- Revenue of $95.0 million represents 46% year-over-year
growth over same quarter last year
- Second sequential quarter with 45+% year-over-year growth;
first half revenue of $184 million up 46% from same period last
year
- $61 million of revenue from products for 400G and above
applications, contributing 64% of revenue and representing
approximately 105% year-over-year growth
- GAAP Operating Profit of $6.4 million, up from a loss of
$16.3 million in the same period last year on the strength of the
400G product ramp
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 second quarter of 2022.
“Our business remains on a strong growth path with revenue of
$95 million, 46% above the same quarter last year and also up 46%
year-to-date. This was despite ongoing supply chain limitations
which had an adverse impact on revenue of approximately $10
million. Our 400G and above products grew approximately 105%
year-over-year, and now comprise 64% of total revenue. Our revenue
from 400ZR coherent DCO module products to datacenter customers is
now in low millions per quarter,” said Tim Jenks, Chairman and CEO
of NeoPhotonics. “In addition to 400ZR, we are ramping our 96 Gbaud
components and sampling 130 Gbaud for even higher data rate
applications. These new component products, together with our
ramping 400ZR and CFP2 400G module products, give us confidence in
continued growth for the quarters ahead, despite the expected
challenges with IC chip supply shortages.”
Mr. Jenks continued, “I would like to thank NeoPhotonics
employees for their continued commitment, which has built the
Company’s strong technology leadership for high speed over distance
applications and has resulted in the Company’s strong performance
in the second quarter of 2022.”
Mr. Jenks concluded, “The Lumentum transaction, announced last
November, remains on track having been approved by our shareholders
and received antitrust clearance from US regulators. We look
forward to securing regulatory approval in China and closing the
transaction. Our strong quarter with more than 46% year over year
revenue growth, GAAP operating profit and significant growth from
western customers, reflects our success in pivoting our business
following the loss of revenue in 2020 due to Department of Commerce
restrictions on certain Chinese customers.”
Second Quarter 2022 Summary
- Revenue of $95.0 million was up 46% year-over-year on growth in
400G and above capable products and up 6% quarter-over-quarter.
Supply chain shortages negatively impacted revenue by approximately
$10 million in the second quarter. Demand remains strong and chip
supply continues to constrain revenue.
- Three customers were greater than 10% of our revenue for the
three months ended June 30, 2022 and our top five customers
accounted for 83% of our revenue in the quarter versus 77% in the
same quarter last year.
- Gross margin was 34.8%, up nearly 20 percentage points
year-over-year on improved factory utilization and up 4.2
percentage points from the prior quarter on meaningful yield
improvements.
- Non-GAAP gross margin was 35.2% up from 21.7% in the same
quarter last year and 31.2% in the prior quarter.
- Operating expense was $26.7 million, down $3.4 million from
Q1’22 on a gain on the sale of our Fremont wafer fab and lower
costs related to the sale.
- Non-GAAP operating expense of $24.1 million, down $0.9 million
from Q1’22 on lower R&D materials & operating costs of the
Fremont site.
- Operating income was $6.4 million, compared to a loss of $2.8
million in Q1’22 and a loss of $16.3 million in Q2’21, driven by
the significant improvement in revenue and gross margin.
- Non-GAAP operating income was $9.4 million, compared to a loss
of $10.3 million in Q2’21 and a profit of $2.8 million in the prior
quarter, a notable turnaround in results.
- Foreign Exchange was a gain of $6.0 million on the appreciation
of the U.S. dollar. As a reminder, the foreign exchange impact is
largely related to the revaluation of U.S. dollar assets on our
overseas books which are stated in their local currency. Beginning
this quarter, we will exclude unrealized foreign exchange from our
Non-GAAP results, to better focus on our operational results.
- Net earnings per share was $0.17, compared to net loss of $0.34
a year ago and a loss of $0.06 per share in the prior quarter.
