Finisar Corporation
Jun 15, 2017
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Finisar Announces All-time Record Fiscal 2017 Revenues

SUNNYVALE, Calif., June 15, 2017 (GLOBE NEWSWIRE) -- 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 fiscal year, ended April 30, 2017

COMMENTARY

"Revenues for fiscal 2017, were $1.449 billion, an all-time record for Finisar and an increase of $186.1 million, or 14.7%, over fiscal 2016. Despite continued robust demand in our fourth fiscal quarter for our 100G QSFP28 transceivers for datacenter applications, which grew over 30% over the third quarter, our overall revenues were $357.5 million, a decrease of $23.1 million, or 6.1%, compared to the third quarter. This decline was primarily the result of a decline in telecom revenues due to lower revenues from our Chinese OEM customers and the impact of the full three months of the annual telecom price erosion," said Jerry Rawls, Finisar's Chief Executive Officer.

FINANCIAL HIGHLIGHTS - Fourth Quarter Ended April 30, 2017 
    
Summary GAAP ResultsFourth Third
 Quarter Quarter
 Ended Ended
 April 30, 2017 January 29, 2017
 (in thousands, except per share amounts)
    
Revenues$357,527  $380,588 
Gross margin 35.0%  35.9%
Operating expenses$84,324  $81,731 
Operating income$40,839  $54,906 
Operating margin 11.4%  14.4%
Net income$130,245  $46,387 
Income per share-basic$1.17  $0.42 
Income per share-diluted$1.13  $0.40 
    
Basic shares 111,438   110,956 
Diluted shares 115,242   114,873 
    
   Summary Non-GAAP Results (a)   
    
   Fourth Third
Quarter Quarter
Ended Ended
 April 30, 2017 January 29, 2017
 (in thousands, except per share amounts)
    
Revenues$357,527  $380,588 
Non-GAAP Gross margin 36.2%  37.0%
Non-GAAP Operating expenses$70,952  $70,538 
Non-GAAP Operating income $58,411  $70,375 
Non-GAAP Operating margin 16.3%  18.5%
Non-GAAP Net income $57,515  $67,204 
Non-GAAP Income per share-basic$0.52  $0.61 
Non-GAAP Income per share-diluted$0.50  $0.59 
    
Basic shares 111,438   110,956 
Diluted shares 115,242   114,873 

_____________

(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 of Finisar's core ongoing operating resultsA 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 2017: 

FINANCIAL HIGHLIGHTS - Fiscal Year Ended April 30, 2017
    
Summary GAAP Results   
 Fiscal Year Fiscal Year
 Ended Ended
 April 30, 2017 May 1, 2016
 (in thousands, except per share amounts)
    
Revenues$1,449,303  $1,263,166 
Gross margin 34.8%   28.1%
Operating expenses$326,762  $313,627 
Operating income$176,884  $41,022 
Operating margin 12.2%  3.2%
Net income$ 249,346  $35,193 
Income per share-basic$2.26  $0.33 
Income per share-diluted$2.19  $0.32 
    
Basic shares 110,405   106,678 
Diluted shares 114,097   108,870 
    
    
   Summary Non-GAAP Results (b)   
      
Fiscal Year  Fiscal Year
Ended Ended
 April 30, 2017 May 1, 2016
 (in thousands, except per share amounts)
    
Revenues$1,449,303  $1,263,166 
Non-GAAP Gross margin 35.9%  30.3%
Non-GAAP Operating expenses$280,252  $269,909 
Non-GAAP Operating income $240,556  $112,333 
Non-GAAP Operating margin 16.6%  8.9%
Non-GAAP Net income $231,698  $109,817 
Non-GAAP Income per share-basic$2.10  $1.03 
Non-GAAP Income  per share-diluted$2.03  $ 1.01 
    
Basic shares 110,405   106,678 
Diluted shares 114,097   108,870 

_____________

(b) 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 of Finisar's core ongoing operating resultsA 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 2017: 

OUTLOOK

Finisar indicated that for the first quarter of fiscal 2018 it currently expects revenues in the range of $330 to $350 million, non-GAAP gross margin of approximately 35%, non-GAAP operating margin of approximately 14%, and non-GAAP earnings per fully diluted share in the range of approximately $0.37 to $0.43.

