NeoPhotonics Reports First Quarter 2021 Financial Results

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 first quarter of 2021.

“NeoPhotonics again delivered strong results in the first quarter, as we transition our business to cloud-centric. We demonstrated transmission of 400G data rates over 800 km using our 400ZR+ coherent modules,” said Tim Jenks, NeoPhotonics CEO. “We are excited about the prospects these modules are demonstrating for the next generation of highest speed over distance interconnects,” concluded Mr. Jenks.

First Quarter 2021 Summary

  • Revenue was $60.9 million, down 11% quarter-over-quarter and 37% year-over-year
  • Gross margin was 21.9%, down from 22.7% in the prior quarter
  • Non-GAAP gross margin was 22.4%, down from 24.7% in the prior quarter
  • Net loss per share was $0.21, compared to net loss of $0.23 per share in the prior quarter
  • Non-GAAP net loss per share was $0.15, compared to Non-GAAP net loss of $0.14 per share in the prior quarter
  • Adjusted EBITDA was negative $0.7 million, up from a negative $4.5 million in the prior quarter

Non-GAAP results in the first quarter of 2021 exclude a net gain of $0.6 million on a reduction in materials reserves, and expenses of $3.3 million of stock-based compensation, $0.5 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 March 31, 2021, cash and cash equivalents, short-term investments and restricted cash totaled $111 million.

Outlook for the Quarter Ending June 30, 2021

GAAP

Non-GAAP

Revenue

$59 to $65 million

Gross Margin

15% to 19%

17% to 21%

Operating Expenses

$25 to $26 million

$22.5 to $23.5 million

Earnings per share

($0.35) to ($0.25)

($0.30) to ($0.20)

The non-GAAP outlook for the second 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 $0.4 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

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; 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 conditions in the industry or negotiating leverage of buyers; the impact of any previous or future acquisitions or divestitures of assets and related product lines; 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; a decline in general conditions in the telecommunications equipment industry, the cloud and datacenter 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 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

Mar. 31, 2021

Dec. 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

83,068

$

95,117

Short-term investments

27,671

27,669

Restricted cash

488

489

Accounts receivable, net

39,975

45,232

Inventories

46,373

46,901

Prepaid expenses and other current assets

15,425

20,173

Total current assets

213,000

235,581

Property, plant and equipment, net

60,977

66,765

Operating lease right-of-use assets

13,315

13,823

Purchased intangible assets, net

1,280

1,468

Goodwill

1,115

1,115

Other long-term assets

4,808

4,912

Total assets

$

294,495

$

323,664

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

37,538

$

43,539

Current portion of long-term debt

3,026

3,232

Accrued and other current liabilities

32,672

42,053

Total current liabilities

73,236

88,824

Long-term debt, net of current portion

29,047

30,327

Operating lease liabilities, noncurrent

13,974

14,522

Other noncurrent liabilities

8,580

9,584

Total liabilities

124,837

143,257

Stockholders’ equity:

Common stock

128

126

Additional paid-in capital

599,744

597,460

Accumulated other comprehensive income (loss)

(608

)

1,735

Accumulated deficit

(429,606

)

(418,914

)

Total stockholders’ equity

169,658

180,407

Total liabilities and stockholders’ equity

$

294,495

$

323,664

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

 

Three Months Ended

Mar. 31, 2021

Dec. 31, 2020

Mar. 31, 2020

Revenue

$

60,926

$

68,193

$

97,401

Cost of goods sold (1)

47,587

52,743

67,675

Gross profit

13,339

15,450

29,726

Gross margin

21.9

%

22.7

%

30.5

%

Operating expenses:

Research and development (1)

13,098

15,251

11,884

Sales and marketing (1)

3,865

3,999

3,659

General and administrative (1)

7,294

7,219

6,789

Acquisition and asset sale related costs

163

875

12

Restructuring charges

15

Litigation Settlement

(2,988

)

Gain on asset sale

(1,044

)

Total operating expenses

24,420

23,327

22,344

Income (loss) from operations

(11,081

)

(7,877

)

7,382

Interest income

105

41

98

Interest expense

(227

)

(240

)

(378

)

Other income (expense), net

1,143

(3,416

)

1,198

Total interest and other income (expense), net

1,021

(3,615

)

918

Income (loss) before income taxes

(10,060

)

(11,492

)

8,300

Income tax provision

(632

)

(3

)

(1,993

)

Net income (loss)

$

(10,692

)

$

(11,495

)

$

6,307

Basic net income (loss) per share

$

(0.21

)

$

(0.23

)

$

0.13

Diluted net income (loss) per share

$

(0.21

)

$

(0.23

)

