Finisar Corporation
Sep 10, 2015
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Finisar Announces First Fiscal Quarter 2016 Financial Results

SUNNYVALE, CA -- (Marketwired) -- 09/10/15 --

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 2016, ended August 2, 2015.

COMMENTARY
"Revenues for our first fiscal quarter were $314.0 million compared to $320.0 million in the prior quarter; however, the prior quarter had the benefit of an additional week. Taking that into consideration, the first fiscal quarter had a higher average weekly revenue relative to the prior quarter," said Jerry Rawls, Finisar's executive Chairman of the Board. "Strength in revenue was primarily driven by 40 gigabit transceivers for datacom applications".

 
FINANCIAL HIGHLIGHTS - First Quarter Ended August 2, 2015
 
Summary GAAP Results   First     Fourth  
    Quarter     Quarter  
    Ended     Ended  
    August 2, 2015     May 3, 2015  
    (in thousands, except per share amounts)  
             
Revenues   $ 314,030     $ 320,042  
Gross margin     27.8 %     27.9 %
Operating expenses   $ 80,316     $ 78,933  
Operating income (loss)   $ 7,061     $ 10,284  
Operating margin     2.2 %     3.2 %
Net income (loss)   $ 3,393     $ 7,327  
Income per share-basic   $ 0.03     $ 0.07  
Income per share-diluted   $ 0.03     $ 0.07  
                 
Basic shares     105,286       104,005  
Diluted shares     108,107       107,535  
                 
Summary Non-GAAP Results (a)   First     Fourth  
Quarter     Quarter  
Ended     Ended  
    August 2, 2015     May 3, 2015  
    (in thousands, except per share amounts)  
       
Revenues   $ 314,030     $ 320,042  
Gross margin     30.2 %     30.3 %
Operating expenses   $ 68,406     $ 68,167  
Operating income   $ 26,511     $ 28,831  
Operating margin     8.4 %     9.0 %
Net income   $ 24,532     $ 26,873  
Income per share-basic   $ 0.23     $ 0.26  
Income per share-diluted   $ 0.23     $ 0.25  
                 
Basic shares     105,286       104,005  
Diluted shares     108,107       107,535  
                 
                         
  (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 2016:

OUTLOOK
The Company indicated that for the second quarter of fiscal 2016 it currently expects revenues in the range of $304 to $324 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 8% to 9%, and non-GAAP earnings per diluted share in the range of approximately $0.20 to $0.26.

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 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 877-741-4244 (domestic) or +719-325-4849 (international) and enter conference ID 8055566.

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 8055566 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  
    Aug 02, 2015     July 27, 2014     May 03, 2015  
Revenues   $ 314,030     $ 327,638     $ 320,042  
Cost of revenues     224,147       227,385       229,390  
Impairment of long-lived assets     1,071       -       -  
Amortization of acquired developed technology     1,435       1,434       1,435  
Gross profit     87,377       98,819       89,217  
Gross margin     27.8 %     30.2 %     27.9 %
Operating expenses:                        
  Research and development     52,408       51,006       51,117  
  Sales and marketing     11,202       11,965       11,800  
  General and administrative     15,208       14,719       15,303  
  Impairment of long-lived assets     830       -       -  
  Amortization of purchased intangibles     668       761       713  
    Total operating expenses     80,316       78,451       78,933  
Income from operations     7,061       20,368       10,284  
Interest income     365       612       536  
Interest expense     (2,883 )     (3,134 )     (3,335 )
Other income (expenses), net     881       (2,026 )     4,041  
Income before income taxes     5,424       15,820       11,526  
Provision for income taxes     2,031       1,577       4,199  
Net income   $ 3,393     $ 14,243     $ 7,327  
                         
Net income per share attributable to Finisar Corporation common stockholders:                        
                         
  Basic   $ 0.03     $ 0.14     $ 0.07  
  Diluted   $ 0.03     $ 0.14     $ 0.07  
                         
Shares used in computing net income per share - basic     105,286       98,241       104,005  
Shares used in computing net income per share - diluted     108,107       102,287       107,535
 
                         
   
Finisar Corporation  
Consolidated Balance Sheets  
(in thousands)  
             
    Aug 02, 2015     May 03, 2015  
    (Unaudited)        
ASSETS            
Current assets:                
  Cash and cash equivalents   $ 232,997     $ 197,443  
  Short-term held-to-maturity investments     262,695       292,748  
  Accounts receivable, net     234,798       213,234  
  Accounts receivable, other     40,807       40,650  
  Inventories     282,093       283,670  
  Prepaid expenses and other assets     22,649       36,518  
    Total current assets     1,076,039       1,064,263  
Property, equipment and improvements, net     322,043       315,777  
Purchased intangible assets, net     25,086       27,188  
Goodwill     106,735       106,735  
Minority investments     2,997       2,847  
Other assets     34,960       35,072  
    Total assets   $ 1,567,860     $ 1,551,882  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 139,600     $ 131,510  
  Accrued compensation     26,392       24,918  
  Other accrued liabilities     39,753       39,238  
  Deferred revenue     11,480       9,850  
    Total current liabilities     217,225       205,516  
Long-term liabilities:                
  Convertible notes, net of current portion     223,760       221,406  
  Other non-current liabilities     21,545       21,167  
    Total liabilities     462,530       448,089  
Stockholders' equity:                
  Common stock     107       104  
  Additional paid-in capital     2,564,506       2,551,114  
  Accumulated other comprehensive income     (14,390 )     861  
  Accumulated deficit     (1,444,893 )     (1,448,286 )
    Total stockholders' equity     1,105,330       1,103,793  
Total liabilities and stockholders' equity   $ 1,567,860     $ 1,551,882  
                 
