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NeoPhotonics Reports Fourth Quarter and Fiscal Year 2020 Financial Results

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·12 min read
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  • Revenue growth to $371.2 million for FY2020; $68.2 million in the fourth quarter

  • Increased diversification with four 10% or greater customers in the fourth quarter

  • Record cash and cash equivalents, short term investments and restricted cash at $123 million

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 fourth quarter and fiscal year ended December 31, 2020.

"2020 was a strong and dynamic year for NeoPhotonics, with accelerating market adoption and deployment of our industry leading ultra-pure light tunable lasers, high bandwidth receiver and modulator solutions for the highest speed over distance interconnects," said Tim Jenks, NeoPhotonics CEO. "With our current rollout of 400ZR and 400ZR+ coherent modules for Cloud Data Center interconnects, we look forward to accelerating growth. I am proud of our team and what they accomplished in a challenging year," concluded Mr. Jenks.

Fourth Quarter 2020 Summary

  • Revenue was $68.2 million, down 33% quarter-over-quarter and 34% year-over-year

  • Gross margin was 22.7%, down from 23.8% in the prior quarter

  • Non-GAAP gross margin was 24.7%, down from 33.6% in the prior quarter

  • Net loss per share was $0.23, compared to net loss of $0.10 per share in the prior quarter

  • Non-GAAP net loss per share was $0.14, compared to Non-GAAP net income of $0.11 per share in the prior quarter

  • Cash generated from operations was $5.4 million, compared to $15.0 million in the prior quarter

  • Adjusted EBITDA was negative $4.5 million, down from positive $13.1 million in the prior quarter

Non-GAAP results in the fourth quarter of 2020 exclude a net gain of $2.1 million of legal settlements and advisory services, a gain of $1.0 million on the sale of assets, and expenses of $3.3 million of stock-based compensation, $0.7 million of accelerated depreciation and restructuring, and approximately $0.2 million of amortization of acquisition related intangibles. 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.

Full Year 2020 Summary

  • Revenue in 2020 was $371.2 million, compared to $356.8 million in 2019

  • Gross margin was 27.8%, compared to 24.9% in 2019

  • Non-GAAP gross margin was 31.3%, compared to 27.3% in 2019

  • Diluted net loss per share was $0.09, compared to net loss of $0.36 per diluted share in 2019

  • Non-GAAP diluted net income per share was $0.31, compared to net income of $0.01 per diluted share in 2019

  • Cash generated from operations was $54.9 million, compared to $34.7 million in 2019

  • Adjusted EBITDA was $43.3 million, compared to $32.7 million in 2019

Non-GAAP results in 2020 exclude $12.3 million of stock-based compensation expense, $10.1 million for inventory write-downs, accelerated depreciation and restructuring expenses, $1.0 million of amortization of acquisition-related intangibles and other costs, net gain of $2.1 million of legal settlements and advisory services and a gain of $1.0 million on the sale of assets. 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 December 31, 2020, cash and cash equivalents, short-term investments and restricted cash totaled $123.3 million.

Outlook for the Quarter Ending March 31, 2021

GAAP

Non-GAAP

Revenue

$57 to $62 million

Gross Margin

16% to 20 %

18 % to 22 %

Operating Expenses

$25 to $26 million

$22 to $23 million

Earnings per share

($0.28) to ($0.18)

($0.20) to ($0.10)

The non-GAAP outlook for the first 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 of $0.2 million and the impact of expected amortization of intangibles and other costs of approximately of $0.3 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, Thursday, February 25, 2021 at 5:00 P.M. Eastern Time (2:00 P.M. Pacific Time). The call will be available, live, to interested parties by dialing +1-800-437-2398. For international callers, please dial +1-929-477-0577. The Conference ID number is 6627222. 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; 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/A for the year ended December 31, 2019 and 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.

NeoPhotonics Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

As of

Dec. 31, 2020

Dec. 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

95,117

$

70,467

Short-term investments

27,669

7,638

Restricted cash

489

10,972

Accounts receivable, net

45,232

68,890

Inventories

46,901

46,930

Prepaid expenses and other current assets

20,173

25,851

Total current assets

235,581

230,748

Property, plant and equipment, net

66,765

81,133

Operating lease right-of-use assets

13,823

15,603

Purchased intangible assets, net

1,468

2,151

Goodwill

1,115

1,115

Other long-term assets

4,912

3,929

Total assets

$

323,664

$

334,679

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

43,539

$

58,554

Current portion of long-term debt

3,232

3,044

Accrued and other current liabilities

42,053

47,481

Total current liabilities

88,824

109,079

Long-term debt, net of current portion

30,327

39,237

Operating lease liabilities, noncurrent

14,522

16,543

Other noncurrent liabilities

9,584

9,614

Total liabilities

143,257

174,473

Stockholders’ equity:

