Revenues Set Another All-Time Record
SUNNYVALE, CA -- 09/01/2005 -- Finisar Corporation (NASDAQ: FNSR), a technology leader in gigabit fiber optic solutions for high-speed data networks, today reported its financial results for its first fiscal quarter ended July 31, 2005.
FINANCIAL HIGHLIGHTS -- FIRST FISCAL QUARTER ENDED JULY 31, 2005
GAAP
- -- Revenues of $81.7 million were up 32% from prior year, 9% sequentially
and exceeded upper end of guidance for the quarter of $75-$80 million.
- -- Net loss of $.07 per share compares to a net loss of $.15 per share in
the fourth quarter and a net loss of $.10 per share in the first quarter of
the prior year.
- -- Gross margins of 21.1% were up from 15.8% in the fourth quarter and
19.7% in the first quarter of the prior year.
- -- Cash and short-term investments of $101.8 million at July 31, 2005 are
down only slightly from $102.4 million at the end of last quarter.
Non-GAAP Financial Measures
- -- Net loss of $.03 per share compares to a net loss of $.05 per share in
the fourth quarter and a net loss of $.06 per share in the first quarter of
the prior year.
- -- Gross margins of 27.6% are up from 25.5% in the fourth quarter and
26.1% in the first quarter of the prior year, despite an unfavorable
product mix.
OPERATING RESULTSTotal revenues in the first quarter of fiscal 2006 were $81.7 million, up 9% on a sequential basis from $74.9 million in the fourth quarter and 32% from $61.9 million in the first quarter of the prior year. For the fourth consecutive quarter, the Company's revenues set a new all time record. Total revenues from the sale of optical subsystems were $72.4 million in the first quarter, up 12% on a sequential basis from $64.5 million in the fourth quarter and 35% from $53.8 million in the first quarter of the prior year. Sales of network test and monitoring systems were $9.4 million in the first quarter, down 10% on a sequential basis from $10.4 million in the fourth quarter but up 15% from $8.1 million in the first quarter of the prior year.
The Company reported a net loss of $19.1 million, or $0.07 per share, for the first quarter of fiscal 2006, compared to a net loss of $37.8 million, or $0.15 per share, in the fourth quarter and a net loss of $22.1 million, or $0.10 per share, in the first quarter of fiscal 2005. The Company's gross profit for the first quarter was $15.3 million, or 21.1% of total revenues, compared to 15.8% in the fourth quarter and 19.7% in the first quarter of 2005.
The Company's operating results include a number of non-cash and cash charges, principally related to acquisitions, restructuring activities and financing transactions. For the first quarter of fiscal 2006, these items totaled $10.6 million and included, among other items, amortization of acquired developed technology of $5.7 million associated with a number of previous acquisitions, the payment of $1.3 million primarily representing incentive payments to employees of Infineon Technologies A.G. and I-TECH Corporation associated with the transfer of know-how and manufacturing processes related to various recently acquired product lines, and $1.1 million related to the amortization of discount on convertible notes issued in 2001 and 2003. Also included in the current quarter is a non-cash tax provision of $.6 million resulting from timing differences associated with the amortization of goodwill for tax reporting purposes which is not amortized for financial reporting purposes.
The Company excludes these and certain other items for the purpose of tracking its performance on a non-GAAP basis. Non-GAAP gross profit and non-GAAP net income (loss), as reported by the Company, give an indication of the Company's baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. The Company's non-GAAP net loss for the first quarter of fiscal 2006 was $8.5 million, or $.03 per share, compared to $12.5 million, or $.05 per share, in the fourth quarter and $14.3 million, or $.06 per share, in the first quarter of the prior year. On a non-GAAP basis, gross profit was $22.6 million, or 27.6% of total revenues, compared to 25.5% in the fourth quarter and 26.1% in the first quarter of the prior year.
