EX-99.1 2 exhibit991201910312019.htm EXHIBIT 99.1 Exhibit

nptnq22019logoa01.jpg
NeoPhotonics Reports Third Quarter 2019 Financial Results
•
Revenue of $92.4 million for the quarter, up 13% sequentially and year-over-year
•
Operating Profit of $1.3 million, non-GAAP Operating Profit of $4.4 million
SAN JOSE, Calif. - October 31, 2019 - 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 third quarter ended September 30, 2019.
"Solid execution, strong customer demand, and cost reduction combined for a profitable quarter for NeoPhotonics.” said Tim Jenks, Chairman and CEO of NeoPhotonics. “Despite the trade tensions, we believe the macro trends of the industry favor our core capabilities of delivering the highest performance products for the most demanding applications,” concluded Mr. Jenks.
Third Quarter Summary
•
Revenue was $92.4 million, up 13% quarter-over-quarter and up 13% year-over-year
•
Gross margin was 28.4%, up from 19.2% in the prior quarter
•
Non-GAAP Gross margin was 29.0%, up from 25.6% in the prior quarter
•
Diluted net earnings per share was $0.05, up from a net loss of $0.16 per share in the prior quarter
•
Non-GAAP diluted net earnings per share was $0.11, up from net loss of $0.03 per share in the prior quarter
•
Cash generated from operations was $9 million, up from $0.7 million in the prior quarter
•
Adjusted EBITDA was $14.2 million, up from $6.8 million in the prior quarter

Non-GAAP results in the third quarter of 2019 exclude $3.0 million of stock-based compensation expense and $0.2 million of amortization of acquisition-related intangibles. 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 September 30, 2019, cash and cash equivalents, short-term investments and restricted cash, together totaled $80 million, up $6 million compared to June 30, 2019.
Outlook for the Quarter Ending December 31, 2019
 
GAAP
Non-GAAP
Revenue
$94 to $100 million
Gross Margin
27% to 31%
28% to 32%
Operating Expenses
$26 +/- $0.5 million
$23 +/- $0.5 million
Earnings per share
($0.02) to $0.08
$0.04 to $0.14
The non-GAAP outlook for the fourth 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, and the impact of expected amortization of intangibles of approximately $0.2 million.



1


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, October 31, 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 +1-800-367-2403. For international callers, please dial +1-334-777-6978. The Conference ID number is 6277959. 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

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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.


3


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

 
 
As of
 
 
Sep. 30, 2019
 
Dec. 31, 2018
 
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
61,396

 
$
58,185

Short-term investments
 
7,607

 
7,481

Restricted cash
 
10,827

 
11,053

Accounts receivable, net
 
65,245

 
74,751

Inventories
 
48,668

 
52,159

Assets held for sale
 
—

 
2,971

Prepaid expenses and other current assets
 
23,921

 
26,605

Total current assets
 
217,664

 
233,205

Property, plant and equipment, net
 
85,125

 
100,090

Operating lease right-of-use assets
 
16,037

 
—

Purchased intangible assets, net
 
2,315

 
3,018

Goodwill
 
1,115

 
1,115

Other long-term assets
 
3,088

 
3,148

Total assets
 
$
325,344

 
$
340,576

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
58,306

 
$
58,403

Notes payable and short-term borrowing
 
—

 
4,795

Current portion of long-term debt
 
3,054

 
2,897

Accrued and other current liabilities
 
42,414

 
50,288

Total current liabilities
 
103,774

 
116,383

Long-term debt, net of current portion
 
44,771

 
50,454

Operating lease liabilities, noncurrent
 
17,054

 
—

Other noncurrent liabilities
 
9,748

 
13,499

Total liabilities
 
175,347

 
180,336

 
 
 
 
 
Stockholders’ equity:
 
 

 
 

Common stock
 
120

 
116

Additional paid-in capital
 
577,088

 
564,722

Accumulated other comprehensive loss
 
(10,594
)
 
