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Finisar Announces Second Quarter Financial Results




SUNNYVALE, CA — (Marketwired) — 12/04/14 — Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second quarter of fiscal 2015, ended October 26, 2014.

“Revenues for our second fiscal quarter were $297.0 million, an increase of $6.3 million compared to the second fiscal quarter of 2014, but a decrease of $30.7 million, or 9.4%, compared to the first fiscal quarter of fiscal 2015. The second quarter was challenging. During the quarter, we experienced decreased demand for telecom products compared to the prior fiscal quarter, due to sluggish carrier capital expenditures. In addition, sales of transceivers for wireless applications were soft as were sales to several datacom customers with lumpy order patterns,” said Jerry Rawls, Finisar–s executive Chairman of the Board.

“We remain confident in our industry leading market position and the long term growth potential for the industry. We expect revenue to grow sequentially in the third fiscal quarter, primarily driven by growth in the demand for 40 gigabit and 100 gigabit transceivers for datacom applications as well as transceivers for wireless applications,” said Eitan Gertel, Finisar–s Chief Executive Officer.

Revenues decreased to $297.0 million, down $30.7 million, or 9.4%, from $327.6 million in the preceding quarter.

Sales of products for datacom applications decreased by $25.3 million, or 10.5%, compared to the preceding quarter, primarily due to a decrease in sales of transceivers for wireless applications and a decrease in orders from several datacom customers with lumpy order patterns.

Sales of products for telecom applications decreased by $5.3 million, or 6.2%, compared to the preceding quarter, primarily due to the decrease in demand for transceivers for telecom applications driven by sluggish carrier capital expenditures.

GAAP gross margin decreased to 28.6% from 30.2% in the preceding quarter, primarily driven by decreased revenue levels and an increase in depreciation.

Non-GAAP gross margin decreased to 31.1% from 32.0% in the preceding quarter.

GAAP operating expenses increased $13.7 million to $92.2million from $78.5 million in the preceding quarter, primarily from expenses related to resolving a pending litigation alleging patent infringement.

Non-GAAP operating expenses decreased $2.1 million to $67.3 million from $69.4 million in the preceding quarter.

GAAP operating income decreased $27.6 million, to an operating loss $7.3 million or (2.4)% of revenues, compared to $20.4 million or 6.2% of revenues in the preceding quarter, primarily as the result of lower revenue levels and gross margins, and higher expenses related to resolving a pending litigation alleging patent infringement.

Non-GAAP operating income decreased $10.4 million to $25.0 million, or 8.4% of revenues, compared to $35.4 million, or 10.8% of revenues, in the preceding quarter, primarily as the result of lower revenue levels and gross margins.

Cash, cash equivalents and short term investments decreased $20.0 million to $477.4 million at the end of the second quarter, compared to $497.4 million at the end of the preceding quarter, primarily as the result of capital expenditures of $28.4 million, increased inventory of $14.7 million and legal settlement-related expenses of approximately $13.7 million.

The Company indicated that for the third quarter of fiscal 2015 it currently expects revenues in the range of $297 to $312 million, non-GAAP gross margin of approximately 31%, non-GAAP operating margin of approximately 8.4% to 9.4%, and non-GAAP earnings per diluted share in the range of approximately $0.23 to $0.27.

Finisar will discuss its financial results for the second quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, December 4, 2014, at 2:00 pm PT (5:00 pm ET). To listen to the call you may connect through the Finisar investor relations page at or dial 1-800-432-7390 (domestic) or +1-913-312-1454 (international) and enter conference ID 1607677.

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 1607677 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.

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.

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 .

The following financial tables are presented in accordance with GAAP.

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 charges)

Stock-based compensation expense (non-cash charges);

Abandonment of fix assets (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);

Gain on fair value re-measurement of contingent consideration (non-cash benefit);

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 expenses 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-F

Kurt Adzema
Chief Financial Officer
408-542-5050 or

Victoria McDonald
Director, Corporate Communications
408-542-4261





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