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, November 1, 2016 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, November 1, 2016 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 Three Months Ended Nine Months Ended Ended -------------------- -------------------- --------- Jan 31, January Jan 31, January Nov 01, 2016 25, 2015 2016 25, 2015 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 107,493 per share - diluted 108,128 105,990 108,488 103,825
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 Three Months Ended Nine Months Ended Ended ------------------- ------------------- --------- Jan 31, January Jan 31, January Nov 01, 2016 25, 2015 2016 25, 2015 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