(7,126
)
Accumulated deficit
 
(416,617
)
 
(397,472
)
Total stockholders’ equity
 
149,997

 
160,240

Total liabilities and stockholders’ equity
 
$
325,344

 
$
340,576



4


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

 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep. 30, 2019
 
Jun. 30, 2019
 
Sep. 30, 2018
 
Sep. 30, 2019
 
Sep. 30, 2018
Revenue
 
$
92,392

 
$
81,690

 
$
81,748

 
$
253,448

 
$
231,436

Cost of goods sold (1)
 
66,193

 
66,015

 
62,815

 
195,837

 
187,849

Gross profit
 
26,199

 
15,675

 
18,933

 
57,611

 
43,587

Gross margin
 
28.4
%
 
19.2
%
 
23.2
%
 
22.7
%
 
18.8
%
Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research and development (1)
 
13,688

 
13,793

 
13,177

 
42,164

 
40,308

Sales and marketing (1)
 
3,832

 
3,623

 
4,351

 
12,058

 
12,366

General and administrative (1)
 
7,403

 
7,174

 
8,592

 
22,330

 
23,509

Amortization of purchased intangible assets
 
—

 
—

 
118

 
119

 
357

Asset sale related costs
 
12

 
47

 
251

 
388

 
344

Restructuring charges
 
3

 
79

 
1,133

 
261

 
1,786

Gain on asset sale
 
—

 
(817
)
 
—

 
(817
)
 
—

Total operating expenses
 
24,938

 
23,899

 
27,622

 
76,503

 
78,670

Income (loss) from operations
 
1,261

 
(8,224
)
 
(8,689
)
 
(18,892
)
 
(35,083
)
Interest income
 
95

 
99

 
85

 
293

 
300

Interest expense
 
(483
)
 
(496
)
 
(540
)
 
(1,472
)
 
(2,007
)
Other income (expense), net
 
2,960

 
1,090

 
1,310

 
2,452

 
1,891

Total interest and other income (expense), net
 
2,572

 
693

 
855

 
1,273

 
184

Income (loss) before income taxes
 
3,833

 
(7,531
)
 
(7,834
)
 
(17,619
)
 
(34,899
)
Income tax benefit (provision)
 
(1,561
)
 
205

 
(291
)
 
(1,526
)
 
(2,009
)
Net income (loss)
 
$
2,272

 
$
(7,326
)
 
$
(8,125
)
 
$
(19,145
)
 
$
(36,908
)
Basic net income (loss) per share
 
$
0.05

 
$
(0.16
)
 
$
(0.18
)
 
$
(0.41
)
 
$
(0.82
)
Diluted net income (loss) per share
 
$
0.05

 
$
(0.16
)
 
$
(0.18
)
 
$
(0.41
)
 
$
(0.82
)
Weighted average shares used to compute basic net income (loss) per share
 
47,666

 
46,754

 
45,476

 
46,949

 
44,804

Weighted average shares used to compute diluted net income (loss) per share
 
48,615

 
46,754

 
45,476

 
46,949

 
44,804

 
 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation expense as follows for the periods presented:
 
 
 
 
 
 
 
 
 
 
Cost of goods sold
 
$
441

 
$
609

 
$
553

 
$
1,651

 
$
1,832

Research and development
 
715

 
787

 
1,016

 
2,383

 
2,618

Sales and marketing
 
575

 
599

 
931

 
1,852

 
2,511

General and administrative
 
1,220

 
1,010

 
1,541

 
3,408

 
3,566

Total stock-based compensation expense
 
$
2,951

 
$
3,005

 
$
4,041

 
$
9,294

 
$
10,527



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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
 
Nine Months Ended
 
 
Sep. 30, 2019
 
Jun. 30, 2019
 
Sep. 30, 2018
 
Sep. 30, 2019
 
Sep. 30, 2018
NON-GAAP GROSS PROFIT:
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
26,199

