NEOPHOTONICS CORP - FORM 8-K - EX-99.1

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8-K - 8-K - NEOPHOTONICS CORP	nptn-20151027x8k.htm

Exhibit 99.1

LOGO

NeoPhotonics Reports Third Quarter 2015 Financial Results

Revenue of $83.6 million

Non-GAAP Gross Margin of 29.8%

Adjusted EBITDA of $10.2 million for the quarter; $43.1 million over last four quarters

SAN JOSE, Calif. — November 2, 2015 - 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 third quarter ended September 30, 2015.

“We are pleased to report our fourth straight quarter of GAAP profitability and year over year revenue and margin expansion which resulted in our generating $43 million of Adjusted EBITDA over the last four quarters,” said Tim Jenks, NeoPhotonics Chairman and CEO. “We are excited about the renewed momentum we are seeing in the 100G market and the progress we are making with our strategy of increasing our content per 100G port and extending our products to 400G and beyond,” concluded Mr. Jenks.

Third Quarter Summary

Revenue was $83.6 million, up $2.0 million, or 2.4%, from the third quarter of 2014, and down $1.8 million, or 2.1%, from the prior quarter

Gross margin was 28.4%, up from 24.6% in the third quarter of 2014, and down from 30.6% in the prior quarter

Non-GAAP gross margin was 29.8%, up from 26.5% in the third quarter of 2014, and down from 32.3% in the prior quarter

Net income was $1.4 million, up from a loss of $1.9 million in the third quarter of 2014, and down from $1.8 million in the prior quarter

Non-GAAP net income was $4.6 million, up from earnings of $1.4 million in the third quarter of 2014, and down from $5.3 million in the prior quarter

Diluted earnings per share was $0.03, an improvement from a loss of $0.06 in the third quarter of 2014, and down from $0.05 in the prior quarter

Non-GAAP diluted earnings per share was $0.11, up from earnings of $0.04 in the third quarter of 2014, and down from earnings of $0.14 in the prior quarter

Adjusted EBITDA was $10.2 million, an improvement from $7.3 million in the third quarter of 2014, and down from $11.4 million in the prior quarter

At September 30, 2015, cash and cash equivalents, short-term investments and restricted cash and investments, together totaled $103.6 million, nearly flat from $104.4 million at June 30, 2015. Restricted cash and investments at September 30, 2015 was $3.1 million, down from $4.0 million at June 30, 2015.

Outlook for the Quarter Ending December 31, 2015

The Company’s expectations for the fourth quarter 2015 are:

Revenue in the range of $82 million to $86 million

Non-GAAP gross margin in the range of 30% to 34%

Diluted net income/loss per share in the range of a 3 cent loss to earnings of 4 cents, and

Non-GAAP diluted earnings per share in the range of 5 cents to 13 cents

The Non-GAAP outlook for the fourth quarter of 2015 excludes the impact of expected amortization of intangibles and other assets and other legal costs of approximately $1.8 million and the anticipated impact of stock-based compensation of approximately $1.4 million, of which $0.3 million is estimated for cost of goods sold.

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

The Company’s Non-GAAP and Adjusted EBITDA measures exclude certain GAAP financial measures, and 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, November 2, 2015, 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 62209028. A live webcast will also be available in the Investors 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 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 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, 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; 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, including the recent acquisition of EMCORE’s tunable laser product line; 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, 2014 as well as the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2015. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

Source: NeoPhotonics Corporation

NeoPhotonics Corporation

Clyde R. Wallin, +1-408-895-6020

Chief Financial Officer

ray.wallin@neophotonics.com

Sapphire Investor Relations, LLC

Erica Mannion, +1-617-542-6180

Investor Relations

ir@neophotonics.com

NeoPhotonics Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)


	As of
	Sept. 30, 2015		Dec. 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	77,250	$	43,035
Short-term investments		23,302		—
Restricted cash and investments		3,062		5,504
Accounts receivable, net		77,830		77,597
Inventories, net		70,747		57,347
Prepaid expenses and other current assets		10,723		15,540
Total current assets		262,914		199,023
Property, plant and equipment, net		62,470		57,657
Restricted cash and investments, non-current		—		15,750
Purchased intangible assets, net		11,169		10,263
Goodwill		1,115		—
Other long-term assets		3,743		3,591
Total assets	$	341,411	$	286,284

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	54,465	$	48,949
Notes payable and short-term borrowing		10,196		22,771
Current portion of long-term debt		24,563		2,445
Accrued and other current liabilities		21,406		22,728
Total current liabilities		110,630		96,893
Long-term debt, net of current portion		11,005		20,891
Deferred income tax liabilities		1,808		1,818
Other noncurrent liabilities		7,547		7,226
Total liabilities		130,990		126,828

