SUNNYVALE, CA -- (Marketwire - March 07, 2013) - 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 27, 2013.
COMMENTARY
"I am pleased to report fiscal third quarter revenues of $238.4 million, which is $6.3 million, or 2.7%, greater than the prior quarter. Our growth in revenues came primarily from sales of 10G and 100G transceivers and transponders for datacom applications," said Jerry Rawls, Finisar's executive Chairman of the Board.
"During the quarter, we continued to invest significantly in technology and product development and made substantial progress on a number of new products for our datacom and telecom products lines. We are planning several compelling product announcements at the OFC show during the week of March 18th in Anaheim, California," said Eitan Gertel, Finisar's Chief Executive Officer.
FINANCIAL HIGHLIGHTS -THIRD QUARTER ENDED January 27, 2013 Summary GAAP Results Third Second Quarter Quarter Ended Ended January 27, October 28, 2013 2012 ------------ ------------ (in thousands, except per share amounts) Revenues $ 238,351 $ 232,041 Gross margin 28.5% 27.5% Operating expenses $ 68,841 $ 63,820 Operating income (loss) $ (797) $ 54 Operating margin (0.3)% 0.0% Income (loss) $ (3,407) $ 271 Income (loss) per share-basic $ (0.04) $ 0.00 Income (loss) per share-diluted $ (0.04) $ 0.00 Basic shares 93,097 92,780 Diluted shares 93,097 94,735 Summary Non-GAAP Results (a) Third Second Quarter Quarter Ended Ended January 27, October 28, 2013 2012 ------------ ------------ (in thousands, except per share amounts) Revenues $ 238,351 $ 232,041 Gross margin 30.7% 30.5% Operating expenses $ 55,816 $ 54,846 Operating income $ 17,377 $ 15,838 Operating margin 7.3% 6.8% Income $ 16,390 $ 14,205 Income per share-basic $ 0.18 $ 0.15 Income per share-diluted $ 0.17 $ 0.15 Basic shares 93,097 92,780 Diluted shares 99,094 98,483 (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 Finisar's core 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.
Operating Statement Highlights for the third quarter of fiscal 2013:
- Revenues increased to $238.4 million, an increase of $6.3 million, or 2.7%, from $232.0 million in the preceding quarter, primarily driven by growth in revenues from 10G and 100G transceivers and transponders for datacom applications.
- Compared to the preceding quarter, the sale of products for datacom applications increased by $7.8 million, or 5.6%, and the sale of products for telecom applications decreased by $1.5 million, or (1.6)%, as the result of the impact of approximately one month of the annual telecom price reductions that typically go into effect on approximately January 1st, partially offset in the increase in unit sales including tunable XFP transceivers.
- Gross margin increased to 28.5% on a GAAP basis and 30.7% on a non-GAAP basis, from 27.5% and 30.5%, respectively, in the preceding quarter, primarily as a result of higher revenue levels, partially offset by the impact of one month of the annual telecom price reductions that typically go into effect on approximately January 1st.
- GAAP operating loss increased $0.8 million to $0.8 million, or (0.3) % of revenues, compared to an operating gain of $0.05 million, or 0.0% of revenues, in the preceding quarter.
- Non-GAAP operating income increased $1.5 million to $17.4 million, or 7.3% of revenues, compared to $15.8 million, or 6.8% of revenues, in the preceding quarter as the Company was able to hold non-GAAP operating expenses relatively flat while revenues grew.
- Non-GAAP EBITDA increased $2.4 million to $31.1 million, or 13.1% of revenues, compared to $28.7 million, or 12.4% of revenues, in the preceding quarter.
Balance Sheet Highlights for the third quarter of fiscal 2013:
- Cash and cash equivalents totaled $265.5 million at the end of the third quarter, compared to $262.4 million at the end of the preceding quarter.
- At the end of the third quarter, Finisar had approximately $40.0 million in principal amount of convertible notes outstanding with a conversion price of $10.675 per share.
OUTLOOK
The Company currently expects revenues for the fourth quarter of fiscal 2013 to be in the range of $235 to $250 million; GAAP operating margin to be approximately 2%; non-GAAP operating margin to be approximately 7%; and non-GAAP earnings per diluted share to be in the range of approximately $0.15 to $0.19.
