Attached files
| file | filename |
|---|---|
| 8-K - 8-K - NEOPHOTONICS CORP | a202011022020document.htm |
NeoPhotonics Reports Third Quarter 2020 Financial Results
• | Revenue of $102.4 million for the quarter, up 11% year-over-year |
• | Three customers greater than 10% of revenue |
• | Generated $15.0 million of cash from operations |
SAN JOSE, California - November 2, 2020 - 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 third quarter ended September 30, 2020.
“We are pleased to report another strong, non-GAAP profitable quarter, driven by our highest speed products. We took decisive actions to better align our capacity and production infrastructure with expected demand levels without relying on future revenue contributions from Huawei, resulting in a restructuring charge of approximately $9.4 million in this quarter. Excluding Huawei, our products for 400G and above applications grew 91% year to date, and were 44% of Q3 revenue,” said Tim Jenks, NeoPhotonics CEO. “Going forward we believe we will rapidly grow the business excluding Huawei by supporting the highest speed over distance solutions at 400G and above for telecom equipment providers, and expand our business by ramping our 400ZR and 400ZR+ coherent modules to Cloud and hyper-scale customers starting in 2021,” concluded Mr. Jenks.
Third Quarter Summary
• | Revenue was $102.4 million, down 1% sequentially and up 11% year-over-year |
• | Gross margin was 23.8%, down from 32.5% in the prior quarter and from 28.4% in the prior year, including actions to align the Company’s cost structure |
• | Non-GAAP gross margin was 33.6%, up from 33.2% in the prior quarter and up from 29.0% in the prior year |
• | Diluted net loss per share was $0.10, in comparison to net income per share of $0.11 in the prior quarter and to $0.05 in the same period last year |
• | Non-GAAP diluted net income per share was $0.11, in comparison to $0.16 in the prior quarter and to $0.11 in the same period last year |
• | Cash generated from operations was $15.0 million, up from $9.6 million in the prior quarter and up from $9.0 million in the same period last year |
• | Adjusted EBITDA was $13.1 million, in comparison to $16.9 million in the prior quarter and to $14.2 million in the same period last year. |
Non-GAAP results in the third quarter of 2020 exclude $2.8 million of stock-based compensation expense, $9.4 million of restructuring and other related charges and $0.3 million of amortization of acquisition-related intangibles and other costs. 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, 2020, cash and cash equivalents, short-term investments and restricted cash, together totaled $123 million, up $10 million compared to June 30, 2020.
1
Outlook for the Quarter Ending December 31, 2020
GAAP | Non-GAAP | |
Revenue | $64 to $70 million | |
Gross Margin | 20% to 24% | 22% to 26% |
Operating Expenses | $24.5 to $25.5 million | $24 to $25 million |
Earnings per share | $0.26 loss to $0.16 loss | $0.23 loss to $0.13 loss |
The fourth quarter EPS outlook includes revenue without contribution from Huawei and therefore expectation of higher underutilization charges and lower gross margin. Operating expenses increase on investment in 400ZR development to drive business growth.
The non-GAAP outlook for the fourth quarter of 2020 excludes the expected impact of stock-based compensation expense of approximately $3.4 million, of which $0.7 million is estimated for cost of goods sold, $2.9 million of gain on legal settlement, $0.7 million of restructuring and other related charges and the impact of expected amortization of acquisition-related intangibles and other costs of approximately $0.3 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, Monday, November 2, 2020 at 4:30 PM Eastern Time (1:30 PM Pacific Time). The call will be available, live, to interested parties by dialing 866-248-8441. For international callers, please dial +1-929-477-0577. The Conference ID number is 2900063. 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.
2
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, growth in the Company’s data center business, 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;; the Company’s need to qualify its products and achieve market acceptance in the cloud and data center markets; 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 qualifications, and/or the rate at which design wins and qualifications 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; 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/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.
