Delaware | 94-3253730 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |
Non-accelerated filer | ☐ | (do not check if a smaller reporting company) | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
Page | ||
As of | |||||||
June 30, 2018 | December 31, 2017 | ||||||
(In thousands, except par data) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 48,383 | $ | 78,906 | |||
Short-term investments | 12,401 | 12,311 | |||||
Restricted cash | 6,839 | 2,658 | |||||
Accounts receivable, net of allowance for doubtful accounts | 77,316 | 67,229 | |||||
Inventories | 60,947 | 67,301 | |||||
Prepaid expenses and other current assets | 30,239 | 36,235 | |||||
Total current assets | 236,125 | 264,640 | |||||
Property, plant and equipment, net | 115,710 | 127,565 | |||||
Purchased intangible assets, net | 3,657 | 4,294 | |||||
Goodwill | 1,115 | 1,115 | |||||
Other long-term assets | 3,199 | 5,339 | |||||
Total assets | $ | 359,806 | $ | 402,953 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 64,085 | $ | 69,017 | |||
Notes payable and short-term borrowing | 18,929 | 35,607 | |||||
Current portion of long-term debt | 2,868 | 6,005 | |||||
Accrued and other current liabilities | 44,288 | 43,242 | |||||
Total current liabilities | 130,170 | 153,871 | |||||
Long-term debt, net of current portion | 46,152 | 40,556 | |||||
Other noncurrent liabilities | 14,026 | 14,075 | |||||
Total liabilities | 190,348 | 208,502 | |||||
Commitments and contingencies (Note 11) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.0025 par value, 10,000 shares authorized, no shares issued or outstanding | — | — | |||||
Common stock, $0.0025 par value, 100,000 shares authorized | |||||||
As of June 30, 2018, 44,906 shares issued and outstanding; as of December 31, 2017, 44,219 shares issued and outstanding | 112 | 111 | |||||
Additional paid-in capital | 553,945 | 545,953 | |||||
Accumulated other comprehensive income (loss) | (1,981 | ) | 398 | ||||
Accumulated deficit | (382,618 | ) | (352,011 | ) | |||
Total stockholders’ equity | 169,458 | 194,451 | |||||
Total liabilities and stockholders’ equity | $ | 359,806 | $ | 402,953 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(In thousands, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Revenue | $ | 81,102 | $ | 73,214 | $ | 149,688 | $ | 144,902 | |||||||
Cost of goods sold | 65,630 | 56,437 | 125,034 | 109,622 | |||||||||||
Gross profit | 15,472 | 16,777 | 24,654 | 35,280 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 13,243 | 14,206 | 27,131 | 29,750 | |||||||||||
Sales and marketing | 3,891 | 3,910 | 8,015 | 8,842 | |||||||||||
General and administrative | 7,267 | 7,729 | 14,917 | 19,155 | |||||||||||
Amortization of purchased intangible assets | 120 | 118 | 239 | 236 | |||||||||||
Asset sale related costs | 79 | 21 | 93 | 151 | |||||||||||
Restructuring charges | 622 | 494 | 653 | 721 | |||||||||||
Gain on asset sale | — | — | — | (2,000 | ) | ||||||||||
Total operating expenses | 25,222 | 26,478 | 51,048 | 56,855 | |||||||||||
Loss from operations | (9,750 | ) | (9,701 | ) | (26,394 | ) | (21,575 | ) | |||||||
Interest income | 122 | 31 | 215 | 104 | |||||||||||
Interest expense | (759 | ) | (111 | ) | (1,467 | ) | (248 | ) | |||||||
Other income (expense), net | 930 | (11 | ) | 581 | 238 | ||||||||||
Total interest and other income (expense), net | 293 | (91 | ) | (671 | ) | 94 | |||||||||
Loss before income taxes | (9,457 | ) | (9,792 | ) | (27,065 | ) | (21,481 | ) | |||||||
Income tax (provision) benefit | (1,080 | ) | 451 | (1,718 | ) | 618 | |||||||||
Net loss | $ | (10,537 | ) | $ | (9,341 | ) | $ | (28,783 | ) | $ | (20,863 | ) | |||
Basic net loss per share | $ | (0.24 | ) | $ | (0.22 | ) | $ | (0.65 | ) | $ | (0.49 | ) | |||
Diluted net loss per share | $ | (0.24 | ) | $ | (0.22 | ) | $ | (0.65 | ) | $ | (0.49 | ) | |||
Weighted average shares used to compute basic net loss per share | 44,665 | 43,219 | 44,463 | 42,919 | |||||||||||
Weighted average shares used to compute diluted net loss per share | 44,665 | 43,219 | 44,463 | 42,919 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net loss | $ | (10,537 | ) | $ | (9,341 | ) | $ | (28,783 | ) | $ | (20,863 | ) | |||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments, net of zero tax | (8,482 | ) | 1,445 | (2,380 | ) | 3,913 | |||||||||
Unrealized gains on available-for-sale securities, net of zero tax | — | 13 | 1 | 16 | |||||||||||
Total other comprehensive income (loss) | (8,482 | ) | 1,458 | (2,379 | ) | 3,929 | |||||||||
Comprehensive loss | $ | (19,019 | ) | $ | (7,883 | ) | $ | (31,162 | ) | $ | (16,934 | ) |
Six Months Ended June 30, | |||||||
(In thousands) | 2018 | 2017 | |||||
Cash flows from operating activities | |||||||
Net loss | $ | (28,783 | ) | $ | (20,863 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 15,911 | 13,298 | |||||
Stock-based compensation expense | 6,486 | 3,758 | |||||
Deferred taxes | (42 | ) | 609 | ||||
Others | 214 | 122 | |||||
Loss (gain) on sale of assets and other write-offs | 43 | (1,669 | ) | ||||
Loss (gain) on foreign currency hedges | 1,005 | (1,070 | ) | ||||
Allowance for doubtful accounts | (101 | ) | 92 | ||||
Write-down of inventories | 1,857 | 2,279 | |||||
Foreign currency remeasurement | (1,123 | ) | 650 | ||||
Change in assets and liabilities, net of effects of asset sale: | |||||||
Accounts receivable | (9,981 | ) | 24,110 | ||||
Inventories | 4,173 | (32,291 | ) | ||||
Prepaid expenses and other assets | 5,565 | (14,803 | ) | ||||
Accounts payable | 94 | 2,451 | |||||
Accrued and other liabilities | 148 | 6,831 | |||||
Net cash used in operating activities | (4,534 | ) | (16,496 | ) | |||
Cash flows from investing activities | |||||||
Purchase of property, plant and equipment | (10,653 | ) | (34,597 | ) | |||
Proceeds from sale of property, plant and equipment and other assets | 15 | 21,784 | |||||
Purchase of marketable securities | (840 | ) | (41,807 | ) | |||
Proceeds from sale of marketable securities | — | 52,271 | |||||
Proceeds from maturity of marketable securities | 750 | 6,458 | |||||
Settlement of foreign currency hedges | 1,003 | 1,005 | |||||
Net cash (used in) provided by investing activities | (9,725 | ) | 5,114 | ||||
Cash flows from financing activities | |||||||
Proceeds from exercise of stock options and issuance of stock under ESPP | 1,933 | 3,136 | |||||
Tax withholding on restricted stock units | (276 | ) | (638 | ) | |||
Payments for public stock offering | — | (117 | ) | ||||
Proceeds from bank loans, net of debt issuance costs | 24,419 | 48,994 | |||||
Repayment of bank loans | (39,603 | ) | (48,045 | ) | |||
Proceeds from issuance of notes payable | 2,039 | 4,235 | |||||
Repayment of notes payable | (1,676 | ) | (6,599 | ) | |||
Proceeds from government grants | 1,257 | — | |||||
Net cash (used in) provided by financing activities | (11,907 | ) | 966 | ||||
Effect of exchange rates on cash, cash equivalents and restricted cash | (176 | ) | 782 | ||||
Net decrease in cash, cash equivalents and restricted cash | (26,342 | ) | (9,634 | ) | |||
Cash, cash equivalents and restricted cash at the beginning of the period | 81,564 | 86,585 | |||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 55,222 | $ | 76,951 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Decrease in unpaid property, plant and equipment | $ | 6,943 | $ | 6,342 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
High Speed Products | $ | 69,754 | $ | 59,384 | $ | 128,843 | $ | 118,062 | |||||||
Network Products and Solutions | 11,348 | 13,830 | 20,845 | 26,840 | |||||||||||
Total revenue | $ | 81,102 | $ | 73,214 | $ | 149,688 | $ | 144,902 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
China | $ | 46,111 | $ | 38,700 | $ | 87,783 | $ | 77,086 | |||||||
Americas | 17,694 | 13,602 | 29,901 | 23,365 | |||||||||||
Rest of world | 17,297 | 20,912 | 32,004 | 44,451 | |||||||||||
Total revenue | $ | 81,102 | $ | 73,214 | $ | 149,688 | $ | 144,902 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | |||||||||||||||
Net loss | $ | (10,537 | ) | $ | (9,341 | ) | $ | (28,783 | ) | $ | (20,863 | ) | |||
Denominator: | |||||||||||||||
Weighted average shares used to compute per share amount: | |||||||||||||||
Basic | 44,665 | 43,219 | 44,463 | 42,919 | |||||||||||
Diluted | 44,665 | 43,219 | 44,463 | 42,919 | |||||||||||
Basic net loss per share | $ | (0.24 | ) | $ | (0.22 | ) | $ | (0.65 | ) | $ | (0.49 | ) | |||
Diluted net loss per share | $ | (0.24 | ) | $ | (0.22 | ) | $ | (0.65 | ) | $ | (0.49 | ) | |||
June 30, 2018 | June 30, 2017 | ||||
Employee stock options | 3,860 | 3,898 | |||
Restricted stock units | 3,279 | 1,663 | |||
Employee stock purchase plan | 193 | 186 | |||
7,332 | 5,747 |
June 30, 2018 | December 31, 2017 | ||||||
Cash and cash equivalents: | |||||||
Cash | $ | 48,383 | $ | 78,906 | |||
Cash equivalents | — | — | |||||
Cash and cash equivalents | $ | 48,383 | $ | 78,906 | |||
Short-term investments | $ | 12,401 | $ | 12,311 | |||
Restricted cash | $ | 6,839 | $ | 2,658 |
June 30, 2018 | December 31, 2017 | ||||||
Cash and cash equivalents | $ | 48,383 | $ | 78,906 | |||
Restricted cash | 6,839 | 2,658 | |||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 55,222 | $ | 81,564 |
As of June 30, 2018 | As of December 31, 2017 | ||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Loss | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Marketable securities: | |||||||||||||||||||||||||||||||
Money market funds | $ | 12,401 | $ | — | $ | — | $ | 12,401 | $ | 11,561 | $ | — | $ | — | $ | 11,561 | |||||||||||||||
U.S. government securities | — | — | — | — | 751 | — | (1 | ) | 750 | ||||||||||||||||||||||
Total | $ | 12,401 | $ | — | $ | — | $ | 12,401 | $ | 12,312 | $ | — | $ | (1 | ) | $ | 12,311 | ||||||||||||||
Reported as: | |||||||||||||||||||||||||||||||
Short-term investments | 12,401 | — | — | 12,401 | 12,312 | — | (1 | ) | 12,311 | ||||||||||||||||||||||
Total | $ | 12,401 | $ | — | $ | — | $ | 12,401 | $ | 12,312 | $ | — | $ | (1 | ) | $ | 12,311 |
June 30, 2018 | December 31, 2017 | ||||||
Less than 1 year | $ | 12,401 | $ | 12,311 | |||
Due in 1 to 2 years | — | — | |||||
Due in 3 to 5 years | — | — | |||||
Total | $ | 12,401 | $ | 12,311 |
As of June 30, 2018 | As of December 31, 2017 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Cash equivalents and short-term investments: | |||||||||||||||||||||||||||||||
Money market funds | $ | 12,401 | $ | — | $ | — | $ | 12,401 | $ | 11,561 | $ | — | $ | — | $ | 11,561 | |||||||||||||||
U.S. government securities | — | — | — | — | 750 | — | — | 750 | |||||||||||||||||||||||
Total | $ | 12,401 | $ | — | $ | — | $ | 12,401 | $ | 12,311 | $ | — | $ | — | $ | 12,311 | |||||||||||||||
Foreign currency forward contracts* | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Mutual funds held in Rabbi Trust, recorded in other long-term assets | $ | 563 | $ | — | $ | — | $ | 563 | $ | 523 | $ | — | $ | — | $ | 523 |
As of June 30, 2018 | As of December 31, 2017 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Rusnano payment derivative | $ | — | $ | — | $ | 1,000 | $ | 1,000 | $ | — | $ | — | $ | 389 | $ | 389 | ||||||||||||||||
Foreign currency forward contracts | — | — | 53 | — | 53 | — | 43 | — | 43 | |||||||||||||||||||||||
$ | — | $ | 53 | $ | 1,000 | $ | 1,053 | $ | — | $ | 43 | $ | 389 | $ | 432 |
June 30, 2018 | December 31, 2017 | ||||||
Accounts receivable | $ | 76,752 | $ | 65,499 | |||
Trade notes receivable | 727 | 2,356 | |||||
Allowance for doubtful accounts | (163 | ) | (626 | ) | |||
$ | 77,316 | $ | 67,229 |
June 30, 2018 | December 31, 2017 | ||||||
Raw materials | $ | 30,714 | $ | 33,400 | |||
Work in process | 13,670 | 13,246 | |||||
Finished goods(1) | 16,563 | 20,655 | |||||
$ | 60,947 | $ | 67,301 |
(1) | Finished goods inventory at customer vendor managed inventory locations was $6.8 million and $7.1 million as of June 30, 2018 and December 31, 2017, respectively. |
June 30, 2018 | December 31, 2017 | ||||||
Prepaid taxes and taxes receivable | $ | 9,676 | $ | 15,162 | |||
Transition services agreement receivable (Note 6) | 12,525 | 12,817 | |||||
Deposits and other prepaid expenses | 3,852 | 4,138 | |||||
Other receivable | 4,186 | 4,118 | |||||
$ | 30,239 | $ | 36,235 |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||
Gross Assets | Accumulated Amortization | Net Assets | Gross Assets | Accumulated Amortization | Net Assets | ||||||||||||||||||
Technology and patents | $ | 37,478 | $ | (35,088 | ) | $ | 2,390 | $ | 37,684 | $ | (34,923 | ) | $ | 2,761 | |||||||||
Customer relationships | 15,346 | (14,991 | ) | 355 | 15,425 | (14,835 | ) | 590 | |||||||||||||||
Leasehold interest | 1,286 | (374 | ) | 912 | 1,309 | (366 | ) | 943 | |||||||||||||||
$ | 54,110 | $ | (50,453 | ) | $ | 3,657 | $ | 54,418 | $ | (50,124 | ) | $ | 4,294 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of goods sold | $ | 184 | $ | 203 | $ | 387 | $ | 465 | |||||||
Operating expenses | 120 | 118 | 239 | 236 | |||||||||||
Total | $ | 304 | $ | 321 | $ | 626 | $ | 701 |
2018 (remaining six months) | $ | 606 | |
2019 | 857 | ||
2020 | 739 | ||
2021 | 646 | ||
2022 | 30 | ||
Thereafter | 779 | ||
$ | 3,657 |
June 30, 2018 | December 31, 2017 | ||||||
Transition services agreement payables (Note 6) | $ | 11,781 | $ | 11,222 | |||
Employee-related | 11,560 | 12,990 | |||||
Asset sale related contingent liabilities (Note 6) | 7,014 | 7,135 | |||||
Accrued warranty | 1,592 | 1,334 | |||||
Deferred revenue, current | 735 | 939 | |||||
Income and other taxes payable | 2,401 | 542 | |||||
Rusnano payment derivative | 1,000 | — | |||||
Other accrued expenses | 8,205 | 9,080 | |||||
$ | 44,288 | $ | 43,242 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Beginning balance | $ | 1,699 | $ | 582 | $ | 1,334 | $ | 678 | |||||||
Warranty accruals | (17 | ) | 34 | 529 | (28 | ) | |||||||||
Settlements | (90 | ) | (88 | ) | (271 | ) | (122 | ) | |||||||
Ending balance | $ | 1,592 | $ | 528 | $ | 1,592 | $ | 528 |
June 30, 2018 | December 31, 2017 | ||||||
Pension and other employee-related | $ | 4,774 | $ | 4,675 | |||
Deferred rent | 2,984 | 2,908 | |||||
Deferred revenue | 280 | 617 | |||||
Government grant | 2,089 | 1,095 | |||||
Rusnano payment derivative | — | 389 | |||||
Deferred income tax liabilities | 65 | 106 | |||||
Asset retirement obligations and other | 3,834 | 4,285 | |||||
$ | 14,026 | $ | 14,075 |
Employee Severance | Facilities Consolidation | Others | Total | ||||||||||||
Restructuring obligations December 31, 2017 | $ | — | $ | 1,580 | $ | 43 | $ | 1,623 | |||||||
Charges | 177 | (40 | ) | 662 | 799 | ||||||||||
Cash payments | (123 | ) | (362 | ) | (43 | ) | (528 | ) | |||||||
Non-cash settlements and others | — | — | (51 | ) | (51 | ) | |||||||||
Restructuring obligations June 30, 2018 | $ | 54 | $ | 1,178 | $ | 611 | $ | 1,843 |
June 30, 2018 | December 31, 2017 | ||||||||||||
Carrying Amount | Interest Rate | Carrying Amount | Interest Rate | ||||||||||
Note payable to Shanghai Pudong Development Bank | $ | — | $ | 17,000 | 4.10 | % | |||||||
Note payable to CITIC Bank | 17,000 | 4.74 | % | 17,000 | 4.00 | % | |||||||
Notes payable to suppliers | 1,929 | — | 1,607 | ||||||||||
Total notes payable and short-term borrowing | $ | 18,929 | $ | 35,607 | |||||||||
Long-term debt, current and non-current: | |||||||||||||
Borrowing under Wells Fargo Credit Facility | $ | 30,305 | 4.10 | % | $ | 30,018 | 3.29 | % | |||||
Mitsubishi Bank loans | 11,996 | 1.05% -1.45% | 16,924 | 1.05% -1.45% | |||||||||
