Finisar Corporation
Sep 7, 2017
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Finisar Announces First Quarter Fiscal 2018 Financial Results

SUNNYVALE, Calif., Sept. 07, 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 first fiscal quarter, ended July 30, 2017

COMMENTARY

"We experienced strong demand in our first fiscal quarter for our 100G QSFP28 transceivers for datacenter applications," said Jerry Rawls, Finisar's Chief Executive Officer.  "However, our overall revenues for our first fiscal quarter were $341.8 million, a decrease of $15.7 million, or 4.4%, compared to the fourth quarter of fiscal 2017. This decrease resulted primarily from a decline in telecom revenues as well as a decrease in 10G and below datacom transceivers."  

FINANCIAL HIGHLIGHTS - First Quarter Ended July 30, 2017 
  
Summary GAAP Results First       Fourth 
  Quarter      Quarter 
  Ended      Ended 
  July 30, 2017      April 30, 2017 
 (in thousands, except per share amounts)
            
Revenues$341,806     $357,527 
Gross margin 33.7%      35.0% 
Operating expenses$85,387     $84,324 
Operating income$29,912     $40,839 
Operating margin 8.8%      11.4% 
Net income$19,859     $130,245 
Income per share-basic$0.18     $1.17 
Income per share-diluted$0.17      $1.13 
         
Basic shares 112,544       111,438 
Diluted shares 115,698      115,242 
         
Summary Non-GAAP Results (a) First      Fourth 
  Quarter      Quarter 
   Ended      Ended 
  July 30, 2017      April 30, 2017 
 (in thousands, except per share amounts)
          
Revenues$341,806     $357,527 
Non-GAAP Gross margin 34.9%       36.2% 
Non-GAAP Operating expenses $73,150     $70,952 
Non-GAAP Operating income $46,005     $58,411 
Non-GAAP Operating margin 13.5%      16.3% 
Non-GAAP Net income  45,750     $57,515 
Non-GAAP Income per share-basic$0.41     $0.52 
Non-GAAP Income per share-diluted$0.40     $0.50 
         
Basic shares 112,544       111,438 
Diluted shares 115,698      115,242 

_____________

(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 First Quarter of Fiscal 2018: 

OUTLOOK

Finisar indicated that for the second quarter of fiscal 2018 it currently expects revenues in the range of $322 to $342 million, non-GAAP gross margin of approximately 33%-34%, non-GAAP operating margin of approximately 10% -11%, and non-GAAP earnings per fully diluted share in the range of approximately $0.27 to $0.33.

Finisar has not provided a reconciliation of its second 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 first quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, September 7, 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 16, 2017) 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
 Jul 30, 2017 July 31, 2016 Apr 30, 2017
Revenues$341,806  $341,325  $357,527 
Cost of revenues 225,896   231,637   231,374 
Amortization of acquired developed technology 611   1,523   990 
Gross profit 115,299    108,165   125,163 
Gross margin 33.7%   31.7%   35.0% 
Operating expenses:     
Research and development 58,040   51,008   58,973 
Sales and marketing 12,351   11,863   12,322 
General and administrative 14,289   16,315   12,316 
Amortization of purchased intangibles 707   668   713 
Total operating expenses 85,387   79,854   84,324 
Income from operations 29,912   28,311   40,839 
Interest income 3,440   726   3,299 
Interest expense (9,013)  (2,986)  (8,953)
Other expenses (2,694)  (59)  (488)
Income before income taxes 21,645   25,992   34,697 
Provision (benefit) for income taxes 1,786   2,043    (95,548)
Net income$19,859  $23,949  $130,245 
      
Net income per share attributable to Finisar Corporation common stockholders:     
      
Basic$0.18  $0.22  $1.17 
Diluted$0.17  $0.22  $1.13 
      
Shares used in computing net income per share - basic 112,544   108,820   111,438 
Shares used in computing net income per share - diluted 115,698   110,821   115,242 
      


Finisar Corporation
Consolidated Balance Sheets
 (in thousands)
      
  Jul 30, 2017 Apr 30, 2017 
  (Unaudited)   
ASSETS     
Current assets:     
Cash and cash equivalents $278,826  $260,228  
Short-term held-to-maturity investments  954,026    976,595  
Accounts receivable, net  273,180   272,377  
Inventories  356,845    331,388  
Other current assets  63,629   68,269  
Total current assets  1,926,506   1,908,857  
Property, equipment and improvements, net  420,298   383,919  
Purchased intangible assets, net  11,700   13,019  
Goodwill  106,735   106,735  
Minority investments  605   3,161  
Other assets  21,651   16,964  
Deferred tax assets  108,567   107,225  
Total assets $2,596,062  $2,539,880  
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:     
Accounts payable $148,605  $140,568  
Accrued compensation  42,030   54,520  
Other accrued liabilities  46,648   43,697  
Deferred revenue  14,348   13,015  
Total current liabilities  251,631   251,800  
Long-term liabilities:     
Convertible notes  715,722   707,782  
Other non-current liabilities  17,546    17,594  
Total liabilities  984,899    977,176  
Stockholders' equity:     
Common stock  114   112  
Additional paid-in capital  2,799,118   2,784,204  
Accumulated other comprehensive income (loss)  (44,181)  (57,865) 
Accumulated deficit  (1,143,888)  (1,163,747) 
Total stockholders' equity  1,611,163   1,562,704  
Total liabilities and stockholders' equity $2,596,062  $2,539,880  
      
Note - Balance sheet amounts as of April 30, 2017 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.

