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

Nov 12, 2019 • 09:00 am ET


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


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Vincent D. Mattera

latest generation of 100G, 200G and 400G pluggable coherent transceivers. In fact, we've already had multiple design-in engagements for the coherent opportunities before us and we have committed significant resources in order to intersect the market and establish a strong Number 1 position. Our investment focus is being guided by a broad customer base with whom we have over 20 active design engagements. We expect to see meaningful revenue and profit upside in both FY '20 and '21.

This differentiated platform for coherent products will help offset the fact that the datacom space is in a low part of the cycle as Web 2.0 players prepare for a technology change. Combined with our coherent transceiver innovations, our high-speed VCSEL know-how will help spur growth in the next transceiver upgrade cycle in data centers from 100G through 400G and 800G, which Giovanni will discuss in more detail.

We are continuing to work at expanding the number of new opportunities that we can address from our 3D sensing VCSEL business. I've spent a good deal of my personal time in the last six weeks, communicating with customers and employees, to understand the capability and readiness of the operations at the Sherman, Texas plant. That facility is the newest and largest of the world's compound semiconductor fabs known to us. During my visits, I found a well-equipped, world-class wafer fab, substantial and sufficient in-house MOCVD epitaxial growth infrastructure and capacity, and the market-leading development team well-positioned for the next generation design-in cycle currently underway.

Although the fab was qualified in the September quarter and it was well-positioned to begin volume shipments in the December quarter, a technical issue required some additional attention and that work is causing a delay. We are working closely with our largest 3D sensing customer to implement and qualify the improvements that have been identified. And as of today, our conservative view is that we will begin shipping in the March quarter.

We are actively sharing best practices between the fabs and expect the benefits of that synergy to quickly accrue. We are accelerating the improvements through the final stages of the approval process. In the meanwhile, we have been asked to ramp up the capacity and shipments from our Eastern Pennsylvania and Warren, New Jersey fabs, over and above our forecast and that is going extremely well.

With respect to cost synergies, we got off to a very good start at the crack of the bat. Our pre-closing integration planning work allowed us to hit the ground running on the first day of the combined company. At this point, we have a very robust process underway for the supply chain synergies, the largest portion of our identified $85 million of cost of goods sold synergies over three years. Our new Chief Sales Officer is also working with his team to identify revenue synergies, which would be accretive to our total $150 million three-year cost synergy projections from both the cost of goods sold and opex.

Customer engagements have