Initial calendar 1Q20 optical component and transceiver revenue reports all over the map

With reporting season upon us, optical transceiver vendors have started to reveal their numbers for the first three months of this calendar year, including the initial impacts of the COVID-19 coronavirus. NeoPhotonics, Acacia Communications, and Lumentum were the first to report – and the significant variation in results showed that the pandemic’s most salient effect on component and transceiver vendors’ bottom lines is its influence on production and supply. And that influence should be felt even more strongly in the short term.

NeoPhotonics (NYSE:NPTN) kicked things off April 30 by reporting revenues of $97.4 million for the first fiscal quarter ended March 31, 2020, up 23% year-over-year. GAAP gross margin was 30.5%, up both from 30.2% in the prior quarter and from 19.8% in the year-ago quarter. And diluted net income per share was $0.12, significantly improved from a net income per share of $0.04 in 4Q19 and to a net loss per share of $0.30 in the same period last year.

Non-GAAP figures were also bright and shiny. Non-GAAP gross margin of 31.2% beat the prior quarter’s 30.9% and the year-ago quarter’s 22.4%. And non-GAAP diluted net income per share came in at $0.17, better than the $0.10 of last year’s fourth quarter and the net loss of $0.19 in last year’s first quarter.

Speaking to attendees of an analyst call April 30, NeoPhotonics Chairman and CEO Tim Jenks said that the key to the successful quarter was the fact that China rebounded from the coronavirus shutdown, both in terms of product demand – Chinese customers accounted for 60% of the quarter’s revenues – and production resources. “Currently, our North American facilities are operating under shelter-in-place orders with some impact, while our China and Japan factories are running with full labor capacity, producing steady output,” Jenks said on the call according to transcript compiled by SeekingAlpha. The company’s production facilities in Thailand are “running full throttle” as well, Jenks said.

However, the same can’t be said for links in the supply chain elsewhere, which could affect  NeoPhotonics’ ability to meet product demand. For this reason, Jenks and the rest of the company’s management have built $10 million of risk into their revenue guidance for the fiscal second quarter, which is within the range of $94 million to $102 million. GAAP gross margin is forecast at 29% to 33% and earnings per share (EPS) at a loss of $0.02 to income of $0.08 (non-GAAP is income of $0.05 to $0.15).

No comment from Acacia, plenty from Lumentum

Acacia Communications (NASDAQ: ACIA) followed May 4 with more good news for the first fiscal quarter, which also ended March 31. The company’s revenues of $125.6 million beat the Street’s expectations by $6.79 million while its non-GAAP EPS of $0.54 beat by $0.14. GAAP EPS was $0.36. GAAP gross margin was 47.2%; the non-GAAP version was 47.4%.

The revenue number beat that of the year-ago quarter by $20.4 million (19.4%). While the company did not provide any color on the recently concluded quarter or provide guidance moving forward due to its impending acquisition by Cisco (see “Cisco to buy Acacia Communications for optical transceiver, components play”), the performance implies that Acacia managed to either avoid or mitigate COVID-19 related production and supply problems during the quarter.

The same cannot be said for Lumentum (NASDAQ:LITE), which today reported results for its third quarter of fiscal 2020, which ended March 30, 2020. The company reported revenues of $402.8 million, lower than the year-ago $432.9 million. GAAP gross margin of 39.2% did show a noticeable improvement over the 20.4% of the third quarter of FY19. GAAP net income of $49.1 million, or $0.63 per diluted share, also significantly beat that of a year ago, when Lumentum suffered a net loss of $74.3 million, $0.98 per diluted share. Non-GAAP net income for the quarter was $98.0 million, or $1.26 per diluted share.

Still, things would have been better without the effects of the pandemic. “Third quarter results were impacted by the COVID-19 pandemic due to limitations on our ability to supply products to our customers,” the company stated via a press release. “As the outbreak spread outside of China late in the quarter, we experienced supply disruptions in excess of our prior assumptions. The supply of certain products produced in Malaysia was significantly disrupted as the Malaysian government issued a movement control order on March 16, 2020. As we provide an essential service under the order, we have been able to slowly increase production in Malaysia from zero when the movement control order was issued and expect to reach near 100% production levels in the coming weeks.”

Like NeoPhotonics, Lumentum expects further supply issues in the current quarter. The company estimates that the fiscal fourth quarter impact from COVID-19 will include a revenue hit of more than $90 million and a reduction in non-GAAP diluted earnings per share of more than $0.50. This has led to revenue guidance of $325 million to $365 million, non-GAAP operating margin of 18% to 21%, and non-GAAP diluted earnings per share of $0.70 to $0.90.

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