CST: 27/09/2016 20:48:58   

Finisar Announces Third Fiscal Quarter 2016 Financial Results

201 Days ago

SUNNYVALE, CA --(Marketwired - March 10, 2016) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its third quarter of fiscal 2016, ended January 31, 2016. 

COMMENTARY

"Revenues for our third fiscal quarter were $309.2 million, approximately in line with the midpoint of our prior guidance range for the quarter of $300 to $320 million. Better than expected gross margins, due to favorable product mix, as well as lower than expected operating and other expenses, resulted in earnings per fully diluted share at the upper end of our prior guidance range," said Jerry Rawls, Finisar's Chief Executive Officer.

   
   
FINANCIAL HIGHLIGHTS - Third Quarter Ended January 31, 2016  
   
Summary GAAP Results   Third     Second  
Quarter     Quarter  
Ended     Ended  
    January 31, 2016     November 1, 2015  
    (in thousands, except per share amounts)  
                 
Revenues   $ 309,206     $ 321,136  
Gross margin     28.4 %     27.7 %
Operating expenses   $ 77,282     $ 79,723  
Operating income   $ 10,458     $ 9,368  
Operating margin     3.4 %     2.9 %
Net income   $ 12,084     $ 6,644  
Income per share-basic   $ 0.11     $ 0.06  
Income per share-diluted   $ 0.11     $ 0.06  
                 
Basic shares     107,180       106,635  
Diluted shares     108,128       107,493  
                 
             
             
Summary Non-GAAP Results (a)   Third     Second  
Quarter     Quarter  
Ended     Ended  
    January 31, 2016     November 1, 2015  
    (in thousands, except per share amounts)  
                 
Revenues   $ 309,206     $ 321,136  
Non-GAAP Gross margin     30.3 %     30.0 %
Non-GAAP Operating expenses   $ 67,292     $ 68,025  
Non-GAAP Operating income   $ 26,309     $ 28,274  
Non-GAAP Operating margin     8.5 %     8.8 %
Non-GAAP Net income   $ 26,604     $ 26,857  
Non-GAAP Income per share-basic   $ 0.25     $ 0.25  
Non-GAAP Income per share-diluted   $ 0.25     $ 0.25  
                 
Basic shares     107,180       106,635  
Diluted shares     108,128       107,493  
                 
(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 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 Third Quarter of Fiscal 2016: 

  • Revenues were $309.2 million, a decrease of $11.9 million, or (3.7)%, from $321.1 million in the preceding quarter.
  • Sales of products for telecom applications increased by $2.6 million, or 2.9%, compared to the preceding quarter, primarily driven by growth in wavelength selective switches.
  • Sales of products for datacom applications decreased by $14.5 million, or (6.2)%, compared to the preceding quarter, primarily driven by a decline in 40 gigabit transceivers, primarily as the result of reduced levels of capital spending by web 2.0 and hyperscale data center customers in anticipation of the roll out of next generation 100G QSFP28 transceivers.
  • GAAP gross margin was 28.4% compared to 27.7% in the preceding quarter.
  • Non-GAAP gross margin improved to 30.3% compared to 30.0% in the prior quarter as favorable product mix more than offset the impact of one month of annual telecom price negotiations, which typically take effect on January 1. 
  • GAAP operating expenses were $77.3 million compared to $79.7 million in the prior quarter.
  • Non-GAAP operating expenses were $67.3 million compared to $68.0 million in the prior quarter. 
  • GAAP earnings per fully diluted share was $0.11 compared to $0.06 in the preceding quarter.
  • Non-GAAP earnings per fully diluted share was $0.25 compared to $0.25 in the preceding quarter.
  • Cash, cash equivalents and short term investments increased $10.3 million to $531.1 million at the end of the third quarter, compared to $520.8 million at the end of the preceding quarter.

OUTLOOK

The Company indicated that for the fourth quarter of fiscal 2016 it currently expects revenues in the range of $307 to $327 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 8.2% to 9.2%, and non-GAAP earnings per fully diluted share in the range of approximately $0.22 to $0.28.

CONFERENCE CALL

Finisar will discuss its financial results for the third quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, March 10, 2016, 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 877-675-4756 (domestic) or +1.719.325.4812 (international) and enter conference ID 1574347.

