Finisar Corporation
Jun 18, 2015
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Finisar Announces Record Revenues for Fiscal 2015

SUNNYVALE, CA -- (Marketwired) -- 06/18/15 --

Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its fourth quarter and full year fiscal 2015, ended May 3, 2015.

COMMENTARY

"Revenues for our fourth fiscal quarter were $320.0 million, an increase of $13.8 million, or 4.5% compared to the prior quarter," said Jerry Rawls, Finisar's executive Chairman of the Board. "Revenue growth was primarily driven by the benefit from an extra week in the fourth quarter partially offset by the impact of Chinese New Year."

"We also reported record revenue for the full fiscal year 2015, an increase of 8.1% over fiscal 2014, primarily driven by demand for datacom applications," said Eitan Gertel, Finisar's Chief Executive Officer.

 
 
FINANCIAL HIGHLIGHTS - Fourth QUARTER ENDED May 3, 2015
 
Summary GAAP Results   Fourth   Third
Quarter   Quarter
Ended   Ended
    May 3, 2015   January 25, 2015
    (in thousands, except per share amounts)
         
Revenues   $320,042   $306,283
Gross margin   27.9%   25.5%
Operating expenses   $78,933   $74,552
Operating income (loss)   $10,284   $3,401
Operating margin   3.2%   1.1%
Net income (loss)   $7,327   $1,678
Income per share - basic   $0.07   $0.02
Income per share - diluted   $0.07   $0.02
         
Basic shares   104,005   103,563
Diluted shares   107,535   105,990
         
Summary Non-GAAP Results (a)   Fourth   Third
Quarter   Quarter
Ended   Ended
    May 3, 2015   January 25, 2015
    (in thousands, except per share amounts)
         
Revenues   $320,042   $306,283
Gross margin   30.3%   30.0%
Operating expenses   $68,167   $65,128
Operating income   $28,831   $26,852
Operating margin   9.0%   8.8%
Net income   $26,873   $26,706
Income per share - basic   $0.26   $0.26
Income per share - diluted   $0.25   $0.25
         
Basic shares   104,005   103,563
Diluted shares   107,535   105,990
         
     
(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 Fourth Quarter of Fiscal 2015:

 
 
FINANCIAL HIGHLIGHTS - FISCAL YEAR 2015 ENDED May 3, 2015
 
Summary GAAP Results        
Fiscal Year   Fiscal Year
Ended   Ended
    May 3, 2015   April 27, 2014
    (in thousands, except per share amounts)
         
Revenues   $1,250,944   $1,156,833
Gross margin   28.1%   34.3%
Operating expenses   $324,116   $285,584
Operating income   $26,794   $111,415
Operating margin   2.1%   9.6%
Net income   $11,887   $111,787
Income per share - basic   $0.12   $1.16
Income per share - diluted   $0.11   $1.09
         
Basic shares   101,408   95,979
Diluted shares   104,970   104,112
         
Summary Non-GAAP Results (a)        
Fiscal Year   Fiscal Year
Ended   Ended
    May 3, 2015   April 27, 2014
    (in thousands, except per share amounts)
         
Revenues   $1,250,944   $1,156,833
Gross margin   30.9%   35.9%
Operating expenses   $270,040   $253,202
Operating income   $116,071   $162,341
Operating margin   9.3%   14.0%
Net income   $110,376   $157,021
Income per share - basic   $1.09   $1.64
Income per share - diluted   $1.04   $1.53
         
Basic shares   101,408   95,979
Diluted shares   106,819   104,112
         
     
(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 fiscal 2015:

OUTLOOK

The Company indicated that for the first quarter of fiscal 2016 it currently expects revenues in the range of $308 to $328 million, non-GAAP gross margin of approximately 30.5%, non-GAAP operating margin of approximately 8.8% to 9.8%, and non-GAAP earnings per diluted share in the range of approximately $0.23 to $0.29. Please note that the first quarter fiscal 2016 will have 13 weeks compared to 14 weeks in the preceding quarter.

CONFERENCE CALL

Finisar will discuss its financial results for the fourth quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, June 18, 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 877-397-0286 (domestic) or + 719-325-4857 (international) and enter conference ID 9819662.

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 9819662 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 Statements of Operations
(Unaudited, in thousands, except per share data)
                     
