NeoPhotonics raises Q4/2018 profit guidance

For fourth-quarter 2018, NeoPhotonics Corp of San Jose, CA, USA (a vertically integrated designer and manufacturer of hybrid photonic integrated optoelectronic modules and subsystems for high-speed communications networks) has announced preliminary results that reflect recent developments including the end-of-life of certain client transceiver modules, a legal settlement, and the signing of a definitive agreement to sell its manufacturing operations in Russia.

The firm will discontinue manufacturing and selling the end-of-life client transceiver modules after completing last-time production runs through May 2019. This will result in about $3.5m in charges for inventory and asset write-downs in fourth-quarter 2018 and accelerated depreciation of about $3m, to be amortized over the final production during the first and second quarters of 2019. These products contributed about $10m of revenue in 2018.

Regarding the lawsuit with Lestina International Ltd (pursuant to a purchase commitment for materials related to product assets sold by one of NeoPhotonics’ foreign subsidiaries to APAT Optoelectronics Components Co Ltd in January 2017), NeoPhotonics has agreed to settle the lawsuit with a cash payment of $2.2m (to be recognized as an expense in fourth-quarter 2018).

Additionally, NeoPhotonics has agreed to sell its manufacturing operations in Russia for approximately book value (consistent with the firm’s financial results disclosed in the 10-Q filing for third-quarter 2018).

Collectively, these actions are expected to reduce cost of goods sold (COGS) by an amount roughly equivalent to one percentage point of non-GAAP gross margin, beginning in first-quarter 2019.

Including these factors, for Q4/2018 NeoPhotonics expects revenue of $90-92m (compared with the $87-92m guidance announced in early November), and non-GAAP gross margin of 27-29% (compared with 24-28%). Excluding total restructuring and other charges of about $5.7m (comprising restructuring costs of $1m, end-of-life inventory write-downs of $2.6m, and the $2.2m legal settlement expenses), diluted non-GAAP earnings per share should be a profit of $0.00-0.04 (compared with the previously expected range of between a net loss $0.08 to a net profit of $0.02).

“We remain committed to our core capabilities, including our industry-leading coherent components and solutions for data-center interconnect and telecommunications systems,” says chairman & CEO Tim Jenks. “These actions will complete our move from module- to component-level solutions for client network applications and will further increase our focus on our more profitable, industry-leading platforms for 400 Gigabits/sec to beyond 1 Terabit/sec on a single wavelength, in which our advanced hybrid photonic integration technology provides the highest value,” he concludes.

See related items:

NeoPhotonics’ Q3 revenue up 15% year-on-year to $81.7m

NeoPhotonics’ revenue grows 18% in Q2 to $81.1m

NeoPhotonics’ Q1 revenue falls 4% year-on-year, as ZTE loss counteracts growth in North America

NeoPhotonics reports revenue up 8% in Q4 to $76.9m

Tags: NeoPhotonics PICs

Visit: www.neophotonics.com