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February 24, 2016

Applied Optoelectronics Reports Fourth Quarter and Year 2015 Results

SUGAR LAND, Texas, Feb. 24, 2016 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (NASDAQ:AAOI), a leading provider of fiber-optic access network products for the internet datacenter, cable broadband and fiber-to-the-home markets, today announced financial results for its fourth quarter and year ended December 31, 2015.

"We achieved another record year with strong growth in both revenue and net income. Fourth quarter revenue exceeded our expectations and grew 46% year-over-year driven by significantly higher than expected 100G datacenter transceiver shipments," said Dr. Thompson Lin, Applied Optoelectronics Inc. founder and CEO. "With our in-house laser manufacturing and high volume light engine production capacity, we were able to accelerate shipments to meet growing hyperscale datacenter customer demand and we shipped nearly 10,000 units of 100G long reach transceivers in the fourth quarter."

Lin continued, "In addition to the design wins we announced in November, we were awarded three additional 100G transceiver design wins from our existing customers. We are excited by our continued success in this important customer segment and believe we are well positioned to build on our momentum."

Fourth Quarter 2015 Financial Summary

  • Total revenue was $53.0 million, up 46% compared with $36.4 million in the fourth quarter 2014 and down 7% sequentially compared with $57.1 million in the third quarter 2015.
     
  • GAAP gross margin was 29.5% compared with 33.7% in the fourth quarter 2014 and 31.6% in the third quarter 2015. Non-GAAP gross margin was 29.5% compared with 36.0% in the fourth quarter 2014 and 31.7% in the third quarter 2015. Our fourth quarter gross margin was below the expected range due to a shift in product mix within the datacenter segment toward certain shorter-reach 40G transceivers that carried a lower gross margin. 
     
  • GAAP net income was $2.7 million, or $0.15 per diluted share, compared with net income of $0.7 million, or $0.05 per diluted share in the fourth quarter 2014, and net income of $2.7 million, or $0.16 per diluted share in the third quarter 2015.
     
  • Non-GAAP net income was $3.9 million, or $0.22 per diluted share, compared with non-GAAP net income of $4.0 million, or $0.27 per diluted share in the fourth quarter 2014, and non-GAAP net income of $6.7 million, or $0.40 per diluted share in the third quarter 2015.

             
Full Year 2015 Financial Summary

  • Total revenue grew to $189.9 million, up 46% compared with $130.4 million in 2014.
     
  • GAAP gross margin was 31.8% compared with 33.9% in 2014. Non-GAAP gross margin was 31.9% compared with 34.6% in 2014.
     
  • GAAP net income was $10.8 million, or $0.65 per diluted share, compared with net income of $4.3 million, or $0.28 per diluted share in 2014. Non-GAAP net income was $17.0 million, or $1.03 per diluted share, compared with non-GAAP net income of $10.4 million, or $0.68 per diluted share in 2014.
     
  • On December 31, 2015, cash, cash equivalents, short-term investments and restricted cash totaled $40.7 million, compared with the December 31, 2014 balance of $40.9 million.

A reconciliation between all GAAP and non-GAAP information referenced above is contained in the tables below. Please also refer to "Non-GAAP Financial Measures" below for a description of these non-GAAP financial measures.

First Quarter 2016 Business Outlook (+)

For the first quarter of 2016, the company currently expects:

  • Revenue in the range of $50 million to $54 million
  • Non-GAAP gross margin in the range of 31.0% to 32.5%
  • Non-GAAP net income in the range of $3.8 million to $5.0 million, and non-GAAP fully diluted earnings per share in the range of $0.21 to $0.28 using approximately 17.8 million shares

 (+) Please refer to the note below on forward-looking statements and the risks involved with such statements as well as the note on non-GAAP financial measures.

Conference Call Information

Applied Optoelectronics will host a conference call today, February 24, 2016 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its fourth quarter and year 2015 results and outlook for its first quarter of 2016. Open to the public, investors may access the call by dialing (412) 317-6789 A live audio webcast of the conference call along with supplemental financial information will also be accessible on the company's website at investors.ao-inc.com. Following the webcast, an archived version will be available on the website for one year. A telephonic replay of the call will be available two hours after the call and will run for five business days and may be accessed by dialing (412)-317-0088 and entering passcode 10079684.

Forward-Looking Information

This press release contains forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations, which could cause the company's actual results to differ materially from those anticipated in such forward-looking statements. These risks and uncertainties include but are not limited to: reduction in the size or quantity of customer orders; change in demand for the company's products due to industry conditions; changes in manufacturing operations; volatility in manufacturing costs; delays in shipments of products; disruptions in the supply chain; change in the rate of design wins or the rate of customer acceptance of new products; the company's reliance on a small number of customers for a substantial portion of its revenues; potential pricing pressure; a decline in demand for our customers' products or their rate of deployment of their products; general conditions in the internet datacenter, CATV or FTTH markets; changes in the world economy (particularly in the United States and China); the negative effects of seasonality; and other risks and uncertainties described more fully in the company's documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact the company's business are set forth in the "Risk Factors" section of the company's quarterly and annual reports on file with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "could," "would," "target," "seek," "aim," "believe," "predicts," "think," "objectives," "optimistic," "new," "goal," "strategy," "potential," "is likely," "will," "expect," "plan" "project," "permit"  or by other similar expressions that convey uncertainty of future events or outcomes. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements in this press release are based upon information available to us as of the date hereof, and qualified in their entirety by this cautionary statement. Except as required by law, we assume no obligation to update forward-looking statements for any reason after the date of this press release to conform these statements to actual results or to changes in the company's expectations.

