NPTN NeoPhotonics Corporation

• Products for 400G and above applications grew 134% year-over-year
• Revenue, Gross Margin & Operating profit above mid-point of guidance
• Announced successful completion of 2,000 hours of high temperature reliability testing for QSFP-DD 400ZR modules, plus successful demonstrations in fully populated Ethernet switch

NeoPhotonics Corporation (NYSE: NPTN), a leading developer of silicon photonics and advanced hybrid photonic integrated circuit-based lasers, modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its first quarter of 2021.

“NeoPhotonics again delivered strong results in the first quarter, as we transition our business to cloud-centric. We demonstrated transmission of 400G data rates over 800 km using our 400ZR+ coherent modules,” said Tim Jenks, NeoPhotonics CEO. “We are excited about the prospects these modules are demonstrating for the next generation of highest speed over distance interconnects,” concluded Mr. Jenks.

First Quarter 2021 Summary

• Revenue was $60.9 million, down 11% quarter-over-quarter and 37% year-over-year
• Gross margin was 21.9%, down from 22.7% in the prior quarter
• Non-GAAP gross margin was 22.4%, down from 24.7% in the prior quarter
• Net loss per share was $0.21, compared to net loss of $0.23 per share in the prior quarter
• Non-GAAP net loss per share was $0.15, compared to Non-GAAP net loss of $0.14 per share in the prior quarter
• Adjusted EBITDA was negative $0.7 million, up from a negative $4.5 million in the prior quarter

Non-GAAP results in the first quarter of 2021 exclude a net gain of $0.6 million on a reduction in materials reserves, and expenses of $3.3 million of stock-based compensation, $0.5 million of accelerated depreciation, amortization and other 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, 2021, cash and cash equivalents, short-term investments and restricted cash totaled $111 million.

Outlook for the Quarter Ending June 30, 2021

 

GAAP

Non-GAAP

Revenue

$59 to $65 million

Gross Margin

15% to 19%

17% to 21%

Operating Expenses

$25 to $26 million

$22.5 to $23.5 million

Earnings per share

($0.35) to ($0.25)

($0.30) to ($0.20)

The non-GAAP outlook for the second quarter of 2021 excludes the expected impact of stock-based compensation expense of approximately $3.3 million, of which $0.7 million is estimated for cost of goods sold, accelerated depreciation and amortization of $0.4 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

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 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.

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 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 conditions in the industry or negotiating leverage of buyers; the impact of any previous or future acquisitions or divestitures of assets and related product lines; the discontinuance or end of life of 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, the cloud and datacenter 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 Reports on Form 10-K for the year ended December 31, 2020. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

©2021 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, 2021

 

Dec. 31, 2020

 

 

 

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

83,068

 

 

$

95,117

 

Short-term investments

 

27,671

 

 

27,669

 

Restricted cash

 

488

 

 

489

 

Accounts receivable, net

 

39,975

 

 

45,232

 

Inventories

 

46,373

 

 

46,901

 

Prepaid expenses and other current assets

 

15,425

 

 

20,173

 

Total current assets

 

213,000

 

 

235,581

 

Property, plant and equipment, net

 

60,977

 

 

66,765

 

Operating lease right-of-use assets

 

13,315

 

 

13,823

 

Purchased intangible assets, net

 

1,280

 

 

1,468

 

Goodwill

 

1,115

 

 

1,115

 

Other long-term assets

 

4,808

 

 

4,912

 

Total assets

 

$

294,495

 

 

$

323,664

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

37,538

 

 

$

43,539

 

Current portion of long-term debt

 

3,026

 

 

3,232

 

Accrued and other current liabilities

 

32,672

 

 

42,053

 

Total current liabilities

 

73,236

 

 

88,824

 

Long-term debt, net of current portion

 

29,047

 

 

30,327

 

Operating lease liabilities, noncurrent

 

13,974

 

 

14,522

 

Other noncurrent liabilities

 

8,580

 

 

9,584

 

Total liabilities

 

124,837

 

 

143,257

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock

 

128

 

 

126

 

Additional paid-in capital

 

599,744

 

 

597,460

 

Accumulated other comprehensive income (loss)

 

(608

)

 

1,735

 

Accumulated deficit

 

(429,606

)

 

(418,914

)

Total stockholders’ equity

 

169,658

 

 

180,407

 

Total liabilities and stockholders’ equity

 

$

294,495

 

 

$

323,664

 

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

 

 

 

Three Months Ended

 

 

Mar. 31, 2021

 