Mitsubishi Bank and Yamanashi Chou Bank loan | 7,405 | 1.1 | % | — | |||||||||
Unaccreted discount and issuance costs within current portion of long-term debt | (171 | ) | (86 | ) | |||||||||
Unaccreted discount and issuance costs within long-term debt, net of current portion | (515 | ) | (295 | ) | |||||||||
Total long-term debt, net of unaccreted discount and issuance costs | $ | 49,020 | $ | 46,561 | |||||||||
Reported as: | |||||||||||||
Current portion of long-term debt | $ | 2,868 | $ | 6,005 | |||||||||
Long-term debt, net of current portion | 46,152 | 40,556 | |||||||||||
Total long-term debt, net of unaccreted discount and issuance costs | $ | 49,020 | $ | 46,561 |
• | Under the first line of credit facility with Shanghai Pudong Development Bank, the Company can borrow up to RMB 120.0 million ($18.1 million) for short-term loans at varying interest rates, or up to approximately RMB 171.4 million ($25.9 million) for bank acceptance drafts (with a up to 50% compensating balance requirement). This line of credit facility expires in July 2019. In November 2017, the Company borrowed $17.0 million under this line which bears interest at 4.1%. The amount of $17.0 million under this line was repaid in May 2018. |
• | Under the second line of credit facility with Shanghai Pudong Development Bank, which expires in July 2019, the Company can borrow up to RMB 30.0 million ($4.5 million) for short-term loans at varying interest rates, or up to approximately RMB 42.9 million ($6.5 million) for bank acceptance drafts (with a up to 50% compensating balance requirement). |
• | In December 2017, the Company's subsidiary in China entered into a third line of credit facility with CITIC Bank in China, which expires in November 2018. The purpose of the credit facility is to provide short-term borrowings, bank acceptance drafts and letters of credits. Under this credit facility, the Company can borrow up to approximately RMB 250 million ($37.8 million) at varying interest rates. In February 2018, the Company borrowed $17.0 million under this line which bears interest at 4.7%. The amount of $17.0 million under this line was repaid in August 2018. |
2018 (remaining six months) | $ | 1,520 | |
2019 | 3,039 | ||
2020 | 3,039 | ||
2021 | 3,039 | ||
2022 | 33,344 | ||
Thereafter | 5,725 | ||
$ | 49,706 |
Foreign Currency Translation Adjustments | Unrealized Gain (Loss) on Available-For-Sale Securities | Defined Benefit Pension Plan Adjustment | Total Accumulated Other Comprehensive Income (loss) | ||||||||||||
Balance as of December 31, 2017 | $ | 567 | $ | (1 | ) | $ | (168 | ) | $ | 398 | |||||
Other comprehensive income (loss), net of taxes of zero and reclassifications | (2,380 | ) | 1 | — | (2,379 | ) | |||||||||
Balance as of June 30, 2018 | $ | (1,813 | ) | $ | — | $ | (168 | ) | $ | (1,981 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of goods sold | $ | 629 | $ | 324 | $ | 1,279 | $ | 471 | |||||||
Research and development | 829 | 511 | 1,602 | 1,173 | |||||||||||
Sales and marketing | 642 | 313 | 1,580 | 777 | |||||||||||
General and administrative | 1,039 | 738 | 2,025 | 1,337 | |||||||||||
$ | 3,139 | $ | 1,886 | $ | 6,486 | $ | 3,758 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
Stock options | 2018 | 2017 | 2018 | 2017 | |||
Weighted-average expected term (years) | 6.02 | 5.99 | 6.02 | 5.99 | |||
Weighted-average volatility | 66% | 65% | 65% | 65% | |||
Risk-free interest rate | 2.62% | 2.08% | 2.27%-2.62% | 2.08% | |||
Expected dividends | —% | —% | —% | —% | |||
Stock appreciation units | |||||||
Weighted-average expected term (years) | 2.0 | 2.33 | 2.04 | 2.39 | |||
Weighted-average volatility | 67% | 71% | 67% | 71% | |||
Risk-free interest rate | 1.73%-2.39% | 0.76%-1.50% | 1.03%-2.39% | 0.51%-1.50% | |||
Expected dividends | —% | —% | —% | —% | |||
ESPP | |||||||
Weighted-average expected term (years) | 0.71 | 0.68 | 0.71 | 0.68 | |||
Weighted-average volatility | 61% | 55% | 61% | 55% | |||
Risk-free interest rate | 1.20%-1.93% | 0.45%-0.91% | 1.20%-1.93% | 0.45%-0.91% | |||
Expected dividends | —% | —% | —% | —% |
Stock Options | Restricted Stock Units | ||||||||||||
Number of Shares | Weighted Average Exercise Price | Number of Units | Weighted Average Grant Date Fair Value | ||||||||||
Balance as of December 31, 2017 | 3,933,529 | $ | 5.55 | 2,404,637 | $ | 9.02 | |||||||
Granted | 158,116 | 6.64 | 1,306,588 | 6.80 | |||||||||
Exercised/Converted | (188,621 | ) | 3.73 | (312,076 | ) | 8.33 | |||||||
Cancelled/Forfeited | (42,993 | ) | 9.20 | (119,782 | ) | 9.02 | |||||||
Balance as of June 30, 2018 | 3,860,031 | 5.65 | 3,279,367 | 8.20 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Income tax (provision) benefit | $ | (1,080 | ) | $ | 451 | $ | (1,718 | ) | $ | 618 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | |||||||||||||||
Total revenue | $ | 81,102 | $ | 73,214 | $7,888 | 11% | $ | 149,688 | $ | 144,902 | $4,786 | 3% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
(in thousands, except percentages) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | |||||||||||||||||
Cost of goods sold | 65,630 | 56,437 | $ | 9,193 | 16 | % | 125,034 | 109,622 | $ | 15,412 | 14 | % | |||||||||||||
Gross profit | 15,472 | 16,777 | $ | (1,305 | ) | (8 | )% | 24,654 | 35,280 | $ | (10,626 | ) | (30 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Gross profit as a % of revenue | 19 | % | 23 | % | 16 | % | 24 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
(in thousands, except percentages) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | |||||||||||||||||||||
Research and development | $ | 13,243 | $ | 14,206 | $ | (963 | ) | (7 | )% | $ | 27,131 | $ | 29,750 | $ | (2,619 | ) | (9 | )% | |||||||||||
Sales and marketing | 3,891 | 3,910 | (19 | ) | — | % | 8,015 | 8,842 | (827 | ) | (9 | )% | |||||||||||||||||
General and administrative | 7,267 | 7,729 | (462 | ) | (6 | )% | 14,917 | 19,155 | (4,238 | ) | (22 | )% | |||||||||||||||||
Amortization of purchased intangible assets | 120 | 118 | 2 | 2 | % | 239 | 236 | 3 | 1 | % | |||||||||||||||||||
Asset sale related costs | 79 | 21 | 58 | 276 | % | 93 | 151 | (58 | ) | (38 | )% | ||||||||||||||||||
Restructuring charges | 622 | 494 | 128 | 26 | % | 653 | 721 | (68 | ) | (9 | )% | ||||||||||||||||||
Gain on asset sale | — | — | — | — | % | — | (2,000 | ) | 2,000 | (100 | )% | ||||||||||||||||||
Total operating expenses | $ | 25,222 | $ | 26,478 | $ | (1,256 | ) | (5 | )% | $ | 51,048 | $ | 56,855 | $ | (5,807 | ) | (10 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
(in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | |||||||||||||||||
Interest income | 122 | 31 | $ | 91 | 294 | % | 215 | 104 | $ | 111 | 107 | % | |||||||||||||
Interest expense | (759 | ) | (111 | ) | $ | (648 | ) | 584 | % | (1,467 | ) | (248 | ) | $ | (1,219 | ) | 492 | % | |||||||
Other income (expense), net | 930 | (11 | ) | $ | 941 | (8,555 | )% | 581 | 238 | $ | 343 | 144 | % | ||||||||||||
Total | 293 | (91 | ) | $ | 384 | (422 | )% | (671 | ) | 94 | $ | (765 | ) | (814 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
(in thousands) | 2018 | 2017 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | |||||||||||||||||
Income tax (provision) benefit | (1,080 | ) | 451 | $ | (1,531 | ) | (339 | )% | (1,718 | ) | 618 | $ | (2,336 | ) | (378 | )% |
Six Months Ended June 30, | |||||||
(in thousands) | 2018 | 2017 | |||||
Net cash used in operating activities | $ | (4,534 | ) | $ | (16,496 | ) | |
Net cash (used in) provided by investing activities | (9,725 | ) | 5,114 | ||||
Net cash (used in) provided by financing activities | (11,907 | ) | 966 | ||||
Effect of exchange rates on cash, cash equivalents and restricted cash | (176 | ) | 782 | ||||
Net decrease in cash, cash equivalents and restricted cash | $ | (26,342 | ) | $ | (9,634 | ) |
Payments Due by Period | |||||||||||||||||||
Total | Less than 1 Year | 1-3 years | 3-5 Years | More than 5 Years | |||||||||||||||
Mitsubishi Bank and Yamanashi Chou Bank loan | $ | 7,405 | $ | 549 | $ | 2,194 | $ | 2,194 | $ | 2,468 | |||||||||
Expected interest payments (1) | 264 | 38 | 122 | 75 | 29 | ||||||||||||||
Total | $ | 7,669 | $ | 587 | $ | 2,316 | $ | 2,269 | $ | 2,497 |
• | invest in our research and development efforts, including by hiring additional technical and other personnel; |
• | maintain and expand our operating or manufacturing infrastructure; |
• | acquire complementary businesses, products, services or technologies; or |
• | otherwise pursue our strategic plans and respond to competitive pressures. |
• | difficulties in staffing, managing and supporting operations in more than one country; |
• | difficulties in enforcing agreements and collecting receivables through foreign legal systems; |
• | fewer legal protections for intellectual property in foreign jurisdictions; |
• | the need for compliance with local laws and regulations; |
• | foreign and U.S. taxation issues and international trade barriers; |
• | general economic and political conditions in the markets in which we operate; |
• | difficulties in obtaining any necessary governmental authorizations for the export of our products to certain foreign jurisdictions; |
• | imposition of export restrictions on sales to any of our major foreign customers; |
• | fluctuations in foreign economies and fluctuations in the value of foreign currencies and interest rates; |
• | trade and travel restrictions; |
• | outbreaks of contagious disease; |
• | domestic and international economic or political changes, hostilities and other disruptions; and |
• | difficulties and increased expenses in complying with a variety of U.S. and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act and international labor standards. Negative developments in any of these areas in China, Japan, Russia or other countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulties in producing and delivering our products, threats to our intellectual property, difficulty in collecting receivables, higher labor costs and a higher cost of doing business. |
• | fluctuations in demand for our products; |
• | the timing, size and product mix of sales of our products; |
• | changes in our pricing and sales policies, particularly in the first quarter of the year, or changes in the pricing and sales policies of our competitors; |
• | our ability to design, manufacture and deliver products to our customers in a timely and cost-effective manner and that meet customer requirements; |
• | quality control, yield or other output-related problems in our manufacturing operations; |
• | our ability to timely obtain adequate quantities of the components used in our products; |
• | length and variability of the sales cycles of our products; |
• | unanticipated increases in costs or expenses; and |
• | fluctuations in foreign currency exchange rates. |
• | providing for a classified board of directors with staggered, three-year terms; |
• | not providing for cumulative voting in the election of directors; |
• | authorizing our board of directors to issue, without stockholder approval, preferred stock rights senior to those of common stock; |
• | prohibiting stockholder action by written consent; |
• | limiting the persons who may call special meetings of stockholders; and |
• | requiring advance notification of stockholder nominations and proposals. |
Exhibit no. | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | Filed herewith | |||||
Form 8-K | 001-35061 | 2.1 | January 23, 2017 | ||||||||
Form 8-K | 001-35061 | 2.2 | January 23, 2017 | ||||||||
Form 8-K | 001-35061 | 2.3 | January 23, 2017 | ||||||||
Form 8-K | 001-35061 | 3.1 | February 10, 2011 | ||||||||
Form S-1/A | 333-166096 | 3.5 | November 22, 2010 | ||||||||
Form S-1/A | 333-166096 | 4.1 | May 17, 2010 | ||||||||
Form S-1 | 333-166096 | 4.2 | April 15, 2010 | ||||||||
Form S-1 | 333-201180 | 4.4 | December 19, 2014 | ||||||||
X | |||||||||||
X | |||||||||||
X | |||||||||||
X |
Exhibit no. | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | Filed herewith | |||||
101.INS | XBRL Instance Document. | X | |||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | |||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | |||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | |||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | |||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
NeoPhotonics Corporation | |||
Date: | August 6, 2018 | By: | /S/ ELIZABETH EBY |
Elizabeth Eby | |||
Senior Vice President, Finance and Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
/S/ TIMOTHY S. JENKS |
Timothy S. Jenks |
President, Chief Executive Officer and |
Chairman of the Board of Directors |
/S/ ELIZABETH EBY |
Elizabeth Eby |
Senior Vice President, Finance and Chief Financial Officer |
(Principal Financial and Accounting Officer) |
/S/ TIMOTHY S. JENKS | /S/ ELIZABETH EBY | |
Timothy S. Jenks | Elizabeth Eby | |
President, Chief Executive Officer and | Senior Vice President, Finance and Chief Financial Officer | |
Chairman of the Board of Directors | (Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jul. 31, 2018 |
|
Document Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | NPTN | |
Entity Registrant Name | NEOPHOTONICS CORP | |
Entity Central Index Key | 0001227025 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 45,302,477 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.0025 | $ 0.0025 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0025 | $ 0.0025 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 44,906,000 | 44,219,000 |
Common stock, shares outstanding (in shares) | 44,906,000 | 44,219,000 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement [Abstract] | ||||
Revenue | $ 81,102 | $ 73,214 | $ 149,688 | $ 144,902 |
Cost of goods sold | 65,630 | 56,437 | 125,034 | 109,622 |
Gross profit | 15,472 | 16,777 | 24,654 | 35,280 |
Operating expenses: | ||||
Research and development | 13,243 | 14,206 | 27,131 | 29,750 |
Sales and marketing | 3,891 | 3,910 | 8,015 | 8,842 |
General and administrative | 7,267 | 7,729 | 14,917 | 19,155 |
Amortization of purchased intangible assets | 120 | 118 | 239 | 236 |
Asset sale related costs | 79 | 21 | 93 | 151 |
Restructuring charges | 622 | 494 | 653 | 721 |
Gain on asset sale | 0 | 0 | 0 | (2,000) |
Total operating expenses | 25,222 | 26,478 | 51,048 | 56,855 |
Loss from operations | (9,750) | (9,701) | (26,394) | (21,575) |
Interest income | 122 | 31 | 215 | 104 |
Interest expense | (759) | (111) | (1,467) | (248) |
Other income (expense), net | 930 | (11) | 581 | 238 |
Total interest and other income (expense), net | 293 | (91) | (671) | 94 |
Loss before income taxes | (9,457) | (9,792) | (27,065) | (21,481) |
Income tax (provision) benefit | (1,080) | 451 | (1,718) | 618 |
Net loss | $ (10,537) | $ (9,341) | $ (28,783) | $ (20,863) |
Basic net loss per share (USD per share) | $ (0.24) | $ (0.22) | $ (0.65) | $ (0.49) |
Diluted net loss per share (USD per share) | $ (0.24) | $ (0.22) | $ (0.65) | $ (0.49) |
Weighted average shares used to compute basic net loss per share (in shares) | 44,665 | 43,219 | 44,463 | 42,919 |
Weighted average shares used to compute diluted net loss per share (in shares) | 44,665 | 43,219 | 44,463 | 42,919 |
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (10,537) | $ (9,341) | $ (28,783) | $ (20,863) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments, net of zero tax | (8,482) | 1,445 | (2,380) | 3,913 |
Unrealized gains on available-for-sale securities, net of zero tax | 0 | 13 | 1 | 16 |
