Finisar Announces Record Revenues for Fiscal 2015

SUNNYVALE, CA--(Marketwired - June 18, 2015) - Finisar Corporation (FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its fourth quarter and full year fiscal 2015, ended May 3, 2015.

COMMENTARY

"Revenues for our fourth fiscal quarter were $320.0 million, an increase of $13.8 million, or 4.5% compared to the prior quarter," said Jerry Rawls, Finisar's executive Chairman of the Board. "Revenue growth was primarily driven by the benefit from an extra week in the fourth quarter partially offset by the impact of Chinese New Year."

"We also reported record revenue for the full fiscal year 2015, an increase of 8.1% over fiscal 2014, primarily driven by demand for datacom applications," said Eitan Gertel, Finisar's Chief Executive Officer.

FINANCIAL HIGHLIGHTS - Fourth QUARTER ENDED May 3, 2015
Summary GAAP Results		Fourth		Third
		Quarter		Quarter
		Ended		Ended
		May 3, 2015		January 25, 2015
		(in thousands, except per share amounts)
Revenues		$320,042		$306,283
Gross margin		27.9%		25.5%
Operating expenses		$78,933		$74,552
Operating income (loss)		$10,284		$3,401
Operating margin		3.2%		1.1%
Net income (loss)		$7,327		$1,678
Income per share - basic		$0.07		$0.02
Income per share - diluted		$0.07		$0.02
Basic shares		104,005		103,563
Diluted shares		107,535		105,990
Summary Non-GAAP Results (a)		Fourth		Third
		Quarter		Quarter
		Ended		Ended
		May 3, 2015		January 25, 2015
		(in thousands, except per share amounts)
Revenues		$320,042		$306,283
Gross margin		30.3%		30.0%
Operating expenses		$68,167		$65,128
Operating income		$28,831		$26,852
Operating margin		9.0%		8.8%
Net income		$26,873		$26,706
Income per share - basic		$0.26		$0.26
Income per share - diluted		$0.25		$0.25
Basic shares		104,005		103,563
Diluted shares		107,535		105,990

(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 Finisar's core 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 Fourth Quarter of Fiscal 2015:

• Revenues increased to $320.0 million, up $13.8 million, or 4.5%, from $306.3 million in the preceding quarter.
  

• Sales of products for datacom applications increased by $7.6 million, or 3.2%, compared to the preceding quarter, primarily driven by the benefit from an extra week in the fourth quarter, partially offset by the impact of Chinese New Year.
  

• Sales of products for telecom applications increased by $6.2 million, or 8.6%, compared to the preceding quarter, primarily due to the benefit of an extra week in the fourth quarter partially offset by the impact of three month of the annual telecom price reduction that typically takes effect on January 1 and the impact of Chinese New Year.
  

• GAAP gross margin increased to 27.9% from 25.5% in the preceding quarter, primarily due to a $5.7 million non-cash charge for the impairment of long-lived assets during the preceding quarter, not present in the fourth quarter.
  

• Non-GAAP gross margin improved to 30.3% compared to 30.0% in the preceding quarter, primarily due to the improvement in yields for a new optical engine product for supercomputing applications that we started to ramp in the third quarter of fiscal 2015 that had negatively impacted gross margin during that third quarter, partially offset by the impact of the full three months of the annual telecom price reduction that typically takes effect on January.
  

• GAAP operating expenses increased $4.4 million to $78.9 million from $74.6 million in the preceding quarter.
  

• Non-GAAP operating expenses increased $3.1 million to $68.2 million from $65.1 million in the preceding quarter, primarily due to the extra week of salaries in Q4 relative to Q3, higher R&D project materials associated with the qualification of our new products, and higher S&M expenses due to the higher revenue level.
  

• GAAP operating income increased $6.9 million, to $10.3 million or 3.2% of revenues, compared to $3.4 million or 1.1% of revenues in the preceding quarter.
  

• Non-GAAP operating income increased $1.9 million to $28.8 million, or 9.0% of revenues, compared to $26.9 million, or 8.8% of revenues, in the preceding quarter.
  

• Cash, cash equivalents and short term investments increased $1.3 million to $490.2 million at the end of the fourth quarter, compared to $488.9 million at the end of the preceding quarter.

