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November 3, 2016

Applied Optoelectronics Reports Third Quarter 2016 Results

SUGAR LAND, Texas, Nov. 03, 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 third quarter ended Sept. 30, 2016.

"We delivered a strong third quarter with record revenue and achieved top and bottom-line results well above our guidance. Our results were driven by accelerated demand for our market-leading datacenter products, where we generated our sixth consecutive quarter of record revenue, and strong execution by the AOI team," said Dr. Thompson Lin, Applied Optoelectronics, Inc. founder, president and CEO. "With our expansion facility fully operational in Sugar Land we were able to scale to demand and I am very proud of our team's ability to execute in this increasing-demand environment. We remain focused on building on our momentum to drive growth and achieve our long-term financial objectives."

Third Quarter 2016 Financial Summary

  • Total revenue was $70.1 million, up 23% compared with $57.1 million in the third quarter 2015 and up 27% compared with $55.3 million in the second quarter of 2016.
  • GAAP gross margin was 33.0% compared with 31.6% in the third quarter 2015 and 31.3% in the second quarter of 2016. Non-GAAP gross margin was 33.1% compared with 31.7% in the third quarter 2015 and 31.4% in the second quarter of 2016.
  • GAAP net income was $17.7 million, or $0.97 per diluted share, compared with net income of $2.7 million, or $0.16 per diluted share in the third quarter 2015, and net income of $0.6 million, or $0.03 per diluted share in the second quarter of 2016.
  • Non-GAAP net income was $7.0 million, or $0.38 per diluted share, compared with non-GAAP net income of $6.7 million, or $0.40 per diluted share in the third quarter 2015, and non-GAAP net income of $2.8 million, or $0.16 per diluted share in the second 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.

Fourth Quarter 2016 Business Outlook (+)

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

  • Revenue in the range of $75 million to $79 million.
  • Non-GAAP gross margin in the range of 34% to 35.5%.
  • Non-GAAP net income in the range of $8.5 million to $9.5 million, and non-GAAP fully diluted earnings per share in the range of $0.46 to $0.51 using approximately 18.5 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

Applied Optoelectronics will host a conference call today, Nov. 3, 2016 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its third quarter results and outlook for its fourth 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 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 10094453.

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 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 3Q16 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. 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, 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

 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Balance Sheets
(In thousands)
 September 30, 2016December 31, 2015 
Cash, Cash Equivalents and Short term investments$  60,239 $  40,679  
Accounts Receivable, Net   44,242    38,775  
Inventories   54,919    66,238  
Other Receivables   2,259    4,121  
Prepaid Expenses and Other Current Assets   2,502    4,115  
Total Current Assets   164,161     153,928   
Cash restricted for Construction in Progress   847    -   
Property, Plant And Equipment, Net   140,516    109,699  
Land Use Rights, Net   814    854  
Intangible Assets, net   4,004    3,900  
Deferred Income Tax Assets   11,856    -    
Other Assets   4,593    5,094  
TOTAL ASSETS$   326,791  $   273,475   
Accounts Payable$  32,413 $  28,668  
Accrued Expenses   11,316    11,506  
Banker's Acceptance Payable   3,231    2,998  
Bank Loan-Short Term   17,346    27,316  
Current Portion of Long Term Debt   7,746    3,592  
Total Current Liabilities   72,052     74,080   
Notes Payable and Long Term Debt   67,201    33,997  
TOTAL LIABILITIES   139,253     108,077   
Total Preferred Stock   -     -   
Common Stock   17    17  
Additional Paid-in Capital   236,646    233,336  
Cumulative Translation Adjustment   2,113    292  
Accumulated Deficit   (51,238)   (68,247) 
TOTAL STOCKHOLDERS' EQUITY   187,538     165,398   