    Three Months Ended   Twelve Months Ended   Three Months Ended
    May 03, 2015   April 27, 2014   May 03, 2015   April 27, 2014   January 25, 2015
Revenues   $ 320,042   $ 306,025   $ 1,250,944   $ 1,156,833   $ 306,283
Cost of revenues     229,390     208,135     888,573     754,773     221,173
Impairment of acquired developed technology and other long-lived assets     -     -     5,722     -     5,722
Amortization of acquired developed technology     1,435     1,326     5,739     5,061     1,435
Gross profit     89,217     96,564     350,910     396,999     77,953
Gross margin     27.9%     31.6%     28.1%     34.3%     25.5%
Operating expenses:                              
  Research and development     51,117     48,132     202,089     183,355     48,782
  Sales and marketing     11,800     11,509     46,178     46,547     10,926
  General and administrative     15,303     15,133     72,856     53,214     14,062
  Impairment of acquired developed technology and other long-lived assets     -     -     45     -     45
  Amortization of purchased intangibles     713     683     2,948     2,468     737
    Total operating expenses     78,933     75,457     324,116     285,584     74,552
Income from operations     10,284     21,107     26,794     111,415     3,401
Interest income     536     485     1,811     1,319     321
Interest expense     (3,335)     (2,965)     (12,022)     (5,547)     (2,686)
Other income (expenses), net     4,041     8,124     4,099     7,234     2,051
Income before income taxes and non-controlling interest     11,526     26,751     20,682     114,421     3,087
Provision (benefits) for income taxes     4,199     (1,932)     8,795     2,884     1,409
Income before non-controlling interest     7,327     28,683     11,887     111,537     1,678
Adjust for net loss attributable to non-controlling interest     -     67     -     250     -
Net income attributable to Finisar Corporation   $ 7,327   $ 28,750   $ 11,887   $ 111,787   $ 1,678
                               
Net income per share attributable to Finisar Corporation common stockholders:                              
                               
  Basic   $ 0.07   $ 0.30   $ 0.12   $ 1.16   $ 0.02
  Diluted   $ 0.07   $ 0.28   $ 0.11   $ 1.09   $ 0.02
                               
Shares used in computing net income per share - basic     104,005     96,965     101,408     95,979     103,563
Shares used in computing net income per share - diluted     107,535     105,418     104,970     104,112     105,990
                               
 
 
Finisar Corporation
Consolidated Balance Sheets
(in thousands)
                     
    May 03, 2015   January 25, 2015   October 26, 2014   July 27, 2014   April 27, 2014
        (Unaudited)   (Unaudited)   (Unaudited)    
ASSETS                    
Current assets:                        
  Cash and cash equivalents   $ 197,443   $ 198,344   $ 186,952   $ 287,455   $ 303,101
  Short-term held-to-maturity investments     292,748     290,520   290,478   209,927   209,922
  Accounts receivable, net     213,234     210,116   213,721   231,312   225,020
  Accounts receivable, other     40,650     41,540   34,573   41,595   33,749
  Inventories     283,670     277,862   284,789   270,122   259,759
  Prepaid expenses and other assets     36,518     37,265   38,065   38,582   33,022
    Total current assets     1,064,263     1,055,647   1,048,578   1,078,993   1,064,573
Property, equipment and improvements, net     315,777     304,547   306,331   301,020   273,328
Purchased intangible assets, net     27,188     29,336   31,508   33,680   34,141
Goodwill     106,735     106,735   106,735   106,735   106,115
Minority investments     2,847     2,647   2,547   2,317   2,117
Other assets     35,072     22,444   22,528   20,907   17,272
    Total assets   $ 1,551,882   $ 1,521,356   $ 1,518,227   $ 1,543,652   $ 1,497,546
                         
LIABILITIES AND STOCKHOLDERS' EQUITY                        
Current liabilities:                        
  Accounts payable   $ 131,510   $ 123,895   $ 113,235   $ 143,224   $ 119,439
  Accrued compensation     24,918     30,632   35,354   28,215   38,541
  Other accrued liabilities     39,238     32,029   33,716   27,815   31,776
  Deferred revenue     9,850     11,240   12,358   16,872   16,659
  Current portion of convertible notes     -     -   36,665   40,015   40,015
    Total current liabilities     205,516     197,796   231,328   256,141   246,430
Long-term liabilities:                        
  Convertible notes, net of current portion     221,406     219,072   216,775   214,496   212,253
  Other non-current liabilities     21,167     24,184   24,900   24,042   22,804
    Total liabilities     448,089     441,052   473,003   494,679   481,487
Stockholders' equity:                        
  Common stock     104     104   100   100   97
  Additional paid-in capital     2,551,114     2,537,231   2,485,133   2,469,687   2,456,110
  Accumulated other comprehensive income     861     (1,418)   17,282   25,116   20,025
  Accumulated deficit     (1,448,286   (1,455,613)   (1,457,291)   (1,445,930)   (1,460,173)
    Total stockholders' equity     1,103,793     1,080,304   1,045,224   1,048,973   1,016,059
Total liabilities and stockholders' equity   $ 1,551,882   $ 1,521,356   $ 1,518,227   $ 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 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:

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:

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:

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   Twelve Months Ended   Three Months Ended
    May 03, 2015   April 27, 2014   May 03, 2015   April 27, 2014   January 25, 2015
GAAP to non-GAAP reconciliation of gross profit:                              
Gross profit - GAAP   $ 89,217   $ 96,564   $ 350,910   $ 396,999   $ 77,953
Gross margin - GAAP     27.9%     31.6%     28.1%     34.3%     25.5%
Adjustments:                              
Cost of revenues                              
  Change in excess and obsolete inventory reserve     2,752     3,384     10,293     3,439     3,772
  Amortization of acquired technology     1,435     1,326     5,739     5,061     1,435
  Duplicate facility costs during facility move     4           776           6
  Stock compensation     2,692     2,531     10,216     8,738     2,660
  Abandonment of fixed assets     -     -     124     -     -
  Impairment of long-lived assets     420     -     6,142     -     5,722
  Acquisition method accounting adjustment for sale of acquired inventory     -     822     -     822     -
  Reduction in force costs     406     124     1,571     228     371
  Acquisition related retention payment     72     62     340     256     61
    Total cost of revenue adjustments     7,781     8,249     35,201     18,544     14,027
Gross profit - non-GAAP     96,998     104,813     386,111     415,543     91,980
Gross margin - non-GAAP     30.3%     37.2%     30.9%     35.9%     30.0%
                               