Finisar has not provided a reconciliation of its first quarter outlook for non-GAAP gross margin, non-GAAP operating margin and non-GAAP earnings per fully diluted share because estimates of all of the reconciling items cannot be provided without unreasonable efforts.  It is difficult to reasonably provide a forward-looking estimate of certain reconciling items between such non-GAAP forward-looking measures and the comparable forward-looking GAAP measures. Certain factors that are materially significant to Finisar's ability to estimate these items are out of its control and/or cannot be reasonably predicted, including with respect to restructuring charges, litigation settlements and resolutions and related costs, and the timing of tax related adjustments. Accordingly, a reconciliation of such non-GAAP forward-looking measures to the comparable forward-looking GAAP measures are not available within a reasonable range of predictability. 

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 15, 2017, 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-(855) 473-9088 (domestic) or 1- (720) 405-0995 (international) and enter conference ID 61562686.

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 61562686 and 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. 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 17, 2016) 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 over 25 years, Finisar has provided critical optics technologies to system manufacturers to meet the increasing demands for network bandwidth and storage.  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
 Apr 30, 2017 May 1, 2016 Apr 30, 2017 May 1, 2016 Jan 29, 2017
Revenues$357,527  $318,794  $1,449,303  $1,263,166  $380,588 
Cost of revenues 231,374   226,723   941,164   901,316   242,961 
Impairment of long-lived assets -   -   -   1,071   - 
Amortization of acquired developed technology 990   1,630    4,493   6,130   990 
Gross profit 125,163   90,441   503,646   354,649   136,637 
Gross margin 35.0%  28.4%  34.8%  28.1%  35.9%
Operating expenses:         
Research and development 58,973   50,169   217,914    203,389   54,691 
Sales and marketing 12,322   11,621   50,644   46,619   13,092 
General and administrative  12,316   13,848   55,442   60,117   13,235 
Impairment of long-lived assets -   -   -   830   - 
Amortization of purchased intangibles 713   668   2,762   2,672   713 
Total operating expenses 84,324    76,306   326,762   313,627   81,731 
Income from operations 40,839   14,135   176,884   41,022    54,906 
Interest income 3,299   802   6,763   2,345   1,717 
Interest expense (8,953)  (3,017)   (20,363)  (11,750)  (5,399)
Other income (expenses), net (488)  (80)  (90)  3,214   (338)
Income before income taxes 34,697   11,840   163,194   34,831   50,886 
Provision (benefit) for income taxes (95,548)  (1,232)  (86,152)  (362)  4,499 
Net income$130,245  $13,072  $249,346  $35,193  $46,387 
          
Net income per share attributable to Finisar Corporation common stockholders:         
           
Basic$1.17  $0.12  $2.26  $0.33  $0.42 
Diluted$1.13  $0.12  $2.19  $0.32  $0.40 
          
Shares used in computing net income per share - basic 111,438   107,612   110,405    106,678   110,956 
Shares used in computing net income per share - diluted 115,242   109,386   114,097   108,870   114,873 


Finisar Corporation
Consolidated Balance Sheets
 (in thousands)
            
  Apr 30, 2017 Jan 29, 2017 Oct 30, 2016 Jul 31, 2016 May 1, 2016 
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)   
ASSETS           
Current assets:           
  Cash and cash equivalents $  260,228  $  240,593  $  282,963  $  280,414  $  299,221  
  Short-term held-to-maturity investments    976,595     973,675     343,319     313,389     263,255  
  Accounts receivable, net    272,377     280,098     277,667     255,036     249,257  
  Accounts receivable, other    48,807     58,498     49,997     43,678     44,576  
  Inventories    331,388     312,271     292,439     272,592     273,291  
  Prepaid expenses and other assets    19,462     20,526     17,140     18,646     18,483  
    Total current assets    1,908,857     1,885,661     1,263,525      1,183,755     1,148,083  
Property, equipment and improvements, net    383,919     357,039     341,563     338,918     348,613  
Purchased intangible assets, net    13,019     14,638     16,339     16,197     18,388  
Goodwill    106,735     106,735     106,735     106,735     106,735  
Minority investments    3,161     3,322     3,893     3,974     4,051  
Other assets    16,964     19,072     14,102     15,365     14,656  
Deferred tax assets    107,225     5,203     3,906     3,563     4,845  
  Total assets $  2,539,880  $  2,391,670  $  1,750,063  $  1,668,507  $  1,645,371  
            
