Press Releases

NeoPhotonics Reports Fourth Quarter and Annual 2013 Financial Results and Updated Outlook for First Quarter 2014

• Quarterly Revenue of $74.4 million
• Fourth Quarter 2013-over-Fourth Quarter 2012 Revenue Growth of 20%
• Record Annual Revenue of $282.2 million
• Year-over-Year Revenue Growth of 15%

SAN JOSE, Calif.--(BUSINESS WIRE)--May 19, 2014-- NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of photonic integrated circuits, or PIC, based optoelectronic modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its fourth quarter and year ended December 31, 2013.

“We are pleased to note the growing momentum behind global 100G deployments, notably in China and in North America, and we are confident that our new 100G products, coupled with our recent 100G capacity expansion, will put us in a strong position to benefit from this coming wave of 100G adoption,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “Our recent product introductions span both line side and data center applications and include next generation, smaller lower power lasers, transmitters and receivers for 100G coherent transmission, 100G CFP2 transceivers for use in data centers and 100G semiconductor laser arrays as well as drivers for modulators and lasers,” he concluded.

Fourth Quarter Summary

Following is a summary of certain key financial measures for the fourth quarter of 2013.

• Revenue was $74.4 million, a decrease of $2.4 million, or 3%, from the third quarter of 2013 and up $12.4 million, or 20%, from the fourth quarter of 2012.
• Gross margin was 26.4%, up from 23.7% in the third quarter of 2013, and up from 22.7% in the fourth quarter of 2012.
• Non-GAAP gross margin was 27.5%, flat with 27.5% in the third quarter of 2013 and up from 24.5% in the fourth quarter of 2012.
• Net loss was $4.5 million, a decrease from a net loss of $9.4 million in the third quarter of 2013 and up from a net loss of $3.0 million in the fourth quarter of 2012.
• Non-GAAP net loss was $1.8 million, a decrease from a net loss of $3.2 million in the third quarter of 2013 and up from a net loss of $0.2 million in the fourth quarter of 2012.
• Diluted net loss per share was $0.14, a decrease from a diluted net loss per share of $0.30 in the third quarter of 2013 and up from a diluted net loss per share of $0.10 in the fourth quarter of 2012.
• Non-GAAP diluted net loss per share was $0.06, a decrease from a diluted net loss per share of $0.10 in the third quarter of 2013 and up from a diluted net loss per share of $0.01 in the fourth quarter of 2012.
• Adjusted EBITDA was $3.0 million, an increase from $1.9 million in the third quarter of 2013 and down from $3.4 million in the fourth quarter of 2012.

At December 31, 2013, combined cash, cash equivalents and short-term investments was $75.0 million, up from $70.6 million at September 30, 2013. Combined notes payable and debt was $44.2 million at December 31, 2013, which is down from $44.9 million at September 30, 2013.

Annual Summary

Following is a summary of certain key financial measures for 2013.

• Revenue was $282.2 million, an increase of $36.8 million, or 15%, from $245.4 million in 2012.
• Gross margin was 23.1%, down from 25.0 % in 2012.
• Non-GAAP gross margin was 26.0%, down from 27.0% in 2012.
• Net loss was $34.3 million, an increase from a net loss of $17.5 million in 2012.
• Non-GAAP net loss was $14.2 million, an increase from a net loss of $4.5 million in 2012.
• Diluted net loss per share was $1.11, an increase from a diluted net loss per share of $0.62 in 2012.
• Non-GAAP diluted net loss per share was $0.46, an increase from a diluted net loss per share of $0.16 in 2012.
• Adjusted EBITDA was $4.4 million, a decrease from $9.5 million in 2012.

Non-GAAP and Adjusted EBITDA measures vs. GAAP Financial Measures

Our Non-GAAP and Adjusted EBITDA measures exclude certain GAAP financial measures, and 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.

Updated Outlook for the First Quarter of 2014 Ending March 31, 2014

The Company’s updated outlook for the first quarter of 2014 is:

• Revenue in the range of $67.5 million to $68.5 million versus the Company’s prior outlook range (announced in April 2014) of $67 to $69 million;
• Non-GAAP gross margin in the range of 20% to 23%; and
• Diluted net loss per share in the range of $0.38 to $0.42, and on a Non-GAAP basis in the range of a net loss of $0.28 to $0.32 per diluted share

The Company did not provide expectations previously on Non-GAAP gross margin, on diluted net loss per share, or on diluted Non-GAAP net loss per share.

The Non-GAAP outlook for the first quarter of 2014 excludes approximately $3.2 million of combined expenses related to the expected amortization of intangibles and anticipated impact of stock-based compensation. Of these expenses, $1.2 million is estimated to relate to cost of goods sold.