 
$
15,675

 
$
18,933

 
$
57,611

 
$
43,587

Stock-based compensation expense
 
441

 
609

 
553

 
1,651

 
1,832

Amortization of purchased intangible assets
 
185

 
184

 
185

 
553

 
572

Depreciation of acquisition-related fixed asset step-up
 
(66
)
 
(66
)
 
(71
)
 
(198
)
 
(213
)
End-of-life related inventory write-down
 
—

 
3,553

 
—

 
3,553

 
—

Accelerated depreciation
 
—

 
950

 
—

 
2,265

 
—

Restructuring charges
 
—

 
—

 
22

 
—

 
168

Non-GAAP gross profit
 
$
26,759

 
$
20,905

 
$
19,622

 
$
65,435

 
$
45,946

Non-GAAP gross margin as a % of revenue
 
29.0
%
 
25.6
 %
 
24.0
 %
 
25.8
 %
 
19.9
 %
 
 
 
 
 
 
 
 
 
 
 
NON-GAAP TOTAL OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
GAAP total operating expenses
 
$
24,938

 
$
23,899

 
$
27,622

 
$
76,503

 
$
78,670

Stock-based compensation expense
 
(2,510
)
 
(2,396
)
 
(3,488
)
 
(7,643
)
 
(8,695
)
Amortization of purchased intangible assets
 
—

 
—

 
(118
)
 
(119
)
 
(357
)
Depreciation of acquisition-related fixed asset step-up
 
(66
)
 
(67
)
 
(65
)
 
(199
)
 
(200
)
Asset sale related costs
 
(12
)
 
(47
)
 
(252
)
 
(388
)
 
(345
)
Restructuring charges
 
(3
)
 
(79
)
 
(1,133
)
 
(261
)
 
(1,786
)
Litigation settlement
 
—

 
—

 
(450
)
 
—

 
(450
)
Gain on asset sale
 
—

 
817

 
—

 
817

 
—

Non-GAAP total operating expenses
 
$
22,347

 
$
22,127

 
$
22,116

 
$
68,710

 
$
66,837

Non-GAAP total operating expenses as a % of revenue
 
24.2
%
 
27.1
 %
 
27.1
 %
 
27.1
 %
 
28.9
 %
 
 
 
 
 
 
 
 
 
 
 
NON-GAAP OPERATING INCOME (LOSS):
 
 
 
 
 
 
 
 
 
 
GAAP income (loss) from operations
 
$
1,261

 
$
(8,224
)
 
$
(8,689
)
 
$
(18,892
)
 
$
(35,083
)
Stock-based compensation expense
 
2,951

 
3,005

 
4,041

 
9,294

 
10,527

Amortization of purchased intangible assets
 
185

 
184

 
303

 
672

 
929

Depreciation of acquisition-related fixed asset step-up
 
—

 
1

 
(6
)
 
1

 
(13
)
Asset sale related costs
 
12

 
47

 
252

 
388

 
345

End-of-life related inventory write-down
 
—

 
3,553

 
—

 
3,553

 
—

Accelerated depreciation
 
—

 
950

 
—

 
2,265

 
—

Restructuring charges
 
3

 
79

 
1,155

 
261

 
1,954

Litigation settlement
 
—

 
—

 
450

 
—

 
450

Gain on asset sale
 
—

 
(817
)
 
—

 
(817
)
 
—

Non-GAAP income (loss) from operations
 
$
4,412

 
$
(1,222
)
 
$
(2,494
)
 
$
(3,275
)
 
$
(20,891
)
Non-GAAP operating margin as a % of revenue
 
4.8
%
 
(1.5
)%
 
(3.1
)%
 
(1.3
)%
 
(9.0
)%


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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
 
Nine Months Ended
 
 
Sep. 30, 2019
 
Jun. 30, 2019
 
Sep. 30, 2018
 
Sep. 30, 2019
 
Sep. 30, 2018
NON-GAAP NET INCOME (LOSS):
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
 
$
2,272

 
$
(7,326
)
 
