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NeoPhotonics Reports Second Quarter 2018 Financial Results
  • Revenue of $81.1 million for the quarter
  • High Speed Products increased to 86% of total revenue for the quarter

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 6, 2018-- NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and data center applications, today announced financial results for its second quarter ended June 30, 2018.

“In the second quarter, NeoPhotonics delivered strong results with revenue of $81 million, coming in above the high end of our outlook range and representing 18% sequential growth and 11% growth over the same period last year. Sequential growth outside of China was 30% and the result of very strong Data Center Interconnect and Metro deployments by our key customers in the Americas and EMEA,” said Tim Jenks, NeoPhotonics Chairman and CEO. “We met our key financial metrics for the quarter and with our new product traction and increasing momentum in our core markets, we are optimistic for continued improvement.”

Second Quarter Summary

  • Revenue was $81.1 million, up 18% quarter-over-quarter and 11% year-over-year
  • Gross margin was 19.1%, compared to 13.4% in the prior quarter
  • Non-GAAP Gross margin was 20.1%, compared to 14.7% in the prior quarter
  • Net loss was $10.5 million, compared to a net loss of $18.2 million in the prior quarter
  • Non-GAAP net loss was $6.3 million, compared to a net loss of $14.6 million in the prior quarter
  • Diluted net loss per share was $0.24, in comparison to a net loss of $0.41 per share in the prior quarter
  • Non-GAAP diluted net loss per share was $0.14, compared to a net loss of $0.33 in the prior quarter
  • Adjusted EBITDA was $3.0 million, compared to negative $5.5 million in the prior quarter

Non-GAAP results in the second quarter of 2018 exclude $3.1 million of stock-based compensation expense, $0.3 million of amortization of acquisition-related intangibles 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, 2018, cash and cash equivalents, short-term investments and restricted cash, together totaled $67.6 million, compared to $86.9 million at March 31, 2018, reflecting debt repayments of $18.6 million in the second quarter. Restricted cash as of June 30, 2018 was $6.8 million, compared to $2.7 million as of March 31, 2018.

 

Outlook for the Quarter Ending September 30, 2018

 
    GAAP   Non-GAAP
Revenue   $79 to $84 million
Gross Margin   19% to 23%   20% to 24%
Operating Expenses   $25 to $26 million   $22 to $23 million
Earnings per share   $0.27 to $0.17 net loss   $0.17 to $0.07 net loss
   

The Non-GAAP outlook for the third quarter of 2018 excludes the expected impact of stock-based compensation expense of approximately $3.9 million, of which $0.6 million is estimated for cost of goods sold, and the impact of expected amortization of intangibles of approximately $0.3 million.

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, Monday, August 6, 2018 at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing 800-263-0877. For international callers, please dial +1-323-794-2094. The Conference ID number is 1980911. 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, and the Company’s market position. 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; potential governmental trade actions; 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; volatility in utilization of manufacturing operations and manufacturing 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 of assets and related product lines; challenges involving integration of acquired businesses and utilization of acquired technology; 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, 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.

©2018 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,
2018

Dec. 31,
2017

ASSETS
Current assets:
Cash and cash equivalents $ 48,383 $ 78,906
Short-term investments 12,401 12,311
Restricted cash 6,839 2,658
Accounts receivable, net 77,316 67,229
Inventories, net 60,947 67,301
Prepaid expenses and other current assets   30,239     36,235  
Total current assets 236,125 264,640
Property, plant and equipment, net 115,710 127,565
Purchased intangible assets, net 3,657 4,294
Goodwill 1,115 1,115
Other long-term assets   3,199     5,339  
Total assets $ 359,806   $ 402,953  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 64,085 $ 69,017
Notes payable and short-term borrowing 18,929 35,607
Current portion of long-term debt 2,868 6,005
Accrued and other current liabilities   44,288     43,242  
Total current liabilities 130,170 153,871
Long-term debt, net of current portion 46,152 40,556
Other noncurrent liabilities   14,026     14,075  
Total liabilities   190,348     208,502  
 
Stockholders' equity:
Common stock 112 111
Additional paid-in capital 553,945 545,953
Accumulated other comprehensive income (loss) (1,981 ) 398
Accumulated deficit   (382,618 )   (352,011 )
Total stockholders' equity   169,458     194,451  
Total liabilities and stockholders' equity $ 359,806   $ 402,953  
 
