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NeoPhotonics Reports First Quarter 2020 Financial Results
  • Revenue of $97.4 million for the quarter, up 23% year-over-year
  • Gross Margin was 30.5%, nearly 11 percentage points higher year-over-year

SAN JOSE, Calif.--(BUSINESS WIRE)--Apr. 30, 2020-- NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of advanced hybrid photonic integrated circuit-based modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its first quarter ended March 31, 2020.

“We are pleased to deliver another profitable quarter, notably through our seasonally low first quarter, in spite of supply chain risks related to the pandemic,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “As we look forward, the industry continues to move in our direction with higher and higher speed over distance requirements, which are satisfied by our ultra-narrow linewidth lasers, high baud rate coherent components and our Coherent pluggable DCO modules utilizing these leading optical components. Needless to say, we are optimistic about our future,” concluded Mr. Jenks.

First Quarter Summary

  • Revenue was $97.4 million, down 6% quarter-over-quarter and up 23% year-over-year
  • Gross margin was 30.5%, up from 30.2% in the prior quarter and from 19.8% in the prior year
  • Non-GAAP Gross margin was 31.2%, up from 30.9% in the prior quarter and up from 22.4% in the prior year
  • Diluted net income per share was $0.12, in comparison to a net income per share of $0.04 in the prior quarter and to a net loss per share of $0.30 in the same period last year
  • Non-GAAP diluted net income per share was $0.17, up from $0.10 in the prior quarter and up from a net loss of $0.19 in the same period last year
  • Cash generated from operations was $24.9 million, up from $16.3 million in the prior quarter
  • Adjusted EBITDA was $17.8 million, up from $12.5 million in the prior quarter and up from a loss of $0.8 million in the same period last year

Non-GAAP results in the first quarter of 2020 exclude $2.5 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 March 31, 2020 cash and cash equivalents, short-term investments and restricted cash, together totaled $109.5 million, up $20.4 million compared to December 31, 2019. Restricted cash as of March 31, 2020 was $10.9 million.

Outlook for the Quarter Ending June 30, 2020

 

GAAP

Non-GAAP

Revenue

$94 to $102 million

Gross Margin

29% to 33%

30% to 34%

Operating Expenses

$27 to $28 million

$24 to $25 million

Earnings per share

$0.02 net loss to $0.08 net profit

$0.05 to $0.15 net profit

This outlook includes approximately $10 million of Covid-19 pandemic related impact to Q2 revenue, reflecting identified supply chain risks.

The non-GAAP outlook for the second quarter of 2020 excludes the expected impact of stock-based compensation expense of approximately $3.3 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, April 30, 2020 at 4:30 PM Eastern Time (1:30 PM Pacific Time). The call will be available, live, to interested parties by dialing +1-888-204-4368. For international callers, please dial +1-323-994-2093. The Conference ID number is 1041932. 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 developer and manufacturer of lasers and optoelectronic solutions that transmit, receive and switch high-speed digital optical signals for Cloud and hyper-scale data center internet content provider and telecom networks. The Company’s products enable cost-effective, high-speed over distance data transmission and efficient allocation of bandwidth in optical 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.

Legal Notice Regarding Forward-Looking Statements

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 impacts of the Covid-19 pandemic; possible reduction in or volatility of customer orders or delays in shipments of products to customers; 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; 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; 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/A for the year ended December 31, 2019. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

©2020 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

 

 

Mar 31, 2020

 

Dec 31, 2019

 

 

 

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

90,905

 

 

$

70,467

 

Short-term investments

 

7,662

 

 

7,638

 

Restricted cash

 

10,932

 

 

10,972

 

Accounts receivable, net

 

61,663

 

 

68,890

 

Inventories

 

46,146

 

 

46,930

 

Prepaid expenses and other current assets

 

26,178

 

 

25,851

 

Total current assets

 

243,486

 

 

230,748

 

Property, plant and equipment, net

 

76,293

 

 

81,133

 

Operating lease right-of-use assets

 

15,128

 

 

15,603

 

Purchased intangible assets, net

 

1,953

 

 

2,151

 

Goodwill

 

1,115

 

 

1,115

 

Other long-term assets

 

3,781

 

 

3,929

 

Total assets

 

$

341,756

 

 

$

334,679

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

58,283

 

 

$

58,554

 

Current portion of long-term debt

 

3,066

 

 

3,044

 

Accrued and other current liabilities

 

48,710

 

 

47,481

 

Total current liabilities

 

110,059

 

 

109,079

 

Long-term debt, net of current portion

 

