NeoPhotonics sees Q4 adjusted EPS 0c-4c, consenus (2c)
NeoPhotonics Corporation announced preliminary fourth quarter results which 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 company has announced the end-of-life of certain client transceiver modules and therefore will discontinue the manufacture and sale of those products after completing last time production runs through May 2019. This will result in approximately $3.5M in charges for inventory and asset write-downs in the fourth quarter of 2018 and accelerated depreciation of approximately $3M, to be amortized over the final production during the first and second quarters of 2019. These products contributed approximately $10M of revenue in 2018. Further, the Company has entered into an agreement to settle its lawsuit with Lestina International with a cash payment of $2.2M. The expense will be recognized in the fourth quarter of 2018. Additionally, the Company has entered into a definitive agreement to sell its manufacturing operations in Russia for approximately book value. Taken together, these actions are expected to reduce cost of goods sold by an amount approximately equivalent to one percentage point of non-GAAP gross margin beginning in the first quarter of 2019. Including these factors, preliminary results for the quarter ended December 31, 2018 are anticipated as follows: Revenue is expected to be in the range of $90M to $92M, compared to the previously announced expectation of $87M to $92M, consensus $89.62M. Gross margin of approximately 24%-25%, compared to the previous expectation of 22%-26%. Non-GAAP gross margin of 27% to 29%, compared to a previous expectation of 24%-28% Total restructuring and other charges of approximately $5.7M, including restructuring costs, inventory write-downs and legal settlement expenses. Diluted Net loss per share of 18c to 15c, inclusive of restructuring charges. Non-GAAP earnings per share in the range of 0c to earnings of 4c.