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Finisar posts Q2 dip due to decreased Chinese demand

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Company looks forward to ramping up Texas VCSEL array production facility next year

Finisar, a maker of leader for subsystems and components for optical communications, has announced financial results for its second fiscal quarter, ended October 29, 2017.

"We experienced strong demand in our second fiscal quarter for our 100G QSFP28 transceivers for data centres," said Jerry Rawls, Finisar's CEO. "However, our overall revenues for the second fiscal quarter were $332.2 million, a decrease of $9.6 million, or 2.8 percent, compared to the first quarter of fiscal 2018. This decline was primarily due to lower revenues from our Chinese OEM customers."

He added:"Also, during the second quarter, we began shipping production quantities of our VCSEL arrays for 3D sensing. In addition, after the end of the quarter, we acquired an approximately 700,000 square foot facility in Sherman, Texas. In the second half of calendar year 2018, we expect this facility will allow us to produce VCSEL arrays using 6 inch wafers for both consumer and automotive applications."

Q2 highlights

ŠSales of datacom products decreased by $1.7 million, or (0.7) percent, compared to the first quarter of fiscal 2018, primarily from lower demand for 10G and below transceivers, 40G QSFP transceivers, and 100G CFP ethernet transceivers.

This was partially offset by an increase in sales of 100G QSFP28 transceivers as well as new revenues from VCSEL arrays for 3D sensing. Sales of telecom products decreased by $7.9 million, or (9.5) percent, compared to the first quarter of fiscal 2018, primarily driven by lower revenues from our Chinese OEM customers.

Š GAAP gross margin was 29.0 percent compared to 33.7 percent in the first quarter of fiscal 2018, primarily due to lower revenue levels, unfavorable product mix, and under-absorption of manufacturing costs at our Allen, Texas VCSEL fab. This under-absorption was primarily due to our shipping production quantities of VCSEL arrays late in the quarter.

Non-GAAP gross margin was 30.3 percent compared to 34.9 percent in the first quarter of fiscal 2018. ŠGAAP operating margin was 2.8 percent compared to 8.8 percent in the first quarter of fiscal 2018, primarily due to lower revenue levels and gross margins. ŠNon-GAAP operating margin was 7.8 percent compared to 13.5 percent in the first quarter of fiscal 2018.

ŠGAAP income per fully diluted share was $0.05 compared to $0.17 in the first quarter of fiscal 2018, primarily due to lower revenue levels and gross margin. Non-GAAP income per fully diluted share was $0.23 compared to $0.40 in the first quarter of fiscal 2018.

Outlook

Finisar indicated that for the third quarter of fiscal 2018 it currently expects revenues in the range of $325 to $345 million, non-GAAP gross margin of approximately 30 percent-31 percent, non-GAAP operating margin of approximately 7.5 percent -8.5 percent, and nonGAAP earnings per fully diluted share in the range of approximately $0.21 to $0.27.

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