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NeoPhotonics Reports Record Fourth Quarter and Fiscal Year 2015 Financial Results
  • Record Revenue of $89.1 million for the quarter; $339.4 million for the year
  • Non-GAAP Gross Margin of 32.4% for the quarter; 31.5% for the year
  • Adjusted EBITDA of $11.8 million for the quarter; $43.2 million for the year
  • Non-GAAP Net income of $6.9 million for the quarter; $21.1 million for the year

SAN JOSE, Calif.--(BUSINESS WIRE)--Mar. 1, 2016-- NeoPhotonics Corporation (NYSE:NPTN), a leading designer and manufacturer of advanced hybrid photonic integrated optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks, today announced financial results for its fourth quarter and year ended December 31, 2015.

“We are pleased to report record results for the fourth quarter and the full fiscal year of 2015. For the quarter, we reported record revenue, non-GAAP gross profit and net income. And for the year we reported both record revenue and record non-GAAP earnings, making it the best year in the Company’s history,” said Tim Jenks, CEO of NeoPhotonics. “The market for 100G and beyond optical networks is growing very robustly and NeoPhotonics’ leading product positions coupled with our new product introductions for coherent transport and data center applications places us in an advantageous position for the coming year. We are currently expecting full year revenue growth for 2016 to be in the range of 15% overall,” concluded Mr. Jenks.

Fourth Quarter Summary

  • Revenue was $89.1 million, up $10.1 million, or 12.8%, from the fourth quarter of 2014, and up $5.6 million, or 6.7%, from the prior quarter
  • GAAP Gross margin was 28.2%, down from 28.7% in the fourth quarter of 2014, and down from 28.4% in the prior quarter
  • Non-GAAP Gross margin was 32.4%, up from 30.3% in the fourth quarter of 2014, and up from 29.8% in the prior quarter
  • GAAP Net income was $0.4 million, down from $1.6 million in the fourth quarter of 2014, and down from $1.4 million in the prior quarter
  • Non-GAAP Net income was $6.9 million, compared with earnings of $6.3 million in the fourth quarter of 2014, and up from $4.6 million in the prior quarter
  • GAAP Diluted earnings per share was $0.01, down from earnings of $0.05 in the fourth quarter of 2014, and down from $0.03 in the prior quarter
  • Non-GAAP Diluted earnings per share was $0.16, down from $0.19 in the fourth quarter of 2014, and up from earnings of $0.11 in the prior quarter
  • Adjusted EBITDA was $11.8 million, up from $11.6 million in the fourth quarter of 2014, and up from $10.2 million in the prior quarter
  • Non-GAAP results exclude $2.8 million of end-of-life inventory write-down charges, $1.3 million of amortization of acquisition-related intangibles, inventory and fixed asset step-up costs, $2.3 million of stock based compensation expenses and $0.5 million of acquisition-related costs

At December 31, 2015, cash and cash equivalents, short-term investments and restricted cash and investments, together totaled $102.0 million, down from $103.6 million at September 30, 2015. Restricted cash and investments at December 31, 2015 was $2.7 million, down from $3.1 million at September 30, 2015.

Annual Summary

  • Revenue in 2015 was $339.4 million, an increase of $33.3 million, or 10.9%, from $306.2 million in 2014
  • GAAP Gross margin was 29.2%, a six percentage point increase from 2014
  • Non-GAAP Gross margin was 31.5%, up 6.5 percentage points from 2014
  • GAAP Net income for the full year was $3.7 million, a major improvement from the net loss of $19.7 million in 2014
  • Non-GAAP Net income for the full year was $21.1 million, a strong improvement from the net loss of $9.2 million in 2014
  • GAAP Diluted net income per share was $0.09, compared to a diluted net loss per share of $0.61 in 2014
  • Non-GAAP Diluted net income per share was $0.53, a solid improvement from the diluted net loss per share of $0.29 in 2014
  • Adjusted EBITDA was $43.2 million, up from $12.0 million in 2014

Outlook for the Quarter Ending March 31, 2016

The Company’s expectations for the first quarter 2016 are:

  • Revenue in the range of $92 million to $98 million
  • Non-GAAP Gross margin in the range of 30% to 33%
  • Diluted earnings per share in the range of 1 cent to 10 cents, and
  • Non-GAAP diluted earnings per share in the range of 10 cents to 18 cents

The Non-GAAP outlook for the first quarter of 2016 excludes the impact of expected amortization of intangibles of approximately $1.4 million and the anticipated impact of stock-based compensation of approximately $2.8 million, of which $0.6 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, March 1, 2016, at 4:30 P.M. Eastern Time (1:30 p.m. Pacific Time). The call will be available, live, to interested parties by dialing +1 844-809-8111. For international callers, please dial +1 541-797-7255. The Conference ID number is 30757442. A live webcast will be available in the Investor Relations section of NeoPhotonics website at: www.neophotonics.com.

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

About NeoPhotonics

NeoPhotonics is a leading designer and manufacturer of advanced hybrid photonic integrated optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks. 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.

© 2016 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.

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, the Company’s market position 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: 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; economic conditions or natural disasters; volatility in utilization of manufacturing operations, supporting utility services and other 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; the Company’s reliance on a small number of customers for a substantial portion of its revenues; potential pricing pressure that may arise from changing supply or demand conditions in the industry; the impact of any previous or future acquisitions; challenges involving integration of acquired businesses and utilization of acquired technology, including the acquisition of EMCORE’s tunable laser product line and EigenLight’s precision optical power monitor business in 2015; 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, 2014 as well as the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015. 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
Dec. 31,

2015

Dec. 31,

2014

ASSETS
Current assets:
Cash and cash equivalents $ 76,088 $ 43,035
Short-term investments 23,294 -
Restricted cash and investments 2,660 5,504
Accounts receivable, net 83,161 77,597
Inventories, net 65,602 57,347
Prepaid expenses and other current assets   12,393     15,540  
Total current assets 263,198 199,023
Property, plant and equipment, net 62,618 57,657
Restricted cash and investments, non-current - 15,750
Purchased intangible assets, net 9,852 10,263
Goodwill 1,115 -
Other long-term assets   5,095     3,591  
Total assets $ 341,878   $ 286,284  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 50,620 $ 48,949
Notes payable and short-term borrowing 32,657 22,771
Current portion of long-term debt 760 2,445
Accrued and other current liabilities   27,950     22,728  
Total current liabilities 111,987 96,893
Long-term debt, net of current portion 10,759 20,891
Deferred income tax liabilities 88 1,818
Other noncurrent liabilities   7,388     7,226  
Total liabilities   130,222     126,828  
 
Stockholders' equity:
Common stock 102 82
Additional paid-in capital 511,750 456,189
Accumulated other comprehensive (loss) income (1,723 ) 5,326
Accumulated deficit   (298,473 )   (302,141 )
Total stockholders' equity   211,656     159,456  
Total liabilities and stockholders' equity $ 341,878   $ 286,284  
 
     
NeoPhotonics Corporation
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages and per share data)
   
 
Three Months Ended   Year Ended
Dec. 31,

2015

Sept 30,

2015

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

 
Revenue $ 89,123 $ 83,560 $ 78,982 $ 339,439 $ 306,177
Cost of goods sold (1)   64,013     59,788     56,296     240,358     235,059  
Gross profit 25,110 23,772 22,686 99,081 71,118

Gross margin

28.2 % 28.4 % 28.7 % 29.2 % 23.2 %
Operating expenses:
Research and development (1) 11,831 10,763 9,976 44,533 45,959
Sales and marketing (1) 4,384 3,789 3,668 15,823 13,725
General and administrative (1) 8,636 7,384 7,671 31,635 31,570
Amortization of purchased intangible assets 447 447 366 1,791 1,502
Acquisition-related costs 467 180 622 934 615
Restructuring charges - 18 158 44 662
Asset impairment charge - 368 1,130 368 1,130
Escrow settlement gain   -     -     (1,027 )   -     (4,913 )
Total operating expenses   25,765     22,949     22,564     95,128     90,250  
Income (loss) from operations   (655 )   823     122     3,953     (19,132 )
Interest income 37 31 34 121 189
Interest expense (110 ) (171 ) (332 ) (1,243 ) (1,269 )
Other income, net   1,533     1,852     2,519     3,941     3,012  
Total interest and other income, net   1,460     1,712     2,221     2,819     1,932  
 