Common stock

126

121

Additional paid-in capital

597,460

582,504

Accumulated other comprehensive loss

1,735

(7,871

)

Accumulated deficit

(418,914

)

(414,548

)

Total stockholders’ equity

180,407

160,206

Total liabilities and stockholders’ equity

$

323,664

$

334,679

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

Three Months Ended

Twelve Months Ended

Dec. 31, 2020

Sep. 30, 2020

Dec. 31, 2019

Dec. 31, 2020

Dec. 31, 2019

Revenue

$

68,193

$

102,398

$

103,356

$

371,163

$

356,804

Cost of goods sold (1)

52,743

77,994

72,154

268,081

267,991

Gross profit

15,450

24,404

31,202

103,082

88,813

Gross margin

22.7

%

23.8

%

30.2

%

27.8

%

24.9

%

Operating expenses:

Research and development (1)

15,251

15,276

15,470

56,100

57,634

Sales and marketing (1)

3,999

3,692

4,030

15,629

16,088

General and administrative (1)

7,219

7,758

7,429

30,569

29,759

Amortization of purchased intangible assets

119

Acquisition and asset sale related costs

875

87

9

1,094

397

Restructuring charges

15

141

156

261

Litigation Settlement

(2,988

)

(2,988

)

Gain on asset sale

(1,044

)

(86

)

(1,044

)

(903

)

Total operating expenses

23,327

26,954

26,852

99,516

103,355

Income (loss) from operations

(7,877

)

(2,550

)

4,350

3,566

(14,542

)

Interest income

41

21

83

182

376

Interest expense

(240

)

(263

)

(447

)

(1,182

)

(1,919

)

Other income (expense), net

(3,416

)

(3,317

)

(1,810

)

(5,730

)

642

Total interest and other income (expense), net

(3,615

)

(3,559

)

(2,174

)

(6,730

)

(901

)

Income (loss) before income taxes

(11,492

)

(6,109

)

2,176

(3,164

)

(15,443

)

Income tax (provision) benefit

(3

)

1,206

(107

)

(1,202

)

(1,633

)

Net income (loss)

$

(11,495

)

$

(4,903

)

$

2,069

$

(4,366

)

$

(17,076

)

Basic net income (loss) per share

$

(0.23

)

$

(0.10

)

$

0.04

$

(0.09

)

$

(0.36

)

Diluted net income (loss) per share

$

(0.23

)

$

(0.10

)

$

0.04

$

(0.09

)

$

(0.36

)

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

50,256

49,936

48,358

49,474

47,304

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

50,256

49,936

50,238

49,474

47,304

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

Cost of goods sold

$

540

$

607

$

593

$

2,305

$

2,244

Research and development

862

748

755

3,367

3,138

Sales and marketing

570

565

559

2,403

2,411

General and administrative

1,287

853

1,255

4,262

4,663

Total stock-based compensation expense

$

3,259

$

2,773

$

3,162

$

12,337

$

12,456

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

Twelve Months Ended

Dec. 31, 2020

Sep. 30, 2020

Dec. 31, 2019

Dec. 31, 2020

Dec. 31, 2019

NON-GAAP GROSS PROFIT:

GAAP gross profit

$

15,450

$

24,404

$

31,202

$

103,082

$

88,813

Stock-based compensation expense

540

607

593

2,305

2,244

Amortization of purchased intangible assets

185

184

184

737

737

Depreciation of acquisition-related fixed asset step-up

(6

)

(8

)

(66

)

(34

)

(264

)

End-of-life related inventory write-down

4,435

4,435

3,553

Accelerated depreciation

515

4,120

4,635

2,265

Restructuring charges

161

706

867

Non-GAAP gross profit

$

16,845

$

34,448

$

31,913

$

116,027

$

97,348

Non-GAAP gross margin as a % of revenue

24.7

%

33.6

%

30.9

%

31.3

%

27.3

%

NON-GAAP TOTAL OPERATING EXPENSES:

GAAP total operating expenses

$

23,327

$

26,954

$

26,852

$

99,516

$

103,355

Stock-based compensation expense

(2,719

)

(2,166

)

(2,569

)

(10,032

)

(10,212

)

Amortization of purchased intangible assets

(119

)

Depreciation of acquisition-related fixed asset step-up

(28

)

(28

)

(67

)

(113

)

(266

)

Acquisition and asset sale related costs

(875

)

(87

)

(9

)

(1,094

)

(397

)

