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February 23, 2017

Applied Optoelectronics Reports Fourth Quarter and Year 2016 Results

SUGAR LAND, Texas, Feb. 23, 2017 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc.(NASDAQ:AAOI), a leading provider of fiber-optic network products for the internet datacenter, cable broadband, fiber-to-the-home and telecom markets, today announced financial results for its fourth quarter and year ended Dec. 31, 2016.

"AOI achieved another record year driven by strong demand for our market-leading datacenter products and continued execution by the AOI team. We believe our record performance further demonstrates our growing market share in advanced optics and our team's ability to generate manufacturing efficiencies that lead to margin improvement," said Dr. Thompson Lin, Applied Optoelectronics, Inc. founder, president and CEO. "Our ability to internally manufacture lasers and light engines provides us with cost-leadership advantages, a faster time to market, and the ability to quickly scale to demand. Looking ahead, as the 100G transition accelerates this year, we see the opportunity to build on our momentum and expand our market leadership." 

Fourth Quarter 2016 Financial Summary

  • Total revenue increased to $84.9 million, up 60% compared with $53.0 million in the fourth quarter 2015 and up 21% compared with $70.1 million in the third quarter of 2016.
     
  • GAAP gross margin increased to 38.0%, up from 29.5% in the fourth quarter 2015 and 33.0% in the third quarter of 2016. Non-GAAP gross margin increased to 38.0%, up from 29.5% in the fourth quarter 2015 and 33.1% in the third quarter of 2016.
     
  • GAAP net income increased to $14.2 million, or $0.77 per diluted share, compared with net income of $2.7 million, or $0.15 per diluted share in the fourth quarter 2015, and net income of $17.7 million, or $0.97 per diluted share in the third quarter of 2016.
     
  • Non-GAAP net income increased to $15.5 million, or $0.84 per diluted share, compared with non-GAAP net income of $3.9 million, or $0.22 per diluted share in the fourth quarter 2015, and non-GAAP net income of $7.0 million, or $0.38 per diluted share in the third quarter of 2016.

Year 2016 Financial Summary

  • Total revenue grew to $260.7 million, up 37% compared with $189.9 million in 2015.
     
  • GAAP gross margin increased to 33.4%, up from 31.8% in 2015. Non-GAAP gross margin increased to 33.4% compared with 31.9% in 2015.
     
  • GAAP net income increased to $31.2 million, or $1.76 per diluted share, compared with net income of $10.8 million, or $0.65 per diluted share in 2015. Non-GAAP net income increased to $24.6 million, or $1.39 per diluted share, compared with non-GAAP net income of $17.0 million, or $1.03 per diluted share in 2015.
     
  • On December 31, 2016, cash, cash equivalents, short-term investments and restricted cash totaled $52.0 million, compared with the December 31, 2015 balance of $40.7 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 2017 Business Outlook (+)

For the first quarter of 2017, the company currently expects:

  • Revenue in the range of $87 million to $91 million.
  • Non-GAAP gross margin in the range of 38% to 40%.
  • Non-GAAP net income in the range of $15.5 million to $17.2 million, and non-GAAP fully diluted earnings per share in the range of $0.80 to $0.88 using approximately 19.5 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

The company will host a conference call and webcast for analysts and investors on Feb. 23, 2017 to discuss its fourth quarter and year 2016 results and outlook for its first quarter of 2017 at 4:30 p.m. Eastern time / 3:30 p.m. Central time. 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 one hour after the call and will run for five business days and may be accessed by dialing (412) 317-0088 and entering passcode 10098914.

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, FTTH or Telecom 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 net income (loss), and non-GAAP earnings per share 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 1Q16 to 4Q16 are certain consulting fees, items related to the relocation of our plant in Texas, realized loss on the maturity of certain foreign currency investments, and a tax benefit arising from the removal of our valuation allowance.  Our non-GAAP earnings per share is calculated by dividing our non-GAAP net income by the fully diluted share count. 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 and non-recurring expenses 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.

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 non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate 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 were 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, fiber-to-the-home and telecom markets. AOI supplies optical networking lasers, components and equipment to tier-1 customers in all four 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, 2016     December 31, 2015  
             
ASSETS            
CURRENT ASSETS            
Cash, Cash Equivalents and Short term investments   $   52,000     $   40,679  
Accounts Receivable, Net       49,766         38,775  
Inventories       51,817         66,238  
Other Receivables       1,501         4,121  
Prepaid Expenses and Other Current Assets       2,468         4,115  
Total Current Assets       157,552         153,928  
       
Cash restricted for Construction in Progress       8       -  
Property, Plant And Equipment, Net       144,098         109,699  
Land Use Rights, Net       778         854  
Intangible Assets, Net       3,993         3,900  
Deferred Income Tax Assets       11,421       -  
Other Assets       4,468         5,094  
TOTAL ASSETS   $   322,318     $   273,475  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
CURRENT LIABILITIES      
Accounts Payable   $   36,375     $   28,668  
Accrued Expenses       15,426         11,506  
Bank Acceptance Payable       307         2,998  
Bank Loan-Short Term     -         27,316  
Current Portion of Long Term Debt       7,865         3,592  
Total Current Liabilities       59,973         74,080  
       
Notes Payable and Long Term Debt       34,961         33,997  
TOTAL LIABILITIES       94,934         108,077  
       
STOCKHOLDERS' EQUITY      
Total Preferred Stock     -       -  
Common Stock       18         17  
Additional Paid-in Capital       265,264         233,336  
Cumulative Translation Adjustment       (885 )       292  
Accumulated Deficit       (37,013 )       (68,247 )
TOTAL STOCKHOLDERS' EQUITY       227,384         165,398  
       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $   322,318     $   273,475  
       