Income (loss) before income taxes 805 2,535 2,343 6,772 (17,200 )
Provision for income taxes   (406 )   (1,157 )   (758 )   (3,104 )   (2,519 )
Net income (loss) $ 399   $ 1,378   $ 1,585   $ 3,668   $ (19,719 )
Basic net income (loss) per share $ 0.01   $ 0.03   $ 0.05   $ 0.10   $ (0.61 )
Diluted net income (loss) per share $ 0.01   $ 0.03   $ 0.05   $ 0.09   $ (0.61 )
Weighted averages shares used to compute basic net income (loss) per share   40,739     40,367     32,640     37,421     32,109  
Weighted averages shares used to compute diluted net income (loss) per share   42,668     42,217     32,710     38,686     32,109  
(1) Includes stock-based compensation expense as follows for the periods presented:
Cost of goods sold $ 216 $ 339 $ 160 $ 1,335 $ 1,148
Research and development 692 363 557 2,049 2,269
Sales and marketing 619 275 554 1,794 1,429
General and administrative   818     459     758     2,585     1,995  
Total stock-based compensation expense $ 2,345   $ 1,436   $ 2,029   $ 7,763   $ 6,841  
 
       
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 Year Ended
Dec. 31,

2015

Sept 30,

2015

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

 
NON-GAAP GROSS PROFIT:
GAAP gross profit $ 25,110 $ 23,772 $ 22,686 $ 99,081 $ 71,118
Stock-based compensation expense 216 339 160 1,335 1,148
Amortization of purchased intangible assets 837 836 696 3,349 2,833
Depreciation of acquisition-related fixed asset step-up (61 ) (55 ) 289 13 1,071
Amortization of acquisition-related inventory step-up (5 ) 31 - 182 -
End-of-life related inventory write-down 2,768 - - 2,768 -
Restructuring charges   -     -     132     125     424  
Non-GAAP gross profit $ 28,865   $ 24,923   $ 23,963   $ 106,853   $ 76,594  
Non-GAAP gross margin as a % of revenue 32.4 % 29.8 % 30.3 % 31.5 % 25.0 %
 
NON-GAAP TOTAL OPERATING EXPENSES:
GAAP Total operating expenses $ 25,765 $ 22,949 $ 22,564 $ 95,128 $ 90,250
Stock-based compensation expense (2,129 ) (1,097 ) (1,869 ) (6,428 ) (5,693 )
Amortization of purchased intangible assets (447 ) (447 ) (366 ) (1,791 ) (1,502 )
Depreciation of acquisition-related fixed asset step-up (101 ) (106 ) (272 ) (620 ) (994 )
Acquisition-related costs (467 ) (180 ) (622 ) (934 ) (615 )
Restructuring charges - (18 ) (158 ) (44 ) (662 )
Asset Impairment charges - (368 ) (1,130 ) (368 ) (1,130 )
Litigation - - - (278 ) -
Escrow settlement gain - - 1,027 - 4,913
         
Non-GAAP total operating expenses $ 22,621   $ 20,733   $ 19,174   $ 84,665   $ 84,567  
Non-GAAP total operating expenses as a % of revenue 25.4 % 24.8 % 24.3 % 24.9 % 27.6 %
 