- Non-GAAP net income per share was $0.15, compared to a Non-GAAP
loss per share of $0.22 a year ago and a Non-GAAP earnings per
share of $0.04 in the prior quarter. Excluding the impact of
unrealized foreign exchange in the prior quarters, earnings per
share was a loss of $0.22 in Q2’21 and an income of $0.05 in
Q1’22.
- Adjusted EBITDA was $13.2 million, up from $7.8 million in the
prior quarter excluding the impact of unrealized foreign
exchange.
- Net Inventory grew $5.8 million from Q1’22, to $66 million, as
we increased 400ZR inventories to a total of $20 million to ensure
ongoing module supply.
- As of June 30, 2022, cash and cash equivalents, short-term
investments and restricted cash totaled $105 million, down
approximately $2.0 million from Q1’22. Capital Expenditure was $3
million.
Non-GAAP results in the second quarter of 2022 exclude gains of
$5.4 million for unrealized foreign exchange, $1.9 million on the
sale of assets, expenses of $2.6 million for stock-based
compensation, $2.0 million of merger retention and other
acquisition related charges, income tax effect of $1.4 million for
Non-GAAP items and $0.2 million of 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.
NeoPhotonics Product Milestone Achievements
- Products capable of use for 400G and above applications were
64% of revenue in Q2 2022.
- Continued to ramp production of our 400ZR small form factor
coherent transceiver modules, reaching low single digit millions in
revenue.
- Shipped first samples of 130 Gbaud Coherent Receivers and
Modulators for next generation 800G and 1.6T links.
- Conducted webinar outlining the application of NeoPhotonics
coherent products and technology to Lidar for Autonomous Vehicles
and other remote sensing applications.
Supply Chain Impacts
Second quarter revenue was approximately $10 million lower than
we project it would have been without supply chain constraints.
Supply chain impacts in the quarter were primarily shortages of
analog and power semiconductors. The Company expects such impacts
to continue through 2022.
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 not host a conference call regarding the Q2
2022 results.
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.
Notice Regarding Forward-Looking Statements
This communication contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements generally relate to future
events, including the timing of the proposed transaction,
information related to the proposed transaction, and supply chain
constraints. In some cases, you can identify forward-looking
statements because they contain words such as "may," "will,"
"should," "expects," "plans," "anticipates," "could," "intends,"
"target," "projects," "contemplates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these
words or other similar terms or expressions that concern the
proposed transaction and our expectations, strategy, plans or
intentions regarding it. Forward-looking statements in this
communication include, but are not limited to, (i) expectations
regarding the timing, completion and expected benefits of the
proposed transaction, (ii) expected continued supply chain impacts,
plans, objectives and intentions with respect to future operations,
customers and the market, and (iii) future growth and
profitability. Expectations and beliefs regarding these matters may
not materialize, and actual results in future periods are subject
to risks and uncertainties that could cause actual results to
differ materially from those projected. These risks include the
risk that the transaction may not be completed in a timely manner
or at all; the ability to secure additional regulatory approvals on
the terms expected in a timely manner or at all; the effect of the
announcement or pendency of the transaction on our business
relationships, results of operations and business generally;
ability to win customer awards; risks that the proposed transaction
disrupts current plans and operations; the risk of litigation
and/or regulatory actions related to the proposed transaction;
disruptions and shortages in supply chains; impact of inflation on
our business; potential impacts of the Covid-19 pandemic; changing
supply and demand conditions in the industry; and general market,
political, economic, and business conditions. The forward-looking
statements contained in this communication are also subject to
other risks and uncertainties, including those more fully described
in filings with the Securities and Exchange Commission ("SEC"),
including reports filed on Form 10-K, 10-Q and 8-K and in other
filings made by NeoPhotonics with the SEC from time to time and
available at www.sec.gov. These forward-looking statements are
based on current expectations, and are based on NeoPhotonics’
current expectations which is subject to change.
The parties undertake no obligation to update the information
contained in this communication or any other forward-looking
statement.
