November 10, 2014

Applied Optoelectronics Reports Sixth Consecutive Quarter of Record Revenue

Third Quarter 2014 Highlights

  • Record revenue of $36.5 million grew 76% year-over-year and 12% sequentially
  • Data center revenue grew 12% sequentially to reach a new record of $20.1 million
  • CATV revenue of $12.2 million increased 15% sequentially

SUGAR LAND, Texas, Nov. 10, 2014 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (Nasdaq:AAOI), a leading provider of fiber-optic access network products for the cable broadband, internet data center and fiber-to-the-home markets, today announced financial results for its third quarter ended September 30, 2014.

"We are very pleased to report our sixth consecutive quarter of record revenue that was primarily driven by demand for our 10G and 40G data center products," said Dr. Thompson Lin, Applied Optoelectronics, Inc. (AOI) founder and CEO. "Revenue for our data center products grew to over $20 million from just a little over $3 million in the third quarter of last year and we are encouraged by the market momentum. While Non-GAAP net income grew over 30% from the prior quarter, it was slightly below our expectations. We will continue to focus on delivering earnings growth while prudently investing in new technologies for long-term growth and protect our gross margin profile."

Third Quarter 2014 Financial Summary

  • Total revenue grew to $36.5 million, up 76% year-over-year compared with $20.8 million in the same quarter last year and up 12% compared with $32.7 million in the previous quarter.
     
  • GAAP gross margin was 33.2%, compared with 30.4% in the same quarter last year and 34.3% in the previous quarter. Non-GAAP gross margin was 33.3%, compared with 30.5% in the same quarter last year and 34.4% in the previous quarter. Gross margin was slightly below our expected range due to annual price negotiations on our 10G data center products and somewhat higher costs in the early stages of the rapid ramp of our 40G data center products.
     
  • GAAP net income was $1.6 million or $0.10 per diluted share, compared with net income of $0.4 million or $0.04 per diluted share in the same quarter last year and net income of $1.9 million or $0.12 per diluted share in the previous quarter.
     
  • Non-GAAP net income was $3.1 million or $0.20 per diluted share, compared with a non-GAAP net income of $0.6 million or $0.07 per diluted share in the same quarter last year and non-GAAP net income of $2.4 million or $0.15 per diluted share in the previous quarter.
     
  • On September 30, 2014, cash, cash equivalents and short-term investments totaled $45.8 million, up from the June 30, 2014 balance of $43.0 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.

Fourth Quarter 2014 Business Outlook (+)

For the fourth quarter of 2014, the company currently expects:

  • Revenue in the range of $39.5 million to $41.5 million
  • Non-GAAP gross margin in the range of 33.5% to 34.5%
  • Non-GAAP net income in the range of $4.3 million to $4.8 million, and non-GAAP fully diluted earnings per share in the range of $0.28 to $0.31 using approximately 15.6 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, November 10, 2014 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its third quarter 2014 results and outlook for its fourth quarter of 2014. Open to the public, investors may access the call by dialing (719) 325-2494. 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 two hours after the call and will run for five business days and may be accessed by dialing (719) 457-0820 and entering passcode 7561961.

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 CATV, internet data center or FTTH 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 ''may,'' ''will,'' ''should,'' ''expects,'' ''plans,'' ''anticipates,'' ''believes,'' or ''estimates" 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 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 Q3 non-recurring expenses are items related to the relocation of our Taiwan plant and CFO separation costs. 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). 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, 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.

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 CATV broadband, internet datacenter and fiber-to-the-home markets. AOI supplies optical networking lasers, components and equipment to tier-1 customers in all three 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. and the related AOI logo are trademarks of Applied Optoelectronics Inc.

Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
  September 30, 2014 December 31, 2013
     
ASSETS    
CURRENT ASSETS    
Cash, Cash Equivalents and Short term investments  $ 45,779  $ 30,751
Accounts Receivable, Net  24,181  22,089
Inventories  33,129  19,608
Notes Receivable  358  -- 
Other Receivables  1,785  742
Prepaid Expenses and Other Current Assets  5,704  4,746
Total Current Assets  110,936  77,936
     
Property, Plant And Equipment, Net  51,267  31,134
Land Use Rights, Net  931  959
Intangible Assets, net  3,830  851
Other Assets  1,190  177
TOTAL ASSETS  $ 168,154  $ 111,057
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Accounts Payable  $ 22,616  $ 15,010
Accrued Expenses  4,960  4,515
Bank Acceptance Payable  2,115  2,347
Bank Loan-Short Term  8,734  13,260
Current Portion of Long Term Debt  658  3,925
Total Current Liabilities  39,083  39,057
     
Notes Payable and Long Term Debt  14,000  8,923
Other Long Term liabilities  1,250  -- 
TOTAL LIABILITIES  54,333  47,980
     