Note - Balance sheet amounts as of May 3, 2015 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  
    Aug 02, 2015     July 27, 2014     May 03, 2015  
GAAP to non-GAAP reconciliation of gross profit:                        
Gross profit - GAAP   $ 87,377     $ 98,819     $ 89,217  
Gross margin - GAAP     27.8 %     30.2 %     27.9 %
Adjustments:                        
Cost of revenues                        
  Change in excess and obsolete inventory reserve     1,430       1,721       2,752  
  Amortization of acquired technology     1,435       1,434       1,435  
  Duplicate facility costs related to facility move     82       -       4  
  Stock compensation     2,692       2,276       2,692  
  Impairment of long-lived assets     1,282       -       420  
  Reduction in force costs     554       475       406  
  Acquisition related retention payment     65       118       72  
    Total cost of revenue adjustments     7,540       6,024       7,781  
Gross profit - non-GAAP     94,917       104,843       96,998  
Gross margin - non-GAAP     30.2 %     32.0 %     30.3 %
                         
GAAP to non-GAAP reconciliation of operating income:                        
Operating income - GAAP     7,061       20,368       10,284  
Operating margin - GAAP     2.2 %     6.2 %     3.2 %
Adjustments:                        
Total cost of revenue adjustments     7,540       6,024       7,781  
Research and development                        
  Reduction in force costs     288       332       82  
  Acquisition related retention payment     91       193       104  
  Stock compensation     4,838       4,436       5,084  
  Duplicate facility costs related to facility move     221       -       143  
  Impairment of long-lived assets     287       -       -  
  Impairment of acquired R&D reimbursement receivable     -       -       87  
Sales and marketing                        
  Reduction in force costs     63       -       -  
  Acquisition related retention payment     10       20       12  
  Stock compensation     1,707       1,529       1,749  
General and administrative                        
  Reduction in force costs     352       (5 )     -  
  Duplicate facility costs related to facility move     9       -       -  
  Acquisition related retention payment     (5 )     16       8  
  Stock compensation     2,760       2,812       2,894  
  Acquisition related costs     18       230       18  
  Litigation settlements and resolutions and related costs (benefits)     16       (1,312 )     (6 )
  Shareholder class action and derivative litigation costs (benefits)     -       -       (121 )
Amortization of purchased intangibles     668       761       713  
Impairment of long-lived assets     587       -       (1 )
    Total cost of revenue and operating expense adjustments     19,450       15,036       18,547  
Operating income - non-GAAP     26,511       35,404       28,831  
Operating margin - non-GAAP     8.4 %     10.8 %     9.0 %
                         
GAAP to non-GAAP reconciliation of income:                        
Net income - GAAP     3,393       14,243       7,327  
Adjustments:                        
Total cost of revenue and operating expense adjustments     19,450       15,036       18,547  
Non-cash imputed interest expenses on convertible debt     2,354       2,243       2,334  
Imputed interest related to restructuring     45       51       47  
Other (income) expense, net                        
  Loss (gain) on sale of assets     (185 )     238       (559 )
  Gain related to minority investments     -       -       (1,470 )
  Other miscellaneous income     (17 )     (1 )     (850 )
  Foreign exchange transaction (gain) or loss     (693 )     1,991       (607 )
  Amortization of debt issuance costs     154       154       154  
Provision for income taxes                        
  Income tax provision (benefits) adjustments     31       (623 )     1,950  
Total adjustments     21,139       19,089       19,546  
Net income - non-GAAP   $ 24,532     $ 33,332     $ 26,873  
                         
Non-GAAP income   $ 24,532     $ 33,332     $ 26,873  
Add: interest expense for dilutive convertible notes     -       539       -  
Adjusted non-GAAP income   $ 24,532     $ 33,871     $ 26,873  
                         
Non-GAAP income per share common stockholders                        
  Basic   $ 0.23     $ 0.34     $ 0.26  
  Diluted   $ 0.23     $ 0.32     $ 0.25  
Shares used in computing non-GAAP income per share common stockholders                        
  Basic     105,286       98,241       104,005  
  Diluted     108,107       106,036       107,535  
                         
Non-GAAP EBITDA                        
Non-GAAP income   $ 24,532     $ 33,332     $ 26,873  
Depreciation expense     21,365       19,648       20,488  
Amortization     -       39       -  
Interest expense (income)     (35 )     228       (197 )
Income tax expense     2,000       2,200       2,249  
Non-GAAP EBITDA   $ 47,862     $ 55,447     $ 49,413  
                         

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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