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Finisar Announces Third Quarter Revenues of $306.3 Million, 3.1% Growth Over Prior Quarter

March 5, 2015 4:00 PM

SUNNYVALE, CA -- (Marketwired) -- 03/05/15 --

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 2015, ended January 25, 2015.

COMMENTARY
"Revenues for our third fiscal quarter were $306.3 million, an increase of $9.3 million compared to the prior quarter," said Jerry Rawls, Finisar's executive Chairman of the Board. "Revenue growth was primarily driven by the demand for 40 gigabit and 100 gigabit transceivers for datacom applications, as well as transceivers for wireless applications."

"Although our gross margins declined primarily as a result of our annual telecom price reductions and low yields on a new optical engine product, we significantly decreased our operating expenses resulting in a minimal impact to our earnings," said Eitan Gertel, Finisar's Chief Executive Officer.

                                                                            
       FINANCIAL HIGHLIGHTS - THIRD QUARTER ENDED JANUARY 25, 2015          
                                                                            
Summary GAAP Results                                 Third        Second    
                                                    Quarter      Quarter    
                                                     Ended        Ended     
                                                  January 25,  October 26,  
                                                     2015          2014     
                                                 ------------  -----------  
                                                 (in thousands, except per  
                                                       share amounts)       
                                                                            
Revenues                                         $    306,283  $   296,981  
Gross margin                                             25.5%        28.6% 
Operating expenses                               $     74,552  $    92,180  
Operating income (loss)                          $      3,401  $    (7,259) 
Operating margin                                          1.1%        (2.4)%
Net income (loss)                                $      1,678  $   (11,361) 
Income per share-basic                           $       0.02  $     (0.11) 
Income per share-diluted                         $       0.02  $     (0.11) 
                                                                            
Basic shares                                          103,563       99,621  
Diluted shares                                        105,990       99,621  
                                                                            
Summary Non-GAAP Results (a)                         Third        Second    
                                                    Quarter      Quarter    
                                                     Ended        Ended     
                                                  January 25,  October 26,  
                                                     2015          2014     
                                                 ------------  -----------  
                                                 (in thousands, except per  
                                                       share amounts)       
                                                                            
Revenues                                         $    306,283  $   296,981  
Gross margin                                             30.0%        31.1% 
Operating expenses                               $     65,128  $    67,306  
Operating income                                 $     26,852  $    24,984  
Operating margin                                          8.8%         8.4% 
Net income                                       $     26,706  $    23,465  
Income per share-basic                           $       0.26  $      0.24  
Income per share-diluted                         $       0.25  $      0.23  
                                                                            
Basic shares                                          103,563       99,621  
Diluted shares                                        105,990      105,340  
                                                                            
(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.                                     
                                                                            

Financial Statement Highlights for the Third Quarter of Fiscal 2015:

OUTLOOK

The Company indicated that for the fourth quarter of fiscal 2015 it currently expects revenues in the range of $310 to $330 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 8% to 9%, and non-GAAP earnings per diluted share in the range of approximately $0.22 to $0.28. Please note that the fourth quarter fiscal 2015 will have 14 weeks compared to 13 weeks in the preceding quarter. However, the positive benefit to revenue of the extra week will be partially offset by the impact of Chinese New Year which occurred in February. In addition, operating expenses are expected to increase primarily due to the extra week relative to the preceding quarter.

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 5, 2015, 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 877-718-5108 (domestic) or + 719-325-4773(international) and enter conference ID 3629508.

