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| 8-K - 8-K - NEOPHOTONICS CORP | a8-k201902272020docume.htm |
NeoPhotonics Reports Fourth Quarter and Fiscal Year 2019 Financial Results
• | Revenue of $103.4 million for the quarter, up 12% sequentially; up 13% year-over-year |
• | Gross margins expanded 2 points over the prior quarter to 30% on a GAAP basis and 31% non-GAAP |
SAN JOSE, Calif. - February 27, 2020 - NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and datacenter applications, today announced financial results for its fourth quarter and fiscal year ended December 31, 2019.
“Our strong revenue and gross margin expansion throughout the year was a result of our leadership in high speed products, serving the largest players in the industry in DCI and the transition of Cloud and hyper-scale data center networks to coherent technologies,” said Tim Jenks, Chairman and CEO of NeoPhotonics.
Fourth Quarter Summary
• | Revenue was $103.4 million, up 12% quarter-over-quarter and 13% year-over-year |
• | Gross margin was 30.2%, up from 28.4% in the prior quarter |
• | Non-GAAP Gross margin was 30.9%, up from 29.0% in the prior quarter |
• | Diluted net income per share was $0.04, compared to $0.05 per share in the prior quarter |
• | Non-GAAP diluted net income per share was $0.10, compared to $0.11 in the prior quarter |
• | Cash generated from operations was $16 million, up from $9 million in the prior quarter |
• | Adjusted EBITDA was $12.5 million, down from $14.2 million in the prior quarter |
Non-GAAP results in the fourth quarter of 2019 exclude $3.2 million of stock-based compensation expense, $0.2 million of amortization of acquisition-related intangibles and $0.1 million of gain on sale of assets. 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.
Annual Summary
• | Revenue in 2019 was $356.8 million, compared to $322.5 million in 2018 |
• | Gross margin was 24.9%, compared to 20.5% in 2018 |
• | Non-GAAP Gross margin was 27.3%, compared to 22.3% in 2018 |
• | Diluted net loss per share was $0.36, compared to $0.97 in 2018 |
• | Non-GAAP diluted net income per share was $0.01, compared to a net loss of $0.45 in 2018 |
• | Cash generated from operations was $34.7 million, compared to $19.6 million in 2018 |
• | Adjusted EBITDA was $32.7 million, compared to $14.2 million in 2018 |
Non-GAAP results in 2019 exclude $12.5 million of stock-based compensation expense, $5.8 million for inventory write-downs and accelerated depreciation, $1.5 million of divestiture costs, amortization of acquisition-related intangibles and restructuring charges, and $0.9 million of gain on sale of Russia assets. 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 December 31, 2019, cash and cash equivalents, short-term investments and restricted cash, together totaled $89.1 million, up $9.2 million compared to September 30, 2019 and up $12.4 million year-over-
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year. Restricted cash as of December 31, 2019 was $11.0 million, approximately flat compared to September 30, 2019.
Outlook for the Quarter Ending March 31, 2020
GAAP | Non-GAAP | |
Revenue | $83 to $90 million | |
Gross Margin | 27% to 31% | 28% to 32% |
Operating Expenses | $25 to $26 million | $22 to $23 million |
Earnings per share | $(0.05) to $0.05 | $0.00 to $0.10 |
This outlook includes approximately $10 million of estimated coronavirus-related impacts to Q1 revenue reflecting reduced production in the quarter and added supply chain risks.
The non-GAAP outlook for the first 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, February 27, 2020 at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing +800-367-2403. For international callers, please dial +1-334-777-6978. The Conference ID number is 1233987. 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 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; 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; potential impacts of the coronavirus outbreak; 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, 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.