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 1574347 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     Nine Months Ended     Three Months Ended  
    Jan 31, 2016     January 25, 2015     Jan 31, 2016     January 25, 2015     Nov 01, 2015  
Revenues   $ 309,206     $ 306,283     $ 944,372     $ 930,902     $ 321,136  
Cost of revenues     219,836       221,173       674,593       659,183       230,610  
Impairment of long-lived assets     -       5,722       1,071       5,722       -  
Amortization of acquired developed technology     1,630       1,435       4,500       4,304       1,435  
Gross profit     87,740       77,953       264,208       261,693       89,091  
Gross margin     28.4 %     25.5 %     28.0 %     28.1 %     27.7 %
Operating expenses:                                        
  Research and development     49,840       48,782       153,220       150,972       50,972  
  Sales and marketing     11,899       10,926       34,998       34,378       11,897  
  General and administrative     14,875       14,062       46,269       57,553       16,186  
  Impairment of long-lived assets     -       45       2,004       45       -  
  Amortization of purchased intangibles     668       737       830       2,235       668  
    Total operating expenses     77,282       74,552       237,321       245,183       79,723  
Income from operations     10,458       3,401       26,887       16,510       9,368  
Interest income     709       321       1,543       1,275       469  
Interest expense     (2,933 )     (2,686 )     (8,733 )     (8,687 )     (2,917 )
Other income (expenses), net     1,968       2,051       3,294       58       445  
Income before income taxes     10,202       3,087       22,991       9,156       7,365  
Provision (benefit) for income taxes     (1,882 )     1,409       870       4,596       721  
Net income   $ 12,084     $ 1,678     $ 22,121     $ 4,560     $ 6,644  
                                         
Net income per share attributable to Finisar Corporation common stockholders:                                        
                                         
  Basic   $ 0.11     $ 0.02     $ 0.21     $ 0.05     $ 0.06  
  Diluted   $ 0.11     $ 0.02     $ 0.20     $ 0.04     $ 0.06  
                                         
Shares used in computing net income per share - basic     107,180       103,563       106,367       100,475       106,635  
Shares used in computing net income per share - diluted     108,128       105,990       108,488       103,825       107,493
 
                                         
   
   
Finisar Corporation  
Consolidated Balance Sheets  
(in thousands)  
                         
    Jan 31, 2016     Nov 01, 2015     Aug 02, 2015     May 03, 2015  
    (Unaudited)     (Unaudited)     (Unaudited)        
ASSETS                                
Current assets:                                
  Cash and cash equivalents   $ 268,330     $ 258,270     $ 232,997     $ 197,443  
  Short-term held-to-maturity investments     262,726       262,500       262,695       292,748  
  Accounts receivable, net     241,384       230,065       234,798       213,234  
  Accounts receivable, other     41,933       39,982       40,807       40,650  
  Inventories     262,591       264,706       282,093       283,670  
  Prepaid expenses and other assets     25,317       20,538       22,649       36,518  
    Total current assets     1,102,281       1,076,061       1,076,039       1,064,263  
Property, equipment and improvements, net     342,818       344,695       322,043       315,777  
Purchased intangible assets, net     20,686       22,983       25,086       27,188  
Goodwill     106,735       106,735       106,735       106,735  
Minority investments     3,692       3,647       2,997       2,847  
Other assets     21,516       23,133       34,960       35,072  
    Total assets   $ 1,597,728     $ 1,577,254     $ 1,567,860     $ 1,551,882  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY                                
Current liabilities:                                
  Accounts payable   $ 131,240     $ 133,220     $ 139,600     $ 131,510  
  Accrued compensation     32,908       31,680       26,392       24,918  
  Other accrued liabilities     45,492       43,301       39,753       39,238  
  Deferred revenue     11,933       12,438       11,480       9,850  
    Total current liabilities     221,573       220,639       217,225       205,516  
Long-term liabilities:                                
  Convertible notes, net of current portion     228,561       226,151       223,760       221,406  
  Other non-current liabilities     21,765       23,195       21,545       21,167  
    Total liabilities     471,899       469,985       462,530       448,089  
Stockholders' equity:                                
  Common stock     108       107       107       104  
  Additional paid-in capital     2,593,587       2,577,246       2,564,506       2,551,114  
  Accumulated other comprehensive income (loss)     (41,701 )     (31,835 )     (14,390 )     861  
  Accumulated deficit     (1,426,165 )     (1,438,249 )     (1,444,893 )     (1,448,286 )
    Total stockholders' equity     1,125,829       1,107,269       1,105,330       1,103,793  
Total liabilities and stockholders' equity   $ 1,597,728     $ 1,577,254     $ 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, non-GAAP income and non-GAAP net 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 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 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:

  • Changes in excess and obsolete inventory reserve (predominantly non-cash charges or non-cash benefits);
  • Amortization of acquired technology (non-cash charges related to technology obtained in acquisitions);
  • Duplicate facility costs during facility move (non-core cash charges);
  • Stock-based compensation expense (non-cash charges);
  • Impairment of long-lived assets (non-cash charges);
  • Reduction in force costs (non-core cash charges); and
  • Acquisition related retention payments (non-core cash charges). 

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:

  • Gain or loss on litigation settlements and resolutions and related costs (non-core cash charges or benefits);
  • Shareholder class action and derivative litigation costs (non-core cash charges associated with the derivative litigation related to our historical stock option granting practices and related to the class action and derivative litigation related to our March 8, 2011 earnings announcement);
  • Acquisition related costs (non-core cash charges); and
  • Amortization of purchased intangibles (non-cash charges).

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:

  • Imputed interest expenses on convertible debt (non-cash charges);
  • Imputed interest related to restructuring (non-cash charges);
  • Gains and losses on sales of assets (non-cash losses and cash gains related to the periodic disposal of assets no longer required for current activities);
  • Other miscellaneous expenses (income) (non-core charges or benefits);
  • Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits);
  • Amortization of debt issuance costs (non-cash charges); and
  • Differences between cash payable for income taxes and the provision for income taxes in accordance with GAAP, less discrete items.

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   Nine Months Ended   Three Months Ended  
  Jan 31, 2016   January 25, 2015   Jan 31, 2016   January 25, 2015   Nov 01, 2015  
GAAP to non-GAAP reconciliation of gross profit:                              
Gross profit - GAAP $ 87,740   $ 77,953   $ 264,208   $ 261,693   $ 89,091  
Gross margin - GAAP   28.4 %   25.5 %   28.0 %   28.1 %   27.7 %
Adjustments:                              
Cost of revenues                              
  Change in excess and obsolete inventory valuation adjustments   1,293     3,772     5,125     7,541     2,402  
  Amortization of acquired technology   1,630     1,435     4,500     4,304     1,435  
  Duplicate facility costs during facility move   7     6     93     772     4  
  Stock compensation   2,539     2,660     8,153     7,524     2,922  
  Impairment of long-lived assets   -     5,722     1,282     5,846     -  
  Reduction in force costs   364     371     1,335     1,165     417  
  Acquisition related retention payment   28     61     121     268     28  
    Total cost of revenue adjustments   5,861     14,027     20,609     27,420     7,208  
Gross profit - non-GAAP   93,601     91,980     284,817     289,113     96,299  
Gross margin - non-GAAP   30.3 %   30.0 %   30.2 %   31.1 %   30.0 %
                               
GAAP to non-GAAP reconciliation of operating income:                              
Operating income - GAAP   10,458     3,401     26,887     16,510     9,368  
Operating margin - GAAP   3.4 %   1.1 %   2.8 %   1.8 %   2.9 %
Adjustments:                              
Total cost of revenue adjustments   5,861     14,027     20,609     27,420     7,208  
Total operating expense adjustments                              
  Operating expenses - GAAP   77,282     74,552     237,321     245,183     79,723  
    Research and development                              
    Reduction in force costs   230     23     518     708     -  
    Duplicate facility costs during facility move   7     99     277     866     49  
    Acquisition related retention payment   32     132     190     491     67  
    Stock compensation   4,723     4,669     14,531     13,832     4,970  
    Impairment of long-lived assets   -     -     287     -     -  
  Sales and marketing                              
    Reduction in force costs   44     -     224     -     117  
    Acquisition related retention payment   2     9     15     38     3  
    Stock compensation   1,713     1,600     5,138     4,754     1,718  
  General and administrative                              
    Reduction in force costs   39     49     1,354     103     963  
    Duplicate facility costs   150     36     167     152     8  
    Acquisition related retention payment   -     7     (5 )   (32 )   -  
    Stock compensation   2,343     2,654     7,860     8,083     2,757  
    Payroll taxes related to options investigation   -     -     -     17     -  
    Acquisition related costs   39     36     435     274     378  
    Litigation settlements and resolutions and related costs   -     (662 )   16     11,754     -  
    Shareholder class action and derivative litigation costs   -     (10 )   -     (10 )   -  
  Amortization of purchased intangibles   668     737     2,004     2,235     668  
  Impairment of long-lived assets   -     45     587     45     -  
      Total operating expense adjustments   9,990     9,424     33,598     43,310     11,698  
  Operating expenses - non-GAAP   67,292     65,128     203,723     201,873     68,025  
Operating income - non-GAAP   26,309     26,852     81,094     87,240     28,274  
Operating margin - non-GAAP   8.5 %   8.8 %   8.6 %   9.4 %   8.8 %
                               