LIABILITIES AND STOCKHOLDERS' EQUITY           
Current liabilities:           
  Accounts payable $  140,568  $  155,916  $  153,023  $  136,317  $  141,591  
  Accrued compensation    54,520     50,640     45,213     36,332     36,084  
  Other accrued liabilities    43,697     43,081     36,736     39,201     42,206  
  Deferred revenue    13,015     14,965     17,818     16,468     13,529  
    Total current liabilities    251,800     264,602     252,790      228,318     233,410  
Long-term liabilities:           
  Convertible notes    707,782     699,903     234,679     232,016     229,393  
  Other non-current liabilities    17,594     12,594     13,279     14,056     14,882  
    Total liabilities    977,176     977,099     500,748     474,390     477,685  
Stockholders' equity:           
  Common stock    112     111     111      110     108  
  Additional paid-in capital    2,784,204     2,768,396     2,639,355     2,621,260     2,605,859  
  Accumulated other comprehensive income (loss)    (57,865)    (59,944)    (49,772)    (38,109)    (25,188) 
  Accumulated deficit    (1,163,747)    (1,293,992)    (1,340,379)    (1,389,144)    (1,413,093) 
    Total stockholders' equity    1,562,704     1,414,571     1,249,315     1,194,117     1,167,686  
Total liabilities and stockholders' equity $  2,539,880  $  2,391,670  $  1,750,063  $  1,668,507  $  1,645,371  
             
  Note - Balance sheet amounts as of May 1, 2016 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, non-GAAP income and non-GAAP net income per share. These non-GAAP financial measures are supplemental information regarding Finisar's operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be outside of our ongoing core operating results.   Management believes that tracking non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and non-GAAP net income per share provides management and the investment community with valuable insight into our ongoing core current operations, our ability to generate cash and the underlying business trends that 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:

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 taxes including the non-cash benefit of to the GAAP income tax provision due to the release of a significant portion of the valuation allowance against certain U.S. deferred tax assets.

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
 Apr 30, 2017 May 1, 2016 Apr 30, 2017 May 1, 2016 Jan 29, 2017
GAAP to non-GAAP reconciliation of gross profit:         
Gross profit - GAAP$125,163  $90,441  $503,646  $354,649  $136,637 
Gross margin - GAAP 35.0%  28.4%  34.8%  28.1%  35.9%
Adjustments:         
Cost of revenues         
Change in excess and obsolete inventory valuation adjustments (1) -   2,102   -   7,227   - 
Amortization of acquired technology 990   1,630   4,493   6,130   990 
Duplicate facility costs during facility move 10   8   36   101   10 
Stock compensation 3,071   2,847   12,249   11,000   3,182 
Impairment of long-lived assets -   -   -   1,282   - 
Reduction in force costs 103   369    287   1,704   68 
Acquisition related retention payment 26   28   97   149   26 
Total cost of revenue adjustments 4,200   6,984   17,162   27,593   4,276 
Gross profit - non-GAAP 129,363   97,425   520,808    382,242   140,913 
Gross margin - non-GAAP 36.2%  30.6%  35.9%  30.3%  37.0%
          