Non-GAAP Financial Measures

We provide non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP earnings per share, and other non-GAAP measures like Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our overall operating performance. To arrive at our non-GAAP gross profit, we exclude stock-based compensation expense and non-recurring expenses, if any, from our GAAP gross profit. To arrive at our non-GAAP income (loss) from operations, we exclude all amortization of intangible assets, stock-based compensation expense and non-recurring expenses, if any, from our GAAP net income (loss) from operations. Included in our non-recurring expenses for the periods from 4Q14 to 4Q15 are items related to the relocation of our Taiwan plant as well as certain consulting fees. To arrive at Adjusted EBITDA, we exclude these same items and, additionally, exclude asset impairment charges, loss (gain) from disposal of idle assets, unrealized exchange loss (gain), interest (income) expense, on a net basis, provision for (benefit from) income taxes and depreciation expense, from our GAAP net income (loss). We believe that our non-GAAP measures are useful to investors in evaluating our operating performance for the following reasons:

  • We believe that elimination of items such as stock-based compensation expense, non-recurring expenses, amortization and tax is appropriate because treatment of these items may vary for reasons unrelated to our overall operating performance;
  • We believe that non-GAAP measures provide better comparability with our past financial performance, period-to-period results and with our peer companies, many of which also use similar non-GAAP financial measures; and
  • We anticipate that investors and securities analysts will utilize non-GAAP measures to evaluate our overall operating performance.

Adjusted EBITDA and other non-GAAP measures should not be considered as an alternative to gross profit, income (loss) from operations, net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA and other non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Adjusted EBITDA or such other non-GAAP measures in the same manner. We have not reconciled the non-GAAP measures included in our guidance to the appropriate GAAP financial measures because the GAAP measures are not accessible on a forward-looking basis.  GAAP measures that impact our non-GAAP financial measures may include stock-based compensation expense, non-recurring expenses, amortization of intangible assets, unrealized exchange loss (gain), asset impairment charges, and loss (gain) from disposal of idle assets. These GAAP measures cannot be reasonably predicted and may directly impact our non-GAAP gross margin, our non-GAAP net income and our non-GAAP fully-diluted earnings per share, although changes with respect to certain of these measures may offset other changes.  In addition, certain of these measures are out of our control.  Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.

About Applied Optoelectronics
Applied Optoelectronics, Inc. (AOI) is a leading developer and manufacturer of advanced optical products, including components, modules and equipment. AOI's products are the building blocks for broadband fiber access networks around the world, where they are used in the internet datacenter, CATV broadband and fiber-to-the-home markets. AOI supplies optical networking lasers, components and equipment to tier-1 customers in all three of these markets. In addition to its corporate headquarters, wafer fab and advanced engineering and production facilities in Sugar Land, TX, AOI has engineering and manufacturing facilities in Taipei, Taiwan and Ningbo, China. For additional information, visit www.ao-inc.com.

 

 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
  December 31, 2015 December 31, 2014
     
ASSETS    
CURRENT ASSETS    
Cash, Cash Equivalents and Short term investments $   40,679   $   40,873  
Accounts Receivable, Net     38,775       31,589  
Inventories     66,238       33,780  
Notes Receivable     -       980  
Other Receivables     4,121       1,659  
Prepaid Expenses and Other Current Assets     4,115       4,358  
Total Current Assets     153,928       113,239  
     
Property, Plant And Equipment, Net     109,699       64,808  
Land Use Rights, Net     854       930  
Intangible Assets, Net     3,900       3,833  
Other Assets     5,094       860  
TOTAL ASSETS $    273,475   $    183,670  
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Accounts Payable $   27,548   $   30,799  
Accrued Expenses     12,626       6,940  
Banker's Acceptance Payable     2,998       1,271  
Bank Loan-Short Term     27,316       8,205  
Current Portion of Long Term Debt     3,592       1,386  
Total Current Liabilities     74,080       48,601  
     
Notes Payable and Long Term Debt     33,997       19,057  
Other Long Term Liability     -       1,000  
TOTAL LIABILITIES     108,077       68,658  
     
STOCKHOLDERS' EQUITY    
TOTAL STOCKHOLDERS' EQUITY     165,398       115,012  
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $    273,475   $    183,670  
     

 

 Applied Optoelectronics, Inc.  
Preliminary Condensed Consolidated Statements of Operations  
(In thousands, except per share data)  
(Unaudited)  
  Three Months Ended
Dec 31,
  Twelve Months Ended
Dec 31,
 