GAAP to non-GAAP reconciliation of income before income taxes:                              
Income before income taxes - GAAP   10,202     3,087     22,991     9,156     7,365  
Adjustments:                              
Total cost of revenue adjustments   5,861     14,027     20,609     27,420     7,208  
Total operating expense adjustments   9,990     9,424     33,598     43,310     11,698  
Total Interest and other adjustments                              
Other interest income   (113 )   -     (113 )   -     -  
Non-cash imputed interest expenses on convertible debt   2,411     2,297     7,156     6,819     2,391  
Imputed interest related to restructuring   42     48     131     149     44  
Other (income) expense, net                              
    Loss (gain) on sale of assets   (644 )   31     (744 )   242     85  
    Other miscellaneous income   (1,503 )   (167 )   (1,640 )   (178 )   (120 )
    Foreign exchange transaction (gain) or loss   1,205     (338 )   563     1,980     51  
    Amortization of debt issuance cost   154     154     462     462     154  
      Total Interest and other adjustments   1,552     2,025     5,815     9,474     2,605  
Income before income taxes - non-GAAP   27,605     28,563     83,013     89,360     28,876  
                               
GAAP to non-GAAP reconciliation of net income:                              
Net income - GAAP   12,084     1,678     22,121     4,560     6,644  
Total cost of revenue adjustments   5,861     14,027     20,609     27,420     7,208  
Total operating expense adjustments   9,990     9,424     33,598     43,310     11,698  
Total Interest and other adjustments   1,552     2,025     5,815     9,474     2,605  
Income tax provision adjustments   (2,883 )   (448 )   (4,150 )   (1,261 )   (1,298 )
  Total adjustments   14,520     25,028     55,872     78,943     20,213  
Net income - non-GAAP $ 26,604   $ 26,706   $ 77,993   $ 83,503   $ 26,857  
                               
Non-GAAP net income for diluted earnings per share calcuation                              
Non-GAAP net income $ 26,604   $ 26,706   $ 77,993   $ 83,503   $ 26,857  
Add: interest expense for dilutive convertible notes   -     -     -     1,072     -  
Adjusted non-GAAP income $ 26,604   $ 26,706   $ 77,993   $ 84,575   $ 26,857  
                               
Basic non-GAAP income per share                              
  GAAP earnings per share $ 0.11   $ 0.02   $ 0.21   $ 0.05   $ 0.06  
  Impact of all non-GAAP adjustments $ 0.14   $ 0.24   $ 0.53   $ 0.79   $ 0.19  
  Non-GAAP earnings per share $ 0.25   $ 0.26   $ 0.73   $ 0.83   $ 0.25  
                               
Diluted non-GAAP income per share                              
  GAAP earnings per share $ 0.11   $ 0.02   $ 0.20   $ 0.04   $ 0.06  
  Impact of all non-GAAP adjustments $ 0.14   $ 0.23   $ 0.52   $ 0.76   $ 0.19  
  Non-GAAP earnings per share $ 0.25   $ 0.25   $ 0.72   $ 0.80   $ 0.25  
                               
Shares used in computing non-GAAP income per share                              
  Basic   107,180     103,563     106,367     100,475     106,635  
  Diluted   108,128     105,990     108,488     106,339     107,493  
                               

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