Stockholders' equity:
Common stock		101		82
Additional paid-in capital		507,969		456,189
Accumulated other comprehensive income		1,223		5,326
Accumulated deficit		(298,872)		(302,141)
Total stockholders' equity		210,421		159,456
Total liabilities and stockholders' equity	$	341,411	$	286,284

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)


	Three Months Ended									Nine Months Ended
	Sept. 30, 2015			June 30, 2015			Sept. 30, 2014			Sept. 30, 2015			Sept. 30, 2014

Revenue	$	83,560		$	85,372			$ 81,576			$ 250,316			$ 227,195
Cost of goods sold (1)		59,788			59,226			61,512			176,345			178,763
Gross profit		23,772			26,146			20,064			73,971			48,432
Gross margin		28.4	%		30.6	%		24.6	%		29.6	%		21.3	%
Operating expenses:
Research and development (1)		10,763			11,457			11,842			32,702			35,983
Sales and marketing (1)		3,789			3,906			3,075			11,439			10,057
General and administrative (1)		7,384			7,419			6,712			22,999			23,892
Amortization of purchased intangible assets		447			448			378			1,344			1,136
Acquisition-related costs		180			147			—			467			—
Restructuring charges		18			20			504			44			504
Asset impairment charge		368			—			—			368			—
Escrow settlement gain		—			—			—			—			(3,886)
Total operating expenses		22,949			23,397			22,511			69,363			67,686
Income (loss) from operations		823			2,749			(2,447)			4,608			(19,254)
Interest income		31			23			52			84			155
Interest expense		(171)			(456)			(375)			(1,133)			(937)
Other income (expense), net		1,852			602			1,735			2,408			493
Total interest and other income (expense), net		1,712			169			1,412			1,359			(289)

Income (loss) before income taxes		2,535			2,918			(1,035)			5,967			(19,543)
Provision for income taxes		(1,157)			(1,127)			(902)			(2,698)			(1,761)
Net income (loss)	$	1,378		$	1,791		$	(1,937)		$	3,269		$	(21,304)
Basic net income (loss) per share	$	0.03		$	0.05		$	(0.06)		$	0.09		$	(0.67)
Diluted net income (loss) per share	$	0.03		$	0.05		$	(0.06)		$	0.09		$	(0.67)
Weighted averages shares used to compute basic net income (loss) per share		40,367			35,684			32,383			36,303			31,930
Weighted averages shares used to compute diluted net income (loss) per share		42,217			37,294			32,383			37,537			31,930
(1) Includes stock-based compensation expense as follows for the periods presented:
Cost of goods sold	$	339		$	410		$	203		$	1,119		$	988
Research and development		363			501			339			1,357			1,454
Sales and marketing		275			447			417			1,175			1,377
General and administrative		459			568			229			1,767			993
Total stock-based compensation expense	$	1,436		$	1,926		$	1,188		$	5,418		$	4,812

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									Nine Months Ended
	Sept. 30, 2015			June 30, 2015			Sept. 30, 2014			Sept. 30, 2015			Sept. 30, 2014
NON-GAAP GROSS PROFIT:
GAAP gross profit	$	23,772		$	26,146		$	20,064		$	73,971		$	48,432
Stock-based compensation expense		339			410			203			1,119			988
Amortization of purchased intangible assets		836			837			709			2,512			2,137
Depreciation of acquisition-related fixed asset step-up		(55)			(43)			323			74			782
Amortization of acquisition-related inventory step-up		31			78			—			187			—
Restructuring charges		—			125			292			125			292
Non-GAAP gross profit	$	24,923		$	27,553		$	21,591		$	77,988		$	52,631
Non-GAAP gross margin as a % of revenue		29.8	%		32.3	%		26.5	%		31.2	%		23.2	%
NON-GAAP TOTAL OPERATING EXPENSES:
GAAP Total operating expenses	$	22,949		$	23,397		$	22,511		$	69,363		$	67,686
Stock-based compensation expense		(1,097)			(1,516)			(985)			(4,299)			(3,824)
Amortization of purchased intangible assets		(447)			(448)			(378)			(1,344)			(1,136)
Depreciation of acquisition-related fixed asset step-up		(106)			(123)			(304)			(519)			(722)
Acquisition-related costs		(180)			(147)			—			(467)			7
Restructuring charges		(18)			(20)			(504)			(44)			(504)
Asset Impairment charges		(368)			—			—			(368)			—
Litigation		—			—			—			(278)			—
Escrow settlement gain		—			—			—			—			3,886

