NeoPhotonics Reports Second Quarter 2021 Financial Results

• Product Revenue for 400G and above applications grew 100% year-over-year
• 400ZR modules are in General Availability

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 [phone]. 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.

©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

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-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/

NeoPhotonics Corporation Beth Eby, Chief Financial Officer [phone] [e-mail] Sapphire Investor Relations, LLC Erica Mannion, Investor Relations [phone] [e-mail]