Finisar Corp. (NASDAQ:FNSR) Q1 2020 Earnings Conference Call - Final Transcript

Nov 12, 2019 • 09:00 am ET

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Finisar Corp. (NASDAQ:FNSR) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions]

And our first question will come from Meera Marshall of Morgan Stanley. Your line is open.

Analyst
Meera Marshall

Great, thank you so much.

Maybe, just starting with kind of looking forward into Q1 and just it sounds as if -- perhaps some of the weakness to expectation is coming from kind of lower ramps on some of the Finisar products. But, just any help kind of between legacy II-VI, legacy's Finisar, just as you're looking into Q1?

And then, second question, just Compound Semiconductor which had a tremendous amount of operating leverage in Q1, just any help there as to where you were seeing that leverage would be helpful? Thanks.

Executive
Mary Jane Raymond

Well, I will the answer the first question -- the second question for you, and then Chuck and Giovanni can answer the first part of your question.

So, as you know, the 3D sensing business for both companies is one of the few businesses because of consumer aspect, where a lot of the capacity, if not, almost all of it, needs to go in for qualification. As a result, volume, if it lags, can cause disleverage. But, when it is shipping, it's very, very good. And we see this as well even in Photonics, where when the volumes are high, the operating leverage is very good. So, that's not atypical in a capital-intensive company. But I would say that particularly in Compound Semiconductor because of the shipments in 3D sensing and --- while are down[Phonetic], not dramatically down just 10%, not what some others are reporting with respect to Industrial, that also helps the margin mix a little bit.

Executive
Vincent D. Mattera

But I would add Meera, just to repeat maybe what I said, actually the call -- we're hosting the call today from Warren, New Jersey, from our 3D sensing and Compound Semiconductor fab. I said it's going extremely well here. The team here have done really a fantastic job and it's really exciting to see. So, I think that's --- we've said all along when we get these fabs filled to the target utilization, that we would be able to have a real nice business and that's what we're seeing.

For the rest of your question with regard to the business, I think we tried to give us a very clear transparent and balanced view. Each one of our markets in Q1 whether we talk about our traditional silicon carbide or industrial laser markets, we experienced softness in the legacy II-VI markets in the first quarter. And with regard to the Finisar, -- legacy Finisar business, the the Web 2.0 scale purchases of transceivers were less than what we expected they would be in the first quarter.

And so, I would say it's a mix of both legacy and Finisar business, that we're a little bit softer than what we would have hoped for expected Meera.

Analyst
Meera Marshall

Got it. Thank you so much.

Operator
Operator

Your next question will come from Jim Ricchiuti from Needham and Company. Your line is open.

Analyst
Jim Ricchiuti

Thank you. Good morning.