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NeoPhotonics Reports First Quarter 2012 Financial Results
-
Record First Quarter Revenue of
$54.2 Million - 40/100G Products Exceed 10% of Revenue for Second Consecutive Quarter
- Outlook for Second Quarter Includes Expected Increasing Revenue and Expected Lower Net Loss from Continuing Operations
“We are pleased with our results for the first quarter of 2012, which
exceeded our projected ranges for revenue, gross margin and earnings per
share,” said
“We are also pleased with the demand for products we acquired from
Financial Highlights for the First Quarter of 2012
For the first quarter of 2012,
Loss from continuing operations for the first quarter of 2012 was
Diluted loss per share from continuing operations for the first quarter
of 2012 was
A reconciliation of GAAP financial measures to Non-GAAP financial measures is included at the end of this press release. See “Use of Non-GAAP Financial Information” later in this press release for a description of these Non-GAAP financial measures.
Total cash, cash equivalents and short-term investments at
Business Highlights
-
NeoPhotonics announced completion of phase one in its plan to significantly increase production capacity of narrow linewidth tunable lasers (NLW-TL) in support of rapidly growing demand. The company has doubled NLW-TL output since initiating the production plan in the fourth quarter of 2011. Demand for these products has outstripped industry capacity due to the rapid uptake of coherent optical technology coupled with industry supply constraints attributable to the flooding inThailand in 2011. -
NeoPhotonics announced the sample availability of its PIC-based Multicast Switch for next generation ROADM (Reconfigurable Optical Add/Drop Multiplexer) applications. The Multicast Switch is intended to build on current WSS (Wavelength Selective Switch) and ROADM technology to enable next-generation “colorless, directionless and contentionless” (CDC) networks. -
NeoPhotonics announced that it has received an investment of$39.8 million in gross proceeds from RUSNANO, a$10 billion sovereign investment corporation located inMoscow, Russia . RUSNANO acquired 4.97 million newly-issued common shares ofNeoPhotonics Corporation in a private placement transaction at a price per share of$8.00 . The company intends to use the net proceeds to establish design and production capabilities inRussia for the benefit of its global organization and for general corporate purposes. -
As of the end of the first quarter of 2012,
NeoPhotonics had substantially completed the integration ofSantur Corporation . Since theOctober 2011 acquisition, the company has combined the respective organizations, consolidated certain operations, merged ERP systems, eliminated redundancies, and trained and engaged the respective companies’ sales channels to support the expanded product offerings.
Outlook for the Quarter Ending
During the quarter ending
Conference Call
An audio replay of the conference call will also be available
approximately two hours after the conclusion of the call. The audio
replay will remain available until
About
© 2012
Forward Looking Statements
The statements in this press release under the heading “Outlook for the
Quarter Ending
Use of Non-GAAP Financial Information
To help readers understand the company’s past financial performance and
its future results,
Management uses these Non-GAAP financial measures to evaluate the operating performance of the business and aid in period-to-period comparability. Management also uses the Non-GAAP financial measures for planning and forecasting and measuring results against its forecast. Using several measures to evaluate the business allows the company and investors to assess the company’s relative performance and ultimately monitor the company’s capacity to generate returns for its stockholders. The Non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the company’s industry, as other companies may calculate such financial results differently, particularly related to nonrecurring or unusual items. The company’s Non-GAAP financial measures are not measurements of financial performance under GAAP, and should not be considered as alternatives to gross margin, income (loss) from continuing operations, and diluted income (loss) per share for continuing operations, or as indications of operating performance or any other measure of performance derived in accordance with GAAP. The company does not consider these Non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the Non-GAAP financial measures to the most directly comparable GAAP financial measures and more information about Non-GAAP financial measures are provided in the financial schedules portion of this press release.
