EX-99.1 2 exhibit9912018q2.htm EXHIBIT 99.1 Exhibit


nptnq32017logoa02.jpg

NeoPhotonics Reports Second Quarter 2018 Financial Results

•
Revenue of $81.1 million for the quarter
•
High Speed Products increased to 86% of total revenue for the quarter

SAN JOSE, Calif. - August 6, 2018 - 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 second quarter ended June 30, 2018.

“In the second quarter, NeoPhotonics delivered strong results with revenue of $81 million, coming in above the high end of our outlook range and representing 18% sequential growth and 11% growth over the same period last year. Sequential growth outside of China was 30% and the result of very strong Data Center Interconnect and Metro deployments by our key customers in the Americas and EMEA,” said Tim Jenks, NeoPhotonics Chairman and CEO. “We met our key financial metrics for the quarter and with our new product traction and increasing momentum in our core markets, we are optimistic for continued improvement.”

Second Quarter Summary

•
Revenue was $81.1 million, up 18% quarter-over-quarter and 11% year-over-year
•
Gross margin was 19.1%, compared to 13.4% in the prior quarter
•
Non-GAAP Gross margin was 20.1%, compared to 14.7% in the prior quarter
•
Net loss was $10.5 million, compared to a net loss of $18.2 million in the prior quarter
•
Non-GAAP net loss was $6.3 million, compared to a net loss of $14.6 million in the prior quarter
•
Diluted net loss per share was $0.24, in comparison to a net loss of $0.41 per share in the prior quarter
•
Non-GAAP diluted net loss per share was $0.14, compared to a net loss of $0.33 in the prior quarter
•
Adjusted EBITDA was $3.0 million, compared to negative $5.5 million in the prior quarter

Non-GAAP results in the second quarter of 2018 exclude $3.1 million of stock-based compensation expense, $0.3 million of amortization of acquisition-related intangibles and $0.7 million of 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 June 30, 2018, cash and cash equivalents, short-term investments and restricted cash, together totaled $67.6 million, compared to $86.9 million at March 31, 2018, reflecting debt repayments of $18.6 million in the second quarter. Restricted cash as of June 30, 2018 was $6.8 million, compared to $2.7 million as of March 31, 2018.

Outlook for the Quarter Ending September 30, 2018
 
GAAP
Non-GAAP
Revenue
$79 to $84 million
Gross Margin
19% to 23%
20% to 24%
Operating Expenses
$25 to $26 million
$22 to $23 million
Earnings per share
$0.27 to $0.17 net loss
$0.17 to $0.07 net loss


1



The Non-GAAP outlook for the third quarter of 2018 excludes the expected impact of stock-based compensation expense of approximately $3.9 million, of which $0.6 million is estimated for cost of goods sold, and the impact of expected amortization of intangibles of approximately $0.3 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, Monday, August 6, 2018 at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing 800-263-0877. For international callers, please dial +1-323-794-2094. The Conference ID number is 1980911. 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 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 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 9001:2000 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, 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

2



in China and other key countries; possible reduction in or volatility of customer orders or delays in shipments of products to customers; timing of customer drawdowns of vendor-managed inventory; 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; the impact of any previous or future acquisitions or divestitures of assets and related product lines; challenges involving integration of acquired businesses and utilization of acquired technology; the discontinuance or end of life of certain other products; 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, 2017. 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
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
©2018 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.








3



NeoPhotonics Corporation
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

 
 
As of
 
 
Jun. 30, 2018
 
Dec. 31, 2017
 
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

  Cash and cash equivalents
 
$
48,383

 
$
78,906

  Short-term investments
 
12,401

 
12,311

  Restricted cash
 
6,839

 
2,658

  Accounts receivable, net
 
77,316

 
67,229

  Inventories, net
 
60,947

 
67,301

  Prepaid expenses and other current assets
 
30,239

 
36,235

    Total current assets
 
236,125

 
264,640

  Property, plant and equipment, net
 
115,710

 
127,565

  Purchased intangible assets, net
 
3,657

 
4,294

  Goodwill
 
1,115

 
1,115

  Other long-term assets
 
3,199

 
5,339

    Total assets
 
$
359,806

 
$
402,953

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

  Accounts payable
 
$
64,085

 
$
69,017

  Notes payable and short-term borrowing
 
18,929

 
35,607

  Current portion of long-term debt
 
2,868

 
6,005

  Accrued and other current liabilities
 
44,288

 
43,242

    Total current liabilities
 
130,170

 
153,871

Long-term debt, net of current portion
 
46,152

 
40,556

Other noncurrent liabilities
 
14,026

 
14,075

    Total liabilities
 
190,348

 
208,502

 
 