 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 Revenue  2016  2015   2016  2015 
 CATV $   12,891  $   14,233    $   30,143  $   42,675  
 Datacenter  52,949  38,591   133,209  84,517 
 FTTH  476  962    1,333  2,371 
 Other  3,821  3,299   11,128  7,388 
Total Revenue 70,137  57,085   175,813  136,951 
Total Cost of Goods Sold 46,976  39,032   121,097  92,116 
Total Gross Profit 23,161  18,053   54,716  44,835 
 Operating Expenses:      
 Research & Development  8,362  5,386   24,572  14,892 
 Sales and Marketing  1,594  1,582   4,884  4,748 
 General and administrative  6,445  4,963   18,084  14,500 
Total Operating Expenses 16,401  11,931   47,540  34,140 
Operating Income 6,760  6,122    7,176  10,695 
 Other Income (Expense):      
 Interest Income  40  82   206  236 
 Interest Expense  (462) (351)  (1,313) (776)
 Other Income  135  20   82  217 
 Foreign Exchange Loss  (69) (2,767)  (614) (1,717)
Total Other Expense: (356) (3,016)  (1,639) (2,040)
Net Income before Income Taxes 6,404  3,106   5,537  8,655 
Income Tax Benefit (Expense) 11,332  (406)  11,472  (541)
Net Income 17,736  2,700   17,009  8,114 

 Net income per share attributable to common stockholders 
 basic $  1.03 $  0.17  $  1.00 $  0.53 
 diluted $  0.97 $  0.16  $  0.95 $  0.50 
 Weighted-average shares used to compute
  net income per share attributable to
  common stockholders 
 basic   17,151  15,869   17,058  15,220 
 diluted  18,361  16,694   17,954  16,185 


 Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands)
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
  2016  2015   2016  2015 
GAAP total gross profit$  23,161 $  18,053  $  54,716 $  44,835 
Share-based compensation expense 52  17   139  52 
Non-recurring expense 0  45   0  45 
Non-GAAP income from gross profit 23,213  18,115   54,855  44,932 
GAAP research and development expense 8,362  5,386   24,572  14,892 
Share-based compensation expense 165  55   437  166 
Non-GAAP research and development expense 8,197  5,331   24,135  14,726 
GAAP sales and marketing expense 1,594   1,582   4,884  4,748 
Share-based compensation expense 97  58   265  162 
Non-GAAP sales and marketing expense 1,497  1,524   4,619  4,586 
GAAP general and administrative expense 6,445  4,963   18,084  14,500 
Share-based compensation expense 732  387   1,988   1,188 
Amortization expense 115  104   337  305 
Non-recurring expense 134  137   722  572 
Non-GAAP general and administrative expense 5,464  4,335   15,037  12,435 
GAAP total operating expense  16,401  11,931   47,540  34,140 
Share-based compensation expense 994  500   2,690  1,516 
Amortization expense 115  104   337  305 
Non-recurring expense 134  137   722  572 
Non-GAAP total operating expense 15,158  11,190   43,791  31,747 
GAAP operating income  6,760  6,122    7,176  10,695 
Share-based compensation expense 1,046  517   2,829  1,568 
Amortization expense 115  104   337  305 
Non-recurring expense 134  182   722  617 
Non-GAAP operating income 8,055  6,925   11,064  13,185 
GAAP other expense (356) (3,016)  (1,639) (2,040)
Loss from disposal of idle assets 4  0   44  0 
Unrealized exchange loss (gain) (3,318) 3,160   (3,686) 2,268 
Non-recurring expense 3,095  0   3,737  153 
Non-GAAP other income (expense) (575) 144   (1,544) 381 
GAAP net income 17,736  2,700   17,009  8,114 
Amortization of intangible assets 115  104   337  305 
Share-based compensation expense 1,046  517   2,829  1,568 
Non-recurring charges 3,229   182   4,459  770 
Loss from disposal of idle assets 4  0   44  0 
Unrealized exchange loss (gain) (3,318) 3,160   (3,686) 2,268 
Non Recurring Tax benefit (11,856) 0   (11,856) 0 
Non-GAAP net income 6,956  6,663   9,136  13,025 
GAAP net income  17,736  2,700   17,009  8,114 
Amortization of intangible assets 115  104   337  305 
Share-based compensation expense 1,046  517   2,829   1,568 
Depreciation expense 3,569  2,317   9,588  6,428 
Non-recurring charges 3,229  182   4,459   770 
Loss from disposal of idle assets 4  0   44  0 
Unrealized exchange loss (gain) (3,318) 3,160   (3,686) 2,268 
Interest expense, net 422  269   1,107  540 
Taxes related to the above (11,332) 406   (11,472) 541 
Adjusted EBITDA$  11,471 $  9,655  $  20,215 $  20,534  
Investor Relations Contacts:

The Blueshirt Group, Investor Relations

Maria Riley & Chelsea Lish


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