NeoPhotonics reports profit for fourth consecutive quarter

NeoPhotonics Corp. (NYSE: NPTN) reported diluted earnings per share of $0.03 for its fiscal third quarter, which ended September 30, 2015. This was the optical component and module vendor's fourth consecutive profitable quarter. However, most performance figures slipped sequentially.

The company also announced a new member of its board of directors.

"We are pleased to report our fourth straight quarter of GAAP profitability and year over year revenue and margin expansion, which resulted in our generating $43 million of adjusted EBITDA over the last four quarters," said Tim Jenks, NeoPhotonics chairman and CEO, via a press release. "We are excited about the renewed momentum we are seeing in the 100G market and the progress we are making with our strategy of increasing our content per 100G port and extending our products to 400G and beyond."

As Jenks mentioned, the quarter showed significant improvement year-on-year; however, it paled in comparison to the immediately previous three months. Revenue was slightly above guidance at $83.6 million, up $2.0 million from the third quarter of 2014 but down $1.8 million from 2Q15. On a GAAP basis, gross margin of 28.4% was better than the 24.6% of 2Q14 but less than the 30.6% of the prior quarter; net income was $1.4 million versus a loss of $1.9 million in the third quarter of 2014 and positive $1.8 million in this year's second quarter; and the $0.03 earnings per share were much better than last year's loss of $0.06, but not as good as the $0.05 earned in the prior quarter.

Non-GAAP figures told a similar story. Non-GAAP gross margin was 29.8%, an increase from the 26.5% in 3Q14 but a decrease from the 32.3% in the prior quarter; net income was $4.6 million, up from $1.4 million in the year-ago quarter but down from $5.3 million in 2Q15; and diluted earnings per share were $0.11, better than last year's $0.04 but worse than the $0.14 of the prior quarter.

Adjusted EBITDA was $10.2 million, versus $7.3 million in the third quarter of 2014 and $11.4 million in the prior quarter.

As is the case at other his competitors (see, for example, "Oclaro achieves positive adjusted EBITDA, non-GAAP operating income in FY1Q16"), Jenks sees 100-Gbps technology as a major opportunity. He told analysts on a call held November 2 to discuss the quarter's performance that such products composed 56% of the quarter's revenues. He also reported an uptick in demand from Chinese customers.

Looking ahead to the fourth quarter, which ends December 31, NeoPhotonics management expects revenues between $82 million and $86 million, non-GAAP gross margin in the range of 30% to 34%, diluted net income/loss per share in the range of a $0.03 loss to earnings of 0.04 cents, and non-GAAP diluted earnings per share in the range of $0.05 to $0.13.

Meanwhile, the company announced that Equinix CTO Ihab Tarazi has joined the board of directors. Tarazi, who also held senior positions at Verizon, replaced Allan Kwan, who left after serving on the board since 2008.

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