FINANCIAL HIGHLIGHTS - FISCAL YEAR 2015 ENDED May 3, 2015
Summary GAAP Results
		Fiscal Year		Fiscal Year
		Ended		Ended
		May 3, 2015		April 27, 2014
		(in thousands, except per share amounts)
Revenues		$1,250,944		$1,156,833
Gross margin		28.1%		34.3%
Operating expenses		$324,116		$285,584
Operating income		$26,794		$111,415
Operating margin		2.1%		9.6%
Net income		$11,887		$111,787
Income per share - basic		$0.12		$1.16
Income per share - diluted		$0.11		$1.09
Basic shares		101,408		95,979
Diluted shares		104,970		104,112
Summary Non-GAAP Results (a)
		Fiscal Year		Fiscal Year
		Ended		Ended
		May 3, 2015		April 27, 2014
		(in thousands, except per share amounts)
Revenues		$1,250,944		$1,156,833
Gross margin		30.9%		35.9%
Operating expenses		$270,040		$253,202
Operating income		$116,071		$162,341
Operating margin		9.3%		14.0%
Net income		$110,376		$157,021
Income per share - basic		$1.09		$1.64
Income per share - diluted		$1.04		$1.53
Basic shares		101,408		95,979
Diluted shares		106,819		104,112

(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 Finisar's core 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 fiscal 2015:

• Revenues increased to $1,250.9 million, up $94.1 million, or 8.1%, from $1,156.8 million in the preceding year.
  

• The sale of products for datacom applications increased by $111.4 million, or 13.6%, compared to the preceding year.
  

• The sale of products for telecom applications decreased by $17.3 million, or (5.2)%, compared to the preceding year.
  

• GAAP gross margin decreased to 28.1% from 34.3% in the preceding year, primarily due to the impact of the annual average sales price erosion.
  

• Non-GAAP gross margin decreased to 30.9% from 35.9% in the preceding year.
  

• GAAP operating income decreased $84.6 million to $26.8 million, or 2.1% of revenues, compared to $111.4 million, or 9.6% of revenues in the preceding year, primarily due to the lower gross margins.
  

• Non-GAAP operating income decreased $46.3 million to $116.1 million, or 9.3% of revenues, compared to $162.3 million, or 14.0% of revenues, in the preceding year.

OUTLOOK

The Company indicated that for the first quarter of fiscal 2016 it currently expects revenues in the range of $308 to $328 million, non-GAAP gross margin of approximately 30.5%, non-GAAP operating margin of approximately 8.8% to 9.8%, and non-GAAP earnings per diluted share in the range of approximately $0.23 to $0.29. Please note that the first quarter fiscal 2016 will have 13 weeks compared to 14 weeks in the preceding quarter.

CONFERENCE CALL

Finisar will discuss its financial results for the fourth quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, June 18, 2015, 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 877-397-0286 (domestic) or + 719-325-4857 (international) and enter conference ID 9819662.

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 9819662 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.

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; 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.

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 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 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
				May 03, 2015			April 27, 2014			May 03, 2015			April 27, 2014			January 25, 2015
Revenues				$	320,042		$	306,025		$	1,250,944		$	1,156,833		$	306,283
Cost of revenues					229,390			208,135			888,573			754,773			221,173
Impairment of acquired developed technology and other long-lived assets					-			-			5,722			-			5,722
Amortization of acquired developed technology					1,435			1,326			5,739			5,061			1,435
Gross profit					89,217			96,564			350,910			396,999			77,953
Gross margin					27.9%			31.6%			28.1%			34.3%			25.5%
Operating expenses:
	Research and development				51,117			48,132			202,089			183,355			48,782
	Sales and marketing				11,800			11,509			46,178			46,547			10,926
	General and administrative				15,303			15,133			72,856			53,214			14,062
	Impairment of acquired developed technology and other long-lived assets				-			-			45			-			45
	Amortization of purchased intangibles				713			683			2,948			2,468			737
		Total operating expenses			78,933			75,457			324,116			285,584			74,552
Income from operations					10,284			21,107			26,794			111,415			3,401
Interest income					536			485			1,811			1,319			321
Interest expense					(3,335)			(2,965)			(12,022)			(5,547)			(2,686)
Other income (expenses), net					4,041			8,124			4,099			7,234			2,051
Income before income taxes and non-controlling interest					11,526			26,751			20,682			114,421			3,087
Provision (benefits) for income taxes					4,199			(1,932)			8,795			2,884			1,409
Income before non-controlling interest					7,327			28,683			11,887			111,537			1,678
Adjust for net loss attributable to non-controlling interest					-			67			-			250			-
Net income attributable to Finisar Corporation				$	7,327		$	28,750		$	11,887		$	111,787		$	1,678
Net income per share attributable to Finisar Corporation common stockholders:
	Basic			$	0.07		$	0.30		$	0.12		$	1.16		$	0.02
	Diluted			$	0.07		$	0.28		$	0.11		$	1.09		$	0.02
Shares used in computing net income per share - basic					104,005			96,965			101,408			95,979			103,563
Shares used in computing net income per share - diluted					107,535			105,418			104,970			104,112			105,990

