NeoPhotonics Reports First Quarter 2013 Financial Results

NeoPhotonics Reports First Quarter 2013 Financial Results

  • Record First Quarter Revenue of $56.1 Million
  • Record 39% of Revenue from 40/100G Products
  • Completed the Acquisition of Laser Specialist LAPIS Optical Components Unit

SAN JOSE, Calif.--(BUSINESS WIRE)-- NeoPhotonics Corporation (NYS: NPTN) , a leading designer and manufacturer of photonic integrated circuit, or PIC, based optoelectronic modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its first quarter ended March 31, 2013.

"We are pleased with the success we are experiencing in our portfolio of 100G products for telecom and datacom applications, which grew approximately 41% quarter-on-quarter and are poised for further growth as the 100G upgrade cycle continues," said Tim Jenks, Chairman, President and CEO of NeoPhotonics. "Moreover, our recent acquisition of the optical components unit of LAPIS Semiconductor, now called NeoPhotonics Semiconductor, is expected to further strengthen our technology leadership and market opportunity in the 100G upgrade cycle as carriers seek to satisfy growing customer demand for high speed connectivity to drive mobile video and other bandwidth intensive enterprise applications."

First Quarter Summary

  • Revenue was $56.1 million, down $6.0 million, or 9.6%, from the prior quarter and up $1.8 million, or 3.4%, from the first quarter 2012
  • Gross margin was 20.9%, down from 22.7% in the prior quarter and 21.0% in the first quarter 2012
  • Non-GAAP gross margin was 23.1%, down from 24.5% in the prior quarter and 23.9% in the first quarter 2012
  • Loss from continuing operations was $10.5 million, up from a loss of $3.0 million in the prior quarter and an improvement from a loss of $11.8 million in the first quarter 2012
  • Non-GAAP loss from continuing operations was $4.4 million, up from a loss of $0.1 million in the prior quarter and an improvement from a loss of $5.4 million in the first quarter 2012
  • Diluted loss per share from continuing operations was $0.34, up from a loss of $0.10 in the prior quarter and an improvement from a loss of $0.47 in the first quarter 2012
  • Non-GAAP diluted loss per share from continuing operations was $0.14, up from $0.00 in the prior quarter and an improvement from a loss of $0.22 in the first quarter 2012
  • Adjusted EBITDA was a loss of $1.7 million, down from income of $3.5 million in the prior quarter and an improvement from a loss of $2.4 million in the first quarter 2012
  • On March 29, 2013, completed the acquisition of LAPIS Optical Components Unit (OCU), a leading designer and manufacturer of high speed lasers, laser drivers, photodiodes and amplifiers for high speed networks, which included the business, a portfolio of more than 150 patents and patents applications, the associated real estate and high speed semiconductor, laser and detector fabrication facility.

At March 31, 2013, total cash, cash equivalents and short-term investments was $99.8 million, down from $101.2 million in the prior quarter. Also at March 31, 2013, bank debt was $40.0 million, up from $22.2 million in the prior quarter, as the company amended and restated its loan agreement to finance the acquisition of LAPIS OCU. In connection with the acquisition of LAPIS OCU, the company also agreed to pay the seller approximately $11.1 million in Japanese Yen for the purchase of the real estate used by the acquired business in three equal installments on the first, second and third anniversaries of the closing date.

The company intends to file its quarterly report on Form 10-Q on or before May 15, 2013, availing itself of a permitted extension period under SEC rules. This is to enable the company to complete its final quarterly closing procedures in light of the acquisition of LAPIS OCU that closed at the end of the first quarter. The company plans to file the required notice of this extension with the SEC.

Outlook for the Quarter Ending June 30, 2013

The company's expectations for the second quarter 2013 are:

  • Revenue in the range of $70 million to $75 million
  • Non-GAAP gross margin in the range of 21% to 25%
  • Diluted loss per share from continuing operations in the range of $0.16 to $0.27, and on a Non-GAAP basis in the range of a loss of $0.08 to $0.18 per share

The Non-GAAP outlook for the second quarter of 2013 excludes the expected amortization of intangibles and other assets, including relating to the acquisition of LAPIS OCU, of approximately $1.4 million, and the anticipated impact of stock-based compensation of approximately $1.1 million, of which $1.1 million is estimated to relate to cost of goods sold.

Conference Call

The company will discuss these financial results in a conference call at 5:30 p.m. EDT today. The public is invited to listen to a live webcast of the conference call on the Investor Relations section of the company website at A replay of the webcast will be available on the Investor Relations section on the company's website approximately two hours after the conclusion of the call.

About NeoPhotonics

NeoPhotonics is a leading designer and manufacturer of photonic integrated circuit, or PIC, based 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

© 2013 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.

Forward Looking Statements

The statements in this press release under the heading "Outlook for the Quarter Ending March 31, 2013", as well Mr. Jenks' statements about the expected benefits of the LAPIS OCU acquisition, are forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations, which could cause the company's actual results to differ materially from those anticipated in such forward-looking statements. The risks and uncertainties that could cause the company's results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to: 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, economic conditions or natural disasters; volatility in utilization of manufacturing operations 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; a decline in general conditions in the telecommunications equipment industry or the world economy generally (particularly in the United States, China or Europe); effects of seasonality; the risk that the OCU business may not perform as expected due to transaction-related uncertainty or other factors; and other risks and uncertainties described more fully in the company's documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact the company's business are set forth in the "Risk Factors" section of the company's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on March 15, 2013. All forward-looking statements in this press release are based on information available to NeoPhotonics as of the date hereof and qualified in their entirety by this cautionary statement, and NeoPhotonics assumes no obligation to revise or update these forward-looking statements.