"Our progress at the top line this quarter was boosted by having a full quarter of results from the acquisition of the transceiver and transponder product lines of Infineon Technologies A.G.," said Jerry Rawls, Finisar's President and CEO. "Those products accounted for about 40% of our sequential growth in optics revenues. The overall growth in optics revenues more than offset some weakness in our test and monitoring business, which we restructured during the quarter to enhance profitability. We believe that our continuing execution at the top line combined with a number of cost reduction initiatives that are taking place over the next two quarters should put us in a position to achieve our goal of returning to profitability in the near future and becoming profitable on a non-GAAP basis in the third quarter of the current fiscal year. In addition, we were EBITDA positive on a non-GAAP basis in the first quarter and our cash balances remained above $100 million."
CONFERENCE CALL
Finisar plans to review its first quarter results and discuss its current business outlook during a conference call for investors at 5:30 p.m. EDT (2:30 p.m. PDT) today, September 1, 2005. The call will be broadcast live over the Internet on the Investor Relations section of Finisar's web site, located at www.Finisar.com. To listen to the Webcast, interested investors are encouraged to log onto the broadcast at least 15 minutes prior to the call. Participating in the call will be Jerry Rawls, Finisar's President and CEO, and Steve Workman, Finisar's CFO.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACTS OF 1995
The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding Finisar's expectations, beliefs, intentions, or strategies regarding the future. All forward-looking statements included in this press release are based upon information available to Finisar as of the date hereof, and 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. These risks include those associated with 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 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; intensive competition; and potential problems related to the assimilation and integration of the operations, technologies and products of several recently acquired companies and product lines, including the assets related to the transceiver product lines of the Fiber Optics Business Unit of Infineon A.G. acquired in January 2005, and the acquisitions of I-TECH Corporation in April 2005 and InterSAN Corporation in May 2005. Further information regarding these and other risks relating to Finisar's business is set forth in Finisar's Annual Report on Form 10-K and other interim reports as filed with the Securities and Exchange Commission.
ABOUT FINISAR
Finisar Corporation (NASDAQ: FNSR) is a technology leader for fiber optic components and subsystems and network test and monitoring systems. These products enable high-speed data communications for networking and storage applications over Gigabit Ethernet Local Area Networks (LANs), Fibre Channel Storage Area Networks (SANs), and Metropolitan Area Networks (MANs) using Fibre Channel, IP, SAS, SATA and SONET/SDH protocols. The Company's headquarters is in Sunnyvale, California, USA. www.finisar.com.
FINANCIAL STATEMENTS
The following financial tables are presented in accordance with GAAP.
Finisar Corporation
Consolidated Statement of Operations
Three Months Ended
July 31,
--------
2005 2004
---------- ----------
(Unaudited, in thousands,
except per share data)
Revenues
Optical subsystems and components $ 72,370 $ 53,750
Network test and monitoring systems 9,362 8,127
---------- ----------
Total revenues 81,732 61,877
Cost of revenues 60,791 45,704
Amortization of acquired developed
technology 5,654 5,566
---------- ----------
Gross profit 15,287 10,607
Gross margin 18.7% 17.1%
Operating expenses:
Research and development 13,021 16,075
Sales and marketing 8,371 7,151
General and administrative 8,009 4,682
Amortization of deferred stock
compensation - 97
Amortization of purchased
intangibles 476 143
Restructuring costs - -
Acquired in-process research and
development - -
---------- ----------
Total operating expenses 29,877 28,148
Loss from operations (14,590) (17,541)
Interest income 783 592
Interest expense (4,087) (3,363)
Other income (expense), net (600) (1,788)
---------- ----------
Loss before income taxes (18,494) (22,100)
Provision for income taxes 594 19
---------- ----------
Net loss $ (19,088) $ (22,119)
========== ==========
Net loss per share - basic and diluted $ (0.07) $ (0.10)
========== ==========
Shares used in computing net loss
per share - basic and diluted 272,228 222,929
Finisar Corporation
