Finisar Corporation
Dec 10, 2015
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Finisar Announces Second Fiscal Quarter 2016 Financial Results

SUNNYVALE, CA -- (Marketwired) -- 12/10/15 --

Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second quarter of fiscal 2016, ended November 1, 2015.

COMMENTARY

"Revenues for our second fiscal quarter were $321.1 million compared to $314.0 million in the prior quarter; an increase of approximately 2.3%. This increase was primarily driven by growth in 100 gigabit Ethernet transceivers and 10 gigabit tunable transceivers and wavelength selective switches for telecom WDM applications," said Jerry Rawls, Finisar's Chief Executive Officer.

   
FINANCIAL HIGHLIGHTS - Second Quarter Ended November 1, 2015  
   
Summary GAAP Results   Second     First  
    Quarter     Quarter  
    Ended     Ended  
    November 1, 2015     August 2, 2015  
    (in thousands, except per share amounts)  
                 
Revenues   $ 321,136     $ 314,030  
Gross margin     27.7 %     27.8 %
Operating expenses   $ 79,723     $ 80,316  
Operating income (loss)   $ 9,368     $ 7,061  
Operating margin     2.9 %     2.2 %
Net income (loss)   $ 6,644     $ 3,393  
Income per share-basic   $ 0.06     $ 0.03  
Income per share-diluted   $ 0.06     $ 0.03  
                 
Basic shares     106,635       105,286  
Diluted shares     107,493       108,107  
                 
Summary Non-GAAP Results (a)   Second     First  
    Quarter     Quarter  
    Ended     Ended  
    November 1, 2015     August 2, 2015  
    (in thousands, except per share amounts)  
             
Revenues   $ 321,136     $ 314,030  
Gross margin     30.0 %     30.2 %
Operating expenses   $ 68,025     $ 68,406  
Operating income   $ 28,274     $ 26,511  
Operating margin     8.8 %     8.4 %
Net income   $ 26,857     $ 24,532  
Income per share-basic   $ 0.25     $ 0.23  
Income per share-diluted   $ 0.25     $ 0.23  
                 
Basic shares     106,635       105,286  
Diluted shares     107,493       108,107  
                 

_____________

(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 Second Quarter of Fiscal 2016:

OUTLOOK

The Company indicated that for the third quarter of fiscal 2016 it currently expects revenues in the range of $300 to $320 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 7.5% to 8.5%, and non-GAAP earnings per diluted share in the range of approximately $0.19 to $0.25.

CONFERENCE CALL

Finisar will discuss its financial results for the second quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, December 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 800-500-0177 (domestic) or +1.719.457.2602 (international) and enter conference ID 1806814.

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 1806814 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     Six Months Ended     Three Months Ended  
  Nov 01, 2015     October 26, 2014     Nov 01, 2015     October 26, 2014     Aug 02, 2015  
Revenues $ 321,136     $ 296,981     $ 635,166     $ 624,619     $ 314,030  
Cost of revenues   230,610       210,625       454,757       438,010       224,147  
Impairment of long-lived assets   -       -       1,071       -       1,071  
Amortization of acquired developed technology   1,435       1,435       2,870       2,869       1,435  
Gross profit   89,091       84,921       176,468       183,740       87,377  
Gross margin   27.7 %     28.6 %     27.8 %     29.4 %     27.8 %
Operating expenses:                                      
  Research and development   50,972       51,184       103,380       102,190       52,408  
  Sales and marketing   11,897       11,487       23,099       23,452       11,202  
  General and administrative   16,186       28,772       31,394       43,491       15,208  
  Impairment of long-lived assets   -       -       830       -       830  
  Amortization of purchased intangibles   668       737       1,336       1,498       668  
    Total operating expenses   79,723       92,180       160,039       170,631       80,316  
Income (loss) from operations   9,368       (7,259 )     16,429       13,109       7,061  
Interest income   469       342       834       954       365  
Interest expense   (2,917 )     (2,867 )     (5,800 )     (6,001 )     (2,883 )
Other income (expenses), net   445       33       1,326       (1,993 )     881  
Income (loss) before income taxes   7,365       (9,751 )     12,789       6,069       5,424  
Provision for income taxes   721       1,610       2,752       3,187       2,031  
Net income (loss) $ 6,644     $ (11,361 )   $ 10,037     $ 2,882     $ 3,393  
                                       
