NeoPhotonics Provides Second Quarter 2019 Business Update

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 an updated business outlook for the second quarter of 2019 as
well as a write-down of certain inventories as a result of the U.S.
Bureau of Industry and Security (BIS) of the U.S. Department of
Commerce placing Huawei Technologies Co. and certain of its affiliates
on the Bureau’s Entity List with an effective date of May 21, 2019.
Companies may not provide products and technologies subject to U.S.
Export Administration Regulations (EAR) to organizations on the
“Entities List” without a license.

“This action creates a material impact on NeoPhotonics and many others
in the optical communications market and related industries. We are
fully complying with the restrictions and have ceased shipments of
products subject to EAR,” said Tim Jenks, Chairman and CEO of
NeoPhotonics. “Our objective is now to move rapidly to lower
manufacturing and operating expense levels to be cash positive at a
lower revenue level,” concluded Mr. Jenks.

Taking these actions into account, the Company is updating its outlook
for the quarter ending June 30, 2019.

The updated Non-GAAP outlook for the second quarter of 2019 excludes the
impact of expected inventory write-downs of $8.6 million, the
anticipated impact of stock based compensation of $3.5 million,
accelerated depreciation of $0.9 million, amortization of intangibles of
approximately $0.3 million and a gain on the sale of assets of $0.8
million.

On May 20, 2019, BIS announced a Temporary General License (TGL) which
would allow shipment of certain categories of products to Huawei for a
period of 90 days. Should the Company receive additional orders from
Huawei Technologies or its designated affiliates that are compliant with
the Temporary General License, this could favorably impact the revised
second quarter outlook. No such benefit is included in the outlook as
the Company has no visibility into the timing or magnitude of such
orders, if any.

The Company remains focused on preserving working capital in the
near-term and is evaluating restructuring options to be cash neutral at
a lower revenue level.

As of March 31, 2019 the Company had a net working capital balance of
$111 million, which is above the amounts needed to cover outstanding
debt.

In addition to this press release, the Company has posted a summary
presentation including updated estimates on its investor relations
website which can be found at https://ir.neophotonics.com/.

Non-GAAP and Adjusted EBITDA Measures vs. GAAP Financial Measures

The Company’s non-GAAP measures exclude certain GAAP financial measures.
A reconciliation of the non-GAAP financial measures to the most directly
comparable GAAP financial measures is provided in the text following the
table above. These non-GAAP financial measures differ from GAAP measures
with the same captions and may differ from non-GAAP financial measures
with the same or similar captions that are used by other companies. As
such, these non-GAAP measures should be considered as a supplement to,
and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP.

The Company uses these non-GAAP financial measures to analyze its
operating performance and future prospects, develop internal budgets and
financial goals, and to facilitate period-to-period comparisons.
NeoPhotonics believes that these non-GAAP financial measures reflect an
additional way of viewing aspects of its operations that, when viewed
with its GAAP results, provide a more complete understanding of factors
and trends affecting its business.

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 9001:2015 certified engineering and
manufacturing facilities in Silicon Valley (USA), Japan and China. For
additional information visit www.neophotonics.com.

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: the Company’s updated outlook for the second quarter of 2019,
the Company’s ability to lower manufacturing and operating expenses and
preserve working capital, and the Company’s ability to reach cash
neutral at lower revenue levels. 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; further developments regarding the
Department of Commerce licensing requirements applicable to Huawei;
other potential governmental trade actions; possible disruptions in
demand for the Company’s products due to industry developments; changes
in demand for the Company’s products; the impact of competitive products
and pricing and alternative technological advances; the timely and
successful development and market acceptance of new products and
upgrades to existing products; changes in economic and industry
projections; and a decline in general conditions in the
telecommunications equipment industry or the world economy generally.
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, 2018 and Form 10-Q for the quarter ended March 31, 2019.
All forward-looking statements are made as of the date of this press
release, and the Company disclaims any duty to update such statements.

^©2019 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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