Applied Optoelectronics Reports Second Quarter 2021 Results

August 5, 2021

SUGAR LAND, Texas, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (NASDAQ: AAOI), a leading provider of fiber-optic access network products for the internet datacenter, cable broadband, telecom and fiber-to-the-home (FTTH) markets, today announced financial results for its second quarter 2021 ended June 30, 2021.

“We are pleased with the continued strength we are seeing in our CATV product sales, which recorded significant year over year and sequential growth to become our largest product type in the second quarter,” said Dr. Thompson Lin, Applied Optoelectronics Inc. Founder, President and Chief Executive Officer. “While we continue to see softness in the datacenter market as we expected, we are delighted to report that we secured two design wins for our 400G products during the second quarter, and expect that increased contribution from our 400G products will drive a recovery in our datacenter business.”

Second Quarter 2021 Financial Summary

  • GAAP revenue was $54.2 million, compared with $65.2 million in the second quarter of 2020 and $49.7 million in the first quarter of 2021.
  • GAAP gross margin was 19.9%, compared with 21.1% in the second quarter of 2020 and 21.6% in the first quarter of 2021. Non-GAAP gross margin was 25.0%, compared with 23.1% in the second quarter of 2020 and 24.6% in the first quarter of 2021.
  • GAAP net loss was $8.2 million, or $0.31 per basic share, compared with net loss of $18.6 million, or $0.89 per basic share in the second quarter of 2020, and a net loss of $15.6 million, or $0.59 per basic share in the first quarter of 2021.
  • Non-GAAP net loss was $4.1 million, or $0.15 per basic share, compared with non-GAAP net loss of $5.0 million, or $0.24 per basic share in the second quarter of 2020, and a non-GAAP net loss of $5.5 million, or $0.21 per basic share in the first quarter of 2021.

A reconciliation between all GAAP and non-GAAP information referenced above for the second quarters of 2021 and 2020 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 2021 Business Outlook (+)

For the third quarter of 2021, the company currently expects:

  • Revenue in the range of $ 51 million to $ 56 million.
  • Non-GAAP gross margin in the range of 19.5% to 21.5%.
  • Non-GAAP net loss in the range of $ 6.9 million to $ 9 million, and non-GAAP loss per share in the range of $0.25 to $0.33 using approximately 27.7 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 August 5, 2021 to discuss its second quarter 2021 results and outlook for its third quarter 2021 at 4:30 p.m. Eastern time / 3:30 p.m. Central time. Open to the public, investors may access the call by dialing 844-890-1794 (domestic) or 412-717-9586 (international). 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 877-344-7529 (domestic) or 412-317-0088 (international) and entering passcode 10157944.

Forward-Looking Information

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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," "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. These statements include management’s beliefs and expectations related to our outlook for the third quarter of 2021. Such forward-looking statements reflect the views of management at the time such statements are made. 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: the impact of the COVID-19 pandemic on our business and financial results; 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, cable television (CATV) broadband, telecom, or fiber-to-the-home (FTTH) markets; changes in the world economy (particularly in the United States and China); changes in the regulation and taxation of international trade, including the imposition of tariffs; changes in currency exchange rates; 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, including our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. 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. 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 margin, we exclude stock-based compensation expense, expenses associated with discontinued products, and non-recurring expenses, if any, from our GAAP gross margin. To arrive at our non-GAAP net income (loss), we exclude all amortization of intangible assets, stock-based compensation expense, non-recurring expenses, unrealized foreign exchange gain (loss), losses from the disposal of idle assets, if any, non-GAAP tax expenses (benefits), expenses associated with discontinued products, if any, and the effects of forgiveness of our PPP loan from our GAAP net income (loss). Included in our non-recurring expenses in Q2 2021 and Q2 2020 are certain one-time legal (if any) and consulting fees (if any) and employee severance expenses (if any). In computing our non-GAAP income tax expense (benefit), we have applied an estimate of our annual effective income tax rate and applied it to our net income before income taxes.   Our non-GAAP earnings per share is calculated by dividing our non-GAAP net income by the fully diluted share count (for periods in which non-GAAP net income is positive) or basic share count (for periods in which our non-GAAP net income is negative). 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 amortization of intangible assets, stock-based compensation expense, non-recurring revenue, expenses and other income, losses from the disposal of idle assets, unrealized foreign exchange gain or loss, unamortized debt issuance costs associated with the extinguishment of debt, and depreciation on certain equipment undergoing reconfiguration is appropriate because treatment of these items may vary for reasons unrelated to our overall operating performance;
  • We believe that elimination of expenses associated with discontinued products, including depreciation and inventory obsolescence is appropriate because these expenses are not indicative of our ongoing operations;
  • We believe that estimating non-GAAP income taxes allows comparison with prior periods and provides additional information regarding the generation of potential future deferred tax assets;
  • 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 as a supplement to GAAP measures to evaluate our overall operating performance.

A reconciliation of our GAAP net income (loss) and GAAP earnings (loss) per share for the quarter ended June 30, 2021 to our non-GAAP net income (loss) and earnings (loss) per share is provided below, together with corresponding reconciliations for the quarter period ended June 30, 2020.   A reconciliation of our GAAP net income (loss) and GAAP earnings (loss) per share for the quarter ended June 30, 2021 to our non-GAAP net income (loss) and earnings (loss) per share is provided in our earnings release dated August 5, 2021, which was filed with the Securities and Exchange Commission with a Current Report on Form 8-K filed on August 5, 2021.

