Finisar Announces Fiscal 2019 Financial Results

 | Source: Finisar Corporation Finisar Corporation

SUNNYVALE, Calif., June 13, 2019 (GLOBE NEWSWIRE) -- Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its fourth quarter and full fiscal year, ended April 28, 2019. Finisar will not hold an earnings call, nor provide forward guidance for the first quarter of fiscal 2020 due to the previously announced proposed acquisition by II-VI Incorporated (NASDAQ: IIVI).

FINANCIAL HIGHLIGHTS – Fourth Quarter Ended April 28, 2019
Summary GAAP ResultsFourth
 Third
 Quarter
 Quarter
 Ended
 Ended
  April 28, 2019
  January 27, 2019
 (in thousands, except per share amounts)
        
Revenues$310,085  $327,636 
Gross margin 28.2%  28.8%
Operating expenses$98,579  $93,890 
Operating income (loss)$(11,278) $533 
Operating margin (3.6)%  0.2%
Net loss$(14,151) $(15,301)
Loss per share-basic$(0.12) $(0.13)
Loss per share-diluted$(0.12) $(0.13)
      
Basic shares 117,953   117,608 
Diluted shares 117,953   117,608 
      


Summary Non-GAAP Results (a)Fourth
 Third
 Quarter
 Quarter
 Ended
 Ended
 April 28, 2019 January 27, 2019
 (in thousands, except per share amounts)
    
Revenues$310,085  $327,636 
Non-GAAP Gross margin 30.8%  30.2%
Non-GAAP Operating expenses$64,642  $63,645 
Non-GAAP Operating income $30,895  $35,229 
Non-GAAP Operating margin  10.0%  10.8%
Non-GAAP Net income $32,960  $34,192 
Non-GAAP Income per share-basic$0.28  $0.29 
Non-GAAP Income per share-diluted$0.27  $0.29 
    
Basic shares  117,953   117,608 
Diluted shares  120,795   119,570 

_____________
(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.

Revenue Details for the Fourth Quarter of Fiscal 2019: 

  • Revenues for datacom applications decreased by $12.8 million, or (5.5)%, compared to the third quarter of fiscal 2019, primarily as the result of a decline in sales of 40G and lower transceivers as well as VCSELs arrays for 3D applications.
     
  • Revenues for telecom applications decreased by $4.8 million, or (5.0)%, compared to the third quarter of fiscal 2019, primarily as a result of a decline in sales of 10G tunable transceivers. 
FINANCIAL HIGHLIGHTS – Fiscal Year Ended April 28, 2019
Summary GAAP Results      
 Fiscal Year
 Fiscal Year
 Ended
 Ended
 April 28, 2019 April 29, 2018
 (in thousands, except per share amounts)
    
Revenues$1,280,480  $1,316,483 
Gross margin 27.2%  27.5%
Operating expenses$378,633  $355,652 
Operating income (loss)$(30,541) $6,513 
Operating margin  (2.4)%  0.5%
Net loss$(53,216) $(48,287)
Loss per share-basic$(0.45) $(0.42)
Loss per share-diluted$(0.45) $(0.42)
    
Basic shares 117,178   113,864 
Diluted shares 117,178   113,864 
        
        
        
Summary Non-GAAP Results (b)       
        
 Fiscal Year Fiscal Year
 Ended Ended
 April 28, 2019 April 29, 2018
 (in thousands, except per share amounts)
        
Revenues$1,280,480  $1,316,483 
Non-GAAP Gross margin 29.2%  29.7%
Non-GAAP Operating expenses$260,157  $292,197 
Non-GAAP Operating income $113,591  $99,195 
Non-GAAP Operating margin  8.9%  7.5%
Non-GAAP Net income $119,049  $100,420 
Non-GAAP Income per share-basic$1.02  $0.88 
Non-GAAP Income per share-diluted$1.00  $0.86 
      
Basic shares  117,178   113,864 
Diluted shares  119,389   116,274 

_____________
(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.

Revenue Details for Fiscal 2019: 

  • Revenues for datacom applications decreased by $102.3 million, or (9.9)%, compared to fiscal 2018, primarily as the result of a decline in sales of 40G transceivers due to our customers switching their technology infrastructure to higher speed transceivers as well as lower 100G datacom transceiver revenue due to a decrease in the average selling prices for our products.
     
  • Revenues for telecom applications increased by $66.2 million, or 23.0%, compared to the fiscal 2018, primarily as the result of an increase in sales of WSS products. 