Consolidated Balance Sheet
July 31, 2005 April 30, 2005
------------- --------------
(Unaudited, in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 29,180 $ 29,431
Short-term investments 72,604 72,931
Restricted investments, short-term 3,732 3,717
Accounts receivable, net 43,350 42,443
Accounts receivable, other 4,723 11,371
Inventories 37,486 36,330
Prepaid expenses 3,486 3,470
---------- ----------
Total current assets 194,561 199,693
Property, plant and improvements, net 84,798 87,264
Restricted investments, long-term 5,425 5,393
Purchased technology, net 27,821 33,046
Other purchased intangible assets, net 5,476 4,424
Goodwill, net 132,217 119,690
Minority investments 16,689 21,366
Other assets 17,127 18,109
---------- ----------
Total assets $ 484,114 $ 488,985
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,827 $ 30,430
Accrued compensation 6,667 4,500
Other accrued liabilities 15,422 14,073
Deferred revenue 6,560 5,916
Current portion of other long-term
liabilities 2,599 2,242
Convertible notes 1,000 15,811
Non-cancelable purchase obligations 2,009 6,449
---------- ----------
Total current liabilities 67,084 79,421
Long-term liabilities:
Convertible notes 247,043 250,019
Other long-term liabilities 13,571 13,623
Deferred income taxes 2,218 1,632
---------- ----------
Total long-term 262,832 265,274
Stockholders' equity:
Common stock 285 259
Additional paid-in capital 1,344,031 1,314,960
Accumulated other comprehensive
income 280 381
Accumulated deficit (1,190,398) (1,171,310)
---------- ----------
Total stockholders' equity 154,198 144,290
---------- ----------
Total liabilities and stockholders'
equity $ 484,114 $ 488,985
========== ==========
NON-GAAP FINANCIAL MEASURES
The Company provides supplemental information regarding the Company's operational performance on a non-GAAP basis, which excludes various non-cash and cash charges, principally related to acquisitions, restructuring activities and financing transactions. Non-GAAP gross profit and non-GAAP net income (loss), as reported by the Company, give an indication of the Company's baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. While non-GAAP financial measures are not in accordance with, or an alternative for, U.S. generally accepted accounting principles, the Company's management uses this information for the purpose of evaluating the Company's historical and prospective financial performance in the ordinary course of business. The Company believes that providing this information to its investors, in addition to the GAAP presentation, allows investors to better evaluate the Company's progress over time and its financial results in comparison to other companies with whom it competes.
A reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below (in millions, except per share amounts):
Finisar Corporation
Reconciliation of Results of Operations under GAAP and non-GAAP
Three Months Ended
July 31,
--------
2005 2004
---------- ----------
(Unaudited, in thousands,
except per share data)
Reconciliation of GAAP Gross Profit to
non-GAAP Gross Profit:
Gross profit per GAAP 15,287 10,607
Gross margin, GAAP 18.7% 17.1%
Adjustments:
Cost of revenues
Change in excess and obsolete
inventory reserve (473) -
Purchase accounting adjustment for
sale of acquired I-tech inventory 231 -
Reduction in force and employee
retention and incentive costs related
to acquisitions 1,310 -
Duplicate facility costs during
facility move 566 -
Amortization of acquired technology 5,654 5,566
---------- ----------
Total cost of revenue
adjustments 7,288 5,566
Gross profit, non-GAAP 22,575 16,173
Gross margin, non-GAAP 27.6% 26.1%
Reconciliation of GAAP net loss to
non-GAAP net loss:
Net loss per GAAP (19,088) (22,119)
Total cost of revenue adjustments 7,288 5,566
Research and development
Reduction in force costs 252 (319)
Sales and marketing
Reduction in force costs 209 -
General and administrative
Reduction in force costs 117 (95)
Amortization of deferred compensation - 97
Amortization of purchased intangibles 476 143
Amortization of discount on
convertible debt 1,081 1,060
Other expense, net
Loss on sale of assets 28 1,019
Loss on minority investments 522 361
Provision for income tax
Timing difference related to asset
purchases 584 -
---------- ----------
Total adjustments 10,557 7,832
---------- ----------
Net loss, non-GAAP $ (8,531) $ (14,287)
========== ==========
Net loss, non-GAAP loss per share -
basic and diluted (0.03) (0.06)
Shares used in computing proforma
net loss per share - basic and diluted 272,228 222,929
Contact: Steve Workman VP Finance, Chief Financial Officer 408-548-1000 Ed Lamb Investor Relations 408-542-5050 investor.relations@Finisar.com