EX-99.1 2 exhibit991202004302020.htm EXHIBIT 99.1 Exhibit
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NeoPhotonics Reports First Quarter 2020 Financial Results

•
Revenue of $97.4 million for the quarter, up 23% year-over-year
•
Gross Margin was 30.5%, nearly 11 percentage points higher year-over-year

SAN JOSE, Calif. - April 30, 2020 - NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of advanced hybrid photonic integrated circuit-based modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its first quarter ended March 31, 2020.
“We are pleased to deliver another profitable quarter, notably through our seasonally low first quarter, in spite of supply chain risks related to the pandemic,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “As we look forward, the industry continues to move in our direction with higher and higher speed over distance requirements, which are satisfied by our ultra-narrow linewidth lasers, high baud rate coherent components and our Coherent pluggable DCO modules utilizing these leading optical components.  Needless to say, we are optimistic about our future,” concluded Mr. Jenks.
First Quarter Summary
•
Revenue was $97.4 million, down 6% quarter-over-quarter and up 23% year-over-year
•
Gross margin was 30.5%, up from 30.2% in the prior quarter and from 19.8% in the prior year
•
Non-GAAP Gross margin was 31.2%, up from 30.9% in the prior quarter and up from 22.4% in the prior year
•
Diluted net income per share was $0.12, in comparison to a net income per share of $0.04 in the prior quarter and to a net loss per share of $0.30 in the same period last year
•
Non-GAAP diluted net income per share was $0.17, up from $0.10 in the prior quarter and up from a net loss of $0.19 in the same period last year
•
Cash generated from operations was $24.9 million, up from $16.3 million in the prior quarter
•
Adjusted EBITDA was $17.8 million, up from $12.5 million in the prior quarter and up from a loss of $0.8 million in the same period last year

Non-GAAP results in the first quarter of 2020 exclude $2.5 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 March 31, 2020 cash and cash equivalents, short-term investments and restricted cash, together totaled $109.5 million, up $20.4 million compared to December 31, 2019. Restricted cash as of March 31, 2020 was $10.9 million.


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Outlook for the Quarter Ending June 30, 2020
 
GAAP
Non-GAAP
Revenue
$94 to $102 million
Gross Margin
29% to 33%
30% to 34%
Operating Expenses
$27 to $28 million
$24 to $25 million
Earnings per share
$0.02 net loss to $0.08 net profit
$0.05 to $0.15 net profit
This outlook includes approximately $10 million of Covid-19 pandemic related impact to Q2 revenue, reflecting identified supply chain risks.
The non-GAAP outlook for the second quarter of 2020 excludes the expected impact of stock-based compensation expense of approximately $3.3 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.
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, April 30, 2020 at 4:30 PM Eastern Time (1:30 PM Pacific Time). The call will be available, live, to interested parties by dialing +1-888-204-4368. For international callers, please dial +1-323-994-2093. The Conference ID number is 1041932. 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.


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About NeoPhotonics
NeoPhotonics is a leading developer and manufacturer of lasers and optoelectronic solutions that transmit, receive and switch high-speed digital optical signals for Cloud and hyper-scale data center internet content provider and telecom networks. The Company’s products enable cost-effective, high-speed over distance data transmission and efficient allocation of bandwidth in optical 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.
Legal Notice Regarding Forward-Looking Statements
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 impacts of the Covid-19 pandemic; possible reduction in or volatility of customer orders or delays in shipments of products to customers; 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; 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; 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/A for the year ended December 31, 2019. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.
©2020 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.



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

 
 
As of
 
 
Mar 31, 2020
 
Dec 31, 2019
 
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
90,905

 
$
70,467

Short-term investments
 
7,662

 
7,638

Restricted cash
 
10,932

 
10,972

Accounts receivable, net
 
61,663

 
68,890

Inventories
 
46,146

 
46,930

Prepaid expenses and other current assets
 
26,178

 
25,851

Total current assets
 
243,486

 
230,748

Property, plant and equipment, net
 
76,293

 
81,133

Operating lease right-of-use assets
 
15,128

 
15,603

Purchased intangible assets, net
 
1,953

 
2,151

Goodwill
 
1,115

 
1,115

Other long-term assets
 
3,781

 
3,929

Total assets
 
$
341,756

 
$
334,679

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
58,283

 
$
58,554

Current portion of long-term debt
 
3,066

 
3,044

Accrued and other current liabilities
 
48,710

 
47,481

Total current liabilities
 
110,059

 
109,079

Long-term debt, net of current portion
 
37,791

 
39,237

Operating lease liabilities, noncurrent
 
15,998

 
16,543

Other noncurrent liabilities
 
10,670

 
9,614

Total liabilities
 
174,518

 
174,473

 
 
