EX-99.1 2 nptnq32017earningsreleased.htm EXHIBIT 99.1 Exhibit



nptnq32017earningsrel_image1.jpg

NeoPhotonics Reports Third Quarter 2017 Financial Results
Quarterly Revenue of $71.1 Million
High Speed Products Climb to Highest Mix at 84% of Total Revenue
Restructuring Actions Taken to Improve Profitability while Focusing Investment and Developments on Key Growth Opportunities
SAN JOSE, Calif. — November 6, 2017 - 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 third quarter ended September 30, 2017.
“We are focused on growth initiatives in telecom, data center and cloud markets, as well as operational execution to lower our breakeven level as China continues with steady though muted demand,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “Growth drivers in our markets include Metro deployments across the globe, China high speed build-outs in advance of 5G wireless, and data centers and big data applications that are embracing our higher speed technologies and leverage NeoPhotonics’ core strengths,” concluded Mr. Jenks.
Third Quarter Summary

Revenue was $71.1 million, in comparison to $73.2 million in the prior quarter
Gross margin was 14.8%, compared to 22.9% in the prior quarter
Non-GAAP Gross margin was 18.6%, compared to 23.9% in the prior quarter
Net loss was $18.2 million, compared to a net loss of $9.3 million in the prior quarter
Non-GAAP net loss was $10.9 million, compared to a net loss of $6.6 million in the prior quarter
Diluted net loss per share was $0.42, in comparison to a net loss of $0.22 per share in the prior quarter
Non-GAAP diluted net loss per share was $0.25, compared to a net loss of $0.15 in the prior quarter
Adjusted EBITDA was negative $4.5 million, compared to positive $48,000 in the prior quarter

Non-GAAP results in the third quarter of 2017 exclude $0.4 million of asset sale related costs and amortization of acquisition-related intangibles, $1.9 million of stock-based compensation expense, $2.0 million of end-of-life related inventory write-downs and $3.1 million of 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 September 30, 2017, cash and cash equivalents, short-term investments and restricted cash, together totaled $73.7 million, compared to $79.0 million at June 30, 2017. Restricted cash as of September 30, 2017 was $2.9 million, down from $3.3 million at June 30, 2017.


1




Outlook for the Quarter Ending December 31, 2017
 
GAAP
Non-GAAP
Revenue
$69 to $74 million
Gross Margin
19% to 22%
20% to 23%
Operating Expenses
$25 to $26 million
$23 to $24 million
Earnings per share
$0.29 to $0.19 net loss
$0.23 to $0.13 net loss
The Non-GAAP outlook for the fourth quarter of 2017 excludes the impact of expected amortization of intangibles of approximately $0.3 million, the anticipated impact of stock-based compensation of approximately $1.9 million, of which $0.3 million is estimated for cost of goods sold and $0.7 million for the expected impact of restructuring charges.
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 6, 2017, at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing 800-239-9838. For international callers, please dial +1-323-794-2551. The Conference ID number is 9384833. 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 web site 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 9001:2000 certified engineering and manufacturing facilities in Silicon Valley (USA), Japan and China. For additional information visit www.neophotonics.com.


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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, the Company’s market position, the outlook for the China market, and industry trends. 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; timing of customer drawdowns of vendor-managed inventory; 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; economic conditions or natural disasters; volatility in utilization of manufacturing operations, supporting utility services and other manufacturing costs; the savings anticipated from cost reduction actions and the impact of severance 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; the impact of any previous or future acquisitions or divestitures; challenges involving integration of acquired businesses and utilization of acquired technology or divestitures of assets and related product lines; the impact of the sale of the low speed transceiver product lines and the discontinuance or end of life of certain other products; market adoption, revenue growth and margins of acquired 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 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 for the year ended December 31, 2016 and its Form 10-Q for the six months ended June 30, 2017. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

NeoPhotonics Corporation
Beth Eby, +1-408-895-6086
Chief Financial Officer

Sapphire Investor Relations, LLC
Erica Mannion, +1-617-542-6180
Investor Relations
©2017 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.