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; the risk that our pending merger with II-VI does not close, due to the failure of one or more conditions to closing; uncertainty as to the market value of the II-VI merger consideration to be paid in the merger; the risk that required governmental or stockholder approvals of the merger (including China antitrust approval) will not be obtained or that such approvals will be delayed beyond current expectations; the risk of litigation in respect of either Finisar or II-VI or the merger; disruption from the merger making it more difficult to maintain our customer, supplier, key personnel and other strategic relationships.  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 15, 2018) and quarterly SEC filings.

ABOUT FINISAR

Finisar Corporation (NASDAQ: FNSR) is a global technology leader in optical communications, providing components and subsystems to networking equipment manufacturers, data center operators, telecom service providers, consumer electronics and automotive companies.  Founded in 1988, Finisar designs products that meet the increasing demands for network bandwidth, data storage and 3D sensing subsystems. The company is headquartered in Sunnyvale, California, USA with R&D, manufacturing sites, and sales offices worldwide. Visit our website at 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 Ended Twelve Months Ended Three Months Ended
 Apr 28, 2019 Apr 29, 2018 Apr 28, 2019 Apr 29, 2018 Jan 27, 2019
Revenues$310,085  $310,069  $1,280,480  $1,316,483  $327,636 
Cost of revenues 218,513   246,501   926,550   951,510   232,655 
Amortization of acquired developed technology 471   604   1,959   2,437   496 
Impairment of long-lived assets 3,800   371   3,879   371   62 
Gross profit 87,301   62,593   348,092   362,165   94,423 
Gross margin 28.2%  20.2%  27.2%  27.5%  28.8%
Operating expenses:                   
Research and development 51,133   60,520   217,878   239,008   51,228 
Sales and marketing 12,000   12,530   49,077   49,024   12,170 
General and administrative 14,396   12,207   54,844   59,517   14,973 
Amortization of purchased intangibles 324   666   1,737   2,705   337 
Impairment of long-lived assets 317   510   580   1,863   46 
Startup costs 20,409   2,897   54,517   3,535   15,136 
Total operating expenses 98,579   89,330   378,633   355,652   93,890 
Income (loss) from operations (11,278)  (26,737)  (30,541)  6,513   533 
Interest income 4,731   4,904   21,200   16,085   5,333 
Interest expense (6,447)  (9,322)  (33,490)  (36,658)  (8,167)
Other income (expenses), net 325   1,097   (718)  (945)  (38)
Loss before income taxes (12,669)  (30,058)  (43,549)  (15,005)  (2,339)
Provision (benefit) for income taxes 1,482   (11,714)  9,667   33,282   12,962 
Net loss$(14,151) $(18,344) $(53,216) $(48,287) $(15,301)
          
Net loss per share attributable to Finisar Corporation common stockholders:                   
                    
Basic$(0.12) $(0.16) $(0.45) $(0.42) $(0.13)
Diluted$(0.12) $(0.16) $(0.45) $(0.42) $(0.13)
                    
Shares used in computing net loss per share - basic 117,953   114,742   117,178   113,864   117,608 
Shares used in computing net loss per share - diluted 117,953   114,742   117,178   113,864   117,608 
                    
                    


Finisar Corporation
Consolidated Balance Sheets 
 (in thousands)
          
 4/28/2019 1/27/2019 10/28/2018 7/29/2018 Apr 29, 2018
 (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
ASSETS                   
Current assets:                   
Cash and cash equivalents$814,185  $906,854  $332,138  $326,189  $312,257 
Short-term held-to-maturity investments 100,000   3,754   837,658   832,681   884,838 
Accounts receivable, net 263,394   263,737   247,688   248,138   233,529 
Inventories 299,028   306,864   309,500   325,846   348,527 
Other current assets 44,224   44,713   51,232   54,863   56,001 
Total current assets 1,520,831   1,525,922   1,778,216   1,787,717   1,835,152 
Property, equipment and improvements, net 622,979   622,770   600,972   587,203   520,849 
Purchased intangible assets, net 4,183   4,977   5,810   6,742   7,878 
Goodwill 106,735   106,735   106,735   106,735   106,735 
Other assets 15,462   12,185   12,250   25,179   31,721 
Deferred tax assets 81,977   85,372   89,202   85,873   80,850 
Total assets$2,352,167  $2,357,961  $2,593,185  $2,599,449  $2,583,185 
                    