3
NeoPhotonics Corporation
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
As of | ||||||||
Sep. 30, 2020 | Dec. 31, 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 83,619 | $ | 70,467 | ||||
Short-term investments | 27,667 | 7,638 | ||||||
Restricted cash | 11,655 | 10,972 | ||||||
Accounts receivable, net | 60,148 | 68,890 | ||||||
Inventories | 46,989 | 46,930 | ||||||
Prepaid expenses and other current assets | 27,507 | 25,851 | ||||||
Total current assets | 257,585 | 230,748 | ||||||
Property, plant and equipment, net | 67,729 | 81,133 | ||||||
Operating lease right-of-use assets | 14,297 | 15,603 | ||||||
Purchased intangible assets, net | 1,618 | 2,151 | ||||||
Goodwill | 1,115 | 1,115 | ||||||
Other long-term assets | 3,904 | 3,929 | ||||||
Total assets | $ | 346,248 | $ | 334,679 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 54,822 | $ | 58,554 | ||||
Current portion of long-term debt | 3,153 | 3,044 | ||||||
Accrued and other current liabilities | 51,049 | 47,481 | ||||||
Total current liabilities | 109,024 | 109,079 | ||||||
Long-term debt, net of current portion | 31,799 | 39,237 | ||||||
Operating lease liabilities, noncurrent | 15,039 | 16,543 | ||||||
Other noncurrent liabilities | 8,868 | 9,614 | ||||||
Total liabilities | 164,730 | 174,473 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 125 | 121 | ||||||
Additional paid-in capital | 592,875 | 582,504 | ||||||
Accumulated other comprehensive loss | (4,063 | ) | (7,871 | ) | ||||
Accumulated deficit | (407,419 | ) | (414,548 | ) | ||||
Total stockholders’ equity | 181,518 | 160,206 | ||||||
Total liabilities and stockholders’ equity | $ | 346,248 | $ | 334,679 | ||||
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, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||||||||||||||||
Revenue | $ | 102,398 | $ | 103,171 | $ | 92,392 | $ | 302,970 | $ | 253,448 | ||||||||||
Cost of goods sold (1) | 77,994 | 69,669 | 66,193 | 215,338 | 195,837 | |||||||||||||||
Gross profit | 24,404 | 33,502 | 26,199 | 87,632 | 57,611 | |||||||||||||||
Gross margin | 23.8 | % | 32.5 | % | 28.4 | % | 28.9 | % | 22.7 | % | ||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development (1) | 15,276 | 13,689 | 13,688 | 40,849 | 42,164 | |||||||||||||||
Sales and marketing (1) | 3,692 | 4,279 | 3,832 | 11,630 | 12,058 | |||||||||||||||
General and administrative (1) | 7,758 | 8,803 | 7,403 | 23,350 | 22,330 | |||||||||||||||
Amortization of purchased intangible assets | — | — | — | — | 119 | |||||||||||||||
Asset sale related costs | 87 | 120 | 12 | 219 | 388 | |||||||||||||||
Restructuring charges | 141 | — | 3 | 141 | 261 | |||||||||||||||
Gain on asset sale | — | — | — | — | (817 | ) | ||||||||||||||
Total operating expenses | 26,954 | 26,891 | 24,938 | 76,189 | 76,503 | |||||||||||||||
Income (loss) from operations | (2,550 | ) | 6,611 | 1,261 | 11,443 | (18,892 | ) | |||||||||||||
Interest income | 21 | 22 | 95 | 141 | 293 | |||||||||||||||
Interest expense | (263 | ) | (301 | ) | (483 | ) | (942 | ) | (1,472 | ) | ||||||||||
Other income (expense), net | (3,317 | ) | (195 | ) | 2,960 | (2,314 | ) | 2,452 | ||||||||||||
Total interest and other income (expense), net | (3,559 | ) | (474 | ) | 2,572 | (3,115 | ) | 1,273 | ||||||||||||
Income (loss) before income taxes | (6,109 | ) | 6,137 | 3,833 | 8,328 | (17,619 | ) | |||||||||||||
Income tax (provision) benefit | 1,206 | (412 | ) | (1,561 | ) | (1,199 | ) | (1,526 | ) | |||||||||||
Net income (loss) | $ | (4,903 | ) | $ | 5,725 | $ | 2,272 | $ | 7,129 | $ | (19,145 | ) | ||||||||
Basic net income (loss) per share | $ | (0.10 | ) | $ | 0.12 | $ | 0.05 | $ | 0.14 | $ | (0.41 | ) | ||||||||
