SAN JOSE, Calif.--(BUSINESS WIRE)--NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of advanced hybrid photonic integrated optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks, today announced financial results for its second quarter ended June 30, 2016.
“Globally, we continue to see the overall environment for 100G and beyond products very robust across both telecom and datacenter applications. In spite of PON market softness, we delivered solid financial results in the second quarter including strong profitability at 15 cents per share and cash generation of approximately $10 million. We are accelerating our high speed product growth and we have announced the end of life of our declining and lower margin PON products,” stated Tim Jenks, Chairman and CEO of NeoPhotonics. “We are experiencing an unprecedented level of demand for our 100G products, which we’re seeing as a major and sustaining mid-term trend in China as well as in the west. Given these industry trends and our strong market position, we are raising and narrowing our expected revenue growth for 2016 to a range of 22-25%,” concluded Mr. Jenks.
Second Quarter Summary
- Revenue was $99.1 million, up $13.8 million, or 16.1%, from the second quarter of 2015, and flat from the prior quarter
- GAAP Gross margin was 27.8%, down from 30.6% in the second quarter of 2015, and down from 31.4% in the prior quarter
- Non-GAAP Gross margin was 29.3%, down from 32.3% in the second quarter of 2015, and down from 32.8% in the prior quarter
- GAAP Net income was $2.7 million, up from $1.8 million in the second quarter of 2015, and up from $2.3 million in the prior quarter
- Non-GAAP Net income was $6.9 million, up from $5.3 million in the second quarter of 2015, down slightly from $7.0 million in the prior quarter
- GAAP Diluted earnings per share was $0.06, up from $0.05 per share in the second quarter of 2015 and up from the $0.05 per share in the prior quarter
- Non-GAAP Diluted earnings per share was $0.15, up from $0.14 per share in the second quarter of 2015, and flat with $0.15 in the prior quarter
- Adjusted EBITDA was $12.0 million, up from $11.4 million in the second quarter of 2015, and down slightly from $12.3 million in the prior quarter
Non-GAAP results exclude $1.3 million of amortization of acquisition-related intangibles and $2.2 million of stock based compensation expenses and $0.8 million of transaction costs.
At June 30, 2016, cash and cash equivalents, short-term investments and restricted cash, together totaled $113.5 million, up $9.7 million from $103.8 million at March 31, 2016. Restricted cash at June 30, 2016 was $2.6 million, down $0.1 million from March 31, 2016.
Outlook for the Quarter Ending September 30, 2016
| GAAP | Non-GAAP | |||
| Revenue | $100 to $106 million | |||
| Gross Margin | 28% to 30% | 29% to 31% | ||
| Operating Expenses | $26 to $28 million | $23 to $25 million | ||
| Earnings per share | $0.01 to $0.09 | $0.09 to $0.17 | ||
The Non-GAAP outlook for the third quarter of 2016 excludes the impact of expected amortization of intangibles of approximately $1.2 million and the anticipated impact of stock-based compensation of approximately $2.3 million, of which $0.7 million is estimated for cost of goods sold.
The Company announced that it will end of life the sales of PON products within a year. Revenue for PON products for the last four quarters was $43.9 million and had gross margins in the range of 15-20%. For the second half of 2016, the company expects PON products revenue to be less than $10 million with gross margins in the range of 10-15%, down from revenues of $19.8 million in the first half of 2016.
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, August 8, 2016, at 4:30 P.M. Eastern Time (1:30 p.m. Pacific Time). The call will be available, live, to interested parties by dialing +1 844-809-8111. For international callers, please dial +1 541-797-7255. The Conference ID number is 49142007. A live webcast will be available in the Investor Relations section of NeoPhotonics website at: www.neophotonics.com.
A replay of the webcast will be available in the Investor Relations section of the Company’s web site after the conclusion of the call and remain available for approximately 30 calendar days.
About NeoPhotonics
NeoPhotonics is a leading designer and manufacturer of advanced hybrid photonic integrated optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks. 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, Russia and China. For additional information visit www.neophotonics.com.
© 2016 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.