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 Three Months Ended
 Jul 30, 2017 July 31, 2016 Apr 30, 2017
GAAP to non-GAAP reconciliation of gross profit:     
Gross profit - GAAP$115,299  $108,165  $125,163 
Gross margin - GAAP 33.7%   31.7%   35.0% 
Adjustments:      
Cost of revenues     
Amortization of acquired technology 611   1,523   990 
Duplicate facility costs during facility move -   8   10 
Stock compensation 2,570   3,047    3,071 
Reduction in force costs 634   102   103 
Acquisition related retention payment 41   19   26 
Total cost of revenue adjustments 3,856   4,699   4,200 
Gross profit - non-GAAP 119,155   112,864   129,363 
Gross margin - non-GAAP 34.9%   33.1%   36.2% 
      
GAAP to non-GAAP reconciliation of operating income:     
Operating income - GAAP 29,912   28,311   40,839 
Operating margin - GAAP 8.8%   8.3%   11.4% 
Adjustments:     
Total cost of revenue adjustments 3,856   4,699   4,200 
Total operating expense adjustments     
Operating expenses - GAAP 85,387   79,854    84,324 
Research and development     
Reduction in force costs 93   174   46 
Duplicate facility costs during facility move -   7   10 
Acquisition related retention payment 32   32   32 
Stock compensation 6,082   5,111   5,613 
Impairment of long-lived/other assets -   -   2,387 
Sales and marketing     
Reduction in force costs (12)  29   19 
Acquisition related retention payment (2)  -   2 
Stock compensation 2,044   1,751   1,889 
General and administrative     
Reduction in force costs 37   13   5 
Duplicate facility costs during facility move 183   143   176 
Acquisition related retention payment -   (2)  - 
Stock compensation 3,069   2,553   2,823 
Acquisition related costs 4   31    (343)
Amortization of purchased intangibles 707   668   713 
Total operating expense adjustments 12,237   10,510   13,372 
Operating expenses - non-GAAP 73,150   69,344    70,952 
Operating income - non-GAAP 46,005   43,520   58,411 
Operating margin - non-GAAP 13.5%   12.8%   16.3% 
      
GAAP to non-GAAP reconciliation of income before income taxes:     
Income before income taxes - GAAP 21,645   25,992   34,697 
Adjustments:     
Total cost of revenue adjustments 3,856   4,699   4,200 
Total operating expense adjustments 12,237   10,510    13,372 
Non-cash imputed interest expenses on convertible debt 7,555   2,469   7,494 
Imputed interest related to restructuring 30   38   32 
Other (income) expense, net     
Loss (gain) on sale of assets (113)  (8)  124 
Loss related to impairment of minority investments 2,347   -   - 
Other miscellaneous income (4)  -   (115)
Foreign exchange transaction (gain) or loss 463   (29)  326 
Amortization of  debt issuance cost 385   154   385 
Total Interest and other adjustments 10,663   2,624   8,246 
Income before income taxes - non-GAAP 48,401   43,825   60,515 
      
GAAP to non-GAAP reconciliation of net income:     
Net income - GAAP 19,859   23,949   130,245 
Total cost of revenue adjustments 3,856   4,699   4,200 
Total operating expense adjustments 12,237   10,510   13,372 
Total Interest and other adjustments 10,663    2,624   8,246 
Income tax provision adjustments (865)  43   (98,548)
Total adjustments 25,891   17,876   (72,730)
Net income - non-GAAP$45,750  $41,825  $57,515 
      
Basic non-GAAP income per share      
GAAP earnings per share$0.18  $0.22  $1.17 
Impact of all non-GAAP adjustments$0.23  $0.16  $(0.65)
Non-GAAP earnings per share$0.41  $0.38  $0.52 
      
Diluted non-GAAP income per share      
GAAP earnings per share$0.17  $0.22  $1.13 
Impact of all non-GAAP adjustments$0.23  $0.16  $(0.63)
Non-GAAP earnings per share$0.40  $0.38  $0.50 
      
Shares used in computing non-GAAP income per share     
Basic 112,544   108,820   111,438 
Diluted 115,698   110,821   115,242 
      

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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