 
 
 
Stockholders’ equity:
 
 

 
 

Common stock
 
122

 
121

Additional paid-in capital
 
585,198

 
582,504

Accumulated other comprehensive loss
 
(9,841
)
 
(7,871
)
Accumulated deficit
 
(408,241
)
 
(414,548
)
Total stockholders’ equity
 
167,238

 
160,206

Total liabilities and stockholders’ equity
 
$
341,756

 
$
334,679



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

 
 
Three Months Ended
 
 
Mar. 31, 2020
 
Dec. 31, 2019
 
Mar. 31, 2019
Revenue
 
$
97,401

 
$
103,356

 
$
79,366

Cost of goods sold (1)
 
67,675

 
72,154

 
63,629

Gross profit
 
29,726

 
31,202

 
15,737

Gross margin
 
30.5
%
 
30.2
%
 
19.8
%
Operating expenses:
 
 
 
 
 
 
Research and development (1)
 
11,884

 
15,470

 
14,683

Sales and marketing (1)
 
3,659

 
4,030

 
4,603

General and administrative (1)
 
6,789

 
7,429

 
7,753

Amortization of purchased intangible assets
 
—

 
—

 
119

Asset sale related costs
 
12

 
9

 
329

Restructuring charges
 
—

 
—

 
179

Gain on asset sale
 
—

 
(86
)
 
—

Total operating expenses
 
22,344

 
26,852

 
27,666

Income (loss) from operations
 
7,382

 
4,350

 
(11,929
)
Interest income
 
98

 
83

 
99

Interest expense
 
(378
)
 
(447
)
 
(493
)
Other income (expense), net
 
1,198

 
(1,810
)
 
(1,598
)
Total interest and other income (expense), net
 
918

 
(2,174
)
 
(1,992
)
Income (loss) before income taxes
 
8,300

 
2,176

 
(13,921
)
Income tax provision
 
(1,993
)
 
(107
)
 
(170
)
Net income (loss)
 
$
6,307

 
$
2,069

 
$
(14,091
)
Basic net income (loss) per share
 
$
0.13

 
$
0.04

 
$
(0.30
)
Diluted net income (loss) per share
 
$
0.12

 
$
0.04

 
$
(0.30
)
Weighted average shares used to compute basic net income (loss) per share
 
48,615

 
48,358

 
46,414

Weighted average shares used to compute diluted net income (loss) per share
 
50,617

 
50,238

 
46,414

 
 
 
 
 
 
 
(1) Includes stock-based compensation expense as follows for the periods presented:
 
 
 
 
 
 
Cost of goods sold
 
$
537

 
$
593

 
$
601

Research and development
 
758

 
755

 
881

Sales and marketing
 
530

 
559

 
678

General and administrative
 
693

 
1,255

 
1,178

Total stock-based compensation expense
 
$
2,518

 
$
3,162

 
$
3,338



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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
 
 
Mar. 31, 2020
 
Dec. 31, 2019
 
Mar. 31, 2019
NON-GAAP GROSS PROFIT:
 
 
 
 
 
 
GAAP gross profit
 
$
29,726

 
$
31,202

 
$
15,737

Stock-based compensation expense
 
537

 
593

 
601

Amortization of purchased intangible assets
 
184

 
184

 
184

Depreciation of acquisition-related fixed asset step-up
 
(12
)
 
(66
)
 
(66
)
Accelerated depreciation
 
—

 
—

 
1,315

Non-GAAP gross profit
 
$
30,435

 
$
31,913

 
$
17,771

Non-GAAP gross margin as a % of revenue
 
31.2
%
 
30.9
%
 
22.4
 %
 
 
 
 
 
 
 
NON-GAAP TOTAL OPERATING EXPENSES:
 
 
 
 
 
 
GAAP total operating expenses
 
$
22,344

 
$
26,852

 
$
27,666

Stock-based compensation expense
 
(1,981
)
 
(2,569
)
 