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 7, 2013, at 2:00 pm PST (5:00 pm EST). To listen to the call you may connect through the Finisar investor relations page at http://investor.finisar.com/ or dial 1-888-417-8533 (domestic) or (719) 457-2697 (international) and enter conference ID 4484284.
An audio replay will be available for two weeks following the call by dialing 1-888-203-1112 (domestic) or (719) 457-0820 and then following the prompts: enter conference ID 4484284 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
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. 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. 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; challenges related to the integration of the recently completed RED-C acquisition; 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 29, 2012) 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 more than 20 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) January 27, October 28, July 29, April 30, 2013 2012 2012 2012 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 265,454 $ 262,432 $ 220,409 $ 234,544 Accounts receivable, net 155,502 155,949 179,441 167,760 Accounts receivable, other 10,843 15,240 14,972 21,004 Inventories 202,123 203,554 208,168 218,432 Prepaid expenses 22,875 25,183 24,430 25,482 ------------ ------------ ------------ ------------ Total current assets 656,797 662,358 647,420 667,222 Property, equipment and improvements, net 192,381 173,284 165,837 163,817 Purchased intangible assets, net 45,823 53,300 43,049 45,177 Goodwill 91,551 91,098 97,994 81,431 Minority investments 884 884 884 884 Other assets 7,321 7,263 7,393 10,896 ------------ ------------ ------------ ------------ Total assets $ 994,757 $ 988,187 $ 962,577 $ 969,427 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 67,264 $ 72,844 $ 71,295 $ 72,339 Accrued compensation 28,436 27,901 22,210 27,090 Other accrued liabilities 31,901 22,774 21,456 20,871 Deferred revenue 9,760 7,868 9,775 8,970 Current portion of long-term debt - - - 3,150 ------------ ------------ ------------ ------------ Total current liabilities 137,361 131,387 124,736 132,420 Long-term liabilities: Convertible notes, net of current portion 40,015 40,015 40,015 40,015 Other non-current liabilities 14,078 21,171 16,274 15,175 Deferred tax liabilities 2,512 2,459 2,433 1,972 ------------ ------------ ------------ ------------ Total liabilities 193,966 195,032 183,458 189,582 Stockholders' equity: Common stock 93 93 93 91 Additional paid-in capital 2,341,448 2,330,683 2,321,064 2,309,219 Accumulated other comprehensive income 26,904 26,346 22,356 28,720 Accumulated deficit (1,575,839) (1,572,432) (1,572,703) (1,566,506) ------------ ------------ ------------ ------------ Finisar Corporation stockholders' equity 792,606 784,690 770,810 771,524 Non-controlling interest 8,185 8,465 8,309 8,321 ------------ ------------ ------------ ------------ Total stockholders' equity 800,791 793,155 779,119 779,845 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $ 994,757 $ 988,187 $ 962,577 $ 969,427 ============ ============ ============ ============ Note - Balance sheet amounts as of April 30, 2012 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 Three Months Ended Nine Months Ended Ended -------------------- -------------------- --------- January January January January October 27, 2013 29, 2012 27, 2013 29, 2012 28, 2012 --------- --------- --------- --------- --------- Revenues $ 238,351 $ 242,954 $ 690,918 $ 712,669 $ 232,041 Cost of revenues 168,377 170,215 496,001 500,009 166,167 Amortization of acquired developed technology 1,930 1,637 5,202 4,796 2,000 --------- --------- --------- --------- --------- Gross profit 68,044 71,102 189,715 207,864 63,874 Gross margin 28.5% 29.3% 27.5% 29.2% 27.5% Operating expenses: Research and development 39,725 36,470 117,514 108,573 39,620 Sales and marketing 10,398 10,599 31,291 30,310 10,219 General and administrative 12,797 11,766 39,058 39,491 12,919 Amortization of purchased intangibles 1,035 959 2,906 2,597 1,062 Impairment of long- lived assets 4,886 - 4,886 - - Restructuring recoveries - - - (322) - --------- --------- --------- --------- --------- Total operating expenses 68,841 59,794 195,655 180,649 63,820 --------- --------- --------- --------- --------- Income (loss) from operations (797) 11,308 (5,940) 27,215 54 Interest income 186 151 544 411 162 Interest expense (648) (862) (2,045) (2,911) (750) Loss on debt extinguishment - - - (419) - Other income (expenses), net (275) (355) (295) 4,168 (101) --------- --------- --------- --------- --------- Income (loss) before income taxes and non-controlling interest (1,534) 10,242 (7,736) 28,464 (635) Provision (benefits) for income taxes 2,153 875 1,733 2,792 (1,062) --------- --------- --------- --------- --------- Income (loss) before non-controlling interest (3,687) 9,367 (9,469) 25,672 427 Adjust for net (income) loss attributable to non- controlling interest 280 (458) 136 (694) (156) --------- --------- --------- --------- --------- Net income (loss) attributable to Finisar Corporation $ (3,407) $ 8,909 $ (9,333) $ 24,978 $ 271 ========= ========= ========= ========= ========= Net income (loss) per share attributable to Finisar Corporation common stockholders: Basic $ (0.04) $ 0.10 $ (0.10) $ 0.28 $ 0.00 Diluted $ (0.04) $ 0.09 $ (0.10) $ 0.27 $ 0.00 Shares used in computing net income (loss) per share - basic 93,097 91,001 92,624 90,644 92,780 Shares used in computing net income (loss) per share - diluted 93,097 94,032 92,624 93,904 94,735
FINISAR NON-GAAP FINANCIAL MEASURES
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides 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 which occur relatively infrequently and which management considers to be outside our core operating results. Some of these non-GAAP measures also exclude the ongoing impact of historical business decisions made in different business and economic environments. Management believes that tracking non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and non-GAAP net income per share provides management and the investment community with valuable insight into our 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:
- 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);
- Stock-based compensation expense (non-cash charges);
- Acquisition method accounting adjustment for sale of acquired inventory (non-cash charges);
- Reduction in force costs (non-recurring cash charges); and
- Acquisition related retention payments (non-recurring 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:
- Gain or loss on litigation settlements and resolutions and related costs (non-recurring cash charges or benefits);
- Shareholder class action and derivative litigation costs (non-recurring cash expenses 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);
- Impairment of long-lived assets (non-cash charges)
- Acquisition related costs (non-recurring cash charges);
- Amortization of purchased intangibles (non-cash charges); and
- Restructuring costs and recoveries (non-recurring charges and benefits).
In calculating non-GAAP income and non-GAAP income per share in this release, we have also excluded the following items in applicable periods:
- Imputed interest related to restructuring (non-cash charges);
- Gains and losses on sales of assets (non-recurring or non-cash losses and cash gains related to the periodic disposal of assets no longer required for current activities);
- Loss related to minority and equity method investments (non-cash charges);
- Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits);
- Other miscellaneous expenses (income) (non-recurring charges or benefits);
- Debt extinguishment loss (non-recurring charges);
- Fair value re-measurement of equity investment (non-cash gain from re-measurement of value of prior investment in an investee); and
- Differences between cash payable for income taxes and the provision for income taxes in accordance with GAAP, less discrete items.
In calculating non-GAAP income per share in this release, we have included the shares issuable upon conversion of our outstanding convertible notes and excluded the interest expenses associated with such notes in such periods where such treatment is dilutive to non-GAAP income (loss) per share.
