FNSR
$30.96
Finisar
($.84)
(2.64%)
Earnings Details
1st Quarter July 2016
Thursday, September 08, 2016 4:00:09 PM
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Summary

Finisar Beats

Finisar (FNSR) reported 1st Quarter July 2016 earnings of $0.36 per share on revenue of $341.3 million. The consensus earnings estimate was $0.30 per share on revenue of $333.5 million. The Earnings Whisper number was $0.31 per share. Revenue grew 8.7% on a year-over-year basis.

The company said it expects second quarter non-GAAP earnings of $0.44 to $0.50 per share on revenue of $355.0 million to $375.0 million. The current consensus earnings estimate is $0.32 per share on revenue of $342.6 million for the quarter ending October 31, 2016.

Finisar Corp is a provider of optical subsystems and components that are used in data communication and telecommunication applications.

Results
Reported Earnings
$0.36
Earnings Whisper
$0.31
Consensus Estimate
$0.30
Reported Revenue
$341.3 Mil
Revenue Estimate
$333.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Finisar Announces Record First Fiscal Quarter Revenues

SUNNYVALE, CA--(Marketwired - September 08, 2016) - Finisar Corporation (FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its first quarter of fiscal year 2017, ended July 31, 2016.

COMMENTARY

"I am pleased to announce that Finisar achieved record revenues for our first quarter of $341.3 million, an increase of $22.5 million, or 7.1% compared to the prior quarter. This growth was primarily driven by strong demand for 100Gb/s transceivers in CFP, CFP2, CFP4, and QSFP28 form factors. In addition, demand for wavelength selective switches was strong. Our gross margins improved significantly due to favorable product mix and leverage of our vertically integrated manufacturing infrastructure over the larger volume. The combination of revenues being at the higher end of our guidance range and better than expected gross margins resulted in earnings per fully diluted share exceeding the upper end of our guidance range," said Jerry Rawls, Finisar’s Chief Executive Officer.

 
FINANCIAL HIGHLIGHTS - First Quarter Ended July 31, 2016
 
 
 
 
 
Summary GAAP Results
 
First
 
Fourth
 
 
Quarter
 
Quarter
 
 
Ended
 
Ended
 
 
July 31, 2016  
May 1, 2016
 
 
(in thousands, except per share amounts)
 
 
 
 
 
Revenues
 
$341,325
 
$318,794
Gross margin
 
31.7%
 
28.4%
Operating expenses
 
$79,854
 
$76,306
Operating income
 
$28,311
 
$14,135
Operating margin
 
8.3%
 
4.4%
Net income
 
$23,949
 
$13,072
Income per share-basic
 
$0.22
 
$0.12
Income per share-diluted
 
$0.22
 
$0.12
 
 
 
 
 
Basic shares
 
108,820
 
107,612
Diluted shares
 
110,821
 
109,386
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary Non-GAAP Results (a)  
First
 
Fourth
 
 
Quarter
 
Quarter
 
 
Ended
 
Ended
 
 
July 31, 2016  
May 1, 2016
 
 
(in thousands, except per share amounts)
 
 
 
 
 
Revenues
 
$341,325
 
$318,794
Non-GAAP Gross margin
 
33.1%
 
30.6%
Non-GAAP Operating expenses
 
$69,344
 
$66,186
Non-GAAP Operating income
 
$43,520
 
$31,239
Non-GAAP Operating margin
 
12.8%
 
9.8%
Non-GAAP Net income
 
$41,825
 
$31,824
Non-GAAP Income per share-basic
 
$0.38
 
$0.30
Non-GAAP Income per share-diluted
 
$0.38
 
$0.29
 
 
 
 
 
Basic shares
 
108,820
 
107,612
Diluted shares
 
110,821
 
109,386
 
 
 
 
 

(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 First Quarter of Fiscal 2017:

Revenues were $341.3 million, an increase of $22.5 million, or 7.1%, from $318.8 million in the preceding quarter.

Sales of telecom products increased by $22.0 million, or 29.0%, compared to the preceding quarter. This increase was due to higher sales of wavelength selective switches, coherent receivers, and 100G transceivers, as well as a rebound in demand for other telecom products including amplifiers and 10G transceivers, both tunable and fixed wavelength.

