Form 8-K NEOPHOTONICS CORP For: Nov 10

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November 10, 2014 4:24 PM EST

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�

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

��

FORM 8-K

��

CURRENT REPORT

Pursuant to Section�13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 10, 2014

��

NEOPHOTONICS CORPORATION

(Exact name of registrant as specified in its charter)

��

�

�	�	�	�	�
DELAWARE	�	001-35061	�	94-3253730
(State of incorporation)	�	(Commission File No.)	�	(IRS Employer Identification No.)

NeoPhotonics Corporation

2911 Zanker Road

San Jose, California 95134

(Address of principal executive offices and zip code)

Registrants telephone number, including area code: (408)�232-9200

��

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

�

�	Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)

�

�	Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)

�

�	Pre-commencement communications pursuant to Rule�14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

�

�	Pre-commencement communications pursuant to Rule�13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

�

ITEM�2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On November 10, 2014, NeoPhotonics Corporation (the Company) issued a press release regarding the Companys financial results for the third quarter ended September 30, 2014. A copy of the Companys press release is furnished and attached as Exhibit�99.1 to this Form 8-K.

The information in this Form 8-K and the exhibit attached hereto shall not be deemed filed for purposes of Section�18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended (the Securities Act), and shall not be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filings, except as shall be expressly set forth by specific reference in such a filing.

�

ITEM�9.01

FINANCIAL STATEMENTS AND EXHIBITS.

�

(d)

Exhibits.

�

Exhibit�Number	��	Description
�	�
99.1	��	Press Release issued by NeoPhotonics Corporation on November 10, 2014.

�

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

�

�	�	�	�	�
Date: November 10, 2014	�	NEOPHOTONICS CORPORATION
�	�		�
�	�	By:	�	/s/ Clyde R. Wallin
�	�	�	�	Clyde R. Wallin
�	�	�	�	Senior Vice President and Chief Financial Officer

�

INDEX TO EXHIBITS

�

�	�	�
Exhibit�Number	��	Description
�	�
99.1	��	Press Release issued by NeoPhotonics Corporation on November 10, 2014.

�

Exhibit 99.1

�

NeoPhotonics Reports Third Quarter Financial Results and Outlook for Fourth Quarter 2014

�	Record Quarterly Revenue of $81.6 Million, Sequential Growth of 5.3%

�	Sequential 40/100G Revenue Growth of 22.9%

�	Sequential Cash and Cash Equivalents Increased by $7.2 million

�	Announced Agreement to Acquire EMCOREs Tunable Laser Product Line

�	Continued Focus on Path to Profitability

�	Awarded Fourth Consecutive Annual Excellent Core Partner Award by Huawei

�

SAN JOSE, CA November 10, 2014 NeoPhotonics Corporation (NYSE: 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, 2014.��

We are pleased to announce that we again achieved record revenue this quarter.��Our previously announced profit improvement actions are taking hold and moved us into non-GAAP profitability. We expect to operate in a manner focused on our path to profitability; managing expenses tightly, and continuing to operate so as to strengthen our balance sheet, said Tim Jenks, NeoPhotonics Chairman and CEO. Equally important, we believe our product focus on 100G, enhanced by our pending acquisition of EMCOREs tunable laser product line, positions us to be a major contributor to this expanding market segment, and therefore benefit from the accelerating worldwide deployments of 100G systems, continued Mr. Jenks.

Third Quarter Summary

Following is a summary of certain key financial measures for the third quarter of 2014.

�	Revenue was $81.6 million, an increase of $4.1 million, or 5.3%, from the second quarter of 2014 and up $4.8 million, or 6.2%, from the third quarter of 2013.

�	Gross margin was 24.6%, up from 18.8% in the second quarter of 2014, and up from 23.7% in the third quarter of 2013.

�	Non-GAAP gross margin was 26.5%, up from 20.8% in the second quarter of 2014 and down from 27.5% in the third quarter of 2013.