 

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     2016     2015       2016     2015  
 CATV   $   13,424   $   11,000     $   43,567   $   53,675  
 Datacenter     68,105     38,769       201,314     123,286  
 FTTH     234     87       1,567     2,458  
 Other     3,137     3,096       14,265     10,484  
Total Revenue     84,900     52,952       260,713     189,903  
             
Total Cost of Goods Sold     52,662     37,334       173,759     129,450  
             
Total Gross Profit     32,238     15,618       86,954     60,453  
             
 Operating Expenses:            
 Research and Development     7,208     5,960       31,780     20,852  
 Sales and Marketing     1,743     1,633       6,627     6,381  
 General and Administrative     7,443     5,271       25,527     19,771  
Total Operating Expenses     16,394     12,864       63,934     47,004  
             
Operating Income     15,844     2,754       23,020     13,449  
             
 Other Income (Expense):            
 Interest Income     41     92       247     328  
 Interest Expense     (404 )   (242 )     (1,717 )   (1,018 )
 Other Income (Expense)     (12 )   39       70     257  
 Foreign Exchange Gain (Loss)     (3 )   (130 )     (617 )   (1,848 )
Total Other Income (Expense):     (378 )   (241 )     (2,017 )   (2,281 )
             
Net Income before Income Taxes     15,466     2,513       21,003     11,168  
             
Income Tax Benefit (Expense)     (1,241 )   166       10,231     (375 )
             
Net Income     14,225     2,679       31,234     10,793  
 Net income per share attributable to common stockholders
 basic   $   0.81   $   0.16     $   1.82   $   0.69  
 diluted   $   0.77   $   0.15     $   1.76   $   0.65  
             
 Weighted-average shares used to compute
  net income per share attributable to
  common stockholders
     
 basic     17,631     16,833       17,202     15,627  
 diluted     18,513     17,691       17,713     16,533  
             

 

Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands)
(Unaudited)
    Three Months Ended
Dec 31,
  Twelve Months Ended
Dec 31,
      2016   2015     2016   2015
GAAP total gross profit   $   32,238 $   15,618   $   86,954 $   60,453
Share-based compensation expense     51   18     190   70
Non-recurring expense     0   0     0   45
Non-GAAP income from gross profit     32,289   15,636     87,144   60,568
             
GAAP research and development expense     7,208   5,960     31,780   20,852
Share-based compensation expense     154   65     591   231
Non-GAAP research and development expense     7,054   5,895     31,189   20,621
             
GAAP sales and marketing expense     1,743   1,633     6,627   6,381
Share-based compensation expense     93   55     358   217
Non-GAAP sales and marketing expense     1,650   1,578     6,269   6,164
             
GAAP general and administrative expense     7,443   5,271     25,527   19,771
Share-based compensation expense     705   415     2,693   1,602
Amortization expense     117   106     454   412
Non-recurring expense     53   235     775   807
Non-GAAP general and administrative expense     6,568   4,515     21,605   16,950
             
GAAP total operating expense     16,394   12,864     63,934   47,004
Share-based compensation expense     952   535     3,642   2,050
Amortization expense     117   106     454   412
Non-recurring expense     53   235     775   807
Non-GAAP total operating expense     15,272   11,988     59,063   43,735
             
GAAP operating income     15,844   2,754     23,020   13,449
Share-based compensation expense     1,003   553     3,832   2,120
Amortization expense     117   106     454   412
Non-recurring expense     53   235     775   852
Non-GAAP operating income     17,017   3,648     28,081   16,833

 

Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands)
(Unaudited)
    Three Months Ended
Dec 31,
  Twelve Months Ended
Dec 31,
      2016     2015       2016     2015  
             
GAAP other income (loss)     (378 )   (241 )     (2,017 )   (2,281 )
Loss from disposal of idle assets     37     54       81     54  
Unrealized exchange loss (gain)     46     299       (3,639 )   2,567  
Non-recurring expense     0     0       3,736     153  
Non-GAAP other income (loss)     (295 )   112       (1,839 )   493  
             
GAAP net income     14,225     2,679       31,234     10,793  
Amortization of intangible assets     117     106       454     412  
Share-based compensation expense     1,003     553       3,832     2,120  
Non-recurring charges     53     235       4,511     1,005  
Loss from disposal of idle assets     37     54       81     54  
Unrealized exchange loss (gain)     46     299       (3,639 )   2,567  
Non-recurring tax benefit     0     0       (11,856 )   0  
Non-GAAP net income     15,481     3,926       24,617     16,951  
             
GAAP net income     14,225     2,679       31,234     10,793  
Amortization of intangible assets     117     106       454     412  
Share-based compensation expense     1,003     553       3,832     2,120  
Depreciation expense     4,146     2,584       13,734     9,012  
Non-recurring charges     53     235       4,511     1,005  
Loss from disposal of idle assets     37     54       81     54  
Unrealized exchange loss (gain)     46     299       (3,639 )   2,567  
Interest expense, net     363     150       1,470     690  
Tax (benefit) expense related to the above     1,241     (166 )     (10,231 )   375  
Adjusted EBITDA   $   21,231   $   6,494     $   41,446   $   27,028  
             

 

Investor Relations Contacts:



The Blueshirt Group, Investor Relations

Maria Riley & Chelsea Lish

+1-415-217-7722                   

ir@ao-inc.com

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Source: Applied Optoelectronics, Inc.

 

 

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