   
NeoPhotonics Corporation
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages and per share data)
     
 
Three Months Ended Six Months Ended

Jun. 30,
2018

Mar. 31,
2018

Jun. 30,
2017

Jun. 30,
2018

Jun. 30,
2017

 
Revenue $ 81,102 $ 68,586 $ 73,214 $ 149,688 $ 144,902
Cost of goods sold (1)   65,630     59,404     56,437     125,034     109,622  
Gross profit 15,472 9,182 16,777 24,654 35,280
Gross margin 19.1 % 13.4 % 22.9 % 16.5 % 24.3 %
Operating expenses:
Research and development (1) 13,243 13,888 14,206 27,131 29,750
Sales and marketing (1) 3,891 4,124 3,910 8,015 8,842
General and administrative (1) 7,267 7,650 7,729 14,917 19,155
Amortization of purchased intangible assets 120 119 118 239 236
Asset sale related costs 79 14 21 93 151
Restructuring charges 622 31 494 653 721
Gain on asset sale   -     -     -     -     (2,000 )
Total operating expenses   25,222     25,826     26,478     51,048     56,855  
Loss from operations (9,750 ) (16,644 ) (9,701 ) (26,394 ) (21,575 )
Interest income 122 93 31 215 104
Interest expense (759 ) (708 ) (111 ) (1,467 ) (248 )
Other income (expense), net   930     (349 )   (11 )   581     238  
Total interest and other income (expense), net   293     (964 )   (91 )   (671 )   94  
Loss before income taxes (9,457 ) (17,608 ) (9,792 ) (27,065 ) (21,481 )
Income tax (provision) benefit   (1,080 )   (638 )   451     (1,718 )   618  
Net loss $ (10,537 ) $ (18,246 ) $ (9,341 ) $ (28,783 ) $ (20,863 )
 
Basic net loss per share $ (0.24 ) $ (0.41 ) $ (0.22 ) $ (0.65 ) $ (0.49 )
Diluted net loss per share $ (0.24 ) $ (0.41 ) $ (0.22 ) $ (0.65 ) $ (0.49 )
Weighted average shares used to compute basic net loss per share   44,665     44,259     43,219     44,463     42,919  
Weighted average shares used to compute diluted net loss per share   44,665     44,259     43,219     44,463     42,919  
 
(1) Includes stock-based compensation expense as follows for the periods presented:
Cost of goods sold $ 629 $ 650 $ 324 $ 1,279 $ 471
Research and development 829 773 511 1,602 1,173
Sales and marketing 642 938 313 1,580 777
General and administrative   1,039     986     738     2,025     1,337  
Total stock-based compensation expense $ 3,139   $ 3,347   $ 1,886   $ 6,486   $ 3,758  
 
 
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,
2018

Mar. 31,
2018

Jun. 30,
2017

Jun. 30,
2018

Jun. 30,
2017

 
NON-GAAP GROSS PROFIT:
GAAP gross profit $ 15,472 $ 9,182 $ 16,777 $ 24,654 $ 35,280
Stock-based compensation expense 629 650 324 1,279 471
Amortization of purchased intangible assets 184 203 203 387 465
Depreciation of acquisition-related fixed asset step-up (73 ) (69 ) (68 ) (142 ) (134 )
Restructuring charges   54     92     240     146     279  
Non-GAAP gross profit $ 16,266   $ 10,058   $ 17,476   $ 26,324   $ 36,361  
Non-GAAP gross margin as a % of revenue 20.1 % 14.7 % 23.9 % 17.6 % 25.1 %
 
NON-GAAP TOTAL OPERATING EXPENSES:
GAAP total operating expenses $ 25,222 $ 25,826 $ 26,478 $ 51,048 $ 56,855
Stock-based compensation expense (2,510 ) (2,697 ) (1,562 ) (5,207 ) (3,287 )
Amortization of purchased intangible assets (120 ) (119 ) (118 ) (239 ) (236 )
Depreciation of acquisition-related fixed asset step-up (68 ) (67 ) (72 ) (135 ) (145 )
Asset sale related costs (79 ) (14 ) (21 ) (93 ) (151 )
Restructuring charges (622 ) (31 ) (494 ) (653 ) (721 )
Litigation - - - - 64
Gain on asset sale   -     -     -     -     2,000  
Non-GAAP total operating expenses $ 21,823   $ 22,898   $ 24,211   $ 44,721   $ 54,379  
Non-GAAP total operating expenses as a % of revenue 26.9 % 33.4 % 33.1 % 29.9 % 37.5 %
 
