Investor News Release

Printer Friendly Version View printer-friendly version
<< Back
NeoPhotonics Reports Second Quarter 2017 Financial Results
  • Revenue of $73.2 million
  • High Speed Products Represented 81% of Total Revenue
  • Sequential growth over the First Quarter 2017

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 3, 2017-- NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and datacenter applications, today announced financial results for its second quarter ended June 30, 2017.

"We are pleased to report revenue of $73.2 million at the upper end of our previously-announced outlook range and representing sequential growth from the first quarter, including modest sequential growth in China despite an inventory overhang,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “While the near term outlook in China isn’t certain, we see positive indicators there for the longer-term and we see strong current demand in North America. We anticipate robust growth in the medium and long term driven by metro, data center interconnect, a normalized China market and the emergence of 400G and above,” concluded Mr. Jenks.

Second Quarter Summary

  • Revenue was $73.2 million, up $1.5 million, or 2%, from the prior quarter
  • Gross margin was 22.9%, down from 25.8% in the prior quarter
  • Non-GAAP Gross margin was 23.9%, down from 26.3% in the prior quarter
  • Net loss was $9.3 million, an improvement from a net loss of $11.5 million in the prior quarter
  • Non-GAAP net loss was $6.6 million, an improvement from a net loss of $10.7 million in the prior quarter
  • Diluted net loss per share was $0.22, an improvement from a net loss of $0.27 per share in the prior quarter
  • Non-GAAP Diluted net loss per share was $0.15, an improvement from a net loss of $0.25 in the prior quarter
  • Adjusted EBITDA was breakeven, an improvement from a loss of $5.2 million in the prior quarter

Non-GAAP results in the second quarter of 2017 exclude $0.3 million of amortization of acquisition-related intangibles, $1.9 million of stock-based compensation expense and $0.7 million of restructuring charges. A reconciliation of the Non-GAAP and Adjusted EBITDA financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release.

As of June 30, 2017, cash and cash equivalents, short-term investments and restricted cash, together totaled $79.0 million, down from $91.5 million at March 31, 2017. Restricted cash as of June 30, 2017 was $3.3 million, down from $3.7 million at March 31, 2017.

Outlook for the Quarter Ending September 30, 2017

   
    GAAP   Non-GAAP
Revenue   $70 to $76 million
Gross Margin   23% to 26%   24% to 27%
Operating Expenses   $24 to $26 million   $23 to $25 million
Earnings per share   $0.21 to $0.11 net loss   $0.17 to $0.07 net loss
 

The Non-GAAP outlook for the third quarter of 2017 excludes the impact of expected amortization of intangibles of approximately $0.3 million and the anticipated impact of stock-based compensation of approximately $1.8 million, of which $0.3 million is estimated for cost of goods sold.

Non-GAAP and Adjusted EBITDA Measures vs. GAAP Financial Measures

The Company’s non-GAAP and adjusted EBITDA measures exclude certain GAAP financial measures. A reconciliation of the Non-GAAP and Adjusted EBITDA financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release. These non-GAAP financial measures differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. NeoPhotonics believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Conference Call

The Company will host a conference call today, August 3, 2017, at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing 866-548-4713. For international callers, please dial +1 323-794-2093. The Conference ID number is 2298213. A live webcast will be available in the Investor Relations section of NeoPhotonics’ website at: http://ir.neophotonics.com/phoenix.zhtml?c=236218&p=irol-calendar.

A replay of the webcast will be available in the Investor Relations section of the company’s web site approximately two hours after the conclusion of the call and remain available for approximately 30 calendar days.

