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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 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 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 www.ao-inc.com.

 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
  September 30, 2016 December 31, 2015  
       
ASSETS      
CURRENT ASSETS      
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    
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
CURRENT LIABILITIES      
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    
       
STOCKHOLDERS' EQUITY      
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    
       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $    326,791   $    273,475    
       

 

 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
  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)
(Unaudited)
  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

+1-415-217-7722                   

ir@ao-inc.com

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Source: Applied Optoelectronics, Inc.

 

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