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NeoPhotonics Reports Third Quarter 2019 Financial Results
  • Revenue of $92.4 million for the quarter, up 13% sequentially and year-over-year
  • Operating Profit of $1.3 million, non-GAAP Operating Profit of $4.4 million

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 31, 2019-- 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 third quarter ended September 30, 2019.

“Solid execution, strong customer demand, and cost reduction combined for a profitable quarter for NeoPhotonics,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “Despite the trade tensions, we believe the macro trends of the industry favor our core capabilities of delivering the highest performance products for the most demanding applications,” concluded Mr. Jenks.

Third Quarter Summary

  • Revenue was $92.4 million, up 13% quarter-over-quarter and up 13% year-over-year
  • Gross margin was 28.4%, up from 19.2% in the prior quarter
  • Non-GAAP Gross margin was 29.0%, up from 25.6% in the prior quarter
  • Diluted net earnings per share was $0.05, up from a net loss of $0.16 per share in the prior quarter
  • Non-GAAP diluted net earnings per share was $0.11, up from net loss of $0.03 per share in the prior quarter
  • Cash generated from operations was $9 million, up from $0.7 million in the prior quarter
  • Adjusted EBITDA was $14.2 million, up from $6.8 million in the prior quarter

Non-GAAP results in the third quarter of 2019 exclude $3.0 million of stock-based compensation expense and $0.2 million of amortization of acquisition-related intangibles. 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 September 30, 2019, cash and cash equivalents, short-term investments and restricted cash, together totaled $80 million, up $6 million compared to June 30, 2019.

Outlook for the Quarter Ending December 31, 2019

GAAP

Non-GAAP

Revenue

$94 to $100 million

Gross Margin

27% to 31%

28% to 32%

Operating Expenses

$26 +/- $0.5 million

$23 +/- $0.5 million

Earnings per share

($0.02) to $0.08

$0.04 to $0.14

The non-GAAP outlook for the fourth quarter of 2019 excludes the expected impact of stock-based compensation expense of approximately $3.5 million, of which $0.6 million is estimated for cost of goods sold, and the impact of expected amortization of intangibles of approximately $0.2 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, Thursday, October 31, 2019 at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing +1-800-367-2403. For international callers, please dial +1-334-777-6978. The Conference ID number is 6277959. Please dial into the conference call 5-10 minutes prior to the scheduled start time.

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 website 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 9001:2015 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; potential governmental trade actions; possible disruptions in demand for the Company’s products due to industry developments; changes in demand for the Company's products; the impact of competitive products and pricing and alternative technological advances; the timely and successful development and market acceptance of new products and upgrades to existing products; changes in economic and industry projections; and a decline in general conditions in the telecommunications equipment industry or the world economy generally. 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, 2018. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

NeoPhotonics Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

As of

Sep. 30, 2019

Dec. 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

61,396

$

58,185

Short-term investments

7,607

7,481

Restricted cash

10,827

11,053

Accounts receivable, net

65,245

74,751

Inventories

48,668

52,159

Assets held for sale

2,971

Prepaid expenses and other current assets

23,921

26,605

Total current assets

217,664

233,205

Property, plant and equipment, net

85,125

100,090

Operating lease right-of-use assets

16,037

Purchased intangible assets, net

2,315

3,018

Goodwill

1,115

1,115

Other long-term assets

3,088

3,148

Total assets

$

325,344

$

340,576

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

58,306

$

58,403

Notes payable and short-term borrowing

4,795

Current portion of long-term debt

3,054

2,897

Accrued and other current liabilities

42,414

50,288

Total current liabilities

103,774

116,383

Long-term debt, net of current portion

44,771

50,454

Operating lease liabilities, noncurrent

17,054

Other noncurrent liabilities

9,748

13,499

Total liabilities

175,347

180,336

Stockholders’ equity:

Common stock

120

116

Additional paid-in capital

577,088

564,722

Accumulated other comprehensive loss

(10,594

)

(7,126

)

Accumulated deficit

(416,617

)

(397,472

)

Total stockholders’ equity

149,997

160,240

Total liabilities and stockholders’ equity

$

325,344

$

340,576

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

Three Months Ended

Nine Months Ended

Sep. 30, 2019

Jun. 30, 2019

Sep. 30, 2018

Sep. 30, 2019

Sep. 30, 2018

Revenue

$

92,392

$

81,690

$

81,748

$

253,448

$

231,436

Cost of goods sold (1)

