SUNNYVALE, Calif., March 08, 2018 (GLOBE NEWSWIRE) -- Finisar Corporation (NASDAQ:FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its third fiscal quarter, ended January 28, 2018.
COMMENTARY
“We experienced strong demand and record revenues in our third fiscal quarter for our 100G QSFP28 transceivers for datacenters as well as higher revenue for our VCSEL arrays for 3D sensing,” said Michael Hurlston, Finisar’s Chief Executive Officer. “However, our overall revenues for the third fiscal quarter only grew modestly to $332.4 million, as the growth from 100G QSFP28 and VCSEL arrays was offset by decline in revenue from telecom products, as well as lower revenues from our 40G QSFP and 100G CFP and CFP2 ethernet datacom transceivers.”
FINANCIAL HIGHLIGHTS – Third Quarter Ended January 28, 2018
Summary GAAP Results
Third
Second
Quarter
Quarter
Ended
Ended
January 28, 2018
October 29, 2017
(in thousands, except per share amounts)
Revenues
$332,403
$332,205
Gross margin
26.5%
29.0%
Operating expenses
$94,197
$86,738
Operating income (loss)
$(6,129)
$9,467
Operating margin
(1.8)%
2.8%
Net income (loss)
$(55,659)
$5,857
Income (loss) per share-basic
$(0.49)
$0.05
Income (loss) per share-diluted
$(0.49)
$0.05
Basic shares
114,209
113,960
Diluted shares
114,209
115,443
Summary Non-GAAP Results (a)
Third
Second
Quarter
Quarter
Ended
Ended
January 28, 2018
October 29, 2017
(in thousands, except per share amounts)
Revenues
$332,403
$332,205
Non-GAAP Gross margin
28.6%
30.3%
Non-GAAP Operating expenses
$72,376
$74,643
Non-GAAP Operating income
$22,702
$25,914
Non-GAAP Operating margin
6.8%
7.8%
Non-GAAP Net income
22,801
26,089
Non-GAAP Income per share-basic
$0.20
$0.23
Non-GAAP Income per share-diluted
$0.20
$0.23
Basic shares
114,209
113,960
Diluted shares
115,661
115,443
_____________
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.
Revenue Details for the Third Quarter of Fiscal 2018:
Sales of datacom products increased from $256.6 million to $266.1 million, or by $9.5 million, or 3.7%, compared to the second quarter of fiscal 2018.
Sales of telecom products decreased from $75.6 million to $66.3 million, or by $9.3 million, or (12.3)%, compared to the second quarter of fiscal 2018.
OUTLOOK
Finisar indicated that for the fourth quarter of fiscal 2018 it currently expects revenues in the range of $300 to $320 million, non-GAAP gross margin of approximately 27%-28%, non-GAAP operating margin of approximately 4%, and non-GAAP earnings per fully diluted share in the range of approximately $0.09 to $0.15.
Finisar has not provided a reconciliation of its fourth 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 third quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, March 8, 2018, 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 5898449.
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 5898449 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 30 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 Balance Sheets
(in thousands)
Jan 28, 2018
Oct 29, 2017
Jul 30, 2017
Apr 30, 2017
(Unaudited)
(Unaudited)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
259,023
$
274,547
$
278,826
$
260,228
Short-term held-to-maturity investments
957,267
958,216
954,026
976,595
Accounts receivable, net
243,963
260,870
273,180
272,377
Inventories
382,179
369,078
356,845
331,388
Other current assets
53,023
61,517
63,629
68,269
Total current assets
1,895,455
1,924,228
1,926,506
1,908,857
Property, equipment and improvements, net
495,364
443,733
420,298
383,919
Purchased intangible assets, net
9,148
10,424
11,700
13,019
Goodwill
106,735
106,735
106,735
106,735
Other assets
21,883
21,424
22,256
20,125
Deferred tax assets
78,593
116,055
108,567
107,225
Total assets
$
2,607,178
$
2,622,599
$
2,596,062
$
2,539,880
