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NeoPhotonics Provides Financial Update

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SAN Jose, Calif. -- NeoPhotonics Corporation (NPTN), a leading designer and manufacturer of photonic integrated circuits, or PIC, based optoelectronic modules and subsystems for bandwidth-intensive, high speed communications networks, today announced financial results for its third quarter ended September 30, 2013. The Company further announced that it will file today with the Securities and Exchange Commission (SEC) amended Form 10-Q reports with its restated financial results for its first and second quarters ended March 31, 2013 and June 30, 2013, respectively, together with its Form 10-Q report for third quarter 2013 results.

“After several quarters of slower than expected growth in China, we are pleased to see the ramp in demand for 100G solutions now beginning to materialize,” said Tim Jenks, Chairman, President and CEO of NeoPhotonics. “Further, we are excited to see the shift to 100G in the metro and data center gaining momentum and believe these could be sizeable market opportunities for the industry as well as NeoPhotonics in the years ahead,” concluded Jenks.

Third Quarter Summary

Following is a summary of certain key financial measures for the third quarter of 2013 which are compared with the same measures from the second quarter of 2013 and from the third quarter of 2012. The financial measures for the second quarter of 2013 in this press release are restated and revised as outlined following this summary.

  • Revenue was $76.8 million, up $1.8 million, or 2%, from the second quarter of 2013 and up $10.7 million, or 16%, from the third quarter of 2012.

  • Gross margin was 23.7%, up from 20.8% in the second quarter of 2013 and down from 31.2% in the third quarter of 2012.

  • Non-GAAP gross margin was 27.5%, up from 25.1% in the second quarter of 2013 and down from 32.9% in the third quarter of 2012.

  • Net loss was $9.4 million, an increase from a net loss of $8.3 million in the second quarter of 2013 and down from a net income of $0.7 million in the third quarter of 2012.

  • Non-GAAP net loss was $3.2 million, a decrease from a net loss of $3.8 million in the second quarter of 2013 and down from a net income of $2.7 million in the third quarter of 2012.

  • Diluted net loss per share was $0.30, an increase from a diluted net loss per share of $0.27 in the second quarter of 2013 and down from a diluted net income per share of $0.02 in the third quarter of 2012.

  • Non-GAAP diluted net loss per share was $0.10, a decrease from a diluted net loss per share of $0.12 in the second quarter of 2013 and down from a diluted net income per share of $0.08 in the third quarter of 2012.

  • Adjusted EBITDA was $1.9 million, an increase from $1.4 million in the second quarter of 2013 and down from $6.4 million in the third quarter of 2012.

    At September 30, 2013, combined cash, cash equivalents and short-term investments was $70.6 million, down from $74.4 million at June 30, 2013. Combined notes payable and debt was $44.9 million at September 30, 2013, which is down from $45.9 million at June 30, 2013.

    Our 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.

    Q1 2013 and Q2 2013 Restatements and Revisions

    The Company will file with the Securities and Exchange Commission (SEC) today its amended quarterly reports on Form 10-Q/A for the quarters ended March 31, 2013 and June 30, 2013. As disclosed in the Company’s Form 8-K filed with the SEC on November 14, 2013, the Company determined that its unaudited condensed consolidated financial statements for the three months ended March 31, 2013 and the three and six months ended June 30, 2013 contained an error related to its accounting for a real estate registration tax which was incorrectly reflected as a component of the property, plant and equipment acquired as part of the purchase of NeoPhotonics Semiconductor (formerly the Optical Component Unit of LAPIS Semiconductor). In addition, the Company has made other corrections related to the purchase of NeoPhotonics Semiconductor, primarily additional real estate registration tax and fixed asset valuation modifications, reclassified certain amounts and made other adjustments, all of which were discovered during the close of its September 30, 2013 accounting records. Full details will be contained within the amended quarterly reports on Form 10/Q-A, when filed. Changes from the restatements and revisions include:

  • For the quarter ended March 31, 2013, there was no change in revenue and an increase in diluted net loss per share of $0.06 to $0.40 diluted net loss per share.

