NPTN - NeoPhotonics Reports First Quarter 2019 Financial Results

May, 02 2019 04:05 PM NeoPhotonics Corporation

Revenue of $79.4 million for the quarter, up 16% year-over-year
High Speed Products represented 88% of total revenue for the quarter

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 first quarter ended March 31, 2019.

“NeoPhotonics delivered strong year over year growth in our seasonally low first quarter. We are focused on the highest speed coherent solutions that are well-aligned with leading industry trends, which has positioned us to benefit from growing deployments of high baud rate systems for 200G to 600G globally,” said Tim Jenks, NeoPhotonics Chairman and CEO. “These higher bandwidth systems accentuate the unique value proposition of our ultra-narrow linewidth lasers and high performance photonic integrated chips,” concluded Mr. Jenks.

First Quarter Summary

Revenue was $79.4 million, down 13% quarter-over-quarter and up 16% year-over-year
Gross margin was 19.8%, down from 24.8% in the prior quarter
Non-GAAP Gross margin was 22.4%, down from 28.6% in the prior quarter
Diluted net loss per share was $0.30, in comparison to a net loss of $0.15 per share in the prior quarter
Non-GAAP diluted net loss per share was $0.19, down from net income per share of $0.05 in the prior quarter
Cash generated from operations was $8.7 million, down from $10.6 million in the prior quarter
Adjusted EBITDA was a loss of $0.8 million, down from income of $10.5 million in the prior quarter

Non-GAAP results in the first quarter of 2019 exclude $3.3 million of stock-based compensation expense, $1.3 million of accelerated depreciation, $0.8 million of divestiture costs, amortization of acquisition-related intangibles and restructuring charges. 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, 2019, cash and cash equivalents, short-term investments and restricted cash, together totaled $78.9 million, up $2.2 million compared to December 31, 2018. Restricted cash as of March 31, 2019 was $11.6 million, up $0.5 million compared to December 31, 2018.

Outlook for the Quarter Ending June 30, 2019

GAAP

Non-GAAP

Revenue

$88 to $93 million

Gross Margin

23% to 27%

25% to 29%

Operating Expenses

$27.0 +/- $0.5 million

$24.0 +/- $0.5 million

Earnings per share

$0.16 to $0.06 net loss

$0.06 net loss to $0.04 net profit

The non-GAAP outlook for the second 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, the impact of expected amortization of intangibles of approximately $0.3 million and restructuring charges of approximately $0.8 million for accelerated depreciation on an end-of-life production line.

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, May 2, 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 +1-855-719-5012. For international callers, please dial +1-334-323-0505. The Conference ID number is 3001544. 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


Mar 31, 2019

Dec 31, 2018





ASSETS




Current assets:




Cash and cash equivalents

$
59,793


$
58,185

Short-term investments


7,524



7,481

Restricted cash


11,577



11,053

Accounts receivable, net


65,210



74,751

Inventories


53,618



52,159

Assets held for sale


3,074



2,971

Prepaid expenses and other current assets


23,995



26,605

Total current assets


224,791



233,205

Property, plant and equipment, net


95,688



100,090

Operating lease right-of-use assets


16,847



—

Purchased intangible assets, net


2,736



3,018

Goodwill


1,115



1,115

Other long-term assets


3,159



3,148

Total assets

$
344,336


$
340,576






LIABILITIES AND STOCKHOLDERS’ EQUITY


Current liabilities:




Accounts payable

$
57,853


$
58,403

Notes payable and short-term borrowing


2,339



4,795

Current portion of long-term debt


2,963



2,897

Accrued and other current liabilities


50,269



50,288

Total current liabilities


113,424



116,383

Long-term debt, net of current portion


50,213



50,454

Operating lease liabilities, noncurrent


18,019



—

Other noncurrent liabilities


10,122



13,499

Total liabilities


191,778



180,336






Stockholders’ equity:




Common stock


116



116

Additional paid-in capital


568,194



564,722

Accumulated other comprehensive loss


(4,189
)


(7,126
)
Accumulated deficit


(411,563
)


(397,472
)
Total stockholders’ equity


152,558



160,240

Total liabilities and stockholders’ equity

$
344,336


$
340,576


NeoPhotonics Corporation
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages and per share data)









Three Months Ended


Mar 31, 2019

Dec 31, 2018

Mar 31, 2018
Revenue

$
79,366


$
91,104


$
68,586

Cost of goods sold (1)


63,629



68,518



59,404

Gross profit


15,737



22,586



9,182

Gross margin


19.8
%


24.8
%


13.4
%
Operating expenses:






Research and development (1)


14,683



13,510



13,888

Sales and marketing (1)


4,603



4,362



4,124

General and administrative (1)


7,753



7,344



7,650

Amortization of purchased intangible assets


119



118



119

Asset sale related costs


329



83



14

Restructuring charges


179



1,349



31

Litigation settlement


—



2,195



—

Loss on asset sale


—



200



—

Total operating expenses


27,666



29,161



25,826

Loss from operations


(11,929
)


(6,575
)


(16,644
)
Interest income


99



97



93

Interest expense


(493
)


(486
)


(708
)
Other income (expense), net


(1,598
)


(445
)


(349
)
Total interest and other income (expense), net


(1,992
)


(834
)


(964
)
Loss before income taxes


(13,921
)


(7,409
)


(17,608
)
Income tax (provision) benefit


(170
)


680



(638
)
Net loss

$
(14,091
)

$
(6,729
)

