ARM Purification

CLICK HERE: free registration for Semiconductor Today and Semiconductor Today ASIACLICK HERE: free registration for Semiconductor Today and Semiconductor Today ASIA

Join our LinkedIn group!

Follow ST on Twitter


10 May 2019

NeoPhotonics’ Q1 revenue grows 16% year-on-year to $79.4m

For first-quarter 2019, 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 reported revenue of $79.4m, down 13% on $91.1m last quarter (reflecting the usual seasonal declines related to the Chinese New Year holiday - making it a shorter quarter - plus the impact of annual price reductions, as well as a $2-3m impact from some supply constraints on purchased sub-components) but up 16% on $68.6m a year ago. “Demand continued apace in both the West and China,” notes chairman & CEO Tim Jenks.

Fiscal Q1/2018 Q2/2018 Q3/2018 Q4/2018 Q1/2019
Revenue $68.6m $81.1m $81.7m $91.1m $79.4m

Shipments to China comprised 57% of total revenue (down from 59% last quarter and 61% a year ago). Of this, NeoPhotonics’ largest customer Huawei Technologies (including its affiliate HiSilicon Technologies) accounted for 49% (up from 44% last quarter and roughly level with 48% a year ago). The next four customers (which includes Ciena) collectively comprised 37% (down on last quarter’s 41% due mostly to the lower revenue from China customers other than Huawei). The Americas fell from 20% to 18% of total revenue while the rest of the world rose from 21% to 25% as Western customers shifted between contract manufacturing locations.

High-Speed products (for data rates of 100G-and-above) have grown further, from 86% of revenue last quarter to 88%. “We are focused on the highest-speed coherent solutions that are well aligned with leading industry trends, which has positioned us to benefit from growing deployments of high-baud-rate systems for 200-600G globally,” says Jenks. “These higher-bandwidth systems accentuate the unique value proposition of our ultra-narrow-linewidth lasers and high-performance photonic integrated chips,” he adds.

On a non-GAAP basis, gross margin was 22.4%, down from 28.6% last quarter but up from 14.7% a year ago. “While Q1 is our traditional low point for the year, this was about 2.5 points lower than [the 23-27%] expected,” notes senior VP & chief financial officer Beth Eby. Specifically, product margin fell more than expected, from 31.6% last quarter to 27%, due to the impact of annual price reductions as well as a less favorable product mix (with more mature, lower-margin 100G and 200G products making up a higher-than-expected proportion of sales, while 400G revenue grew less than expected).

Due to R&D expenditure rising by $1.2m (as a result of some important programs to support new chips and components that had near-term spending), operating expenses were $24.2m, up from $22.3m last quarter and $22.9m a year ago (but falling from 33.4% to 30.5% of revenue).

In Q1, appreciation of the Chinese Yuan relative to the US dollar drove a foreign exchange charge of $1.7m. As a result, net loss was $9m ($0.19 per diluted share, worse than the expected $0.17-0.08), compared with net income of $2.4m ($0.05 per diluted share) last quarter but cut from a loss of $14.6m ($0.33 per diluted share) a year ago.

Cash generated from operations was $8.7m, down from $10.6m last quarter. Free cash flow was $5m.
Net inventory was $54m (76 days), up $1m from last quarter.

During the quarter, cash and cash equivalents, short-term investments and restricted cash rose by $2.2m to $78.9m.

After the end of the quarter, NeoPhotonics closed the sale of its Russia manufacturing operation, as part of its ongoing process to align business with product lines that are strongest and most profitable.

For second-quarter 2019, NeoPhotonics expects revenue to grow by about 15% to $88-93m. Gross margin should recover to 25-29%, driven by higher factory loading without Q1’s two-week holiday, plus a few cost reductions taking effect (rather than product mix, as 100G and 200G products will comprise a similar proportion of revenue as Q1). With operating expenses of $24m, diluted earnings per share should range between a $0.06 loss and a $0.04 gain.

“Demand signals from our customers are positive for the year,” notes Eby. “Because of higher industry-wide demand, notably with the 5G launch, some of our supply constraints [on purchased sub-components] carry forward into Q2 and Q3,” she adds. “They are ameliorating in the second quarter and they should be gone in the third quarter.”

“Telecom and metro shipments are reasonably stable, and we are cautiously optimistic about data-center interconnect (DCI) demand in North America for all of 2019,” says Jenks. “Much of our DCI deployment volume today is 200G and 400G, with growth coming at 600G. We anticipate that 400G will continue to deploy while our 600G products continue to ramp through this year and next. Subsequently, 600G will coexist with coming 800G, and of course we will be engaged in deployments in each of these data rates,” he adds.

“Similarly, we see a positive outlook this year for China. Our largest customer Huawei conducted an analyst conference in April and forecasted meaningful revenue growth in their carrier network business and a significant ramp in 5G deployments. There has been much discussion about China customers’ building strategic inventory,” continues Jenks. “Based on demand for the products we supply, we are seeing some increases that are in line with what would be consumed with strong tender volumes and we are seeing solid indications of tender activity. We continued to see good progress with design-ins and volume growth for our 64Gigabaud product suite,” he adds. “In the West, these products [64Gigabaud] are used by our customers to achieve 600Gb/s on a single wavelength for distances up to about 80km, such as data-center interconnect. In China, these 64Gigabaud components are being utilized initially to double the speeds of long-haul coherent networks from 100G to 200G while keeping largely the same transmission performance. This same technology will be used across the spectrum of networks to increase the data rates and the available fiber capacity… 64Gigabaud is the next major baud-rate node that will see substantial deployment in telecom networks, notably in China. On the telecom side, the adoption of new technologies may be slower, but may have a longer lifecycle and higher aggregate volume than DCI. As a result, NeoPhotonics will benefit from 64 Gigabaud in both DCI and telecom deployments.”

“Building on our success with 64Gigabaud discrete components, we are extending our offerings to 90-100Gigabaud network applications with our recent announcements at the OFC trade show during March. These included our Class 50 integrated coherent receiver (ICR) and coherent driver modulator (CDM), which are based on our indium phosphide (InP) photonic integration platform,” says Jenks. NeoPhotonics is now testing initial products for 90-100Gigabaud. “We view indium phosphide as optimal to support 90-100Gigabaud for up to 800Gb/s on a single wavelength, further increasing data rates across multiple reaches. Moreover, this platform will continue to be the platform of choice at even higher speed targets above 100Gigabaud, which we will continue to support.”

See related items:

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

NeoPhotonics’ Q3 revenue up 15% year-on-year to $81.7m

NeoPhotonics’ revenue grows 18% in Q2 to $81.1m

NeoPhotonics’ Q1 revenue falls 4% year-on-year, as ZTE loss counteracts growth in North America

Tags: NeoPhotonics PICs

Visit: www.neophotonics.com

See Latest IssueRSS Feed