Total other comprehensive income (loss) | (8,482) | 1,458 | (2,379) | 3,929 |
Comprehensive loss | $ (19,019) | $ (7,883) | $ (31,162) | $ (16,934) |
Basis of presentation and significant accounting policies |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation and significant accounting policies | Basis of presentation and significant accounting policies Basis of Presentation and Consolidation The condensed consolidated financial statements of NeoPhotonics Corporation (“NeoPhotonics” or the “Company”) as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017, have been prepared in accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, the Company has omitted certain information and notes normally provided in the Company’s annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the interim periods. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”). These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results expected for the entire fiscal year. All intercompany accounts and transactions have been eliminated. Going Concern Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, requires an entity to disclose information about its potential inability to continue as a going concern when conditions and events indicate that it is probable that the entity may be unable to meet its obligations as they become due within one year. Management has assessed the Company’s ability to continue as a going concern within one year of the filing date of this Quarterly Report on Form 10-Q with the SEC in August 2018. The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of June 30, 2018, the Company’s working capital was $106.0 million, including available cash, cash equivalents, short-term investments and restricted cash of approximately $67.6 million. In the first six months of 2018, the Company had operating losses of $26.4 million and cash used in operations of $4.5 million. It had an accumulated deficit of approximately $382.6 million as of June 30, 2018. Through 2017 and the early part of 2018, the Company's operating results and cash flows were negatively affected by demand that was lower than customer estimates that were used to put capacity in place over the last two years. In the three months ended June 30, 2018, demand began to increase, primarily due to volume growth in the Americas and the result of increased provincial deployments in China. To adjust to the demand that has been less than estimates used for capacity decisions, the Company implemented restructuring plans in May and September 2017 that included a reduction in force and consolidation of facilities, in order to reduce expenses. The Company has also reduced or delayed certain product development projects and capital expenditures, aggressively pursued collections of accounts and notes receivable and continued to closely manage production and inventory levels. In September 2017, the Company entered into a revolving line of credit agreement with Wells Fargo Bank, National Association ("Wells Fargo") which provides for borrowings under an accounts receivable based formula up to a maximum of $50.0 million. As of June 30, 2018, $30.3 million was outstanding under this line. The remaining borrowing capacity as of June 30, 2018 was $19.7 million, of which $5.0 million is required to be maintained as unused borrowing capacity. Borrowings under the Wells Fargo line are not due until June 30, 2022 as long as the borrowing base is not less than the outstanding amount (See Note 9). Additionally, the Company has $18.9 million of notes payable and short-term borrowing and $2.9 million of current portion of long-term debt as of June 30, 2018, which it plans to pay out of its existing available cash. The Company currently believes it will have sufficient resources to fund its currently planned operations and expenditures over the next twelve months without additional financing or other actions. In addition, the Company believes there are a number of ongoing and potential actions that may further strengthen its projected cash and projected financial position. The Company operates in an industry in which it is difficult to evaluate its prospects with certainty. Future declines in China market demand or other changes to the Company’s forecasts could adversely affect the Company’s results of operations, financial position and cash flows. As a result, the Company may need to raise additional debt or equity capital to fund its operations. Any additional debt arrangements may likely require regular interest and principal payments which could adversely affect the Company’s operations. There can be no assurance that additional debt or equity capital will be available on acceptable terms, or at all. Certain Significant Risks and Uncertainties The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the general state of the U.S., China and world economies; the highly cyclical nature of the industries the Company serves; the loss of any of a small number of its larger customers; ability to obtain additional financing; inability to meet certain debt covenants; fundamental changes in the technology underlying the Company’s products; the hiring, training and retention of key employees; successful and timely completion of product design efforts; and new product design introductions by competitors. Concentration In the three months ended June 30, 2018, Huawei Technologies Co. Ltd. and their affiliate HiSilicon Technologies (together with Huawei Technologies Co. Ltd., "Huawei") accounted for approximately 43% of the Company's total revenue. Two other customers accounted for approximately 25% and 12% of the Company’s total revenue and the Company’s top five customers represented approximately 90% of the Company’s total revenue. In the three months ended June 30, 2017, Huawei accounted for approximately 37% of the Company's total revenue. One other customer accounted for approximately 19% of the Company’s total revenue and the Company’s top five customers represented approximately 78% of the Company’s total revenue. In the six months ended June 30, 2018, Huawei accounted for approximately 46%, of the Company's total revenue. Two other customers accounted for approximately 22% and 10% of the Company's total revenue and the Company's top five customers represented approximately 87% of its total revenue. In the six months ended June 30, 2017, Huawei accounted for approximately 39% of the Company's total revenue. One other customer accounted for approximately 16% of the Company's total revenue and the Company's top five customers represented approximately 76% of the Company's total revenue. As of June 30, 2018, three customers accounted for approximately 44%, 13% and 11% of the Company’s accounts receivable. As of December 31, 2017, three customers accounted for approximately 36%, 14% and 10%, respectively, of the Company’s accounts receivable. Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Significant estimates made by management include: the useful lives of property, plant and equipment and intangible assets as well as future cash flows to be generated by those assets; fair values of identifiable assets acquired and liabilities assumed in business combinations; allowances for doubtful accounts; valuation allowances for deferred tax assets; valuation of excess and obsolete inventories; warranty reserves; litigation accrual and recognition of stock-based compensation, among others. Actual results could differ from these estimates. Accounting Standards Update Recently Adopted In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”). The standard, along with the amendments issued in 2016 and 2015, provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-9 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-9; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-9 recognized at the date of initial application and providing certain additional disclosures. This standard, as amended, is effective for annual and interim periods beginning after December 15, 2017 and permits entities to early adopt for annual and interim reporting periods beginning after December 15, 2016. The Company adopted this standard as of January 1, 2018, using the full retrospective transition method. See Note 2 for further details. In May 2017, the FASB issued ASU No. 2017-9, Compensation—Stock Compensation (718)—Scope of Modification Accounting (ASU 2017-9”). This guidance redefines which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting for a share-based payment. ASU 2017-9 is effective for interim and annual periods after December 15, 2017 and early adoption is permitted in any interim period. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In January 2017, the FASB issued ASU 2017-1, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-1”). This standard provides a framework in determining when a set of assets and activities is a business. ASU 2017-1 is effective for interim and annual periods beginning after December 15, 2017 on a prospective basis. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASC 2016-18”). This standard provides guidance on the classification and presentation of restricted cash in the statement of cash flows and must be applied retrospectively. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017. The Company adopted this standard effective January 1, 2018. The reclassified restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash on the condensed consolidated statements of cash flows were not material for all periods presented. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). This standard provides guidance on the tax accounting for the transferring and receiving entities upon transfer of an asset. ASU 2016-16 is effective for the Company’s interim and annual periods beginning after December 15, 2017 and should be applied on a modified retrospective basis. Upon adoption of this standard on January 1, 2018, the Company recorded $1.8 million to accumulated deficit balance for intra-entity transfer of an asset other than inventory in prior years. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). This standard provides guidance on the classification of certain cash receipts and payments in the statement of cash flows. It is effective, retrospectively, for the Company’s annual and interim reporting periods beginning after December 15, 2017 or prospectively from the earliest date practicable if retrospective application is impracticable. The Company adopted this standard effective January 1, 2018, using the retrospective transition method. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In January 2016, the FASB issued ASU 2016-1, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-1”). ASU 2016-1 revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments and is effective for the Company’s annual and interim reporting periods beginning after December 15, 2017. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In March 2017, the FASB issued ASU No. 2017-7, Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-7”). This guidance revises the presentation of employer-sponsored defined benefit pension and other postretirement plans for the net periodic benefit cost in the statement of operations and requires that the service cost component of net periodic benefit be presented in the same income statement line items as other employee compensation costs for services rendered during the period. The other components of the net benefit costs are required to be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. This guidance allows only the service cost component of net periodic benefit costs to be eligible for capitalization. ASU 2017-7 is effective for interim and annual periods after December 15, 2017. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. There have been no other changes in the Company’s significant accounting policies in the six months ended June 30, 2018, as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended December 31, 2017. Recent Accounting Standards Update Not Yet Effective In January 2017, the FASB issued ASU 2017-4, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-4”). This standard amends the goodwill impairment test to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, up to the total amount of goodwill allocated to that reporting unit. ASU 2017-4 is effective prospectively for interim and annual periods beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 amends existing guidance on the impairment of financial assets and adds an impairment model that is based on expected losses rather than incurred losses and requires an entity to recognize as an allowance its estimate of expected credit losses for its financial assets. An entity will apply this guidance through a cumulative-effect adjustment to retained earnings upon adoption (a modified-retrospective approach) while a prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. It is effective for the Company’s annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption on its consolidated financial statements and related disclosure. In February 2016, the FASB issued ASU 2016-2, Leases (Topic 842) (“ASU 2016-2”). ASU 2016-2 introduces a lessee model that requires recognition of assets and liabilities arising from qualified leases on the consolidated balance sheets and consolidated statements of operations and to disclose qualitative and quantitative information about lease transactions. It is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition is required with certain optional practical expedients allowed. The Company is in the process of evaluating the impact of the adoption on its consolidated financial statements and related disclosure. |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Adoption of ASC Topic 606, “Revenue from Contracts with Customers” On January 1, 2018, the Company adopted Topic 606 using the full retrospective method which required it to restate each prior reporting period presented. The adoption did not have a material impact on the Company's consolidated financial statements and as a result, no changes were made to prior reporting periods presented. Product revenue The Company develops, manufactures and sells optoelectronic products that transmit, receive and switch high speed digital optical signals for communications networks. Revenue is derived primarily from the sale of hardware products. The Company sells its products worldwide, primarily to leading network equipment manufacturers. Revenue recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company generally bears all costs, risk of loss or damage and retains title to the goods up to the point of transfer of control of promised products to customers. Revenue related to the sale of consignment inventory at customer vendor managed locations is not recognized until the product is pulled from consignment inventory by customers. In instances where acceptance of the product or solutions is specified by the customer, revenue is deferred until such required acceptance criteria have been met. Shipping and handling costs are included in the cost of goods sold. The Company presents revenue net of sales taxes and any similar assessments. Nature of products Revenue from sale of hardware products is recognized upon transfer of control to the customer. The performance obligation for the sale of hardware products is satisfied at a point in time. The Company has aligned its products in two groups - High Speed Products and Network Products and Solutions. The following presents revenue by product group (in thousands):