$
(18,246
)
Basic net loss per share

$
(0.30
)

$
(0.15
)

$
(0.41
)
Diluted net loss per share

$
(0.30
)

$
(0.15
)

$
(0.41
)
Weighted average shares used to compute basic net loss per share


46,414



46,150



44,259

Weighted average shares used to compute diluted net loss per share


46,414



46,150



44,259








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






Cost of goods sold

$
601


$
764


$
650

Research and development


881



952



773

Sales and marketing


678



737



938

General and administrative


1,178



1,162



986

Total stock-based compensation expense

$
3,338


$
3,615


$
3,347


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, 2019

Dec 31, 2018

Mar 31, 2018
NON-GAAP GROSS PROFIT:






GAAP gross profit

$
15,737


$
22,586


$
9,182

Stock-based compensation expense


601



764



650

Amortization of purchased intangible assets


184



184



203

Depreciation of acquisition-related fixed asset step-up


(66
)


(75
)


(69
)
End-of-life related inventory write-down


—



2,565



—

Accelerated depreciation


1,315



—



—

Restructuring charges


—



—



92

Non-GAAP gross profit

$
17,771


$
26,024


$
10,058

Non-GAAP gross margin as a % of revenue


22.4
%


28.6
%


14.7
%







NON-GAAP TOTAL OPERATING EXPENSES:






GAAP total operating expenses

$
27,666


$
29,161


$
25,826

Stock-based compensation expense


(2,737
)


(2,851
)


(2,697
)
Amortization of purchased intangible assets


(119
)


(118
)


(119
)
Depreciation of acquisition-related fixed asset step-up


(66
)


(66
)


(67
)
Asset sale related costs


(329
)


(83
)


(14
)
Restructuring charges


(179
)


(1,349
)


(31
)
Litigation settlement


—



(2,195
)


—

Loss on asset sale


—



(200
)


—

Non-GAAP total operating expenses

$
24,236


$
22,299


$
22,898

Non-GAAP total operating expenses as a % of revenue


30.5
%


24.5
%


33.4
%







NON-GAAP OPERATING INCOME (LOSS):






GAAP loss from operations

$
(11,929
)

$
(6,575
)

$
(16,644
)
Stock-based compensation expense


3,338



3,615



3,347

Amortization of purchased intangible assets


303



302



322

Depreciation of acquisition-related fixed asset step-up


—



(9
)


(2
)
Asset sale related costs


329



83



14

End-of-life related inventory write-down


—



2,565



—

Accelerated depreciation


1,315



—



—

Restructuring charges


179



1,349



123

Litigation settlement


—



2,195



—

Loss on asset sale


—



200



—

Non-GAAP income (loss) from operations

$
(6,465
)

$
3,725


$
(12,840
)
Non-GAAP operating margin as a % of revenue


(8.1
)%


4.1
%


(18.7
)%


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, 2019

Dec 31, 2018

Mar 31, 2018
NON-GAAP NET INCOME (LOSS):






GAAP net loss

$
(14,091
)

$
(6,729
)

$
(18,246
)
Stock-based compensation expense


3,338



3,615



3,347

Amortization of purchased intangible assets


303



302



322

Depreciation of acquisition-related fixed asset step-up


—



(9
)


(2
)
Asset sale related costs


329



83



14

End-of-life related inventory write-down


—



2,565



—

Accelerated depreciation


1,315



—



—

Restructuring charges


179



1,349



123

Litigation settlement


—



2,195



—

Loss on asset sale


—



200



—

Income tax effect of Non-GAAP adjustments


(377
)


(1,153
)


(126
)
Non-GAAP net income (loss)

$
(9,004
)

$
2,418


$
(14,568
)
Non-GAAP net income (loss) as a % of revenue


(11.3
)%


2.7
%


(21.2
)%







ADJUSTED EBITDA:






GAAP net loss

$
(14,091
)

$
(6,729
)

$
(18,246
)
Stock-based compensation expense


3,338



3,615



3,347

Amortization of purchased intangible assets


303



302



322

Depreciation of acquisition-related fixed asset step-up


—



(9
)


(2
)
Asset sale related costs


329



83



14

End-of-life related inventory write-down


—



2,565



—

Accelerated depreciation


1,315



—



—

Restructuring charges


179



1,349



123

Litigation settlement


—



2,195



—

Loss on asset sale


—



200



—

Interest expense, net


394



389



615

Provision (benefit) for income taxes


170



(680
)


638

Depreciation expense


7,233



7,260



7,686

Adjusted EBITDA

$
(830
)

$
10,540


$
(5,503
)
Adjusted EBITDA as a % of revenue


(1.0
)%


11.6
%


(8.0
)%







BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:






GAAP basic net loss per share

$
(0.30
)

$
(0.15
)

$
(0.41
)
GAAP diluted net loss per share

$
(0.30
)

$
(0.15
)

$
(0.41
)
Non-GAAP basic net income (loss) per share

$
(0.19
)

$
0.05


$
(0.33
)
Non-GAAP diluted net income (loss) per share

$
(0.19
)

$
0.05


$
(0.33
)







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


46,414



46,150



44,259

SHARES USED TO COMPUTE GAAP DILUTED NET LOSS PER SHARE


46,414



46,150



44,259

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


46,414



49,334



44,259

View source version on businesswire.com: https://www.businesswire.com/news/home/20190502005725/en/

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

Company Name:	NeoPhotonics Corporation
Stock Symbol:	NPTN
Market:	NYSE
Website:	neophotonics.com

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