Diluted net income (loss) per share | $ | (0.10 | ) | $ | 0.11 | $ | 0.05 | $ | 0.14 | $ | (0.41 | ) | ||||||||
Weighted average shares used to compute basic net income (loss) per share | 49,936 | 49,077 | 47,666 | 49,212 | 46,949 | |||||||||||||||
Weighted average shares used to compute diluted net income (loss) per share | 49,936 | 51,661 | 48,615 | 51,411 | 46,949 | |||||||||||||||
(1) Includes stock-based compensation expense as follows for the periods presented: | ||||||||||||||||||||
Cost of goods sold | $ | 607 | $ | 621 | $ | 441 | $ | 1,765 | $ | 1,651 | ||||||||||
Research and development | 748 | 999 | 715 | 2,505 | 2,383 | |||||||||||||||
Sales and marketing | 565 | 738 | 575 | 1,833 | 1,852 | |||||||||||||||
General and administrative | 853 | 1,429 | 1,220 | 2,975 | 3,408 | |||||||||||||||
Total stock-based compensation expense | $ | 2,773 | $ | 3,787 | $ | 2,951 | $ | 9,078 | $ | 9,294 | ||||||||||
5
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, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||||||||||||||||
NON-GAAP GROSS PROFIT: | ||||||||||||||||||||
GAAP gross profit | $ | 24,404 | $ | 33,502 | $ | 26,199 | $ | 87,632 | $ | 57,611 | ||||||||||
Stock-based compensation expense | 607 | 621 | 441 | 1,765 | 1,651 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 184 | 185 | 552 | 553 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | (8 | ) | (8 | ) | (66 | ) | (28 | ) | (198 | ) | ||||||||||
End-of-life related inventory write-down | 4,435 | — | — | 4,435 | 3,553 | |||||||||||||||
Accelerated depreciation | 4,120 | — | — | 4,120 | 2,265 | |||||||||||||||
Restructuring charges | 706 | — | — | 706 | — | |||||||||||||||
Non-GAAP gross profit | $ | 34,448 | $ | 34,299 | $ | 26,759 | $ | 99,182 | $ | 65,435 | ||||||||||
Non-GAAP gross margin as a % of revenue | 33.6 | % | 33.2 | % | 29.0 | % | 32.7 | % | 25.8 | % | ||||||||||
NON-GAAP TOTAL OPERATING EXPENSES: | ||||||||||||||||||||
GAAP total operating expenses | $ | 26,954 | $ | 26,891 | $ | 24,938 | $ | 76,189 | $ | 76,503 | ||||||||||
Stock-based compensation expense | (2,166 | ) | (3,166 | ) | (2,510 | ) | (7,313 | ) | (7,643 | ) | ||||||||||
Amortization of purchased intangible assets | — | — | — | — | (119 | ) | ||||||||||||||
Depreciation of acquisition-related fixed asset step-up | (28 | ) | (28 | ) | (66 | ) | (85 | ) | (199 | ) | ||||||||||
Asset sale related costs | (87 | ) | (120 | ) | (12 | ) | (219 | ) | (388 | ) | ||||||||||
Restructuring charges | (141 | ) | — | (3 | ) | (141 | ) | (261 | ) | |||||||||||
Gain on asset sale | — | — | — | — | 817 | |||||||||||||||
Non-GAAP total operating expenses | $ | 24,532 | $ | 23,577 | $ | 22,347 | $ | 68,431 | $ | 68,710 | ||||||||||
Non-GAAP total operating expenses as a % of revenue | 24.0 | % | 22.9 | % | 24.2 | % | 22.6 | % | 27.1 | % | ||||||||||
NON-GAAP OPERATING INCOME (LOSS): | ||||||||||||||||||||
GAAP income (loss) from operations | $ | (2,550 | ) | $ | 6,611 | $ | 1,261 | $ | 11,443 | $ | (18,892 | ) | ||||||||
Stock-based compensation expense | 2,773 | 3,787 | 2,951 | 9,078 | 9,294 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 184 | 185 | 552 | 672 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | 20 | 20 | — | 57 | 1 | |||||||||||||||
Asset sale related costs | 87 | 120 | 12 | 219 | 388 | |||||||||||||||
End-of-life related inventory write-down | 4,435 | — | — | 4,435 | 3,553 | |||||||||||||||
Accelerated depreciation | 4,120 | — | — | 4,120 | 2,265 | |||||||||||||||
Restructuring charges | 847 | — | 3 | 847 | 261 | |||||||||||||||
Gain on asset sale | — | — | — | — | (817 | ) | ||||||||||||||
