Finisar Corporation Net Income dropped on 119% and Revenue decreased on 9.2%
06/14/2018 • About Finisar Corporation (
$FNSR) • By InTwits
Finisar Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 8.5% in FY2018, 18.8% in FY2017, 10.7% in FY2016, 9.5% in FY2015, 15.7% in FY2014
- Finisar Corporation motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 3.9% while average EBITDA Margin was 12.7% for the sames years. In FY2018 SBC/Revenue was even higher: 4.8%
- Finisar Corporation has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.8%. At the same time it's a lot of higher than industry average of 7.4%.
- CAPEX is quite volatile: $34m in FY2018, $18m in FY2017, $14m in FY2016, $13m in FY2015, $18m in FY2014
- The company has potentially unprofitable business model: ROIC is 0.3%
- It operates with high leverage: Net Debt/EBITDA is 3.8x while industry average is -0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 9.2%. Revenue decline showed acceleration in FY18Q4 - it was 13.3% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 10.3 pp from 18.8% to 8.5% in FY2018.
Gross Margin decreased on 7.2 pp from 34.8% to 27.5% in FY2018. SG&A as a % of Revenue increased slightly on 0.93 pp from 7.3% to 8.2% in FY2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.2 pp from 3.6% to 4.8% in FY2018.
Net Income margin dropped on 20.9 pp from 17.2% to -3.7% in FY2018.
Investments (CAPEX, working capital and M&A)
Finisar Corporation's CAPEX/Revenue was 16.8% in FY2018. CAPEX/Revenue increased on 4.9 pp from 11.9% in FY2015 to 16.8% in FY2018. It's average level of CAPEX/Revenue for the last three years was 12.0%. Battling declining revenue the company made large investments to CAPEX (198% of EBITDA) but that didn't help at least in this year.
Accounts receivable as a % of Revenue decreased slightly on 1.1 pp from 18.8% to 17.7% in FY2018. Inventories as a % of Revenue increased on 3.6 pp from 22.9% to 26.5% in FY2018. Accounts payable as a % of Revenue decreased slightly on 1.0 pp from 14.9% to 13.8% in FY2018.
Return on investment
The company operates at low but positive ROIC (0.3%) and negative ROE (-3.0%). ROIC decreased on 9.1 pp from 9.4% to 0.27% in FY2018. ROE dropped on 21.3 pp from 18.3% to -3.0% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.8x and Debt / EBITDA is 6.6x. Net Debt / EBITDA jumped on 2.2x from 1.6x to 3.8x in FY2018. Debt increased on 4.6% while cash jumped on 20.0%.
Finisar Corporation has questionable short term financial stability: Interest coverage ratio (ICR) is only 0.2x. Finisar Corporation has no short term refinancing risk: cash is higher than short term debt (124.3%).
Average interest expence paid by the company was 5.0% in FY2018.
Management team
Finisar Corporation's CEO is Michael E Hurlston. Michael E Hurlston is a founder and has 1 year tenure with the company. CEO total compensation was
$22,375,992 in FY2018 which included
$706,846 salary. The company's CFO Kurt Adzema has spent 9 years with the company.
The company has 1.7% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 13,000 employees. The number of employees decreased on 7.1%. Average revenue per employee in FY2018 was
$101,268 and it decreased on 2.2%.