| NeoPhotonics Corporation | ||||||||||||
| Consolidated Statements of Operations (Unaudited) | ||||||||||||
| (In thousands, except percentages, share and per share data) | ||||||||||||
| Three months ended | ||||||||||||
Mar. 31, |
Dec. 31, |
Mar. 31, | ||||||||||
| Revenue | $ | 54,223 | $ | 57,183 | $ | 50,020 | ||||||
| Cost of goods sold (1) | 42,817 | 44,909 | 37,861 | |||||||||
| Gross profit | 11,406 | 12,274 | 12,159 | |||||||||
| 21.0 | % | 21.5 | % | 24.3 | % | |||||||
| Operating expenses: | ||||||||||||
| Research and development (1) | 10,538 | 11,039 | 6,392 | |||||||||
| Sales and marketing (1) | 3,023 | 3,368 | 2,982 | |||||||||
| General and administrative (1) | 7,125 | 8,584 | 4,111 | |||||||||
Amortization of purchased intangible assets | 354 | 326 | 292 | |||||||||
| Earn out adjustment | 1,907 | (1,287 | ) | - | ||||||||
| Goodwill impairment charges | - | 13,106 | - | |||||||||
| Total operating expenses | 22,947 | 35,136 | 13,777 | |||||||||
| Loss from operations | (11,541 | ) | (22,862 | ) | (1,618 | ) | ||||||
| Interest income | 132 | 253 | 34 | |||||||||
| Interest expense | (154 | ) | (192 | ) | (118 | ) | ||||||
| Other expense, net | (275 | ) | (53 | ) | (26 | ) | ||||||
| Total interest and other income (expense), net | (297 | ) | 8 | (110 | ) | |||||||
| Loss before income taxes | (11,838 | ) | (22,854 | ) | (1,728 | ) | ||||||
| Benefit from (provision for) income taxes | 60 | 22 | (372 | ) | ||||||||
| Loss from continuing operations | (11,778 | ) | (22,832 | ) | (2,100 | ) | ||||||
Income from discontinued operations, net of tax | 170 | 523 | 165 | |||||||||
Net loss attributable to NeoPhotonics Corporation | (11,608 | ) | (22,309 | ) | (1,935 | ) | ||||||
Deemed dividend on beneficial conversion of Series X redeemable convertible preferred stock and accretion of redeemable convertible preferred stock | - | - | (17,056 | ) | ||||||||
Net loss attributable to NeoPhotonics Corporation common stockholders | $ | (11,608 | ) | $ | (22,309 | ) | $ | (18,991 | ) | |||
| Loss per share from continuing operations: | ||||||||||||
| Basic | $ | (0.47 | ) | $ | (0.92 | ) | $ | (1.27 | ) | |||
| Diluted | $ | (0.47 | ) | $ | (0.92 | ) | $ | (1.27 | ) | |||
Weighted average shares used to compute loss per share from continuing operations: | ||||||||||||
| Basic | 24,870,684 | 24,807,478 | 15,069,394 | |||||||||
| Diluted | 24,870,684 | 24,807,478 | 15,069,394 | |||||||||
| (1) Includes stock-based compensation expense as follows for the periods presented: | ||||||||||||
| Cost of goods sold | $ | 188 | $ | 120 | $ | 685 | ||||||
| Research and development | 469 | 256 | 607 | |||||||||
| Sales and marketing | 209 | 145 | 274 | |||||||||
| General and administrative | 278 | 219 | 367 | |||||||||
| Total stock-based compensation expense | $ | 1,144 | $ | 740 | $ | 1,933 | ||||||
| NeoPhotonics Corporation | ||||||||
| Consolidated Balance Sheets (Unaudited) | ||||||||
| (In thousands) | ||||||||
Mar. 31, |
Dec. 31, | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash, cash equivalents and short-term investments | $ | 83,780 | $ | 86,384 | ||||
| Restricted cash | 3,162 | 3,227 | ||||||
| Accounts receivable, net | 59,664 | 68,877 | ||||||
| Inventories | 39,007 | 35,341 | ||||||
| Prepaid expenses and other current assets | 6,954 | 5,882 | ||||||
| Short-term assets held-for-sale | - | 1,687 | ||||||
| Total current assets | 192,567 | 201,398 | ||||||
| Property, plant and equipment, net | 53,643 | 56,344 | ||||||
| Other intangible assets, net | 17,041 | 17,999 | ||||||
| Other long-term assets | 1,178 | 1,141 | ||||||
| Long-term assets held-for-sale | - | 167 | ||||||
| Total assets | $ | 264,429 | $ | 277,049 | ||||
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 38,451 | $ | 37,599 | ||||
| Notes payable | 14,506 | 14,620 | ||||||
| Current portion of long-term debt | 5,000 | 5,000 | ||||||
| Accrued and other current liabilities | 19,437 | 18,299 | ||||||
| Current liabilities held-for-sale | - | 1,681 | ||||||
| Total current liabilities | 77,394 | 77,199 | ||||||
| Long-term debt, net of current portion | 20,917 | 22,166 | ||||||