�	Net loss was $1.9 million, a decrease from a net loss of $6.8 million in the second quarter of 2014 and from a net loss of $9.4 million in the third quarter of 2013.

�	Non-GAAP net income was $1.4 million, improved from a net loss of $7.5 million in the second quarter of 2014 and from a net loss of $3.2 million in the third quarter of 2013.

�	Diluted net loss per share was $0.06, a decrease from a diluted net loss per share of $0.21 in the second quarter of 2014 and from a diluted net loss per share of $0.30 in the third quarter of 2013.

�	Non-GAAP diluted net income per share was $0.04, improved from a diluted net loss per share of $0.24 in the second quarter of 2014 and from a diluted net loss per share of $0.10 in the third quarter of 2013.

�

�	Adjusted EBITDA was $7.3 million, improved from a loss of $2.6 million in the second quarter of 2014 and from $1.9 million adjusted EBITDA in the third quarter of 2013.

�

At September 30, 2014, cash and cash equivalents totaled $35.3 million, up from $28.0 million at June 30, 2014. In addition, restricted cash and investments were $22.7 million at September 30, 2014, down from $26.4 million at June 30, 2014. Combined notes payable and debt was $46.3 million at September 30, 2014, down from $48.0 million at June 30, 2014.

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

The Companys 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.

Outlook for the Fourth Quarter of 2014 Ending December 31, 2014

The Companys outlook for the fourth quarter of 2014 is:

�	Revenue in the range of $74 million to $80 million;

�	Gross margin in the range of 23% to 25%;

�	Non-GAAP gross margin in the range of 24% to 27%;

�	Diluted net loss per share in the range of $0.08�to�$0.20; and

�	Non-GAAP diluted net loss per share in the range of $0.01 to $0.13.��

�

The Non-GAAP outlook for the fourth quarter of 2014 excludes approximately $3.4 million of estimated combined expenses related to the expected amortization of intangibles, anticipated impact of stock-based compensation and restructuring charges, less $1.0 million of income related to a settlement with LAPIS Semiconductor Co., Ltd. Of these expenses, $1.3 million is estimated to relate to cost of goods sold.

Additionally, the Company has received the prestigious Annual Excellent Core Partner Award from its largest customer, Huawei Technologies Co., Ltd. (Huawei), one of the world's leading providers of telecommunications network solutions.��This is the fourth consecutive year that the Company has been recognized by Huawei, out of more than one thousand suppliers, for its consistency in delivering the highest performance and quality products meeting Huawei's highly specialized requirements.

�

Conference Call

The Company will host a conference call today, November 10, 2014, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). President and Chief Executive Officer, Tim Jenks, and Chief Financial Officer, Ray Wallin, will present an overview of the third quarter 2014 financial results, discuss current business conditions, and respond to questions. The call will be available, live, to interested parties by dialing +1 (888) 505-4368. For international callers, please dial +1 (719) 325-2393. The Conference ID number is 9327366. 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 Companys web site approximately two hours after the conclusion of the call and remain available for approximately 30 calendar days.

�

About NeoPhotonics

�

NeoPhotonics is a leading designer and manufacturer of photonic integrated circuits, or PIC, based optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks. The Companys 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 9001:2008 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 Companys 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 Companys 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 and other manufacturing costs; reductions in the Companys 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 Companys 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 pending acquisition of EMCOREs 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 Companys 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, 2013 and the Companys Quarterly Reports on Form 10-Q for the three and six months ended June 30, 2014 and for the three and nine months ended September 30, 2014.�All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

�

Contacts:
Clyde R. Wallin, Chief Financial Officer
NeoPhotonics Corporation
+1-408-895-6020

[email protected]

�

Erica Mannion, Investor Relations

Sapphire Investor Relations, LLC

+1-415-471-2700

[email protected]