37,791

 

 

39,237

 

Operating lease liabilities, noncurrent

 

15,998

 

 

16,543

 

Other noncurrent liabilities

 

10,670

 

 

9,614

 

Total liabilities

 

174,518

 

 

174,473

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock

 

122

 

 

121

 

Additional paid-in capital

 

585,198

 

 

582,504

 

Accumulated other comprehensive loss

 

(9,841

)

 

(7,871

)

Accumulated deficit

 

(408,241

)

 

(414,548

)

Total stockholders’ equity

 

167,238

 

 

160,206

 

Total liabilities and stockholders’ equity

 

$

341,756

 

 

$

334,679

 

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

 

 

 

Three Months Ended

 

 

Mar. 31, 2020

 

Dec. 31, 2019

 

Mar. 31, 2019

Revenue

 

$

97,401

 

 

$

103,356

 

 

$

79,366

 

Cost of goods sold (1)

 

67,675

 

 

72,154

 

 

63,629

 

Gross profit

 

29,726

 

 

31,202

 

 

15,737

 

Gross margin

 

30.5

%

 

30.2

%

 

19.8

%

Operating expenses:

 

 

 

 

 

 

Research and development (1)

 

11,884

 

 

15,470

 

 

14,683

 

Sales and marketing (1)

 

3,659

 

 

4,030

 

 

4,603

 

General and administrative (1)

 

6,789

 

 

7,429

 

 

7,753

 

Amortization of purchased intangible assets

 

 

 

 

 

119

 

Asset sale related costs

 

12

 

 

9

 

 

329

 

Restructuring charges

 

 

 

 

 

179

 

Gain on asset sale

 

 

 

(86

)

 

 

Total operating expenses

 

22,344

 

 

26,852

 

 

27,666

 

Income (loss) from operations

 

7,382

 

 

4,350

 

 

(11,929

)

Interest income

 

98

 

 

83

 

 

99

 

Interest expense

 

(378

)

 

(447

)

 

(493

)

Other income (expense), net

 

1,198

 

 

(1,810

)

 

(1,598

)

Total interest and other income (expense), net

 

918

 

 

(2,174

)

 

(1,992

)

Income (loss) before income taxes

 

8,300

 

 

2,176

 

 

(13,921

)

Income tax provision

 

(1,993

)

 

(107

)

 

(170

)

Net income (loss)

 

$

6,307

 

 

$

2,069

 

 

$

(14,091

)

Basic net income (loss) per share

 

$

0.13

 

 

$

0.04

 

 

$

(0.30

)

Diluted net income (loss) per share

 

$

0.12

 

 

$

0.04

 

 

$

(0.30

)

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

 

48,615

 

 

48,358

 

 

46,414

 

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

 

50,617

 

 

50,238

 

 

46,414

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Cost of goods sold

 

$

537

 

 

$

593

 

 

$

601

 

Research and development

 

758

 

 

755

 

 

881

 

Sales and marketing

 

530

 

 

559

 

 

678

 

General and administrative

 

693

 

 

1,255

 

 

1,178

 

Total stock-based compensation expense

 

$

2,518

 

 

$

3,162

 

 

$

3,338

 

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

 

 

Mar. 31, 2020

 

Dec. 31, 2019

 

Mar. 31, 2019

NON-GAAP GROSS PROFIT:

 

 

 

 

 

 

GAAP gross profit

 

$

29,726

 

 

$

31,202

 

 

$

15,737

 

Stock-based compensation expense

 

537

 

 

593

 

 

601

 

Amortization of purchased intangible assets

 

184

 

 

184

 

 

184

 

Depreciation of acquisition-related fixed asset step-up

 

(12

)

 

(66

)

 

(66

)

Accelerated depreciation

 

 

 

 

 

1,315

 

Non-GAAP gross profit

 

$

30,435

 

 

$

31,913

 

 

$

17,771

 

Non-GAAP gross margin as a % of revenue

 

31.2

%

 

30.9

%

 

22.4

%

 

 

 

 

 

 

 

NON-GAAP TOTAL OPERATING EXPENSES:

 

 

 

 

 

 

GAAP total operating expenses

 

$

22,344

 

 

$

26,852

 

 

$

27,666

 

Stock-based compensation expense

 

(1,981

)

 

(2,569

)

 

(2,737

)

Amortization of purchased intangible assets

 

 

 

 

 

(119

)

Depreciation of acquisition-related fixed asset step-up

 

(29

)

 

(67

)

 

(66

)

Asset sale related costs

 

(12

)

