EX-99.1 2 exhibit991201822819.htm EXHIBIT 99.1 Exhibit


nptnq32017logo.jpg

NeoPhotonics Reports Fourth Quarter and Fiscal Year 2018 Financial Results

•
Revenue of $91.1 million for the quarter, up 11% sequentially; up 19% year-over-year
•
High Speed Products represented 86% of total revenue for the quarter

SAN JOSE, Calif. - February 28, 2019 - NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and data center applications, today announced financial results for its fourth quarter and fiscal year ended December 31, 2018.

“NeoPhotonics delivered its highest revenue quarter in the past two years, with strong orders and shipments, non-GAAP profitable operations and positive cash flow,” said Tim Jenks, NeoPhotonics Chairman and CEO. “With continued strength in demand, combined with increasing volume growth across leading high speed product lines, we again achieved solid gross margin expansion,” concluded Mr. Jenks.

Fourth Quarter Summary

•
Revenue was $91.1 million, up 11% quarter-over-quarter and 19% year-over-year
•
Gross margin was 24.8%, up from 23.2% in the prior quarter
•
Non-GAAP Gross margin was 28.6%, up from 24.0% in the prior quarter
•
Diluted net loss per share was $0.15, an improvement from a net loss of $0.18 per share in the prior quarter
•
Non-GAAP diluted net income per share was $0.05, an improvement from a net loss of $0.05 in the prior quarter
•
Cash generated from operations was $10.6 million, down from $13.5 million in the prior quarter
•
Adjusted EBITDA was $10.5 million, up from $6.2 million in the prior quarter

Non-GAAP results in the fourth quarter of 2018 exclude $3.6 million of stock-based compensation expense, $0.3 million of amortization of acquisition-related intangibles, $2.6 million for inventory write-downs, $2.2 million for a litigation settlement and $1.3 million of restructuring charges. A reconciliation of the non-GAAP and Adjusted EBITDA financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release.

Annual Summary

•
Revenue in 2018 was $322.5 million, compared to $292.9 million in 2017
•
Gross margin was 20.5%, compared to 21.0% in 2017
•
Non-GAAP Gross margin was 22.3%, compared to 22.5% in 2017
•
Diluted net loss per share was $0.97, compared to $1.23 in 2017
•
Non-GAAP diluted net loss per share was $0.45, compared to $0.92 in 2017
•
Cash generated from operations was $19.6 million, compared to negative $32.8 million in 2017
•
Adjusted EBITDA was $14.2 million, compared to negative $10.1 million in 2017

Non-GAAP results in 2018 exclude $14.1 million of stock-based compensation expense, $1.2 million of amortization of acquisition-related intangibles, $3.3 million of restructuring charges, $2.6 million for litigation settlement charges and $2.6 million for inventory write-downs. A reconciliation of the non-GAAP

1



and Adjusted EBITDA financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release.

As of December 31, 2018, cash and cash equivalents, short-term investments and restricted cash, together totaled $76.7 million, up $12.0 million compared to September 30, 2018. Restricted cash as of December 31, 2018 was $11.1 million, up $5.9 million compared to September 30, 2018.

Outlook for the Quarter Ending March 31, 2019
 
GAAP
Non-GAAP
Revenue
$77 to $82 million
Gross Margin
20% to 24%
23% to 27%
Operating Expenses
$27 to $28 million
$24 to $25 million
Earnings per share
$(0.28) to $(0.19) net loss

$(0.17) to $(0.08) net loss


The non-GAAP outlook for the first quarter of 2019 excludes the expected impact of stock-based compensation expense of approximately $3.5 million, of which $0.6 million is estimated for cost of goods sold, the impact of expected amortization of intangibles of approximately $0.3 million and restructuring charges of approximately $1.5 million for accelerated depreciation on an end-of-life production line.

Non-GAAP and Adjusted EBITDA Measures vs. GAAP Financial Measures

The Company’s non-GAAP and adjusted EBITDA measures exclude certain GAAP financial measures. A reconciliation of the non-GAAP and Adjusted EBITDA financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release. These non-GAAP financial measures differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. NeoPhotonics believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Conference Call

The Company will host a conference call today, Thursday, February 28, 2019 at 4:30 P.M. Eastern Time (1:30 P.M. Pacific Time). The call will be available, live, to interested parties by dialing +1-855-719-5012. For international callers, please dial +1-334-323-0522. The Conference ID number is 5578535. Please dial into the conference call 5-10 minutes prior to the scheduled start time.