Dec. 31, 2020

 

Mar. 31, 2020

Revenue

 

$

60,926

 

 

$

68,193

 

 

$

97,401

 

Cost of goods sold (1)

 

47,587

 

 

52,743

 

 

67,675

 

Gross profit

 

13,339

 

 

15,450

 

 

29,726

 

Gross margin

 

21.9

%

 

22.7

%

 

30.5

%

Operating expenses:

 

 

 

 

 

 

Research and development (1)

 

13,098

 

 

15,251

 

 

11,884

 

Sales and marketing (1)

 

3,865

 

 

3,999

 

 

3,659

 

General and administrative (1)

 

7,294

 

 

7,219

 

 

6,789

 

Acquisition and asset sale related costs

 

163

 

 

875

 

 

12

 

Restructuring charges

 

—

 

 

15

 

 

—

 

Litigation Settlement

 

—

 

 

(2,988

)

 

—

 

Gain on asset sale

 

—

 

 

(1,044

)

 

—

 

Total operating expenses

 

24,420

 

 

23,327

 

 

22,344

 

Income (loss) from operations

 

(11,081

)

 

(7,877

)

 

7,382

 

Interest income

 

105

 

 

41

 

 

98

 

Interest expense

 

(227

)

 

(240

)

 

(378

)

Other income (expense), net

 

1,143

 

 

(3,416

)

 

1,198

 

Total interest and other income (expense), net

 

1,021

 

 

(3,615

)

 

918

 

Income (loss) before income taxes

 

(10,060

)

 

(11,492

)

 

8,300

 

Income tax provision

 

(632

)

 

(3

)

 

(1,993

)

Net income (loss)

 

$

(10,692

)

 

$

(11,495

)

 

$

6,307

 

Basic net income (loss) per share

 

$

(0.21

)

 

$

(0.23

)

 

$

0.13

 

Diluted net income (loss) per share

 

$

(0.21

)

 

$

(0.23

)

 

$

0.12

 

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

 

50,717

 

 

50,256

 

 

48,615

 

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

 

50,717

 

 

50,256

 

 

50,617

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Cost of goods sold

 

$

548

 

 

$

540

 

 

$

537

 

Research and development

 

862

 

 

862

 

 

758

 

Sales and marketing

 

554

 

 

570

 

 

530

 

General and administrative

 

1,313

 

 

1,287

 

 

693

 

Total stock-based compensation expense

 

$

3,277

 

 

$

3,259

 

 

$

2,518

 

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, 2021

 

Dec. 31, 2020

 

Mar. 31, 2020

NON-GAAP GROSS PROFIT:

 

 

 

 

 

 

GAAP gross profit

 

$

13,339

 

 

$

15,450

 

 

$

29,726

 

Stock-based compensation expense

 

548

 

 

540

 

 

537

 

Amortization of purchased intangible assets

 

185

 

 

185

 

 

184

 

Depreciation of acquisition-related fixed asset step-up

 

(6

)

 

(6

)

 

(12

)

End-of-life related inventory write-down

 

(577

)

 

—

 

 

—

 

Accelerated depreciation

 

174

 

 

515

 

 

—

 

Restructuring charges

 

—

 

 

161

 

 

—

 

Non-GAAP gross profit

 

$

13,663

 

 

$

16,845

 

 

$

30,435

 

Non-GAAP gross margin as a % of revenue

 

22.4

%

 

24.7

%

 

31.2

%

 

 

 

 

 

 

 

NON-GAAP TOTAL OPERATING EXPENSES:

 

 

 

 

 

 

GAAP total operating expenses

 

$

24,420

 

 

$

23,327

 

 

$

22,344

 

Stock-based compensation expense

 

(2,729

)

 

(2,719

)

 

(1,981

)

Depreciation of acquisition-related fixed asset step-up

 

(25

)

 

(28

)

 

(29

)

Acquisition and asset sale related costs

 

(163

)

 

(875

)

 

(12

)

Restructuring charges

 

—

 

 

(15

)

 

—

 

Litigation settlement

 

—

 

 

2,988

 

 

—

 

Gain on asset sale

 

—

 

 

1,044

 

 

—

 

Non-GAAP total operating expenses

 

$

21,503

 

 

$

23,722

 

 

$

20,322

 

Non-GAAP total operating expenses as a % of revenue

 

35.3

%

 

34.8

%

 

20.9

%

 

 

 

 

 

 

 

NON-GAAP OPERATING INCOME (LOSS):

 

 

 

 

 

 