 
 
 
Stockholders’ equity:
 
 

 
 

  Common stock
 
112

 
111

  Additional paid-in capital
 
553,945

 
545,953

  Accumulated other comprehensive income (loss)
 
(1,981
)
 
398

  Accumulated deficit
 
(382,618
)
 
(352,011
)
    Total stockholders’ equity
 
169,458

 
194,451

    Total liabilities and stockholders’ equity
 
$
359,806

 
$
402,953



4



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

 
 
Three Months Ended
 
Six Months Ended
 
 
Jun. 30, 2018
 
Mar. 31, 2018
 
Jun. 30, 2017
 
Jun. 30, 2018
 
Jun. 30, 2017
Revenue
 
$
81,102

 
$
68,586

 
$
73,214

 
$
149,688

 
$
144,902

Cost of goods sold (1)
 
65,630

 
59,404

 
56,437

 
125,034

 
109,622

Gross profit
 
15,472

 
9,182

 
16,777

 
24,654

 
35,280

Gross margin
 
19.1
%
 
13.4
%
 
22.9
%
 
16.5
%
 
24.3
%
Operating expenses:
 
 
 
 
 
 
 
 
 
 
  Research and development (1)
 
13,243

 
13,888

 
14,206

 
27,131

 
29,750

  Sales and marketing (1)
 
3,891

 
4,124

 
3,910

 
8,015

 
8,842

  General and administrative (1)
 
7,267

 
7,650

 
7,729

 
14,917

 
19,155

  Amortization of purchased intangible assets
 
120

 
119

 
118

 
239

 
236

  Asset sale related costs
 
79

 
14

 
21

 
93

 
151

  Restructuring charges
 
622

 
31

 
494

 
653

 
721

  Gain on asset sale
 
—

 
—

 
—

 
—

 
(2,000
)
    Total operating expenses
 
25,222

 
25,826

 
26,478

 
51,048

 
56,855

Loss from operations
 
(9,750
)
 
(16,644
)
 
(9,701
)
 
(26,394
)
 
(21,575
)
  Interest income
 
122

 
93

 
31

 
215

 
104

  Interest expense
 
(759
)
 
(708
)
 
(111
)
 
(1,467
)
 
(248
)
  Other income (expense), net
 
930

 
(349
)
 
(11
)
 
581

 
238

    Total interest and other income (expense), net
 
293

 
(964
)
 
(91
)
 
(671
)
 
94

Loss before income taxes
 
(9,457
)
 
(17,608
)
 
(9,792
)
 
(27,065
)
 
(21,481
)
Income tax (provision) benefit
 
(1,080
)
 
(638
)
 
451

 
(1,718
)
 
618

Net loss
 
$
(10,537
)
 
$
(18,246
)
 
$
(9,341
)
 
$
(28,783
)
 
$
(20,863
)
Basic net loss per share
 
$
(0.24
)
 
$
(0.41
)
 
$
(0.22
)
 
$
(0.65
)
 
$
(0.49
)
Diluted net loss per share
 
$
(0.24
)
 
$
(0.41
)
 
$
(0.22
)
 
$
(0.65
)
 
$
(0.49
)
Weighted average shares used to compute basic net loss per share
 
44,665

 
44,259

 
43,219

 
44,463

 
42,919

Weighted average shares used to compute diluted net loss per share
 
44,665

 
44,259

 
43,219

 
44,463

 
42,919

 
 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation expense as follows for the periods presented:
 
 
 
 
 
 
 
 
 