A live webcast will be available in the Investor Relations section of NeoPhotonics’ website at: http://ir.neophotonics.com/phoenix.zhtml?c=236218&p=irol-calendar.




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A replay of the webcast will be available in the Investor Relations section of the Company’s website approximately two hours after the conclusion of the call and remain available for approximately 30 calendar days.

About NeoPhotonics

NeoPhotonics is a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and datacenter applications. The Company’s products enable cost-effective, high-speed data transmission and efficient allocation of bandwidth over communications networks. NeoPhotonics maintains headquarters in San Jose, California and ISO 9001:2000 certified engineering and manufacturing facilities in Silicon Valley (USA), Japan and China. For additional information visit www.neophotonics.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release includes statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about the following topics: future financial results, demand for the Company’s high-speed products, and the Company’s market position. Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. Those risks and uncertainties include, but are not limited to, such factors as: the Company’s reliance on a small number of customers for a substantial portion of its revenues; market growth in China and other key countries; possible reduction in or volatility of customer orders or delays in shipments of products to customers; timing of customer drawdowns of vendor-managed inventory; potential governmental trade actions; possible disruptions in the supply chain or in demand for the Company’s products due to industry developments; the ability of the Company's vendors and subcontractors to supply or manufacture the Company's products in a timely manner; ability of the Company to meet customer demand; volatility in utilization of manufacturing operations and manufacturing costs; reductions in the Company’s rate of new design wins, and/or the rate at which design wins go into production, and the rate of customer acceptance of new product introductions; potential pricing pressure that may arise from changing supply or demand conditions in the industry; the impact of any previous or future acquisitions or divestitures of assets and related product lines; challenges involving integration of acquired businesses and utilization of acquired technology; the discontinuance or end of life of certain other products; market adoption, revenue growth and margins of acquired products; changes in demand for the Company's products; the impact of competitive products and pricing and alternative technological advances; the accuracy of estimates used to prepare the Company's financial statements and forecasts; the timely and successful development and market acceptance of new products and upgrades to existing products; the difficulty of predicting future cash needs; the nature of other investment opportunities available to the Company from time to time; the Company’s operating cash flow; changes in economic and industry projections; a decline in general conditions in the telecommunications equipment industry or the world economy generally; and the effects of seasonality. For further discussion of these risks and uncertainties, please refer to the documents the Company files with the SEC from time to time, including the Company's Annual Report on Form 10-K for the year ended December 31, 2017. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

NeoPhotonics Corporation
Beth Eby, Chief Financial Officer
+1-408-895-6086
ir@neophotonics.com


3



Sapphire Investor Relations, LLC
Erica Mannion, Investor Relations
+1-617-542-6180
ir@neophotonics.com

©2019 NeoPhotonics Corporation. All rights reserved. NeoPhotonics and the red dot logo are trademarks of NeoPhotonics Corporation. All other marks are the property of their respective owners.
 





4



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

 
 
As of
 
 
Dec. 31, 2018
 
Dec. 31, 2017
 
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

  Cash and cash equivalents
 
$
58,185

 
$
78,906

  Short-term investments
 
7,481

 
12,311

  Restricted cash
 
11,053

 
2,658

  Accounts receivable, net
 
74,751

 
67,229

  Inventories
 
52,159

 
67,301

  Assets held for sale
 
2,971

 
—

  Prepaid expenses and other current assets
 
26,605

 
36,235

    Total current assets
 
233,205

 
264,640

  Property, plant and equipment, net
 
100,090

 
127,565

  Purchased intangible assets, net
 
3,018

 
4,294

  Goodwill
 
1,115

 
1,115

  Other long-term assets
 
3,148

 
5,339

    Total assets
 
$
340,576

 
$
402,953

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

  Accounts payable
 
$
58,403

 
$
69,017

  Notes payable and short-term borrowing
 
4,795

 
35,607

  Current portion of long-term debt
 
2,897

 
6,005

  Accrued and other current liabilities
 
50,288

 
43,242

    Total current liabilities
 
116,383

 
153,871

Long-term debt, net of current portion
 
50,454

 
40,556

Other noncurrent liabilities
 
13,499

 
14,075

    Total liabilities
 
180,336

 
208,502

 
 
