Solutions for the Communications Industry

Transcription

1 The World s Largest Supplier of Optical Solutions for the Communications Industry April 8, 2010 *Financial guidance for Q410 is per earnings call on March 3, 2010 and is not being updated or confirmed in this presentation.

2 Financial Presentation and Forward Looking Statements Forward Looking Statements This presentation contains forward-looking statements as defined under the Private Securities Litigation Act of Except for historical information, the matters discussed in this presentation contain forward-looking statements regarding future trends or events that involve risks and uncertainties. Please be aware that these statements are only predictions and that actual events or results may differ materially. Please refer to the Company s Form 10-K and other interim reports as filed with the Securities and Exchange Commission for a discussion of those risk factors. The Company assumes no obligation to update the information in this presentation. GAAP Reconciliation References to financial measures in this presentation will include references to non-gaap financial measures. Finisar provides a complete reconciliation between GAAP and non-gaap financial information in its earnings release which is posted on the company s web site 2

3 Company Highlights World s largest supplier of optical communications solutions Continue to gain market share from key competitors High performance, best-in-class broad product line Entry into new market segments Strong growth projected for optical communications solutions market Vertical integration and low cost manufacturing Strong financial performance: high growth and margin expansion Experienced management team 3

4 Market Leader with Growing Share CAGR: 17.6+% $140M in FY2001 SAN 1M/Yr Market/Product Diversification Vertical Integration Customer Expansion Niche Player Preferred Supplier 1 Gb/s 10/40/100 Gb/s Volume 12M/Yr IP Patent Portfolio $600M+ in FY2010 (1) FTTx Parallel Telecom Metro LAN SAN Other (2) Source Photonics 38% Optical Modules & Components Market Share Finisar 12% Sumitomo 11% 7% Avago 14% Finisar Optical Modules Other (2) 38% Sumitomo 25% 11% 11% 4% 5% 8% 8% 9% JDSU Source 7% 8% JDSU Photonics Oclaro Opnext Oclaro Opnext 9% Avago 3Q 08 3Q Notes: 1. Includes Q4FY10 revenue guidance 2. Category includes companies with <5% market share Source: Ovum Other 75% Finisar Over 95% of Finisar revenue from module sales Source: Lightcounting 4

5 Broad Product Portfolio and Customer Base SAN LAN SAN LAN Telecom SFP SFP SFP+ X2/XENPAK SFP+ CFP Active Cable PARALLEL METRO/TELECOM SFP CML Laser XFP 300-pin WDM passives Interleaver ROADM FTTx and dcatv PON SAN and LAN WSS ROADM line card CATV 5

6 Industry s Broadest Product Portfolio Finisar SFP/ SFP+ XFP XAUI 40G 40G 10G Line Client Line Side Side Side pin pin GHz 50 GHz Tunable pin Tunable 100G ROADM ROADM FTTx CATV Passives Parallel Active Serial Cables Optical Amplifiers JDSU OpNext Emcore Oclaro OpLink Sumitomo/ Excelight Avago CoAdna Mintera Established market positions Recent market entry 7

7 Optics Markets Projected to Enjoy Strong Growth Total Transceiver Market (Excluding CATV) Gig Market (MM) 4,000 3,500 3,000 2,500 2,000 1,500 1, , % 43.5% 17.0% 9.5% 13.9% 0.6% 10.0% 2, % 39.9% 16.6% % 1.8 % % 10.3% 2, % 39.0% % 9.7% 16.3 % 3.4 % 9.5% 2,745 66% 6.6% 39.2% 14.7 % 10.0% 15.5% 4.4 % 9.5% 3, % 39.1% 14.3 % 10.7% 14.3 % 5.5 % 9.4% 3, % 39.1% 13.5% 10.3% 13.7% 6.4% 10.4% (MM) 2,000 1,800 1,600 1,400 1,200 1, ,955 1,629 1, % 1,095 1, % % 59.6% 66.4% 60.3% 15.7% 15.6% 15.0% 15.2% 15.1% 16.2% 22.3% 21.5% 24.6% 25.3% 24.1% 17.5% FTTX Parallel LAN SAN LAN Metro Telecom Metro Telecom ROADMs CAGR CAGR FTTX Parallel LAN SAN Metro Telecom ROADMs LAN Metro Telecom 16.2% 59.8% 11.5% 19.0% 10.3% 15.5% 18.7% 15.6% 20.6% 20.7% Source: Lightcounting (Mar 10); ROADMs data per Ovum (Sept 09); excludes CATV, components and optical amplifiers 8

8 Total Transceiver/Transponder Market Total market expected to grow 16% per year ( ) Additional growth drivers due to: Entry into FTTx market with GPON in fiscal Q Entry into Parallel market in fiscal Q1 10 Market share gains Sources: Lightcounting 2009 (transceivers); Infonetics 2009 (ROADMs); excludes CATV, components and optical amplifiers 8

9 G Market Grows Even Faster 10-40G market expected to grow 19.5% per year ( ) Additional growth drivers due to: Qualification of legacy form factors X2 and XENPAK in fiscal Q G X2/XENPAK 10G SFP+ 100G CFP Source: Lightcounting 2009 (transceivers) 9