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NeoPhotonics Corporation
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
As of | ||||||||
Dec. 31, 2019 | Dec. 31, 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 70,467 | $ | 58,185 | ||||
Short-term investments | 7,638 | 7,481 | ||||||
Restricted cash | 10,972 | 11,053 | ||||||
Accounts receivable, net | 68,890 | 74,751 | ||||||
Inventories | 46,930 | 52,159 | ||||||
Assets held for sale | — | 2,971 | ||||||
Prepaid expenses and other current assets | 25,851 | 26,605 | ||||||
Total current assets | 230,748 | 233,205 | ||||||
Property, plant and equipment, net | 81,133 | 100,090 | ||||||
Operating lease right-of-use assets | 15,603 | — | ||||||
Purchased intangible assets, net | 2,151 | 3,018 | ||||||
Goodwill | 1,115 | 1,115 | ||||||
Other long-term assets | 3,929 | 3,148 | ||||||
Total assets | $ | 334,679 | $ | 340,576 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 58,554 | $ | 58,403 | ||||
Notes payable and short-term borrowing | — | 4,795 | ||||||
Current portion of long-term debt | 3,044 | 2,897 | ||||||
Accrued and other current liabilities | 47,481 | 50,288 | ||||||
Total current liabilities | 109,079 | 116,383 | ||||||
Long-term debt, net of current portion | 39,237 | 50,454 | ||||||
Operating lease liabilities, noncurrent | 16,543 | — | ||||||
Other noncurrent liabilities | 9,614 | 13,499 | ||||||
Total liabilities | 174,473 | 180,336 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 121 | 116 | ||||||
Additional paid-in capital | 582,504 | 564,722 | ||||||
Accumulated other comprehensive loss | (7,871 | ) | (7,126 | ) | ||||
Accumulated deficit | (414,548 | ) | (397,472 | ) | ||||
Total stockholders’ equity | 160,206 | 160,240 | ||||||
Total liabilities and stockholders’ equity | $ | 334,679 | $ | 340,576 | ||||
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NeoPhotonics Corporation
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages and per share data)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||||||||||||||||
Revenue | $ | 103,356 | $ | 92,392 | $ | 91,104 | $ | 356,804 | $ | 322,540 | ||||||||||
Cost of goods sold (1) | 72,154 | 66,193 | 68,518 | 267,991 | 256,367 | |||||||||||||||
Gross profit | 31,202 | 26,199 | 22,586 | 88,813 | 66,173 | |||||||||||||||
Gross margin | 30.2 | % | 28.4 | % | 24.8 | % | 24.9 | % | 20.5 | % | ||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development (1) | 15,470 | 13,688 | 13,510 | 57,634 | 53,818 | |||||||||||||||
Sales and marketing (1) | 4,030 | 3,832 | 4,362 | 16,088 | 16,728 | |||||||||||||||
General and administrative (1) | 7,429 | 7,403 | 7,344 | 29,759 | 30,403 | |||||||||||||||
Amortization of purchased intangible assets | — | — | 118 | 119 | 475 | |||||||||||||||
Asset sale related costs | 9 | 12 | 83 | 397 | 427 | |||||||||||||||
Restructuring charges | — | 3 | 1,349 | 261 | 3,135 | |||||||||||||||
Litigation settlement | — | — | 2,195 | — | 2,645 | |||||||||||||||
Loss (gain) on asset sale | (86 | ) | — | 200 | (903 | ) | 200 | |||||||||||||
Total operating expenses | 26,852 | 24,938 | 29,161 | 103,355 | 107,831 | |||||||||||||||
Income (loss) from operations | 4,350 | 1,261 | (6,575 | ) | (14,542 | ) | (41,658 | ) | ||||||||||||
Interest income | 83 | 95 | 97 | 376 | 397 | |||||||||||||||
Interest expense | (447 | ) | (483 | ) | (486 | ) | (1,919 | ) | (2,493 | ) | ||||||||||
Other income (expense), net | (1,810 | ) | 2,960 | (445 | ) | 642 | 1,446 | |||||||||||||
Total interest and other income (expense), net | (2,174 | ) | 2,572 | (834 | ) | (901 | ) | (650 | ) | |||||||||||
Income (loss) before income taxes | 2,176 | 3,833 | (7,409 | ) | (15,443 | ) | (42,308 | ) | ||||||||||||
Income tax benefit (provision) | (107 | ) | (1,561 | ) | 680 | (1,633 | ) | (1,329 | ) | |||||||||||
Net income (loss) | $ | 2,069 | $ | 2,272 | $ | (6,729 | ) | $ | (17,076 | ) | $ | (43,637 | ) | |||||||
Basic net income (loss) per share | $ | 0.04 | $ | 0.05 | $ | (0.15 | ) | $ | (0.36 | ) | $ | (0.97 | ) | |||||||
