Finisar Announces Third Quarter Fiscal 2018 Financial Results

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 ResultsThird
Second
Quarter
Quarter
Ended
Ended
January 28, 2018
October 29, 2017
(in thousands, except per share amounts)
Revenues$332,403 $332,205
Gross margin26.5% 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 shares114,209 113,960
Diluted shares114,209 115,443
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 margin28.6% 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

_____________

  1. 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, 2018Oct 29, 2017Jul 30, 2017Apr 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 EndedNine Months EndedThree Months Ended
Jan 28, 2018Jan 29, 2017Jan 28, 2018Jan 29, 2017Oct 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);
  • Stock-based compensation expense (non-cash charges);
  • Reduction in force costs (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);
  • Unclaimed property tax audit accrual (non-core benefits);
  • 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 EndedNine Months EndedThree Months Ended
Jan 28, 2018Jan 29, 2017Jan 28, 2018Jan 29, 2017Oct 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 Investor.relations@finisar.com

Press contact:
Victoria McDonald
Director, Corporate Communications
408-542-4261

Source:Finisar Corporation