66,193

66,015

62,815

195,837

187,849

Gross profit

26,199

15,675

18,933

57,611

43,587

Gross margin

28.4

%

19.2

%

23.2

%

22.7

%

18.8

%

Operating expenses:

Research and development (1)

13,688

13,793

13,177

42,164

40,308

Sales and marketing (1)

3,832

3,623

4,351

12,058

12,366

General and administrative (1)

7,403

7,174

8,592

22,330

23,509

Amortization of purchased intangible assets

118

119

357

Asset sale related costs

12

47

251

388

344

Restructuring charges

3

79

1,133

261

1,786

Gain on asset sale

(817

)

(817

)

Total operating expenses

24,938

23,899

27,622

76,503

78,670

Income (loss) from operations

1,261

(8,224

)

(8,689

)

(18,892

)

(35,083

)

Interest income

95

99

85

293

300

Interest expense

(483

)

(496

)

(540

)

(1,472

)

(2,007

)

Other income (expense), net

2,960

1,090

1,310

2,452

1,891

Total interest and other income (expense), net

2,572

693

855

1,273

184

Income (loss) before income taxes

3,833

(7,531

)

(7,834

)

(17,619

)

(34,899

)

Income tax benefit (provision)

(1,561

)

205

(291

)

(1,526

)

(2,009

)

Net income (loss)

$

2,272

$

(7,326

)

$

(8,125

)

$

(19,145

)

$

(36,908

)

Basic net income (loss) per share

$

0.05

$

(0.16

)

$

(0.18

)

$

(0.41

)

$

(0.82

)

Diluted net income (loss) per share

$

0.05

$

(0.16

)

$

(0.18

)

$

(0.41

)

$

(0.82

)

Weighted average shares used to compute basic net income (loss) per share

47,666

46,754

45,476

46,949

44,804

Weighted average shares used to compute diluted net income (loss) per share

48,615

46,754

45,476

46,949

44,804

(1) Includes stock-based compensation expense as follows for the periods presented:

Cost of goods sold

$

441

$

609

$

553

$

1,651

$

1,832

Research and development

715

787

1,016

2,383

2,618

Sales and marketing

575

599

931

1,852

2,511

General and administrative

1,220

1,010

1,541

3,408

3,566

Total stock-based compensation expense

$

2,951

$

3,005

$

4,041

$

9,294

$

10,527

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

Nine Months Ended

Sep. 30, 2019

Jun. 30, 2019

Sep. 30, 2018

Sep. 30, 2019

Sep. 30, 2018

NON-GAAP GROSS PROFIT:

GAAP gross profit

$

26,199

$

15,675

$

18,933

$

57,611

$

43,587

Stock-based compensation expense

441

609

553

1,651

1,832

Amortization of purchased intangible assets

185

184

185

553

572

Depreciation of acquisition-related fixed asset step-up

(66

)

(66

)

(71

)

(198

)

(213

)

End-of-life related inventory write-down

3,553

3,553

Accelerated depreciation

950

2,265

Restructuring charges

22

168

Non-GAAP gross profit

$

26,759

$

20,905

$

19,622

$

65,435

$

45,946

Non-GAAP gross margin as a % of revenue

29.0

%

25.6

%

24.0

%

25.8

%

19.9

%

NON-GAAP TOTAL OPERATING EXPENSES:

GAAP total operating expenses

$

24,938

$

23,899

$

27,622

$

76,503

$

78,670

Stock-based compensation expense

(2,510

)

(2,396

)

(3,488

)

(7,643

)

(8,695

)

Amortization of purchased intangible assets

(118

)

(119

)

(357

)

Depreciation of acquisition-related fixed asset step-up

(66

)

(67

)

(65

)

(199

)

(200

)

Asset sale related costs

(12

)

(47

)

(252

)

(388

)

(345

)

Restructuring charges

(3

)

(79

)

(1,133

)

(261

)

(1,786

)

Litigation settlement

(450

)

(450

)

Gain on asset sale

817

817

Non-GAAP total operating expenses

$

22,347

$

22,127

$

22,116

$

68,710

$

66,837

Non-GAAP total operating expenses as a % of revenue

24.2

%

27.1

%

27.1

%

27.1

%

28.9

%

NON-GAAP OPERATING INCOME (LOSS):

