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Finisar Announces Fiscal 2019 Financial Results

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 Results Fourth
  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  
           

/EIN News/ --

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 resultsA 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 resultsA 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 Adzema Victoria McDonald
Chief Financial Officer Director, 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.

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