Diluted net income (loss) per share | $ | 0.04 | $ | 0.05 | $ | (0.15 | ) | $ | (0.36 | ) | $ | (0.97 | ) | |||||||
Weighted average shares used to compute basic net income (loss) per share | 48,358 | 47,666 | 46,150 | 47,304 | 45,144 | |||||||||||||||
Weighted average shares used to compute diluted net income (loss) per share | 50,238 | 48,615 | 46,150 | 47,304 | 45,144 | |||||||||||||||
(1) Includes stock-based compensation expense as follows for the periods presented: | ||||||||||||||||||||
Cost of goods sold | $ | 593 | $ | 441 | $ | 764 | $ | 2,244 | $ | 2,596 | ||||||||||
Research and development | 755 | 715 | 952 | 3,138 | 3,570 | |||||||||||||||
Sales and marketing | 559 | 575 | 737 | 2,411 | 3,248 | |||||||||||||||
General and administrative | 1,255 | 1,220 | 1,162 | 4,663 | 4,728 | |||||||||||||||
Total stock-based compensation expense | $ | 3,162 | $ | 2,951 | $ | 3,615 | $ | 12,456 | $ | 14,142 | ||||||||||
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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 | Twelve Months Ended | |||||||||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||||||||||||||||
NON-GAAP GROSS PROFIT: | ||||||||||||||||||||
GAAP gross profit | $ | 31,202 | $ | 26,199 | $ | 22,586 | $ | 88,813 | $ | 66,173 | ||||||||||
Stock-based compensation expense | 593 | 441 | 764 | 2,244 | 2,596 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 185 | 184 | 737 | 756 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | (66 | ) | (66 | ) | (75 | ) | (264 | ) | (288 | ) | ||||||||||
End-of-life related inventory write-down | — | — | 2,565 | 3,553 | 2,565 | |||||||||||||||
Accelerated depreciation | — | — | — | 2,265 | — | |||||||||||||||
Restructuring charges | — | — | — | — | 168 | |||||||||||||||
Non-GAAP gross profit | $ | 31,913 | $ | 26,759 | $ | 26,024 | $ | 97,348 | $ | 71,970 | ||||||||||
Non-GAAP gross margin as a % of revenue | 30.9 | % | 29.0 | % | 28.6 | % | 27.3 | % | 22.3 | % | ||||||||||
NON-GAAP TOTAL OPERATING EXPENSES: | ||||||||||||||||||||
GAAP total operating expenses | $ | 26,852 | $ | 24,938 | $ | 29,161 | $ | 103,355 | $ | 107,831 | ||||||||||
Stock-based compensation expense | (2,569 | ) | (2,510 | ) | (2,851 | ) | (10,212 | ) | (11,546 | ) | ||||||||||
Amortization of purchased intangible assets | — | — | (118 | ) | (119 | ) | (475 | ) | ||||||||||||
Depreciation of acquisition-related fixed asset step-up | (67 | ) | (66 | ) | (66 | ) | (266 | ) | (266 | ) | ||||||||||
Asset sale related costs | (9 | ) | (12 | ) | (83 | ) | (397 | ) | (427 | ) | ||||||||||
Restructuring charges | — | (3 | ) | (1,349 | ) | (261 | ) | (3,135 | ) | |||||||||||
Litigation settlement | — | — | (2,195 | ) | — | (2,645 | ) | |||||||||||||
Loss (gain) on asset sale | 86 | — | (200 | ) | 903 | (200 | ) | |||||||||||||
Non-GAAP total operating expenses | $ | 24,293 | $ | 22,347 | $ | 22,299 | $ | 93,003 | $ | 89,137 | ||||||||||
Non-GAAP total operating expenses as a % of revenue | 23.5 | % | 24.2 | % | 24.5 | % | 26.1 | % | 27.6 | % | ||||||||||
NON-GAAP OPERATING INCOME (LOSS): | ||||||||||||||||||||
GAAP income (loss) from operations | $ | 4,350 | $ | 1,261 | $ | (6,575 | ) | $ | (14,542 | ) | $ | (41,658 | ) | |||||||
Stock-based compensation expense | 3,162 | 2,951 | 3,615 | 12,456 | 14,142 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 185 | 302 | 856 | 1,231 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | 1 | — | (9 | ) | 2 | (22 | ) | |||||||||||||
Asset sale related costs | 9 | 12 | 83 | 397 | 427 | |||||||||||||||
End-of-life related inventory write-down | — | — | 2,565 | 3,553 | 2,565 | |||||||||||||||
Accelerated depreciation | — | — | — | 2,265 | — | |||||||||||||||
Restructuring charges | — | 3 | 1,349 | 261 | 3,303 | |||||||||||||||
Litigation settlement | — | — | 2,195 | — | 2,645 | |||||||||||||||
Loss (gain) on asset sale | (86 | ) | — | 200 | (903 | ) | 200 | |||||||||||||