Finisar Corporation

Consolidated Balance Sheets

(in thousands)

				May 03, 2015			January 25, 2015			October 26, 2014		July 27, 2014		April 27, 2014
							(Unaudited)			(Unaudited)		(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	197,443		$	198,344		$ 186,952		$ 287,455		$ 303,101
	Short-term held-to-maturity investments				292,748			290,520		290,478		209,927		209,922
	Accounts receivable, net				213,234			210,116		213,721		231,312		225,020
	Accounts receivable, other				40,650			41,540		34,573		41,595		33,749
	Inventories				283,670			277,862		284,789		270,122		259,759
	Prepaid expenses and other assets				36,518			37,265		38,065		38,582		33,022
		Total current assets			1,064,263			1,055,647		1,048,578		1,078,993		1,064,573
Property, equipment and improvements, net					315,777			304,547		306,331		301,020		273,328
Purchased intangible assets, net					27,188			29,336		31,508		33,680		34,141
Goodwill					106,735			106,735		106,735		106,735		106,115
Minority investments					2,847			2,647		2,547		2,317		2,117
Other assets					35,072			22,444		22,528		20,907		17,272
		Total assets		$	1,551,882		$	1,521,356		$ 1,518,227		$ 1,543,652		$ 1,497,546
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	131,510		$	123,895		$ 113,235		$ 143,224		$ 119,439
	Accrued compensation				24,918			30,632		35,354		28,215		38,541
	Other accrued liabilities				39,238			32,029		33,716		27,815		31,776
	Deferred revenue				9,850			11,240		12,358		16,872		16,659
	Current portion of convertible notes				-			-		36,665		40,015		40,015
		Total current liabilities			205,516			197,796		231,328		256,141		246,430
Long-term liabilities:
	Convertible notes, net of current portion				221,406			219,072		216,775		214,496		212,253
	Other non-current liabilities				21,167			24,184		24,900		24,042		22,804
		Total liabilities			448,089			441,052		473,003		494,679		481,487
Stockholders' equity:
	Common stock				104			104		100		100		97
	Additional paid-in capital				2,551,114			2,537,231		2,485,133		2,469,687		2,456,110
	Accumulated other comprehensive income				861			(1,418)		17,282		25,116		20,025
	Accumulated deficit				(1,448,286	)		(1,455,613)		(1,457,291)		(1,445,930)		(1,460,173)
		Total stockholders' equity			1,103,793			1,080,304		1,045,224		1,048,973		1,016,059
Total liabilities and stockholders' equity				$	1,551,882		$	1,521,356		$ 1,518,227		$ 1,543,652		$ 1,497,546
Note - Balance sheet amounts as of April 27, 2014 are derived from the audited consolidated financial statements as of the 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 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 cash charges)

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

• Abandonment of fixed assets (non-recurring non-cash charges);

• Impairment of long-lived assets (non-recurring non-cash charges);

• Acquisition method accounting adjustment for sale of acquired inventory (non-recurring 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);

• 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 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-recurring cash charges);

• Impairment of acquired R&D reimbursement receivable (non-recurring non-cash charges);

