NeoPhotonics cuts Q2 revenue guidance from $88-93m to $75-80m after Huawei export ban

As a result of the US Department of Commerce’s Bureau of Industry and Security (BIS) adding Huawei Technologies Co Ltd and 68 of its affiliates to its ‘Entity List’ prohibiting the sale to Huawei of products covered by the Export Administration Regulations (EAR) without obtaining an appropriate export license, 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) has updated its business outlook for second-quarter 2019 and announced a write-down of certain inventories.

“This action creates a material impact on NeoPhotonics and many others in the optical communications market and related industries,” says chairman & CEO Tim Jenks. “We are fully complying with the restrictions and have ceased shipments of products subject to EAR,” he adds. “Our objective is now to move rapidly to lower manufacturing and operating expense levels to be cash positive at a lower revenue level.”

Taking these actions into account, the firm is cutting its non-GAAP second-quarter 2019 guidance for revenue from $88-93m to $75-80m, for gross margin from 25-29% to 22-26%, for operating expenses from $23.5-24.5m to $22-23m, and for earnings per share from between a net loss of $0.06 and net profit of $0.04 to a net loss of $0.15-0.05.

This excludes the impact of expected inventory write-downs of $8.6m, the anticipated impact of stock based compensation of $3.5m, accelerated depreciation of $0.9m, amortization of intangibles of $0.3m and a gain on the sale of assets of $0.8m.

On 20 May, the BIS announced a Temporary General License (TGL) that would allow shipment of certain categories of products to Huawei for a period of 90 days. Should NeoPhotonics receive additional orders from Huawei or its designated affiliates that are compliant with the Temporary General License, this could favorably impact the revised second-quarter outlook.

NeoPhotonics says it remains focused on preserving working capital in the near-term and is evaluating restructuring options to be cash neutral at a lower revenue level. As of 31 March, the firm had a net working capital balance of $111m, which is above the amounts needed to cover outstanding debt.

See related items:

NeoPhotonics’ revenue grows 11% in Q4 to $91.1m

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Visit: www.neophotonics.com