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August 4, 2016

Applied Optoelectronics Reports Second Quarter 2016 Results

SUGAR LAND, Texas, Aug. 04, 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 second quarter ended June 30, 2016.

"We achieved top and bottom-line results well above our guidance and we are pleased with the progress we made during the quarter. Our results were driven by continued strong demand for our market-leading datacenter products, where we generated our fifth consecutive quarter of record revenue, and an improvement in demand for our CATV products," said Dr. Thompson Lin, Applied Optoelectronics, Inc. founder, president and CEO. "Our improved performance reflects our commitment to operational excellence and I am confident we are on the right path to build on our momentum in the datacenter and CATV markets and achieve our long-term financial objectives."

Second Quarter 2016 Financial Summary

  • Total revenue was $55.3 million, up 11% compared with $49.6 million in the second quarter 2015 and up 10% compared with $50.4 million in the first quarter of 2016.
     
  • GAAP gross margin was 31.3% compared with 33.7% in the second quarter 2015 and 28.3% in the first quarter of 2016. Non-GAAP gross margin was 31.4% compared with 33.7% in the second quarter 2015 and 28.3% in the first quarter of 2016.
     
  • GAAP net income was $0.6 million, or $0.03 per diluted share, compared with net income of $6.1 million, or $0.38 per diluted share in the second quarter 2015, and net loss of $1.3 million, or $0.08 per basic share in the first quarter of 2016.
     
  • Non-GAAP net income was $2.8 million, or $0.16 per diluted share, compared with non-GAAP net income of $6.1 million, or $0.38 per diluted share in the second quarter 2015, and non-GAAP net loss of $0.6 million, or $0.04 per basic share in the first quarter of 2016.

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.

Third Quarter 2016 Business Outlook (+)

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

  • Revenue in the range of $56 million to $59 million.
  • Non-GAAP gross margin in the range of 30.5% to 32%.
  • Non-GAAP net income in the range of $2.9 million to $3.8 million, and non-GAAP fully diluted earnings per share in the range of $0.16 to $0.21 using approximately 18.0 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, Aug. 4, 2016 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its second quarter results and outlook for its third 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 one hour after the call and will run for five business days and may be accessed by dialing (412) 317-0088 and entering passcode 10089194.

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 1Q16 to 2Q16 are certain consulting fees, items related to the relocation of our plant in Texas, and realized loss on the maturity of foreign currency investment. 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). 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, 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)  
   
  June 30, 2016   December 31, 2015  
       
ASSETS      
CURRENT ASSETS      
Cash, Cash Equivalents and Short term investments $   47,268   $   40,679    
Accounts Receivable, Net     41,536       38,775    
Inventories     59,833       66,238    
Other Receivables     2,069       4,121    
Prepaid Expenses and Other Current Assets     3,005       4,115    
Total Current Assets     153,711       153,928    
       
Property, Plant And Equipment, Net     136,828       109,699    
Land Use Rights, Net     825       854    
Intangible Assets, net     3,962       3,900    
Other Assets     6,040       5,094    
TOTAL ASSETS $    301,366   $    273,475    
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
CURRENT LIABILITIES      
Accounts Payable $   33,130   $   28,668    
Accrued Expenses     13,762       11,506    
Banker's Acceptance Payable     2,435       2,998    
Bank Loan-Short Term     21,525       27,316    
Current Portion of Long Term Debt     7,303       3,592    
Total Current Liabilities     78,155       74,080    
       
Notes Payable and Long Term Debt     56,040       33,997    
Other Long Term Liability     -        -     
TOTAL LIABILITIES     134,195       108,077    
       
STOCKHOLDERS' EQUITY      
Total Preferred Stock     -        -     
Common Stock     17       17    
Additional Paid-in Capital     235,338       233,336    
Cumulative Translation Adjustment     790       292    
Accumulated Deficit     (68,974 )     (68,247 )  
TOTAL STOCKHOLDERS' EQUITY     167,171       165,398    
       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $    301,366   $    273,475    
       

 

 Applied Optoelectronics, Inc.  
Preliminary Condensed Consolidated Statements of Operations  
(In thousands, except per share data)  
(Unaudited)  
  Three Months Ended
Jun 30,
  Six Months Ended
Jun 30,
 
 Revenue    2016     2015       2016     2015    
 CATV  $    9,521   $    16,428     $    17,252   $    28,442    
 Datacenter    41,280     29,610       80,260     45,926    
 FTTH    436     1,287       857     1,409    
 Other    4,017     2,307       7,307     4,089    
Total Revenue   55,254     49,632       105,676     79,866    
             