10 Growth Drivers Global IP Traffic Mobile Bandwidth Trends EB 55.1 Mobile Business EB/Month VoIP Gaming P2P 27.5 Consumer Web/Data/Other Video Source: Cisco VNI (June 2009) Source: Cisco VNI (February 2010) Wireless Backhaul Virtualization Cell Sites (MM) 8 Europe 7 SCA 6 North America Asia-Pacific MEA Source: Ovum (2009) Direct attached storage moves into a SAN environment Copper ports reduced while Optic ports increase by 50% or more Higher IO utilization pulls demand for higher speeds (8-10Gbps) Servers Storage Optical ports Copper ports Facilities BEFORE Virtualization/ Blade Servers (3 data centers) AFTER Virtualization/ Blade Servers ( 10:1 consolidation) SAN/Direct attach Tiered SAN and NAS 66 98/126 (with/without blade servers) 320 cables/ports 52/80 (with/without blade servers) 15 racks 3 racks 30 power Cables 6 power Cables 10

11 Growth Drivers: New Market Entry - Parallel Optics Active Optical Cables C.wire 150G (12 channel x 12.5G) Quadwire 40G (4 channel x 10G) Lowest cost solution for 40G and 100G short links Increases density, reduces cable count, weight, and EMI Leverages leadership in VCSELs and detectors Demonstrated 150G active cable at ISC 2009 $200M+ addressable market by CY13 per Lightcounting Problem Solution IBM Supercomputer Using Parallel Optic Connections 11

12 Differentiation Through Technology: LCoS WSS* ROADMs LCoS Liquid Crystal on Silicon Developed in late 90 s for displays: 15+ million manufactured Combines mature CMOS wafer fab and liquid crystal technologies Manufactured exclusively for Finisar Common hardware switching element provides platform for wide range of functionality and performance WSS optical performance and functionality controlled by software Incident light Reflected light Liquid Crystal Cell Gasket Glass Window Liquid Crystal Gasket CMOS Backplane Silicon die * WSS: Wavelength Selective Switch 12

13 WSS ROADM Functionality WSS ROADMs provide carriers with highly flexible wavelength selective switch capabilities operating on both 50 and 100 GHz ITU grids for 10G and 40G applications 1x9 versions of the WSS (10 ports) are able to direct any wavelength or group of wavelengths to 9 different ports Advanced functionalities include drop and continue, channel monitoring and channel contouring plus in-service functionality and software upgrade capability 13

14 WSS ROADMs Lower Operating Costs for Carriers ROADMs act as automated patch panels for carriers enabling wavelengths and bandwidth to be shifted quickly to different portions of the network from a central office, thereby minimizing truck rolls and reducing carrier operating costs CO CO CO CO CO Central Office (CO) WSS 7100 WSS CO WSS WSS Optical Broadcast Port Card ADM ADM 14

15 Differentiation Through Vertical Integration In-House Integrated Circuit Design In-House Design of Optical Chips World-class analog and digital integrated circuit design team Majority of optics revenue contains internally-designed optical chips World-class foundries Highest volume shipping ICs in the industry VCSELs 1.3 um Fabry-Perot and DFBs Photodetectors Net impact: higher gross margins partially offset by higher R&D expense Today: up to 10G Tomorrow: 100G (4x25G) In-House Optical Package Design Majority of optical components used in Finisar modules are designed and manufactured in-house TO can technology high volume, low cost Cooled box technology higher performance for CML, higher speeds and longer distances 15

16 Differentiation Through Hi-Vol /Low-Cost /In-House Manufacturing Ipoh, Malaysia Shanghai Acquired 2001 Acquired acres of land Produces: 640,000 ft 2 facility Passive optical components used in 2 LW transceivers (e.g. isolators) 200,000 ft clean room Parallel optics products WSS ROADM linecards Passive optical components for merchant market (e.g. interleavers, couplers) 2009 Best Supplier in Innovation (ALU) 2009 Huawei Core Supplier Award 2008 Huawei Core Supplier Award 2005 Cisco Operational Excellence Award Finisar is one of a few optics companies to own assembly / manufacturing facilities October 2008: Expanded from 50,000sq ft to 150,000 sq ft 16

17 Vertical Integration and Consolidation through M&A New Focus Big Bear Networks Passive components Long wavelength FP and DFB lasers Short wavelength VCSEL lasers 10Gbps Technology 40Gbps Technology CML Technology for 10-40Gbps ROADM, CATV, 10-40Gbps May 2002 April 2003 March 2004 Jan 2005 Nov 2005 March 2007 Aug 2008 Note: All dates are closing dates Strong expertise in integrating acquisitions 17