NON-GAAP OPERATING INCOME (LOSS):
GAAP operating income (loss) $ (655 ) $ 823 $ 122 $ 3,953 $ (19,132 )
Stock-based compensation expense 2,345 1,436 2,029 7,763 6,841
Amortization of purchased intangible assets 1,284 1,283 1,063 5,140 4,335
Depreciation of acquisition-related fixed asset step-up 40 51 560 633 2,065
Amortization of acquisition-related inventory step-up (5 ) 31 - 182 -
Acquisition-related costs 467 180 622 934 615
End-of-life related inventory write-down 2,768 - - 2,768 -
Restructuring charges - 18 290 169 1,086
Asset Impairment charges - 368 1,130 368 1,130
Litigation - - - 278 -
Escrow settlement gain - - (1,027 ) - (4,913 )
        -    
Non-GAAP operating income (loss) $ 6,244   $ 4,190   $ 4,789   $ 22,188   $ (7,973 )
Non-GAAP operating margin as a % of revenue 7.0 % 5.0 % 6.1 % 6.5 % (2.6 )%
 
         
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 Year Ended
Dec. 31,

2015

Sept 30,

2015

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

NON-GAAP NET INCOME (LOSS):
GAAP net income (loss) $ 399 $ 1,378 $ 1,585 $ 3,668 $ (19,719 )
Stock-based compensation expense 2,345 1,436 2,029 7,763 6,841
Amortization of purchased intangible assets 1,284 1,283 1,063 5,140 4,335
Depreciation of acquisition-related fixed asset step-up 40 51 560 633 2,065
Amortization of acquisition-related inventory step-up (5 ) 31 - 182 -
Acquisition-related costs 467 180 622 934 615
End-of-life related inventory write-down 2,768 - - 2,768 -
Restructuring charges - 18 290 169 1,086
Asset Impairment charges - 368 1,130 368 1,130
Litigation - - - 278 -
Escrow settlement gain - - (1,027 ) - (4,913 )
Income tax effect of Non-GAAP adjustments   (375 )   (107 )   85     (840 )   (680 )
Non-GAAP net income (loss) $ 6,923   $ 4,638   $ 6,337   $ 21,063   $ (9,240 )
Non-GAAP net income (loss) as a % of revenue 7.8 % 5.6 % 8.0 % 6.2 % (3.0 )%
 
ADJUSTED EBITDA:
GAAP net income (loss) $ 399 $ 1,378 $ 1,585 $ 3,668 $ (19,719 )
Stock-based compensation expense 2,345 1,436 2,029 7,763 6,841
Amortization of purchased intangible assets 1,284 1,283 1,063 5,140 4,335
Depreciation of acquisition-related fixed asset step-up 40 51 560 633 2,065
Amortization of acquisition-related inventory step-up (5 ) 31 - 182 -
Acquisition-related costs 467 180 622 934 615
End-of-life related inventory write-down 2,768 - - 2,768 -
Restructuring charges - 18 290 169 1,086
Asset Impairment charges - 368 1,130 368 1,130
Litigation - - - 278 -
Escrow settlement gain - - (1,027 ) - (4,913 )
Interest expense, net 73 140 298 1,122 1,080
Provision for income taxes 406 1,157 758 3,104 2,519
Depreciation expense   4,040     4,131     4,277     17,102     17,003  
Adjusted EBITDA $ 11,817   $ 10,173   $ 11,585   $ 43,231   $ 12,042  
Adjusted EBITDA as a % of revenue 13.3 % 12.2 % 14.7 % 12.7 % 3.9 %
 
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
GAAP basic net income (loss) per share $ 0.01   $ 0.03   $ 0.05   $ 0.10   $ (0.61 )
GAAP diluted net income (loss) per share $ 0.01   $ 0.03   $ 0.05   $ 0.09   $ (0.61 )
Non-GAAP basic net income (loss) per share $ 0.17   $ 0.11   $ 0.19   $ 0.56   $ (0.29 )
Non-GAAP diluted net income (loss) per share $ 0.16   $ 0.11   $ 0.19   $ 0.53   $ (0.29 )
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE   40,739     40,367     32,640     37,421     32,109  
SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE   42,668     42,217     32,710     38,686     32,109  
SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE   44,289     42,914     32,821     39,445     32,109  
 

Source: NeoPhotonics Corporation

NeoPhotonics Corporation
Clyde R. Wallin, +1-408-678-1852
Chief Financial Officer
ray.wallin@neophotonics.com
or
Sapphire Investor Relations, LLC
Erica Mannion, +1-617-542-6180
Investor Relations
ir@neophotonics.com