May 23, 2019   SOURCE: BusinessWire

NeoPhotonics Provides Second Quarter 2019 Business Update

NeoPhotonics Corporation (NYSE: NPTN), a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and datacenter applications, today announced an updated business outlook for the second quarter of 2019 as well as a write-down of certain inventories as a result of the U.S. Bureau of Industry and Security (BIS) of the U.S. Department of Commerce placing Huawei Technologies Co. and certain of its affiliates on the Bureau’s Entity List with an effective date of May 21, 2019. Companies may not provide products and technologies subject to U.S. Export Administration Regulations (EAR) to organizations on the “Entities List” without a license.

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

Taking these actions into account, the Company is updating its outlook for the quarter ending June 30, 2019.

 

Revised Outlook for the Quarter Ending June 30, 2019

    GAAP   Non-GAAP
Revenue   $75 to $80 million
Gross Margin   10% to 14%   22% to 26%
Operating Expenses   $25 +/- $0.5 million   $22 to $23 million
Earnings per share   $0.40 to $0.30 net loss   $0.15 to $0.05 net loss
 
 

Prior Outlook for the Quarter Ending June 30, 2019

    GAAP   Non-GAAP
Revenue   $88 to $93 million
Gross Margin   23% to 27%   25% to 29%
Operating Expenses   $27 +/- $0.5 million   $24 +/- $0.5 million
Earnings per share   $0.16 to $0.06 net loss   $0.06 net loss to $0.04 net profit
 

The updated Non-GAAP outlook for the second quarter of 2019 excludes the impact of expected inventory write-downs of $8.6 million, the anticipated impact of stock based compensation of $3.5 million, accelerated depreciation of $0.9 million, amortization of intangibles of approximately $0.3 million and a gain on the sale of assets of $0.8 million.

On May 20, 2019, BIS announced a Temporary General License (TGL) which would allow shipment of certain categories of products to Huawei for a period of 90 days. Should the Company receive additional orders from Huawei Technologies or its designated affiliates that are compliant with the Temporary General License, this could favorably impact the revised second quarter outlook. No such benefit is included in the outlook as the Company has no visibility into the timing or magnitude of such orders, if any.

The Company 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 March 31, 2019 the Company had a net working capital balance of $111 million, which is above the amounts needed to cover outstanding debt.

In addition to this press release, the Company has posted a summary presentation including updated estimates on its investor relations website which can be found at https://ir.neophotonics.com/.

Non-GAAP and Adjusted EBITDA Measures vs. GAAP Financial Measures

The Company’s non-GAAP measures exclude certain GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the text following the table above. These non-GAAP financial measures differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. NeoPhotonics believes that these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

About NeoPhotonics

NeoPhotonics is a leading designer and manufacturer of optoelectronic solutions for the highest speed communications networks in telecom and datacenter applications. The Company’s products enable cost-effective, high-speed data transmission and efficient allocation of bandwidth over communications networks. NeoPhotonics maintains headquarters in San Jose, California and ISO 9001:2015 certified engineering and manufacturing facilities in Silicon Valley (USA), Japan and China. For additional information visit www.neophotonics.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release includes statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about the following topics: the Company’s updated outlook for the second quarter of 2019, the Company’s ability to lower manufacturing and operating expenses and preserve working capital, and the Company’s ability to reach cash neutral at lower revenue levels. Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. Those risks and uncertainties include, but are not limited to, such factors as: the Company’s reliance on a small number of customers for a substantial portion of its revenues; market growth in China and other key countries; further developments regarding the Department of Commerce licensing requirements applicable to Huawei; other potential governmental trade actions; possible disruptions in demand for the Company’s products due to industry developments; changes in demand for the Company's products; the impact of competitive products and pricing and alternative technological advances; the timely and successful development and market acceptance of new products and upgrades to existing products; changes in economic and industry projections; and a decline in general conditions in the telecommunications equipment industry or the world economy generally. For further discussion of these risks and uncertainties, please refer to the documents the Company files with the SEC from time to time, including the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and Form 10-Q for the quarter ended March 31, 2019. All forward-looking statements are made as of the date of this press release, and the Company disclaims any duty to update such statements.

©2019 NeoPhotonics Corporation. All rights reserved. NeoPhotonics and the red dot logo are trademarks of NeoPhotonics Corporation. All other marks are the property of their respective owners.