18 Optium Merger Realizing Significant Synergies Minimal Product Overlap Redundant Operating Expenses (1)(2) Finisar Products Minimal Product Overlap Optium Products $MM Finisar Optium premerger GPON/EPON optics 1-10Gb/s pluggable modules RF over fiber Cable TV transmission 10Gb/s 300pin tunable 10Gb/s 300pin fixed wavelength 10Gb/s XFP CMLs 40Gb/s client 10Gb/s 300pin tunable side 40Gb/s line side VCSELs/1310nm lasers Passive optics WSS ROADM & ROADM circuit packs $42.5 $11.5 $31.0 $ Q1FY09 Q4FY09 Product Transfer Activity to Lower Cost Regions Current Manufacturing Locations Off-Shore Locations Finisar Components in Optium Products Horsham, PA 10G 300 Pin Transponders CATV Malaysia Sydney, Aus WSS Optical Subassemblies Notes: 1. Non-GAAP; fiscal year ends April Q4FY09 salary- and 401K match-adjusted for comparison purposes China Target: $10 - $15 million in annual synergies 18

19 Financial Overview 19

20 Strong Revenue Growth ($MM) Optium Merger Adds $91.3M in Revenues % % % 59.7% 61.2% 43.4% % 40.3% 45.6% 38.7% 11.7% 0.1% 0.1% 4.5% 1.9% 3.0% FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 LAN/SAN Metro-Telecom ROADM CATV Notes: 1. Fiscal year ends April 30. Figures are non-gaap and exclude Network Tools Division, which was divested 2. Includes Q4FY10 revenue guidance as of March 3, 2010, which is not being updated or confirmed in this presentation (2) 20

21 Return to Growth Total Revenue Gbps Revenue ($MM) ($MM) 200 Optium 100 Merger 180 Closes % 49% 6% 2% % 39% 50% 5% 3% 38% 53% 7% 2% 49% 9% 3% % 44% 11% 4% 44% 41% 11% 4% Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY % 84% LAN/SAN Metro-Telecom ROADM CATV Note: 1. Fiscal year ends April 30. Figures are non-gaap and exclude Network Tools Division, which was divested % 81% % 78% % % 74% 70% % 62% Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 21

22 Increasing Operating Leverage Gross Margin (%) (%) Operating Margin Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 (3.0) 0.0 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 (1.5) Profitable on a non-gaap annual basis since Q3FY06 Note: 1. Fiscal year ends April 30. Figures are non-gaap and exclude Network Tools Division, which was divested 22

23 Capacity Expansion Capital Expenditures Capacity expansion is driving level of CapEx spending to be somewhat higher than normal Next quarter CapEx spending expected at around $12 million before turning down next fiscal year Substantial portion of CapEx next quarter related to expansion in Shanghai and additional capacity in Sydney Working to get ahead of customer demand CapEx spending will drive growth as capacity expands Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Note: 1. Fiscal year ends April 30. Figures are non-gaap and exclude Network Tools Division, which was divested 23

24 Strong Cash Flow Generation EBITDA EBITDA Capex ($MM) 30.0 ($MM) Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Note: 1. Fiscal year ends April 30. Figures are non-gaap and exclude Network Tools Division, which was divested 24

25 Summary of Equity Offering Offering Size: Offering Mix: Over-Allotment Option: 8.64MM (9.79MM including over-allotment option) 100% Primary 15%, 1.15 MM Primary, 0.15 MM Secondary Pricing: $14.00 on March 23, 2010 Lock-Up: Symbol / Exchange: Use of Primary Proceeds: Joint Bookrunners: Co-Managers: 90 days FNSR / Nasdaq General corporate purposes, incl. debt reduction and M&A Morgan Stanley, Jefferies Piper Jaffray, Morgan Keegan 25

26 Liquidity Profile Cash and Amortization Schedule (1)(2)(3)(4) ($MM) Cash Debt Convertible Bonds $ $ $ $10.0 $ $8.5 $4.0 $2.8 Cash Offering Revolver CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 Notes: 1. Cash and debt are as of the end of Q3 10 (quarter ending January 31, 2010) and excludes common stock offering 2. Cash includes restricted cash 3. $60MM of revolver has not been drawn 4. Convertible note due CY2010 has conversion price of $ Convertible note due CY2014 has conversion price of $

27 Target Model (Non-GAAP) $ Millions Q1FY10 Q2FY10 Q3FY10 Q4FY10 Quarterly Actual Actual Actual Guidance Target* Optics revenue $128.7 $145.7 $166.9 $175-$185 $200-$220 Gross Gossmargins ag 28.8% 88% 29.6% 96% 32.2% Operating expense In line with Q %-35% 35% $33.8 $34.2 $ $44-$46 Expense ratio 26.2% 2% 23.5% 23.8% -- 21%-22% 22% Operating margins 2.5% 6.1% 8.5% 8.5%-10% 12%-14% Net income $1.8 $7.5 $ $17-$21$21 EBITDA 10.4 $16.0 $ $26-$30 Capex $3.1 $7.6 $10.7 $12 $7-$9 Note: 1. Fiscal year ends April 30. Figures are non-gaap and exclude Network Tools Division, based on guidance provided March 3, 2010, which is not being updated or confirmed in this presentation. * Achieving target model depends on overall revenue levels, product mix and achievement of cost reduction initiatives over the next four quarters. 27

28 The World s Largest Supplier of Optical Solutions for the Communications Industry