February 23, 2017

Applied Optoelectronics Reports Fourth Quarter and Year 2016 Results

SUGAR LAND, Texas, Feb. 23, 2017 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (NASDAQ:AAOI), a leading provider of fiber-optic network products for the internet datacenter, cable broadband, fiber-to-the-home and telecom markets, today announced financial results for its fourth quarter and year ended Dec. 31, 2016.

"AOI achieved another record year driven by strong demand for our market-leading datacenter products and continued execution by the AOI team. We believe our record performance further demonstrates our growing market share in advanced optics and our team's ability to generate manufacturing efficiencies that lead to margin improvement," said Dr. Thompson Lin, Applied Optoelectronics, Inc. founder, president and CEO. "Our ability to internally manufacture lasers and light engines provides us with cost-leadership advantages, a faster time to market, and the ability to quickly scale to demand. Looking ahead, as the 100G transition accelerates this year, we see the opportunity to build on our momentum and expand our market leadership." 

Fourth Quarter 2016 Financial Summary

  • Total revenue increased to $84.9 million, up 60% compared with $53.0 million in the fourth quarter 2015 and up 21% compared with $70.1 million in the third quarter of 2016.
     
  • GAAP gross margin increased to 38.0%, up from 29.5% in the fourth quarter 2015 and 33.0% in the third quarter of 2016. Non-GAAP gross margin increased to 38.0%, up from 29.5% in the fourth quarter 2015 and 33.1% in the third quarter of 2016.
     
  • GAAP net income increased to $14.2 million, or $0.77 per diluted share, compared with net income of $2.7 million, or $0.15 per diluted share in the fourth quarter 2015, and net income of $17.7 million, or $0.97 per diluted share in the third quarter of 2016.
     
  • Non-GAAP net income increased to $15.5 million, or $0.84 per diluted share, compared with non-GAAP net income of $3.9 million, or $0.22 per diluted share in the fourth quarter 2015, and non-GAAP net income of $7.0 million, or $0.38 per diluted share in the third quarter of 2016.

Year 2016 Financial Summary

  • Total revenue grew to $260.7 million, up 37% compared with $189.9 million in 2015.
     
  • GAAP gross margin increased to 33.4%, up from 31.8% in 2015. Non-GAAP gross margin increased to 33.4% compared with 31.9% in 2015.
     
  • GAAP net income increased to $31.2 million, or $1.76 per diluted share, compared with net income of $10.8 million, or $0.65 per diluted share in 2015. Non-GAAP net income increased to $24.6 million, or $1.39 per diluted share, compared with non-GAAP net income of $17.0 million, or $1.03 per diluted share in 2015.
     
  • On December 31, 2016, cash, cash equivalents, short-term investments and restricted cash totaled $52.0 million, compared with the December 31, 2015 balance of $40.7 million.

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.

First Quarter 2017 Business Outlook (+)

For the first quarter of 2017, the company currently expects:

  • Revenue in the range of $87 million to $91 million.
  • Non-GAAP gross margin in the range of 38% to 40%.
  • Non-GAAP net income in the range of $15.5 million to $17.2 million, and non-GAAP fully diluted earnings per share in the range of $0.80 to $0.88 using approximately 19.5 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

The company will host a conference call and webcast for analysts and investors on Feb. 23, 2017 to discuss its fourth quarter and year 2016 results and outlook for its first quarter of 2017 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) 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 10098914.

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 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 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 4Q16 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.  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 and non-recurring expenses 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.

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 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 were 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)
  December 31, 2016   December 31, 2015 
       
ASSETS      
CURRENT ASSETS      
Cash, Cash Equivalents and Short term investments $  52,000  $  40,679 
Accounts Receivable, Net    49,766     38,775 
Inventories    51,817     66,238 
Other Receivables    1,501     4,121 
Prepaid Expenses and Other Current Assets    2,468     4,115 
Total Current Assets    157,552      153,928  
    
Cash restricted for Construction in Progress    8   - 
Property, Plant And Equipment, Net    144,098     109,699 
Land Use Rights, Net    778     854 
Intangible Assets, Net    3,993     3,900 
Deferred Income Tax Assets    11,421   - 
Other Assets    4,468     5,094 
TOTAL ASSETS $  322,318   $  273,475  
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
    
CURRENT LIABILITIES   
Accounts Payable $  36,375  $  28,668 
Accrued Expenses    15,426     11,506 
Bank Acceptance Payable    307     2,998 
Bank Loan-Short Term  -     27,316 
Current Portion of Long Term Debt    7,865     3,592 
Total Current Liabilities     59,973      74,080  
    
Notes Payable and Long Term Debt    34,961     33,997 
TOTAL LIABILITIES    94,934      108,077  
    
STOCKHOLDERS' EQUITY   
Total Preferred Stock  -   - 
Common Stock    18     17 
Additional Paid-in Capital    265,264     233,336 
Cumulative Translation Adjustment    (885)    292 
Accumulated Deficit    (37,013)    (68,247)
TOTAL STOCKHOLDERS' EQUITY    227,384      165,398  
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $  322,318   $  273,475  
    


Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
  Three Months Ended
Dec 31,
 Twelve Months Ended
Dec 31,
 Revenue  2016  2015   2016  2015 
 CATV $  13,424 $  11,000   $  43,567  $  53,675  
 Datacenter  68,105  38,769   201,314  123,286 
 FTTH  234  87   1,567   2,458 
 Other  3,137   3,096   14,265  10,484 
Total Revenue  84,900  52,952   260,713  189,903 
       
Total Cost of Goods Sold  52,662  37,334   173,759  129,450 
       
Total Gross Profit  32,238  15,618   86,954  60,453 
       
 Operating Expenses:      
 Research and Development  7,208  5,960   31,780  20,852 
 Sales and Marketing  1,743  1,633   6,627  6,381 
 General and Administrative   7,443  5,271   25,527  19,771 
Total Operating Expenses  16,394  12,864   63,934  47,004 
       
Operating Income  15,844  2,754   23,020  13,449 
       
 Other Income (Expense):      
 Interest Income  41  92   247  328 
 Interest Expense  (404) (242)   (1,717) (1,018)
 Other Income (Expense)  (12) 39   70  257 
 Foreign Exchange Gain (Loss)  (3) (130)   (617) (1,848)
Total Other Income (Expense):  (378) (241)  (2,017) (2,281)
       
Net Income before Income Taxes  15,466  2,513   21,003  11,168 
       
Income Tax Benefit (Expense)   (1,241) 166   10,231  (375)
       
Net Income  14,225  2,679   31,234  10,793 
 Net income per share attributable to common stockholders
 basic  $  0.81 $  0.16  $  1.82 $  0.69 
 diluted  $  0.77 $  0.15  $  1.76 $  0.65 
       
 Weighted-average shares used to compute
  net income per share attributable to
  common stockholders
   
 basic   17,631  16,833   17,202  15,627 
 diluted   18,513  17,691   17,713  16,533 
       


Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands)
(Unaudited)
  Three Months Ended
Dec 31,
 Twelve Months Ended
Dec 31,
   2016 2015  2016 2015
GAAP total gross profit $  32,238$  15,618 $  86,954$  60,453
Share-based compensation expense  51 18  190 70
Non-recurring expense  0 0  0 45
Non-GAAP income from gross profit  32,289 15,636  87,144 60,568
       
GAAP research and development expense  7,208 5,960  31,780 20,852
Share-based compensation expense  154 65  591 231
Non-GAAP research and development expense  7,054 5,895  31,189 20,621
        
GAAP sales and marketing expense  1,743 1,633  6,627 6,381
Share-based compensation expense  93 55  358 217
Non-GAAP sales and marketing expense  1,650 1,578  6,269 6,164
       
GAAP general and administrative expense  7,443 5,271  25,527 19,771
Share-based compensation expense  705 415   2,693 1,602
Amortization expense  117 106  454 412
Non-recurring expense  53 235  775 807
Non-GAAP general and administrative expense  6,568 4,515  21,605 16,950
       
GAAP total operating expense   16,394 12,864  63,934 47,004
Share-based compensation expense  952 535  3,642 2,050
Amortization expense  117 106  454 412
Non-recurring expense  53 235  775 807
Non-GAAP total operating expense  15,272 11,988  59,063 43,735
       
GAAP operating income  15,844 2,754  23,020 13,449
Share-based compensation expense  1,003 553  3,832 2,120
Amortization expense  117 106  454 412
Non-recurring expense  53 235  775 852
Non-GAAP operating income  17,017 3,648  28,081 16,833


Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands)
(Unaudited)
  Three Months Ended
Dec 31,
 Twelve Months Ended
Dec 31,
   2016  2015   2016  2015 
       
GAAP other income (loss)  (378) (241)  (2,017) (2,281)
Loss from disposal of idle assets  37  54   81  54 
Unrealized exchange loss (gain)  46  299   (3,639) 2,567 
Non-recurring expense  0  0   3,736  153 
Non-GAAP other income (loss)  (295) 112   (1,839) 493 
       
GAAP net income  14,225  2,679   31,234  10,793 
Amortization of intangible assets  117  106   454  412 
Share-based compensation expense  1,003  553   3,832  2,120 
Non-recurring charges  53  235   4,511  1,005 
Loss from disposal of idle assets  37  54   81  54 
Unrealized exchange loss (gain)  46  299   (3,639) 2,567 
Non-recurring tax benefit  0  0   (11,856) 0 
Non-GAAP net income  15,481  3,926   24,617  16,951 
       
GAAP net income  14,225  2,679   31,234  10,793 
Amortization of intangible assets  117  106    454  412 
Share-based compensation expense  1,003  553   3,832  2,120 
Depreciation expense  4,146  2,584   13,734  9,012 
Non-recurring charges  53   235   4,511  1,005 
Loss from disposal of idle assets  37  54   81  54 
Unrealized exchange loss (gain)  46  299   (3,639) 2,567 
Interest expense, net  363  150   1,470  690 
Tax (benefit) expense related to the above  1,241  (166)  (10,231) 375 
Adjusted EBITDA $  21,231 $  6,494  $  41,446 $  27,028 
       

 

Investor Relations Contacts:



The Blueshirt Group, Investor Relations

Maria Riley & Chelsea Lish

+1-415-217-7722                   

ir@ao-inc.com

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