 | 25,716 | 72,714 | 19,859 | ||||||||||||||
Total cost of revenue adjustments | 4,352 | 3,987 | 8,208 | 8,686 | 3,856 | ||||||||||||||
Total operating expense adjustments | 12,095 | 11,435 | 24,332 | 21,945 | 12,237 | ||||||||||||||
Total Interest and other adjustments | 6,649 | 1,713 | 17,311 | 4,337 | 10,663 | ||||||||||||||
Income tax provision adjustments | (2,864 | ) | (746 | ) | (3,728 | ) | (703 | ) | (865 | ) | |||||||||
Total adjustments | 20,232 | 16,389 | 46,123 | 34,265 | 25,891 | ||||||||||||||
Net income - non-GAAP | $ | 26,089 | $ | 65,154 | $ | 71,839 | $ | 106,979 | $ | 45,750 | |||||||||
Basic non-GAAP income per share | |||||||||||||||||||
GAAP earnings per share | $ | 0.05 | $ | 0.44 | $ | 0.23 | $ | 0.66 | $ | 0.18 | |||||||||
Impact of all non-GAAP adjustments | $ | 0.18 | $ | 0.15 | $ | 0.40 | $ | 0.32 | $ | 0.23 | |||||||||
Non-GAAP earnings per share | $ | 0.23 | $ | 0.59 | $ | 0.63 | $ | 0.98 | $ | 0.41 | |||||||||
Diluted non-GAAP income per share | |||||||||||||||||||
GAAP earnings per share | $ | 0.05 | $ | 0.43 | $ | 0.22 | $ | 0.65 | $ | 0.17 | |||||||||
Impact of all non-GAAP adjustments | $ | 0.18 | $ | 0.15 | $ | 0.40 | $ | 0.30 | $ | 0.23 | |||||||||
Non-GAAP earnings per share | $ | 0.23 | $ | 0.58 | $ | 0.62 | $ | 0.95 | $ | 0.40 | |||||||||
Shares used in computing non-GAAP income per share | |||||||||||||||||||
Basic | 113,960 | 110,407 | 113,252 | 109,614 | 112,544 | ||||||||||||||
Diluted | 115,443 | 113,192 | 115,973 | 112,450 | 115,698 |
Finisar-F
Investor Contact:
Chief Financial Officer
408-542-5050 or Investor.relations@finisar.com
Press contact:
Director, Corporate Communications
408-542-4261
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