  • For the quarter ended June 30, 2013, there was no change in revenue and a decrease in diluted net loss per share of $0.04 to $0.27 diluted net loss per share.

  • For the six months ended June 30, 2013, there was no change in revenue and an increase in diluted net loss per share of $0.02 to $0.67 diluted net loss per share.

    Revision of the December 31, 2012 Balance Sheet

    As previously disclosed in the Company’s prior financial statements, the Company may be required to pay a $5.0 million penalty if it does not achieve certain performance obligations agreed to in connection with the sale of its common stock in a private placement transaction on April 27, 2012. The penalty payment was originally classified outside of equity as redeemable common stock at December 31, 2012. The Company has since determined that the $5.0 million penalty payment is an embedded derivative instrument and has thus classified $4.9 million of the $5.0 million to additional paid-in capital and the remaining $0.1 million, representing the estimated fair value of the derivative, to other noncurrent liabilities at December 31, 2012. This revision is reflected in the Balance Sheet as of December 31, 2012 presented in this press release.

    Outlook for the Quarter Ending December 31, 2013

    The Company’s updated expectations for the fourth quarter 2013 are:

  • Revenue in the range of $74 million to $75 million versus the Company’s prior outlook range (announced in November 2013) of $70 to $76 million

  • Non-GAAP gross margin in the range of 25% to 28%

  • Diluted net loss per share in the range of $0.15 to $0.20, and on a Non-GAAP basis in the range of a net loss of $0.05 to $0.10 per diluted share

    The Company did not provide an outlook previously on Non-GAAP gross margin, on diluted net loss per share, or on diluted Non-GAAP net loss per share.

    The Non-GAAP outlook for the fourth quarter of 2013 excludes approximately $2.9 million of expenses related to the expected amortization of intangibles, anticipated impact of stock-based compensation and other assets. Of these expenses, $1.1 million is estimated to relate to cost of goods sold.

    Outlook for the Quarter Ending March 31, 2014

    The Company’s expectation for the first quarter of 2014 is:

  • Revenue in the range of $67 million to $69 million.

    Update on NYSE Listing

    In addition, on April 3, 2014, the Company received a letter from the NYSE Regulation, Inc. (the “Exchange”) indicating that the Company is not in compliance with the Exchange’s continued listing requirements under the timely filing criteria outlined in Section 802.01E of the NYSE-Listed Company Manual as a result of the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2013. The Company did not timely file the Form 10-K because of the reasons set forth below. The Company understands that the letter is routine practice under NYSE rules when a listed Company does not make a timely filing with the SEC.

    The NYSE has informed the Company that under NYSE rules the Company will have until six months from the filing due date (i.e., until October 1, 2014) to file its Form 10-K. The Company can regain compliance with the NYSE listing standards at any time prior to such date once it files the Form 10-K with the SEC, along with its Quarterly Report on Form 10-Q for the period ended September 30, 2013. In the event that the Company has failed to cure the deficiency prior to October 1, 2014, the NYSE may grant, at its discretion, a further extension of up to six months, depending on the specific circumstances. The letter also notes that regardless of these procedures, the NYSE may commence delisting proceedings at any time if the circumstances warrant.

    Until the Company files the Form 10-K and Form 10-Q, the Company's common stock will remain listed on the NYSE under the symbol "NPTN," but it will have an "LF" indicator by the NYSE to signify the Company's late filing status.

    As previously disclosed in its Notification of Late Filing on Form 12b-25 filed with the SEC on March 18, 2014, the Company has delayed filing its Annual Report on Form 10-K because the Company required additional time to complete the adjustments described above to its consolidated financial statements on Forms 10-Q/A for each of the quarterly periods ended March 31, 2013 and June 30, 2013 and its quarterly report on Form 10-Q for the quarterly period ended September 30, 2013. With these adjustments now completed, the Company will now need to complete its financial statements and disclosures as of December 31, 2013, finalize the preparation of the Form 10-K, conclude testing of internal controls and complete the audit process with its independent public accounting firm. The Company intends to file the Form 10-K upon completion of these matters.

    NeoPhotonics Corp. (NYSE: NPTN)

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