| Deferred income tax liabilities | 653 | 927 | ||||||
| Other noncurrent liabilities | 1,770 | 3,103 | ||||||
| Total liabilities | 100,734 | 103,395 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 62 | 62 | ||||||
| Additional paid-in capital | 394,020 | 392,792 | ||||||
| Accumulated other comprehensive income | 11,774 | 11,353 | ||||||
| Accumulated deficit | (242,161 | ) | (230,553 | ) | ||||
| Total stockholders' equity | 163,695 | 173,654 | ||||||
| Total liabilities, redeemable convertible preferred stock and stockholders' equity | $ | 264,429 | $ | 277,049 | ||||
| NeoPhotonics Corporation | ||||||||||||
| Reconciliation of Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited) | ||||||||||||
| (In thousands, except percentages, share and per share data) | ||||||||||||
| Three months ended | ||||||||||||
March 31, |
December 31, |
March 31, | ||||||||||
| NON-GAAP GROSS PROFIT: | ||||||||||||
| GAAP gross profit | $ | 11,406 | $ | 12,274 | $ | 12,159 | ||||||
| Stock-based compensation expense (a) | 188 | 120 | 685 | |||||||||
| Amortization of purchased intangible assets (b) | 598 | 532 | 51 | |||||||||
| Amortization of acquisition-related fixed asset step-up (c) | 786 | 292 | - | |||||||||
| Amortization of acquisition-related inventory step-up (d) | - | 215 | - | |||||||||
| Acquisition-related costs (e) | (12 | ) | 12 | - | ||||||||
| Non-GAAP gross profit | $ | 12,966 | $ | 13,445 | $ | 12,895 | ||||||
| Non-GAAP gross margin (% of revenue) | 23.9 | % | 23.5 | % | 25.8 | % | ||||||
| NON-GAAP LOSS FROM CONTINUING PERATIONS: | ||||||||||||
| GAAP loss from continuing operations | $ | (11,778 | ) | $ | (22,832 | ) | $ | (2,100 | ) | |||
| Stock-based compensation expense (a) | 1,144 | 740 | 1,933 | |||||||||
| Amortization of purchased intangible assets (b) | 952 | 858 | 343 | |||||||||
| Amortization of acquisition-related fixed asset step-up (c) | 1,319 | 427 | - | |||||||||
| Amortization of acquisition-related inventory step-up (d) | - | 215 | - | |||||||||
| Acquisition-related costs (e) | 924 | 1,089 | - | |||||||||
| Restructuring charges (f) | 130 | 1,297 | - | |||||||||
| Fair value adjustment to contingent consideration (g) | 1,907 | (1,287 | ) | - | ||||||||
| Goodwill impairment charge (h) | - | 13,106 | - | |||||||||
| Income tax effect of Non-GAAP adjustments (i) | (37 | ) | (6 | ) | (227 | ) | ||||||
| Non-GAAP loss from continuing operations | $ | (5,439 | ) | $ | (6,393 | ) | $ | (51 | ) | |||
| ADJUSTED EBITDA: | ||||||||||||
| GAAP income (loss) from continuing operations | $ | (11,778 | ) | $ | (22,832 | ) | $ | (2,100 | ) | |||
| Stock-based compensation expense (a) | 1,144 | 740 | 1,933 | |||||||||
| Amortization of purchased intangible assets (b) | 952 | 858 | 343 | |||||||||
| Amortization of acquisition-related fixed asset step-up (c) | 1,319 | 427 | - | |||||||||
| Amortization of acquisition-related inventory step-up (d) | - | 215 | - | |||||||||
| Acquisition-related costs (e) | 924 | 1,089 | - | |||||||||
| Restructuring charges (f) | 130 | 1,297 | - | |||||||||
| Fair value adjustment to contingent consideration (g) | 1,907 | (1,287 | ) | - | ||||||||
| Goodwill impairment charge (h) | - | 13,106 | - | |||||||||
| Interest (income) expense, net (j) | 22 | (61 | ) | 84 | ||||||||
| Provision for (benefit from) income taxes (k) | (60 | ) | (22 | ) | 372 | |||||||
| Depreciation expense (l) | 3,082 | 3,470 | 2,431 | |||||||||
| Adjusted EBITDA | $ | (2,358 | ) | $ | (3,000 | ) | $ | 3,063 | ||||
| NON-GAAP DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS: | ||||||||||||
| GAAP diluted loss per share from continuing operations | $ | (0.47 | ) | $ | (0.92 | ) | $ | (1.27 | ) | |||
| Non-GAAP diluted loss per share from continuing operations | $ | (0.22 | ) | $ | (0.26 | ) | $ | (0.00 | ) | |||
| SHARES USED TO COMPUTE NON-GAAP DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS: | ||||||||||||
| Shares used to compute GAAP diluted loss per share from continuing operations | 24,870,684 | 24,807,478 | 15,069,394 | |||||||||