About NeoPhotonics

NeoPhotonics is a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and datacenter applications. The Company’s products enable cost-effective, high-speed data transmission and efficient allocation of bandwidth over communications networks. NeoPhotonics maintains headquarters in San Jose, California and ISO 9001:2000 certified engineering and manufacturing facilities in Silicon Valley (USA), Japan and China. For additional information visit www.neophotonics.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release includes statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about the following topics: future financial results, demand for the Company’s high speed products, the Company’s market position, the outlook for the China market, and industry trends. Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. Those risks and uncertainties include, but are not limited to, such factors as: the Company’s reliance on a small number of customers for a substantial portion of its revenues; market growth in China and other key countries; possible reduction in or volatility of customer orders or delays in shipments of products to customers; timing of customer drawdowns of vendor-managed inventory; possible disruptions in the supply chain or in demand for the Company’s products due to industry developments; the ability of the Company's vendors and subcontractors to supply or manufacture the Company's products in a timely manner; ability of the Company to meet customer demand; economic conditions or natural disasters; volatility in utilization of manufacturing operations, supporting utility services and other manufacturing costs; the savings anticipated from cost reduction actions and the impact of severance costs; reductions in the Company’s rate of new design wins, and/or the rate at which design wins go into production, and the rate of customer acceptance of new product introductions; potential pricing pressure that may arise from changing supply or demand conditions in the industry; the impact of any previous or future acquisitions or divestitures; challenges involving integration of acquired businesses and utilization of acquired technology or divestitures of assets and related product lines; the impact of the sale of the low speed transceiver product lines and the discontinuance or end of life of certain other products; market adoption, revenue growth and margins of acquired products; changes in demand for the Company's products; the impact of competitive products and pricing and alternative technological advances; the accuracy of estimates used to prepare the Company's financial statements and forecasts; the timely and successful development and market acceptance of new products and upgrades to existing products; the difficulty of predicting future cash needs; the nature of other investment opportunities available to the Company from time to time; the Company’s operating cash flow; changes in economic and industry projections; a decline in general conditions in the telecommunications equipment industry or the world economy generally; and the effects of seasonality. For further discussion of these risks and uncertainties, please refer to the documents the Company files with the SEC from time to time, including the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and its Form 10-Q for the three months ended March 31, 2017. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

©2017 NeoPhotonics Corporation. All rights reserved. NeoPhotonics and the red dot logo are trademarks of NeoPhotonics Corporation. All other marks are the property of their respective owners.

 
NeoPhotonics Corporation
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
   
 
As of
Jun. 30,

2017

Dec. 31,

2016

ASSETS
Current assets:
Cash and cash equivalents $ 73,661 $ 82,500
Short-term investments 2,055 19,015
Restricted cash 3,290 4,085
Accounts receivable, net 56,525 80,610
Inventories, net 81,328 48,237
Assets held for sale 13,953
Prepaid expenses and other current assets   36,766     22,396  
Total current assets 253,625 270,796
Property, plant and equipment, net 125,102 106,867
Purchased intangible assets, net 4,898 5,562
Goodwill 1,115 1,115
Other long-term assets   6,436     6,547  
Total assets $ 391,176   $ 390,887  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 80,446 $ 84,766
Notes payable and short-term borrowing 24,149 30,190
Current portion of long-term debt 5,458 747
Accrued and other current liabilities   40,725     30,625  
Total current liabilities 150,778 146,328
Long-term debt, net of current portion 10,810 10,215
Other noncurrent liabilities   13,967     8,939  
Total liabilities   175,555     165,482  
 
Stockholders' equity:
Common stock 109 106
Additional paid-in capital 539,525 532,378
Accumulated other comprehensive loss (4,472 ) (8,401 )
Accumulated deficit   (319,541 )   (298,678 )
Total stockholders' equity   215,621     225,405  
Total liabilities and stockholders' equity $ 391,176   $ 390,887  
 
 
 
NeoPhotonics Corporation
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages and per share data)
         