Use of Non-GAAP Financial Information

The company provides Non-GAAP gross margin, Non-GAAP net income (loss) from continuing operations, Non-GAAP diluted net income (loss) per share and adjusted EBITDA, as supplemental information. In computing certain of these Non-GAAP financial measures, the company excludes certain items included under GAAP, including stock-based compensation expense, amortization of purchased intangible assets, amortization of acquisition-related fixed asset and inventory step-ups, acquisition-related costs, restructuring charges, and fair value adjustment to contingent consideration. In computing adjusted EBITDA, the company also excludes interest (income) expense, net, provision for (benefit from) income taxes and depreciation expense.

Management uses these Non-GAAP financial measures to evaluate the operating performance of the business and aid in the period-to-period comparability. Management also uses the Non-GAAP financial measures for planning and forecasting and measuring results against its forecast. Using several measures to evaluate the business allows the company and investors to assess the company's relative performance and ultimately monitor the company's capacity to generate returns for its stockholders. The Non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the company's industry, as other companies may calculate such financial results differently. The company's Non-GAAP financial measures are not measurements of financial performance under GAAP, and should not be considered as alternatives to the financial measures derived in accordance with GAAP. The company does not consider these Non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the Non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion of this press release.

NeoPhotonics Corporation
Consolidated Statements of Operations (Unaudited)
(In thousands, except percentages, share and per share data)
Three months ended

Mar. 31,

Dec. 31,

Mar. 31,

Cost of goods sold (1) 44,333  47,973  42,817 
Gross profit11,73014,05011,406
Operating expenses:
Research and development (1)9,7078,53510,538
Sales and marketing (1)3,5863,4583,023
General and administrative (1)8,5455,3516,995
Amortization of purchased intangible assets321320354
Adjustment to fair value of contingent consideration-(308)1,907
Restructuring charges 325  (91) 130 
Total operating expenses 22,484  17,265  22,947 
Loss from operations (10,754) (3,215) (11,541)
Interest income131168132
Interest expense(163)(134)(154)
Other expense, net (274) 696  (275)
Total interest and other income (expense), net (306) 730  (297)
Loss before income taxes(11,060)(2,485)(11,838)
Benefit from (provision for) income taxes 596  (476) 60 
Loss from continuing operations(10,464)(2,961)(11,778)
Income from discontinued operations, net of tax -  (28) 170 
Net loss$(10,464)$(2,989)$(11,608)
Basic and diluted net loss per share:

Continuing operations

Discontinued operations$- $- $0.01 
Net loss$(0.34)$(0.10)$(0.46)
Weighted average shares used to compute basic and diluted net loss per share: 30,574,032  30,414,735  24,870,684 
(1) Includes stock-based compensation expense as follows for the periods presented:
Cost of goods sold$243$248$188
Research and development418475469
Sales and marketing238279209
General and administrative 303  341  278 
Total stock-based compensation expense$1,202 $1,343 $1,144 
NeoPhotonics Corporation
Consolidated Balance Sheets (Unaudited)
(In thousands)

Mar. 31,

Dec. 31,

Current assets:
Cash, cash equivalents and short-term investments$99,760$101,241
Restricted cash2,1082,626
Accounts receivable, net63,26770,354
Prepaid expenses and other current assets 8,053  7,630 
Total current assets242,006225,644
Long-term investments331188
Property, plant and equipment, net65,07954,440
Other intangible assets, net17,17614,213
Other long-term assets 4,206  1,147 
Total assets$330,986 $295,632 
Current liabilities:
Accounts payable$40,963$36,308
Notes payable10,43112,003
Current portion of long-term debt10,7105,000
Accrued and other current liabilities 23,520  19,959 
Total current liabilities85,62473,270
Long-term debt, net of current portion40,42017,167
Deferred income tax liabilities655653
Other noncurrent liabilities 10,506  1,724 
Total liabilities 137,205  92,814 
Redeemable common stock5,0005,000
Stockholders' equity:
Common stock7676
Additional paid-in capital435,282433,996
Accumulated other comprehensive income11,97011,829
Accumulated deficit (258,547) (248,083)
Total stockholders' equity 188,781  197,818 
Total liabilities, redeemable convertible preferred stock and stockholders' equity$330,986 $295,632 
NeoPhotonics Corporation
Reconciliation of Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)
(In thousands, except percentages, share and per share data)
Three months ended

March 31,

December 31,

March 31,

GAAP gross profit$11,730$14,050$11,406
Stock-based compensation expense243248188
Amortization of purchased intangible assets428642598
Amortization of acquisition-related fixed asset step-up534225786
Acquisition-related costs -  50  (12)
Non-GAAP gross profit$12,935 $15,215 $12,966 
Non-GAAP gross margin (% of revenue)23.1%24.5%23.9%
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