NeoPhotonics Announces Restructuring Actions and Preliminary Financial Results for the Third Quarter
October 05 2017 - 7:00AM
Business Wire
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 that as a part of its continuing actions to improve
profitability and cash flow, the Company has implemented certain
restructuring actions. The actions include a reduction in force,
real estate consolidation, a write down of inventory for certain
programs and assets and a write-down of idle assets.
These actions are intended to accelerate the Company's goal of a
return to profitability by implementing specific and sustainable
measures designed to lower the Company’s breakeven revenue levels
for profitability and free cash flow, while maintaining the
Company’s focus on its core capabilities, including its industry
leading coherent components and solutions for datacenter
interconnect and telecommunications systems. The actions being
taken are expected to reduce quarterly operating expenses with
immediate impact and achieve an approximately two-million-dollar
reduction when fully realized in the first quarter of 2018.
The costs to implement these actions are expected to be
approximately $4.8 million, with $4.2 million in asset-write off
costs and $0.6 million in severance costs. The Company expects to
incur approximately $4.6 million of these costs in the third
quarter with the remainder to be incurred in the fourth
quarter.
“Lacking a clear indication of increased demand in China in the
third quarter, we initiated several operational changes with the
goal of expediting our return to profitability, including
implementing certain restructuring initiatives designed to align
our business with the current demand environment and lowering
manufacturing output to manage inventory levels,” said Tim Jenks,
Chairman and CEO of NeoPhotonics. “In taking these actions, we have
maintained our research and development focus on products for next
generation coherent systems, operating at 400 Gigabits/sec to
beyond 1 Terabit/sec, wherein our advanced hybrid photonic
integration provides the highest value,” concluded Mr. Jenks.
In addition to these restructuring activities, the Company
provided preliminary estimated financial results for the third
quarter of 2017. Revenue is expected to be in the range of $69 to
$71 million, with GAAP gross margin of approximately 10% to 13% and
GAAP loss per share of $0.50 to $0.40, inclusive of restructuring
charges. Excluding restructuring charges, and other regularly
excluded items, the Company expects non-GAAP gross margin to be in
the range of 14% to 17% and non-GAAP loss per share in the range of
$0.35 to $0.27. A reconciliation of the non-GAAP financial measures
to the most directly applicable GAAP financial measures is provided
at the end of this press release.
These preliminary results compare to a previously provided
forecast for third quarter revenue of $70 to $76 million, GAAP
gross margin of 23% to 26%, and GAAP net loss per share of $0.21 to
$0.11 and non-GAAP gross margin of 24% to 27% and non-GAAP loss of
$0.17 to $0.07. In addition to restructuring charges, non-GAAP
gross margin and non-GAAP net loss were negatively impacted by the
Company’s decision to reduce production levels during the quarter
resulting from a lack of visibility into future demand levels in
China. While this reduction impacted overall capacity utilization
and gross margin respectively in the third quarter, the Company
anticipates these actions will help reduce inventory levels in the
fourth quarter.
Cash, cash equivalents and restricted cash totaled approximately
$74 million at the end of the third quarter.
Revised Outlook for the Quarter Ending
September 30, 2017
GAAP Non-GAAP Revenue
$69 to $71 million
Gross Margin
10% to 13% 14% to 17%
Earnings per share
$0.50 to $0.40 net loss $0.35 to $0.27
net loss
The Non-GAAP outlook for the third quarter of 2017 excludes the
impact of expected restructuring charges and end-of-life inventory
write-downs of approximately $4.6 million, acquisition related
costs of $0.2 million, amortization of intangibles of approximately
$0.3 million and the anticipated impact of stock-based compensation
of approximately $1.9 million, of which $0.3 million is estimated
for cost of goods sold.
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: future financial results,
demand for the Company’s high speed products, the Company’s market
position, the outlook for the China market, and industry trends.
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; possible reduction
in or volatility of customer orders or delays in shipments of
products to customers; timing of customer drawdowns of
vendor-managed inventory; possible disruptions in the supply chain
or in demand for the Company’s products due to industry
developments; the ability of the Company's vendors and
subcontractors to supply or manufacture the Company's products in a
timely manner; ability of the Company to meet customer demand;
economic conditions or natural disasters; volatility in utilization
of manufacturing operations, supporting utility services and other
manufacturing costs; the savings anticipated from cost reduction
actions and the impact of severance costs; reductions in the
Company’s rate of new design wins, and/or the rate at which design
wins go into production, and the rate of customer acceptance of new
product introductions; potential pricing pressure that may arise
from changing supply or demand conditions in the industry; the
impact of any previous or future acquisitions or divestitures;
challenges involving integration of acquired businesses and
utilization of acquired technology or divestitures of assets and
related product lines; the impact of the sale of the low speed
transceiver product lines and the discontinuance or end of life of
certain other products; market adoption, revenue growth and margins
of acquired products; changes in demand for the Company's products;
the impact of competitive products and pricing and alternative
technological advances; the accuracy of estimates used to prepare
the Company's financial statements and forecasts; the timely and
successful development and market acceptance of new products and
upgrades to existing products; the difficulty of predicting future
cash needs; the nature of other investment opportunities available
to the Company from time to time; the Company’s operating cash
flow; changes in economic and industry projections; a decline in
general conditions in the telecommunications equipment industry or
the world economy generally; and the effects of seasonality. 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, 2016 and its Form 10-Q for the three months
ended June 30, 2017. All forward-looking statements are made as of
the date of this press release, and the Company disclaims any duty
to update such statements.
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
9001:2000 certified engineering and manufacturing facilities in
Silicon Valley (USA), Japan and China. For additional information
visit www.neophotonics.com.
©2017 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.
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NeoPhotonics CorporationBeth Eby +1-408-895-6086Chief Financial
Officerir@neophotonics.comorSapphire Investor Relations, LLCErica
Mannion +1-617-542-6180Investor Relationsir@neophotonics.com
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