 
 
 
Stockholders’ equity:
 
 

 
 

  Common stock
 
116

 
111

  Additional paid-in capital
 
564,722

 
545,953

  Accumulated other comprehensive income (loss)
 
(7,126
)
 
398

  Accumulated deficit
 
(397,472
)
 
(352,011
)
    Total stockholders’ equity
 
160,240

 
194,451

    Total liabilities and stockholders’ equity
 
$
340,576

 
$
402,953



5



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

 
 
Three Months Ended
 
Twelve Months Ended
 
 
Dec. 31, 2018
 
Sep. 30, 2018
 
Dec. 31, 2017
 
Dec. 31, 2018
 
Dec. 31, 2017
Revenue
 
$
91,104

 
$
81,748

 
$
76,871

 
$
322,540

 
$
292,894

Cost of goods sold (1)
 
68,518

 
62,815

 
61,185

 
256,367

 
231,415

Gross profit
 
22,586

 
18,933

 
15,686

 
66,173

 
61,479

Gross margin
 
24.8
%
 
23.2
%
 
20.4
%
 
20.5
%
 
21.0
%
Operating expenses:
 
 
 
 
 
 
 
 
 
 
  Research and development (1)
 
13,510

 
13,177

 
13,875

 
53,818

 
58,287

  Sales and marketing (1)
 
4,362

 
4,351

 
4,847

 
16,728

 
17,760

  General and administrative (1)
 
7,344

 
8,142

 
7,661

 
30,403

 
34,453

  Amortization of purchased intangible assets
 
118

 
118

 
117

 
475

 
472

  Asset sale related costs
 
83

 
251

 
(99
)
 
427

 
130

  Restructuring charges
 
1,349

 
1,133

 
384

 
3,135

 
3,934

  Litigation Settlement
 
2,195

 
450

 
—

 
2,645

 
—

  Loss (gain) on asset sale
 
200

 
—

 
(193
)
 
200

 
(2,193
)
    Total operating expenses
 
29,161

 
27,622

 
26,592

 
107,831

 
112,843

Loss from operations
 
(6,575
)
 
(8,689
)
 
(10,906
)
 
(41,658
)
 
(51,364
)
  Interest income
 
97

 
85

 
57

 
397

 
198

  Interest expense
 
(486
)
 
(540
)
 
(619
)
 
(2,493
)
 
(1,362
)
  Other income (expense), net
 
(445
)
 
1,310

 
(93
)
 
1,446

 
104

    Total interest and other income (expense), net
 
(834
)
 
855

 
(655
)
 
(650
)
 
(1,060
)
Loss before income taxes
 
(7,409
)
 
(7,834
)
 
(11,561
)
 
(42,308
)
 
(52,424
)
Income tax (provision) benefit
 
680

 
(291
)
 
(2,722
)
 
(1,329
)
 
(909
)
Net loss
 
$
(6,729
)
 
$
(8,125
)
 
$
(14,283
)
 
$
(43,637
)
 
$
(53,333
)
Basic net loss per share
 
$
(0.15
)
 
$
(0.18
)
 
$
(0.32
)
 
$
(0.97
)
 
$
(1.23
)
Diluted net loss per share
 
$
(0.15
)
 
$
(0.18
)
 
$
(0.32
)
 
$
(0.97
)
 
$
(1.23
)
Weighted average shares used to compute basic net loss per share
 
46,150

 
45,476

 
44,079

 
45,144

 
43,431

Weighted average shares used to compute diluted net loss per share
 
46,150

 
45,476

 
44,079

 
45,144

 
43,431

 
 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation expense as follows for the periods presented:
 
 
 
 
 
 
 
 
 
 
    Cost of goods sold
 
$
764

 
$
553

 
$
287

 
$
2,596

 
$
1,098

    Research and development
 
952

 
1,016

 
712

 
3,570

 
2,491

    Sales and marketing
 
737

 
931

 
527

 
3,248

 
1,697

    General and administrative
 
1,162

 
1,541

 
988

 
4,728

 
2,920

    Total stock-based compensation expense
 
$
3,615

 
$
4,041

 
$
2,514

 
$
14,142

 
$
8,206



6



NeoPhotonics Corporation
Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(In thousands, except percentages and per share data)

