Finisar Announces Second Fiscal Quarter 2016 Financial Results

SUNNYVALE, CA--(Marketwired - December 10, 2015) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second quarter of fiscal 2016, ended November 1, 2015.

COMMENTARY

"Revenues for our second fiscal quarter were $321.1 million compared to $314.0 million in the prior quarter; an increase of approximately 2.3%. This increase was primarily driven by growth in 100 gigabit Ethernet transceivers and 10 gigabit tunable transceivers and wavelength selective switches for telecom WDM applications," said Jerry Rawls, Finisar's Chief Executive Officer.

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Financial Statement Highlights for the Second Quarter of Fiscal 2016:

• Revenues increased to $321.1 million, an increase of $7.1 million, or 2.3%, from $314.0 million in the preceding quarter.
• Sales of products for datacom applications increased by $0.5 million, or 0.2%, compared to the preceding quarter, primarily driven by growth in 100 gigabit transceivers offset by a decline in 40 gigabit transceivers, after a record quarter for 40 gigabit transceivers in the preceding quarter.
• Sales of products for telecom applications increased by $6.6 million, or 8.2%, compared to the preceding quarter, primarily driven by growth in 10 gigabit tunable transceivers and wavelength selective switches.
• GAAP gross margin was 27.7% compared to 27.8% in the preceding quarter.
• Non-GAAP gross margin was 30.0% compared to 30.2% in the prior quarter.
• GAAP operating expenses were $79.7 million compared to $80.3 million in the prior quarter.
• Non-GAAP operating expenses were $68.0 million, or 21.2% of revenues compared to $68.4 million, or 21.8% of revenues, in the prior quarter.
• GAAP operating income increased by $2.3 million, to $9.4 million or 2.9% of revenues, compared to $7.1 million or 2.2% of revenues in the preceding quarter, primarily due to the higher revenue level.
• Non-GAAP operating income increased by $1.8 million to $28.2 million, or 8.8% of revenues, compared to $26.5 million, or 8.4% of revenues, in the preceding quarter.
• Cash, cash equivalents and short term investments increased $25.1 million to $520.8 million at the end of the second quarter, compared to $495.7 million at the end of the preceding quarter.

OUTLOOK

The Company indicated that for the third quarter of fiscal 2016 it currently expects revenues in the range of $300 to $320 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 7.5% to 8.5%, and non-GAAP earnings per diluted share in the range of approximately $0.19 to $0.25.

CONFERENCE CALL

Finisar will discuss its financial results for the second quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, December 10, 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 800-500-0177 (domestic) or +1.719.457.2602 (international) and enter conference ID 1806814.

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 1806814 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; and intensive competition. 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 19, 2015) and quarterly SEC filings.

ABOUT FINISAR

Finisar Corporation (NASDAQ: 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 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, non-GAAP income per share, and Non-GAAP EBITDA. 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. 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);
• Impairment of long-lived assets (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);
• Acquisition related costs (non-recurring 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);
• 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); 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-F