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
127,248
$
152,047
$
148,605
$
140,568
Accrued compensation
39,660
36,614
42,030
54,520
Other accrued liabilities
36,947
40,130
46,648
43,697
Deferred revenue
14,539
17,716
14,348
13,015
Current portion of convertible notes
248,426
-
-
-
Total current liabilities
466,820
246,507
251,631
251,800
Long-term liabilities:
Convertible notes
483,481
723,784
715,722
707,782
Other non-current liabilities
16,464
17,176
17,546
17,594
Total liabilities
966,765
987,467
984,899
977,176
Stockholders' equity:
Common stock
114
114
114
112
Additional paid-in capital
2,839,701
2,814,713
2,799,118
2,784,204
Accumulated other comprehensive income (loss)
(5,712
)
(41,664
)
(44,181
)
(57,865
)
Accumulated deficit
(1,193,690
)
(1,138,031
)
(1,143,888
)
(1,163,747
)
Total stockholders' equity
1,640,413
1,635,132
1,611,163
1,562,704
Total liabilities and stockholders' equity
$
2,607,178
$
2,622,599
$
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 Corporation
Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Three Months Ended
Nine Months Ended
Three Months Ended
Jan 28, 2018
Jan 29, 2017
Jan 28, 2018
Jan 29, 2017
Oct 29, 2017
Revenues
$
332,403
$
380,588
$
1,006,414
$
1,091,776
$
332,205
Cost of revenues
243,724
242,961
705,009
709,790
235,389
Amortization of acquired developed technology
611
990
1,833
3,503
611
Gross profit
88,068
136,637
299,572
378,483
96,205
Gross margin
26.5
%
35.9
%
29.8
%
34.7
%
29.0
%
Operating expenses:
Research and development
59,888
54,691
178,488
158,941
60,560
Sales and marketing
11,913
13,092
36,494
38,322
12,230
General and administrative
19,739
13,235
47,310
43,126
13,282
Startup costs
638
-
638
-
-
Amortization of purchased intangibles
666
713
2,039
2,049
666
Impairment of long-lived assets
1,353
-
1,353
-
-
Total operating expenses
94,197
81,731
266,322
242,438
86,738
Income (loss) from operations
(6,129
)
54,906
33,250
136,045
9,467
Interest income
3,995
1,717
11,181
3,464
3,746
Interest expense
(9,192
)
(5,399
)
(27,336
)
(11,410
)
(9,131
)
Other income (expenses), net
(459
)
(338
)
(2,042
)
398
1,111
Income (loss) before income taxes
(11,785
)
50,886
15,053
128,497
5,193
Provision (benefit) for income taxes
43,874
4,499
44,996
9,396
(664
)
Net income (loss)
$
(55,659
)
$
46,387
$
(29,943
)
$
119,101
$
5,857
Net income (loss) per share attributable to Finisar Corporation common stockholders:
Basic
$
(0.49
)
$
0.42
$
(0.26
)
$
1.08
$
0.05
Diluted
$
(0.49
)
$
0.40
$
(0.26
)
$
1.05
$
0.05
Shares used in computing net income per share - basic
114,209
110,956
113,571
110,061
113,960
Shares used in computing net income per share - diluted
114,209
114,873
113,571
113,506
115,443
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:
Amortization of acquired technology (non-cash charges related to technology obtained in acquisitions);
Duplicate facility costs during facility move (non-core cash charges);
Acquisition related retention payments (non-core cash charges); and
Inventory write-off related to discontinued products (non-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:
Litigation settlements and resolutions and related costs (non-core cash charges);
Acquisition related costs (non-core cash charges);
Amortization of purchased intangibles (non-cash charges);
Impairment of long-lived assets (non-cash charges); and
Start-up cash costs related to our Sherman VCSEL fab until we begin commercial production.
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);
Other interest income (non-core benefits);
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);
Loss (gain) related to minority investment (non-core charges or benefits);
Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits); and
Amortization of debt issuance costs (non-cash charges).