 
 
Three Months Ended
 
Twelve Months Ended
 
 
Dec. 31, 2018
 
Sep. 30, 2018
 
Dec. 31, 2017
 
Dec. 31, 2018
 
Dec. 31, 2017
NON-GAAP GROSS PROFIT:
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
22,586

 
$
18,933

 
$
15,686

 
$
66,173

 
$
61,479

  Stock-based compensation expense
 
764

 
553

 
287

 
2,596

 
1,098

  Amortization of purchased intangible assets
 
184

 
185

 
203

 
756

 
870

  Depreciation of acquisition-related fixed asset step-up
 
(75
)
 
(71
)
 
(68
)
 
(288
)
 
(270
)
  End-of-life related inventory write-down
 
2,565

 
—

 
—

 
2,565

 
1,975

  Restructuring charges
 
—

 
22

 
248

 
168

 
812

Non-GAAP gross profit
 
$
26,024

 
$
19,622

 
$
16,356

 
$
71,970

 
$
65,964

Non-GAAP gross margin as a % of revenue
 
28.6
%
 
24.0
 %
 
21.3
 %
 
22.3
 %
 
22.5
 %
 
 
 
 
 
 
 
 
 
 
 
NON-GAAP TOTAL OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
GAAP total operating expenses
 
$
29,161

 
$
27,622

 
$
26,592

 
$
107,831

 
$
112,843

  Stock-based compensation expense
 
(2,851
)
 
(3,488
)
 
(2,227
)
 
(11,546
)
 
(7,108
)
  Amortization of purchased intangible assets
 
(118
)
 
(118
)
 
(117
)
 
(475
)
 
(472
)
  Depreciation of acquisition-related fixed asset step-up
 
(66
)
 
(65
)
 
(69
)
 
(266
)
 
(285
)
  Asset sale related costs
 
(83
)
 
(251
)
 
99

 
(427
)
 
(130
)
  Restructuring charges
 
(1,349
)
 
(1,133
)
 
(384
)
 
(3,135
)
 
(3,934
)
  Litigation settlement
 
(2,195
)
 
(450
)
 
—

 
(2,645
)
 
64

  Loss (gain) on asset sale
 
(200
)
 
—

 
193

 
(200
)
 
2,193

Non-GAAP total operating expenses
 
$
22,299

 
$
22,117

 
$
24,087

 
$
89,137

 
$
103,171

Non-GAAP total operating expenses as a % of revenue
 
24.5
%
 
27.1
 %
 
31.3
 %
 
27.6
 %
 
35.2
 %
 
 
 
 
 
 
 
 
 
 
 
NON-GAAP OPERATING INCOME (LOSS):
 
 
 
 
 
 
 
 
 
 
GAAP loss from operations
 
$
(6,575
)
 
$
(8,689
)
 
$
(10,906
)
 
$
(41,658
)
 
$
(51,364
)
  Stock-based compensation expense
 
3,615

 
4,041

 
2,514

 
14,142

 
8,206

  Amortization of purchased intangible assets
 
302

 
303

 
320

 
1,231

 
1,342

  Depreciation of acquisition-related fixed asset step-up
 
(9
)
 
(6
)
 
1

 
(22
)
 
15

  Asset sale related costs
 
83

 
251

 
(99
)
 
427

 
130

  End-of-life related inventory write-down
 
2,565

 
—

 
—

 
2,565

 
1,975

  Restructuring charges
 
1,349

 
1,155

 
632

 
3,303

 
4,746

  Litigation settlement
 
2,195

 
450

 
—

 
2,645

 
(64
)
  Loss (gain) on asset sale
 
200

 
—

 
(193
)
 
200

 
(2,193
)
Non-GAAP income (loss) from operations
 
$
3,725

 
$
(2,495
)
 
$
(7,731
)
 
$
(17,167
)
 
$
(37,207
)
Non-GAAP operating margin as a % of revenue
 
4.1
%
 
(3.1
)%
 
(10.1
)%
 
(5.3
)%
 
(12.7
)%


7



NeoPhotonics Corporation
Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited) (Continued)
(In thousands, except percentages and per share data)

 
 