The following table presents the Company's revenue information by geographical region. Revenue is classified based on the ship to location requested by the customer. Such classification recognizes that for many customers, including those in North America or in Europe, designated shipping points are often in China or elsewhere in Asia (in thousands):
Certain prior period amounts have been reclassified to conform to the current period presentation. Deferred revenue The Company records deferred revenue when cash payments are received or due in advance of our performance. Refer to Note 7 for disclosure of deferred revenue balances. The increase in the deferred revenue balances during the three and six months ended June 30, 2018 was immaterial, offset by approximately $0.2 million and $0.6 million of revenue recognized during the three and six months ended June 30, 2018 that was included in the deferred revenue balance as of December 31, 2017. The increase in the deferred revenue balances during the three and six months ended June 30, 2017 was $0.4 million and $1.6 million, respectively, offset by approximately $0.2 million and $0.5 million of revenue recognized during the three and six months ended June 30, 2017, respectively, that was included in the deferred revenue balance as of December 31, 2016. Contract assets The Company records contract assets when the revenue is recognized but the customer payment is contingent on a future event. The balance of contract assets as of June 30, 2018 and December 31, 2017 was immaterial. Refund liabilities The Company records refund liabilities when the contract permits the customer to return the product if certain circumstances arise. The balance of refund liabilities as of June 30, 2018 and December 31, 2017 was immaterial. |
Net loss per share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss per share | Net loss per share The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):
The Company has excluded the impact of the following outstanding employee stock options and restricted stock units as well as the shares expected to be issued under its employee stock purchase plan from the computation of diluted net loss per share, as their effect would have been antidilutive (in thousands):
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Cash, cash equivalents, short-term investments, and restricted cash |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, cash equivalents, short-term investments and restricted cash | Cash, cash equivalents, short-term investments, and restricted cash The following table summarizes the Company’s cash, cash equivalents, short-term investments and restricted cash (in thousands):
As of June 30, 2018 restricted cash primarily included approximately $2.1 million pursuant to an asset purchase agreement with APAT Optoelectronics Components Co., Ltd. (“APAT OE”) relating to the asset sale closed in January 2017, $2.5 million related to cash balances temporarily restricted for regular business operations until a current legal dispute with APAT OE is resolved (See Note 11), $1.3 million relating to government grants received in advance and approximately $0.9 million for the compensating balances relating to the Company’s notes payable issued under its line of credit facilities in China (see Note 9). As of December 31, 2017, restricted cash primarily included approximately $2.1 million pursuant to an asset purchase agreement with APAT OE. The following table summarizes the Company’s unrealized gains and losses related to its cash equivalents and short-term investments in marketable securities designated as available-for-sale (in thousands):
As of June 30, 2018 and December 31, 2017, maturities of marketable securities were as follows (in thousands):
Realized gains and losses on the sale of marketable securities during the three and six months ended June 30, 2018 and 2017 were insignificant. The Company did not recognize any impairment losses on its marketable securities during the three and six months ended June 30, 2018 or 2017. As of June 30, 2018, the Company did not have any investments in marketable securities that were in an unrealized loss position for a period in excess of 12 months. |
Fair value disclosures |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value disclosures | Fair value disclosures Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the Company's assets that are measured at fair value on a recurring basis (in thousands):
________________________________________________________ *The fair value of the Company’s foreign currency forward contract was immaterial as of June 30, 2018 and December 31, 2017. The Company offers a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of its highly compensated employees. The NQDC Plan provides participants the opportunity to defer payment of certain compensation as defined in the NQDC Plan. A Rabbi Trust has been established to fund the NQDC Plan obligation, which was fully funded at June 30, 2018. The assets held by the Rabbi Trust are substantially in the form of exchange traded mutual funds and are included in the Company’s other long-term assets on its condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017. Effective July 1, 2016, the Company maintains a hedging program using forward exchange contracts as economic hedges, to protect against volatility of foreign exchange rate exposure when it is deemed economical to do so, based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. The forward contracts are not designated for hedge accounting. Under the hedging program, the Company enters into monthly forward exchange contracts, that have average maturities of one month, to offset the effects of exchange rate exposures for its net intercompany activities denominated in Chinese Renminbi, or RMB, by buying and selling the underlying foreign currency in the future at fixed exchange rates, to offset the consequences of changes in foreign exchange on the balance sheet. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the re-measurement of the hedged assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. The net effect of fair value changes is reported in other income (expense), net. As of June 30, 2018, the fair value of the Company’s foreign currency forward contract was immaterial due to the short-term nature of the contract, which generally expires at each month-end. The total notional value of the Company’s foreign currency exchange contract as of June 30, 2018 was $48.0 million for Chinese Yuan offshore or CNH that approximates the RMB and $5.2 million for Japanese Yen (JPY). The following table presents the Company's liabilities that are measured at fair value on a recurring basis (in thousands):
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis As of June 30, 2018 and December 31, 2017 the Company had no assets or liabilities required to be measured at fair value on a nonrecurring basis. In the three months ended March 31, 2017, the Company recorded a $6.7 million contingent liability within accrued and other current liabilities on its balance sheet in connection with the contingent indemnification commitments pursuant to an asset sale closed in January 2017. See Note 6. This liability was measured using the Company's best estimate of the likelihood of payment based on circumstances the Company identified as having a significant impact on its fair value during the period, which is considered to be a level 3 fair value measurement. Assets and Liabilities Not Measured at Fair Value The carrying values of accounts receivable, accounts payable, notes payable and short-term borrowings approximate their fair values due to the short-term nature and liquidity of these financial instruments. The estimated fair value of the Company's long-term debt approximated its carrying value as of June 30, 2018 and December 31, 2017, as the interest rates approximated rates currently available to the Company on the issuance of liabilities with a similar maturity. This estimate is considered to be a level 2 fair value measurement. |
Asset sale |
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Jun. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Asset sale | Asset sale In January 2017, the Company completed the sale of its Low Speed Transceiver Products’ assets to APAT OE pursuant to an asset purchase agreement dated December 14, 2016 for consideration of approximately $25.0 million (in RMB equivalent) plus approximately $1.4 million (in RMB equivalent) for post-closing transaction service fees under a transition services agreement with APAT OE in which the Company provided short-term manufacturing and other specific services pursuant to such agreement. The related supply chain purchase commitments and value-added tax obligations have been assumed by APAT OE. The receivable and payable balances related to the transition service arrangement were $12.5 million and $11.8 million, respectively, as of June 30, 2018. See Note 11 for litigation and arbitration matters with APAT OE. As of December 31, 2016, the balance in assets held for sale was $13.9 million, consisting of $13.1 million in inventories and $0.8 million in property, plant and equipment. As a result of post-closing adjustments, total consideration was reduced by approximately $3.4 million for inventory. In addition, an immaterial amount of property, plant and equipment was reclassified from assets held for sale. Upon closing, assets sold to APAT OE were approximately $12.8 million, including approximately $12.1 million in inventories and $0.7 million in property, plant and equipment. The adjusted consideration received of approximately $21.6 million is subject to further reduction of up to $10.0 million for any indemnification claims. As of June 30, 2018, the Company has a reserve of $7.0 million within accrued and other current liabilities for warranty claims. The indemnification warranties expired on June 30, 2017. The Company recognized a $2.2 million gain on the sale of these assets within the operating loss in 2017. All of the Low Speed Transceiver Products were part of the Company’s Network Products and Solution product group and included the low speed optical network (PON) products for which the end-of-life plan was announced in mid-2016. |
Balance sheet components |
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Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance sheet components | Balance sheet components Accounts receivable, net Accounts receivable, net, consists of the following (in thousands):
Inventories, net Inventories, net consist of the following (in thousands):
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Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following (in thousands):
Property, plant and equipment, net Purchases of property, plant and equipment unpaid as of June 30, 2018 and June 30, 2017 was $3.1 million and $9.8 million, respectively. Purchased intangible assets Purchased intangible assets consist of the following (in thousands):
Amortization expense relating to technology and patents and the leasehold interest intangible assets is included within cost of goods sold and customer relationships within operating expenses. The following table presents details of the amortization expense of the Company’s purchased intangible assets as reported in the condensed consolidated statements of operations (in thousands):
The estimated future amortization expense of purchased intangible assets as of June 30, 2018, is as follows (in thousands):
Accrued and other current liabilities Accrued and other current liabilities consist of the following (in thousands):
Warranty Accrual The table below summarizes the movement in the warranty accrual, which is included in accrued and other current liabilities (in thousands):
Other noncurrent liabilities Other noncurrent liabilities consist of the following (in thousands):
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Restructuring |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | Restructuring In 2017, the Company initiated restructuring actions in order to focus on key growth initiatives and to move towards a lower break even revenue level through lower operating expenses and manufacturing cost reductions. Actions included a reduction in force, facilities consolidation and certain asset-related adjustments. The Company recorded $0.1 million in restructuring charges within cost of goods sold in the three and six months ended June 30, 2018 and $0.6 million and $0.7 million in restructuring charges within operating expenses in the three and six months ended June 30, 2018, respectively. The Company recorded $0.7 million and $1.0 million in restructuring charges within cost of goods sold and operating expenses in the three and six months ended June 30, 2017. Restructuring activities for the six months ended June 30, 2018 were as follows (in thousands):
The current restructuring liability reported in Accrued and other current liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2018 was $1.5 million. The non-current restructuring liability reported in other noncurrent liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2018 was $0.3 million. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The table below summarizes the carrying amount and weighted average interest rate of the Company’s debt (in thousands, except percentages):
Notes payable The Company regularly issues notes payable to its suppliers in China. These notes are supported by non-interest bearing bank acceptance drafts issued under the Company’s existing line of credit facilities and are due three to six months after issuance. As a condition of the notes payable arrangements, the Company is required to keep a compensating balance at the issuing banks that is a percentage of the total notes payable balance until the amounts are settled. As of June 30, 2018, the Company’s subsidiary in China had three line of credit facilities with the following banking institutions:
