UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

_________________

 

FORM 8-K

 
CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 7, 2018

 

_________________

 

Applied Optoelectronics, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware	001-36083	76-0533927
(State of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

 

13139 Jess Pirtle Blvd.

Sugar Land, TX 77478

(address of principal executive offices and zip code)

 

(281) 295-1800

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

 

☐      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

ITEM 2.02.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On August 7, 2018 Applied Optoelectronics, Inc. (the “Company”) issued a press release regarding the Company’s financial results for the second quarter ended June 30, 2018. A copy of the Company’s press release is attached as Exhibit 99.1 to this Form 8-K.

 

The information furnished in this Current Report under this Item 2.02 and the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

ITEM 9.01.

FINANCIAL STATEMENTS AND EXHIBITS.

 

(d) Exhibits

 

Exhibit Number	Description
99.1	Press release dated August 7, 2018, issued by Applied Optoelectronics, Inc., filed herewith.

 

 

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Applied Optoelectronics, Inc.

 

 

By: /s/ Stefan J. Murry                                                  

Stefan J. Murry

Chief Financial Officer

Date: August 7, 2018

 

 

 

 

 

Exhibit 99.1

 

 

 

Applied Optoelectronics Reports Second Quarter 2018 Results

 

Sugar Land, Texas, Aug. 7, 2018 – 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 ended June 30, 2018.

 

“We are pleased with our second quarter results, which were driven by increased demand for our market-leading datacenter products. We continue to focus on diversifying our customer base and in the quarter secured seven design wins, including one 100G win with a large datacenter operator in China,” said Dr. Thompson Lin, Applied Optoelectronics Inc. founder and CEO. “We remain confident in our competitive position. We believe our platform, proprietary manufacturing processes and vertical integration are keys to our success in the market, and remain focused on building on this strong foundation to position AOI for further success.”

 

Second Quarter 2018 Financial Summary

 

·

Total revenue was $87.8 million, compared with $117.4 million in the second quarter 2017 and $65.2 million in the first quarter of 2018.

 

·

GAAP gross margin was 38.6%, compared with 45.4% in the second quarter 2017 and 39.6% in the first quarter of 2018. Non-GAAP gross margin was 40.4%, compared with 45.5% in the second quarter 2017 and 40.0% in the first quarter of 2018.

 

·

GAAP net income was $8.0 million, or $0.40 per diluted share, compared with net income of $29.1 million, or $1.43 per diluted share in the second quarter 2017, and net income of $2.1 million, or $0.11 per diluted share in the first quarter of 2018.

 

·

Non-GAAP net income was $12.9 million, or $0.64 per diluted share, compared with non-GAAP net income of $31.3 million, or $1.54 per diluted share in the second quarter 2017, and non-GAAP net income of $5.6 million, or $0.28 per diluted share in the first quarter of 2018.

 

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 2018 Business Outlook ⁽⁺⁾

 

For the third quarter of 2018, the company currently expects:

 

·

Revenue in the range of $82 million to $92 million.

 

·

Non-GAAP gross margin in the range of 40.0% to 41.5%.

 

·

Non-GAAP net income in the range of $11.1 million to $15.2 million, and non-GAAP fully diluted earnings per share in the range of $0.54 to $0.75 using approximately 20.4 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 Aug. 7, 2018 to discuss its second quarter 2018 results and outlook for its third quarter 2018 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) 717-9586. 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 10122233.

 

Forward-Looking Information

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 company's reliance on a small number of customers for a substantial portion of its revenues; reduction in the size or quantity of customer orders; change in demand for the company's products or their rate of deployment of their products; 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; potential pricing pressure; 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. 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

 

In addition to GAAP reporting, 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, non-recurring expenses and expenses associated with discontinued products, 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-recurring tax expenses (benefits), and expenses associated with discontinued products, if any, from our GAAP net income (loss). Included in our non-recurring expenses in Q2 2018 are certain consulting fees, and employee severance expenses. Non-cash expenses associated with discontinued products in Q2 2018 include depreciation on certain equipment undergoing reconfiguration. Other expenses associated with discontinued products in Q2 2018 include inventory obsolescence charges associated with materials used in the manufacture of these discontinued products.

 

 

 

 

 

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, unrealized foreign exchange gain (loss) and non-recurring expenses 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 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.

 

A reconciliation of our GAAP net income (loss) and GAAP earnings per share for the three and six months ended June 30, 2018 to our non-GAAP net income (loss) and earnings per share is provided below. Also provided below for the three and six months ended June 30, 2018 is a reconciliation of our GAAP total gross profit to our non-GAAP total gross profit, for purposes of calculating our non-GAAP gross margin.