Restructuring charges

(15

)

(141

)

(156

)

(261

)

Litigation settlement

2,988

2,988

Gain on asset sale

1,044

86

1,044

903

Non-GAAP total operating expenses

$

23,722

$

24,532

$

24,293

$

92,153

$

93,003

Non-GAAP total operating expenses as a % of revenue

34.8

%

24.0

%

23.5

%

24.8

%

26.1

%

NON-GAAP OPERATING INCOME (LOSS):

GAAP income (loss) from operations

$

(7,877

)

$

(2,550

)

$

4,350

$

3,566

$

(14,542

)

Stock-based compensation expense

3,259

2,773

3,162

12,337

12,456

Amortization of purchased intangible assets

185

184

184

737

856

Depreciation of acquisition-related fixed asset step-up

22

20

1

79

2

Acquisition and asset sale related costs

875

87

9

1,094

397

End-of-life related inventory write-down

4,435

4,435

3,553

Accelerated depreciation

515

4,120

4,635

2,265

Restructuring charges

176

847

1,023

261

Litigation settlement

(2,988

)

(2,988

)

Gain on asset sale

(1,044

)

(86

)

(1,044

)

(903

)

Non-GAAP income (loss) from operations

$

(6,877

)

$

9,916

$

7,620

$

23,874

$

4,345

Non-GAAP operating margin as a % of revenue

(10.1

)%

9.7

%

7.4

%

6.4

%

1.2

%

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

Twelve Months Ended

Dec. 31, 2020

Sep. 30, 2020

Dec. 31, 2019

Dec. 31, 2020

Dec. 31, 2019

NON-GAAP NET INCOME (LOSS):

GAAP net income (loss)

$

(11,495

)

$

(4,903

)

$

2,069

$

(4,366

)

$

(17,076

)

Stock-based compensation expense

3,259

2,773

3,162

12,337

12,456

Amortization of purchased intangible assets

185

184

184

737

856

Depreciation of acquisition-related fixed asset step-up

22

20

1

79

2

Acquisition and asset sale related costs

875

87

9

1,094

397

End-of-life related inventory write-down

4,435

4,435

3,553

Accelerated depreciation

515

4,120

4,635

2,265

Restructuring charges

176

847

1,023

261

Litigation settlement

(2,988

)

(2,988

)

Gain on asset sale

(1,044

)

(86

)

(1,044

)

(903

)

Income tax effect of Non-GAAP adjustments

3,255

(1,327

)

(82

)

794

(1,368

)

Non-GAAP net income (loss)

$

(7,240

)

$

6,236

$

5,257

$

16,736

$

443

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

(10.6

)%

6.1

%

5.1

%

4.5

%

0.1

%

ADJUSTED EBITDA:

GAAP net income (loss)

$

(11,495

)

$

(4,903

)

$

2,069

$

(4,366

)

$

(17,076

)

Stock-based compensation expense

3,259

2,773

3,162

12,337

12,456

Amortization of purchased intangible assets

185

184

184

737

856

Depreciation of acquisition-related fixed asset step-up

22

20

1

79

2

Acquisition and asset sale related costs

875

87

9

1,094

397

End-of-life related inventory write-down

4,435

4,435

3,553

Accelerated depreciation

515

4,120

4,635

2,265

Restructuring charges

176

847

1,023

261

Litigation settlement

(2,988

)

(2,988

)

Gain on asset sale

(1,044

)

(86

)

(1,044

)

(903

)

Interest expense, net

199

242

364

1,000

1,543

Income tax provision (benefit)

3

(1,206

)

107

1,202

1,633

Depreciation expense

5,831

6,479

6,647

25,197

27,665

Adjusted EBITDA

$

(4,462

)

$

13,078

$

12,457

$

43,341

$

32,652

Adjusted EBITDA as a % of revenue

(6.5

)%

12.8

%

12.1

%

11.7

%

9.2

%

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

GAAP basic net income (loss) per share

$

(0.23

)

$

(0.10

)

$

0.04

$

(0.09

)

$

(0.36

)

GAAP diluted net income (loss) per share

$

(0.23

)

$

(0.10

)

$

0.04

$

(0.09

)

$

(0.36

)

Non-GAAP basic net income (loss) per share

$

(0.14

)

$

0.12

$

0.11

$

0.34

$

0.01

Non-GAAP diluted net income (loss) per share

$

(0.14

)

$

0.11

$

0.10

$

0.31

$

0.01

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

50,256

49,936

48,358

49,474

47,304

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

50,256

49,936

50,238

49,474

47,304

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

50,256

54,385

52,277

53,872

50,631

©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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210225005935/en/

Contacts

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