$
(8,125
)
 
$
(19,145
)
 
$
(36,908
)
Stock-based compensation expense
 
2,951

 
3,005

 
4,041

 
9,294

 
10,527

Amortization of purchased intangible assets
 
185

 
184

 
303

 
672

 
929

Depreciation of acquisition-related fixed asset step-up
 
—

 
1

 
(6
)
 
1

 
(13
)
Asset sale related costs
 
12

 
47

 
252

 
388

 
345

End-of-life related inventory write-down
 
—

 
3,553

 
—

 
3,553

 
—

Accelerated depreciation
 
—

 
950

 
—

 
2,265

 
—

Restructuring charges
 
3

 
79

 
1,155

 
261

 
1,954

Litigation settlement
 
—

 
—

 
450

 
—

 
450

Gain on asset sale
 
—

 
(817
)
 
—

 
(817
)
 
—

Income tax effect of Non-GAAP adjustments
 
(14
)
 
(895
)
 
(138
)
 
(1,286
)
 
(222
)
Non-GAAP net income (loss)
 
$
5,409

 
$
(1,219
)
 
$
(2,068
)
 
$
(4,814
)
 
$
(22,938
)
Non-GAAP net income (loss) as a % of revenue
 
5.9
%
 
(1.5
)%
 
(2.5
)%
 
(1.9
)%
 
(9.9
)%
 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EBITDA:
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
 
$
2,272

 
$
(7,326
)
 
$
(8,125
)
 
$
(19,145
)
 
$
(36,908
)
Stock-based compensation expense
 
2,951

 
3,005

 
4,041

 
9,294

 
10,527

Amortization of purchased intangible assets
 
185

 
184

 
303

 
672

 
929

Depreciation of acquisition-related fixed asset step-up
 
—

 
1

 
(6
)
 
1

 
(13
)
Asset sale related costs
 
12

 
47

 
252

 
388

 
345

End-of-life related inventory write-down
 
—

 
3,553

 
—

 
3,553

 
—

Accelerated depreciation
 
—

 
950

 
—

 
2,265

 
—

Restructuring charges
 
3

 
79

 
1,155

 
261

 
1,954

Litigation settlement
 
—

 
—

 
450

 
—

 
450

Gain on asset sale
 
—

 
(817
)
 
—

 
(817
)
 
—

Interest expense, net
 
388

 
397

 
455

 
1,179

 
1,707

Income tax benefit (provision)
 
1,561

 
(205
)
 
291

 
1,526

 
2,009

Depreciation expense
 
6,829

 
6,956

 
7,343

 
21,018

 
22,636

Adjusted EBITDA
 
$
14,201

 
$
6,824

 
$
6,159

 
$
20,195

 
$
3,636

Adjusted EBITDA as a % of revenue
 
15.4
%
 
8.4
 %
 
7.5
 %
 
8.0
 %
 
1.6
 %
 
 
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
 
 
GAAP basic net income (loss) per share
 
$
0.05

 
$
(0.16
)
 
$
(0.18
)
 
$
(0.41
)
 
$
(0.82
)
GAAP diluted net income (loss) per share
 
$
0.05

 
$
(0.16
)
 
$
(0.18
)
 
$
(0.41
)
 
$
(0.82
)
Non-GAAP basic net income (loss) per share
 
$
0.11

 
$
(0.03
)
 
$
(0.05
)
 
$
(0.10
)
 
$
(0.51
)
Non-GAAP diluted net income (loss) per share
 
$
0.11

 
$
(0.03
)
 
$
(0.05
)
 
$
(0.10
)
 
$
(0.51
)
 
 
 
 
 
 
 
 
 
 
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE
 
47,666

 
46,754

 
45,476

 
46,949

 
44,804

SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE
 
48,615

 
46,754

 
45,476

 
46,949

 
44,804

SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE
 
50,051

 
46,754

 
45,476

 
46,949

 
44,804


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©2019 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.
Contacts
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



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