IIVI - Finisar Announces First Quarter of Fiscal 2020 Financial Results

September, 04 2019 04:01 PM II-VI Incorporated

SUNNYVALE, Calif., Sept. 04, 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 first quarter of fiscal 2020, ended July 28, 2019. Finisar will not hold an earnings call nor provide forward guidance for the second quarter of fiscal 2020 due to the previously announced proposed acquisition by II-VI Incorporated (NASDAQ: IIVI).









FINANCIAL HIGHLIGHTS – First Quarter Ended July 28, 2019








Summary GAAP Results
First

Fourth

Quarter

Quarter

Ended

Ended

July 28, 2019

April 28, 2019



(in thousands, except per share amounts)








Revenues
$
285,028


$
310,085

Gross margin

29.9
%


28.2
%
Operating expenses
$
94,798


$
98,579

Operating income (loss)
$
(9,533
)

$
(11,278
)
Operating margin

(3.3
)%


(3.6
)%
Net loss
$
(8,717
)

$
(14,151
)
Loss per share-basic
$
(0.07
)

$
(0.12
)
Loss per share-diluted
$
(0.07
)

$
(0.12
)








Basic shares

119,216



117,953

Diluted shares

119,216



117,953

Summary Non-GAAP Results (a)
First

Fourth

Quarter

Quarter

Ended

Ended

July 28, 2019

April 28, 2019



(in thousands, except per share amounts)








Revenues
$
285,028


$
310,085

Non-GAAP Gross margin

31.1
%


30.8
%
Non-GAAP Operating expenses
$
63,557


$
64,642

Non-GAAP Operating income
$
25,083


$
30,895

Non-GAAP Operating margin

8.8
%


10.0
%
Non-GAAP Net income
$
27,631


$
32,960

Non-GAAP Income per share-basic
$
0.23


$
0.28

Non-GAAP Income per share-diluted
$
0.23


$
0.27









Basic shares

119,216



117,953

Diluted shares

121,797



120,795

_____________

(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 First Quarter of Fiscal 2020:

Revenues for datacom applications decreased by $19.4 million, or (8.9)%, compared to the fourth quarter of fiscal 2019, primarily as the result of a decline in VCSELs arrays for 3D applications due to lower demand resulting from the timing of the new product cycle of a key customer, as well as lower sales of fibre channel transceivers.
Revenues for telecom applications decreased by $5.6 million, or (6.2)%, compared to the fourth quarter of fiscal 2019, primarily as a result of a decline in sales of wavelength selective switches.

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 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 14, 2019) 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

Three Months Ended

July 28, 2019

July 29, 2018

Apr 28, 2019
Revenues
$
285,028


$
317,336


$
310,085

Cost of revenues

197,627



236,155



218,513

Amortization of acquired developed technology

471



496



471

Impairment of long-lived assets

1,665



-



3,800

Gross profit

85,265



80,685



87,301

Gross margin

29.9
%


25.4
%


28.2
%
Operating expenses:





Research and development

52,151



62,874



51,133

Sales and marketing

12,107



12,480



12,000

General and administrative

13,234



12,643



14,396

Amortization of purchased intangibles

230



640



324

Impairment of long-lived assets

-



186



317

Startup costs

17,076



7,553



20,409

Total operating expenses

94,798



96,376



98,579

Income (loss) from operations

(9,533
)


(15,691
)


(11,278
)
Interest income

4,424



5,155



4,731

Interest expense

(6,423
)


(9,386
)


(6,447
)
Other income (expenses), net

(2,132
)


(1,789
)


325

Loss before income taxes

(13,664
)


(21,711
)


(12,669
)
Provision (benefit) for income taxes

(4,947
)


(3,222
)


1,482

Net loss
$
(8,717
)

$
(18,489
)

$
(14,151
)






Net loss per share attributable to Finisar Corporation common stockholders:











Basic
$
(0.07
)

$
(0.16
)

$
(0.12
)
Diluted
$
(0.07
)

$
(0.16
)

$
(0.12
)






Shares used in computing net loss per share - basic

119,216



115,867



117,953

Shares used in computing net loss per share - diluted

119,216



115,867



117,953






Finisar Corporation Consolidated Balance Sheets (in thousands)







7/28/2019

4/28/2019


(Unaudited)


ASSETS




Current assets:




Cash and cash equivalents

$
882,269


$
814,185

Short-term held-to-maturity investments


-



100,000

Accounts receivable, net


256,605



263,394

Inventories


320,555



299,028

Other current assets


40,179



44,224

Total current assets


1,499,608



1,520,831

Property, equipment and improvements, net


633,323



622,979

Purchased intangible assets, net


3,631



4,182

Goodwill


106,736



106,736

Other assets


62,413



15,462

Deferred tax assets


89,218



81,977

Total assets

$
2,394,929


$
2,352,167






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$
119,628


$
132,440

Accrued compensation


33,343



31,804

Other accrued liabilities


66,163



49,495

Total current liabilities


219,134



213,739

Long-term liabilities:




Convertible notes


516,746



512,105

Other non-current liabilities


44,906



12,162

Total liabilities


780,786



738,006

Stockholders' equity:




Common stock


120



118

Additional paid-in capital


2,933,917



2,919,305

Accumulated other comprehensive income (loss)