Net income (loss) per share attributable to Finisar Corporation common stockholders:                                      
                                       
  Basic $ 0.06     $ (0.11 )   $ 0.09     $ 0.03     $ 0.03  
  Diluted $ 0.06     $ (0.11 )   $ 0.09     $ 0.03     $ 0.03  
                                       
Shares used in computing net income per share - basic   106,635       99,621       105,961       98,931       105,286  
Shares used in computing net income per share - diluted
  107,493       99,621       108,238       102,390       108,107  
                                       
                                       
Finisar Corporation  
Consolidated Balance Sheets  
(in thousands)  
                   
    Nov 01, 2015     Aug 02, 2015     May 03, 2015  
    (Unaudited)     (Unaudited)        
ASSETS                        
Current assets:                        
  Cash and cash equivalents   $ 258,270     $ 232,997     $ 197,443  
  Short-term held-to-maturity investments     262,500       262,695       292,748  
  Accounts receivable, net     230,065       234,798       213,234  
  Accounts receivable, other     39,982       40,807       40,650  
  Inventories     264,706       282,093       283,670  
  Prepaid expenses and other assets     20,538       22,649       36,518  
    Total current assets     1,076,061       1,076,039       1,064,263  
Property, equipment and improvements, net     344,695       322,043       315,777  
Purchased intangible assets, net     22,983       25,086       27,188  
Goodwill     106,735       106,735       106,735  
Minority investments     3,647       2,997       2,847  
Other assets     23,133       34,960       35,072  
    Total assets   $ 1,577,254     $ 1,567,860     $ 1,551,882  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY                        
Current liabilities:                        
  Accounts payable   $ 133,220     $ 139,600     $ 131,510  
  Accrued compensation     31,680       26,392       24,918  
  Other accrued liabilities     43,301       39,753       39,238  
  Deferred revenue     12,438       11,480       9,850  
    Total current liabilities     220,639       217,225       205,516  
Long-term liabilities:                        
  Convertible notes, net of current portion     226,151       223,760       221,406  
  Other non-current liabilities     23,195       21,545       21,167  
    Total liabilities     469,985       462,530       448,089  
Stockholders' equity:                        
  Common stock     107       107       104  
  Additional paid-in capital     2,577,246       2,564,506       2,551,114  
  Accumulated other comprehensive income (loss)     (31,835 )     (14,390 )     861  
  Accumulated deficit     (1,438,249 )     (1,444,893 )     (1,448,286 )
    Total stockholders' equity     1,107,269       1,105,330       1,103,793  
Total liabilities and stockholders' equity   $ 1,577,254     $ 1,567,860     $ 1,551,882  
                         
Note - Balance sheet amounts as of May 3, 2015 ae derived from the auditd 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, non-GAAP income, non-GAAP income per share, and Non-GAAP EBITDA. 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. 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     Six Months Ended     Three Months Ended  
  Nov 01, 2015     October 26, 2014     Nov 01, 2015     October 26, 2014     Aug 02, 2015  
GAAP to non-GAAP reconciliation of gross profit:                                      
Gross profit - GAAP $ 89,091     $ 84,921     $ 176,468     $ 183,740     $ 87,377  
Gross margin - GAAP   27.7 %     28.6 %     27.8 %     29.4 %     27.8 %
Adjustments:                                      
Cost of revenues                                      
  Change in excess and obsolete inventory valuation adjustments   2,402       2,048       3,832       3,769       1,430  
  Amortization of acquired technology   1,435       1,435       2,870       2,869       1,435  
  Duplicate facility costs during facility move   4       766       86       766       82  
  Stock compensation   2,922       2,588       5,614       4,864       2,692  
  Impairment of long-lived assets   -       124       1,282       124       1,282  
  Reduction in force costs   417       319       971       794       554  
  Acquisition related retention payment   28       89       93       207       65  
    Total cost of revenue adjustments   7,208       7,369       14,748       13,393       7,540  
Gross profit - non-GAAP   96,299       92,290       191,216       197,133       94,917  
Gross margin - non-GAAP   30.0 %     31.1 %     30.1 %     31.6 %     30.2 %
                                       