The Company has another line of credit facility with CITIC Bank in China which expired during September 2017. In July 2017, the Company borrowed $17.0 million under this line which bears interest at LIBOR plus 2.55%. The amount of $17.0 million under this line was repaid to CITIC Bank in January 2018. Under these line of credit facilities, the non-interest bearing bank acceptance drafts issued in connection with the Company’s notes payable to its suppliers in China, had an outstanding balance of $1.9 million and $1.6 million as of June 30, 2018 and December 31, 2017, respectively. In addition to the outstanding notes payable, three letters of credit totaling $1.6 million were issued to its suppliers in 2016 for equipment purchases delivered by December 2016. These letters of credit required a 30% compensating balance. As of December 31, 2016, the outstanding balance of these letters of credit was immaterial and was fully repaid as of December 31, 2017. As of June 30, 2018 and December 31, 2017, compensating balances relating to these bank acceptance drafts and letters of credit issued to suppliers and the Company’s subsidiaries totaled $0.9 million and $0.5 million, respectively. Compensating balances are classified as restricted cash on the Company’s condensed consolidated balance sheets. In China, when there is a case pending in judicial court, banks may choose to limit borrowing against existing credit lines, regardless of the legitimacy of the case. The Company has a dispute pending with APAT OE in judicial court (See Note 11). The Company does not expect to make any additional draws against its credit facilities in China until this matter is resolved. Credit facilities The Company had a credit agreement, as amended, with Comerica Bank as lead bank in the U.S. (the “Comerica Bank Credit Facility”) with a borrowing capacity of up to $30.0 million. In January 2017, the Company amended the Comerica Bank Credit Facility to extend the maturity to April 30, 2017 and to remove the covenant related to EBITDA. In April 2017, the Company amended the Comerica Bank Credit Facility to extend the maturity date to July 31, 2017 and to add a financial covenant that required maintenance of a modified EBITDA. In June 2017, the Company amended the Comerica Bank Credit Facility to extend the maturity to August 31, 2017, to allow NeoPhotonics China to borrow up to $17.0 million, to limit the indebtedness under the facility to $20.0 million and to modify the EBITDA requirement. In August 2017, the Credit Facility was further amended to extend the maturity to September 30, 2017. Borrowings under the Comerica Bank Credit Facility bore interest at an interest rate option of a base rate as defined in the agreement plus 1.75% or LIBOR plus 2.75%. The base rate was the greater of (a) the effective prime rate, (b) the Federal Funds effective rate plus one percent, and (c) the daily adjusting LIBOR rate plus one percent. In September 2017, the Company entered into a revolving line of credit agreement with Wells Fargo Bank, National Association ("Wells Fargo") as the administrative agent for a lender group (the "Wells Fargo Credit Facility" or "Credit Facility"), and the amount outstanding under the Comerica Bank Credit Facility was paid in full. The Wells Fargo Credit Facility provides for borrowings equal to the lower of (a) a maximum revolver amount of $50.0 million, or (b) an amount equal to 80% - 85% of eligible accounts receivable plus 100% of qualified cash balances up to $15.0 million, less certain discretionary adjustments ("Borrowing Base"). The maximum revolver amount may be increased by up to $25.0 million, subject to certain conditions. At closing, $50.0 million was available, of which $30.0 million was drawn. The Company used $20.0 million of this amount to pay the principal and interest due under the Comerica Bank Credit Facility, which has since been terminated. The Credit Facility matures on June 30, 2022 and borrowings bear interest at an interest rate option of either (a) the LIBOR rate, plus an applicable margin ranging from 1.50% to 1.75% per annum, or (b) the prime lending rate, plus an applicable margin ranging from 0.50% to 0.75% per annum. The Company is also required to pay a commitment fee equal to 0.25% of the unused portion of the Credit Facility. The Credit Facility agreement ("Agreement") requires prepayment of the borrowings to the extent the outstanding balance is greater than the lesser of (a) the most recently calculated Borrowing Base, or (b) the maximum revolver amount. The Company is required to maintain a combination of certain defined cash balances and unused borrowing capacity under the Credit Facility of at least $20.0 million, of which at least $5.0 million shall include unused borrowing capacity. The Agreement also restricts the Company's ability to dispose of assets, permit change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments and make certain restricted payments. Borrowings under the Credit Facility are collateralized by substantially all of the Company's assets. The Company was in compliance with the covenants of this Credit Facility as of June 30, 2018. As of June 30, 2018, the outstanding balance under the Credit Facility was $30.3 million and the weighted average rate under the LIBOR option was 4.10%. The remaining borrowing capacity as of June 30, 2018 was $19.7 million, of which $5.0 million is required to be maintained as unused borrowing capacity. Mitsubishi Bank loans On February 25, 2015, the Company entered into certain loan agreements and related agreements with the Bank of Tokyo-Mitsubishi UFJ, Ltd. (the “Mitsubishi Bank”) that provided for (i) a term loan in the aggregate principal amount of 500 million JPY ($4.4 million) (the “Term Loan A”) and (ii) a term loan in the aggregate principal amount of one billion JPY ($9.0 million) (the “Term Loan B” and together with the Term Loan A, the “2015 Mitsubishi Bank Loans”). The Mitsubishi Bank Loans are secured by a mortgage on certain real property and buildings owned by the Company’s Japanese subsidiary. Interest on the 2015 Mitsubishi Bank Loans accrues and is paid monthly based upon the annual rate of the monthly Tokyo Interbank Offer Rate (TIBOR) plus 1.40%. The Term Loan A requires interest only payments until the maturity date of February 23, 2018, with a lump sum payment of the aggregate principal amount on the maturity date. The Term Loan B requires equal monthly payments of principal equal to 8,333,000 JPY until the maturity date of February 25, 2025, with a lump sum payment of the balance of 8,373,000 JPY on the maturity date. Interest on the Term Loan B is accrued based upon monthly TIBOR plus 1.40% and is secured by real estate collateral. In conjunction with the execution of the Bank Loans, the Company paid a loan structuring fee, including consumption tax, of 40,500,000 JPY ($0.4 million). The Term Loan A of 500 million JPY (approximately $4.4 million) was repaid to the Mitsubishi Bank in January 2018. The 2015 Mitsubishi Bank Loans contain customary representations and warranties and customary affirmative and negative covenants applicable to the Company’s Japanese subsidiary, including, among other things, restrictions on cessation in business, management, mergers or acquisitions. The 2015 Mitsubishi Bank Loans contain financial covenants relating to minimum net assets, maximum ordinary loss and a dividends covenant. Outstanding principal balance for Term Loan B and unamortized debt issuance costs were approximately 666.7 million JPY (approximately $6.0 million) and 75.9 million JPY (approximately $0.7 million), respectively, as of June 30, 2018. The Company was in compliance with the related covenants as of June 30, 2018 and December 31, 2017. In March 2017, the Company entered into a loan agreement and related agreements with the Mitsubishi Bank for a term loan of 690 million JPY (approximately $6.2 million) (the “2017 Mitsubishi Bank Loan”) to acquire manufacturing equipment for its Japanese subsidiary. This loan is secured by the manufacturing equipment acquired from the loan proceeds. Interest on the 2017 Mitsubishi Bank Loan is based on the annual rate of the monthly TIBOR rate plus 1.00%. The 2017 Mitsubishi Bank Loan matures on March 29, 2024 and requires monthly interest and principal payments over 72 months commencing in April 2018. The loan contains customary covenants relating to minimum net assets, maximum ordinary loss and a dividends covenant. The Company was in compliance with these covenants as of June 30, 2018. The loan is available from March 31, 2017 to March 30, 2018 and 690 million JPY (approximately $6.2 million) under this loan was fully drawn as of December 31, 2017. Mitsubishi Bank and Yamanashi Chou Bank loan In January 2018, the Company entered into a term loan agreement with Mitsubishi Bank and The Yamanashi Chou Bank, Ltd. for a term loan in the aggregate principal amount of 850 million JPY (approximately $7.7 million) (the “Term Loan C”). The purpose of the Term Loan C is to obtain machinery for the core parts of the manufacturing line and payments for related expenses by the Company's subsidiary in Japan. The Term Loan C is secured by the assets owned by the Company's subsidiary in Japan. The Term Loan C is available from January 29, 2018 to January 29, 2025. The full amount of the Term Loan C was drawn in January 2018. Interest on the Term Loan C is based upon the annual rate of the three months TIBOR rate plus 1.00%. The Term Loan C requires quarterly interest payments, along with the principal payments, over 82 months commencing in April 2018. The Term Loan C loan agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Japanese Subsidiary, including, among other things, restrictions on cessation in business, management, mergers or acquisitions. The Term Loan C loan agreement contains financial covenants relating to minimum net assets and maximum ordinary loss. The Company was in compliance with these covenants as of June 30, 2018. As of June 30, 2018, maturities of total long-term debt were as follows (in thousands):
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Japan pension plans |
6 Months Ended |
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Jun. 30, 2018 | |
Retirement Benefits [Abstract] | |
Japan pension plans | Japan pension plan The pension liability related to the Company’s Retirement Allowance Plan (“RAP”) in Japan as of June 30, 2018 and December 31, 2017 was $4.5 million and $4.6 million, respectively, of which $0.3 million and $0.5 million, respectively, was recorded in accrued and other current liabilities and the remainder in other noncurrent liabilities on the Company’s condensed consolidated balance sheet. Net periodic pension cost associated with this plan was immaterial in the three and six months ended June 30, 2018 and 2017. |
Commitments and contingencies |
6 Months Ended |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies Litigation From time to time, the Company is subject to various claims and legal proceedings, either asserted or unasserted, that arise in the ordinary course of business. The Company accrues for legal contingencies if the Company can estimate the potential liability and if the Company believes it is probable that the case will be ruled against it. If a legal claim for which the Company did not accrue is resolved against it, the Company would record the expense in the period in which the ruling was made. The Company believes that the likelihood of an ultimate amount of liability, if any, for any pending claims of any type (alone or combined) that will materially affect the Company’s financial position, results of operations or cash flows is remote. The ultimate outcome of any litigation is uncertain, however, and unfavorable outcomes could have a material negative impact on the Company’s financial condition and operating results. Regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, negative publicity, diversion of management resources and other factors. On January 5, 2010, Finisar Corporation, or Finisar, filed a complaint in the U.S. District Court for the Northern District of California, or the Court, against Source Photonics, Inc., MRV Communications, Inc., Oplink Communications, Inc. and the Company, or collectively, the co-defendants. In the complaint Finisar alleged infringement of certain of its U.S. patents. In 2010 the Company filed an answer to the complaint and counterclaims, asserting two claims of patent infringement and additional claims. The Court dismissed without prejudice all co-defendants (including the Company) except Source Photonics, Inc., on grounds that such claims should have been asserted in four separate lawsuits, one against each defendant. This dismissal does not prevent Finisar from bringing a new similar lawsuit against the Company. In 2011 the Company and Finisar agreed to suspend their respective claims and in 2012 the Company and Finisar further agreed to toll their respective claims. While there has been no action on this matter since 2012, the Company is currently unable to predict the outcome of this dispute and therefore cannot determine the likelihood of loss nor estimate a range of possible loss. On December 27, 2016 the Company was served with a lawsuit filed by Lestina International Ltd. (“Lestina”), in Santa Clara County, CA. The lawsuit is regarding a dispute of approximately $3 million related to purchase orders for the Company’s Low Speed Transceiver Products that was soon thereafter sold by the Company to APAT OE in January 2017. The purchase orders in question were included in the asset sale and were assumed liabilities by the purchaser of the business. The Company is unable to predict with certainty the outcome of this matter, but is seeking to resolve the matter either through a court dismissal of the action or a resolution with the plaintiff and/or the purchaser of the Low Speed Transceiver Products’ assets. Discovery is currently in process. Because the purchase orders in question were an assumed liability of the Low Speed Transceiver Products’ assets that were transferred to the purchaser, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows. A trial date is currently scheduled for January 14, 2019. On April 21, 2018, APAT OE filed a lawsuit in the Qianhai Court in Shenzhen, China against NeoPhotonics (China) Co., Ltd. ("NeoChina"), NeoPhotonics Corporation and NeoPhotonics Dongguan Co. Ltd. The lawsuit is in reference to the sale of the low speed transceiver business to APAT OE from NeoChina. APAT OE claims that the business has been losing money and that APAT OE was not given all of the information about the business they purchased prior to signing the Asset Purchase Agreement. On May 28, 2018, counsel on behalf of NeoChina filed a motion objecting to the jurisdiction, claiming that the proper jurisdiction for any dispute between these parties is the Shenzhen Court of International Arbitration and the proper parties to this dispute are NeoChina and APAT OE, pursuant to the Asset Purchase Agreement signed by APAT OE and NeoChina. On June 20, 2018 a hearing was held in the Qianhai Court in Shenzhen, China. The Company is unable to predict the outcome of this matter. In China, when there is a case pending in judicial court, banks may choose to limit borrowing against existing credit lines, regardless of the legitimacy of the case. The Company does not expect to make any additional draws against its credit lines in China until this matter is resolved. We believe we have cash and credit lines available in the U.S. such that this does not have an impact on our operations in China. APAT Arbitration On June 16, 2017, APAT OE filed an arbitration claim against NeoChina (the Company’s China subsidiary), claiming that approximately $1.5 million of the inventory that was sold to APAT OE by NeoChina in an Asset Purchase Agreement executed between the parties on December 14, 2016 was aged inventory and of no value. The arbitration was heard in the Shenzhen Court of International Arbitration on August 2, 2017. On October 25, 2017, NeoChina was informed that it was successful in the defense of the dispute and was also successful in its counterclaim against APAT OE. NeoChina was awarded approximately RMB700,000 (approximately USD $110,000) in compensatory damages and attorney fees as well as having the approximately $1.5 million claim against it rejected in its entirety. On or about May 1, 2018, APAT OE filed a Notice of Judicial Review of the arbitration judgment in the Shenzhen Intermediate Court in Shenzhen, China. The case was heard on May 29, 2018, and NeoChina was successful in disputing the Judicial Review, which means that the arbitration judgment against APAT OE and in favor of NeoChina stands. Although APAT OE continues to dispute this matter through the lawsuit as described in the above litigation section, NeoPhotonics Corporation and its affiliates continue to argue