3



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

 
As of
 
Sept. 30, 2017
 
Dec. 31, 2016
 
 
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
58,528

 
$
82,500

Short-term investments
12,281

 
19,015

Restricted cash
2,917

 
4,085

Accounts receivable, net
67,003

 
80,610

Inventories, net
82,809

 
48,237

Assets held for sale

 
13,953

Prepaid expenses and other current assets
34,568

 
22,396

Total current assets
258,106

 
270,796

Property, plant and equipment, net
127,316

 
106,867

Purchased intangible assets, net
4,594

 
5,562

Goodwill
1,115

 
1,115

Other long-term assets
6,858

 
6,547

Total assets
$
397,989

 
$
390,887

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
69,771

 
$
84,766

Notes payable and short-term borrowing
19,630

 
30,190

Current portion of long-term debt
5,740

 
747

Accrued and other current liabilities
44,743

 
30,625

Total current liabilities
139,884

 
146,328

Long-term debt, net of current portion
41,029

 
10,215

Other noncurrent liabilities
14,959

 
8,939

Total liabilities
195,872

 
165,482

 
 
 
 
Stockholders’ equity:
 

 
 

Common stock
110

 
106

Additional paid-in capital
542,029

 
532,378

Accumulated other comprehensive loss
(2,294
)
 
(8,401
)
Accumulated deficit
(337,728
)
 
(298,678
)
Total stockholders’ equity
202,117

 
225,405

Total liabilities and stockholders’ equity
$
397,989

 
$
390,887



4



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


 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
2017
 
June 30,
2017
 
Sept. 30,
2016
 
Sept. 30,
2017
 
Sept. 30,
2016
Revenue
$
71,121

 
$
73,214

 
$
103,312

 
$
216,023

 
$
301,586

Cost of goods sold (1)
60,608

 
56,437

 
75,863

 
170,230

 
215,486

Gross profit
10,513

 
16,777

 
27,449

 
45,793

 
86,100

Gross margin
14.8
%
 
22.9
%
 
26.6
%
 
21.2
%
 
28.5
%
Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development (1)
14,662

 
14,206

 
17,474

 
44,412

 
42,206

Sales and marketing (1)
4,071

 
3,910

 
5,936

 
12,913

 
13,674

General and administrative (1)
7,637

 
7,729

 
9,822

 
26,792

 
26,747

Amortization of purchased intangible assets
119

 
118

 
462

 
355

 
1,375

Acquisition and asset sale related costs
78

 
21

 
148

 
229

 
923

Restructuring charges
2,829

 
494

 

 
3,550

 

Gain on asset sale

 

 

 
(2,000
)
 

Total operating expenses
29,396

 
26,478

 
33,842

 
86,251

 
84,925

Income (loss) from operations
(18,883
)
 
(9,701
)
 
(6,393
)
 
(40,458
)
 
1,175

Interest income
37

 
31

 
95

 
141

 
227

Interest expense
(495
)
 
(111
)
 
(103
)
 
(743
)
 
(304
)
Other income (expense), net
(41
)
 
(11
)
 
18

 
197

 
(828
)
Total interest and other income (expense), net
(499
)
 
(91
)
 
10

 
(405
)
 
(905
)
Income (loss) before income taxes
(19,382
)
 
(9,792
)
 
(6,383
)
 
(40,863
)
 
270

Income tax (provision) benefit
1,195

 
451

 
(804
)
 
1,813

 
(2,471
)
Net loss
$
(18,187
)
 
$
(9,341
)
 
$
(7,187
)
 
$
(39,050
)
 
$
(2,201
)
 
 
 
 
 
 
 
 
 
 
Basic net loss per share
$
(0.42
)
 
$
(0.22
)
 
$
(0.17
)
 
$
(0.90
)
 
$
(0.05
)
Diluted net loss per share
$
(0.42
)
 
$
(0.22
)
 
$
(0.17
)
 
$
(0.90
)
 
$
(0.05
)
Weighted average shares used to compute basic net loss per share
43,790