Weighted average effect of the assumed conversion of convertible preferred stock from the date of issuance and dilutive securities under the treasury method (m) | - | - | 6,799,260 | |||||||||
| Shares used to compute Non-GAAP diluted loss per share from continuing operations | 24,870,684 | 24,807,478 | 21,868,654 | |||||||||
The Non-GAAP financial measures included in the table above adjust for the following items: | ||
| a) | Stock-based compensation expense. Included in the GAAP financial results are charges for the fair value of stock options, stock appreciation units, employee stock purchase rights and restricted stock units granted to employees. While this is a recurring item, management believes that excluding these charges from its Non-GAAP financial measures provides for more accurate comparisons of the company’s historical and current operating results to those of similar companies because various valuation methodologies with subjective assumptions may be used to calculate stock-based compensation expense. | |
| b) | Amortization of purchased intangible assets. Included in the GAAP financial results is the amortization of purchased intangible assets associated with prior acquisitions and which is non-cash in nature. The company excludes this expense from its Non-GAAP financial measures because it believes it is not indicative of the company’s core operating performance. | |
| c) | Amortization of acquisition-related fixed asset step-up. The purchase accounting entries associated with the company’s acquisition of Santur required the company to record fixed assets at fair value, which was greater than the previous book value of the fixed assets. The increase in fixed asset value is expensed to cost of goods sold and operating expenses over the estimated life of the asset, as determined at the acquisition date. Included in the GAAP financial results is the amortization expense related to the acquisition-related fixed asset step-up, which is non-cash in nature. Management excludes the fixed asset step-up amortization from the company’s non-GAAP measures because it is a non-cash expense that management does not believe is indicative of the company’s ongoing operating results. Management further believes that excluding this item from the company’s non-GAAP results is useful to investors in that it allows for period-over-period comparability. | |
| d) | Amortization of acquisition-related inventory step-up. The purchase accounting entries associated with the company’s acquisition of Santur required the company to record inventory at its fair value, which was greater than the previous book value of the inventory. The increase in inventory value is expensed to cost of goods sold over the period that the related product is sold. Included in the GAAP financial results is the amortization expense related to the acquisition-related inventory step-up, which is non-cash in nature. Management excludes the inventory step-up amortization from the company’s non-GAAP measures because it is a non-cash expense that management does not believe is indicative of the company’s ongoing operating results. Management further believes that excluding this item from the company’s non-GAAP results is useful to investors in that it allows for period-over-period gross margin comparability. | |
| e) | Acquisition-related costs. Included in the GAAP financial results are external and incremental costs resulting directly from acquisition activities such as due diligence, legal, accounting and integration costs. Management excludes these acquisition-related costs because it believes these amounts are not reflective of ongoing operating results relative to the period in which the amounts are incurred and are not directly related to the company’s core operating performance. | |
| f) | Restructuring expenses. Included in the GAAP financial results are restructuring expenses, representing employee compensation from reductions in employee headcount in connection with the company’s restructuring plan implemented in the fourth quarter of 2011. Management excludes restructuring expenses from its non-GAAP financial measures because management believes they do not reflect expected future operating expenses, they are not indicative of the company’s core operating performance, and they are not meaningful in comparisons to the company’s past operating performance. | |
