Business Wire | Aug 3, 2021 04:06PM EDT

NeoPhotonics Reports Second Quarter 2021 Financial Results

Aug. 03, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 03, 2021--NeoPhotonics Corporation (NYSE: NPTN), a leading developer of silicon photonics and advanced hybrid photonic integrated circuit-based lasers, modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its second quarter of 2021.

"Building on our strong performance in the second quarter, we see accelerating growth in the back half of the year, driven by the initial ramp of 400ZR and related products adding to our 400G+ suite," said Tim Jenks, Chairman and CEO of NeoPhotonics. "We are ramping our modules and component level products, including our Nano Tunable Laser, putting us in a good position to return to profitability," concluded Mr. Jenks.

Second Quarter 2021 Summary

* Revenue was $65.0 million, up 7% quarter-over-quarter and down 37% year-over-year * Gross margin was 15.2%, down from 21.9% in the prior quarter * Non-GAAP gross margin was 21.7%, down from 22.4% in the prior quarter * Net loss per share was $0.34, compared to net loss of $0.21 per share in the prior quarter * Non-GAAP net loss per share was $0.22, compared to Non-GAAP net loss of $0.15 per share in the prior quarter * Adjusted EBITDA was negative $5.4 million, down from a negative $0.7 million in the prior quarter

Non-GAAP results in the second quarter of 2021 exclude a $3.3 million end-of-life related inventory write-down, $2.3 million of stock-based compensation and $0.4 million of accelerated depreciation, amortization and other charges. A reconciliation of the non-GAAP and Adjusted EBITDA financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release.

As of June 30, 2021, cash and cash equivalents, short-term investments and restricted cash totaled $95 million.

Outlook for the Quarter Ending September 30, 2021

GAAP Non-GAAP

Revenue $76 to $84 million

Gross Margin 24% to 29% 25% to 30%

Operating Expenses $26 to $27 million $23 to $24 million

Earnings per share ($0.20) to ($0.10) ($0.10) to $0.00

The non-GAAP outlook for the third quarter of 2021 excludes the expected impact of stock-based compensation expense of approximately $3.3 million, of which $0.7 million is estimated for cost of goods sold, accelerated depreciation and amortization of $0.5 million.

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

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

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

Conference Call

The Company will host a conference call today, Tuesday, August 3, 2021 at 4:30 p.m. EDT (1:30 p.m. PDT). The call will be available, live, to interested partied by dialing 800-437-2398 or +1 313-209-6317. The Conference ID number is 5316525. Please dial into the conference call 5-10 minutes prior to the scheduled start time.

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

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

About NeoPhotonics

NeoPhotonics is a leading developer and manufacturer of lasers and optoelectronic solutions that transmit, receive and switch high-speed digital optical signals for Cloud and hyper-scale data center internet content provider and telecom networks. The Company's products enable cost-effective, high-speed over distance data transmission and efficient allocation of bandwidth in optical networks. NeoPhotonics maintains headquarters in San Jose, California and ISO 9001:2015 certified engineering and manufacturing facilities in Silicon Valley (USA), Japan and China. For additional information visit www.neophotonics.com.

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 key countries; possible reduction in or volatility of customer orders or delays in shipments of products to customers; possible disruptions in the supply chain or in demand for the Company's products; timing of customer drawdowns of vendor-managed inventory; potential governmental trade actions; 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 conditions in the industry or negotiating leverage of buyers; the discontinuance or end of life of 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; and a decline in general conditions in the telecommunications equipment industry, the cloud and datacenter industry, or the world economy generally. For further discussion of these risks and uncertainties, please refer to the documents the Company files with the SEC from time to time, including the Company's Annual Reports on Form 10-K for the year ended December 31, 2020. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

(c)2021 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.

NeoPhotonics Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)



As of

Jun. 30, 2021 Dec. 31, 2020



ASSETS

Current assets:

Cash and cash equivalents $ 66,836 $ 95,117

Short-term investments 27,672 27,669

Restricted cash 495 489

Accounts receivable, net 47,763 45,232

Inventories 44,341 46,901

Prepaid expenses and other current assets 14,307 20,173

Total current assets 201,414 235,581

Property, plant and equipment, net 59,942 66,765

Operating lease right-of-use assets 14,452 13,823

Purchased intangible assets, net 1,139 1,468

Goodwill 1,115 1,115

Other long-term assets 5,193 4,912

Total assets $ 283,255 $ 323,664



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 46,648 $ 43,539

Current portion of long-term debt 3,033 3,232

Accrued and other current liabilities 25,461 42,053

Total current liabilities 75,142 88,824

Long-term debt, net of current portion 27,488 30,327

Operating lease liabilities, noncurrent 14,787 14,522

Other noncurrent liabilities 8,446 9,584

Total liabilities 125,863 143,257



Stockholders' equity:

