The revenue growth was driven primarily by demand for 40 Gbps transponders, wavelength selective switches (WSS) and ROADM line cards.

Finisar Corporation, a technology leader for subsystems and components for fibre optics communications, has announced financial results for its third quarter ended January 30, 2011.

 



"In our just completed third quarter, our revenues were a record $263.0 million, exceeding the revenue guidance of $247.0 to $262.0 million that we provided at the time of our second quarter earnings release. This revenue growth was driven primarily by demand for our 40 Gbps transponders, wavelength selective switches (WSS) and ROADM line cards. Our non-GAAP earnings per diluted share was a record $0.47, at the top end of our prior guidance of $0.45 to $0.47 per share, and would have been $0.48, except for the impact of our common stock offering in December 2010. However, one of the benefits of the offering is that our cash balance at the end of the quarter was over $300 million," said Jerry Rawls, Finisar's executive Chairman of the Board.

"Our revenues for WSS/ROADM line card products grew 22.7% from the second quarter," said Eitan Gertel, Finisar's CEO. "We continue to execute on our new product development programs, including tunable XFP, to generate a significant pipeline of products, which we expect will enable us to win new opportunities with customers and expand our market share."

GAAP revenues increased from $166.9 million in the third quarter of the prior year to $263.0 million, up 57.6%. Compared to Q3 2010, the sale of 10 Gbps or faster products increased by 74.7% to $50.3 million. The sale of less than 10 Gbps products increased by $19.2 million, or 25.7%.

The sale of  WSS/ROADM line card products increased by $28.5 million, or 148.9%, while the sale of products for analogue and CATV applications decreased by $1.9 million, or (33.2)%.

Gross margin increased from 31.0% in the third quarter of the prior year to 32.0%. Operating income decreased to $24.7 million, or 9.4% of revenues, from $36.1 million, or 15.0% of revenues, in the preceding quarter.

The decrease in GAAP operating income was primarily the result of a charge of $3.5 million in the third quarter representing the adverse judgment amount due related to the previously disclosed patent litigation with Emcore as compared to a gain of $2.5 million in the preceding quarter related to a patent settlement with Source Photonics.

A non-cash charge of $5.9 million in the third quarter for induced conversion expense related to the exchange of convertible notes for common stock and a $620,000 non-cash charge in the third quarter for acceleration of the amortization of previously paid fees associated with the original issuance of the exchanged portion of the notes were also imposed. Operating income increased $15.5 million compared to operating income of $9.1 million, or 5.5% of revenues, in the third quarter of the prior year.

Net income from continuing operations was $18.8 million, or $0.22 per diluted share, compared to $33.8 million, or $0.39 per diluted share, n the preceding quarter and $5.6 million, or $0.08 per share, in the third quarter of the prior year. Cash and cash equivalents totalled $310.2 million at the end of the third quarter compared to $184.9 million at the end of the preceding quarter.

On December 27, 2010, Finisar completed a common stock offering for net proceeds of approximately $117.9 million. In addition, during the quarter, Finisar repaid approximately $17.3 million of bank debt associated with its Asian subsidiaries.

Under Finisar's $70.0 million secured credit facility with Wells Fargo Foothill, LLC, no borrowings were outstanding and $66.6 million was available to borrow at the end of the third quarter.

 In several privately-negotiated transactions completed during the quarter, Finisar exchanged an aggregate of approximately $42.2 million of its outstanding 5% Convertible Senior Notes due 2029 for approximately 3.9 million shares of the Company common stock, based on the conversion price of the notes of approximately $10.68 per share, plus a total of approximately 188,000 additional shares, including approximately 16,000 shares issued in payment of accrued and unpaid interest. At the end of the quarter, there was approximately $57.9 million in principal amount of the notes remaining outstanding.

Subsequent to the end of the quarter, Finisar exchanged an aggregate of an additional $17.8 million of the notes for approximately 1.7 million shares of the Company common stock, based on the conversion price of the notes of approximately $10.68, plus a total of approximately 75,000 additional shares including approximately 8,000 shares issued in payment of accrued and unpaid interest.  After such additional exchanges, there was approximately $40.0 million in principal amount of the notes remaining outstanding.

Outlook

During the fourth quarter ending April 30, 2011, the Company will be impacted by the full three months of the annual price negotiations with telecom customers that typically take effect on January 1, the 10-day long shutdown at certain customers for Chinese New Year in February, the adjustment of inventory levels at some telecom customers, particularly for products which had previously been on allocation and long lead times, including WSS and ROADM line cards, and a slowdown in business in China overall.

Primarily as a result of these factors, the Company indicated that it currently expects revenues for the fourth quarter to be in the range of $235 to $250 million. On a GAAP basis, operating margin is expected to be in the range of approximately 10 to 12%.

Weighted average fully-diluted shares are expected to increase from 93.4 million in the third quarter to approximately 98.0 million in the fourth quarter due to the shares issued in the common stock offering that closed on December 27, 2010 and options exercised during the third quarter being outstanding for the full fourth quarter.

Finisar discussed its financial results and current business outlook during its regular quarterly conference call.

An audio replay will be available for two weeks following the call by dialling

1-888-203-1112 (from within the U.S.)    or            (719) 457-0820 (from outside the U.S.)

and then following the prompts and entering conference ID 9631182.

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.