 Revenue    2015     2014       2015     2014    
 CATV  $    11,000   $    14,749     $    53,675   $    47,389    
 Datacenter    38,769     14,923       123,286     64,453    
 FTTH    87     5,663       2,458     13,591    
 Other    3,096     1,056       10,484     5,016    
Total Revenue   52,952     36,391       189,903     130,449    
             
Total Cost of Goods Sold   37,334     24,132       129,450     86,203    
             
Total Gross Profit   15,618     12,259       60,453     44,246    
             
 Operating Expenses:             
 Research & Development    5,960     4,221       20,852     15,970    
 Sales and Marketing    1,633     1,591       6,381     6,043    
 General and administrative    5,271     5,131       19,771     17,095    
Total Operating Expenses   12,864     10,943       47,004     39,108    
             
Operating Income   2,754     1,316       13,449     5,138    
             
 Other Income (Expense):             
 Interest Income    92     89       328     369    
 Interest Expense    (242 )   (51 )     (1,018 )   (326 )  
 Other Income (Expense)    39     210       257     302    
 Foreign Exchange Gain (Loss)    (130 )   (851 )     (1,848 )   (1,001 )  
Total Other Income (Expenses):   (241 )   (602 )     (2,281 )   (656 )  
             
Net Income before Income Taxes   2,513     714       11,168     4,482    
             
Income Tax Benefit (Expense)   166     (12 )     (375 )   (199 )  
             
Net Income   2,679     702       10,793     4,283    
   
 Net income per share attributable to common stockholders                             
basic  $   0.16   $   0.05     $   0.69   $   0.30    
diluted  $   0.15   $   0.05     $   0.65   $   0.28    
             
 Weighted-average shares used to compute
  net income per share attributable to
  common stockholders 
       
basic    16,833     14,819       15,627     14,307    
diluted    17,691     15,207       16,533     15,187    
             

 

 Applied Optoelectronics, Inc.  
Reconciliation of Statements of Operations under GAAP and Non-GAAP  
(In thousands)  
(Unaudited)  
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
    2015     2014       2015     2014    
GAAP total gross profit $   15,618   $   12,259     $   60,453   $   44,246    
Share-based compensation expense   18     27       70     89    
Non Recurring expense     -     797       45     797    
Non-GAAP income from gross profit   15,636     13,083       60,568     45,132    
             
GAAP research and development expense   5,960     4,221       20,852     15,970    
Share-based compensation expense   65     31       231     115    
Non-GAAP research and development expense   5,895     4,190       20,621     15,855    
             
GAAP sales and marketing expense   1,633     1,591       6,381     6,043    
Share-based compensation expense   55     25       217     97    
Non-GAAP sales and marketing expense   1,578     1,566       6,164     5,946    
             
GAAP general and administrative expense   5,271     5,131       19,771     17,095    
Share-based compensation expense   415     483       1,602     1,759    
Amortization expense   106     98       412     356    
Non Recurring expense   235     788       807     1,561    
Non-GAAP general and administrative expense   4,515     3,762       16,950     13,419    
             
GAAP total operating expense   12,864     10,943       47,004     39,108    
Share-based compensation expense   535     539       2,050     1,971    
Amortization expense   106     98       412     356    
Non Recurring expense   235     788       807     1,561    
Non-GAAP total operating expense   11,988     9,518       43,735     35,220    
             
GAAP operating income    2,754     1,316       13,449     5,138    
Share-based compensation expense   553     566       2,120     2,060    
Amortization expense   106     98       412     356    
Non Recurring expense   235     1,585       852     2,358    
Non-GAAP operating income   3,648     3,565       16,833     9,912    
             
GAAP other income (loss)   (241 )   (602 )     (2,281 )   (656 )  
Loss (gain) from disposal of idle assets   54       -       54       -    
Unrealized exchange loss (gain)   299     1,094       2,567     1,300    
Non Recurring expense     -       -       153       -    
Non-GAAP other income (loss)   112     492       493     644    
             
GAAP net income    2,679     702       10,793     4,283    
Amortization of intangible assets   106     98       412     356    
Share-based compensation expense   553     566       2,120     2,060    
Non Recurring charges   235     1,585       1,005     2,358    
Loss (gain) from disposal of idle assets   54       -       54       -    
Unrealized exchange loss (gain)   299     1,094       2,567     1,300    
Non-GAAP net income   3,926     4,045       16,951     10,357    
             
GAAP net income    2,679     702       10,793     4,283    
Amortization of intangible assets   106     98       412     356    
Share-based compensation expense   553     566       2,120     2,060    
Depreciation expense   2,584     1,722       9,012     5,813    
Non recurring charges   235     1,585       1,005     2,358    
Loss (gain) from disposal of idle assets   54       -       54       -    
Unrealized exchange loss (gain)   299     1,094       2,567     1,300    
Interest (income) expense, net   150     (39 )     690     (43 )  
Tax (benefit) expense related to the above   (166 )   12       375     199    
Adjusted EBITDA $   6,494   $   5,740     $   27,028   $   16,326    
             

 

 

 

 

Investor Relations Contacts:

The Blueshirt Group, Investor Relations
Maria Riley
+1-415-217-7722                    
ir@ao-inc.com