 
    Cost of goods sold
 
$
629

 
$
650

 
$
324

 
$
1,279

 
$
471

    Research and development
 
829

 
773

 
511

 
1,602

 
1,173

    Sales and marketing
 
642

 
938

 
313

 
1,580

 
777

    General and administrative
 
1,039

 
986

 
738

 
2,025

 
1,337

    Total stock-based compensation expense
 
$
3,139

 
$
3,347

 
$
1,886

 
$
6,486

 
$
3,758



5



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
 
Six Months Ended
 
 
Jun. 30, 2018
 
Mar. 31, 2018
 
Jun. 30, 2017
 
Jun. 30, 2018
 
Jun. 30, 2017
NON-GAAP GROSS PROFIT:
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
15,472

 
$
9,182

 
$
16,777

 
$
24,654

 
$
35,280

  Stock-based compensation expense
 
629

 
650

 
324

 
1,279

 
471

  Amortization of purchased intangible assets
 
184

 
203

 
203

 
387

 
465

  Depreciation of acquisition-related fixed asset step-up
 
(73
)
 
(69
)
 
(68
)
 
(142
)
 
(134
)
  Restructuring charges
 
54

 
92

 
240

 
146

 
279

Non-GAAP gross profit
 
$
16,266

 
$
10,058

 
$
17,476

 
$
26,324

 
$
36,361

Non-GAAP gross margin as a % of revenue
 
20.1
 %
 
14.7
 %
 
23.9
 %
 
17.6
 %
 
25.1
 %
 
 
 
 
 
 
 
 
 
 
 
NON-GAAP TOTAL OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
GAAP total operating expenses
 
$
25,222

 
$
25,826

 
$
26,478

 
$
51,048

 
$
56,855

  Stock-based compensation expense
 
(2,510
)
 
(2,697
)
 
(1,562
)
 
(5,207
)
 
(3,287
)
  Amortization of purchased intangible assets
 
(120
)
 
(119
)
 
(118
)
 
(239
)
 
(236
)
  Depreciation of acquisition-related fixed asset step-up
 
(68
)
 
(67
)
 
(72
)
 
(135
)
 
(145
)
  Asset sale related costs
 
(79
)
 
(14
)
 
(21
)
 
(93
)
 
(151
)
  Restructuring charges
 
(622
)
 
(31
)
 
(494
)
 
(653
)
 
(721
)
  Litigation
 
—

 
—

 
—

 
—

 
64

  Gain on asset sale
 
—

 
—

 
—

 
—

 
2,000

Non-GAAP total operating expenses
 
$
21,823

 
$
22,898

 
$
24,211

 
$
44,721

 
$
54,379

Non-GAAP total operating expenses as a % of revenue
 
26.9
 %
 
33.4
 %
 
33.1
 %
 
29.9
 %
 
37.5
 %
 
 
 
 
 
 
 
 
 
 
 
NON-GAAP OPERATING LOSS:
 
 
 
 
 
 
 
 
 
 
GAAP loss from operations
 
$
(9,750
)
 
$
(16,644
)
 
$
(9,701
)
 
$
(26,394
)
 
$
(21,575
)
  Stock-based compensation expense
 
3,139

 
3,347

 
1,886

 
6,486

 
3,758

  Amortization of purchased intangible assets
 
304

 
322

 
321

 
626

 
701

  Depreciation of acquisition-related fixed asset step-up
 
(5
)
 
(2
)
 
4

 
(7
)
 
11

  Asset sale related costs
 
79

 
14

 
21

 
93

 
151

  Restructuring charges
 
676

 
123

 
734

 
799

 
1,000

  Litigation
 
—

 
—

 
—

 
—

 
(64
)
  Gain on asset sale
 
—

 
—

 
—

 
—

 
(2,000
)
Non-GAAP loss from operations
 
$
(5,557
)
 
$
(12,840
)
 
$
(6,735
)
 
$
(18,397
)
 
$
(18,018
)
Non-GAAP operating margin as a % of revenue
 
(6.9
)%
 
(18.7
)%
 
(9.2
)%
 
(12.3
)%
 
(12.4
)%


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
 
Six Months Ended
 
 
Jun. 30, 2018
 
Mar. 31, 2018
 
Jun. 30, 2017
 
Jun. 30, 2018
 
Jun. 30, 2017
NON-GAAP NET LOSS:
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(10,537
)
 