©2022 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
Jun. 30, 2022
Dec. 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
77,079
$
77,833
Short-term investments
27,720
27,675
Restricted cash
38
87
Accounts receivable, net
68,460
55,324
Inventories
65,510
52,896
Prepaid expenses and other current
assets
18,927
16,246
Total current assets
257,734
230,061
Property, plant and equipment, net
49,191
54,190
Operating lease right-of-use assets
12,091
13,201
Purchased intangible assets, net
787
844
Goodwill
1,115
1,115
Other long-term assets
5,636
6,156
Total assets
$
326,554
$
305,567
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
69,685
$
58,125
Short-term borrowing, net
—
14,914
Current portion of long-term debt
2,449
2,928
Accrued and other current liabilities
29,327
30,008
Total current liabilities
101,461
105,975
Long-term debt, net of current portion
23,945
25,753
Related party long-term debt
29,954
—
Operating lease liabilities,
noncurrent
12,107
13,441
Other noncurrent liabilities
6,813
7,437
Total liabilities
174,280
152,606
Stockholders’ equity:
Common stock
134
133
Additional paid-in capital
614,553
610,085
Accumulated other comprehensive income
(loss)
(8,782
)
2,376
Accumulated deficit
(453,631
)
(459,633
)
Total stockholders’ equity
152,274
152,961
Total liabilities and stockholders’
equity
$
326,554
$
305,567
NeoPhotonics
Corporation
Condensed Consolidated
Statements of Operations (Unaudited)
(In thousands, except percentages
and per share data)
Three Months Ended
Six Months Ended
Jun. 30, 2022
Mar. 31, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Revenue
$
95,006
$
89,268
$
65,010
$
184,274
$
125,935
Cost of goods sold (1)
61,935
61,979
55,135
123,914
102,721
Gross profit
33,071
27,289
9,875
60,360
23,214
Gross margin
34.8
%
30.6
%
15.2
%
32.8
%
18.4
%
Operating expenses:
Research and development (1)
14,736
15,098
15,410
29,834
28,508
Sales and marketing (1)
3,742
3,686
3,362
7,428
7,227
General and administrative (1) (2)
9,228
9,794
7,398
19,022
14,692
Acquisition and asset sale related costs
(recoveries)
638
905
(36
)
1,543
127
Restructuring charges
—
—
22
—
22
Asset impairment charges
30
413
—
443
—
Facility shutdown related costs
209
300
—
509
—
Litigation Settlement
(12
)
49
—
37
—
Gain on asset sale
(1,866
)
(114
)
—
(1,980
)
—
Total operating expenses
26,705
30,131
26,156
56,836
50,576
Income (loss) from operations
6,366
(2,842
)
(16,281
)
3,524
(27,362
)
Interest income
147
71
140
218
245
Interest expense
(510
)
(355
)
(220
)
(865
)
(447
)
Other income (expense), net
5,823
395
(880
)
6,218
263
Total interest and other income (expense),
net
5,460
111
(960
)
5,571
61
Income (loss) before income taxes
11,826
(2,731
)
(17,241
)
9,095
(27,301
)
Income tax provision
(2,521
)
(572
)
(191
)
(3,093
)
(823
)
Net income (loss)
$
9,305
$
(3,303
)
$
(17,432
)
$
6,002
$
(28,124
)
Basic net income (loss) per share
$
0.17
$
(0.06
)
$
(0.34
)
$
0.11
$
(0.55
)
Diluted net income (loss) per share
$
0.17
$
(0.06
)
$
(0.34
)
$
0.11
$
(0.55
)
Weighted average shares used to compute
basic net income (loss) per share
53,488
53,146
51,634
53,318
51,178
Weighted average shares used to compute
diluted net income (loss) per share
56,095
53,146
51,634
55,999
51,178
(1) Includes stock-based compensation
expense as follows for the periods presented:
Cost of goods sold
$
404
$
525
$
572
$
929
$
1,120
Research and development
794
774
744
1,568
1,606
Sales and marketing
400
385
261
785
815
General and administrative
1,011
931
763
1,942
2,076
Total stock-based compensation expense
$
2,609
$
2,615
$
2,340
$
5,224
$
5,617
(2) Includes $1,359 and $2,810 of
retention costs related to the acquisition for the three and six
months ended June 30, 2022, respectively.
