Finisar Corporation
Sep 4, 2014
PDF

Finisar Announces 7% Revenue Growth Over Prior Quarter

SUNNYVALE, CA -- (Marketwired) -- 09/04/14 -- 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 2015, ended July 27, 2014.

COMMENTARY

"I am pleased to report that first quarter revenues were $327.6 million, a new all-time record for Finisar. Quarterly revenues increased by $21.6 million, or 7.1%, over the fourth fiscal quarter of fiscal 2014. Quarterly revenues grew for the eighth consecutive quarter," said Jerry Rawls, Finisar's executive Chairman of the Board.

"While demand for our transceivers that address wireless applications was very strong in the first quarter, demand for these products is now expected to decrease in the second quarter. We expect the demand to return and revenues to increase sequentially for these products in the third quarter. As a result of this decrease in demand for wireless transceivers, as well as a decrease in demand for telecom products due to soft carrier spending and a decrease in demand from several datacom customers with lumpy order patterns, we expect our overall revenues to decline in the second fiscal quarter," said Eitan Gertel, Finisar's Chief Executive Officer.

FINANCIAL HIGHLIGHTS - FIRST QUARTER ENDED JULY 27, 2014
Summary GAAP Results First Fourth
Quarter Quarter
Ended Ended
July 27, 2014 April 27, 2014
(in thousands, except per share amounts)
Revenues $ 327,638 $ 306,025
Gross margin 30.2 % 31.6 %
Operating expenses $ 78,451 $ 75,457
Operating income $ 20,368 $ 21,107
Operating margin 6.2 % 6.9 %
Net income $ 14,243 $ 28,750
Income per share-basic $ 0.14 $ 0.30
Income per share-diluted $ 0.14 $ 0.28
Basic shares 98,241 96,965
Diluted shares 106,036 105,418
Summary Non-GAAP Results (a) First Fourth
Quarter Quarter
Ended Ended
July 27, 2014 April 27, 2014
(in thousands, except per share amounts)
Revenues $ 327,638 $ 306,025
Gross margin 32.0 % 34.2 %
Operating expenses $ 69,439 $ 65,931
Operating income $ 35,404 $ 38,882
Operating margin 10.8 % 12.7 %
Net income $ 33,332 $ 36,992
Income per share-basic $ 0.34 $ 0.38
Income per share-diluted $ 0.32 $ 0.36
Basic shares 98,241 96,965
Diluted shares 106,036 105,418

_____________

(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 2015:

OUTLOOK

The Company indicated that for the second quarter of fiscal 2015 it currently expects revenues in the range of $305 to $320 million, non-GAAP gross margin of approximately 31% to 32%, non-GAAP operating margin of approximately 8.5% to 9.5%, and non-GAAP earnings per diluted share in the range of approximately $0.23 to $0.27.

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 4, 2014, 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 1-888-299-7205 (domestic) or +1-719-325-3210 (international) and enter conference ID 7685228.

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 7685228 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; intensive competition; and the uncertainty of achieving anticipated cost savings and synergies in connection with the recently completed u2t acquisition. 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 26, 2014) 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 Balance Sheets
(in thousands)
July 27, 2014 April 27, 2014
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 287,455 $ 303,101
Short-term held-to-maturity investments 209,927 209,922
Accounts receivable, net 231,312 225,020
Accounts receivable, other 41,595 33,749
Inventories 270,122 259,759
Prepaid expenses and other assets 38,582 33,022
Total current assets 1,078,993 1,064,573
Property, equipment and improvements, net 301,020 273,328
Purchased intangible assets, net 33,680 34,141
Goodwill 106,735 106,115
Minority investments 2,317 2,117
Other assets 20,907 17,272
Total assets $ 1,543,652 $ 1,497,546
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 143,224 $ 119,439
Accrued compensation 28,215 38,541
Other accrued liabilities 27,568 31,533
Deferred revenue 16,872 16,659
Short term debt 247 243
Current portion of convertible notes 40,015 40,015
Total current liabilities 256,141 246,430
Long-term liabilities:
Convertible notes, net of current portion 214,496 212,253
Other non-current liabilities 24,042 22,804
Total liabilities 494,679 481,487
Stockholders' equity:
Common stock 100 97
Additional paid-in capital 2,469,687 2,456,110
Accumulated other comprehensive income 25,116 20,025
Accumulated deficit (1,445,930 ) (1,460,173 )
Total stockholders' equity 1,048,973 1,016,059
Total liabilities and stockholders' equity $ 1,543,652 $ 1,497,546

Note - Balance sheet amounts as of April 27, 2014 are derived from the audited consolidated financial statements as of the date.