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 3629508 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; intensive competition; and the uncertainty of achieving anticipated cost savings and synergies in connection with the recently completed u2t acquisition. 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 26, 2014) 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   
                      --------------------  --------------------  --------- 
                       January    January    January    January    October  
                      25, 2015   26, 2014   25, 2015   26, 2014   26, 2014  
                      ---------  ---------  ---------  ---------  --------- 
Revenues              $ 306,283  $ 294,018  $ 930,902  $ 850,808  $ 296,981 
Cost of revenues        221,173    187,368    659,183    546,638    210,625 
Impairment of acquired                                                      
 developed technology                                                       
 and other long-lived                                                       
 assets                   5,722          -      5,722          -          - 
Amortization of                                                             
 acquired developed                                                         
 technology               1,435        961      4,304      3,735      1,435 
                      ---------  ---------  ---------  ---------  --------- 
Gross profit             77,953    105,689    261,693    300,435     84,921 
Gross margin               25.5%      35.9%      28.1%      35.3%      28.6%
Operating expenses:                                                         
  Research and                                                              
   development           48,782     46,734    150,972    135,223     51,184 
  Sales and marketing    10,926     10,911     34,378     35,038     11,487 
  General and                                                               
   administrative        14,062     14,353     57,553     38,081     28,772 
  Impairment of                                                             
   acquired developed                                                       
   technology and                                                           
   other long-lived                                                         
   assets                    45          -         45          -          - 
  Amortization of                                                           
   purchased                                                                
   intangibles              737        595      2,235      1,785        737 
                      ---------  ---------  ---------  ---------  --------- 
    Total operating                                                         
     expenses            74,552     72,593    245,183    210,127     92,180 
                      ---------  ---------  ---------  ---------  --------- 
Income (loss) from                                                          
 operations               3,401     33,096     16,510     90,308     (7,259)
Interest income             321        335      1,275        834        342 
Interest expense         (2,686)    (1,663)    (8,687)    (2,582)    (2,867)
Other income                                                                
 (expenses), net          2,051     (1,873)        58       (890)        33 
                      ---------  ---------  ---------  ---------  --------- 
Income (loss) before                                                        
 income taxes and non-                                                      
 controlling interest     3,087     29,895      9,156     87,670     (9,751)
Provision for income                                                        
 taxes                    1,409      2,827      4,596      4,816      1,610 
                      ---------  ---------  ---------  ---------  --------- 
Income (loss) before                                                        
 non-controlling                                                            
 interest                 1,678     27,068      4,560     82,854    (11,361)
Adjust for net loss                                                         
 attributable to non-                                                       
 controlling interest         -         (7)         -        183          - 
                      ---------  ---------  ---------  ---------  --------- 
Net income (loss)                                                           
 attributable to                                                            
 Finisar Corporation  $   1,678  $  27,061  $   4,560  $  83,037  $ (11,361)
                      =========  =========  =========  =========  ========= 
                                                                            
Net income (loss) per                                                       
 share attributable to                                                      
 Finisar Corporation                                                        
 common stockholders:                                                       
                                                                            
  Basic               $    0.02  $    0.28  $    0.05  $    0.87  $   (0.11)
  Diluted             $    0.02  $    0.26  $    0.04  $    0.82  $   (0.11)
                                                                            
Shares used in                                                              
 computing net income                                                       
 per share - basic      103,563     96,394    100,475     95,649     99,621 
Shares used in                                                       99,621 
 computing net income                                                       
 per share - diluted    105,990    104,361    103,825    103,491            
                                                                            
                                                                            
                                                                            
                            Finisar Corporation                             
                        Consolidated Balance Sheets                         
                              (in thousands)                                
                                                                            
                         January 25,  October 26,    July 27,    April 27,  
                             2015         2014         2014         2014    
                         -----------  -----------  -----------  ----------- 
                         (Unaudited)  (Unaudited)  (Unaudited)              
                         -----------  -----------  -----------  ----------- 
          ASSETS                                                            
Current assets:                                                             
  Cash and cash                                                             
   equivalents           $   198,344  $   186,952  $   287,455  $   303,101 
  Short-term held-to-                                                       
   maturity investments      290,520      290,478      209,927      209,922 
  Accounts receivable,                                                      
   net                       210,116      213,721      231,312      225,020 
  Accounts receivable,                                                      
   other                      41,540       34,573       41,595       33,749 
  Inventories                277,862      284,789      270,122      259,759 
  Prepaid expenses and                                                      
   other assets               37,265       38,065       38,582       33,022 
                         -----------  -----------  -----------  ----------- 
    Total current assets   1,055,647    1,048,578    1,078,993    1,064,573 
Property, equipment and                                                     
 improvements, net           304,547      306,331      301,020      273,328 
Purchased intangible                                                        
 assets, net                  29,336       31,508       33,680       34,141 
Goodwill                     106,735      106,735      106,735      106,115 
Minority investments           2,647        2,547        2,317        2,117 
Other assets                  22,444       22,528       20,907       17,272 
                         -----------  -----------  -----------  ----------- 
    Total assets         $ 1,521,356  $ 1,518,227  $ 1,543,652  $ 1,497,546 
                         ===========  ===========  ===========  =========== 
                                                                            