NON-GAAP OPERATING LOSS:
GAAP loss from operations $ (9,750 ) $ (16,644 ) $ (9,701 ) $ (26,394 ) $ (21,575 )
Stock-based compensation expense 3,139 3,347 1,886 6,486 3,758
Amortization of purchased intangible assets 304 322 321 626 701
Depreciation of acquisition-related fixed asset step-up (5 ) (2 ) 4 (7 ) 11
Asset sale related costs 79 14 21 93 151
Restructuring charges 676 123 734 799 1,000
Litigation - - - - (64 )
Gain on asset sale   -     -     -     -     (2,000 )
Non-GAAP loss from operations $ (5,557 ) $ (12,840 ) $ (6,735 ) $ (18,397 ) $ (18,018 )
Non-GAAP operating margin as a % of revenue (6.9 )% (18.7 )% (9.2 )% (12.3 )% (12.4 )%
 
 
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,
2018

Mar. 31,
2018

Jun. 30,
2017

Jun. 30,
2018

Jun. 30,
2017

NON-GAAP NET LOSS:
GAAP net loss $ (10,537 ) $ (18,246 ) $ (9,341 ) $ (28,783 ) $ (20,863 )
Stock-based compensation expense 3,139 3,347 1,886 6,486 3,758
Amortization of purchased intangible assets 304 322 321 626 701
Depreciation of acquisition-related fixed asset step-up (5 ) (2 ) 4 (7 ) 11
Asset sale related costs 79 14 21 93 151
Restructuring charges 676 123 734 799 1,000
Litigation - - - - (64 )
Gain on asset sale - - - - (2,000 )
Income tax effect of Non-GAAP adjustments   42     (126 )   (192 )   (84 )   (3 )
Non-GAAP net loss $ (6,302 ) $ (14,568 ) $ (6,567 ) $ (20,870 ) $ (17,309 )
Non-GAAP net loss as a % of revenue (7.8 )% (21.2 )% (9.0 )% (13.9 )% (11.9 )%
 
ADJUSTED EBITDA:
GAAP net loss $ (10,537 ) $ (18,246 ) $ (9,341 ) $ (28,783 ) $ (20,863 )
Stock-based compensation expense 3,139 3,347 1,886 6,486 3,758
Amortization of purchased intangible assets 304 322 321 626 701
Depreciation of acquisition-related fixed asset step-up (5 ) (2 ) 4 (7 ) 11
Asset sale related costs 79 14 21 93 151
Restructuring charges 676 123 734 799 1,000
Litigation - - - - (64 )
Gain on asset sale - - - - (2,000 )
Interest expense, net 637 615 80 1,252 144
Provision (benefit) for income taxes 1,080 638 (451 ) 1,718 (618 )
Depreciation expense   7,607     7,686     6,794     15,293     12,592  
Adjusted EBITDA $ 2,980   $ (5,503 ) $ 48   $ (2,523 ) $ (5,188 )
Adjusted EBITDA as a % of revenue 3.7 % (8.0 )% 0.1 % (1.7 )% (3.6 )%
 
BASIC AND DILUTED NET LOSS PER SHARE:
GAAP basic net loss per share $ (0.24 ) $ (0.41 ) $ (0.22 ) $ (0.65 ) $ (0.49 )
GAAP diluted net loss per share $ (0.24 ) $ (0.41 ) $ (0.22 ) $ (0.65 ) $ (0.49 )
Non-GAAP basic net loss per share $ (0.14 ) $ (0.33 ) $ (0.15 ) $ (0.47 ) $ (0.40 )
Non-GAAP diluted net loss per share $ (0.14 ) $ (0.33 ) $ (0.15 ) $ (0.47 ) $ (0.40 )
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET LOSS PER SHARE   44,665     44,259     43,219     44,463     42,919  
SHARES USED TO COMPUTE GAAP DILUTED NET LOSS PER SHARE   44,665     44,259     43,219     44,463     42,919  
SHARES USED TO COMPUTE NON-GAAP DILUTED NET LOSS PER SHARE   44,665     44,259     43,219     44,463     42,919  
 

Source: NeoPhotonics Corporation

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