NeoPhotonics Corp of San Jose, CA, a vertically integrated designer and manufacturer of both indium phosphide (InP) and silica-on-silicon photonic integrated circuit (PIC)-based modules and subsystems for high-speed communications networks, has filed with the US Securities and Exchange Commission (SEC) amended Form 10-Q reports with restated financial results for first and second quarters 2013, respectively, together with its Form 10-Q report for third-quarter 2013 (for which it reported revenue alone last November).
Fiscal Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Revenue $66.2m $62 $56.1m $75m $76.8m
Losses cut in Q3/2013
For Q3/2013, revenue was $76.8m (as reported in November), up 2.4%, on Q2/2013's $75m and up 16.1% on Q3/2012's $66.2m. In addition, the firm now reports that, on a non-GAAP basis, gross margin was 27.5%, down from 32.9% in Q3/2012 but up from 25.1% in Q2/2013. Net loss was $3.2m ($0.10 per diluted share), cut from $3.8m ($0.12 per diluted share) in Q2/2013 but compared with net income of $2.7m ($0.08 per diluted share) in Q3/2012. Adjusted EBITDA was $1.9m, up from $1.4m in Q2/2013 but still down from $6.4m in Q3/2012. During Q3/2013, combined cash, cash equivalents and short-term investments fell from $74.4m to $70.6m. Combined notes payable and debt fell from $45.9m to $44.9m.
"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," says chairman, president & CEO Tim Jenks. "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," concludes Jenks.
Q1-Q2/2013 restatements and revisions
As disclosed in the Form 8-K filed with the SEC on 14 November 2013, NeoPhotonics determined that its unaudited financial statements for the three months to end-March 2013 and the three and six months to end-June 2013 contained an error related to its accounting for a real -estate registration tax that 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 firm has made other corrections related to the acquisition, 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 Q3/2013 accounting records. Full details will be contained within the amended quarterly reports on Form 10/Q-A, when filed. Although there are no changes in revenue, the restatements and revisions involve:
for Q1/2013, an increase in diluted net loss per share by $0.06 to $0.40; for Q2/2013, a decrease in diluted net loss per share by $0.04 to $0.27; and for the six months to end-June 2013, an increase in diluted net loss per share by $0.02 to $0.67.
Revision of end-December 2012 balance sheet
As disclosed in prior financial statements, NeoPhotonics may be required to pay a $5m 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 27 April 2012. The penalty payment was originally classified outside of equity as redeemable common stock at end-December 2012. The firm has since determined that the $5m penalty payment is an embedded derivative instrument and has thus classified $4.9m of the $5m to additional paid-in capital and the remaining $0.1m (representing the estimated fair value of the derivative) to other non-current liabilities at end-December 2012. This revision is reflected in the balance sheet as of end-December 2012.
Outlook for Q4/2013 and Q1/2014
NeoPhotonics has updated its expectations for fourth-quarter 2013 as follows:
revenue of $74-75m (versus the $70-76m estimate given in November); non-GAAP gross margin of 25-28% (versus November's 24-28% estimate); net loss per diluted share of $0.05-0.10.
For first-quarter 2014, NeoPhotonics expects revenue to fall to $67-69m (though up about 21% from Q1/2013's $56.1m).
Update on NYSE listing
On 3 April, NeoPhotonics received a letter from NYSE Regulation Inc indicating that, as a result of its failure to file its annual report on Form 10-K for 2013 on time, it is not in compliance with the New York Stock Exchange's continued listing requirements.
As previously disclosed in its Notification of Late Filing on Form 12b-25 filed with the SEC on 18 March, NeoPhotonics delayed filing its annual report on Form 10-K because it required extra time to complete the adjustments to its financial statements for Q1-Q2/2013 and its quarterly report on Form 10-Q for Q3/2013. With the adjustments now completed, the firm now needs to complete its financial statements and disclosures as of end-2013, finalize preparation of the Form 10-K, conclude testing of internal controls and complete the audit process with its independent public accounting firm.
Under NYSE rules NeoPhotonics will have six months from the filing due date (i.e. until 1 October) to file its Form 10-K. It can regain compliance at any time prior to that date once it files the Form 10-K with the SEC, along with Form 10-Q for Q3/2013. Otherwise, the NYSE may grant a further extension of up to six months (depending on the specific circumstances). Regardless of these procedures, the NYSE may commence delisting proceedings at any time if the circumstances warrant.
In the meantime, NeoPhotonics' common stock will remain listed on the NYSE under the symbol NPTN, but with an 'LF' indicator to signify the late filing status.