 
Three Months Ended Six Months Ended
Jun. 30,

2017

Mar. 31,

2017

Jun. 30,

2016

Jun. 30,

2017

Jun. 30,

2016

 
Revenue $ 73,214 $ 71,688 $ 99,129 $ 144,902 $ 198,274
Cost of goods sold (1)   56,437     53,185     71,600     109,622     139,623  
Gross profit 16,777 18,503 27,529 35,280 58,651
Gross margin 22.9 % 25.8 % 27.8 % 24.3 % 29.6 %
Operating expenses:
Research and development (1) 14,206 15,544 11,780 29,750 24,732
Sales and marketing (1) 3,910 4,932 3,807 8,842 7,738
General and administrative (1) 7,729 11,426 7,841 19,155 16,925
Amortization of purchased intangible assets 118 118 460 236 913
Acquisition and asset sale related costs 21 130 775 151 775
Restructuring charges 494 227 721
Gain on asset sale       (2,000 )       (2,000 )    
Total operating expenses   26,478     30,377     24,663     56,855     51,083  
Income (loss) from operations   (9,701 )   (11,874 )   2,866     (21,575 )   7,568  
Interest income 31 73 77 104 132
Interest expense (111 ) (137 ) (99 ) (248 ) (201 )
Other income (expense), net   (11 )   249     458     238     (846 )
Total interest and other income (expense), net   (91 )   185     436     94     (915 )
Income (loss) before income taxes (9,792 ) (11,689 ) 3,302 (21,481 ) 6,653
Provision (benefit) for income taxes   (451 )   (167 )   626     (618 )   1,667  
Net income (loss) $ (9,341 ) $ (11,522 ) $ 2,676   $ (20,863 ) $ 4,986  
Basic net income (loss) per share $ (0.22 ) $ (0.27 ) $ 0.06   $ (0.49 ) $ 0.12  
Diluted net income (loss) per share $ (0.22 ) $ (0.27 ) $ 0.06   $ (0.49 ) $ 0.11  
Weighted average shares used to compute basic net income (loss) per share   43,219     42,615     41,603     42,919     41,362  
Weighted average shares used to compute diluted net income (loss) per share   43,219     42,615     44,320     42,919     44,042  
 
(1) Includes stock-based compensation expense as follows for the periods presented:
Cost of goods sold $ 324 $ 147 $ 719 $ 471 $ 1,308
Research and development 511 662 556 1,173 1,527
Sales and marketing 313 464 365 777 1,252
General and administrative   738     599     590     1,337     1,582  
Total stock-based compensation expense $ 1,886   $ 1,872   $ 2,230   $ 3,758   $ 5,669  
 
 
NeoPhotonics Corporation
Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(In thousands, except percentages and per share data)
         
Three Months Ended Six Months Ended
Jun. 30,

2017

Mar. 31,

2017

Jun. 30,

2016

Jun. 30,

2017

Jun. 30,

2016

 
NON-GAAP GROSS PROFIT:
GAAP gross profit $ 16,777 $ 18,503 $ 27,529 $ 35,280 $ 58,651
Stock-based compensation expense 324 147 719 471 1,308
Amortization of purchased intangible assets 203 262 848 465 1,689
Depreciation of acquisition-related fixed asset step-up (68 ) (66 ) (64 ) (134 ) (126 )
Restructuring charges   240     39         279      
Non-GAAP gross profit $ 17,476   $ 18,885   $ 29,032   $ 36,361   $ 61,522  
Non-GAAP gross margin as a % of revenue 23.9 % 26.3 % 29.3 % 25.1 % 31.0 %
 
NON-GAAP TOTAL OPERATING EXPENSES:
GAAP total operating expenses $ 26,478 $ 30,377 $ 24,663 $ 56,855 $ 51,083
Stock-based compensation expense (1,562 ) (1,725 ) (1,511 ) (3,287 ) (4,361 )
Amortization of purchased intangible assets (118 ) (118 ) (460 ) (236 ) (913 )
Depreciation of acquisition-related fixed asset step-up (72 ) (73 ) (83 ) (145 ) (176 )
Acquisition and asset sale related costs (21 ) (130 ) (775 ) (151 ) (775 )
Restructuring charges (494 ) (227 ) (721 )
Litigation 64 64
Gain on asset sale       2,000         2,000      
Non-GAAP total operating expenses $ 24,211   $ 30,168   $ 21,834   $ 54,379   $ 44,858  
Non-GAAP total operating expenses as a % of revenue 33.1 % 42.1 % 22.0 % 37.5 % 22.6 %
 
