NeoPhotonics tweaks guidance ahead of 4Q18 results announcement

NeoPhotonics Corp. (NYSE: NPTN) said today it expects results from the final quarter of its 2018 fiscal year to end up at the upper range of its guidance – at least for most performance measures. The company made the prediction as it preannounced certain charges and asset sales that will be discussed when the company reports results for the quarter. NeoPhotonics has not yet revealed a reporting date for those results.

Jan 14th, 2019

NeoPhotonics Corp. (NYSE: NPTN) said today it expects results from the final quarter of its 2018 fiscal year to end up at the upper range of its guidance – at least for most performance measures. The company made the prediction as it preannounced certain charges and asset sales that will be discussed when the company reports results for the quarter. NeoPhotonics has not yet revealed a reporting date for those results.

Management at the optical component and subsystems supplier expects to report sales in the range of $90 to $92 million, within the far end of its $87 to $92 million guidance. Similarly, gross margin is expected to fall within approximately 24%-25%, compared to the previously forecasted 22%-26%. Non-GAAP gross margin may do slightly better than expected; it is now forecasted to fall between 27% and 29%, potentially beyond the 24% to 28% predicted earlier.

However, the company also expects to report total restructuring and other charges of approximately $5.7 million, including restructuring costs, inventory write-downs, and legal settlement expenses. Several factors will contribute to this total. For example, NeoPhotonics says it plans to declare end-of-life for certain transceiver modules, ending the sale of these products (which the company didn’t further identify) in May 2019. The company plans to take a charge of $3.5 million for inventory and asset write-downs in the fourth quarter of 2018, as well as accelerated depreciation of approximately $3.0 million, to be amortized over the final production during the first and second quarters of 2019. These products contributed about $10 million in revenue to the company last year, NeoPhotonics reports.

Meanwhile, NeoPhotonics says it has reached a settlement agreement that will cap its litigation with Lestina International, Ltd. The settlement, in the form of a cash payment of $2.2 million, will end a legal dispute regarding a purchase commitment for materials related to the product assets sold by one of NeoPhotonics’ foreign subsidiaries to APAT Optoelectronics Components Co., Ltd. in January 2017 (see "NeoPhotonics completes low speed transceiver business sale to APAT Optoelectronics").

On the plus side, NeoPhotonics says it has reached an agreement to sell its manufacturing operations in Russia for approximately book value. The buyer is a joint stock company by the name of Rusnano, according to a 10-Q NeoPhotonics filed last year. Rusnano is owned by the Russian government.

With these charges considered, NeoPhotonics now expects to report a diluted net loss per share of $0.18 to $0.15, inclusive of restructuring charges. The company had guided for a GAAP $0.17 to $0.07 net loss. For non-GAAP, company management now expects to report earnings per share in the range of $0.00 to earnings of $0.04. This compares to guidance of a $0.08 net loss to $0.02 net profit.

“As a company, we remain committed to our core capabilities, including our industry-leading coherent components and solutions for data center interconnect and telecommunications systems,” said Tim Jenks, chairman and CEO of NeoPhotonics. “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 Gbps to beyond 1 Tbps on a single wavelength, in which our advanced hybrid photonic integration technology provides the highest value.”

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