LIABILITIES AND STOCKHOLDERS' EQUITY                   
Current liabilities:                   
Accounts payable$132,440  $128,594  $133,539  $149,876  $132,161 
Accrued compensation 31,804   41,216   36,152   35,349   32,525 
Other accrued liabilities 49,495   54,890   54,746   50,944   32,824 
Deferred revenue -   -   -   -   9,535 
Current portion of convertible notes -   -   257,067   254,150   251,278 
Total current liabilities 213,739   224,700   481,504   490,319   458,323 
Long-term liabilities:         
Convertible notes 512,105   506,454   499,838   494,316   488,877 
Other non-current liabilities 12,162   11,864   11,558   11,366   12,368 
Total liabilities 738,006   743,018   992,900   996,001   959,568 
Stockholders' equity:         
Common stock 118   118   117   117   115 
Additional paid-in capital 2,919,305   2,904,016   2,885,319   2,869,657   2,850,195 
Accumulated other comprehensive income (loss) (48,565)  (46,645)  (57,906)  (44,356)  (14,659)
Accumulated deficit (1,256,697)  (1,242,546)  (1,227,245)  (1,221,970)  (1,212,034)
Total stockholders' equity 1,614,161   1,614,943   1,600,285   1,603,448   1,623,617 
Total liabilities and stockholders' equity$2,352,167  $2,357,961  $2,593,185  $2,599,449  $2,583,185 
          
Note - Balance sheet amounts as of April 29, 2018 are derived from the audited consolidated financial statements as of that date.  
   

FINISAR NON-GAAP FINANCIAL MEASURES

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: non-GAAP gross profit, non-GAAP operating income, non-GAAP income and non-GAAP net income per share. These non-GAAP financial measures are supplemental information regarding 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);
  • Stock-based compensation expense (non-cash charges);
  • Impairment of long-lived/intangible assets (non-cash charges);
  • Reduction in force costs and other restructuring charges (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:

  • Discontinued product services fee (non-core cash charges);
  • Acquisition related costs (non-core cash charges);
  • Litigation settlements and resolutions and related costs (non-core cash charges);
  • Amortization of purchased intangibles (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 and other miscellaneous (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 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 Twelve Months Ended Three Months Ended
 Apr 28, 2019 Apr 29, 2018 Apr 28, 2019 Apr 29, 2018 Jan 27, 2019
GAAP to non-GAAP reconciliation of gross profit:                   
Gross profit - GAAP$87,301  $62,593  $348,092  $362,165  $94,423 
Gross margin - GAAP 28.2%  20.2%  27.2%  27.5%  28.8%
Adjustments:                   
Cost of revenues                   
Amortization of acquired technology 471   604   1,959   2,437   496 
Stock compensation 4,527   3,453   16,074   12,665   4,248 
Impairment of long-lived/intangible assets 3,800   371   3,879   371   62 
Reduction in force costs 27   556   2,712   1,188   544 
Acquisition related retention payment -   30   28   123   (5)
Write off of discontinued product inventory (589)  8,995   1,004   12,443   (894)
Total cost of revenues adjustments 8,236   14,009   25,656   29,227   4,451 
Gross profit - non-GAAP 95,537   76,602   373,748   391,392   98,874 
Gross margin - non-GAAP 30.8%  24.7%  29.2%  29.7%  30.2%
                    
GAAP to non-GAAP reconciliation of operating income (loss):                   
Operating income (loss) - GAAP (11,278)  (26,737)  (30,541)  6,513   533 
Operating margin - GAAP -3.6%  -8.6%  -2.4%  0.5%  0.2%
Adjustments:                   
Total cost of revenues adjustments 8,236   14,009   25,656   29,227   4,451 
Total operating expense adjustments                   
Operating expenses - GAAP 98,579   89,330   378,633   355,652   93,890 
Research and development                   
Reduction in force costs and other restructuring 558   1,505   8,740   2,412   186 
Acquisition related retention payment (2)  32   39   140   (5)
Stock compensation 5,230   6,034   23,050   24,336   5,683 
Discontinued product service fees -   185   921   185   - 
Sales and marketing                   
Reduction in force costs and other restructuring (18)  335   698   323   32 
Acquisition related retention payment -   -   -   (2)  - 
Stock compensation 2,034   1,956   8,213   7,931   2,012 
General and administrative                   
Reduction in force costs and other restructuring 15   274   981   1,104   190 
Stock compensation 4,194   2,233   13,955   18,189   3,542 
Acquisition related costs 876   127   4,957   146   3,086 
Litigation settlements and resolutions and related costs -   551   88   551   - 
Amortization of purchased intangibles 324   666   1,737   2,705   337 
Startup costs 20,409   2,897   54,517   3,535   15,136 
Impairment of long-lived assets/intangible assets 317   506   580   1,900   46 
Total operating expense adjustments 33,937   17,301   118,476   63,455   30,245 
Operating expenses - non-GAAP 64,642   72,029   260,157   292,197   63,645 
Operating income - non-GAAP 30,895   4,573   113,591   99,195   35,229 
Operating margin - non-GAAP 10.0%  1.5%  8.9%  7.5%  10.8%
                    