Finisar Corporation
Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three Months Ended
July 27, 2014 July 28, 2013 April 27, 2014
Revenues $ 327,638 $ 266,068 $ 306,025
Cost of revenues 227,385 173,102 208,135
Amortization of acquired developed technology 1,434 1,593 1,326
Gross profit 98,819 91,373 96,564
Gross margin 30.2 % 34.3 % 31.6 %
Operating expenses:
Research and development 51,006 43,530 48,132
Sales and marketing 11,965 11,805 11,509
General and administrative 14,719 8,340 15,133
Amortization of purchased intangibles 761 595 683
Total operating expenses 78,451 64,270 75,457
Income from operations 20,368 27,103 21,107
Interest income 612 217 485
Interest expense (3,134 ) (552 ) (2,965 )
Other income (expenses), net (2,026 ) 488 8,124
Income before income taxes and non-controlling interest 15,820 27,256 26,751
Provision (benefits) for income taxes 1,577 1,421 (1,932 )
Income before non-controlling interest 14,243 25,835 28,683
Adjust for net loss attributable to non-controlling interest - 176 67
Net income attributable to Finisar Corporation $ 14,243 $ 26,011 $ 28,750
Net income per share attributable to Finisar Corporation common stockholders:
Basic $ 0.14 $ 0.27 $ 0.30
Diluted $ 0.14 $ 0.26 $ 0.28
Shares used in computing net income per share - basic 98,241 94,609 96,965
Shares used in computing net income per share - diluted 106,036 101,125 105,418

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

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
July 27, 2014 July 28, 2013 April 27, 2014
GAAP to non-GAAP reconciliation of gross profit:
Gross profit - GAAP $ 98,819 $ 91,373 $ 96,564
Gross margin - GAAP 30.2 % 34.3 % 31.6 %
Adjustments:
Cost of revenues
Change in excess and obsolete inventory reserve 1,721 (1,528 ) 3,384
Amortization of acquired technology 1,434 1,593 1,326
Stock compensation 2,276 1,777 2,531
Acquisition method accounting adjustment for sale of acquired inventory - - 822
Reduction in force costs 475 23 124
Acquisition related retention payment 118 62 62
Total cost of revenue adjustments 6,024 1,927 8,249
Gross profit - non-GAAP 104,843 93,300 104,813
Gross margin - non-GAAP 32.0 % 35.1 % 34.2 %
GAAP to non-GAAP reconciliation of operating income:
Operating income - GAAP 20,368 27,103 21,107
Operating margin - GAAP 6.2 % 10.2 % 6.9 %
Adjustments:
Total cost of revenue adjustments 6,024 1,927 8,249
Research and development
Reduction in force costs 332 12 -
Acquisition related retention payment 193 191 190
Stock compensation 4,436 3,525 4,056
Sales and marketing
Acquisition related retention payment 20 17 17
Stock compensation 1,529 1,184 1,406
General and administrative
Reduction in force costs (5 ) 67 69
Acquisition related retention payment 16 217 8
Stock compensation 2,812 2,423 2,525
Acquisition related costs 230 225 567
Litigation settlements and resolutions and related costs (1,312 ) 5 5
Gain on fair value remeasurement of contingent consideration liability - (5,094 ) -
Amortization of purchased intangibles 761 595 683
Total cost of revenue and operating expense adjustments 15,036 5,294 17,775
Operating income - non-GAAP 35,404 32,397 38,882
Operating margin - non-GAAP 10.8 % 12.2 % 12.7 %
GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation:
Net income attributable to Finisar Corporation - GAAP 14,243 26,011 28,750
Adjustments:
Total cost of revenue and operating expense adjustments 15,036 5,294 17,775
Non-cash imputed interest expenses on convertible debt 2,243 - 2,225
Imputed interest related to restructuring 51 57 53
Other (income) expense, net
Loss (gain) on sale of assets 238 (110 ) (8,156 )
Gain related to minority investments - (743 ) -
Other miscellaneous income (1 ) - -
Foreign exchange transaction (gain) or loss 1,991 567 (69 )
Amortization of debt issuance cost 154 - 155
Provision for income taxes
Income tax provision adjustments (623 ) 126 (3,737 )
Non-controlling interest non-GAAP adjustment - 67 (4 )
Total adjustments 19,089 5,258 8,242
Net income attributable to Finisar Corporation - non-GAAP $ 33,332 $ 31,269 $ 36,992
Non-GAAP income attributable to Finisar Corporation $ 33,332 $ 31,269 $ 36,992
Add: interest expense for dilutive convertible notes 539 539 539
Adjusted non-GAAP income attributable to Finisar Corporation $ 33,871 $ 31,808 $ 37,531
Non-GAAP income per share attributable to Finisar Corporation common stockholders
Basic $ 0.34 $ 0.33 $ 0.38
Diluted $ 0.32 $ 0.31 $ 0.36
Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders
Basic 98,241 94,609 96,965
Diluted 106,036 101,125 105,418
Non-GAAP EBITDA
Non-GAAP income attributable to Finisar Corporation $ 33,332 $ 31,269 $ 36,992
Depreciation expense 19,648 13,927 17,518
Amortization 39 94 94
Interest expense 228 278 202
Income tax expense 2,200 1,295 1,805
Non-GAAP EBITDA $ 55,447 $ 46,863 $ 56,611

Finisar-F

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

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

Source: Finisar

News Provided by Acquire Media