• Amortization of purchased intangibles (non-cash charges); and

• Impairment of long-lived assets (non-recurring 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 cash 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 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
				May 03, 2015			April 27, 2014			May 03, 2015			April 27, 2014			January 25, 2015
GAAP to non-GAAP reconciliation of gross profit:
Gross profit - GAAP				$	89,217		$	96,564		$	350,910		$	396,999		$	77,953
Gross margin - GAAP					27.9%			31.6%			28.1%			34.3%			25.5%
Adjustments:
Cost of revenues
	Change in excess and obsolete inventory reserve				2,752			3,384			10,293			3,439			3,772
	Amortization of acquired technology				1,435			1,326			5,739			5,061			1,435
	Duplicate facility costs during facility move				4						776						6
	Stock compensation				2,692			2,531			10,216			8,738			2,660
	Abandonment of fixed assets				-			-			124			-			-
	Impairment of long-lived assets				420			-			6,142			-			5,722
	Acquisition method accounting adjustment for sale of acquired inventory				-			822			-			822			-
	Reduction in force costs				406			124			1,571			228			371
	Acquisition related retention payment				72			62			340			256			61
		Total cost of revenue adjustments			7,781			8,249			35,201			18,544			14,027
Gross profit - non-GAAP					96,998			104,813			386,111			415,543			91,980
Gross margin - non-GAAP					30.3%			37.2%			30.9%			35.9%			30.0%
GAAP to non-GAAP reconciliation of operating income:
Operating income - GAAP					10,284			21,107			26,794			111,415			3,401
Operating margin - GAAP					3.2%			6.9%			2.1%			9.6%			1.1%
Adjustments:
Total cost of revenue adjustments					7,781			8,249			35,201			18,544			14,027
Research and development
	Reduction in force costs				82			-			790			28			23
	Acquisition related retention payment				104			190			595			761			132
	Stock compensation				5,084			4,056			18,916			15,645			4,669
	Duplicate facility costs during facility move				143			-			1,009			-			99
	Impairment of acquired R&D reimbursement receivable				87			-			87			-			-
Sales and marketing
	Acquisition related retention payment				12			17			50			68			9
	Stock compensation				1,749			1,406			6,503			5,341			1,600
General and administrative
	Reduction in force costs				-			69			103			227			49
	Duplicate facility costs				-			-			152			-			36
	Acquisition related retention payment				8			8			(24)			1,044			7
	Stock compensation				2,894			2,525			10,977			10,229			2,654
	Payroll taxes related to options investigation				17			-			34			-			-
	Acquisition related costs				18			567			292			1,507			36
	Litigation settlements and resolutions and related costs (benefits)				(6)			5			11,748			15			(662)
	Shareholder class action and derivative litigation costs (benefits)				(138)			-			(148)			(4,951)			(10)
Amortization of purchased intangibles					713			683			2,948			2,468			737
Impairment of long-lived assets					(1)			-			44			-			45
		Total cost of revenue and operating expense adjustments			18,547			17,775			89,277			50,926			23,451
Operating income - non-GAAP					28,831			38,882			116,071			162,341			26,852
Operating margin - non-GAAP					9.0%			12.7%			9.3%			14.0%			8.8%
GAAP to non-GAAP reconciliation of income attributable to Finisar Corporation:
Net income attributable to Finisar Corporation - GAAP					7,327			28,750			11,887			111,787			1,678
Adjustments:
Total cost of revenue and operating expense adjustments					18,547			17,775			89,277			50,926			23,451
Non-cash imputed interest expenses on convertible debt					2,334			2,225			9,153			3,152			2,297
Imputed interest related to restructuring					47			53			196			220			48
Amortization of debt issuance costs					616			-			616			-			-
Other (income) expense, net
	Loss (gain) on sale of assets				(559)			(8,156)			(317)			(8,291)			31
	Gain related to minority investments				(1,470)			-			(1,470)			(743)			-
	Other miscellaneous income				(850)			-			(1,028)			(5)			(167)
	Foreign exchange transaction (gain) or loss				(607)			(69)			1,373			2,490			(338)
	Amortization of debt issuance costs				(462)			155			-			231			154
Provision for income taxes
	Income tax provision adjustments				1,950			(3,737)			689			(3,116)			(448)
Non-controlling interest non-GAAP adjustment					-			(4)			-			370			-
Total adjustments					19,546			8,242			98,489			45,234			25,028
Net income attributable to Finisar Corporation - non-GAAP				$	26,873		$	36,992		$	110,376		$	157,021		$	26,706
Non-GAAP income attributable to Finisar Corporation				$	26,873		$	36,992		$	110,376		$	157,021		$	26,706
Add: interest expense for dilutive convertible notes					-			539			1,072			2,156			-
Adjusted non-GAAP income attributable to Finisar Corporation				$	26,873		$	37,531		$	111,448		$	159,177		$	26,706
Non-GAAP income per share attributable to Finisar Corporation common stockholders
	Basic			$	0.26		$	0.38		$	1.09		$	1.64		$	0.26
	Diluted			$	0.25		$	0.36		$	1.04		$	1.53		$	0.25
Shares used in computing non-GAAP income per share attributable to Finisar Corporation common stockholders
	Basic				104,005			96,965			101,408			95,979			103,563
	Diluted				107,535			105,418			106,819			104,112			105,990
Non-GAAP EBITDA
Non-GAAP income attributable to Finisar Corporation				$	26,873		$	36,992		$	110,376		$	157,021		$	26,706
Depreciation expense					20,488			17,518			82,422			62,026			21,371
Amortization					-			94			72			376			-
Interest expense					(197)			202			247			856			20
Income tax expense					2,249			1,805			8,106			6,000			1,857
Non-GAAP EBITDA				$	49,413		$	56,611		$	201,223		$	226,279		$	49,954

Finisar-F