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, the Company’s market position and industry trends. Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. Those risks and uncertainties include, but are not limited to, such factors as: possible reduction in or volatility of customer orders or delays in shipments of products to customers; timing of customer drawdowns of vendor-managed inventory; possible disruptions in the supply chain or in demand for the Company’s products due to industry developments; the ability of the Company's vendors and subcontractors to supply or manufacture the Company's products in a timely manner; ability of the Company to meet customer demand; economic conditions or natural disasters; volatility in utilization of manufacturing operations, supporting utility services and other manufacturing costs; 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; the Company’s reliance on a small number of customers for a substantial portion of its revenues; potential pricing pressure that may arise from changing supply or demand conditions in the industry; the impact of any previous or future acquisitions; challenges involving integration of acquired businesses and utilization of acquired technology,; the impact of the discontinuance or end of life of certain products, including certain tunable laser and PON 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, 2015 and its Form 10-Q for the three months ended March 31, 2016. 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 | ||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
| (In thousands) | ||||||||
| As of | ||||||||
|
Jun. 30, |
Dec. 31, |
|||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 82,476 | $ | 76,088 | ||||
| Short-term investments | 28,427 | 23,294 | ||||||
| Restricted cash | 2,580 | 2,660 | ||||||
| Accounts receivable, net | 86,859 | 83,161 | ||||||
| Inventories, net | 61,515 | 65,602 | ||||||
| Prepaid expenses and other current assets | 13,410 | 12,393 | ||||||
| Total current assets | 275,267 | 263,198 | ||||||
| Property, plant and equipment, net | 76,625 | 62,618 | ||||||
| Purchased intangible assets, net | 7,528 | 9,852 | ||||||
| Goodwill | 1,115 | 1,115 | ||||||
| Other long-term assets | 4,888 | 5,095 | ||||||
| Total assets | $ | 365,423 | $ | 341,878 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 64,133 | $ | 50,620 | ||||
| Notes payable and short-term borrowing | 32,389 | 32,657 | ||||||
| Current portion of long-term debt | 892 | 760 | ||||||
| Accrued and other current liabilities | 21,919 | 27,950 | ||||||
| Total current liabilities | 119,333 | 111,987 | ||||||
| Long-term debt, net of current portion | 12,144 | 10,759 | ||||||
| Other noncurrent liabilities | 8,456 | 7,476 | ||||||
| Total liabilities | 139,933 | 130,222 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 104 | 102 | ||||||
| Additional paid-in capital | 520,249 | 511,750 | ||||||
| Accumulated other comprehensive loss | (1,376 | ) | (1,723 | ) | ||||
| Accumulated deficit | (293,487 | ) | (298,473 | ) | ||||
| Total stockholders' equity | 225,490 | 211,656 | ||||||
| Total liabilities and stockholders' equity | $ | 365,423 | $ | 341,878 | ||||
| NeoPhotonics Corporation | ||||||||||||||||||||
| Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||||||||||||
| (In thousands, except percentages and per share data) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
|
Jun. 30,
2016 |
Mar. 31,
2016 |
Jun. 30,
2015 |
Jun. 30,
2016 |
Jun. 30, 2015 |
||||||||||||||||
| Revenue | $ | 99,129 | $ | 99,145 | $ | 85,372 | $ | 198,274 | $ | 166,756 | ||||||||||
| Cost of goods sold (1) | 71,600 | 68,023 | 59,226 | 139,623 | 116,557 | |||||||||||||||
| Gross profit | 27,529 | 31,122 | 26,146 | 58,651 | 50,199 | |||||||||||||||
| Gross margin | 27.8 | % | 31.4 | % | 30.6 | % | 29.6 | % | 30.1 | % | ||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development (1) | 11,780 | 12,952 | 11,457 | 24,732 | 21,939 | |||||||||||||||
| Sales and marketing (1) | 3,807 | 3,931 | 3,906 | 7,738 | 7,650 | |||||||||||||||
| General and administrative (1) | 7,841 | 9,084 | 7,419 | 16,925 | 15,615 | |||||||||||||||