     LIABILITIES AND                                                        
   STOCKHOLDERS' EQUITY                                                     
Current liabilities:                                                        
  Accounts payable       $   123,895  $   113,235  $   143,224  $   119,439 
  Accrued compensation        30,632       35,354       28,215       38,541 
  Other accrued                                                             
   liabilities                31,854       33,529       27,568       31,533 
  Deferred revenue            11,240       12,358       16,872       16,659 
  Short term debt                175          187          247          243 
  Current portion of                                                        
   convertible notes                       36,665       40,015       40,015 
                         -----------  -----------  -----------  ----------- 
    Total current                                                           
     liabilities             197,796      231,328      256,141      246,430 
Long-term liabilities:                                                      
  Convertible notes, net                                                    
   of current portion        219,072      216,775      214,496      212,253 
  Other non-current                                                         
   liabilities                24,184       24,900       24,042       22,804 
                         -----------  -----------  -----------  ----------- 
    Total liabilities        441,052      473,003      494,679      481,487 
Stockholders' equity:                                                       
  Common stock                   104          100          100           97 
  Additional paid-in                                                        
   capital                 2,537,231    2,485,133    2,469,687    2,456,110 
  Accumulated other                                                         
   comprehensive income       (1,418)      17,282       25,116       20,025 
  Accumulated deficit     (1,455,613)  (1,457,291)  (1,445,930)  (1,460,173)
                         -----------  -----------  -----------  ----------- 
    Total stockholders'                                                     
     equity                1,080,304    1,045,224    1,048,973    1,016,059 
                         -----------  -----------  -----------  ----------- 
Total liabilities and                                                       
 stockholders' equity    $ 1,521,356  $ 1,518,227  $ 1,543,652  $ 1,497,546 
                         ===========  ===========  ===========  =========== 
                                                                            
Note - Balance sheet amounts as of April 27, 2014 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 and non-GAAP 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 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 in this release:

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:

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:

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  
                       25, 2015   26, 2014   25, 2015   26, 2014   26, 2014 
                      ---------  ---------  ---------  ---------  --------- 
GAAP to non-GAAP                                                            
 reconciliation of                                                          
 gross profit:                                                              
Gross profit - GAAP   $  77,953  $ 105,689  $ 261,693  $ 300,435  $  84,921 
Gross margin - GAAP        25.5%      35.9%      28.1%      35.3%      28.6%
Adjustments:                                                                
Cost of revenues                                                            
  Change in excess and                                                      
   obsolete inventory                                                       
   reserve                3,772        384      7,541         55      2,048 
  Amortization of                                                           
   acquired technology    1,435        961      4,304      3,735      1,435 
  Duplicate facility                                                        
   costs during                                                             
   facility move              6                   772                   766 
  Stock compensation      2,660      2,374      7,524      6,207      2,588 
  Abandonment of fixed                                                      
   assets                     -          -        124          -        124 
  Impairment of long-                                                       
   lived assets           5,722          -      5,722          -          - 
  Reduction in force                                                        
   costs                    371         34      1,165        104        319 
  Acquisition related                                                       
   retention payment         61         62        268        194         89 
                      ---------  ---------  ---------  ---------  --------- 
    Total cost of                                                           
     revenue                                                                
     adjustments         14,027      3,815     27,420     10,295      7,369 
                      ---------  ---------  ---------  ---------  --------- 
Gross profit - non-                                                         
 GAAP                    91,980    109,504    289,113    310,730     92,290 
                      ---------  ---------  ---------  ---------  --------- 
Gross margin - non-                                                         
 GAAP                      30.0%      37.2%      31.1%      36.5%      31.1%
                                                                            
GAAP to non-GAAP                                                            
 reconciliation of                                                          
 operating income:                                                          
Operating income                                                            
 (loss) - GAAP            3,401     33,096     16,510     90,308     (7,259)
Operating margin -                                                          
 GAAP                       1.1%      11.3%       1.8%      10.6%      -2.4%
Adjustments:                                                                
Total cost of revenue                                                       
 adjustments             14,027      3,815     27,420     10,295      7,369 
Research and                                                                
 development                                                                
  Reduction in force                                                        
   costs                     23          -        708         28        353 
  Duplicate facility                                                        
   costs during                                                             
   facility move             99          -        866          -        767 
  Acquisition related                                                       
   retention payment        132        190        491        571        166 
  Stock compensation      4,669      3,995     13,832     11,589      4,727 
Sales and marketing                                                         
  Acquisition related                                                       
   retention payment          9         17         38         51          9 
  Stock compensation      1,600      1,369      4,754      3,935      1,625 
General and                                                                 
 administrative                                                             
  Reduction in force                                                        
   costs                     49        (82)       103        158         59 
  Duplicate facility                                                        
   costs                     36          -        152          -        116 
  Acquisition related                                                       
   retention payment          7        (11)       (32)     1,036        (55)
  Stock compensation      2,654      2,618      8,083      7,704      2,617 
  Payroll taxes                                                             
   related to options                                                       
   investigation              -          -         17          -         17 
  Acquisition related                                                       
   costs                     36        591        274        940          8 
  Litigation                                                                
   settlements and                                                          
   resolutions and                                                          
   related costs           (662)         5     11,754         10     13,728 
  Shareholder class                                                         
   action and                                                               
   derivative                                                               
   litigation costs         (10)        97        (10)    (4,951)         - 
Amortization of                                                             
 purchased intangibles      737        595      2,235      1,785        737 
Impairment of long-                                                         
 lived assets                45          -         45          -          - 
                      ---------  ---------  ---------  ---------  --------- 
    Total cost of                                                           
     revenue and                                                            
     operating expense                                                      
     adjustments         23,451     13,199     70,730     33,151     32,243 
                      ---------  ---------  ---------  ---------  --------- 
Operating income -                                                          
 non-GAAP                26,852     46,295     87,240    123,459     24,984 
                      ---------  ---------  ---------  ---------  --------- 
Operating margin -                                                          
 non-GAAP                   8.8%      15.7%       9.4%      14.5%       8.4%
                                                                            