GAAP to non-GAAP reconciliation of operating income:                              
Operating income - GAAP     10,284     21,107     26,794     111,415     3,401
Operating margin - GAAP     3.2%     6.9%     2.1%     9.6%     1.1%
Adjustments:                              
Total cost of revenue adjustments     7,781     8,249     35,201     18,544     14,027
Research and development                              
  Reduction in force costs     82     -     790     28     23
  Acquisition related retention payment     104     190     595     761     132
  Stock compensation     5,084     4,056     18,916     15,645     4,669
  Duplicate facility costs during facility move     143     -     1,009     -     99
  Impairment of acquired R&D reimbursement receivable     87     -     87     -     -
Sales and marketing                              
  Acquisition related retention payment     12     17     50     68     9
  Stock compensation     1,749     1,406     6,503     5,341     1,600
General and administrative                              
  Reduction in force costs     -     69     103     227     49
  Duplicate facility costs     -     -     152     -     36
  Acquisition related retention payment     8     8     (24)     1,044     7
  Stock compensation     2,894     2,525     10,977     10,229     2,654
  Payroll taxes related to options investigation     17     -     34     -     -
  Acquisition related costs     18     567     292     1,507     36
  Litigation settlements and resolutions and related costs (benefits)     (6)     5     11,748     15     (662)
  Shareholder class action and derivative litigation costs (benefits)     (138)     -     (148)     (4,951)     (10)
Amortization of purchased intangibles     713     683     2,948     2,468     737
Impairment of long-lived assets     (1)     -     44     -     45
    Total cost of revenue and operating expense adjustments     18,547     17,775     89,277     50,926     23,451
Operating income - non-GAAP     28,831     38,882     116,071     162,341     26,852
Operating margin - non-GAAP     9.0%     12.7%     9.3%     14.0%     8.8%
                               
GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation:                              
Net income attributable to Finisar Corporation - GAAP     7,327     28,750     11,887     111,787     1,678
Adjustments:                              
Total cost of revenue and operating expense adjustments     18,547     17,775     89,277     50,926     23,451
Non-cash imputed interest expenses on convertible debt     2,334     2,225     9,153     3,152     2,297
Imputed interest related to restructuring     47     53     196     220     48
Amortization of debt issuance costs     616     -     616     -     -
Other (income) expense, net                              
  Loss (gain) on sale of assets     (559)     (8,156)     (317)     (8,291)     31
  Gain related to minority investments     (1,470)     -     (1,470)     (743)     -
  Other miscellaneous income     (850)     -     (1,028)     (5)     (167)
  Foreign exchange transaction (gain) or loss     (607)     (69)     1,373     2,490     (338)
  Amortization of debt issuance costs     (462)     155     -     231     154
Provision for income taxes                              
  Income tax provision adjustments     1,950     (3,737)     689     (3,116)     (448)
Non-controlling interest non-GAAP adjustment     -     (4)     -     370     -
Total adjustments     19,546     8,242     98,489     45,234     25,028
Net income attributable to Finisar Corporation - non-GAAP   $ 26,873   $ 36,992   $ 110,376   $ 157,021   $ 26,706
                               
Non-GAAP income attributable to Finisar Corporation   $ 26,873   $ 36,992   $ 110,376   $ 157,021   $ 26,706
Add: interest expense for dilutive convertible notes     -     539     1,072     2,156     -
Adjusted non-GAAP income attributable to Finisar Corporation   $ 26,873   $ 37,531   $ 111,448   $ 159,177   $ 26,706
                               
Non-GAAP income per share attributable to Finisar Corporation common stockholders                              
  Basic   $ 0.26   $ 0.38   $ 1.09   $ 1.64   $ 0.26
  Diluted   $ 0.25   $ 0.36   $ 1.04   $ 1.53   $ 0.25
Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders                              
  Basic     104,005     96,965     101,408     95,979     103,563
  Diluted     107,535     105,418     106,819     104,112     105,990
                               
Non-GAAP EBITDA                              
Non-GAAP income attributable to Finisar Corporation   $ 26,873   $ 36,992   $ 110,376   $ 157,021   $ 26,706
Depreciation expense     20,488     17,518     82,422     62,026     21,371
Amortization     -     94     72     376     -
Interest expense     (197)     202     247     856     20
Income tax expense     2,249     1,805     8,106     6,000     1,857
Non-GAAP EBITDA   $ 49,413   $ 56,611   $ 201,223   $ 226,279   $ 49,954
                               

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

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