GAAP to non-GAAP reconciliation of operating income:                                      
Operating income (loss) - GAAP   9,368       (7,259 )     16,429       13,109       7,061  
Operating margin - GAAP   2.9 %     -2.4 %     2.6 %     2.1 %     2.2 %
Adjustments:                                      
Total cost of revenue adjustments   7,208       7,369       14,748       13,393       7,540  
Research and development                                      
  Reduction in force costs   -       353       288       685       288  
  Duplicate facility costs during facility move   49       767       270       767       221  
  Acquisition related retention payment   67       166       158       359       91  
  Stock compensation   4,970       4,727       9,808       9,163       4,838  
  Impairment of long-lived assets   -       -       287       -       287  
Sales and marketing                                      
  Reduction in force costs   117       -       180       -       63  
  Acquisition related retention payment   3       9       13       29       10  
  Stock compensation   1,718       1,625       3,425       3,154       1,707  
General and administrative                                      
  Reduction in force costs   963       59       1,315       54       352  
  Duplicate facility costs   8       116       17       116       9  
  Acquisition related retention payment   -       (55 )     (5 )     (39 )     (5 )
  Stock compensation   2,757       2,617       5,517       5,429       2,760  
  Payroll taxes related to options investigation   -       17       -       17       -  
  Acquisition related costs   378       8       396       238       18  
  Litigation settlements and resolutions and related costs   -       13,728       16       12,416       16  
Amortization of purchased intangibles   668       737       1,336       1,498       668  
Impairment of long-lived assets   -       -       587       -       587  
    Total cost of revenue and operating expense adjustments   18,906       32,243       38,356       47,279       19,450  
Operating income - non-GAAP   28,274       24,984       54,785       60,388       26,511  
Operating margin - non-GAAP   8.8 %     8.4 %     8.6 %     9.7 %     8.4 %
                                       
GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation:                                      
Net income (loss) attributable to Finisar Corporation - GAAP   6,644       (11,361 )     10,037       2,882       3,393  
Adjustments:                                      
Total cost of revenue and operating expense adjustments   18,906       32,243       38,356       47,279       19,450  
Non-cash imputed interest expenses on convertible debt   2,391       2,279       4,745       4,522       2,354  
Imputed interest related to restructuring   44       50       89       101       45  
Other (income) expense, net                                      
  Loss (gain) on sale of assets   85       (27 )     (100 )     211       (185 )
  Other miscellaneous income   (120 )     (10 )     (137 )     (11 )     (17 )
  Foreign exchange transaction (gain) or loss   51       327       (642 )     2,318       (693 )
  Amortization of debt issuance cost   154       154       308       308       154  
Provision for income taxes                                      
  Income tax provision adjustments   (1,298 )     (190 )     (1,267 )     (813 )     31  
Total adjustments   20,213       34,826       41,352       53,915       21,139  
Net income attributable to Finisar Corporation - non-GAAP $ 26,857     $ 23,465     $ 51,389     $ 56,797     $ 24,532  
                                       
Non-GAAP income attributable to Finisar Corporation $ 26,857     $ 23,465     $ 51,389     $ 56,797     $ 24,532  
Add: interest expense for dilutive convertible notes   -       533       -       1,072       -  
Adjusted non-GAAP income attributable to Finisar Corporation $ 26,857     $ 23,998     $ 51,389     $ 57,869     $ 24,532  
                                       
Non-GAAP income per share attributable to Finisar Corporation common stockholders                                      
  Basic $ 0.25     $ 0.24     $ 0.48     $ 0.57     $ 0.23  
  Diluted $ 0.25     $ 0.23     $ 0.47     $ 0.55     $ 0.23  
Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders                                      
  Basic   106,635       99,621       105,961       98,931       105,286  
  Diluted   107,493       105,340       108,238       106,133       108,107  
                                       
Non-GAAP EBITDA                                      
Non-GAAP income attributable to Finisar Corporation   26,857       23,465       51,389       56,797       24,532  
Depreciation expense   20,989       20,915       42,354       40,563       21,365  
Amortization   -       33       -       72       -  
Interest expense   (141 )     196       (176 )     424       (35 )
Income tax expense   2,019       1,800       4,019       4,000       2,000  
Non-GAAP EBITDA $ 49,724     $ 46,409     $ 97,586     $ 101,856     $ 47,862  

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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