that the proper forum for any dispute in reference to the low speed transceiver business purchased by APAT OE is the Shenzhen Court of International Arbitration. Indemnifications In the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. In November 2016, Oyster Communications, Inc. filed nine patent lawsuits against several defendants in the U.S. District Court for the Eastern District of Texas, including one against Cisco Systems, Inc. ("Cisco"). One defendant has successfully transferred their case to the U.S. District Court for the Northern District of California. Additional defendants requested venue changes are still pending. The Company was not named as a defendant in any of the lawsuits. In July 2017, however, Cisco notified the Company that it would be seeking indemnification from the Company for claims against Cisco arising from the lawsuits. The Company is investigating the matter and in discussions with Cisco, but is currently unable to predict the outcome of this matter and therefore cannot determine the likelihood of loss nor estimate a range of possible loss. Leases The Company leases various facilities under non-cancelable operating leases expiring through 2027. As of June 30, 2018, future minimum payments under these operating leases totaled approximately $28.7 million and future minimum sublease receipts were approximately $1.5 million. Rent expense was $1.0 million and $2.1 million in the three and six months ended June 30, 2018 and $1.3 million and $2.3 million in the three and six months ended June 30, 2017. On June 13, 2017, the Company entered into an office lease for approximately 39,000 square feet for the Company’s current headquarters in San Jose, California (the “ 2017 Lease”) with a commencement date of June 1, 2017. The Company’s existing office lease for the facility was terminated and replaced by the 2017 Lease. Upon commencement, the 2017 Lease had an initial term of one hundred and twenty-three (123) months, ending September 30, 2027, (the “ 2017 Lease Initial Term”) with a monthly rental rate of $41,388, escalating annually to a maximum monthly rental rate of approximately $72,525 in the last year of the 2017 Lease Initial Term. Upon termination of the 2017 Lease, the Company anticipates a restoration cost of approximately $0.7 million. In September 2016, the Company entered into an office lease for approximately 64,000 square feet of office and laboratory space located adjacent to the Company’s current headquarters in San Jose, California (the “2016 Lease”). The term of the 2016 Lease commenced on January 1, 2017. Upon commencement, the 2016 Lease has an initial term of one hundred and twenty-nine (129) months, ending on September 30, 2027 (the “2016 Lease Initial Term”), with a monthly rental rate of $144,000, escalating annually to a maximum monthly rental rate of approximately $194,000 in the last year of the 2016 Lease Initial Term. The Landlord has agreed to provide the office and laboratory space to the Company free of charge for the first nine months of the 2016 Lease Initial Term through September 30, 2017. Upon termination of the 2016 Lease, the Company anticipates a restoration cost of approximately $3.1 million. Penalty Payment Derivative In connection with a private placement transaction with Joint Stock Company “Rusnano” (formerly Open Joint Stock Company “RUSNANO”), or Rusnano, in 2012, the Company agreed to certain performance obligations including establishing a wholly-owned subsidiary in Russia and making a $30.0 million investment commitment (the “Investment Commitment’) towards the Company’s Russian operations, which could be partially satisfied by cash and/or non-cash investment inside or outside of Russia and/or by way of non-cash asset transfers. The Rights Agreement, as amended in 2015 (the “Amended Rights Agreement”) limits the maximum amount of penalties and/or exit fee (the “Rusnano Payment”) to be paid by the Company to $5.0 million in the aggregate and allows such payment to be reduced when certain milestones are met over time. The Amended Rights Agreement also provides for an updated investment plan for the Company’s Russian subsidiaries that includes non-cash transfer of licensing rights to intellectual property, non-cash transfers of existing equipment and commitments to complete the remaining investment milestones through 2019. The Company fulfilled its investment commitment required by 2016 and had contributed over $21.0 million in cash and assets to its subsidiaries in Russia as of December 31, 2016. Therefore, no amounts of the Rusnano Payment were due as of December 31, 2017 or June 30, 2018. As of June 30, 2018, the remaining Investment Commitment was approximately $7.5 million to be invested at any time on or before December 31, 2019. At any point between June 30, 2018 and December 31, 2019, the Company may elect to pay a $2.0 million exit fee to terminate any remaining obligations associated with the Investment Commitment. In August 2016, the Company entered into a letter of agreement with Rusnano to agree to transfer a 10G SFP+ transceiver product line and incur expected costs of approximately $0.1 million, by July 30, 2017, which will not be counted toward the Company’s overall Investment Commitment. Since the asset sale of the Company’s Low Speed Transceiver Products was completed in January 2017, the Company may undertake an alternative path for spending such amount to be discussed and agreed between the parties. Rusnano has non-transferable veto rights over the Company’s Russian subsidiaries’ annual budget during the investment period and must approve non-cash asset transfers to be made in satisfaction of the Investment Commitment. The Company accounted for the Rusnano Payment as an embedded derivative instrument. The fair value of the Penalty Payment derivative has been estimated at the date of the original common stock sale (April 27, 2012) and at each subsequent balance sheet date using a probability-weighted discounted future cash flow approach using unobservable inputs, which are classified as Level 3 within the fair value hierarchy. The primary inputs for this approach include the probability of achieving the Investment Commitment and a discount rate that approximates the Company’s incremental borrowing rate. After the initial measurement, changes in the fair value of this derivative are recorded in other income (expense), net. The estimated fair value of this derivative was $1.0 million as of June 30, 2018 and $0.4 million as of December 31, 2017. As of June 30, 2018, and December 31, 2017, the derivative was reported within Accrued and other current liabilities and other noncurrent liabilities, respectively on the Company’s condensed consolidated balance sheets. See Note 7. |
Stockholders' equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | Stockholders’ equity Common Stock As of June 30, 2018, the Company had reserved 8,790,965 common stock for issuance under its equity incentive plans and 644,187 common stock shares for issuance under its employee stock purchase plan. Accumulated Other Comprehensive Income (loss) The components of accumulated other comprehensive income (loss), net of related taxes, were as follows (in thousands):
No material amounts were reclassified out of accumulated other comprehensive income during the three and six months ended June 30, 2018 and 2017 for realized gains or losses on available-for-sale securities. Accumulated Deficit Approximately $8.8 million of the Company’s retained earnings within its total accumulated deficit as of December 31, 2017 was subject to restriction due to the fact that the Company’s subsidiaries in China are required to set aside at least 10% of their respective accumulated profits each year end to fund statutory common reserves as well as allocate a discretional portion of their after-tax profits to their staff welfare and bonus fund. |
Stock-based compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | Stock-based compensation The following table summarizes the stock-based compensation expense recognized in the three and six months ended June 30, 2018 and 2017 (in thousands):
Determining Fair Value The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:
Stock Options and Restricted Stock Units (RSUs) The following table summarizes the Company’s stock option and RSU activity during the six months ended June 30, 2018:
Stock Appreciation Units (SAU) SAUs are liability classified share-based awards. Outstanding SAUs are re-measured each reporting period at fair value until settlement. The Company did not grant any SAUs during the three and six months ended June 30, 2018 or 2017. As of June 30, 2018 and December 31, 2017, there were 227,201 and 239,824 SAUs outstanding, respectively, and related SAU liabilities were $0.8 million and $0.8 million, respectively. Employee Stock Purchase Plan (ESPP) As of June 30, 2018, there was $0.2 million of unrecognized stock-based compensation expense for employee stock purchase rights that will be recognized over the remaining offering period through November 2018. |
Income taxes |
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Income taxes | Income taxes The income tax (provision) benefit for income taxes in the periods presented is based upon the income (loss) before income taxes (in thousands):
The Company’s income tax (provision) benefit in the three and six months ended June 30, 2018 and 2017 was primarily related to income taxes of the Company’s non-U.S. operations. The Company conducts its business globally and its operating income is subject to varying rates of tax in the U.S., China and Japan. Consequently, the Company’s effective tax rate is dependent upon the geographic distribution of its earnings or losses and the tax laws and regulations in each geographical region. Historically, the Company has experienced net losses in the U.S. and in the short term, expects this trend to continue. Due to historical losses in the U.S., the Company has a full valuation allowance on its U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination. On December 22, 2017, the U.S. President signed into U.S. law the Tax Cuts and Jobs Act of 2017 ("Tax Reform"). The new legislation, among other provisions, lowered the corporate tax rate from 35% to 21%. The SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) which provides guidance on accounting for the tax effects of the Tax Reform. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Reform enactment date for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Reform for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Reform is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Reform. We expect to complete our analysis within the measurement period in accordance with SAB 118. The Company adopted ASU 2016-16 on a modified retrospective basis effective January 1, 2018. Upon adoption of this standard on January 1, 2018, the Company recorded $1.8 million to accumulated deficit balance for intra-entity transfer of an asset other than inventory in prior years. As of June 30, 2018, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2017. |
Subsequent events |
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Subsequent Events [Abstract] | |
Subsequent events | Subsequent events In July 2018, the Company granted 665,000 shares of market-based RSUs to certain employees. These RSUs will vest if the 30-day weighted average closing price of the Company's common stock is equal to or greater than certain price targets per share and the recipients remain in continuous service with the Company through such period. In August 2018, the Company repaid $17.0 million to CITIC Bank, which was borrowed under a line of credit facility with CITIC Bank which expires in November 2018. |
Basis of presentation and significant accounting policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The condensed consolidated financial statements of NeoPhotonics Corporation (“NeoPhotonics” or the “Company”) as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017, have been prepared in accordance with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In accordance with those rules and regulations, the Company has omitted certain information and notes normally provided in the Company’s annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of the Company’s financial position and results of operations for the interim periods. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”). These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results expected for the entire fiscal year. All intercompany accounts and transactions have been eliminated. |
Going Concern | Going Concern Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, requires an entity to disclose information about its potential inability to continue as a going concern when conditions and events indicate that it is probable that the entity may be unable to meet its obligations as they become due within one year. Management has assessed the Company’s ability to continue as a going concern within one year of the filing date of this Quarterly Report on Form 10-Q with the SEC in August 2018. The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of June 30, 2018, the Company’s working capital was $106.0 million, including available cash, cash equivalents, short-term investments and restricted cash of approximately $67.6 million. In the first six months of 2018, the Company had operating losses of $26.4 million and cash used in operations of $4.5 million. It had an accumulated deficit of approximately $382.6 million as of June 30, 2018. Through 2017 and the early part of 2018, the Company's operating results and cash flows were negatively affected by demand that was lower than customer estimates that were used to put capacity in place over the last two years. In the three months ended June 30, 2018, demand began to increase, primarily due to volume growth in the Americas and the result of increased provincial deployments in China. To adjust to the demand that has been less than estimates used for capacity decisions, the Company implemented restructuring plans in May and September 2017 that included a reduction in force and consolidation of facilities, in order to reduce expenses. The Company has also reduced or delayed certain product development projects and capital expenditures, aggressively pursued collections of accounts and notes receivable and continued to closely manage production and inventory levels. In September 2017, the Company entered into a revolving line of credit agreement with Wells Fargo Bank, National Association ("Wells Fargo") which provides for borrowings under an accounts receivable based formula up to a maximum of $50.0 million. As of June 30, 2018, $30.3 million was outstanding under this line. The remaining borrowing capacity as of June 30, 2018 was $19.7 million, of which $5.0 million is required to be maintained as unused borrowing capacity. Borrowings under the Wells Fargo line are not due until June 30, 2022 as long as the borrowing base is not less than the outstanding amount (See Note 9). Additionally, the Company has $18.9 million of notes payable and short-term borrowing and $2.9 million of current portion of long-term debt as of June 30, 2018, which it plans to pay out of its existing available cash. The Company currently believes it will have sufficient resources to fund its currently planned operations and expenditures over the next twelve months without additional financing or other actions. In addition, the Company believes there are a number of ongoing and potential actions that may further strengthen its projected cash and projected financial position. The Company operates in an industry in which it is difficult to evaluate its prospects with certainty. Future declines in China market demand or other changes to the Company’s forecasts could adversely affect the Company’s results of operations, financial position and cash flows. As a result, the Company may need to raise additional debt or equity capital to fund its operations. Any additional debt arrangements may likely require regular interest and principal payments which could adversely affect the Company’s operations. There can be no assurance that additional debt or equity capital will be available on acceptable terms, or at all. |