Common stock 130 126

Additional paid-in capital 602,877 597,460

Accumulated other comprehensive income 1,423 1,735

Accumulated deficit (447,038 ) (418,914 )

Total stockholders' equity 157,392 180,407

Total liabilities and stockholders' equity $ 283,255 $ 323,664

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

Three Months Ended

Six Months Ended

Jun. 30, 2021

Mar. 31, 2021

Jun. 30, 2020

Jun. 30, 2021

Jun. 30, 2020

Revenue

$

65,010

$

60,926

$

103,171

$

125,935

$

200,572

Cost of goods sold (1)

55,135

47,587

69,669

102,721

137,344

Gross profit

9,875

13,339

33,502

23,214

63,228

Gross margin

15.2

%

21.9

%

32.5

%

18.4

%

31.5

%

Operating expenses:

Research and development (1)

15,410

13,098

13,689

28,508

25,573

Sales and marketing (1)

3,362

3,865

4,279

7,227

7,938

General and administrative (1)

7,398

7,294

8,803

14,692

15,592

Acquisition and asset sale related costs (recoveries)

(36

)

163

120

127

132

Restructuring charges

22

-

-

22

-

Total operating expenses

26,156

24,420

26,891

50,576

49,235

Income (loss) from operations

(16,281

)

(11,081

)

6,611

(27,362

)

13,993

Interest income

140

105

22

245

120

Interest expense

(220

)

(227

)

(301

)

(447

)

(679

)

Other income (expense), net

(880

)

1,143

(195

)

263

1,003

Total interest and other income (expense), net

(960

)

1,021

(474

)

61

444

Income (loss) before income taxes

(17,241

)

(10,060

)

6,137

(27,301

)

14,437

Income tax provision

(191

)

(632

)

(412

)

(823

)

(2,405

)

Net income (loss)

$

(17,432

)

$

(10,692

)

$

5,725

$

(28,124

)

$

12,032

Basic net income (loss) per share

$

(0.34

)

$

(0.21

)

$

0.12

$

(0.55

)

$

0.25

Diluted net income (loss) per share

$

(0.34

)

$

(0.21

)

$

0.11

$

(0.55

)

$

0.24

Weighted average shares used to compute basic net income (loss) per share

51,634

50,717

49,077

51,178

48,846

Weighted average shares used to compute diluted net income (loss) per share

51,634

50,717

51,661

51,178

51,124

(1) Includes stock-based compensation expense as follows for the periods presented:

Cost of goods sold

$

572

$

548

$

621

$

1,120

$

1,158

Research and development

744

862

999

1,606

1,757

Sales and marketing

261

554

738

815

1,268

General and administrative

763

1,313

1,429

2,076

2,122

Total stock-based compensation expense

$

2,340

$

3,277

$

3,787

$

5,617

$

6,305

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)



Three Months Ended Six Months Ended

Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, 2021 2021 2020 2021 2020

Revenue $ 65,010 $ 60,926 $ 103,171 $ 125,935 $ 200,572

Cost of goods 55,135 47,587 69,669 102,721 137,344 sold (1)

Gross profit 9,875 13,339 33,502 23,214 63,228

Gross margin 15.2 % 21.9 % 32.5 % 18.4 % 31.5 %

Operating expenses:

Research anddevelopment 15,410 13,098 13,689 28,508 25,573 (1)

Sales and 3,362 3,865 4,279 7,227 7,938 marketing (1)

General andadministrative 7,398 7,294 8,803 14,692 15,592 (1)

Acquisitionand asset sale (36 ) 163 120 127 132 related costs(recoveries)

Restructuring 22 - - 22 - charges

Totaloperating 26,156 24,420 26,891 50,576 49,235 expenses

Income (loss)from (16,281 ) (11,081 ) 6,611 (27,362 ) 13,993 operations

Interest 140 105 22 245 120 income

Interest (220 ) (227 ) (301 ) (447 ) (679 )expense

Other income (880 ) 1,143 (195 ) 263 1,003 (expense), net

Total interestand other (960 ) 1,021 (474 ) 61 444 income(expense), net

Income (loss)before income (17,241 ) (10,060 ) 6,137 (27,301 ) 14,437 taxes

Income tax (191 ) (632 ) (412 ) (823 ) (2,405 )provision

Net income $ (17,432 ) $ (10,692 ) $ 5,725 $ (28,124 ) $ 12,032 (loss)

Basic netincome (loss) $ (0.34 ) $ (0.21 ) $ 0.12 $ (0.55 ) $ 0.25 per share

Diluted netincome (loss) $ (0.34 ) $ (0.21 ) $ 0.11 $ (0.55 ) $ 0.24 per share

Weightedaverage sharesused tocompute basic 51,634 50,717 49,077 51,178 48,846 net income(loss) pershare

