15 March 2022
NeoPhotonics’ full-year 400G-and-above product revenue up more than 70% to $148m
NeoPhotonics Corp of San Jose, CA, USA – a vertically integrated designer and manufacturer of silicon photonics and hybrid photonic integrated circuit (PIC)-based lasers, modules and subsystems for high-speed communications – has reported full-year revenue of $290.3m for 2021, down 22% on $371.2m in 2020 as it replaces the revenue base of its largest customer in 2020. However, revenue from customers other than Huawei grew by 17% year-on-year.
Fourth-quarter 2021 revenue of $80.6m was down 3.7% on $83.7m last quarter, but that reflected “operational challenges as the full force of industry-wide IC chip supply shortages [primarily analog and power semiconductors] impacted our top-line revenue by more than $15m,” says chairman & CEO Tim Jenks.
Also, Q4 revenue was up 18% on $68.2m a year ago, due to growth in 400G-and-above-capable products. “Our products for 400G-and-above applications grew 9% sequentially, comprising 56% of total revenue [and 51% for full-year 2021, after growing by more than 70% to $148m], despite this product group being the most impacted by supply chain chip shortages,” says Jenks.
During Q4/2021, NeoPhotonic announced the following product milestones:
- general availability of 400ZR QSFP-DD and OSFP compact coherent transceiver modules;
- three Cloud and data-center switch customer design wins for 400ZR coherent DCO modules;
- shipment (cumulatively) of more than two million ultra-pure light tunable lasers;
- demonstration of 400Gbps transmission over 1500km by the firm’s CFP2-DCO transceiver module;
- launch of a new frequency-modulated continuous wave (FMCW) laser which, together with a high-power semiconductor optical amplifier (SOA), is used in coherent LiDAR (light detection and ranging) applications for autonomous vehicles (AVs) and for precision industrial instruments.
On a non-GAAP basis, full-year gross margin fell from 31.3% in 2020 to 25.4% for 2021. Fourth-quarter gross margin was 26.6%, down from 29.4% last quarter (although that included $2.5m, or 3.1 percentage points, of incremental costs related to purchasing product on the spot-buy market to help ensure supply for 2022). Also, Q4/2021 gross margin was up from 24.7% a year ago.
Quarterly operating expenses remained roughly flat over the last year at $23.3m, representing a reduction from 34.8% to 28.9% of revenue. Full-year operating expense were roughly flat year-on-year at $92.4m.
Full-year 2021 saw an operating loss of $18.6m, compared with an operating profit of $23.9m in 2020. Likewise, Q4/2021 saw an operating loss of $1.8m, cut from $6.9m a year ago but a set-back from a profit of $1.3m last quarter, due to lower revenue and increased costs (both as a result of supply chain constraints).
Quarterly net loss was $3.4m ($0.06 per share) in Q4/2021, more than halving from $7.2m ($0.14 per share) a year ago but compared with a net profit of $0.78m ($0.01 per share) last quarter. Full-year net loss was $21.5m ($0.41 per share) for 2021, compared with a net profit of $16.7m ($0.31 per share) in 2020.
Full-year adjusted EBITDA fell from $43.3m in 2020 to $2.9m for 2021. However, although it was down from $6.7m in Q3/2021, quarterly adjusted EBITDA of $2.3m in Q4/2021 is an improvement on -$4.7m a year ago.
During the quarter, cash and cash equivalents, short-term investments and restricted cash hence rose by about $1m to $106m.
NeoPhotonics expects the impacts of chip shortages in the supply chain to continue for at least the next two quarters. However: “Our business remains on a strong growth path, as demand continues to increase and our backlog has expanded to record levels with nearly a year of visibility,” notes Jenks.
Proposed acquisition by Lumentum
On 4 November, NeoPhotonics said that it had entered into a definitive agreement to be acquired by Lumentum for $16 per share in cash (a total equity value of about $913m). “Lumentum is an ideal partner to serve our customers on a larger scale,” believes Jenks.
The transaction remains on track, having been approved by stockholders at a special meeting on 1 February and following the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended). The remaining requirements for closure of the transaction are customary closing conditions set forth in the merger agreement and approval from the State Administration for Market Regulation (SAMR) of the People’s Republic of China. The transaction is expected to be completed in second-half 2022.