Total Cost of Goods Sold   37,952     32,901       74,121     53,084    
             
Total Gross Profit   17,302     16,731       31,555     26,782    
             
 Operating Expenses:             
 Research & Development    7,814     4,701       16,210     9,506    
 Sales and Marketing    1,610     1,607       3,290     3,166    
 General and administrative    5,906     4,534       11,639     9,537    
Total Operating Expenses   15,330     10,842       31,139     22,209    
             
Operating Income (Loss)   1,972     5,889       416     4,573    
             
 Other Income (Expense):             
 Interest Income    65     80       166     154    
 Interest Expense    (450 )   (300 )     (851 )   (425 )  
 Other Income (Expense)    (55 )   (132 )     (53 )   198    
 Foreign Exchange Gain (Loss)    (877 )   687       (545 )   1,049    
Total Other Income (Expense):   (1,317 )   335       (1,283 )   976    
             
Net Income (Loss) before Income Taxes   655     6,224       (867 )   5,549    
             
Income Tax Benefit (Expense)   (52 )   (135 )     140     (135 )  
             
Net Income (Loss)   603     6,089       (727 )   5,414    
   
 Net income (loss) per share attributable to common stockholders   
 basic  $   0.04   $   0.41     $   (0.04 ) $   0.36    
 diluted  $   0.03   $   0.38     $   (0.04 ) $   0.34    
             
 Weighted-average shares used to compute
  net income(loss)  per share attributable to
  common stockholders 
       
 basic    17,091     14,936       17,011     14,891    
 diluted    17,455     15,872       17,011     16,015    
             

 

 Applied Optoelectronics, Inc.  
Reconciliation of Statements of Operations under GAAP and Non-GAAP  
(In thousands)  
(Unaudited)  
  Three Months Ended
Jun 30,
  Six Months Ended
Jun 30,
 
    2016     2015       2016     2015    
GAAP total gross profit $   17,302   $   16,731     $   31,555   $   26,782    
Share-based compensation expense   50     19       87     35    
Non-GAAP income from gross profit   17,352     16,750       31,642     26,817    
             
GAAP research and development expense   7,814     4,701       16,210     9,506    
Share-based compensation expense   154     57       272     111    
Non-GAAP research and development expense   7,660     4,644       15,938     9,395    
             
GAAP sales and marketing expense   1,610     1,607       3,290     3,166    
Share-based compensation expense   95     54       168     104    
Non-GAAP sales and marketing expense   1,515     1,553       3,122     3,062    
             
GAAP general and administrative expense   5,906     4,534       11,639     9,537    
Share-based compensation expense   676     404       1,256     800    
Amortization expense   112     102       222     202    
Non-recurring expense   415     54       588     435    
Non-GAAP general and administrative expense   4,703     3,974       9,573     8,100    
             
GAAP total operating expense   15,330     10,842       31,139     22,209    
Share-based compensation expense   925     515       1,696     1,015    
Amortization expense   112     102       222     202    
Non-recurring expense   415     54       588     435    
Non-GAAP total operating expense   13,878     10,171       28,633     20,557    
             
GAAP operating income    1,972     5,889       416     4,573    
Share-based compensation expense   975     534       1,783     1,050    
Amortization expense   112     102       222     202    
Non-recurring expense   415     54       588     435    
Non-GAAP operating income   3,474     6,579       3,009     6,260    
             
GAAP other income (loss)   (1,317 )   335       (1,283 )   976    
Loss (gain) from disposal of idle assets   40     0       40     0    
Unrealized exchange loss (gain)   42     (848 )     (368 )   (892 )  
Non-recurring expense   642     153       642     153    
Non-GAAP other income (loss)   (593 )   (360 )     (969 )   237    
             
GAAP net income (loss)   603     6,089       (727 )   5,414    
Amortization of intangible assets   112     102       222     202    
Share-based compensation expense   975     534       1,783     1,050    
Non-recurring charges   1,057     207       1,230     588    
Loss (gain) from disposal of idle assets   40     0       40     0    
Unrealized exchange loss (gain)   42     (848 )     (368 )   (892 )  
Non-GAAP net income   2,829     6,084       2,180     6,362    
             
GAAP net income (loss)   603     6,089       (727 )   5,414    
Amortization of intangible assets   112     102       222     202    
Share-based compensation expense   975     534       1,783     1,050    
Depreciation expense   3,172     2,176       6,019     4,111    
Non-recurring charges   1,057     207       1,230     588    
Loss (gain) from disposal of idle assets   40     0       40     0    
Unrealized exchange loss (gain)   42     (848 )     (368 )   (892 )  
Interest (income) expense, net   385     220       685     271    
Taxes related to the above   52     135       (140 )   135    
Adjusted EBITDA $   6,438   $   8,615     $   8,744   $   10,879    
             

 

 

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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