 

Non-GAAP measures should not be considered as an alternative to net income (loss), earnings 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 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, 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

Maria Riley & Chelsea Lish

+1-415-217-7722

ir@ao-inc.com

 

 

 

 

Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

		June 30, 2018				December 31, 2017
ASSETS
CURRENT ASSETS
Cash, Cash Equivalents and Short term investments		$	77,943			$	83,984
Accounts Receivable, Net			48,668				59,850
Inventories			93,269				75,768
Prepaid Income Tax			638				1,394
Prepaid Expenses and Other Current Assets			10,070				8,701
Total Current Assets			230,588				229,697
Property, Plant And Equipment, Net			212,105				197,943
Land Use Rights, Net			6,096				804
Intangible Assets, Net			3,978				4,007
Deferred Income Tax Assets			13,151				12,801
Other Assets			6,286				7,732
TOTAL ASSETS		$	472,204			$	452,984
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable		$	51,429			$	43,624
Accrued Expenses			16,651				19,103
Accrued Income Tax			464				7,422
Current Portion of Long Term Debt			3,161				559
Total Current Liabilities			71,705				70,708
Notes Payable and Long Term Debt			57,868				49,000
TOTAL LIABILITIES			129,573				119,708
STOCKHOLDERS' EQUITY
Total Preferred Stock			–				–
Common Stock			20				19
Additional Paid-in Capital			288,686				285,376
Cumulative Translation Adjustment			5,633				9,743
Retained Earnings			48,292				38,138
TOTAL STOCKHOLDERS' EQUITY			342,631				333,276
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	472,204			$	452,984

 

 

 

 

 

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,
		2018				2017				2018				2017
Revenue
Datacenter		$	69,040			$	99,298			$	119,623			$	178,892
CATV			14,184				14,404				24,752				27,498
Telecom			4,157				3,077				7,743				6,248
FTTH			166				125				277				223
Other			275				467				666				734
Total Revenue			87,822				117,371				153,061				213,595
Total Cost of Goods Sold			53,959				64,089				93,362				118,841
Total Gross Profit			33,863				53,282				59,699				94,754
Operating Expenses:
Research and Development			12,645				8,073				24,381				15,505
Sales and Marketing			2,377				2,158				4,851				4,061
General and Administrative			9,898				8,786				19,354				16,608
Total Operating Expenses			24,920				19,017				48,586				36,174
Operating Income			8,943				34,265				11,113				58,580
Other Income (Expense):
Interest Income			85				70				137				105
Interest Expense			(279	)			(245	)			(350	)			(544	)
Other Income			292				192				305				156
Foreign Exchange Gain (Loss)			1,289				(128	)			249				(700	)
Total Other Income (Expense):			1,387				(111	)			341				(983	)
Net Income before Income Taxes			10,330				34,154				11,454				57,597
Income Tax Expense			(2,296	)			(5,083	)			(1,300	)			(8,737	)
Net Income			8,034				29,071				10,154				48,860
Net income per share attributable to common stockholders
basic		$	0.41			$	1.52			$	0.52			$	2.59
diluted		$	0.40			$	1.43			$	0.51			$	2.45
Weighted-average shares used to compute net income per share attributable to common stockholders
basic			19,590				19,081				19,541				18,841
diluted			20,080				20,367				20,012				19,956

 

 

 

 

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,
		2018				2017				2018				2017
GAAP total gross profit (a)		$	33,863			$	53,282			$	59,699			$	94,754
Share-based compensation expense			211				134				388				212
Non-recurring expense			0				0				7				0
Expenses associated with discontinued products			1,432				0				1,503				0
Non-GAAP total gross profit (a)			35,506				53,416				61,597				94,966
GAAP net income			8,034				29,071				10,154				48,860
Amortization of intangible assets			127				120				253				238
Share-based compensation expense			2,900				2,260				5,469				3,767
Non-recurring charges			330				290				620				390
Expenses associated with discontinued products			1,432				–				1,503				–
Non-cash expenses associated with discontinued products			1,004				–				1,755				–
Loss from disposal of idle assets			–				2				–				2
Unrealized exchange loss (gain)			(911	)			(101	)			(1,114	)			147
Non recurring tax benefit			(48	)			(320	)			(162	)			(320	)
Non-GAAP net income			12,868				31,322				18,478				53,084
GAAP diluted net income per share		$	0.40			$	1.43			$	0.51			$	2.45
Amortization of intangible assets			0.01				0.01				0.01				0.01
Share-based compensation expense			0.14				0.11				0.27				0.19
Non-recurring charges			0.02				0.01				0.03				0.02
Expenses associated with discontinued products			0.07				–				0.08				–
Non-cash expenses associated with discontinued products			0.05				–				0.09				–
Loss from disposal of idle assets			–				–				–				–
Unrealized exchange loss (gain)			(0.05	)			(0.00	)			(0.06	)			0.01
Non recurring tax benefit			(0.00	)			(0.02	)			(0.01	)			(0.02	)
Non-GAAP diluted net income per share		$	0.64			$	1.54			$	0.92			$	2.66
Shares used to compute diluted earnings per share			20,080				20,367				20,012				19,956

 

 

(a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).