�

NeoPhotonics Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

�

�	�	As of						�
�	�	Sep. 30,		�	�	Dec. 31,		�
�	�	2014		�	�	2013		�
ASSETS	�	�	�	�	�	�	�	�
Current assets:	�	�	�	�	�	�	�	�
Cash and cash equivalents	�	$	35,269	�	�	$	57,101	�
Short-term investments	�			�	�	�	17,916	�
Restricted cash and investments	�	�	10,401	�	�	�	2,138	�
Accounts receivable, net	�	�	79,174	�	�	�	64,533	�
Inventories, net	�	�	58,819	�	�	�	64,908	�
Prepaid expenses and other current assets	�	�	13,830	�	�	�	9,977	�
Total current assets	�	�	197,493	�	�	�	216,573	�
Property, plant and equipment, net	�	�	62,352	�	�	�	68,851	�
Restricted cash and investments, non-current	�	�	12,250	�	�			�
Purchased intangible assets, net	�	�	11,600	�	�	�	15,005	�
Other long-term assets	�	�	1,959	�	�	�	1,798	�
Total assets	�	$	285,654	�	�	$	302,227	�
�	�	�	�	�	�	�	�	�
LIABILITIES AND STOCKHOLDERS' EQUITY	�	�	�	�	�	�	�	�
Current liabilities:	�	�	�	�	�	�	�	�
Accounts payable	�	$	52,378	�	�	$	48,569	�
Notes payable and short-term borrowing	�	�	20,677	�	�	�	9,738	�
Current portion of long-term debt	�	�	10,198	�	�	�	10,325	�
Accrued and other current liabilities	�	�	19,002	�	�	�	23,643	�
Total current liabilities	�	�	102,255	�	�	�	92,275	�
Long-term debt, net of current portion	�	�	15,448	�	�	�	24,150	�
Deferred income tax liabilities	�	�	1,165	�	�	�	1,004	�
Other noncurrent liabilities	�	�	7,634	�	�	�	7,987	�
Total liabilities	�	�	126,502	�	�	�	125,416	�
�	�	�	�	�	�	�	�	�
Stockholders' equity:	�	�	�	�	�	�	�	�
Common stock	�	81		�	�	79		�
Additional paid-in capital	�	�	454,108	�	�	�	447,467	�
Accumulated other comprehensive income	�	�	8,689	�	�	�	11,687	�
Accumulated deficit	�	�	(303,726	)	�	�	(282,422	)
Total stockholders' equity	�	�	159,152	�	�	�	176,811	�
Total liabilities and stockholders' equity	�	$	285,654	�	�	$	302,227	�

�

NeoPhotonics Corporation

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except percentages and per share data)

�

Three Months Ended

�

Sep. 30,

�

Jun. 30,

�

Sep. 30,

�

2014

�

2014

�

2013

�

Revenue

�

81,576

�

77,451

�

76,814

�

Cost of goods sold (1)

�

61,512

�

62,883

�

58,635

�

Gross profit

�

20,064

�

14,568

�

18,179

�

24.6%

�

18.8%

�

23.7%

�

Operating expenses:

�

Research and development (1)

�

11,842

�

12,085

�

12,227

�

Sales and marketing (1)

�

3,075

�

3,571

�

3,580

�

General and administrative (1)

�

6,712

�

8,193

�

8,905

�

Amortization of purchased intangible assets

�

378

�

379

�

381

�

Restructuring charges

�

504

�

450

�

Escrow settlement gain

�

(3,886)

�

Adjustment to fair value of contingent

�

1,026

�

Acquisition-related transaction costs

�

126

�

��Total operating expenses

�

22,511

�

20,342

�

26,695

�

Loss from operations

�

(2,447

)

�

(5,774

)

�

(8,516

)

�

Interest income

�

Interest expense

�

(375

)

�

(311

)

�

(251

)

Other income (expense), net

�

1,735

�

(635

)

�

115

�

Total interest and other income (expense), net

�

1,412

�

(908

)