Outlook for the Quarter Ending June 30, 2014

The Company’s outlook for the second quarter of 2014 is:

• Revenue in the range of $73 million to $78 million; and
• Non-GAAP gross margin in the range of 20% to 25%.

Conference Call

The Company will host a conference call today, May 19, 2014, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). President and Chief Executive Officer, Tim Jenks, and Chief Financial Officer, Ray Wallin, will present an overview of the 2013 fourth quarter and annual financial results, discuss current business conditions, and respond to questions. The call will be available, live, to interested parties by dialing +1 (888) 417-8533. For international callers, please dial +1 (719) 325-2494. The Conference ID number is 2076202. A live webcast will also be available in the Investors 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 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 photonic integrated circuits, or PIC, based 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.

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, and the nature and extent of macro-economic 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; subsequent events, 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 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, the New York Stock Exchange may initiate delisting proceedings, which would result in the Company’s common stock being delisted by the Exchange; 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, 2012 and the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2013. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

© 2014 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
						Dec. 31, 2013							Sep 30, 2013							Dec. 31, 2012
ASSETS
Current assets:
Cash, cash equivalents and short-term investments						$	75,017						$	70,564						$	101,241
Accounts receivable, net							64,533							78,898							70,354
Inventories							64,908							63,687							43,793
Prepaid expenses and other current assets							12,115							10,285							10,256
Total current assets							216,573							223,434							225,644
Property, plant and equipment, net							68,851							70,818							54,440
Purchased intangible assets, net							15,005							16,309							14,213
Other long-term assets							1,798							1,836							1,335
Total assets						$	302,227						$	312,397						$	295,632
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses						$	72,212						$	78,879						$	56,267
Notes payable							9,738							7,954							12,003
Current portion of long-term debt							10,325							10,570							5,000
Total current liabilities							92,275							97,403							73,270
Long-term debt, net of current portion							24,150							26,390							17,167
Other noncurrent liabilities							8,991							8,772							2,515
Total liabilities							125,416							132,565							92,952
Stockholders' equity:
Common stock							79							78							76
Additional paid-in capital							447,467							444,552							438,858
Accumulated other comprehensive income							11,687							13,172							11,829
Accumulated deficit							(282,422	)						(277,970	)						(248,083	)
Total stockholders' equity							176,811							179,832							202,680
Total liabilities and stockholders' equity						$	302,227						$	312,397						$	295,632

NeoPhotonics Corporation
Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages, share and per share data)
									Three Months Ended																	Year Ended
									Dec. 31, 2013					Sep. 30, 2013					Dec. 31, 2012							Dec. 31, 2013					Dec. 31, 2012
Revenue									$	74,375				$	76,814				$	62,023						$	282,242				$	245,423
Cost of goods sold (1)										54,739					58,635					47,973							217,069					184,163
Gross profit										19,636					18,179					14,050							65,173					61,260
										26.4	%				23.7	%				22.7	%						23.1	%				25.0	%
Operating expenses:
Research and development (1)										12,832					12,227					8,535							45,853					38,288
Sales and marketing (1)										3,727					3,580					3,458							14,242					13,241
General and administrative (1)										8,159					8,905					4,814							30,012					24,361
Adjustment to fair value of contingent consideration										-					1,026					(308	)						1,026					(554	)
Amortization of purchased intangible assets										404					381					320							1,532					1,316
Restructuring charges										-					450					(91	)						775					68
Acquisition- related transaction costs										89					126					537							5,406					1,447
Total operating expenses										25,211					26,695					17,265							98,846					78,167
Loss from operations										(5,575	)				(8,516	)				(3,215	)						(33,673	)				(16,907	)
Interest income										79					66					168							348					592
Interest expense										(240	)				(251	)				(134	)						(996	)				(568	)
Other income (expense), net										1,618					115					696							1,186					575
Total interest and other income (expense), net										1,457					(70	)				730							538					599
Loss before income taxes										(4,118	)				(8,586	)				(2,485	)						(33,135	)				(16,308	)
Provision for income taxes										(334	)				(777	)				(476	)						(1,204	)				(1,364	)
Loss from continuing operations										(4,452	)				(9,363	)				(2,961	)						(34,339	)				(17,672	)
Income (loss) from discontinued operations, net of tax										-					-					(28	)						-					142
Net loss										(4,452	)				(9,363	)				(2,989	)						(34,339	)				(17,530	)
Basic and diluted net loss per share:
Continuing operations									$	(0.14	)			$	(0.30	)			$	(0.10	)					$	(1.11	)			$	(0.62	)
Discontinued operations									$	-				$	-				$	-						$	-				$	-
Net loss									$	(0.14	)			$	(0.30	)			$	(0.10	)					$	(1.11	)			$	(0.62	)
Weighted averages shares used to compute net loss per share:
Basic										31,450,916					31,184,958					30,414,735							31,000,325					28,529,849
Diluted										31,450,916					31,184,958					30,414,735							31,000,325					28,529,849
(1	)		Includes stock-based compensation expense as follows for the periods presented:
			Cost of goods sold						$	79				$	471				$	247						$	924				$	800
			Research and development							625					417					476							2,060					1,744
			Sales and marketing							332					253					278							1,167					934
			General and administrative							435					449					341							1,585					1,299
			Total stock-based compensation expense						$	1,471				$	1,590				$	1,342						$	5,736				$	4,777