Three Months Ended
 
Twelve Months Ended
 
 
Dec. 31, 2018
 
Sep. 30, 2018
 
Dec. 31, 2017
 
Dec. 31, 2018
 
Dec. 31, 2017
NON-GAAP NET INCOME (LOSS):
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(6,729
)
 
$
(8,125
)
 
$
(14,283
)
 
$
(43,637
)
 
$
(53,333
)
  Stock-based compensation expense
 
3,615

 
4,041

 
2,514

 
14,142

 
8,206

  Amortization of purchased intangible assets
 
302

 
303

 
320

 
1,231

 
1,342

  Depreciation of acquisition-related fixed asset step-up
 
(9
)
 
(6
)
 
1

 
(22
)
 
15

  Asset sale related costs
 
83

 
251

 
(99
)
 
427

 
130

  End-of-life related inventory write-down
 
2,565

 
—

 
—

 
2,565

 
1,975

  Restructuring charges
 
1,349

 
1,155

 
632

 
3,303

 
4,746

  Litigation settlement
 
2,195

 
450

 
—

 
2,645

 
(64
)
  Loss (gain) on asset sale
 
200

 
—

 
(193
)
 
200

 
(2,193
)
  Income tax effect of Non-GAAP adjustments
 
(1,153
)
 
(138
)
 
(637
)
 
(1,375
)
 
(754
)
Non-GAAP net income (loss)
 
$
2,418

 
$
(2,069
)
 
$
(11,745
)
 
$
(20,521
)
 
$
(39,930
)
Non-GAAP net income (loss) as a % of revenue
 
2.7
%
 
(2.5
)%
 
(15.3
)%
 
(6.4
)%
 
(13.6
)%
 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EBITDA:
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(6,729
)
 
$
(8,125
)
 
$
(14,283
)
 
$
(43,637
)
 
$
(53,333
)
  Stock-based compensation expense
 
3,615

 
4,041

 
2,514

 
14,142

 
8,206

  Amortization of purchased intangible assets
 
302

 
303

 
320

 
1,231

 
1,342

  Depreciation of acquisition-related fixed asset step-up
 
(9
)
 
(6
)
 
1

 
(22
)
 
15

  Asset sale related costs
 
83

 
251

 
(99
)
 
427

 
130

  End-of-life related inventory write-down
 
2,565

 
—

 
—

 
2,565

 
1,975

  Restructuring charges
 
1,349

 
1,155

 
632

 
3,303

 
4,746

  Litigation settlement
 
2,195

 
450

 
—

 
2,645

 
(64
)
  Loss (gain) on asset sale
 
200

 
—

 
(193
)
 
200

 
(2,193
)
  Interest expense, net
 
389

 
455

 
562

 
2,096

 
1,164

  Provision (benefit) for income taxes
 
(680
)
 
291

 
2,722

 
1,329

 
909

  Depreciation expense
 
7,260

 
7,343

 
7,402

 
29,896

 
27,010

Adjusted EBITDA
 
$
10,540

 
$
6,158

 
$
(422
)
 
$
14,175

 
$
(10,093
)
Adjusted EBITDA as a % of revenue
 
11.6
%
 
7.5
 %
 
(0.5
)%
 
4.4
 %
 
(3.4
)%
 
 
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
 
 
GAAP basic net loss per share
 
$
(0.15
)
 
$
(0.18
)
 
$
(0.32
)
 
$
(0.97
)
 
$
(1.23
)
GAAP diluted net loss per share
 
$
(0.15
)
 
$
(0.18
)
 
$
(0.32
)
 
$
(0.97
)
 
$
(1.23
)
Non-GAAP basic net income (loss) per share
 
$
0.05

 
$
(0.05
)
 
$
(0.27
)
 
$
(0.45
)
 
$
(0.92
)
Non-GAAP diluted net income (loss) per share
 
$
0.05

 
$
(0.05
)
 
$
(0.27
)
 
$
(0.45
)
 
$
(0.92
)
 
 
 
 
 
 
 
 
 
 
 
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE
 
46,150

 
45,476

 
44,079

 
45,144

 
43,431

SHARES USED TO COMPUTE GAAP DILUTED NET LOSS PER SHARE
 
46,150

 
45,476

 
44,079

 
45,144

 
43,431

SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE
 
49,334

 
45,476

 
44,079

 
45,144

 
43,431



8