$
(18,246
)
 
$
(9,341
)
 
$
(28,783
)
 
$
(20,863
)
  Stock-based compensation expense
 
3,139

 
3,347

 
1,886

 
6,486

 
3,758

  Amortization of purchased intangible assets
 
304

 
322

 
321

 
626

 
701

  Depreciation of acquisition-related fixed asset step-up
 
(5
)
 
(2
)
 
4

 
(7
)
 
11

  Asset sale related costs
 
79

 
14

 
21

 
93

 
151

  Restructuring charges
 
676

 
123

 
734

 
799

 
1,000

  Litigation
 
—

 
—

 
—

 
—

 
(64
)
  Gain on asset sale
 
—

 
—

 
—

 
—

 
(2,000
)
  Income tax effect of Non-GAAP adjustments
 
42

 
(126
)
 
(192
)
 
(84
)
 
(3
)
Non-GAAP net loss
 
$
(6,302
)
 
$
(14,568
)
 
$
(6,567
)
 
$
(20,870
)
 
$
(17,309
)
Non-GAAP net loss as a % of revenue
 
(7.8
)%
 
(21.2
)%
 
(9.0
)%
 
(13.9
)%
 
(11.9
)%
 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EBITDA:
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(10,537
)
 
$
(18,246
)
 
$
(9,341
)
 
$
(28,783
)
 
$
(20,863
)
  Stock-based compensation expense
 
3,139

 
3,347

 
1,886

 
6,486

 
3,758

  Amortization of purchased intangible assets
 
304

 
322

 
321

 
626

 
701

  Depreciation of acquisition-related fixed asset step-up
 
(5
)
 
(2
)
 
4

 
(7
)
 
11

  Asset sale related costs
 
79

 
14

 
21

 
93

 
151

  Restructuring charges
 
676

 
123

 
734

 
799

 
1,000

  Litigation
 
—

 
—

 
—

 
—

 
(64
)
  Gain on asset sale
 
—

 
—

 
—

 
—

 
(2,000
)
  Interest expense, net
 
637

 
615

 
80

 
1,252

 
144

  Provision (benefit) for income taxes
 
1,080

 
638

 
(451
)
 
1,718

 
(618
)
  Depreciation expense
 
7,607

 
7,686

 
6,794

 
15,293

 
12,592

Adjusted EBITDA
 
$
2,980

 
$
(5,503
)
 
$
48

 
$
(2,523
)
 
$
(5,188
)
Adjusted EBITDA as a % of revenue
 
3.7
 %
 
(8.0
)%
 
0.1
 %
 
(1.7
)%
 
(3.6
)%
 
 
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED NET LOSS PER SHARE:
 
 
 
 
 
 
 
 
 
 
GAAP basic net loss per share
 
$
(0.24
)
 
$
(0.41
)
 
$
(0.22
)
 
$
(0.65
)
 
$
(0.49
)
GAAP diluted net loss per share
 
$
(0.24
)
 
$
(0.41
)
 
$
(0.22
)
 
$
(0.65
)
 
$
(0.49
)
Non-GAAP basic net loss per share
 
$
(0.14
)
 
$
(0.33
)
 
$
(0.15
)
 
$
(0.47
)
 
$
(0.40
)
Non-GAAP diluted net loss per share
 
$
(0.14
)
 
$
(0.33
)
 
$
(0.15
)
 
$
(0.47
)
 
$
(0.40
)
 
 
 
 
 
 
 
 
 
 
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET LOSS PER SHARE
 
44,665

 
44,259

 
43,219

 
44,463

 
42,919

SHARES USED TO COMPUTE GAAP DILUTED NET LOSS PER SHARE
 
44,665

 
44,259

 
43,219

 
44,463

 
42,919

SHARES USED TO COMPUTE NON-GAAP DILUTED NET LOSS PER SHARE
 
44,665

 
44,259

 
43,219

 
44,463

 
42,919



7