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 Three Months Ended Nine Months Ended Ended -------------------- -------------------- --------- January January January January October 27, 2013 29, 2012 27, 2013 29, 2012 28, 2012 --------- --------- --------- --------- --------- GAAP to non-GAAP reconciliation of gross profit: Gross profit - GAAP $ 68,044 $ 71,102 $ 189,715 $ 207,864 $ 63,874 Gross margin - GAAP 28.5% 29.3% 27.5% 29.2% 27.5% Adjustments: Cost of revenues Change in excess and obsolete inventory reserve 989 1,732 7,858 5,343 2,003 Amortization of acquired technology 1,930 1,637 5,202 4,796 2,000 Stock compensation 2,140 1,596 5,502 5,142 1,876 Acquisition method accounting adjustment for sale of acquired inventory - 952 1,363 4,035 722 Reduction in force costs 17 243 801 844 136 Acquisition related retention payment 73 - 146 - 73 --------- --------- --------- --------- --------- Total cost of revenue adjustments 5,149 6,160 20,872 20,160 6,810 --------- --------- --------- --------- --------- Gross profit - non- GAAP 73,193 77,262 210,587 228,024 70,684 --------- --------- --------- --------- --------- Gross margin - non- GAAP 30.7% 31.8% 30.5% 32.0% 30.5% GAAP to non-GAAP reconciliation of operating income: Operating income (loss) - GAAP (797) 11,308 (5,940) 27,215 54 Operating margin - GAAP -0.3% 4.7% -0.9% 3.8% 0.0% Adjustments: Total cost of revenue adjustments 5,149 6,160 20,872 20,160 6,810 Research and development Reduction in force costs 11 693 188 766 - Acquisition related retention payment 213 - 435 - 222 Stock compensation 2,601 2,200 8,940 6,835 3,353 Sales and marketing Acquisition related retention payment 17 - 37 - 20 Stock compensation 885 747 2,964 2,378 1,002 General and administrative Reduction in force costs 25 51 94 1,014 54 Acquisition related retention payment 223 - 476 - 253 Stock compensation 2,218 1,746 8,003 5,699 2,956 Acquisition related costs 731 304 1,152 1,602 96 Litigation settlements and resolutions and related costs - (185) 13 (93) (10) Shareholder class action and derivative litigation costs 180 (10) 189 625 (34) Amortization of purchased intangibles 1,035 959 2,906 2,597 1,062 Impairment of long- lived assets 4,886 - 4,886 - - Restructuring recoveries - - - (322) - --------- --------- --------- --------- --------- Total cost of revenue and operating expense adjustments 18,174 12,665 51,155 41,261 15,784 --------- --------- --------- --------- --------- Operating income - non-GAAP 17,377 23,973 45,215 68,476 15,838 --------- --------- --------- --------- --------- Operating margin - non-GAAP 7.3% 9.9% 6.5% 9.6% 6.8% GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation: Income (loss) attributable to Finisar Corporation - GAAP (3,407) 8,909 (9,333) 24,978 271 Adjustments: Total cost of revenue and operating expense adjustments 18,174 12,665 51,155 41,261 15,784 Imputed interest related to restructuring 148 206 374 672 164 Other (income) expense, net Loss (gain) on sale of assets 38 (229) (151) (7) (170) Loss related to minority and equity method investments - - - 619 - Other miscellaneous income (101) 351 (261) 601 - Foreign exchange transaction loss (gain) 431 362 (180) (280) (607) Debt extinguishment loss - - 573 419 573 Fair value remeasurement of equity investment - - - (5,429) - Provision for income taxes Income tax provision adjustments 1,107 (386) (711) 109 (1,810) --------- --------- --------- --------- --------- Total adjustments 19,797 12,969 50,799 37,965 13,934 --------- --------- --------- --------- --------- Net income attributable to Finisar Corporation - non-GAAP 16,390 21,878 41,466 62,943 14,205 --------- --------- --------- --------- --------- Non-GAAP income attributable to Finisar Corporation $ 16,390 $ 21,878 $ 41,466 $ 62,943 $ 14,205 Add: interest expense for dilutive convertible notes 539 539 1,618 1,617 539 --------- --------- --------- --------- --------- Adjusted non-GAAP income attributable to Finisar Corporation $ 16,929 $ 22,417 $ 43,084 $ 64,560 $ 14,744 ========= ========= ========= ========= ========= Non-GAAP income per share attributable to Finisar Corporation common stockholders Basic $ 0.18 $ 0.24 $ 0.45 $ 0.69 $ 0.15 Diluted $ 0.17 $ 0.23 $ 0.44 $ 0.66 $ 0.15 Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders Basic 93,097 91,001 92,624 90,644 92,780 Diluted 99,094 97,781 98,891 97,652 98,483 Non-GAAP EBITDA Non-GAAP income attributable to Finisar Corporation $ 16,390 $ 21,878 $ 41,466 $ 62,943 $ 14,205 Depreciation expense 13,306 11,388 39,123 32,978 13,106 Amortization 86 208 559 624 237 Interest expense 314 505 1,127 1,828 424 Income tax expense 1,046 1,261 2,444 2,683 748 --------- --------- --------- --------- --------- Non-GAAP EBITDA $ 31,142 $ 35,240 $ 84,719 $ 101,056 $ 28,720 ========= ========= ========= ========= =========
Investor Contact: Kurt Adzema Chief Financial Officer 408-542-5050 Investor.relations@finisar.com Press contact: Victoria McDonald Sr. Manager, Corporate Communications 408-542-4261