Weightedaverage sharesused tocompute 51,634 50,717 51,661 51,178 51,124 diluted netincome (loss)per share



(1) Includesstock-basedcompensationexpense as follows forthe periodspresented:

Cost of goods $ 572 $ 548 $ 621 $ 1,120 $ 1,158 sold

Research and 744 862 999 1,606 1,757 development

Sales and 261 554 738 815 1,268 marketing

General and 763 1,313 1,429 2,076 2,122 administrative

Totalstock-based $ 2,340 $ 3,277 $ 3,787 $ 5,617 $ 6,305 compensationexpense

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

Six Months Ended

Jun. 30, 2021

Mar. 31, 2021

Jun. 30, 2020

Jun. 30, 2021

Jun. 30, 2020

NON-GAAP GROSS PROFIT:

GAAP gross profit

$

9,875

$

13,339

$

33,502

$

23,214

$

63,228

Stock-based compensation expense

572

548

621

1,120

1,158

Amortization of purchased intangible assets

153

185

184

338

368

Depreciation of acquisition-related fixed asset step-up

3

(6

)

(8

)

(3

)

(20

)

End-of-life related inventory write-down (sell-through)

3,257

(577

)

-

2,680

-

Accelerated depreciation

157

174

-

331

-

Restructuring charges

113

-

-

113

-

Non-GAAP gross profit

$

14,130

$

13,663

$

34,299

$

27,793

$

64,734

Non-GAAP gross margin as a % of revenue

21.7

%

22.4

%

33.2

%

22.1

%

32.3

%

NON-GAAP TOTAL OPERATING EXPENSES:

GAAP total operating expenses

$

26,156

$

24,420

$

26,891

$

50,576

$

49,235

Stock-based compensation expense

(1,768

)

(2,729

)

(3,166

)

(4,497

)

(5,147

)

Depreciation of acquisition-related fixed asset step-up

(21

)

(25

)

(28

)

(46

)

(57

)

Acquisition and asset sale related costs (recoveries)

36

(163

)

(120

)

(127

)

(132

)

Restructuring charges

(22

)

-

-

(22

)

-

Non-GAAP total operating expenses

$

24,381

$

21,503

$

23,577

$

45,884

$

43,899

Non-GAAP total operating expenses as a % of revenue

37.5

%

35.3

%

22.9

%

36.4

%

21.9

%

NON-GAAP OPERATING INCOME (LOSS):

GAAP income (loss) from operations

$

(16,281

)

$

(11,081

)

$

6,661

$

(27,362

)

$

13,993

Stock-based compensation expense

2,340

3,277

3,787

5,617

6,305

Amortization of purchased intangible assets

153

185

184

338

368

Depreciation of acquisition-related fixed asset step-up

24

19

20

43

37

Acquisition and asset sale related costs (recoveries)

(36

)

163

120

127

132

End-of-life related inventory write-down (sell-through)

3,257

(577

)

-

2,680

-

Accelerated depreciation

157

174

-

331

-

Restructuring charges

135

-

-

135

-

Non-GAAP income (loss) from operations

$

(10,251

)

$

(7,840

)

$

10,772

$

(18,091

)

$

20,835

Non-GAAP operating margin as a % of revenue

(15.8

)%

(12.9

)%

10.4

%

(14.4

)%

10.4

%

NeoPhotonics Corporation

Reconciliation of Condensed Consolidated GAAP Financial Measures to Non-GAAPFinancial Measures (Unaudited)

(In thousands, except percentages and per share data)



Three Months Ended Six Months Ended

Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, 2021 2021 2020 2021 2020

NON-GAAP GROSS PROFIT:

GAAP gross profit $ 9,875 $ 13,339 $ 33,502 $ 23,214 $ 63,228

Stock-basedcompensation 572 548 621 1,120 1,158 expense

Amortization ofpurchased 153 185 184 338 368 intangible assets

Depreciation ofacquisition-related 3 (6 ) (8 ) (3 ) (20 )fixed asset step-up

End-of-life relatedinventory 3,257 (577 ) - 2,680 - write-down(sell-through)

Accelerated 157 174 - 331 - depreciation

Restructuring 113 - - 113 - charges

Non-GAAP gross $ 14,130 $ 13,663 $ 34,299 $ 27,793 $ 64,734 profit

Non-GAAP grossmargin as a % of 21.7 % 22.4 % 33.2 % 22.1 % 32.3 %revenue



NON-GAAP TOTAL OPERATING EXPENSES:

GAAP total $ 26,156 $ 24,420 $ 26,891 $ 50,576 $ 49,235 operating expenses

Stock-basedcompensation (1,768 ) (2,729 ) (3,166 ) (4,497 ) (5,147 )expense

Depreciation ofacquisition-related (21 ) (25 ) (28 ) (46 ) (57 )fixed asset step-up