NON-GAAP OPERATING INCOME (LOSS):
GAAP income (loss) from operations $ (9,701 ) $ (11,874 ) $ 2,866 $ (21,575 ) $ 7,568
Stock-based compensation expense 1,886 1,872 2,230 3,758 5,669
Amortization of purchased intangible assets 321 380 1,308 701 2,602
Depreciation of acquisition-related fixed asset step-up 4 7 19 11 50
Acquisition and asset sale related costs 21 130 775 151 775
Restructuring charges 734 266 1,000
Litigation (64 ) (64 )
Gain on asset sale       (2,000 )       (2,000 )    
Non-GAAP income (loss) from operations $ (6,735 ) $ (11,283 ) $ 7,198   $ (18,018 ) $ 16,664  
Non-GAAP operating margin as a % of revenue (9.2 )% (15.7 )% 7.3 % (12.4 )% 8.4 %
 
 
NeoPhotonics Corporation
Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited) (Continued)
(In thousands, except percentages and per share data)
         
Three Months Ended Six Months Ended
Jun. 30,

2017

Mar. 31,

2017

Jun. 30,

2016

Jun. 30,

2017

Jun. 30,

2016

NON-GAAP NET INCOME (LOSS):
GAAP net income (loss) $ (9,341 ) $ (11,522 ) $ 2,676 $ (20,863 ) $ 4,986
Stock-based compensation expense 1,886 1,872 2,230 3,758 5,669
Amortization of purchased intangible assets 321 380 1,308 701 2,602
Depreciation of acquisition-related fixed asset step-up 4 7 19 11 50
Acquisition and asset sale related costs 21 130 775 151 775
Restructuring charges 734 266 1,000
Litigation (64 ) (64 )
Gain on asset sale (2,000 ) (2,000 )
Income tax effect of Non-GAAP adjustments   (192 )   189     (135 )   (3 )   (259 )
Non-GAAP net income (loss) $ (6,567 ) $ (10,742 ) $ 6,873   $ (17,309 ) $ 13,823  
Non-GAAP net income (loss) as a % of revenue (9.0 )% (15.0 )% 6.9 % (11.9 )% 7.0 %
 
ADJUSTED EBITDA:
GAAP net income (loss) $ (9,341 ) $ (11,522 ) $ 2,676 $ (20,863 ) $ 4,986
Stock-based compensation expense 1,886 1,872 2,230 3,758 5,669
Amortization of purchased intangible assets 321 380 1,308 701 2,602
Depreciation of acquisition-related fixed asset step-up 4 7 19 11 50
Acquisition and asset sale related costs 21 130 775 151 775
Restructuring charges 734 266 1,000
Litigation (64 ) (64 )
Gain on asset sale (2,000 ) (2,000 )
Interest expense, net 80 64 22 144 69
Provision (benefit) for income taxes (451 ) (167 ) 626 (618 ) 1,667
Depreciation expense   6,794     5,798     4,357     12,592     8,485  
Adjusted EBITDA $ 48   $ (5,236 ) $ 12,013   $ (5,188 ) $ 24,303  
Adjusted EBITDA as a % of revenue 0.1 % (7.3 )% 12.1 % (3.6 )% 12.3 %
 
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
GAAP basic net income (loss) per share $ (0.22 ) $ (0.27 ) $ 0.06   $ (0.49 ) $ 0.12  
GAAP diluted net income (loss) per share $ (0.22 ) $ (0.27 ) $ 0.06   $ (0.49 ) $ 0.11  
Non-GAAP basic net income (loss) per share $ (0.15 ) $ (0.25 ) $ 0.17   $ (0.40 ) $ 0.33  
Non-GAAP diluted net income (loss) per share $ (0.15 ) $ (0.25 ) $ 0.15   $ (0.40 ) $ 0.31  
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE   43,219     42,615     41,603     42,919     41,362  
SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE   43,219     42,615     44,320     42,919     44,042  
SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE   43,219     42,615     45,393     42,919     45,246  
 

Source: NeoPhotonics Corporation

NeoPhotonics Corporation
Sandra Waechter, +1-408-895-6086
Interim Chief Financial Officer
ir@neophotonics.com
or
Sapphire Investor Relations, LLC
Erica Mannion, +1-617-542-6180
Investor Relations
ir@neophotonics.com