Finisar Announces Third Quarter Revenues of $306.3 Million, 3.1% Growth Over Prior Quarter
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:
- Revenues increased to $306.3 million, up $9.3 million, or 3.1%, from $297.0 million in the preceding quarter.
- Sales of products for datacom applications increased by $18.5 million, or 8.5%, compared to the preceding quarter, primarily driven by the demand for 40 gigabit and 100 gigabit transceivers for datacom applications, as well as transceivers for wireless applications.
- Sales of products for telecom applications decreased by $9.2 million, or 11.3%, compared to the preceding quarter, primarily due to the impact of one month of the annual telecom price reduction that typically takes effect on January 1 and the decrease in demand for transceivers for telecom applications driven by sluggish carrier capital expenditures.
- GAAP gross margin decreased to 25.5% from 28.6% in the preceding quarter, primarily driven by a $5.7 million non-cash charge for the impairment of long-lived assets.
- Non-GAAP gross margin decreased to 30.0% from 31.1% in the preceding quarter primarily due to the impact of one month of the annual telecom price reduction that typically takes effect on January 1 and the impact of substantial yield loss for a new optical engine product for supercomputing applications that we started to ramp in production during the quarter.
- GAAP operating expenses decreased $17.6 million to $74.6 million from $92.2 million in the preceding quarter, primarily from expense reduction related to resolving patent infringement litigation that occurred in the preceding quarter.
- Non-GAAP operating expenses decreased $2.2 million to $65.1 million from $67.3 million in the preceding quarter.
- GAAP operating income increased $10.7 million, to $3.4 million or 1.1% of revenues, compared to an operating loss of $7.3 million or (2.4)% of revenues in the preceding quarter, primarily as the result of higher revenues and lower operating expenses.
- Non-GAAP operating income increased $1.9 million to $26.9 million, or 8.8% of revenues, compared to $25.0 million, or 8.4% of revenues, in the preceding quarter, primarily as the result of higher revenue and lower operating expenses.
- Cash, cash equivalents and short term investments increased $11.4 million to $488.9 million at the end of the third quarter, compared to $477.4 million at the end of the preceding quarter.
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:
- 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 facilities costs during facilities move (non-recurring cash charges)
- Stock-based compensation expense (non-cash charges);
- Abandonment of fix assets (non-cash charges);
- Impairment of long-lived assets (non-recurring non-cash charges);
- Reduction in force costs (non-recurring cash charges); and
- Acquisition related retention payments (non-recurring 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-recurring cash charges or benefits);
- Employee and employer tax liabilities related to the 2006 special investigation into our historical stock option granting practices (non-recurring cash charges);
- Shareholder class action and derivative litigation costs (non-recurring 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-recurring 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-recurring and/or non-cash losses and gains related to the periodic disposal of assets no longer required for current activities);
- Gains and losses related to minority investments (non-cash or non-recurring benefits or charges);
- Other miscellaneous expenses (income) (non-recurring charges or benefits);
- Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits);
- Amortization of debt issuance costs (non-cash charges);
- Non-controlling interest non-GAAP adjustment (non-cash and/or non-recurring charges or benefits attributable to the non-controlling interest in majority-controlled subsidiaries); 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 -------------------- -------------------- --------- 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