GAAP income (loss) from operations

$

1,261

$

(8,224

)

$

(8,689

)

$

(18,892

)

$

(35,083

)

Stock-based compensation expense

2,951

3,005

4,041

9,294

10,527

Amortization of purchased intangible assets

185

184

303

672

929

Depreciation of acquisition-related fixed asset step-up

1

(6

)

1

(13

)

Asset sale related costs

12

47

252

388

345

End-of-life related inventory write-down

3,553

3,553

Accelerated depreciation

950

2,265

Restructuring charges

3

79

1,155

261

1,954

Litigation settlement

450

450

Gain on asset sale

(817

)

(817

)

Non-GAAP income (loss) from operations

$

4,412

$

(1,222

)

$

(2,494

)

$

(3,275

)

$

(20,891

)

Non-GAAP operating margin as a % of revenue

4.8

%

(1.5

)%

(3.1

)%

(1.3

)%

(9.0

)%

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

Nine Months Ended

Sep. 30, 2019

Jun. 30, 2019

Sep. 30, 2018

Sep. 30, 2019

Sep. 30, 2018

NON-GAAP NET INCOME (LOSS):

GAAP net income (loss)

$

2,272

$

(7,326

)

$

(8,125

)

$

(19,145

)

$

(36,908

)

Stock-based compensation expense

2,951

3,005

4,041

9,294

10,527

Amortization of purchased intangible assets

185

184

303

672

929

Depreciation of acquisition-related fixed asset step-up

1

(6

)

1

(13

)

Asset sale related costs

12

47

252

388

345

End-of-life related inventory write-down

3,553

3,553

Accelerated depreciation

950

2,265

Restructuring charges

3

79

1,155

261

1,954

Litigation settlement

450

450

Gain on asset sale

(817

)

(817

)

Income tax effect of Non-GAAP adjustments

(14

)

(895

)

(138

)

(1,286

)

(222

)

Non-GAAP net income (loss)

$

5,409

$

(1,219

)

$

(2,068

)

$

(4,814

)

$

(22,938

)

Non-GAAP net income (loss) as a % of revenue

5.9

%

(1.5

)%

(2.5

)%

(1.9

)%

(9.9

)%

ADJUSTED EBITDA:

GAAP net income (loss)

$

2,272

$

(7,326

)

$

(8,125

)

$

(19,145

)

$

(36,908

)

Stock-based compensation expense

2,951

3,005

4,041

9,294

10,527

Amortization of purchased intangible assets

185

184

303

672

929

Depreciation of acquisition-related fixed asset step-up

1

(6

)

1

(13

)

Asset sale related costs

12

47

252

388

345

End-of-life related inventory write-down

3,553

3,553

Accelerated depreciation

950

2,265

Restructuring charges

3

79

1,155

261

1,954

Litigation settlement

450

450

Gain on asset sale

(817

)

(817

)

Interest expense, net

388

397

455

1,179

1,707

Income tax benefit (provision)

1,561

(205

)

291

1,526

2,009

Depreciation expense

6,829

6,956

7,343

21,018

22,636

Adjusted EBITDA

$

14,201

$

6,824

$

6,159

$

20,195

$

3,636

Adjusted EBITDA as a % of revenue

15.4

%

8.4

%

7.5

%

8.0

%

1.6

%

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

GAAP basic net income (loss) per share

$

0.05

$

(0.16

)

$

(0.18

)

$

(0.41

)

$

(0.82

)

GAAP diluted net income (loss) per share

$

0.05

$

(0.16

)

$

(0.18

)

$

(0.41

)

$

(0.82

)

Non-GAAP basic net income (loss) per share

$

0.11

$

(0.03

)

$

(0.05

)

$

(0.10

)

$

(0.51

)

Non-GAAP diluted net income (loss) per share

$

0.11

$

(0.03

)

$

(0.05

)

$

(0.10

)

$

(0.51

)

SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE

47,666

46,754

45,476

46,949

44,804

SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE

48,615

46,754

45,476

46,949

44,804

SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE

50,051

46,754

45,476

46,949

44,804

©2019 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.

Source: NeoPhotonics Corporation

NeoPhotonics Corporation
Beth Eby, Chief Financial Officer
+1-408-895-6086
ir@neophotonics.com

Sapphire Investor Relations, LLC
Erica Mannion, Investor Relations
+1-617-542-6180
ir@neophotonics.com