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, 2022
Mar. 31, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
NON-GAAP GROSS PROFIT:
GAAP gross profit
$
33,071
$
27,289
$
9,875
$
60,360
$
23,214
Stock-based compensation expense
404
525
572
929
1,120
Amortization of purchased intangible
assets
7
8
153
15
338
Depreciation of acquisition-related fixed
asset step-up
3
3
3
6
(3
)
End-of-life related inventory
write-down
—
—
3,257
—
2,680
Accelerated depreciation
—
—
157
—
331
Restructuring charges (recoveries)
—
(18
)
113
(18
)
113
Non-GAAP gross profit
$
33,485
$
27,807
$
14,130
$
61,292
$
27,793
Non-GAAP gross margin as a % of
revenue
35.2
%
31.2
%
21.7
%
33.3
%
22.1
%
NON-GAAP TOTAL OPERATING
EXPENSES:
GAAP total operating expenses
$
26,705
$
30,131
$
26,156
$
56,836
$
50,576
Stock-based compensation expense
(2,205
)
(2,090
)
(1,768
)
(4,295
)
(4,497
)
Depreciation of acquisition-related fixed
asset step-up
(12
)
(14
)
(21
)
(26
)
(46
)
Acquisition and asset sale related
costs
(638
)
(905
)
36
(1,543
)
(127
)
Retention costs related to acquisition
(1,359
)
(1,451
)
—
(2,810
)
—
Restructuring charges
—
—
(22
)
—
(22
)
Asset impairment charges
(30
)
(413
)
—
(443
)
—
Facility shutdown related costs
(209
)
(300
)
—
(509
)
—
Litigation settlement
12
(49
)
—
(37
)
—
Gain on asset sale
1,866
114
—
1,980
—
Non-GAAP total operating expenses
$
24,130
$
25,023
$
24,381
$
49,153
$
45,884
Non-GAAP total operating expenses as a %
of revenue
25.4
%
28.0
%
37.5
%
26.7
%
36.4
%
NON-GAAP OPERATING INCOME
(LOSS):
GAAP income (loss) from operations
$
6,366
$
(2,842
)
$
(16,281
)
$
3,524
$
(27,362
)
Stock-based compensation expense
2,609
2,615
2,340
5,224
5,617
Amortization of purchased intangible
assets
7
8
153
15
338
Depreciation of acquisition-related fixed
asset step-up
15
17
24
32
43
Acquisition and asset sale related costs
(recoveries)
638
905
(36
)
1,543
127
Retention costs related to acquisition
1,359
1,451
—
2,810
—
End-of-life related inventory
write-down
—
—
3,257
—
2,680
Accelerated depreciation
—
—
157
—
331
Restructuring charges (recoveries)
—
(18
)
135
(18
)
135
Asset impairment charges
30
413
—
443
—
Facility shutdown related costs
209
300
—
509
—
Litigation settlement
(12
)
49
—
37
—
Gain on asset sale
(1,866
)
(114
)
—
(1,980
)
—
Non-GAAP income (loss) from operations
$
9,355
$
2,784
$
(10,251
)
$
12,139
$
(18,091
)
Non-GAAP operating margin as a % of
revenue
9.8
%
3.1
%
(15.8
)%
6.6
%
(14.4
)%
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
Six Months Ended
Jun. 30, 2022
Mar. 31, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
NON-GAAP NET INCOME (LOSS):
GAAP net income (loss)
$
9,305
$
(3,303
)
$
(17,433
)
$
6,002
$
(28,124
)
Stock-based compensation expense
2,609
2,615
2,340
5,224
5,617
Amortization of purchased intangible
assets
7
8
153
15
338
Depreciation of acquisition-related fixed
asset step-up
15
17
24
32
43
Acquisition and asset sale related costs
(recoveries)
638
905