 

(9

)

 

(329

)

Restructuring charges

 

 

 

 

 

(179

)

Gain on asset sale

 

 

 

86

 

 

 

Non-GAAP total operating expenses

 

$

20,322

 

 

$

24,293

 

 

$

24,236

 

Non-GAAP total operating expenses as a % of revenue

 

20.9

%

 

23.5

%

 

30.5

%

 

 

 

 

 

 

 

NON-GAAP OPERATING INCOME (LOSS):

 

 

 

 

 

 

GAAP income (loss) from operations

 

$

7,382

 

 

$

4,350

 

 

$

(11,929

)

Stock-based compensation expense

 

2,518

 

 

3,162

 

 

3,338

 

Amortization of purchased intangible assets

 

184

 

 

184

 

 

303

 

Depreciation of acquisition-related fixed asset step-up

 

17

 

 

1

 

 

 

Asset sale related costs

 

12

 

 

9

 

 

329

 

Accelerated depreciation

 

 

 

 

 

1,315

 

Restructuring charges

 

 

 

 

 

179

 

Gain on asset sale

 

 

 

(86

)

 

 

Non-GAAP income (loss) from operations

 

$

10,113

 

 

$

7,620

 

 

$

(6,465

)

Non-GAAP operating margin as a % of revenue

 

10.4

%

 

7.4

%

 

(8.1

)%

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

 

 

Mar. 31, 2020

 

Dec. 31, 2019

 

Mar. 31, 2019

NON-GAAP NET INCOME (LOSS):

 

 

 

 

 

 

GAAP net income (loss)

 

$

6,307

 

 

$

2,069

 

 

$

(14,091

)

Stock-based compensation expense

 

2,518

 

 

3,162

 

 

3,338

 

Amortization of purchased intangible assets

 

184

 

 

184

 

 

303

 

Depreciation of acquisition-related fixed asset step-up

 

17

 

 

1

 

 

 

Asset sale related costs

 

12

 

 

9

 

 

329

 

Accelerated depreciation

 

 

 

 

 

1,315

 

Restructuring charges

 

 

 

 

 

179

 

Gain on asset sale

 

 

 

(86

)

 

 

Income tax effect of Non-GAAP adjustments

 

26

 

 

(82

)

 

(377

)

Non-GAAP net income (loss)

 

$

9,064

 

 

$

5,257

 

 

$

(9,004

)

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

 

9.3

%

 

5.1

%

 

(11.3

)%

 

 

 

 

 

 

 

ADJUSTED EBITDA:

 

 

 

 

 

 

GAAP net income (loss)

 

$

6,307

 

 

$

2,069

 

 

$

(14,091

)

Stock-based compensation expense

 

2,518

 

 

3,162

 

 

3,338

 

Amortization of purchased intangible assets

 

184

 

 

184

 

 

303

 

Depreciation of acquisition-related fixed asset step-up

 

17

 

 

1

 

 

 

Asset sale related costs

 

12

 

 

9

 

 

329

 

Accelerated depreciation

 

 

 

 

 

1,315

 

Restructuring charges

 

 

 

 

 

179

 

Gain on asset sale

 

 

 

(86

)

 

 

Interest expense, net

 

280

 

 

364

 

 

394

 

Income tax provision

 

1,993

 

 

107

 

 

170

 

Depreciation expense

 

6,473

 

 

6,647

 

 

7,233

 

Adjusted EBITDA

 

$

17,784

 

 

$

12,457

 

 

$

(830

)

Adjusted EBITDA as a % of revenue

 

18.3

%

 

12.1

%

 

(1.0

)%

 

 

 

 

 

 

 

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

GAAP basic net income (loss) per share

 

$

0.13

 

 

$

0.04

 

 

$

(0.30

)

GAAP diluted net income (loss) per share

 

$

0.12

 

 

$

0.04

 

 

$

(0.30

)

Non-GAAP basic net income (loss) per share

 

$

0.19

 

 

$

0.11

 

 

$

(0.19

)

Non-GAAP diluted net income (loss) per share

 

$

0.17

 

 

$

0.10

 

 

$

(0.19

)

 

 

 

 

 

 

 

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

 

48,615

 

 

48,358

 

 

46,414

 

SHARES USED TO COMPUTE GAAP DILUTED NET INCOME

(LOSS) PER SHARE

 

50,617

 

 

50,238

 

 

46,414

 

SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME

(LOSS) PER SHARE

 

52,406

 

 

52,277

 

 

46,414

 

 

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

Source: NeoPhotonics Corporation