Erica Mannion - IR Tim Jenks - Chairman, President and CEO James D. Fay - VP and CFO

Welcome to the NeoPhotonics Third Quarter 2011 Earnings Conference Call. This call is being webcast live on the event calendar page of the Investor Relations section of NeoPhotonics’ website at http://www.neophotonics.com. This call is property of NeoPhotonics and any recording, reproduction or transmission of this call without the expressed written consent of NeoPhotonics is strictly prohibited. As a reminder, today’s call is being recorded. You may listen to a webcast replay of this call by going to the event calendar page of the Investor Relations section of NeoPhotonics’ website. : I would now like to turn the call over to Erica Mannion, Investor Relations for NeoPhotonics.

Good morning. Thank you for joining us to discuss NeoPhotonics’ financial and operating results for the third quarter of 2011. With me today are Tim Jenks, Chairman, President and CEO and JD Fay, CFO. The call today contains forward-looking statements that involve risks and uncertainties. These include statements related to NeoPhotonics’ business outlook for the quarter ending December 31, 2011, future periods and industry trends, as well as forward-looking statements that we may make in response to questions. Forward-looking statements are generally indicated by words such as “would”, “believe”, “should”, “expect”, “outlook”, “estimate,” “anticipate”, “forecast” and similar expressions that look toward future events or performance. Actual results may differ materially from forward-looking statements. Factors that could cause results to be different from these statements include those described in today’s press release as well as those detailed in the section entitled "Risk Factors" of the company’s Quarterly Report on Form 10-Q most recently filed with the SEC. NeoPhotonics cautions you not to place undue reliance on forward-looking statements, and that these statements speak only as of the date they are made. In addition, non-GAAP financial measures will be discussed today. Please visit the Investor Relations section of NeoPhotonics’ Web site for a copy of the company’s press release, which contains an explanation of these non-GAAP financial measures as well as a reconciliation to the comparable GAAP measures. Before I turn the call over to Tim, I would like to mention that during the fourth quarter, the Company will participate in the Piper Jaffray Technology, Media and Telecom Conference in New York on November 8th, and Citi's SMID Conference in Las Vegas on November 16th. Now, I will turn the call over to Tim Jenks, Chairman, President and CEO of NeoPhotonics. Tim…

Thank you for joining us today. I will provide a financial and business update, discuss our recent acquisition of Santur Corporation, and talk about what we are seeing in the industry as a whole. Revenue for the third quarter came in at $44.0 million, below our initial guidance range of $48-$53 million provided in our second quarter call and in the middle of the revised guidance that we provided on October 6th. Demand from our largest customer was significantly below our projections for the quarter, which I will discuss further. Despite the lower than planned revenue in the quarter, we did deliver Non-GAAP gross margin above our projected range, continuing our sequential growth in gross margin. Non-GAAP gross margin increased to 27.5% in the third quarter, up from 26.2% in the second quarter. Additionally, despite lower revenue and inclusive of our “delta” research and development investment we started in the third quarter, we contained our loss per share to the projected range, reporting Non-GAAP diluted net loss per share of $0.13. I’d like to start the discussion with a substantive overview of our relationship with Huawei Technologies. Huawei is our largest customer and among the top providers of optical network equipment globally, and for several years we have been among Huawei’s largest optical suppliers and one of its select “core partners”. Our relationship spans one-third of our product portfolio – we sell Huawei approximately 100 different products – among 18 of our 36 product families. Both parties have enjoyed a strong and prosperous relationship since 2003. In fact, yesterday I was in Shenzhen, China, attending the Huawei annual core partner convention. At an awards ceremony last evening at Huawei’s corporate headquarters, Huawei presented its prestigious Golden Award to NeoPhotonics, as an “Excellent Core Partner”. We were honored for our role…

Thank you Tim and good morning. For the third quarter of 2011, revenue was $44.0 million, a decrease of $8.1 million, or 16%, from $52.1 million in the second quarter of 2011, and a decrease of $3.2 million, or 7%, from $47.1 million in the third quarter of 2010. Gross margin for the third quarter of 2011 was 27.7%. Non-GAAP gross margin for the third quarter was 27.5%, an increase compared to the previous quarter’s Non-GAAP gross margin of 26.2%. Non-GAAP gross margin for the third quarter excludes amortization of purchased intangibles of $0.01 million and a stock-based compensation credit of $0.1 million, primarily as the result of the impact of the decline in our stock price on stock appreciation rights that are revalued each quarter. Net loss for the third quarter of 2011 was $4.1 million, which compares to net income of $13.6 million in the prior quarter and net income of $0.1 million in the third quarter of 2010. Diluted net loss per share for the third quarter was $0.17. Non-GAAP net loss for the third quarter was $3.2 million, as compared to net income that was SLIGHLTY POSITIVE in the second quarter and net income of $1.2 million in third quarter of 2010. Non-GAAP diluted net loss per share for the third quarter was $0.13, as compared to zero cents in the prior quarter and net income per share of $0.07 for the third quarter of 2010. Non-GAAP net loss and Non-GAAP diluted net loss per share for the third quarter of 2011 excludes amortization of purchased intangibles of $0.1 million, stock-based compensation expense of $0.5 million, acquisition-related costs of $0.3 million relating to the acquisition of Santur Corporation, and the income tax effects of these adjustments. Adjusted EBITDA in the third quarter of 2011 was a…

Thank you for joining us today. While we were disappointed by our third quarter revenue results, we remain excited about the market opportunity that lies in front of us. There is a desire and a need for faster, better access, in faster and more agile networks – in our view, these are the drivers of growth for the industry and NeoPhotonics. Before we conclude, I would like to thank our shareholders for their time today and their continued interest in our company, our customers and our employees for their dedication. We look forward to updating you on our progress on our next call.