Financial and operational results
FY ended 04/29/2018
Finisar Corporation ($FNSR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,157 | 1,251 | 1,263 | 1,449 | 1,316 | -9.2% |
| Gross Profit | 397 | 351 | 355 | 504 | 362 | -28.1% |
| SG&A | 100 | 119 | 107 | 106 | 109 | 2.3% |
| EBITDA | 182 | 119 | 136 | 272 | 112 | -58.9% |
| EBIT | 111 | 27 | 41 | 177 | 7 | -96.3% |
| Interest expence | 6 | 12 | 12 | 20 | 37 | 80.0% |
| Tax | 3 | 9 | -0 | -86 | 33 | |
| Net Income | 112 | 12 | 35 | 249 | -48 | -119.4% |
| Stock Based Compensation | 40 | 47 | 48 | 53 | 63 | 20.0% |
Balance Sheet
|
|---|
| Cash | 303 | 197 | 299 | 260 | 312 | 20.0% |
| Accounts Receivable | 225 | 213 | 249 | 272 | 234 | -14.3% |
| Inventory | 260 | 284 | 273 | 331 | 349 | 5.2% |
| Accounts Payable | 119 | 132 | 142 | 141 | 132 | -6.0% |
| Short Term Debt | 40 | 0 | 0 | 0 | 251 | |
| Long Term Debt | 212 | 221 | 229 | 708 | 489 | -30.9% |
Cash flow
|
|---|
| Capex | 130 | 149 | 119 | 140 | 221 | 58.1% |
| Acquisitions | 21 | 3 | | | | |
Ratios
|
|---|
| Revenue growth | 23.8% | 8.1% | 1.0% | 14.7% | -9.2% | |
| EBITDA growth | 209.9% | -34.5% | 14.2% | 100.5% | -58.9% | |
|
|---|
| Gross Margin | 34.3% | 28.1% | 28.1% | 34.8% | 27.5% | -7.2% |
| EBITDA Margin | 15.7% | 9.5% | 10.7% | 18.8% | 8.5% | -10.3% |
| EBIT Margin | 9.6% | 2.1% | 3.2% | 12.2% | 0.5% | -11.7% |
| SG&A, % of revenue | 8.6% | 9.5% | 8.4% | 7.3% | 8.2% | 0.9% |
| SBC, % of revenue | 3.5% | 3.7% | 3.8% | 3.6% | 4.8% | 1.2% |
| Net Income Margin | 9.7% | 1.0% | 2.8% | 17.2% | -3.7% | -20.9% |
| CAPEX, % of revenue | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% | 7.2% |
|
|---|
| ROIC | 10.5% | 2.1% | 3.0% | 9.4% | 0.3% | -9.1% |
| ROE | 12.3% | 1.1% | 3.1% | 18.3% | -3.0% | -21.3% |
| Net Debt/EBITDA | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x | 2.2x |
| Interest expence / Average debt | 2.2% | 5.1% | 5.2% | 4.3% | 5.0% | 0.6% |
People
|
|---|
| Insider ownership | 1.7% | 1.7% | 1.7% | 1.7% | 1.7% | 0.0% |
| Employees | 13,000 | 13,400 | 13,400 | 14,000 | 13,000 | -7.1% |
| Revenue/Employee, th. $ | 89 | 93 | 94 | 104 | 101 | -2.2% |
Finisar Corporation ($FNSR) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 342 | 332 | 332 | 310 | | 0.1% | -10.2% | -12.7% | -13.3% |
| EBITDA | 54 | 36 | 21 | 1 | | 4.4% | -53.2% | -73.5% | -98.3% |
| Net Income | 20 | 6 | -56 | -18 | | -17.1% | -88.0% | -220.0% | -114.1% |
Balance Sheet
|
|---|
| Cash | 279 | 275 | 259 | 312 | | -0.6% | -3.0% | 7.7% | 20.0% |
| Short Term Debt | 0 | 0 | 248 | 251 | | | | | |
| Long Term Debt | 716 | 724 | 483 | 489 | | 208.5% | 208.4% | -30.9% | -30.9% |
Ratios
|
|---|
| Gross Margin | 33.9% | 29.1% | 26.7% | 20.4% | | 2.2% | -7.0% | -9.2% | -14.6% |
| EBITDA Margin | 15.9% | 10.7% | 6.2% | 0.4% | | 0.7% | -9.9% | -14.2% | -18.1% |
| Net Income Margin | 5.8% | 1.8% | -16.7% | -5.9% | | -1.2% | -11.4% | -28.9% | -42.3% |
Peers in Communications Equipment
Below you can find Finisar Corporation benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.6% | 5.1% | 3.5% |
|---|
| Finisar Corporation ($FNSR) | | 8.1% | 1.0% | 14.7% | -9.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| Finisar Corporation ($FNSR) | 34.3% | 28.1% | 28.1% | 34.8% | 27.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| Finisar Corporation ($FNSR) | 15.7% | 9.5% | 10.7% | 18.8% | 8.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Oclaro, Inc. ($OCLR) | 2.2% | 5.3% | 7.3% | 11.7% | 10.6% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.2% | 2.2% | 2.1% | 0.7% |
|---|
| Finisar Corporation ($FNSR) | 10.5% | 2.1% | 3.0% | 9.4% | 0.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Harmonic Inc. ($HLIT) | -4.7x | -4.1x | | | 3.4x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.9x | -0.8x | -0.3x |
|---|
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