 
43,219

 
42,038

 
43,212

 
41,589

Weighted average shares used to compute diluted net loss per share
43,790

 
43,219

 
42,038

 
43,212

 
41,589

 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation expense as follows for the periods presented:
 
 
 
 
 
 
 
 
 
Cost of goods sold
$
340

 
$
324

 
$
297

 
$
811

 
$
1,605

Research and development
606

 
511

 
2,981

 
1,779

 
4,508

Sales and marketing
393

 
313

 
2,352

 
1,170

 
3,604

General and administrative
595

 
738

 
3,146

 
1,932

 
4,728

Total stock-based compensation expense
$
1,934

 
$
1,886

 
$
8,776

 
$
5,692

 
$
14,445




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
 
Sept. 30,
2017
 
June 30,
2017
 
Sept. 30,
2016
 
Sept. 30,
2017
 
Sept. 30,
2016
NON-GAAP GROSS PROFIT:
 
 
 
 
 
 
 
 
 
GAAP gross profit
$
10,513

 
$
16,777

 
$
27,449

 
$
45,793

 
$
86,100

Stock-based compensation expense
340

 
324

 
297

 
811

 
1,605

Amortization of purchased intangible assets
202

 
203

 
853

 
667

 
2,542

Depreciation of acquisition-related fixed asset step-up
(68
)
 
(68
)
 
(68
)
 
(202
)
 
(194
)
End-of-life related inventory write-down
1,975

 

 

 
1,975

 

Restructuring charges
285

 
240

 

 
564

 

Non-GAAP gross profit
$
13,247

 
$
17,476

 
$
28,531

 
$
49,608

 
$
90,053

Non-GAAP gross margin as a % of revenue
18.6
 %
 
23.9
 %
 
27.6
%
 
23.0
 %
 
29.9
%
 
 
 
 
 
 
 
 
 
 
NON-GAAP TOTAL OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
GAAP total operating expenses
$
29,396

 
$
26,478

 
$
33,842

 
$
86,251

 
$
84,925

Stock-based compensation expense
(1,594
)
 
(1,562
)
 
(8,479
)
 
(4,881
)
 
(12,840
)
Amortization of purchased intangible assets
(119
)
 
(118
)
 
(462
)
 
(355
)
 
(1,375
)
Depreciation of acquisition-related fixed asset step-up
(71
)
 
(72
)
 
(79
)
 
(216
)
 
(255
)
Acquisition and asset sale related costs
(78
)
 
(21
)
 
(148
)
 
(229
)
 
(923
)
Restructuring charges
(2,829
)
 
(494
)
 

 
(3,550
)
 

Litigation

 

 

 
64

 

Gain on asset sale

 

 

 
2,000

 

Non-GAAP total operating expenses
$
24,705

 
$
24,211

 
$
24,674

 
$
79,084

 
$
69,532

Non-GAAP total operating expenses as a % of revenue
34.7
 %
 
33.1
 %
 
23.9
%
 
36.6
 %
 
23.1
%
 
 
 
 
 
 
 
 
 
 
NON-GAAP OPERATING INCOME (LOSS):
 
 
 
 
 
 
 
 
 
GAAP income (loss) from operations
$
(18,883
)
 
$
(9,701
)
 
$
(6,393
)
 
$
(40,458
)
 
$
1,175

Stock-based compensation expense
1,934

 
1,886

 
8,776

 
5,692

 
14,445

Amortization of purchased intangible assets
321

 
321

 
1,315

 
1,022

 
3,917

Depreciation of acquisition-related fixed asset step-up
3

 
4

 
11

 
14

 
61

Acquisition and asset sale related costs
78

 
21

 
148

 
229

 
923

End-of-life related inventory write-down
1,975

 

 

 
1,975

 

Restructuring charges
3,114

 
734

 

 
4,114

 

Litigation

 

 

 
(64
)
 

Gain on asset sale

 

 

 
(2,000
)
 

Non-GAAP income (loss) from operations
$
(11,458
)
 
$
(6,735
)
 
$
3,857

 
$
(29,476
)
 