Sales of datacom products increased by $0.5 million, or 0.2%, compared to the preceding quarter, primarily driven by growth in demand for 100G transceivers including CFP, CFP2, CFP4, and QSFP28 form factors, partially offset by a decline in sales of transceivers for wireless applications and 40G transceivers. Datacom revenue, excluding transceivers for wireless applications, increased 3.1% over the preceding quarter. Sales of 100G transceivers for datacom applications increased 21.8% over the preceeding quarter, and 115.8% over the first quarter of the prior fiscal year.

GAAP gross margin improved to 31.7%, compared to 28.4% in the preceding quarter, primarily due to favorable product mix and the benefit of vertical integration over the larger volume.

Non-GAAP gross margin improved to 33.1% compared to 30.6% in the preceding quarter.

GAAP operating expenses were $79.9 million compared to $76.3 million in the preceding quarter. The increase was due to higher payroll taxes from the annual vesting of employee restricted stock unit grants, higher legal expenses from two patent trials completed in the quarter, and higher employee compensation levels. GAAP operating expenses as a percentage of revenue decreased to approximately 23.4% of revenue compared to 23.9% in the preceding quarter.

Non-GAAP operating expenses increased to $69.3 million compared to $66.2 million in the preceding quarter. Non-GAAP operating expenses as a percentage of revenue decreased to approximately 20.3% of revenue compared to 20.8% in the preceding quarter.

GAAP operating margin improved to 8.3% from 4.4% in the preceding quarter.

Non-GAAP operating margin improved to 12.8% from 9.8% in the preceding quarter.

GAAP earnings per fully diluted share was $0.22 compared to $0.12 in the preceding quarter, primarily due to higher revenues levels and improved gross margins.

Non-GAAP earnings per fully diluted share was $0.38 compared to $0.29 in the preceding quarter.

Cash, cash equivalents and short term investments increased $31.3 million to $593.8 million at the end of the first quarter, compared to $562.5 million at the end of the preceding quarter.

OUTLOOK

Finisar indicated that for the second quarter of fiscal 2017 it currently expects revenues in the range of $355 to $375 million, non-GAAP gross margin of approximately 34%, non-GAAP operating margin of approximately 14.3% to 15.3%, and non-GAAP earnings per fully diluted share in the range of approximately $0.44 to $0.50.

Finisar has not provided a reconciliation of its second 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 first quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, September 8, 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 888-208-1815 (domestic) or 719-325-2291 (international) and enter conference ID 1833924.

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 1833924 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 17, 2016) and quarterly SEC filings.

ABOUT FINISAR

Finisar Corporation (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 over 25 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)
 
 
   
     
 
 
  July 31, 2016
    May 1, 2016
 
 
  (Unaudited)
     
 
ASSETS
     
       
 
Current assets:
     
       
 
 
Cash and cash equivalents
  $
280,414
    $
299,221
 
 
Short-term held-to-maturity investments
    313,389
      263,255
 
 
Accounts receivable, net
    255,036
      249,257
 
 
Accounts receivable, other
    43,678
      44,576
 
 
Inventories
    272,592
      273,291
 
 
Prepaid expenses and other assets
    18,646
      18,483
 
 
 
Total current assets
    1,183,755
      1,148,083
 
Property, equipment and improvements, net
    338,918
      348,613
 
Purchased intangible assets, net
    16,197
      18,388
 
Goodwill
    106,735
      106,735
 
Minority investments
    3,974
      4,051
 
Other assets
    18,928
      19,501
 
 
 
Total assets
  $
1,668,507
    $
1,645,371
 
 
     
       
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
     
       
 
Current liabilities:
     
       
 
 
Accounts payable
  $
136,317
    $
141,591
 
 
Accrued compensation
    36,332
      36,084
 
 
Other accrued liabilities
    39,201
      42,206
 
 
Deferred revenue
    16,468
      13,529
 
 
 
Total current liabilities
    228,318
      233,410
 
Long-term liabilities:
     
       
 
 
Convertible notes, net of current portion
    232,016
      229,393
 
 
Other non-current liabilities
    14,056
      14,882
 
 
 
Total liabilities
    474,390
      477,685
 
Stockholders’ equity:
     
       
 