Non-GAAP total operating expenses	$	20,733		$	21,143		$	20,340		$	62,044		$	65,393
Non-GAAP total operating expenses as a % of revenue		24.8	%		24.8	%		24.9	%		24.8	%		28.8	%
NON-GAAP OPERATING INCOME (LOSS):
GAAP operating income (loss)	$	823		$	2,749		$	(2,447)		$	4,608		$	(19,254)
Stock-based compensation expense		1,436			1,926			1,188			5,418			4,812
Amortization of purchased intangible assets		1,283			1,285			1,086			3,856			3,272
Depreciation of acquisition-related fixed asset step-up		51			80			628			593			1,505
Amortization of acquisition-related inventory step-up		31			78			—			187			—
Acquisition-related costs		180			147			—			467			(7)
Restructuring charges		18			145			796			169			796
Asset Impairment charges		368			—			—			368			—
Litigation		—			—			—			278			—
Escrow settlement gain		—			—			—			—			(3,886)

Non-GAAP operating income (loss)	$	4,190		$	6,410		$	1,251		$	15,944		$	(12,762)
Non-GAAP operating margin as a % of revenue		5.0	%		7.5	%		1.5	%		6.4	%		(5.6)	%

NON-GAAP NET INCOME (LOSS):
GAAP net income (loss)	$	1,378		$	1,791		$	(1,937)		$	3,269		$	(21,304)
Stock-based compensation expense		1,436			1,926			1,188			5,418			4,812
Amortization of purchased intangible assets		1,283			1,285			1,086			3,856			3,272
Depreciation of acquisition-related fixed asset step-up		51			80			628			593			1,505
Amortization of acquisition-related inventory step-up		31			78			—			187			—
Acquisition-related costs		180			147			—			467			(7)
Restructuring charges		18			145			796			169			796
Asset Impairment charges		368			—			—			368			—
Litigation		—			—			—			278			—
Escrow settlement gain		—			—			—			—			(3,886)
Income tax effect of Non-GAAP adjustments		(107)			(109)			(343)			(465)			(765)
Non-GAAP net income (loss)	$	4,638		$	5,343		$	1,418		$	14,140		$	(15,577)
Non-GAAP net income (loss) as a % of revenue		5.6	%		6.3	%		1.7	%		5.6	%		(6.9)	%
ADJUSTED EBITDA:
GAAP net income (loss)	$	1,378		$	1,791		$	(1,937)		$	3,269		$	(21,304)
Stock-based compensation expense		1,436			1,926			1,188			5,418			4,812
Amortization of purchased intangible assets		1,283			1,285			1,086			3,856			3,272
Depreciation of acquisition-related fixed asset step-up		51			80			628			593			1,505
Amortization of acquisition-related inventory step-up		31			78			—			187			—
Acquisition-related costs		180			147			—			467			(7)
Restructuring charges		18			145			796			169			796
Asset Impairment charges		368			—			—			368			—
Litigation		—			—			—			278			—
Escrow settlement gain		—			—			—			—			(3,886)
Interest expense, net		140			433			323			1,049			782
Provision for income taxes		1,157			1,127			902			2,698			1,761
Depreciation expense		4,131			4,375			4,323			13,062			12,726
Adjusted EBITDA	$	10,173		$	11,387		$	7,309		$	31,414		$	457
Adjusted EBITDA as a % of revenue		12.2	%		13.3	%		9.0	%		12.5	%		0.2	%
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:
GAAP basic net income (loss) per share	$	0.03		$	0.05		$	(0.06)		$	0.09		$	(0.67)
GAAP diluted net income (loss) per share	$	0.03		$	0.05		$	(0.06)		$	0.09		$	(0.67)
Non-GAAP basic net income (loss) per share	$	0.11		$	0.15		$	0.04		$	0.39		$	(0.49)
Non-GAAP diluted net income (loss) per share	$	0.11		$	0.14		$	0.04		$	0.37		$	(0.49)
SHARES USED TO COMPUTE GAAP AND NON-GAAP BASIC NET INCOME (LOSS) PER SHARE		40,367			35,684			32,383			36,303			31,930
SHARES USED TO COMPUTE GAAP DILUTED NET INCOME (LOSS) PER SHARE		42,217			37,294			32,383			37,537			31,930
SHARES USED TO COMPUTE NON-GAAP DILUTED NET INCOME (LOSS) PER SHARE		42,914			38,465			32,700			38,525			31,930

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