$
20,521

Non-GAAP operating margin as a % of revenue
(16.1
)%
 
(9.2
)%
 
3.7
%
 
(13.6
)%
 
6.8
%


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
 
Sept. 30,
2017
 
June 30,
2017
 
Sept. 30,
2016
 
Sept. 30,
2017
 
Sept. 30,
2016
NON-GAAP NET INCOME (LOSS):
 
 
 
 
 
 
 
 
 
GAAP net loss
$
(18,187
)
 
$
(9,341
)
 
$
(7,187
)
 
$
(39,050
)
 
$
(2,201
)
Stock-based compensation expense
1,934

 
1,886

 
8,776

 
5,692

 
14,445

Amortization of purchased intangible assets
321

 
321

 
1,315

 
1,022

 
3,917

Depreciation of acquisition-related fixed asset step-up
3

 
4

 
11

 
14

 
61

Acquisition and asset sale related costs
78

 
21

 
148

 
229

 
923

End-of-life related inventory write-down
1,975

 

 

 
1,975

 

Restructuring charges
3,114

 
734

 

 
4,114

 

Litigation

 

 

 
(64
)
 

Gain on asset sale

 

 

 
(2,000
)
 

Income tax effect of Non-GAAP adjustments
(114
)
 
(192
)
 
(140
)
 
(117
)
 
(399
)
Non-GAAP net income (loss)
$
(10,876
)
 
$
(6,567
)
 
$
2,923

 
$
(28,185
)
 
$
16,746

Non-GAAP net income (loss) as a % of revenue
(15.3
)%
 
(9.0
)%
 
2.8
%
 
(13.0
)%
 
5.6
%
 
 
 
 
 
 
 
 
 
 
ADJUSTED EBITDA:
 
 
 
 
 
 
 
 
 
GAAP net loss
$
(18,187
)
 
$
(9,341
)
 
$
(7,187
)
 
$
(39,050
)
 
$
(2,201
)
Stock-based compensation expense
1,934

 
1,886

 
8,776

 
5,692

 
14,445

Amortization of purchased intangible assets
321

 
321

 
1,315

 
1,022

 
3,917

Depreciation of acquisition-related fixed asset step-up
3

 
4

 
11

 
14

 
61

Acquisition and asset sale related costs
78

 
21

 
148

 
229

 
923

End-of-life related inventory write-down
1,975

 

 

 
1,975

 

Restructuring charges
3,114

 
734

 

 
4,114

 

Litigation

 

 

 
(64
)
 

Gain on asset sale

 

 

 
(2,000
)
 

Interest expense, net
458

 
80

 
8

 
602

 
77

Provision (benefit) for income taxes
(1,195
)
 
(451
)
 
804

 
(1,813
)
 
2,471

Depreciation expense
7,016

 
6,794

 
4,457

 
19,608

 
12,942

Adjusted EBITDA
$
(4,483
)
 
$
48

 
$
8,332

 
$
(9,671
)
 
$
32,635

Adjusted EBITDA as a % of revenue
(6.3
)%
 
0.1
 %
 
8.1
%
 
(4.5
)%
 
10.8
%
 
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
 
GAAP basic net loss per share
$
(0.42
)
 
$
(0.22
)
 
$
(0.17
)
 
$
(0.90
)
 
$
(0.05
)
GAAP diluted net loss per share
$
(0.42
)
 
$
(0.22
)
 
$
(0.17
)
 
$
(0.90
)
 
$
(0.05
)
Non-GAAP basic net income (loss) per share
$
(0.25
)
 
$
(0.15
)
 
$
0.07

 
$
(0.65
)
 
$
0.40

Non-GAAP diluted net income (loss) per share
$
(0.25
)
 
$
(0.15
)
 
$
0.06

 
$
(0.65
)
 
$
0.37

 
 
 
 
 
 
 
 
 
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE
43,790

 
43,219

 
42,038

 
43,212

 
41,589

SHARES USED TO COMPUTE GAAP DILUTED NET LOSS PER SHARE
43,790

 
43,219

 
42,038

 
43,212

 
41,589

SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE
43,790

 
43,219

 
46,745

 
43,212

 
45,612




7