| g) | Fair value adjustment to contingent consideration. In connection with the company’s acquisition of Santur, the company may be required to pay up to an additional $7.5 million in cash, contingent upon Santur’s gross profit performance during 2012. The fair value of the contingent consideration was measured at the date of acquisition and is subject to remeasurement each reporting period. Included in the GAAP financial results is the adjustment to the fair value of the contingent consideration. Management excludes this fair value adjustment because it believes this amount is not reflective of ongoing operating results relative to the period in which the amount is incurred and is not directly related to the company’s core operating performance. | |
| h) | Goodwill impairment charge. Included in the GAAP financial results is a goodwill impairment charge recorded in the fourth quarter of 2011, primarily resulting from a decline in the company’s market capitalization during the quarter. Management excludes goodwill impairment charge from the company’s non-GAAP financial measures as it is non-cash in nature and because management believes the charge is not reflective of ongoing operating results relative to the period in which the amount was incurred and is not directly related to the company’s core operating performance. | |
| i) | Income tax effect of Non-GAAP adjustments. This amount adjusts the provision for (benefit from) income taxes to reflect the tax effect of the Non-GAAP adjustments on Non-GAAP income (loss) from continuing operations. The adjustments were calculated by applying the effective tax rate of the entity where each Non-GAAP adjustment was recorded. | |
| j) | Interest (income) expense, net. Included in the GAAP financial results is interest income and interest expense. Although the company’s investing and borrowing activities are elements of its cost structure and provide the company with the ability to generate revenue and returns for its owners, management excludes interest income and interest expense from its adjusted EBITDA financial measure to provide period-to-period comparability of the company’s core operating results unassociated with its investing and borrowing activities. | |
| k) | Provision for (benefit from) income taxes. Included in the GAAP financial results is income tax expense. While the company is subject to various state and foreign taxes and the payment of such taxes is a necessary element of the company’s operations, management excludes income tax expense from its adjusted EBITDA financial measure to provide period-to-period comparability of the company’s core operating results unassociated with the varying effective tax rates to which the company is subject. | |
| l) | Depreciation expense. Included in the GAAP financial results is depreciation expense associated with the company’s capital expenditures. While the use of the capital equipment enables the company to generate revenue for the business, to enable the company to compare its financial results with other companies in the industry, management excludes depreciation expense from its adjusted EBITDA financial measure. | |
| m) | Diluted shares. The shares used to compute diluted loss per share for continuing operations include the assumed conversion of all outstanding shares of preferred stock into shares of common stock using the as-if-converted method as of the beginning of each period presented or the date of issuance, if later, and the dilutive effect of outstanding stock options, restricted stock units, warrants and employee stock purchase rights. In February 2011, in connection with the closing of the company’s initial public offering, all of its outstanding preferred stock was converted into shares of common stock. | |
Source:
NeoPhotonics Corporation
JD Fay, Chief Financial Officer
408-895-6086
or
Sapphire
Investor Relations, LLC
Erica Mannion, Investor Relations
415-471-2700