| Amortization of purchased intangible assets | 460 | 453 | 448 | 913 | 897 | |||||||||||||||
| Acquisition-related costs | 775 | - | 147 | 775 | 287 | |||||||||||||||
| Restructuring charges | - | - | 20 | - | 26 | |||||||||||||||
| Total operating expenses | 24,663 | 26,420 | 23,397 | 51,083 | 46,414 | |||||||||||||||
| Income from operations | 2,866 | 4,702 | 2,749 | 7,568 | 3,785 | |||||||||||||||
| Interest income | 77 | 55 | 23 | 132 | 53 | |||||||||||||||
| Interest expense | (99 | ) | (102 | ) | (456 | ) | (201 | ) | (962 | ) | ||||||||||
| Other income (expense), net | 458 | (1,304 | ) | 602 | (846 | ) | 556 | |||||||||||||
| Total interest and other income (expense), net | 436 | (1,351 | ) | 169 | (915 | ) | (353 | ) | ||||||||||||
| Income before income taxes | 3,302 | 3,351 | 2,918 | 6,653 | 3,432 | |||||||||||||||
| Provision for income taxes | (626 | ) | (1,041 | ) | (1,127 | ) | (1,667 | ) | (1,541 | ) | ||||||||||
| Net income attributable to NeoPhotonics Corporation common stockholders | $ | 2,676 | $ | 2,310 | $ | 1,791 | $ | 4,986 | $ | 1,891 | ||||||||||
| Basic net income per share | $ | 0.06 | $ | 0.06 | $ | 0.05 | $ | 0.12 | $ | 0.06 | ||||||||||
| Diluted net income per share | $ | 0.06 | $ | 0.05 | $ | 0.05 | $ | 0.11 | $ | 0.05 | ||||||||||
| Weighted averages shares used to compute basic net income per share | 41,603 | 41,121 | 35,684 | 41,362 | 34,240 | |||||||||||||||
| Weighted averages shares used to compute diluted net income per share | 44,320 | 43,648 | 37,294 | 44,042 | 35,128 | |||||||||||||||
| (1) Includes stock-based compensation expense as follows for the periods presented: | ||||||||||||||||||||
| Cost of goods sold | $ | 719 | $ | 589 | $ | 410 | $ | 1,308 | $ | 780 | ||||||||||
| Research and development | 556 | 971 | 501 | 1,527 | 994 | |||||||||||||||
| Sales and marketing | 365 | 887 | 447 | 1,252 | 900 | |||||||||||||||
| General and administrative | 590 | 992 | 568 | 1,582 | 1,308 | |||||||||||||||
| Total stock-based compensation expense | $ | 2,230 | $ | 3,439 | $ | 1,926 | $ | 5,669 | $ | 3,982 | ||||||||||
| 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,
2016 |
Mar. 31,
2016 |
Jun. 30,
2015 |
Jun. 30,
2016 |
Jun. 30,
2015 |
||||||||||||||||
| NON-GAAP GROSS PROFIT: | ||||||||||||||||||||
| GAAP gross profit | $ | 27,529 | $ | 31,122 | $ | 26,146 | $ | 58,651 | $ | 50,199 | ||||||||||
| Stock-based compensation expense | 719 | 589 | 410 | 1,308 | 780 | |||||||||||||||
| Amortization of purchased intangible assets | 848 | 841 | 837 | 1,689 | 1,676 | |||||||||||||||
| Depreciation of acquisition-related fixed asset step-up | (64 | ) | (62 | ) | (43 | ) | (126 | ) | 129 | |||||||||||
| Amortization of acquisition-related inventory step-up | - | - | 78 | - | 156 | |||||||||||||||
| Restructuring charges | - | - | 125 | - | 125 | |||||||||||||||
| Non-GAAP gross profit | $ | 29,032 | $ | 32,490 | $ | 27,553 | $ | 61,522 | $ | 53,065 | ||||||||||
| Non-GAAP gross margin as a % of revenue | 29.3 | % | 32.8 | % | 32.3 | % | 31.0 | % | 31.8 | % | ||||||||||
| NON-GAAP TOTAL OPERATING EXPENSES: | ||||||||||||||||||||
| GAAP total operating expenses | $ | 24,663 | $ | 26,420 | $ | 23,397 | $ | 51,083 | $ | 46,414 | ||||||||||
| Stock-based compensation expense | (1,511 | ) | (2,850 | ) | (1,516 | ) | (4,361 | ) | (3,202 | ) | ||||||||||
| Amortization of purchased intangible assets | (460 | ) | (453 | ) | (448 | ) | (913 | ) | (897 | ) | ||||||||||
| Depreciation of acquisition-related fixed asset step-up | (83 | ) | (93 | ) | (123 | ) | (176 | ) | (413 | ) | ||||||||||
| Acquisition-related costs | (775 | ) | - | (147 | ) | (775 | ) | (287 | ) | |||||||||||
| Restructuring charges | - | - | (20 | ) | - | (26 | ) | |||||||||||||
| Litigation | - | - | - | - | (278 | ) | ||||||||||||||
| Non-GAAP total operating expenses | $ | 21,834 | $ | 23,024 | $ | 21,143 | $ | 44,858 | $ | 41,311 | ||||||||||
| Non-GAAP total operating expenses as a % of revenue | 22.0 | % | 23.2 | % | 24.8 | % | 22.6 | % | 24.8 | % | ||||||||||
| NON-GAAP OPERATING INCOME: | ||||||||||||||||||||