Non-GAAP income (loss) from operations | $ | 7,620 | $ | 4,412 | $ | 3,725 | $ | 4,345 | $ | (17,167 | ) | |||||||||
Non-GAAP operating margin as a % of revenue | 7.4 | % | 4.8 | % | 4.1 | % | 1.2 | % | (5.3 | )% | ||||||||||
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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 | Twelve Months Ended | |||||||||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||||||||||||||||
NON-GAAP NET INCOME (LOSS): | ||||||||||||||||||||
GAAP net income (loss) | $ | 2,069 | $ | 2,272 | $ | (6,729 | ) | $ | (17,076 | ) | $ | (43,637 | ) | |||||||
Stock-based compensation expense | 3,162 | 2,951 | 3,615 | 12,456 | 14,142 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 185 | 302 | 856 | 1,231 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | 1 | — | (9 | ) | 2 | (22 | ) | |||||||||||||
Asset sale related costs | 9 | 12 | 83 | 397 | 427 | |||||||||||||||
End-of-life related inventory write-down | — | — | 2,565 | 3,553 | 2,565 | |||||||||||||||
Accelerated depreciation | — | — | — | 2,265 | — | |||||||||||||||
Restructuring charges | — | 3 | 1,349 | 261 | 3,303 | |||||||||||||||
Litigation settlement | — | — | 2,195 | — | 2,645 | |||||||||||||||
Loss (gain) on asset sale | (86 | ) | — | 200 | (903 | ) | 200 | |||||||||||||
Income tax effect of Non-GAAP adjustments | (82 | ) | (14 | ) | (1,153 | ) | (1,368 | ) | (1,375 | ) | ||||||||||
Non-GAAP net income (loss) | $ | 5,257 | $ | 5,409 | $ | 2,418 | $ | 443 | $ | (20,521 | ) | |||||||||
Non-GAAP net income (loss) as a % of revenue | 5.1 | % | 5.9 | % | 2.7 | % | 0.1 | % | (6.4 | )% | ||||||||||
ADJUSTED EBITDA: | ||||||||||||||||||||
GAAP net income (loss) | $ | 2,069 | $ | 2,272 | $ | (6,729 | ) | $ | (17,076 | ) | $ | (43,637 | ) | |||||||
Stock-based compensation expense | 3,162 | 2,951 | 3,615 | 12,456 | 14,142 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 185 | 302 | 856 | 1,231 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | 1 | — | (9 | ) | 2 | (22 | ) | |||||||||||||
Asset sale related costs | 9 | 12 | 83 | 397 | 427 | |||||||||||||||
End-of-life related inventory write-down | — | — | 2,565 | 3,553 | 2,565 | |||||||||||||||
Accelerated depreciation | — | — | — | 2,265 | — | |||||||||||||||
Restructuring charges | — | 3 | 1,349 | 261 | 3,303 | |||||||||||||||
Litigation settlement | — | — | 2,195 | — | 2,645 | |||||||||||||||
Loss (gain) on asset sale | (86 | ) | — | 200 | (903 | ) | 200 | |||||||||||||
Interest expense, net | 364 | 388 | 389 | 1,543 | 2,096 | |||||||||||||||
Income tax benefit (provision) | 107 | 1,561 | (680 | ) | 1,633 | 1,329 | ||||||||||||||
Depreciation expense | 6,647 | 6,829 | 7,260 | 27,665 | 29,896 | |||||||||||||||
Adjusted EBITDA | $ | 12,457 | $ | 14,201 | $ | 10,540 | $ | 32,652 | $ | 14,175 | ||||||||||
Adjusted EBITDA as a % of revenue | 12.1 | % | 15.4 | % | 11.6 | % | 9.2 | % | 4.4 | % | ||||||||||
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE: | ||||||||||||||||||||
GAAP basic net income (loss) per share | $ | 0.04 | $ | 0.05 | $ | (0.15 | ) | $ | (0.36 | ) | $ | (0.97 | ) | |||||||
GAAP diluted net income (loss) per share | $ | 0.04 | $ | 0.05 | $ | (0.15 | ) | $ | (0.36 | ) | $ | (0.97 | ) | |||||||
Non-GAAP basic net income (loss) per share | $ | 0.11 | $ | 0.11 | $ | 0.05 | $ | 0.01 | $ | (0.45 | ) | |||||||||
Non-GAAP diluted net income (loss) per share | $ | 0.10 | $ | 0.11 | $ | 0.05 | $ | 0.01 | $ | (0.45 | ) | |||||||||
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE | 48,358 | 47,666 | 46,150 | 47,304 | 45,144 | |||||||||||||||
SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE | 50,238 | 48,615 | 46,150 | 47,304 | 45,144 | |||||||||||||||
SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE | 52,277 | 50,051 | 49,334 | 50,631 | 45,144 | |||||||||||||||
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©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.
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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