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.
©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.
| 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 | |||||||||
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