GAAP to non-GAAP                                                            
 reconciliation of                                                          
 income attributable                                                        
 to Finisar                                                                 
 Corporation:                                                               
Net income (loss)                                                           
 attributable to                                                            
 Finisar Corporation -                                                      
 GAAP                     1,678     27,061      4,560     83,037    (11,361)
Adjustments:                                                                
Total cost of revenue                                                       
 and operating expense                                                      
 adjustments             23,451     13,199     70,730     33,151     32,243 
Non-cash imputed                                                            
 interest expenses on                                                       
 convertible debt         2,297        927      6,819        927      2,279 
Imputed interest                                                            
 related to                                                                 
 restructuring               48         54        149        167         50 
Other (income)                                                              
 expense, net                                                               
  Loss (gain) on sale                                                       
   of assets                 31        (30)       242       (135)       (27)
  Gain related to                                                           
   minority                                                                 
   investments                -          -          -       (743)         - 
  Other miscellaneous                                                       
   income                  (167)        (3)      (178)        (5)       (10)
  Foreign exchange                                                          
   transaction (gain)                                                       
   or loss                 (338)     2,200      1,980      2,559        327 
  Amortization of debt                                                      
   issuance cost            154         76        462         76        154 
Provision for income                                                        
 taxes                                                                      
  Income tax provision                                                      
   adjustments             (448)     1,327     (1,261)       621       (190)
Non-controlling                                                             
 interest non-GAAP                                                          
 adjustment                   -        182          -        374          - 
                      ---------  ---------  ---------  ---------  --------- 
Total adjustments        25,028     17,932     78,943     36,992     34,826 
                      ---------  ---------  ---------  ---------  --------- 
Net income                                                                  
 attributable to                                                            
 Finisar Corporation -                                                      
 non-GAAP             $  26,706  $  44,993  $  83,503  $ 120,029  $  23,465 
                      =========  =========  =========  =========  ========= 
                                                                            
Non-GAAP income                                                             
 attributable to                                                            
 Finisar Corporation  $  26,706  $  44,993  $  83,503  $ 120,029  $  23,465 
Add: interest expense                                                       
 for dilutive                                                               
 convertible notes            -        539      1,072      1,617        533 
                      ---------  ---------  ---------  ---------  --------- 
Adjusted non-GAAP                                                           
 income attributable                                                        
 to Finisar                                                                 
 Corporation          $  26,706  $  45,532  $  84,575  $ 121,646  $  23,998 
                      =========  =========  =========  =========  ========= 
                                                                            
Non-GAAP income per                                                         
 share attributable to                                                      
 Finisar Corporation                                                        
 common stockholders                                                        
  Basic               $    0.26  $    0.47  $    0.83  $    1.25  $    0.24 
  Diluted             $    0.25  $    0.44  $    0.80  $    1.18  $    0.23 
Shares used in                                                              
 computing non-GAAP                                                         
 income per share                                                           
 attributable to                                                            
 Finisar Corporation                                                        
 common stockholders                                                        
  Basic                 103,563     96,394    100,475     95,649     99,621 
  Diluted               105,990    104,361    106,339    103,491    105,340 
                                                                            
Non-GAAP EBITDA                                                             
Non-GAAP income                                                             
 attributable to                                                            
 Finisar Corporation  $  26,706  $  44,993  $  83,503  $ 120,029  $  23,465 
Depreciation expense     21,371     15,960     61,934     44,508     20,915 
Amortization                  -         94         72        282         33 
Interest expense             20        347        444        654        196 
Income tax expense        1,857      1,500      5,857      4,195      1,800 
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP EBITDA       $  49,954  $  62,894  $ 151,810  $ 169,668  $  46,409 
                      =========  =========  =========  =========  ========= 
                                                                            

Finisar-F

   Investor Contact:Kurt AdzemaChief Financial Officer408-542-5050 or [email protected] contact:Victoria McDonaldDirector, Corporate Communications408-542-4261

Source: Finisar

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