�

(70

)

�

Loss before income taxes

�

(1,035

)

�

(6,682

)

�

(8,586

)

Provision for income taxes

�

(902

)

�

(97

)

�

(777

)

Net loss

�

(1,937

)

�

(6,779

)

�

(9,363

)

�

Basic and diluted net loss per share

�

(0.06

)

�

(0.21

)

�

(0.30

)

�

Weighted averages shares used to compute basic and diluted net loss per share

�

32,383

�

31,790

�

31,185

�

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

�

Cost of goods sold

�

203

�

455

�

471

�

Research and development

�

339

�

408

�

417

�

Sales and marketing

�

417

�

587

�

253

�

General and administrative

�

229

�

273

�

449

�

�� Total stock-based compensation expense

�

1,188

�

1,723

�

1,590

�

NeoPhotonics Corporation

Reconciliation of Consolidated GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited)

(In thousands, except percentages and per share data)

�

Three Months Ended

�

Sep. 30,

�

Jun. 30,

�

Sep. 30,

�

2014

�

2014

�

2013

�

NON-GAAP GROSS PROFIT:

�

GAAP gross profit

�

20,064

�

14,568

�

18,179

�

Stock-based compensation expense

�

203

�

455

�

471

�

Amortization of purchased intangible assets

�

709

�

714

�

738

�

Depreciation of acquisition-related fixed asset step-up

�

324

�

337

�

188

�

Amortization of acquisition-related inventory step-up

�

928

�

Restructuring charges

�

291

�

628

�

Non-GAAP gross profit

�

21,591

�

16,074

�

21,132

�

Non-GAAP gross margin (% of revenue)

�

26.5%

�

20.8%

�

27.5%

�

NON-GAAP NET LOSS :

�

GAAP net loss

�

(1,937

)

�

(6,779

)

�

(9,363

)

Stock-based compensation expense

�

1,188

�

1,723

�

1,590

�

Amortization of purchased intangible assets

�

1,086

�

1,093

�

1,119

�

Depreciation of acquisition-related fixed asset step-up

�

628

�

658

�

302

�

Amortization of acquisition-related inventory step-up

�

928

�

Restructuring charges

�

796

�

1,077

�

Acquisition-related costs

�

126

�

Escrow settlement gain

�

(3,886

)

�

Fair value adjustment to contingent consideration

�

1,026

�

Income tax effect of Non-GAAP adjustments

�

(343

)

�

(298

)

�

(39

)

Non-GAAP net income (loss)

�

1,418

�

(7,489

)

�

(3,234

)

�

ADJUSTED EBITDA:

�

GAAP net loss

�

(1,937

)

�

(6,779

)

�

(9,363

)

Stock-based compensation expense

�

1,188

�

1,723

�

1,590

�

Amortization of purchased intangible assets

�

1,086

�

1,093

�

1,119

�

Depreciation of acquisition-related fixed asset step-up

�

628

�

658

�

302

�

Amortization of acquisition-related inventory step-up

�

928

�

Restructuring charges

�

796

�

1,077

�

Acquisition-related costs

�

126

�

Escrow settlement gain

�

(3,886

)

�

Fair value adjustment to contingent consideration

�

1,026

�

Interest expense, net

�

323

�

273

�

185

�

Provision for income taxes

�

902

�

777

�

Depreciation expense

�

4,323

�

4,187

�

4,156

�

Adjusted EBITDA

�

7,309

�

(2,634

)

�

1,923

�

BASIC AND DILUTED NET (LOSS) INCOME PER SHARE:

�

GAAP basic and diluted net loss per share

�

(0.06

)

�

(0.21

)

�

(0.30

)

Non-GAAP basic and diluted net income (loss) per share

�

0.04

�

(0.24

)

�

(0.10

)

�

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

�

32,383

�

31,790

�

31,185

�

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

�

32,700

�

31,790

�

31,185

�

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