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
Nine Months Ended
Three Months Ended
Jan 28, 2018
Jan 29, 2017
Jan 28, 2018
Jan 29, 2017
Oct 29, 2017
GAAP to non-GAAP reconciliation of gross profit:
Gross profit - GAAP
$
88,068
$
136,637
$
299,572
$
378,483
$
96,205
Gross margin - GAAP
26.5
%
35.9
%
29.8
%
34.7
%
29.0
%
Adjustments:
Cost of revenues
Amortization of acquired technology
611
990
1,833
3,503
611
Duplicate facility costs during facility move
-
10
-
26
-
Stock compensation
2,918
3,182
9,212
9,178
3,724
Reduction in force costs
7
68
632
184
(9
)
Acquisition related retention payment
26
26
93
71
26
Write off of discontinued product inventory
3,448
-
3,448
-
-
Total cost of revenue adjustments
7,010
4,276
15,218
12,962
4,352
Gross profit - non-GAAP
95,078
140,913
314,790
391,445
100,557
Gross margin - non-GAAP
28.6
%
37.0
%
31.3
%
35.9
%
30.3
%
GAAP to non-GAAP reconciliation of operating income:
Operating income (loss) - GAAP
(6,129
)
54,906
33,250
136,045
9,467
Operating margin - GAAP
-1.8
%
14.4
%
3.3
%
12.5
%
2.8
%
Adjustments:
Total cost of revenue adjustments
7,010
4,276
15,218
12,962
4,352
Total operating expense adjustments
Operating expenses - GAAP
94,197
81,731
266,322
242,438
86,738
Research and development
Reduction in force costs
792
30
907
292
22
Duplicate facility costs during facility move
-
10
-
24
-
Acquisition related retention payment
44
32
108
96
32
Stock compensation
6,073
5,461
18,302
16,124
6,147
Sales and marketing
Reduction in force costs
-
-
(12
)
29
-
Acquisition related retention payment
-
-
(2
)
-
-
Stock compensation
1,892
1,921
5,975
5,549
2,039
General and administrative
Reduction in force costs
341
20
391
53
13
Duplicate facility costs during facility move
119
168
439
465
137
Acquisition related retention payment
-
-
-
(2
)
-
Stock compensation
9,888
2,807
15,956
8,349
2,999
Acquisition related costs
(25
)
21
19
54
40
Litigation settlements and resolutions and related costs
-
47
-
93
-
Unclaimed property tax audit accrual
-
(37
)
-
(37
)
-
Amortization of purchased intangibles
666
713
2,039
2,049
666
Startup costs
638
-
638
-
-
Impairment of long-lived assets
1,394
-
1,394
-
-
Total operating expense adjustments
21,822
11,193
46,154
33,138
12,095
Operating expenses - non-GAAP
72,375
70,538
220,168
209,300
74,643
Operating income - non-GAAP
22,703
70,375
94,622
182,145
25,914
Operating margin - non-GAAP
6.8
%
18.5
%
9.4
%
16.7
%
7.8
%
GAAP to non-GAAP reconciliation of income before income taxes:
Income (loss) before income taxes - GAAP
(11,785
)
50,886
15,053
128,497
5,193
Adjustments:
Total cost of revenue adjustments
7,010
4,276
15,218
12,962
4,352
Total operating expense adjustments
21,822
11,193
46,154
33,138
12,095
Other interest income
(14
)
-
(14
)
-
-
Non-cash imputed interest expenses on convertible debt
7,739
4,464
22,970
9,442
7,676
Imputed interest related to restructuring
25
34
83
109
28
Other (income) expense, net
Loss (gain) on sale of assets
(79
)
(245
)
(158
)
(270
)
38
Loss related to impairment of minority investments
-
643
2,347
643
-
Foreign exchange transaction (gain) or loss
698
(204
)
(318
)
(1,203
)
(1,478
)
Amortization of debt issuance cost
385
257
1,155
565
385
Total Interest and other adjustments
8,754
4,949
26,065
9,286
6,649
Income before income taxes - non-GAAP
25,801
71,304
102,490
183,883
28,289
GAAP to non-GAAP reconciliation of net income:
Net income (loss) - GAAP
(55,659
)
46,387
(29,943
)
119,101
5,857
Total cost of revenue adjustments
7,010
4,276
15,218
12,962
4,352
Total operating expense adjustments
21,822
11,193
46,154
33,138
12,095
Total Interest and other adjustments
8,754
4,949
26,065
9,286
6,649
Income tax provision adjustments
40,874
399
37,146
(304
)
(2,864
)
Total adjustments
78,460
20,817
124,583
55,082
20,232
Net income - non-GAAP
$
22,801
$
67,204
$
94,640
$
174,183
$
26,089
Basic non-GAAP income per share
GAAP earnings per share
$
(0.49
)
$
0.42
$
(0.26
)
$
1.08
$
0.05
Impact of all non-GAAP adjustments
$
0.69
$
0.19
$
1.09
$
0.50
$
0.18
Non-GAAP earnings per share
$
0.20
$
0.61
$
0.83
$
1.58
$
0.23
Diluted non-GAAP income per share
GAAP earnings per share
$
(0.49
)
$
0.40
$
(0.26
)
$
1.05
$
0.05
Impact of all non-GAAP adjustments
$
0.69
$
0.19
$
1.07
$
0.48
$
0.18
Non-GAAP earnings per share
$
0.20
$
0.59
$
0.81
$
1.53
$
0.23
Shares used in computing non-GAAP income per share
Basic
114,209
110,956
113,571
110,061
113,960
Diluted
115,661
114,873
116,138
113,506
115,443
Finisar-F
Investor Contact: Kurt Adzema Chief Financial Officer 408-542-5050 or [email protected]
Press contact: Victoria McDonald Director, Corporate Communications 408-542-4261