$

0.12

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

50,717

50,256

48,615

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

50,717

50,256

50,617

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

Cost of goods sold

$

548

$

540

$

537

Research and development

862

862

758

Sales and marketing

554

570

530

General and administrative

1,313

1,287

693

Total stock-based compensation expense

$

3,277

$

3,259

$

2,518

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

Mar. 31, 2021

Dec. 31, 2020

Mar. 31, 2020

NON-GAAP GROSS PROFIT:

GAAP gross profit

$

13,339

$

15,450

$

29,726

Stock-based compensation expense

548

540

537

Amortization of purchased intangible assets

185

185

184

Depreciation of acquisition-related fixed asset step-up

(6

)

(6

)

(12

)

End-of-life related inventory write-down

(577

)

Accelerated depreciation

174

515

Restructuring charges

161

Non-GAAP gross profit

$

13,663

$

16,845

$

30,435

Non-GAAP gross margin as a % of revenue

22.4

%

24.7

%

31.2

%

NON-GAAP TOTAL OPERATING EXPENSES:

GAAP total operating expenses

$

24,420

$

23,327

$

22,344

Stock-based compensation expense

(2,729

)

(2,719

)

(1,981

)

Depreciation of acquisition-related fixed asset step-up

(25

)

(28

)

(29

)

Acquisition and asset sale related costs

(163

)

(875

)

(12

)

Restructuring charges

(15

)

Litigation settlement

2,988

Gain on asset sale

1,044

Non-GAAP total operating expenses

$

21,503

$

23,722

$

20,322

Non-GAAP total operating expenses as a % of revenue

35.3

%

34.8

%

20.9

%

NON-GAAP OPERATING INCOME (LOSS):

GAAP income (loss) from operations

$

(11,081

)

$

(7,877

)

$

7,382

Stock-based compensation expense

3,277

3,259

2,518

Amortization of purchased intangible assets

185

185

184

Depreciation of acquisition-related fixed asset step-up

19

22

17

Acquisition and asset sale related costs

163

875

12

End-of-life related inventory write-down

(577

)

Accelerated depreciation

174

515

Restructuring charges

176

Litigation settlement

(2,988

)

Gain on asset sale

(1,044

)

Non-GAAP income (loss) from operations

$

(7,840

)

$

(6,877

)

$

10,113

Non-GAAP operating margin as a % of revenue

(12.9

)%

(10.1

)%

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

Mar. 31, 2021

Dec. 31, 2020

Mar. 31, 2020

NON-GAAP NET INCOME (LOSS):

GAAP net income (loss)

$

(10,692

)

$

(11,495

)

$

6,307

Stock-based compensation expense

3,277

3,259

2,518

Amortization of purchased intangible assets

185

185

184

Depreciation of acquisition-related fixed asset step-up

19

22

17

Acquisition and asset sale related costs

163

875

12

End-of-life related inventory write-down

(577

)

Accelerated depreciation

174

515

Restructuring charges

176

Litigation settlement

(2,988

)

Gain on asset sale

(1,044

)

Income tax effect of Non-GAAP adjustments

(2

)

3,255

26

Non-GAAP net income (loss)

$

(7,453

)

$

(7,240

)

$

9,064

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

(12.2

)%

(10.6

)%

9.3

%

ADJUSTED EBITDA:

GAAP net income (loss)

$

(10,692

)

$

(11,495

)

$

6,307

Stock-based compensation expense

3,277

3,259

2,518

Amortization of purchased intangible assets

185

185

184

Depreciation of acquisition-related fixed asset step-up

19

22

17

Acquisition and asset sale related costs

163

875

12

End-of-life related inventory write-down

(577

)

Accelerated depreciation

174

515

Restructuring charges

176

Litigation settlement

(2,988

)

Gain on asset sale

(1,044

)

Interest expense, net

122

199

280

Income tax provision

632

3

1,993

Depreciation expense

6,003

5,831

6,473

Adjusted EBITDA

$

(694

)

$

(4,462

)

$

17,784

Adjusted EBITDA as a % of revenue

(1.1

)%

(6.5

)%

18.3

%

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

GAAP basic net income (loss) per share

$

(0.21

)

$

(0.23

)

$

0.13

GAAP diluted net income (loss) per share

$

(0.21

)

$

(0.23

)

$

0.12

Non-GAAP basic net income (loss) per share

$

(0.15

)

$

(0.14

)

$

0.19

Non-GAAP diluted net income (loss) per share

$

(0.15

)

$

(0.14

)

$

0.17

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

50,717

50,256

48,615

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

50,717

50,256

50,617

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

50,717

50,256

52,406

Contacts:

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

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