Acquisition andasset sale related 36 (163 ) (120 ) (127 ) (132 )costs (recoveries)

Restructuring (22 ) - - (22 ) - charges

Non-GAAP total $ 24,381 $ 21,503 $ 23,577 $ 45,884 $ 43,899 operating expenses

Non-GAAP totaloperating expenses 37.5 % 35.3 % 22.9 % 36.4 % 21.9 %as a % of revenue



NON-GAAP OPERATING INCOME (LOSS):

GAAP income (loss) $ (16,281 ) $ (11,081 ) $ 6,661 $ (27,362 ) $ 13,993 from operations

Stock-basedcompensation 2,340 3,277 3,787 5,617 6,305 expense

Amortization ofpurchased 153 185 184 338 368 intangible assets

Depreciation ofacquisition-related 24 19 20 43 37 fixed asset step-up

Acquisition andasset sale related (36 ) 163 120 127 132 costs (recoveries)

End-of-life relatedinventory 3,257 (577 ) - 2,680 - write-down(sell-through)

Accelerated 157 174 - 331 - depreciation

Restructuring 135 - - 135 - charges

Non-GAAP income(loss) from $ (10,251 ) $ (7,840 ) $ 10,772 $ (18,091 ) $ 20,835 operations

Non-GAAP operating ) ) )margin as a % of (15.8 % (12.9 % 10.4 % (14.4 % 10.4 %revenue

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

Six Months Ended

Jun. 30, 2021

Mar. 31, 2021

Jun. 30, 2020

Jun. 30, 2021

Jun. 30, 2020

NON-GAAP NET INCOME (LOSS):

GAAP net income (loss)

$

(17,433

)

$

(10,692

)

$

5,725

$

(28,124

)

$

12,032

Stock-based compensation expense

2,340

3,277

3,787

5,617

6,305

Amortization of purchased intangible assets

153

185

184

338

368

Depreciation of acquisition-related fixed asset step-up

24

19

20

43

37

Acquisition and asset sale related costs (recoveries)

(36

)

163

120

127

132

End-of-life related inventory write-down (sell-through)

3,257

(577

)

-

2,680

-

Accelerated depreciation

157

174

-

331

-

Restructuring charges

135

-

-

135

-

Income tax effect of Non-GAAP adjustments

(17

)

(2

)

(1,160

)

(19

)

(1,134

)

Non-GAAP net income (loss)

$

(11,420

)

$

(7,453

)

$

8,676

$

(18,872

)

$

17,740

Non-GAAP net income (loss) as a % of revenue

(17.6

)%

(12.2

)%

8.4

%

(15.0

)%

8.8

%

ADJUSTED EBITDA:

GAAP net income (loss)

$

(17,433

)

$

(10,692

)

$

5,725

$

(28,124

)

$

12,032

Stock-based compensation expense

2,340

3,277

3,787

5,617

6,305

Amortization of purchased intangible assets

153

185

184

338

368

Depreciation of acquisition-related fixed asset step-up

24

19

20

43

37

Acquisition and asset sale related costs (recoveries)

(36

)

163

120

127

132

End-of-life related inventory write-down (sell-through)

3,257

(577

)

-

2,680

-

Accelerated depreciation

157

174

-

331

-

Restructuring charges

135

-

-

135

-

Interest expense, net

80

122

279

202

559

Income tax provision

191

632

412

823

2,405

Depreciation expense

5,771

6,003

6,414

11,774

12,887

Adjusted EBITDA

$

(5,361

)

$

(694

)

$

16,941

$

(6,054

)

$

34,725

Adjusted EBITDA as a % of revenue

(8.2

)%

(1.1

)%

16.4

%

(4.8

)%

17.3

%

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

GAAP basic net income (loss) per share

$

(0.34

)

$

(0.21

)

$

0.12

$

(0.55

)

$

0.25

GAAP diluted net income (loss) per share

$

(0.34

)

$

(0.21

)

$

0.11

$

(0.55

)

$

0.24

Non-GAAP basic net income (loss) per share

$

(0.22

)

$

(0.15

)

$

0.18

$

(0.37

)

$

0.36

Non-GAAP diluted net income (loss) per share

$

(0.22

)

$

(0.15

)

$

0.16

$

(0.37

)

$

0.33

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

51,634

50,717

49,077

51,178

48,846

SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE

51,634

50,717

51,661

51,178

51,124

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

51,634

50,717

54,303

51,178

53,338

View source version on businesswire.com: https://www.businesswire.com/news/home/20210803005742/en/

CONTACT: NeoPhotonics Corporation Beth Eby, Chief Financial Officer +1-408-895-6086 ir@neophotonics.com Sapphire Investor Relations, LLC Erica Mannion, Investor Relations +1-617-542-6180 ir@neophotonics.com