Certain Significant Risks And Uncertainties | Certain Significant Risks and Uncertainties The Company operates in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the general state of the U.S., China and world economies; the highly cyclical nature of the industries the Company serves; the loss of any of a small number of its larger customers; ability to obtain additional financing; inability to meet certain debt covenants; fundamental changes in the technology underlying the Company’s products; the hiring, training and retention of key employees; successful and timely completion of product design efforts; and new product design introductions by competitors. |
Concentration | Concentration In the three months ended June 30, 2018, Huawei Technologies Co. Ltd. and their affiliate HiSilicon Technologies (together with Huawei Technologies Co. Ltd., "Huawei") accounted for approximately 43% of the Company's total revenue. Two other customers accounted for approximately 25% and 12% of the Company’s total revenue and the Company’s top five customers represented approximately 90% of the Company’s total revenue. In the three months ended June 30, 2017, Huawei accounted for approximately 37% of the Company's total revenue. One other customer accounted for approximately 19% of the Company’s total revenue and the Company’s top five customers represented approximately 78% of the Company’s total revenue. In the six months ended June 30, 2018, Huawei accounted for approximately 46%, of the Company's total revenue. Two other customers accounted for approximately 22% and 10% of the Company's total revenue and the Company's top five customers represented approximately 87% of its total revenue. In the six months ended June 30, 2017, Huawei accounted for approximately 39% of the Company's total revenue. One other customer accounted for approximately 16% of the Company's total revenue and the Company's top five customers represented approximately 76% of the Company's total revenue. As of June 30, 2018, three customers accounted for approximately 44%, 13% and 11% of the Company’s accounts receivable. As of December 31, 2017, three customers accounted for approximately 36%, 14% and 10%, respectively, of the Company’s accounts receivable. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Significant estimates made by management include: the useful lives of property, plant and equipment and intangible assets as well as future cash flows to be generated by those assets; fair values of identifiable assets acquired and liabilities assumed in business combinations; allowances for doubtful accounts; valuation allowances for deferred tax assets; valuation of excess and obsolete inventories; warranty reserves; litigation accrual and recognition of stock-based compensation, among others. Actual results could differ from these estimates. |
Recent Accounting Standards Update Adopted and Not Yet Effective | Accounting Standards Update Recently Adopted In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”). The standard, along with the amendments issued in 2016 and 2015, provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2014-9 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-9; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-9 recognized at the date of initial application and providing certain additional disclosures. This standard, as amended, is effective for annual and interim periods beginning after December 15, 2017 and permits entities to early adopt for annual and interim reporting periods beginning after December 15, 2016. The Company adopted this standard as of January 1, 2018, using the full retrospective transition method. See Note 2 for further details. In May 2017, the FASB issued ASU No. 2017-9, Compensation—Stock Compensation (718)—Scope of Modification Accounting (ASU 2017-9”). This guidance redefines which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting for a share-based payment. ASU 2017-9 is effective for interim and annual periods after December 15, 2017 and early adoption is permitted in any interim period. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In January 2017, the FASB issued ASU 2017-1, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-1”). This standard provides a framework in determining when a set of assets and activities is a business. ASU 2017-1 is effective for interim and annual periods beginning after December 15, 2017 on a prospective basis. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASC 2016-18”). This standard provides guidance on the classification and presentation of restricted cash in the statement of cash flows and must be applied retrospectively. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017. The Company adopted this standard effective January 1, 2018. The reclassified restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash on the condensed consolidated statements of cash flows were not material for all periods presented. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). This standard provides guidance on the tax accounting for the transferring and receiving entities upon transfer of an asset. ASU 2016-16 is effective for the Company’s interim and annual periods beginning after December 15, 2017 and should be applied on a modified retrospective basis. Upon adoption of this standard on January 1, 2018, the Company recorded $1.8 million to accumulated deficit balance for intra-entity transfer of an asset other than inventory in prior years. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). This standard provides guidance on the classification of certain cash receipts and payments in the statement of cash flows. It is effective, retrospectively, for the Company’s annual and interim reporting periods beginning after December 15, 2017 or prospectively from the earliest date practicable if retrospective application is impracticable. The Company adopted this standard effective January 1, 2018, using the retrospective transition method. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In January 2016, the FASB issued ASU 2016-1, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-1”). ASU 2016-1 revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments and is effective for the Company’s annual and interim reporting periods beginning after December 15, 2017. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. In March 2017, the FASB issued ASU No. 2017-7, Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-7”). This guidance revises the presentation of employer-sponsored defined benefit pension and other postretirement plans for the net periodic benefit cost in the statement of operations and requires that the service cost component of net periodic benefit be presented in the same income statement line items as other employee compensation costs for services rendered during the period. The other components of the net benefit costs are required to be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. This guidance allows only the service cost component of net periodic benefit costs to be eligible for capitalization. ASU 2017-7 is effective for interim and annual periods after December 15, 2017. The Company adopted this standard effective January 1, 2018. The impact on the Company's consolidated financial statements upon the adoption of this standard was immaterial. There have been no other changes in the Company’s significant accounting policies in the six months ended June 30, 2018, as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended December 31, 2017. Recent Accounting Standards Update Not Yet Effective In January 2017, the FASB issued ASU 2017-4, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-4”). This standard amends the goodwill impairment test to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, up to the total amount of goodwill allocated to that reporting unit. ASU 2017-4 is effective prospectively for interim and annual periods beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 amends existing guidance on the impairment of financial assets and adds an impairment model that is based on expected losses rather than incurred losses and requires an entity to recognize as an allowance its estimate of expected credit losses for its financial assets. An entity will apply this guidance through a cumulative-effect adjustment to retained earnings upon adoption (a modified-retrospective approach) while a prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. It is effective for the Company’s annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption on its consolidated financial statements and related disclosure. In February 2016, the FASB issued ASU 2016-2, Leases (Topic 842) (“ASU 2016-2”). ASU 2016-2 introduces a lessee model that requires recognition of assets and liabilities arising from qualified leases on the consolidated balance sheets and consolidated statements of operations and to disclose qualitative and quantitative information about lease transactions. It is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition is required with certain optional practical expedients allowed. The Company is in the process of evaluating the impact of the adoption on its consolidated financial statements and related disclosure. |
Revenue (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Revenue by Product Group and Geographical Region | The following presents revenue by product group (in thousands):
The following table presents the Company's revenue information by geographical region. Revenue is classified based on the ship to location requested by the customer. Such classification recognizes that for many customers, including those in North America or in Europe, designated shipping points are often in China or elsewhere in Asia (in thousands):
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Net loss per share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Net Income per Share | The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):
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Potentially Dilutive Securities Excluded from Computation of Diluted Net Income per Share Attributable to Common Stockholders | The Company has excluded the impact of the following outstanding employee stock options and restricted stock units as well as the shares expected to be issued under its employee stock purchase plan from the computation of diluted net loss per share, as their effect would have been antidilutive (in thousands):
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Cash, cash equivalents, short-term investments, and restricted cash (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Cash, Cash Equivalents and Short-Term investments and Restricted Cash and Investments | The following table summarizes the Company’s cash, cash equivalents, short-term investments and restricted cash (in thousands):
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Summary of Unrealized Gains and Losses Related to Cash Equivalents and Investments in Marketable Securities | The following table summarizes the Company’s unrealized gains and losses related to its cash equivalents and short-term investments in marketable securities designated as available-for-sale (in thousands):
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Maturities of Marketable Securities | As of June 30, 2018 and December 31, 2017, maturities of marketable securities were as follows (in thousands):
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Fair value disclosures (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Assets | The following table presents the Company's assets that are measured at fair value on a recurring basis (in thousands):
________________________________________________________ *The fair value of the Company’s foreign currency forward contract was immaterial as of June 30, 2018 and December 31, 2017. |
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Fair Value of Financial Liabilities | The following table presents the Company's liabilities that are measured at fair value on a recurring basis (in thousands):
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Balance sheet components (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable, Net | Accounts receivable, net, consists of the following (in thousands):
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Inventories, net | Inventories, net consist of the following (in thousands):
________________________________________________________
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Prepaid expenses and other current assets | Prepaid expenses and other current assets consist of the following (in thousands):
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Purchased intangible assets | Purchased intangible assets consist of the following (in thousands):
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Amortization expense of purchased intangible assets | The following table presents details of the amortization expense of the Company’s purchased intangible assets as reported in the condensed consolidated statements of operations (in thousands):
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Estimated future amortization expense of purchased intangible assets | The estimated future amortization expense of purchased intangible assets as of June 30, 2018, is as follows (in thousands):
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Accrued and other current liabilities | Accrued and other current liabilities consist of the following (in thousands):
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Warranty accrual | The table below summarizes the movement in the warranty accrual, which is included in accrued and other current liabilities (in thousands):
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Other noncurrent liabilities | Other noncurrent liabilities consist of the following (in thousands):
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Restructuring (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs | Restructuring activities for the six months ended June 30, 2018 were as follows (in thousands):
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Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount and Weighted Average Interest Rate of the Company's Debt | The table below summarizes the carrying amount and weighted average interest rate of the Company’s debt (in thousands, except percentages):
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Maturities of Long-term Debt | As of June 30, 2018, maturities of total long-term debt were as follows (in thousands):
