Finisar Corporation (FNSR)
F1Q 2013 Earnings Call
September 4, 2012 05:00 pm ET
Jerry Rawls – Executive Chairman
Eitan Gertel – Chief Executive Officer
Kurt Adzema – Executive Vice President & Chief Financial Officer
Troy Jensen – Piper Jaffray
James Kisner – Jefferies & Co.
Paul Silverstein – Credit Suisse
Kent Schofield – Goldman Sachs
Alex Henderson – Needham and Company
Michael Genovese – MKM Partners
Subu Subrahmanyan – The Juda Group
Dave Kang – B. Riley & Company
Patrick Newton – Stifel Nicolaus
Ehud Gelblum – Morgan Stanley
Analyst – Raymond James
Good afternoon, ladies and gentlemen, and welcome to the Finisar Corporation F1Q 2013 Earnings Conference Call. Today’s call is being recorded. And now I’ll turn things over to our host today, Mr. Jerry Rawls, Executive Chairman. Please go ahead, sir.
Thank you, Melissa, and good afternoon everyone. We appreciate your taking the time to listen to this conference call today. A replay of this call should appear on our website within eight hours. An audio replay will be available for two weeks by calling (888) 203-1112 for domestic; or (719) 457-7820 for international – then enter the ID #2107143.
I need to remind all of you that any forward-looking statements in today’s discussion are subject to risks and uncertainties which are discussed at length in our annual and quarterly SEC filings. Actual events and results can differ materially from any forward-looking statements. In addition, unless otherwise indicated, all results discussed are on a non-GAAP basis. A complete reconciliation of our GAAP to non-GAAP results may be found in our earnings press release and in the Investor Relations section of our website.
I would like to point out that we have prepared some slides for today’s earnings call, which you can access by connecting to the Investor Relations page of our website at www.finisar.com. Click on “Investors” then scroll down to “Webcast Archives” and click on it, and then you’ll see a listing for today’s F1Q 2013 Earnings Call.
As expected, our F1Q 2013 was challenging. Our revenues were $220.5 million, consistent with our prior guidance. The decline from the prior quarter’s revenues of $239.9 million was primarily the result of sluggish macroeconomic conditions, especially in Europe, as well as the slowing of economic growth in China. Generally, telecom spending throughout the world has been soft. In addition, we had two fewer shipping days in F1Q than in the previous quarter.
Non-GAAP gross margin of 30.3% was also consistent with our prior guidance. We held operating expenses for the quarter relatively flat, resulting in earnings per diluted share of $0.12. And now with that I’ll let Kurt review the rest of the numbers. Kurt?
Thanks, Jerry. For F1Q our revenue was of $220.5 million, a decrease of $19.4 million or 8.1% from $239.9 million in the preceding quarter. Revenue for products from data communications was $139.5 million, a decrease of $6.5 million or 4.5% from the prior quarter, primarily as the result of the impact of two fewer shipping days in F1Q than in the previous quarter. Revenue for telecommunication products was $81 million, a decrease of $12.8 million or 13.6% from the prior quarter, primarily as a result of soft telecom spending throughout the world.
In F1Q we had one 10% or greater customer. Our top ten customers represented 62.1% compared to 58.5% in the preceding quarter. Non-GAAP gross margin was 30.3% compared to 31.4% in the preceding quarter primarily due to lower revenue levels. Non-GAAP operating expenses for F1Q were relatively flat at $54.7 million compared to $54.6 million in the preceding quarter. F1Q non-GAAP operating income decreased $8.9 million to $12 million or 5.4% of revenues compared to $20.9 million or 8.7% of revenues in the preceding quarter due primarily to lower revenue levels.
For F1Q net interest expense was approximately $389,000; other expenses were approximately $102,000. The adjustment for net income or loss of a non-controlling interest was a negative $12,000, and non-GAAP taxes were approximately $650,000. Non-GAAP income was $10.9 million or $0.12 per diluted share compared to $20.2 million or $0.21 in the preceding quarter.
Average diluted shares for F1Q for non-GAAP purposes totaled $94.2 million. Please note, unlike prior quarters, given the level of earnings this diluted share number does not include the impact of converting the principal amount of our expanded convertible notes debt for the purposes of calculating EPS as the convertible notes are anti-dilutive to EPS at the current earnings levels; and therefore you do not need to add back the interest expense and other costs associated with the aforementioned convertible notes in calculating diluted EPS for the quarter.
The sum of net interest expense, other expenses and the adjustment for net income or loss of a non-controlling entity is expected to be a deduction of approximately $750,000 to income in F2Q 2013 compared to $500,000 in F1Q 2013. Non-GAAP taxes are estimated at approximately 5.5% of non-GAAP pre-tax income for the remaining quarters of F2013. In F2Q weighted average fully diluted shares are expected to be approximately 98.5 million for non-GAAP purposes as we expect the convertible notes will again be dilutive given our higher earning expectations for F2Q.
Non-GAAP EBITDA decreased $9.3 million to $24.9 million or 11.3% of revenues compared to $34.2 million or 14.2% of revenues in the preceding quarter. F1Q capital expenditures totaled $15 million which is lower than our prior guidance of approximately $23 million. This was the result of a slight delay in the timing of some major expenditures related to the new manufacturing facility we are building in [Wousho], China. We still expect the building to be completed in the second half of calendar 2013. Capital expenditures are expected to be approximately $22 million in F2Q 2013.
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