GAAP to non-GAAP reconciliation of operating income:         
Operating income - GAAP 40,839   14,135   176,884   41,022    54,906 
Operating margin - GAAP 11.4%  4.4%  12.2%  3.2%  14.4%
Adjustments:         
Total cost of revenue adjustments 4,200 # 6,984 # 17,162 # 27,593   4,276 
Total operating expense adjustments         
Operating expenses - GAAP 84,324   76,306   326,762   313,627   81,731 
Research and development         
Reduction in force costs 46   386   338   904   30 
Duplicate facility costs during facility move 10   7   34   284   10 
Acquisition related retention payment 32   32    128   222   32 
Stock compensation 5,613   4,855    21,737   19,386   5,461 
Impairment of long-lived/other assets 2,387   -   2,387   287   - 
Sales and marketing         
Reduction in force costs 19   1   48   225   - 
Acquisition related retention payment 2   -   2   15   - 
Stock compensation 1,889   1,747   7,438    6,885   1,921 
General and administrative          
Reduction in force costs 5   49   58   1,403   20 
Duplicate facility costs during facility move 176   24   641   191   168 
Acquisition related retention payment -   4    (2)  (1)   - 
Stock compensation 2,823   2,381   11,172   10,241   2,807 
Acquisition related costs (343)  (1)  (289)  434   21 
Litigation settlements and resolutions and related costs -   1   93   17   47 
Shareholder class action and derivative litigation costs -   (184)  -   (184)  - 
Unclaimed property tax audit accrual -   150   (37)  150   (37)
Amortization of purchased intangibles 713   668   2,762   2,672   713 
Impairment of  long-lived assets/intangible assets -   -   -   587   - 
    Total operating expense adjustments 13,372   10,120   46,510   43,718   11,193 
Operating expenses - non-GAAP 70,952   66,186   280,252   269,909   70,538 
Operating income - non-GAAP 58,411   31,239   240,556   112,333   70,375 
Operating margin - non-GAAP 16.3%  9.8%  16.6%  8.9%  18.5%
          
GAAP to non-GAAP reconciliation of income before income taxes:         
Income before income taxes - GAAP 34,697   11,840   163,194   34,831   50,886 
Adjustments:          
Total cost of revenue adjustments 4,200   6,984   17,162   27,593   4,276 
Total operating expense adjustments 13,372   10,120   46,510   43,718   11,193 
Other interest income -    (6)  -   (119)  - 
Non-cash imputed interest expenses on convertible debt 7,494   2,449   16,936   9,605   4,464 
Imputed interest related to restructuring 32   40   141   171   34 
Other (income) expense, net         
    Loss (gain) on sale of assets 124   165   134   (579)  35 
    Loss related to minority investments -   -   643    -   643 
    Other miscellaneous income (115)  (184)  (395)  (1,824)  (280)
    Foreign exchange transaction (gain) or loss 326   362   (877)  925   (204)
    Amortization of  debt issuance cost  385   154   950   616   257 
      Total Interest and other adjustments 8,246   2,980   17,532   8,795   4,949 
Income before income taxes - non-GAAP 60,515   31,924   244,398   114,937   71,304 
          
GAAP to non-GAAP reconciliation of net income:          
Net income - GAAP 130,245   13,072   249,346   35,193   46,387 
Total cost of revenue adjustments 4,200   6,984    17,162   27,593   4,276 
Total operating expense adjustments 13,372   10,120   46,510   43,718   11,193 
Total Interest and other adjustments 8,246   2,980   17,532   8,795   4,949 
Income tax provision adjustments (98,548)  (1,332)  (98,852)  (5,482)  399 
       Total adjustments (72,730)  18,752   (17,648)  74,624   20,817 
Net income - non-GAAP$57,515  $31,824  $231,698  $109,817  $67,204 
          
Basic non-GAAP income per share          
GAAP earnings per share$1.17  $0.12  $2.26  $0.33  $0.42 
Impact of all non-GAAP adjustments$(0.65) $0.18  $(0.16) $0.70  $0.19 
Non-GAAP earnings per share$0.52  $0.30  $2.10  $1.03   $0.61 
          
Diluted non-GAAP income per share          
GAAP earnings per share$ 1.13  $0.12  $2.19  $0.32  $0.40 
Impact of all non-GAAP adjustments$(0.63) $0.17  $(0.16)  $0.69  $0.19 
Non-GAAP earnings per share$0.50  $0.29  $2.03  $1.01  $0.59 
           
Shares used in computing non-GAAP income per share         
Basic 111,438   107,612   110,405   106,678   110,956 
Diluted 115,242   109,386   114,097   108,870   114,873 
          
(1) Non-GAAP adjustment no longer made effective fiscal 2017.         

Finisar-F

Investor Contact:

Kurt Adzema

Chief Financial Officer

408-542-5050 or Investor.relations@finisar.com



Press contact:

Victoria McDonald

Director, Corporate Communications

408-542-4261

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Source: Finisar Corporation

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