Non-GAAP income (loss) from operations | $ | 9,916 | $ | 10,722 | $ | 4,412 | $ | 30,751 | $ | (3,275 | ) | |||||||||
Non-GAAP operating margin as a % of revenue | 9.7 | % | 10.4 | % | 4.8 | % | 10.1 | % | (1.3 | )% | ||||||||||
6
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, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||||||||||||||||
NON-GAAP NET INCOME (LOSS): | ||||||||||||||||||||
GAAP net income (loss) | $ | (4,903 | ) | $ | 5,725 | $ | 2,272 | $ | 7,129 | $ | (19,145 | ) | ||||||||
Stock-based compensation expense | 2,773 | 3,787 | 2,951 | 9,078 | 9,294 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 184 | 185 | 552 | 672 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | 20 | 20 | — | 57 | 1 | |||||||||||||||
Asset sale related costs | 87 | 120 | 12 | 219 | 388 | |||||||||||||||
End-of-life related inventory write-down | 4,435 | — | — | 4,435 | 3,553 | |||||||||||||||
Accelerated depreciation | 4,120 | — | — | 4,120 | 2,265 | |||||||||||||||
Restructuring charges | 847 | — | 3 | 847 | 261 | |||||||||||||||
Gain on asset sale | — | — | — | — | (817 | ) | ||||||||||||||
Income tax effect of Non-GAAP adjustments | (1,327 | ) | (1,160 | ) | (14 | ) | (2,461 | ) | (1,286 | ) | ||||||||||
Non-GAAP net income (loss) | $ | 6,236 | $ | 8,676 | $ | 5,409 | $ | 23,976 | $ | (4,814 | ) | |||||||||
Non-GAAP net income (loss) as a % of revenue | 6.1 | % | 8.4 | % | 5.9 | % | 7.9 | % | (1.9 | )% | ||||||||||
ADJUSTED EBITDA: | ||||||||||||||||||||
GAAP net income (loss) | $ | (4,903 | ) | $ | 5,725 | $ | 2,272 | $ | 7,129 | $ | (19,145 | ) | ||||||||
Stock-based compensation expense | 2,773 | 3,787 | 2,951 | 9,078 | 9,294 | |||||||||||||||
Amortization of purchased intangible assets | 184 | 184 | 185 | 552 | 672 | |||||||||||||||
Depreciation of acquisition-related fixed asset step-up | 20 | 20 | — | 57 | 1 | |||||||||||||||
Asset sale related costs | 87 | 120 | 12 | 219 | 388 | |||||||||||||||
End-of-life related inventory write-down | 4,435 | — | — | 4,435 | 3,553 | |||||||||||||||
Accelerated depreciation | 4,120 | — | — | 4,120 | 2,265 | |||||||||||||||
Restructuring charges | 847 | — | 3 | 847 | 261 | |||||||||||||||
Gain on asset sale | — | — | — | — | (817 | ) | ||||||||||||||
Interest expense, net | 242 | 279 | 388 | 801 | 1,179 | |||||||||||||||
Income tax provision (benefit) | (1,206 | ) | 412 | 1,561 | 1,199 | 1,526 | ||||||||||||||
Depreciation expense | 6,479 | 6,414 | 6,829 | 19,366 | 21,018 | |||||||||||||||
Adjusted EBITDA | $ | 13,078 | $ | 16,941 | $ | 14,201 | $ | 47,803 | $ | 20,195 | ||||||||||
Adjusted EBITDA as a % of revenue | 12.8 | % | 16.4 | % | 15.4 | % | 15.8 | % | 8.0 | % | ||||||||||
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE: | ||||||||||||||||||||
GAAP basic net income (loss) per share | $ | (0.10 | ) | $ | 0.12 | $ | 0.05 | $ | 0.14 | $ | (0.41 | ) | ||||||||
GAAP diluted net income (loss) per share | $ | (0.10 | ) | $ | 0.11 | $ | 0.05 | $ | 0.14 | $ | (0.41 | ) | ||||||||
Non-GAAP basic net income (loss) per share | $ | 0.12 | $ | 0.18 | $ | 0.11 | $ | 0.49 | $ | (0.10 | ) | |||||||||
Non-GAAP diluted net income (loss) per share | $ | 0.11 | $ | 0.16 | $ | 0.11 | $ | 0.45 | $ | (0.10 | ) | |||||||||
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE | 49,936 | 49,077 | 47,666 | 49,212 | 46,949 | |||||||||||||||
SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE | 49,936 | 51,661 | 48,615 | 51,411 | 46,949 | |||||||||||||||
SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE | 54,385 | 54,303 | 50,051 | 53,730 | 46,949 | |||||||||||||||
7
©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
8