Non-GAAP measures should not be considered as an alternative to net income (loss), earnings (loss) per share, 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 are not readily determinable 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, telecom and FTTH 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

Investor Relations Contacts:

The Blueshirt Group, Investor Relations
Monica Gould
+1-212-871-3927                
ir@ao-inc.com

 
 
 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
  June 30, 2021 December 31, 2020
     
ASSETS    
CURRENT ASSETS    
Cash, Cash Equivalents and Restricted Cash $ 50,499   $ 50,114
Accounts Receivable, Net   48,404     43,042
Notes receivable   3,819     401
Inventories   100,399     110,397
Prepaid Income Tax   2     2
Prepaid Expenses and Other Current Assets   5,101     5,213
Total Current Assets   208,224     209,169
     
Property, Plant And Equipment, Net   246,797     252,984
Land Use Rights, Net   5,846     5,854
Right of Use Asset   7,576     7,817
Intangible Assets, Net   3,888     3,999
Other Assets   813     982
TOTAL ASSETS $ 473,144   $ 480,805
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Accounts Payable $ 25,593   $ 29,482
Accrued Expenses   15,509     18,511
Current Lease Liability   1,038     1,030
Bank Acceptance Payable   6,469     15,860
Current Portion of Notes Payable and Long Term Debt   41,876     38,265
Total Current Liabilities   90,485     103,148
     
Notes Payable and Long Term Debt   19,360     13,904
Convertible Senior Notes   78,264     77,854
Other Long-Term Liabilities   7,744     8,008
TOTAL LIABILITIES   195,853     202,914
     
STOCKHOLDERS' EQUITY    
TOTAL STOCKHOLDERS' EQUITY   277,291     277,891
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 473,144   $ 480,805
     

 

 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
  Three Months Ended
June 30,
  Six Months Ended
June 30,
Revenue 2021   2020     2021   2020  
Datacenter 22,392   52,533     48,331   85,797  
CATV 27,599   6,141     46,238   10,364  
Telecom 3,333   6,170     7,811   8,730  
FTTH 298   1     722   1  
Other 567   377     788   797  
Total Revenue 54,189   65,222     103,890   105,689  
           
Total Cost of Goods Sold 43,411   51,486     82,393   85,615  
           
Total Gross Profit 10,778   13,736     21,497   20,074  
           
Operating Expenses:          
Research and Development 10,914   10,803     21,842   21,361  
Sales and Marketing 2,832   3,430     5,792   6,366  
General and Administrative 10,681   10,611     21,550   21,249  
Total Operating Expenses 24,427   24,844     49,184   48,976  
           
Operating Loss (13,649 ) (11,108 )   (27,687 ) (28,902 )
           
Other Income (Expense):          
Interest Income 16   47     32   194  
Interest Expense (1,367 ) (1,489 )   (2,798 ) (2,944 )
Other Income 6,370   861     6,410   979  
Foreign Exchange Gain (Loss) 427   113     218   252  
Total Other Expense: 5,446   (468 )   3,862   (1,519 )
           
Net loss before Income Taxes (8,203 ) (11,576 )   (23,825 ) (30,421 )
           
Income Tax Expense -
  (7,024 )   0   (4,976 )
           
Net loss (8,203 ) (18,600 )   (23,825 ) (35,397 )
Net loss per share attributable to common stockholders
basic $ (0.31 ) $ (0.89 )   $ (0.89 ) $ (1.72 )
diluted $ (0.31 ) $ (0.89 )   $ (0.89 ) $ (1.72 )
           
Weighted-average shares used to compute net loss per share attributable to common stockholders      
basic 26,850   20,858     26,637   20,533  
diluted 26,850   20,858     26,637   20,533  
           

 


 Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands, except per share data)
(Unaudited)
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2021   2020     2021   2020  
GAAP total gross profit (a) 10,778   13,736     21,497   20,074  
Non-recurring customer credit -
  -
    -   -  
Share-based compensation expense 267   237     468   483  
Non-recurring expense 16   1     34   972  
Expenses associated with discontinued products 2,461   1,077     3,750   1,431  
Non-GAAP total gross profit (a) 13,522   15,051     25,749   22,960  
           
GAAP net loss (8,203 ) (18,600 )   (23,825 ) (35,397 )
Amortization of intangible assets 152   143     303   285  
Share-based compensation expense 3,274   3,302     5,793   6,540  
Non-recurring (income) expense (6,246 ) (463 )   (5,744 ) 806  
Expenses associated with discontinued products 2,461   1,077     3,750   1,431  
Non-cash expenses associated with discontinued products 1,213   953     2,427   2,210  
Unrealized exchange loss (gain) (133 ) 43     710   (127 )
Non-GAAP tax benefit 3,346   8,562     6,938   10,477  
Non-GAAP net loss (4,136 ) (4,983 )   (9,648 ) (13,775 )
           
GAAP diluted net loss per share (0.31 ) (0.89 )   (0.89 ) (1.72 )
Amortization of intangible assets 0.01   0.01     0.01   0.01  
Share-based compensation expense 0.12   0.16     0.22   0.32  
Non-recurring (income) expense (0.23 ) (0.02 )   (0.22 ) 0.04  
Expenses associated with discontinued products 0.09   0.05     0.14   0.07  
Non-cash expenses associated with discontinued products 0.05   0.04     0.09   0.10  
Unrealized exchange loss (gain) (0.00 ) 0.00     0.03   (0.01 )
Non-GAAP tax benefit 0.12   0.41     0.26   0.51
 
Non-GAAP diluted net loss per share (0.15 ) (0.24 )   (0.36 ) (0.68 )
           
Shares used to compute diluted loss per share 26,850   20,858     26,637   20,533  
Shares used to compute diluted earnings per share 26,850   20,858     26,637   20,533  
           
(a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).      

Primary Logo

Source: Applied Optoelectronics, Inc.