 
Common stock
    110
      108
 
 
Additional paid-in capital
    2,621,260
      2,605,859
 
 
Accumulated other comprehensive income (loss)
    (38,109
)
    (25,188
)
 
Accumulated deficit
    (1,389,144 )
    (1,413,093 )
 
 
Total stockholders’ equity     1,194,117
      1,167,686
 
Total liabilities and stockholders’ equity
  $
1,668,507
    $
1,645,371
 
Note - Balance sheet amounts as of May 1, 2016 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 Ended
 
 
  July 31, 2016
    Aug 02, 2015
    May 1, 2016
 
Revenues
  $
341,325
    $
314,030
    $
318,794
 
Cost of revenues
    231,637
      224,147
      226,723
 
Impairment of long-lived assets
    -
      1,071
      -
 
Amortization of acquired developed technology
    1,523
      1,435
      1,630
 
Gross profit
    108,165
      87,377
      90,441
 
Gross margin
    31.7
%
    27.8
%
    28.4
%
Operating expenses:
                       
 
Research and development
    51,008
      52,408
      50,169
 
 
Sales and marketing
    11,863
      11,202
      11,621
 
 
General and administrative
    16,315
      15,208
      13,848
 
 
Impairment of long-lived assets
    -
      830
      -
 
 
Amortization of purchased intangibles
    668
      668
      668
 
 
 
Total operating expenses
    79,854
      80,316
      76,306
 
Income from operations
    28,311
      7,061
      14,135
 
Interest income
    726
      365
      802
 
Interest expense
    (2,986
)
    (2,883
)
    (3,017
)
Other income (expenses), net
    (59
)
    881
      (80
)
Income before income taxes
    25,992
      5,424
      11,840
 
Provision (benefit) for income taxes
    2,043
      2,031
      (1,232
)
Net income
  $
23,949
    $
3,393
    $
13,072
 
 
                       
Net income per share attributable to Finisar Corporation common stockholders:
                       
 
Basic
  $
0.22
    $
0.03
    $
0.12
 
 
Diluted
  $
0.22
    $
0.03
    $
0.12
 
 
                       
Shares used in computing net income per share - basic
    108,820
      105,286
      107,612
 
Shares used in computing net income per share - diluted
    110,821
      108,107
      109,386
 
 
                       

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 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);

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);

Unclaimed property tax audit accrual (non-core 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);

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);

Other miscellaneous expenses (income) (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 taxes.

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 Ended
 
 
  July 31, 2016
    Aug 02, 2015
    May 1, 2016
 
GAAP to non-GAAP reconciliation of gross profit:
                       
Gross profit - GAAP
  $
108,165
    $
87,377
    $
90,441
 
Gross margin - GAAP
    31.7
%
    27.8
%
    28.4
%
Adjustments:
                       
Cost of revenues
                       
 
Change in excess and obsolete inventory valuation adjustments (1)
            1,430
      2,102
 
 
Amortization of acquired technology
    1,523
      1,435
      1,630
 
 
Duplicate facility costs during facility move
    8
      82
      8
 
 
Stock compensation
    3,047
      2,692
      2,847
 
 
Impairment of long-lived assets
    -
      1,282
      -
 
 
Reduction in force costs
    102
      554
      369
 
 
Acquisition related retention payment
    19
      65
      28
 
 
 
Total cost of revenue adjustments
    4,699
      7,540
      6,984
 
Gross profit - non-GAAP
    112,864
      94,917
      97,425
 
Gross margin - non-GAAP
    33.1
%
    30.2
%
    30.6
%
 
                       
GAAP to non-GAAP reconciliation of operating income:
                       
Operating income - GAAP
    28,311
      7,061
      14,135
 
Operating margin - GAAP
    8.3
%
    2.2
%
    4.4
%
Adjustments:
                       
Total cost of revenue adjustments
    4,699
      7,540
      6,984
 
Total operating expense adjustments
                       
 
Operating expenses - GAAP
    79,854
      80,316
      76,306
 
 
 
Research and development
                       
 
 
Reduction in force costs
    174
      288
      386
 
 
 
Duplicate facility costs during facility move
    7
      221
      7
 
 
 
Acquisition related retention payment
    32
      91
      32
 
 
 
Stock compensation
    5,111
      4,838
      4,855
 
 
 