GAAP to non-GAAP reconciliation of income (loss) before income taxes:                   
Loss before income taxes - GAAP (12,669)  (30,058)  (43,549)  (15,005)  (2,339)
Adjustments:                   
Total cost of revenues adjustments 8,236   14,009   25,656   29,227   4,451 
Total operating expense adjustments 33,937   17,301   118,476   63,455   30,245 
Other interest income -   -   (13)  (14)  (13)
Non-cash imputed interest expenses on convertible debt 5,420   7,863   28,341   30,833   6,940 
Imputed interest related to restructuring 12   23   65   106   15 
Other (income) expense, net                   
Loss (gain) on sale of assets (75)  (157)  (117)  (315)  85 
Loss related to impairment of minority investments -   -   399   2,347   - 
Foreign exchange transaction (gain) or loss (332)  (936)  482   (1,254)  200 
Amortization of debt issuance cost 231   385   1,309   1,540   308 
Total interest and other adjustments 5,256   7,178   30,466   33,243   7,535 
Income before income taxes - non-GAAP 34,760   8,430   131,049   110,920   39,892 
                    
GAAP to non-GAAP reconciliation of net income (loss):                   
Net loss - GAAP (14,151)  (18,344)  (53,216)  (48,287)  (15,301)
Total cost of revenues adjustments 8,236   14,009   25,656   29,227   4,451 
Total operating expense adjustments 33,937   17,301   118,476   63,455   30,245 
Total interest and other adjustments 5,256   7,178   30,466   33,243   7,535 
Income tax provision adjustments (318)  (14,364)  (2,333)  22,782   7,262 
Total adjustments 47,111   24,124   172,265   148,707   49,493 
Net income - non-GAAP$32,960  $5,780  $119,049  $100,420  $34,192 
                    
Basic non-GAAP income per share                    
GAAP earnings per share$(0.12) $(0.16) $(0.45) $(0.42) $(0.13)
Impact of all non-GAAP adjustments$0.40  $0.21  $1.47  $1.30  $0.42 
Non-GAAP earnings per share$0.28  $0.05  $1.02  $0.88  $0.29 
                    
Diluted non-GAAP income per share                    
GAAP earnings per share$(0.12) $(0.16) $(0.45) $(0.42) $(0.13)
Impact of all non-GAAP adjustments$0.39  $0.21  $1.45  $1.28  $0.42 
Non-GAAP earnings per share$0.27  $0.05  $1.00  $0.86  $0.29 
                    
Shares used in computing non-GAAP income per share                   
Basic 117,953   114,742   117,178   113,864   117,608 
Diluted 120,795   115,991   119,389   116,274   119,570 
                    
                    

Finisar-F

Investor Contact:Press contact:
Kurt AdzemaVictoria McDonald
Chief Financial OfficerDirector, Corporate Communications
408-542-5050 or Investor.relations@finisar.com 408-542-4261
  

Forward Looking Statements

This written communication contains forward-looking statements that involve risks and uncertainties concerning Parent’s proposed acquisition of the Company, the Company’s expected financial performance, as well as the Company’s strategic and operational plans. Actual events or results may differ materially from those described in this written communication due to a number of risks and uncertainties. The potential risks and uncertainties include, among others, the possibility that the Company may be unable to obtain required stockholder approval or that other conditions to closing the transaction may not be satisfied, such that the transaction will not close or that the closing may be delayed; the reaction of customers to the transaction; general economic conditions; the transaction may involve unexpected costs, liabilities or delays; risks that the transaction disrupts current plans and operations of the parties to the transaction; the ability to recognize the benefits of the transaction; the amount of the costs, fees, expenses and charges related to the transaction and the actual terms of any financings that will be obtained for the transaction; the outcome of any legal proceedings related to the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the transaction agreement.  In addition, please refer to the documents that the Company files with the SEC on Forms 10-K, 10-Q and 8-K. The filings by the Company identify and address other important factors that could cause its financial and operational results to differ materially from those contained in the forward-looking statements set forth in this written communication. All forward-looking statements speak only as of the date of this written communication or, in the case of any document incorporated by reference, the date of that document. The Company is under no duty to update any of the forward-looking statements after the date of this written communication to conform to actual results.