Finisar Announces Third Fiscal Quarter Financial ResultsSUNNYVALE, 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