Impairment of long-lived assets
    -
      287
      -
 
 
Sales and marketing
                       
 
 
Reduction in force costs
    29
      63
      1
 
 
 
Acquisition related retention payment
    -
      10
      -
 
 
 
Stock compensation
    1,751
      1,707
      1,747
 
 
General and administrative
                       
 
 
Reduction in force costs
    13
      352
      49
 
 
 
Duplicate facility costs
    143
      9
      24
 
 
 
Acquisition related retention payment
    (2
)
    (5
)
    4
 
 
 
Stock compensation
    2,553
      2,760
      2,381
 
 
 
Acquisition related costs
    31
      18
      (1
)
 
 
Litigation settlements and resolutions and related costs
    -
      16
      1
 
 
 
Shareholder class action and derivative litigation costs
    -
      -
      (184
)
 
 
Unclaimed property tax audit accrual
    -
      -
      150
 
 
Amortization of purchased intangibles
    668
      668
      668
 
 
Impairment of long-lived assets
    -
      587
      -
 
 
 
 
Total operating expense adjustments     10,510
      11,910
      10,120
 
 
Operating expenses - non-GAAP
    69,344
      68,406
      66,186
 
Operating income - non-GAAP
    43,520
      26,511
      31,239
 
Operating margin - non-GAAP
    12.8
%
    8.4
%
    9.8
%
 
                       
GAAP to non-GAAP reconciliation of income before income taxes:
                       
Income before income taxes - GAAP
    25,992
      5,424
      11,840
 
Adjustments:
                       
Total cost of revenue adjustments
    4,699
      7,540
      6,984
 
Total operating expense adjustments
    10,510
      11,910
      10,120
 
Total Interest and other adjustments
                       
Other interest income
    -
      -
      (6
)
Non-cash imputed interest expenses on convertible debt
    2,469
      2,354
      2,449
 
Imputed interest related to restructuring
    38
      45
      40
 
Other (income) expense, net
                       
 
Loss (gain) on sale of assets
    (8
)
    (185
)
    165
 
 
Other miscellaneous income
    -
      (17
)
    (184
)
 
Foreign exchange transaction (gain) or loss
    (29
)
    (693
)
    362
 
 
Amortization of debt issuance cost
    154
      154
      154
 
 
 
Total Interest and other adjustments
    2,624
      1,658
      2,980
 
Income before income taxes - non-GAAP
    43,825
      26,532
      31,924
 
 
                       
GAAP to non-GAAP reconciliation of net income:
                       
Net income - GAAP
    23,949
      3,393
      13,072
 
Total cost of revenue adjustments
    4,699
      7,540
      6,984
 
Total operating expense adjustments
    10,510
      11,910
      10,120
 
Total Interest and other adjustments
    2,624
      1,658
      2,980
 
Income tax provision adjustments
    43
      31
      (1,332
)
 
 
Total adjustments
    17,876
      21,139
      18,752
 
Net income - non-GAAP
  $
41,825
    $
24,532
    $
31,824
 
 
                       
Non-GAAP net income for diluted earnings per share calcuation
                       
Non-GAAP net income
  $
41,825
    $
24,532
    $
31,824
 
Add: interest expense for dilutive convertible notes
    -
      -
      -
 
Adjusted non-GAAP income
  $
41,825
    $
24,532
    $
31,824
 
 
                       
Basic non-GAAP income per share
                       
 
GAAP earnings per share
  $
0.22
    $
0.03
    $
0.12
 
 
Impact of all non-GAAP adjustments
  $
0.16
    $
0.20
    $
0.18
 
 
Non-GAAP earnings per share
  $
0.38
    $
0.23
    $
0.30
 
 
                       
Diluted non-GAAP income per share
                       
 
GAAP earnings per share
  $
0.22
    $
0.03
    $
0.12
 
 
Impact of all non-GAAP adjustments
  $
0.16
    $
0.20
    $
0.17
 
 
Non-GAAP earnings per share
  $
0.38
    $
0.23
    $
0.29
 
 
                       
Shares used in computing non-GAAP income per share
                       
 
Basic
    108,820
      105,286
      107,612
 
 
Diluted
    110,821
      108,107
      109,386
 
 (1) Non-GAAP adjustment no longer made effective fiscal 2017.

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