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Stockholders' equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income, Net of Related Taxes | The components of accumulated other comprehensive income (loss), net of related taxes, were as follows (in thousands):
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Stock-based compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Based Compensation Expense | The following table summarizes the stock-based compensation expense recognized in the three and six months ended June 30, 2018 and 2017 (in thousands):
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Estimated Fair Value of Certain Stock-Based Awards Using Black-Scholes-Merton Valuation Model | The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:
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Summary of Stock Option and Restricted Stock Unit Activity | The following table summarizes the Company’s stock option and RSU activity during the six months ended June 30, 2018:
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Income taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Income Tax (Provisions) Benefits | The income tax (provision) benefit for income taxes in the periods presented is based upon the income (loss) before income taxes (in thousands):
|
Revenue - Revenue by Product Group (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 81,102 | $ 73,214 | $ 149,688 | $ 144,902 |
High Speed Products | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 69,754 | 59,384 | 128,843 | 118,062 |
Network Products and Solutions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 11,348 | $ 13,830 | $ 20,845 | $ 26,840 |
Revenue - Revenue From External Customers By Geographic Region (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 81,102 | $ 73,214 | $ 149,688 | $ 144,902 |
China | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 46,111 | 38,700 | 87,783 | 77,086 |
Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 17,694 | 13,602 | 29,901 | 23,365 |
Rest of world | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 17,297 | $ 20,912 | $ 32,004 | $ 44,451 |
Revenue - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenue from Contract with Customer [Abstract] | ||||
Contract with customer, liability, revenue recognized | $ 0.2 | $ 0.2 | $ 0.6 | $ 0.5 |
Increase (decrease) in deferred revenue | $ 0.4 | $ 1.6 |
Net loss per share - Computation of Basic and Diluted Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Numerator: | ||||
Net loss | $ (10,537) | $ (9,341) | $ (28,783) | $ (20,863) |
Weighted average shares used to compute per share amount: | ||||
Basic (in shares) | 44,665 | 43,219 | 44,463 | 42,919 |
Diluted (in shares) | 44,665 | 43,219 | 44,463 | 42,919 |
Basic net loss per share (USD per share) | $ (0.24) | $ (0.22) | $ (0.65) | $ (0.49) |
Diluted net loss per share (USD per share) | $ (0.24) | $ (0.22) | $ (0.65) | $ (0.49) |
Cash, cash equivalents, short-term investments and restricted cash - Short term investments and restricted cash and investments (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Cash and cash equivalents: | ||||
Cash | $ 48,383 | $ 78,906 | ||
Cash equivalents | 0 | 0 | ||
Cash and cash equivalents | 48,383 | 78,906 | ||
Short-term investments | 12,401 | 12,311 | ||
Restricted cash | 6,839 | 2,658 | ||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ 55,222 | $ 81,564 | $ 76,951 | $ 86,585 |
Cash, cash equivalents, short-term investments, and restricted cash - Narrative (Details) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018
USD ($)
investment
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
investment
|
Jun. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
Restricted Cash and Cash Equivalents Items [Line Items] | |||||
Restricted cash | $ 6,839,000 | $ 6,839,000 | $ 2,658,000 | ||
Impairment losses on marketable securities | $ 0 | $ 0 | $ 0 | $ 0 | |
Number of marketable securities in an unrealized loss position | investment | 0 | 0 | |||
Restricted Cash and Investments, Legal Contingency, Current | $ 2,500,000 | $ 2,500,000 | |||
Restricted Cash and Investment, Government Grants, Current | 1,300,000 | 1,300,000 | |||
Restricted Cash and Investments, Compensating Notes Payable Balance, Current | 900,000 | 900,000 | |||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | |||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||
Restricted cash | $ 2,100,000 | $ 2,100,000 | $ 2,100,000 |
Cash, cash equivalents, short-term investments and restricted cash - Summary of unrealized gains and losses (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 12,401 | $ 12,312 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Loss | 0 | 1 |
Fair Value | 12,401 | 12,311 |
Money market funds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 12,401 | 11,561 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Loss | 0 | 0 |
Fair Value | 12,401 | 11,561 |
U.S. government securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 0 | 751 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Loss | 0 | 1 |
Fair Value | 0 | 750 |
Short-term investments | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 12,401 | 12,312 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Loss | 0 | 1 |
Fair Value | $ 12,401 | $ 12,311 |
Cash, cash equivalents, short-term investments and restricted cash - Maturities of marketable securities and additional information (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Less than 1 year | $ 12,401 | $ 12,311 |
Due in 1 to 2 years | 0 | 0 |
Due in 3 to 5 years | 0 | 0 |
Total | $ 12,401 | $ 12,311 |
Fair value disclosures - Hedging Program (Details) - Foreign exchange contracts $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Average maturities of monthly foreign exchange contracts | 1 month |
China, Yuan Renminbi | |
Notional value of derivatives related to economic hedges | $ 48.0 |
Japan, Yen | |
Notional value of derivatives related to economic hedges | $ 5.2 |
Fair value disclosures - Liabilities measured at fair value on non-recurring basis (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
---|---|---|---|
Other current liabilities | Indemnification agreement | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Contingent liability in connection with contingent indemnification commitments | $ 7,000,000 | ||
Fair Value, Measurements, Nonrecurring | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair value, net asset (liability) | $ 0 | $ 0 | |
Level 3 | Fair Value, Measurements, Nonrecurring | Other current liabilities | Indemnification agreement | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Contingent liability in connection with contingent indemnification commitments | $ 6,700,000 |
Balance sheet components - Accounts receivable, net (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Accounts receivable | $ 76,752 | $ 65,499 |
Trade notes receivable | 727 | 2,356 |
Allowance for doubtful accounts | (163) | (626) |
Account and trade note receivables, net | $ 77,316 | $ 67,229 |
Balance sheet components - Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Raw materials | $ 30,714 | $ 33,400 |
Work in process | 13,670 | 13,246 |
Finished goods | 16,563 | 20,655 |
Inventories | 60,947 | 67,301 |
Finished goods, at vendor managed inventory locations | $ 6,800 | $ 7,100 |
Balance sheet components - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Balance Sheet Related Disclosures [Abstract] | |||
Capital Expenditures Incurred but Not yet Paid | $ 3,100 | $ 9,800 | |
Prepaid taxes and taxes receivable | 9,676 | $ 15,162 | |
Transition services agreement receivable (Note 6) | 12,525 | 12,817 | |
Deposits and other prepaid expenses | 3,852 | 4,138 | |
Other receivable | 4,186 | 4,118 | |
Prepaid expenses and other current assets | $ 30,239 | $ 36,235 |
Balance sheet components - Purchased intangible assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Assets | $ 54,110 | $ 54,418 |
Accumulated Amortization | (50,453) | (50,124) |
Net Assets | 3,657 | 4,294 |
Technology and patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Assets | 37,478 | 37,684 |
Accumulated Amortization | (35,088) | (34,923) |
Net Assets | 2,390 | 2,761 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Assets | 15,346 | 15,425 |
Accumulated Amortization | (14,991) | (14,835) |
Net Assets | 355 | 590 |
Leasehold interest | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Assets | 1,286 | 1,309 |
Accumulated Amortization | (374) | (366) |
Net Assets | $ 912 | $ 943 |
Balance sheet components - Amortization expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Balance Sheet Related Disclosures [Abstract] | ||||
Cost of goods sold | $ 184 | $ 203 | $ 387 | $ 465 |
Operating expenses | 120 | 118 | 239 | 236 |
Total | $ 304 | $ 321 | $ 626 | $ 701 |
Balance sheet components - Estimated future amortization expense of purchased intangible assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
2018 (remaining six months) | $ 606 | |
2019 | 857 | |
2020 | 739 | |
2021 | 646 | |
2022 | 30 | |
Thereafter | 779 | |
Net Assets | $ 3,657 | $ 4,294 |
Balance sheet components - Accrued and other current liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||||||
Transition services agreement payables (Note 6) | $ 11,781 | $ 11,222 | ||||
Employee-related | 11,560 | 12,990 | ||||
Asset sale related contingent liabilities (Note 6) | 7,014 | 7,135 | ||||
Accrued warranty | 1,592 | $ 1,699 | 1,334 | $ 528 | $ 582 | $ 678 |
Deferred revenue, current | 735 | 939 | ||||
Income and other taxes payable | 2,401 | 542 | ||||
Rusnano payment derivative | 1,000 | 0 | ||||
Other accrued expenses | 8,205 | 9,080 | ||||
Accrued and other current liabilities | $ 44,288 | $ 43,242 |
Balance sheet components - Warranty accrual (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward] | ||||
Beginning balance | $ 1,699 | $ 582 | $ 1,334 | $ 678 |
Warranty accruals | (17) | 34 | 529 | (28) |
Settlements | (90) | (88) | (271) | (122) |
Ending balance | $ 1,592 | $ 528 | $ 1,592 | $ 528 |
Balance sheet components - Other noncurrent liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Pension and other employee-related | $ 4,774 | $ 4,675 |
Deferred rent | 2,984 | 2,908 |
Deferred revenue | 280 | 617 |
Government grant | 2,089 | 1,095 |
Rusnano payment derivative | 0 | 389 |
Deferred income tax liabilities | 65 | 106 |
Asset retirement obligations and other | 3,834 | 4,285 |
Other noncurrent liabilities | $ 14,026 | $ 14,075 |
Restructuring - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges incurred | $ 799 | |||
Restructuring reserve recorded in accrued and other current liabilities | $ 1,500 | 1,500 | ||
Restructuring reserve recorded in other noncurrent liabilities | 300 | 300 | ||
Cost of goods sold | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges incurred | 100 | 100 | ||
Operating Expense | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges incurred | $ 600 | $ 700 | ||
Cost of Sales And Operating Expense | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges incurred | $ 700 | $ 1,000 |
Restructuring - Reserve Rollforward (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations December 31, 2017 | $ 1,623 |
Charges | 799 |
Cash payments | (528) |
Non-cash settlements and others | (51) |
Restructuring obligations June 30, 2018 | 1,843 |
Employee Severance | |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations December 31, 2017 | 0 |
Charges | 177 |
Cash payments | (123) |
Non-cash settlements and others | 0 |
Restructuring obligations June 30, 2018 | 54 |
Facilities Consolidation | |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations December 31, 2017 | 1,580 |
Charges | (40) |
Cash payments | (362) |
Non-cash settlements and others | 0 |
Restructuring obligations June 30, 2018 | 1,178 |
Others | |
Restructuring Reserve [Roll Forward] | |
Restructuring obligations December 31, 2017 | 43 |
Charges | 662 |
Cash payments | (43) |
Non-cash settlements and others | (51) |
Restructuring obligations June 30, 2018 | $ 611 |
Debt - Mitsubishi Bank and Yamanashi Chou Bank Loans (Details) - 1 months ended Jan. 31, 2018 - Mitsubishi Bank and The Yamanashi Chou Bank, Ltd. - Term Loan C |
USD ($) |
JPY (¥) |
---|---|---|
Debt Instrument [Line Items] | ||
Credit facility, maximum borrowing amount | $ 7,700,000.0 | ¥ 850,000,000 |
Debt instrument, term | 82 months | |
Tokyo interbank offer rate | ||
Debt Instrument [Line Items] | ||
Debt instrument, basis spread | 1.00% |
Debt - Maturities of Long-Term debt (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2018 (remaining six months) | $ 1,520 |
2019 | 3,039 |
2020 | 3,039 |
2021 | 3,039 |
2022 | 33,344 |
Thereafter | 5,725 |
Total long-term debt, current and non-current | $ 49,706 |
Japan pension plans - (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Retirement Benefits [Abstract] | ||
Pension liability | $ 4.5 | $ 4.6 |
Pension liability included in accrued and other current liabilities | $ 0.3 | $ 0.5 |
Stockholders' equity - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Class of Stock [Line Items] | |||||
Reclassified out of accumulated other comprehensive loss for realized gains or losses on available for sale securities | $ 0 | $ 0 | $ 0 | $ 0 | |
Accumulated deficit subject to restriction | $ 8,800 | ||||
Minimum | |||||
Class of Stock [Line Items] | |||||
Accumulated profits | 10.00% | ||||
Employee stock options | |||||
Class of Stock [Line Items] | |||||
Common stock reserved for future issuance (in shares) | 8,790,965 | 8,790,965 | |||
Employee stock purchase plan | |||||
Class of Stock [Line Items] | |||||
Common stock reserved for future issuance (in shares) | 644,187 | 644,187 |
Stock-based compensation - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Stock Appreciation Units (SAUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Awards granted in the period (in shares) | 0 | 0 | 0 | 0 | |
Shares outstanding (in shares) | 227,201 | 227,201 | 239,824 | ||
SAU-related liabilities | $ 0.8 | $ 0.8 | $ 0.8 | ||
Employee stock purchase plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unrecognized stock-based compensation expense | $ 0.2 | $ 0.2 |
Stock-based compensation - Stock appreciation units (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Stock Appreciation Units (SAUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | 0 | 0 | 0 | 0 | |
Shares outstanding (in shares) | 227,201 | 227,201 | 239,824 | ||
SAU-related liabilities | $ 0.8 | $ 0.8 | $ 0.8 | ||
Employee stock purchase plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 0.2 | $ 0.2 |
Income taxes - Provision for income taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax (provision) benefit | $ (1,080) | $ 451 | $ (1,718) | $ 618 |
Income taxes - Additional information (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jan. 01, 2018 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Changes to the amounts of uncertain tax positions previously determined | $ 0 | |
Accounting Standards Update 2016-16 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Adjustments to accumulated deficit for new accounting pronouncements | $ 1,800 |
Subsequent events (Details) - Subsequent Event - USD ($) $ in Millions |
1 Months Ended | |
---|---|---|
Aug. 02, 2018 |
Jul. 31, 2018 |
|
Notes Payable to Banks | Notes Payable CITIC Bank | ||
Subsequent Event [Line Items] | ||
Repayments of lines of credit | $ 17.0 | |
Restricted stock units | ||
Subsequent Event [Line Items] | ||
Market based awards granted | 665,000 |
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