(36
)
1,543
127
Retention costs related to acquisition
1,359
1,451
—
2,810
—
End-of-life related inventory
write-down
—
—
3,257
—
2,680
Accelerated depreciation
—
—
157
—
331
Restructuring charges (recoveries)
—
(18
)
135
(18
)
135
Asset impairment charges
30
413
—
443
—
Facility shutdown related costs
209
300
—
509
—
Litigation settlement
(12
)
49
—
37
—
Gain on asset sale
(1,866
)
(114
)
—
(1,980
)
—
Unrealized foreign exchange (gain) loss,
net (3)
(5,386
)
555
(153
)
(4,831
)
(3,672
)
Income tax effect of Non-GAAP
adjustments
1,439
(83
)
22
1,356
976
Non-GAAP net income (loss)
$
8,347
$
2,795
$
(11,534
)
$
11,142
$
(21,549
)
Non-GAAP net income (loss) as a % of
revenue
8.8
%
3.1
%
(17.7
)%
6.0
%
(17.1
)%
ADJUSTED EBITDA:
GAAP net income (loss)
$
9,305
$
(3,303
)
$
(17,433
)
$
6,002
$
(28,124
)
Stock-based compensation expense
2,609
2,615
2,340
5,224
5,617
Amortization of purchased intangible
assets
7
8
153
15
338
Depreciation of acquisition-related fixed
asset step-up
15
17
24
32
43
Acquisition and asset sale related costs
(recoveries)
638
905
(36
)
1,543
127
Retention costs related to acquisition
1,359
1,451
—
2,810
—
End-of-life related inventory
write-down
—
—
3,257
—
2,680
Accelerated depreciation
—
—
157
—
331
Restructuring charges (recoveries)
—
(18
)
135
(18
)
135
Asset impairment charges
30
413
—
443
—
Facility shutdown related costs
209
300
—
509
—
Litigation settlement
(12
)
49
—
37
—
Gain on asset sale
(1,866
)
(114
)
—
(1,980
)
—
Unrealized foreign exchange (gain) loss,
net (3)
(5,386
)
555
(153
)
(4,831
)
(3,672
)
Interest expense, net
363
284
80
647
202
Income tax provision
2,521
572
191
3,093
823
Depreciation expense
3,438
4,035
5,771
7,473
11,774
Adjusted EBITDA
$
13,230
$
7,769
$
(5,514
)
$
20,999
$
(9,726
)
Adjusted EBITDA as a % of revenue
13.9
%
8.7
%
(8.5
)%
11.4
%
(7.7
)%
BASIC AND DILUTED NET INCOME (LOSS) PER
SHARE:
GAAP basic net income (loss) per share
$
0.17
$
(0.06
)
$
(0.34
)
$
0.11
$
(0.55
)
GAAP diluted net income (loss) per
share
$
0.17
$
(0.06
)
$
(0.34
)
$
0.11
$
(0.55
)
Non-GAAP basic net income (loss) per
share
$
0.16
$
0.05
$
(0.22
)
$
0.21
$
(0.42
)
Non-GAAP diluted net income (loss) per
share
$
0.15
$
0.05
$
(0.22
)
$
0.19
$
(0.42
)
SHARES USED TO COMPUTE GAAP AND
NON-GAAP BASIC NET INCOME (LOSS) PER SHARE
53,488
53,146
51,634
53,518
51,178
SHARES USED TO COMPUTE GAAP DILUTED NET
INCOME (LOSS) PER SHARE
56,095
53,146
51,634
55,999
51,178
SHARES USED TO COMPUTE NON-GAAP DILUTED
NET INCOME (LOSS) PER SHARE
57,307
57,344
51,634
57,327
51,178
(3) The non-GAAP financial measures for
the three and six months ended June 30, 2021, and the three months
ended March 31, 2022, have been adjusted to conform to the current
period presentation by removing unrealized foreign exchange (gain)
loss, net.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220725005253/en/
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
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