(54,480
)


(48,565
)
Accumulated deficit


(1,265,414
)


(1,256,697
)
Total stockholders' equity


1,614,143



1,614,161

Total liabilities and stockholders' equity

$
2,394,929


$
2,352,167






Note - Balance sheet amounts as of April 28, 2019 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 fees (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);
Start-up cash costs related to our Sherman VCSEL fab until we begin commercial production; and
Impairment of long-lived assets/intangible assets (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 and other miscellaneous (non-cash losses and cash gains related to the periodic disposal of assets no longer required for current activities);
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

Three Months Ended

July 28, 2019

July 29, 2018

Apr 28, 2019
GAAP to non-GAAP reconciliation of gross profit:





Gross profit - GAAP
$
85,265


$
80,685


$
87,301

Gross margin - GAAP

29.9
%


25.4
%


28.2
%
Adjustments:





Cost of revenues





Amortization of acquired technology

471



496



471

Stock compensation

2,926



3,806



4,527

Impairment of long-lived/intangible assets

1,665



-



3,800

Reduction in force costs

24



482



27

Acquisition related retention payment

-



12



-

Write off of discontinued product inventory

(1,711
)


1,671



(589
)
Total cost of revenues adjustments

3,375



6,467



8,236

Gross profit - non-GAAP

88,640



87,152



95,537

Gross margin - non-GAAP

31.1
%


27.5
%


30.8
%






GAAP to non-GAAP reconciliation of operating income (loss):




Operating income (loss) - GAAP

(9,533
)


(15,691
)


(11,278
)
Operating margin - GAAP

-3.3
%


-4.9
%


-3.6
%
Adjustments:





Total cost of revenues adjustments

3,375



6,467



8,236

Total operating expense adjustments





Operating expenses - GAAP

94,798



96,376



98,579

Research and development





Reduction in force costs and other restructuring

61



7,024



558

Acquisition related retention payment

-



29



(2
)
Stock compensation

6,317



6,175



5,230

Discontinued product service fees

-



313



-

Sales and marketing





Reduction in force costs and other restructuring

-



402



(18
)
Acquisition related retention payment

-



-



-

Stock compensation

2,335



2,146



2,034

General and administrative





Reduction in force costs and other restructuring

-



519



15

Stock compensation

4,143



3,017



4,194

Acquisition related costs

1,054



(2
)


876

Litigation settlements and resolutions and related costs

25



63



-

Amortization of purchased intangibles

230



640



324

Startup costs

17,076



7,553



20,409

Impairment of long-lived assets/intangible assets

-



186



317

Total operating expense adjustments

31,241



28,065



33,937

Operating expenses - non-GAAP

63,557



68,311



64,642

Operating income - non-GAAP

25,083



18,841



30,895

Operating margin - non-GAAP

8.8
%


5.9
%


10.0
%






GAAP to non-GAAP reconciliation of income (loss) before income taxes:





Loss before income taxes - GAAP

(13,664
)


(21,711
)


(12,669
)
Adjustments:





Total cost of revenues adjustments

3,375



6,467



8,236

Total operating expense adjustments

31,241



28,065



33,937

Other interest income

-



-



-

Non-cash imputed interest expenses on convertible debt

5,464



7,927



5,420

Imputed interest related to restructuring

10



20



12

Other (income) expense, net





Loss (gain) on sale of assets

1



(77
)


(75
)
Foreign exchange transaction (gain) or loss

2,433



1,921



(332
)
Amortization of debt issuance cost

231



385



231

Total interest and other adjustments

8,139



10,176



5,256

Income before income taxes - non-GAAP

29,091



22,997



34,760







GAAP to non-GAAP reconciliation of net income (loss):





Net loss - GAAP

(8,717
)


(18,489
)


(14,151
)
Total cost of revenues adjustments

3,375



6,467



8,236

Total operating expense adjustments

31,241



28,065



33,937

Total interest and other adjustments

8,139



10,176



5,256

Income tax provision adjustments

(6,407
)


(4,922
)


(318
)
Total adjustments

36,348



39,786



47,111

Net income - non-GAAP
$
27,631


$
21,297


$
32,960







Basic non-GAAP income per share





GAAP earnings per share
$
(0.07
)

$
(0.16
)

$
(0.12
)
Impact of all non-GAAP adjustments
$
0.30


$
0.34


$
0.40

Non-GAAP earnings per share
$
0.23


$
0.18


$
0.28







Diluted non-GAAP income per share





GAAP earnings per share
$
(0.07
)

$
(0.16
)

$
(0.12
)
Impact of all non-GAAP adjustments
$
0.30


$
0.34


$
0.39

Non-GAAP earnings per share
$
0.23


$
0.18


$
0.27







Shares used in computing non-GAAP income per share





Basic

119,216



115,867



117,953

Diluted

121,797



117,191



120,795

Finisar-F

Investor Contact:
Kurt Adzema
Chief Financial Officer
408-542-5050 or Investor.relations@finisar.com

Press contact:
Victoria McDonald
Director, Corporate Communications
408-542-4261

Company Name:	II-VI Incorporated
Stock Symbol:	IIVI
Market:	NASDAQ
Website:	ii-vi.com

Twitter