GAAP income (loss) from operations

 

$

(11,081

)

 

$

(7,877

)

 

$

7,382

 

Stock-based compensation expense

 

3,277

 

 

3,259

 

 

2,518

 

Amortization of purchased intangible assets

 

185

 

 

185

 

 

184

 

Depreciation of acquisition-related fixed asset step-up

 

19

 

 

22

 

 

17

 

Acquisition and asset sale related costs

 

163

 

 

875

 

 

12

 

End-of-life related inventory write-down

 

(577

)

 

—

 

 

—

 

Accelerated depreciation

 

174

 

 

515

 

 

—

 

Restructuring charges

 

—

 

 

176

 

 

—

 

Litigation settlement

 

—

 

 

(2,988

)

 

—

 

Gain on asset sale

 

—

 

 

(1,044

)

 

—

 

Non-GAAP income (loss) from operations

 

$

(7,840

)

 

$

(6,877

)

 

$

10,113

 

Non-GAAP operating margin as a % of revenue

 

(12.9

)%

 

(10.1

)%

 

10.4

%

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, 2021

 

Dec. 31, 2020

 

Mar. 31, 2020

NON-GAAP NET INCOME (LOSS):

 

 

 

 

 

 

GAAP net income (loss)

 

$

(10,692

)

 

$

(11,495

)

 

$

6,307

 

Stock-based compensation expense

 

3,277

 

 

3,259

 

 

2,518

 

Amortization of purchased intangible assets

 

185

 

 

185

 

 

184

 

Depreciation of acquisition-related fixed asset step-up

 

19

 

 

22

 

 

17

 

Acquisition and asset sale related costs

 

163

 

 

875

 

 

12

 

End-of-life related inventory write-down

 

(577

)

 

—

 

 

—

 

Accelerated depreciation

 

174

 

 

515

 

 

—

 

Restructuring charges

 

—

 

 

176

 

 

—

 

Litigation settlement

 

—

 

 

(2,988

)

 

—

 

Gain on asset sale

 

—

 

 

(1,044

)

 

—

 

Income tax effect of Non-GAAP adjustments

 

(2

)

 

3,255

 

 

26

 

Non-GAAP net income (loss)

 

$

(7,453

)

 

$

(7,240

)

 

$

9,064

 

Non-GAAP net income (loss) as a % of revenue

 

(12.2

)%

 

(10.6

)%

 

9.3

%

 

 

 

 

 

 

 

ADJUSTED EBITDA:

 

 

 

 

 

 

GAAP net income (loss)

 

$

(10,692

)

 

$

(11,495

)

 

$

6,307

 

Stock-based compensation expense

 

3,277

 

 

3,259

 

 

2,518

 

Amortization of purchased intangible assets

 

185

 

 

185

 

 

184

 

Depreciation of acquisition-related fixed asset step-up

 

19

 

 

22

 

 

17

 

Acquisition and asset sale related costs

 

163

 

 

875

 

 

12

 

End-of-life related inventory write-down

 

(577

)

 

—

 

 

—

 

Accelerated depreciation

 

174

 

 

515

 

 

—

 

Restructuring charges

 

—

 

 

176

 

 

—

 

Litigation settlement

 

—

 

 

(2,988

)

 

—

 

Gain on asset sale

 

—

 

 

(1,044

)

 

—

 

Interest expense, net

 

122

 

 

199

 

 

280

 

Income tax provision

 

632

 

 

3

 

 

1,993

 

Depreciation expense

 

6,003

 

 

5,831

 

 

6,473

 

Adjusted EBITDA

 

$

(694

)

 

$

(4,462

)

 

$

17,784

 

Adjusted EBITDA as a % of revenue

 

(1.1

)%

 

(6.5

)%

 

18.3

%

 

 

 

 

 

 

 

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

GAAP basic net income (loss) per share

 

$

(0.21

)

 

$

(0.23

)

 

$

0.13

 

GAAP diluted net income (loss) per share

 

$

(0.21

)

 

$

(0.23

)

 

$

0.12

 

Non-GAAP basic net income (loss) per share

 

$

(0.15

)

 

$

(0.14

)

 

$

0.19

 

Non-GAAP diluted net income (loss) per share

 

$

(0.15

)

 

$

(0.14

)

 

$

0.17

 

 

 

 

 

 

 

 

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

 

50,717

 

 

50,256

 

 

48,615

 

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

 

50,717

 

 

50,256

 

 

50,617

 

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

 

50,717

 

 

50,256

 

 

52,406

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005954/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