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																	Year Ended
								Dec. 31, 2013					Sep. 30, 2013					Dec. 31, 2012							Dec. 31, 2013					Dec. 31, 2012
NON-GAAP GROSS PROFIT:
GAAP gross profit								$	19,636				$	18,179				$	14,050						$	65,173				$	61,260
Stock-based compensation expense									79					471					247							924					800
Amortization of purchased intangible assets									605					738					642							2,543					2,472
Amortization of acquisition-related fixed asset step-up									208					188					225							1,120					1,512
Amortization of acquisition-related inventory step-up									(176	)				928					-							2,897					-
Acquisition-related retention costs									-					-					50							-					148
Restructuring charges									71					628					-							699					-
Non-GAAP gross profit								$	20,423				$	21,132				$	15,214						$	73,356				$	66,192
Non-GAAP gross margin (% of revenue)									27.5	%				27.5	%				24.5	%						26.0	%				27.0	%
NON-GAAP LOSS FROM CONTINUING OPERATIONS:
GAAP loss from continuing operations								$	(4,452	)			$	(9,363	)			$	(2,961	)					$	(34,339	)			$	(17,672	)
Stock-based compensation expense									1,471					1,590					1,342							5,736					4,777
Amortization of purchased intangible assets									1,009					1,119					963							4,041					3,788
Amortization of acquisition-related fixed asset step-up									315					302					356							1,588					2,480
Amortization of acquisition-related inventory step-up									(176	)				928					-							2,897					-
Acquisition-related retention costs									-					-					92							-					1,201
Acquisition-related transaction costs									89					126					537							5,406					1,447
Restructuring charges									71					1,077					(91	)						1,474					68
Fair value adjustment to contingent consideration									-					1,026					(308	)						1,026					(554	)
Income tax effect of Non-GAAP adjustments									(170	)				(39	)				(56	)						(2,041	)				(202	)
Non-GAAP loss from continuing operations								$	(1,843	)			$	(3,234	)			$	(126	)					$	(14,212	)			$	(4,667	)
ADJUSTED EBITDA FROM CONTINUING OPERATIONS:
GAAP loss from continuing operations								$	(4,452	)			$	(9,363	)			$	(2,961	)					$	(34,339	)			$	(17,672	)
Stock-based compensation expense									1,471					1,590					1,342							5,736					4,777
Amortization of purchased intangible assets									1,009					1,119					963							4,041					3,788
Amortization of acquisition-related fixed asset step-up									315					302					356							1,588					2,480
Amortization of acquisition-related inventory step-up									(176	)				928					-							2,897					-
Acquisition-related retention costs									-					-					92							-					1,201
Acquisition-related transaction costs									89					126					537							5,406					1,447
Restructuring charges									71					1,077					(91	)						1,474					68
Fair value adjustment to contingent consideration									-					1,026					(308	)						1,026					(554	)
Interest (income) expense, net									161					185					(34	)						648					(24	)
Provision for income taxes									334					777					476							1,204					1,364
Depreciation expense									4,194					4,156					3,095							14,752					12,444
Adjusted EBITDA from continuing operations								$	3,016				$	1,923				$	3,467						$	4,433				$	9,319
DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS:
GAAP diluted loss per share from continuing operations								$	(0.14	)			$	(0.30	)			$	(0.10	)					$	(1.11	)			$	(0.62	)
Non-GAAP diluted loss per share from continuing operations								$	(0.06	)			$	(0.10	)			$	(0.00	)					$	(0.46	)			$	(0.16	)
SHARES USED TO COMPUTE NON-GAAP DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS:
Shares used to compute GAAP diluted income (loss) per share from continuing operations									31,450,916					31,184,958					30,414,735							31,000,325					28,529,849
Shares used to compute non-GAAP diluted income (loss) per share from continuing operations									31,450,916					31,184,958					30,414,735							31,000,325					28,529,849

Source: NeoPhotonics Corporation

NeoPhotonics Corporation
Clyde R. Wallin, +1 408-895-6020
Chief Financial Officer
ray.wallin@neophotonics.com
or
Sapphire Investor Relations, LLC
Erica Mannion, +1 415-471-2700
Investor Relations
ir@neophotonics.com