Finisar Corp. (NASDAQ:FNSR) Q4 2018 Earnings Conference Call - Final Transcript

May 14, 2018 • 05:00 pm ET

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Finisar Corp. (NASDAQ:FNSR) Q4 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, ladies and gentlemen. Welcome to the Finisar Corporation Announcing Fourth Quarter Results Conference Call. Just a quick reminder, today's call is being recorded. And now at this time, I'll turn the call over to Michael Hurlston, CEO.

Executive
Kurt Adzema

Actually this is Kurt Adzema, CFO. Thank you, Jesse and good afternoon, everyone.

I need to remind 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, the Company assumes no obligation to update any forward-looking information presented. Unless otherwise indicated, all results discussed are non-GAAP basis. A complete reconciliation of our GAAP to non-GAAP results may be found in our earnings press release and in our Investor Relations section of our website.

In addition, we have prepared some slides for today's call that can be found on the Investor Relations page of our website.

Moving to our fourth quarter results, overall revenue for the fourth fiscal quarter was $310.1 million compared to $332.4 million in the third quarter. Sales of datacom products decreased by $18.1 million or 6.8% compared to the third quarter of fiscal 2018 to $248 million, primarily due to the expected decline in revenues from our VCSEL laser arrays for 3D sensing applications. Sales of telecom products decreased by $4.2 million or 6.4% compared to the third quarter of fiscal 2018 to $62.1 million primarily due to the full three month impact of the annual telecom price reductions. In the fourth quarter, we had two 10% or greater customers.

Our top 10 customers represented 61.1% of total revenues compared to 63.3% in the prior quarter. Non-GAAP gross margin was 24.7% compared to 28.6% in the third quarter primarily due to the impact of the full three months of the telecom price reductions under absorption of fixed manufacturing expenses in our Allen, Texas VCSEL laser fab and an increase in non-cash inventory reserves. Non-GAAP operating expenses were $72 million compared to $72.4 million in the third quarter. Non-GAAP operating income was $4.6 million or 1.5% of revenue compared to $22.7 million or 6.8% of revenue in the third quarter primarily due to lower revenue and lower gross margins. Interest and other income was $3.9 million in the fourth quarter. Non-GAAP net income was $5.8 million or $0.05 per diluted share compared to $22.8 million or $0.20 per diluted share in the third quarter primarily due to lower revenues and lower gross margins.

Non-GAAP taxes for the fourth quarter were approximately $2.7 million a decrease of $0.3 million compared to the third quarter. Non-GAAP tax rate for fiscal 2019 is estimated at 11% to 13%. Average diluted shares for the fourth quarter for non-GAAP purposes were totaled 116 million. Average diluted shares are expected to be approximately 116.8 million in the first fiscal quarter of 2019. Capital expenditures were approximately $55.2 million in the fourth quarter of which $4.4 million related