(2,737
)
Amortization of purchased intangible assets
 
—

 
—

 
(119
)
Depreciation of acquisition-related fixed asset step-up
 
(29
)
 
(67
)
 
(66
)
Asset sale related costs
 
(12
)
 
(9
)
 
(329
)
Restructuring charges
 
—

 
—

 
(179
)
Gain on asset sale
 
—

 
86

 
—

Non-GAAP total operating expenses
 
$
20,322

 
$
24,293

 
$
24,236

Non-GAAP total operating expenses as a % of revenue
 
20.9
%
 
23.5
%
 
30.5
 %
 
 
 
 
 
 
 
NON-GAAP OPERATING INCOME (LOSS):
 
 
 
 
 
 
GAAP income (loss) from operations
 
$
7,382

 
$
4,350

 
$
(11,929
)
Stock-based compensation expense
 
2,518

 
3,162

 
3,338

Amortization of purchased intangible assets
 
184

 
184

 
303

Depreciation of acquisition-related fixed asset step-up
 
17

 
1

 
—

Asset sale related costs
 
12

 
9

 
329

Accelerated depreciation
 
—

 
—

 
1,315

Restructuring charges
 
—

 
—

 
179

Gain on asset sale
 
—

 
(86
)
 
—

Non-GAAP income (loss) from operations
 
$
10,113

 
$
7,620

 
$
(6,465
)
Non-GAAP operating margin as a % of revenue
 
10.4
%
 
7.4
%
 
(8.1
)%


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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
 
 
Mar. 31, 2020
 
Dec. 31, 2019
 
Mar. 31, 2019
NON-GAAP NET INCOME (LOSS):
 
 
 
 
 
 
GAAP net income (loss)
 
$
6,307

 
$
2,069

 
$
(14,091
)
Stock-based compensation expense
 
2,518

 
3,162

 
3,338

Amortization of purchased intangible assets
 
184

 
184

 
303

Depreciation of acquisition-related fixed asset step-up
 
17

 
1

 
—

Asset sale related costs
 
12

 
9

 
329

Accelerated depreciation
 
—

 
—

 
1,315

Restructuring charges
 
—

 
—

 
179

Gain on asset sale
 
—

 
(86
)
 
—

Income tax effect of Non-GAAP adjustments
 
26

 
(82
)
 
(377
)
Non-GAAP net income (loss)
 
$
9,064

 
$
5,257

 
$
(9,004
)
Non-GAAP net income (loss) as a % of revenue
 
9.3
%
 
5.1
%
 
(11.3
)%
 
 
 
 
 
 
 
ADJUSTED EBITDA:
 
 
 
 
 
 
GAAP net income (loss)
 
$
6,307

 
$
2,069

 
$
(14,091
)
Stock-based compensation expense
 
2,518

 
3,162

 
3,338

Amortization of purchased intangible assets
 
184

 
184

 
303

Depreciation of acquisition-related fixed asset step-up
 
17

 
1

 
—

Asset sale related costs
 
12

 
9

 
329

Accelerated depreciation
 
—

 
—

 
1,315

Restructuring charges
 
—

 
—

 
179

Gain on asset sale
 
—

 
(86
)
 
—

Interest expense, net
 
280

 
364

 
394

Income tax provision
 
1,993

 
107

 
170

Depreciation expense
 
6,473

 
6,647

 
7,233

Adjusted EBITDA
 
$
17,784

 
$
12,457

 
$
(830
)
Adjusted EBITDA as a % of revenue
 
18.3
%
 
12.1
%
 
(1.0
)%
 
 
 
 
 
 
 
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
 
 
 
 
 
 
GAAP basic net income (loss) per share
 
$
0.13

 
$
0.04

 
$
(0.30
)
GAAP diluted net income (loss) per share
 
$
0.12

 
$
0.04

 
$
(0.30
)
Non-GAAP basic net income (loss) per share
 
$
0.19

 
$
0.11

 
$
(0.19
)
Non-GAAP diluted net income (loss) per share
 
$
0.17

 
$
0.10

 
$
(0.19
)
 
 
 
 
 
 
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE
 
48,615

 
48,358

 
46,414

SHARES USED TO COMPUTE GAAP DILUTED NET INCOME
    (LOSS) PER SHARE
 
50,617

 
50,238

 
46,414

SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME
    (LOSS) PER SHARE
 
52,406

 
52,277

 
46,414


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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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