| GAAP income from operations | $ | 2,866 | $ | 4,702 | $ | 2,749 | $ | 7,568 | $ | 3,785 | ||||||||||
| Stock-based compensation expense | 2,230 | 3,439 | 1,926 | 5,669 | 3,982 | |||||||||||||||
| Amortization of purchased intangible assets | 1,308 | 1,294 | 1,285 | 2,602 | 2,573 | |||||||||||||||
| Depreciation of acquisition-related fixed asset step-up | 19 | 31 | 80 | 50 | 542 | |||||||||||||||
| Amortization of acquisition-related inventory step-up | - | - | 78 | - | 156 | |||||||||||||||
| Acquisition-related costs | 775 | - | 147 | 775 | 287 | |||||||||||||||
| Restructuring charges | - | - | 145 | - | 151 | |||||||||||||||
| Litigation | - | - | - | - | 278 | |||||||||||||||
| Non-GAAP income from operations | $ | 7,198 | $ | 9,466 | $ | 6,410 | $ | 16,664 | $ | 11,754 | ||||||||||
| Non-GAAP operating margin as a % of revenue | 7.3 | % | 9.5 | % | 7.5 | % | 8.4 | % | 7.0 | % | ||||||||||
| 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,
2016 |
Mar. 31,
2016 |
Jun. 30,
2015 |
Jun. 30,
2016 |
Jun. 30,
2015 |
||||||||||||||||
| NON-GAAP NET INCOME: | ||||||||||||||||||||
| GAAP net income | $ | 2,676 | $ | 2,310 | $ | 1,791 | $ | 4,986 | $ | 1,891 | ||||||||||
| Stock-based compensation expense | 2,230 | 3,439 | 1,926 | 5,669 | 3,982 | |||||||||||||||
| Amortization of purchased intangible assets | 1,308 | 1,294 | 1,285 | 2,602 | 2,573 | |||||||||||||||
| Depreciation of acquisition-related fixed asset step-up | 19 | 31 | 80 | 50 | 542 | |||||||||||||||
| Amortization of acquisition-related inventory step-up | - | - | 78 | - | 156 | |||||||||||||||
| Acquisition-related costs | 775 | - | 147 | 775 | 287 | |||||||||||||||
| Restructuring charges | - | - | 145 | - | 151 | |||||||||||||||
| Litigation | - | - | - | - | 278 | |||||||||||||||
| Income tax effect of Non-GAAP adjustments | (135 | ) | (124 | ) | (109 | ) | (259 | ) | (358 | ) | ||||||||||
| Non-GAAP net income | $ | 6,873 | $ | 6,950 | $ | 5,343 | $ | 13,823 | $ | 9,502 | ||||||||||
| Non-GAAP net income as a % of revenue | 6.9 | % | 7.0 | % | 6.3 | % | 7.0 | % | 5.7 | % | ||||||||||
| ADJUSTED EBITDA: | ||||||||||||||||||||
| GAAP net income | $ | 2,676 | $ | 2,310 | $ | 1,791 | $ | 4,986 | $ | 1,891 | ||||||||||
| Stock-based compensation expense | 2,230 | 3,439 | 1,926 | 5,669 | 3,982 | |||||||||||||||
| Amortization of purchased intangible assets | 1,308 | 1,294 | 1,285 | 2,602 | 2,573 | |||||||||||||||
| Depreciation of acquisition-related fixed asset step-up | 19 | 31 | 80 | 50 | 542 | |||||||||||||||
| Amortization of acquisition-related inventory step-up | - | - | 78 | - | 156 | |||||||||||||||
| Acquisition-related costs | 775 | - | 147 | 775 | 287 | |||||||||||||||
| Restructuring charges | - | - | 145 | - | 151 | |||||||||||||||
| Litigation | - | - | - | - | 278 | |||||||||||||||
| Interest expense, net | 22 | 47 | 433 | 69 | 909 | |||||||||||||||
| Provision for income taxes | 626 | 1,041 | 1,127 | 1,667 | 1,541 | |||||||||||||||
| Depreciation expense | 4,357 | 4,128 | 4,375 | 8,485 | 8,931 | |||||||||||||||
| Adjusted EBITDA | $ | 12,013 | $ | 12,290 | $ | 11,387 | $ | 24,303 | $ | 21,241 | ||||||||||
| Adjusted EBITDA as a % of revenue | 12.1 | % | 12.4 | % | 13.3 | % | 12.3 | % | 12.7 | % | ||||||||||
| BASIC AND DILUTED NET INCOME PER SHARE: | ||||||||||||||||||||
| GAAP basic net income per share | $ | 0.06 | $ | 0.06 | $ | 0.05 | $ | 0.12 | $ | 0.06 | ||||||||||
| GAAP diluted net income per share | $ | 0.06 | $ | 0.05 | $ | 0.05 | $ | 0.11 | $ | 0.05 | ||||||||||
| Non-GAAP basic net income per share | $ | 0.17 | $ | 0.17 | $ | 0.15 | $ | 0.33 | $ | 0.28 | ||||||||||
| Non-GAAP diluted net income per share | $ | 0.15 | $ | 0.15 | $ | 0.14 | $ | 0.31 | $ | 0.26 | ||||||||||
| SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME PER SHARE | 41,603 | 41,121 | 35,684 | 41,362 | 34,240 | |||||||||||||||
| SHARES USED TO COMPUTE GAAP DILUTED NET INCOME PER SHARE | 44,320 | 43,648 | 37,294 | 44,042 | 35,128 | |||||||||||||||
| SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME PER SHARE | 45,393 | 45,113 | 38,465 | 45,246 | 36,054 | |||||||||||||||