STOCKHOLDERS' EQUITY    
TOTAL STOCKHOLDERS' EQUITY  113,821  63,077
     
Total Liabilities, redeemable preferred stock and stockholders' equity  $ 168,154  $ 111,057
 
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,
  2014 2013   2014 2013
 CATV   $ 12,246  $ 14,559    $ 32,640  $ 33,332
 Datacenter   20,056  3,216    49,530  13,476
 FTTH   2,616  982    7,928  2,774
 Telecom   1,294  703    2,904  1,057
 Other   337  1,306    1,056  4,041
Total Revenues  36,549  20,766    94,058  54,680
           
Total Cost of Goods Sold  24,403  14,445    62,071  38,327
           
Total Gross Profit  12,146  6,321    31,987  16,353
           
 Operating Expenses:           
 Research & Development   4,194  2,210    11,749  6,112
 Sales and Marketing   1,622  1,034    4,452  2,994
 General and administrative   4,458  2,436    11,964  7,257
Total Operating Expenses  10,274  5,680    28,165  16,363
           
Operating Income (Loss)  1,872  641    3,822  (10)
           
 Other Income (Expense):           
 Interest Income   95  15    280  50
 Interest Expense   (55)  (323)    (277)  (925)
 Other Income   (38)  66    94  266
 Other Expense   (220)  (8)    (151)  (266)
Total Other Income (Expenses):  (218)  (250)    (54)  (875)
           
Net Income (loss) before Income Taxes  1,654  391    3,768  (885)
           
Income Tax  (77)  --     (187)  -- 
           
Net Income (loss) after Income Taxes  $ 1,577  $ 391    $ 3,581  $ (885)
 Net income (loss) per share attributable to common stockholders           
 basic   $ 0.11  $ 0.04    $ 0.25  $ (3.24)
 diluted   $ 0.10  $ 0.04    $ 0.24  $ (3.24)
           
 Weighted-average shares used to compute
 net income (loss) per share attributable to
 common stockholders 
         
 basic   14,806  8,996    14,135  273
 diluted   15,595  9,155    14,950  273
 
Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated NON GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2014 2013   2014 2013
 CATV   $ 12,246  $ 14,559    $ 32,640  $ 33,332
 Datacenter   20,056  3,216    49,530  13,476
 FTTH   2,616  982    7,928  2,774
 Telecom   1,294  703    2,904  1,057
 Other   337  1,306    1,056  4,041
Total Revenues  36,549  20,766    94,058  54,680
           
Total Cost of Goods Sold  24,396  14,432    62,009  38,288
           
Total Gross Profit  12,153  6,334    32,049  16,392
           
 Operating Expenses:           
 Research & Development   4,165  2,198    11,665  6,075
 Sales and Marketing   1,598  1,023    4,380  2,961
 General and administrative   3,164  2,320    9,657  6,905
Total Operating Expenses  8,927  5,541    25,702  15,941
           
Operating Income (Loss)  3,226  793    6,347  451
           
 Other Income (Expense):           
 Interest Income   95  15    280  50
 Interest Expense   (55)  (323)    (277)  (925)
 Other Income / Expense   (55)  123    148  259
Total Other Income (Expenses):  (15)  (185)    151  (616)
           
Net Income (loss) before Income Taxes  3,211  608    6,498  (165)
           
Income Tax  (77)  --     (187)  -- 
           
Net Income (loss) after Income Taxes  $ 3,134  $ 608    6,311  (165)
 Net income (loss) per share attributable to common stockholders           
 basic   $ 0.21  $ 0.07    $ 0.45  $ (0.60)
 diluted   $ 0.20  $ 0.07    $ 0.42  $ (0.60)
           
 Weighted-average shares used to compute
 net income (loss) per share attributable to
 common stockholders 
         
 basic   14,806  8,996    14,135  273
 diluted   15,595  9,155    14,950  273
 
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,
  2014 2013   2014 2013
GAAP total gross profit  $ 12,146  $ 6,321    $ 31,987  $ 16,353
Share-based compensation expense  7  13    62  39
Non-GAAP income (loss) from gross profit  12,153  6,334    32,049  16,392
           
GAAP research and development expense  4,194  2,210    11,749  6,112
Share-based compensation expense  29  12    84  37
Non-GAAP research and development expense  4,165  2,198    11,665  6,075
           
GAAP sales and marketing expense  1,622  1,034    4,452  2,994
Share-based compensation expense  24  11    72  33
Non-GAAP sales and marketing expense  1,598  1,023    4,380  2,961
           
GAAP general and administrative expense  4,458  2,436    11,964  7,257
Share-based compensation expense  427  99    1,276  267
Amortization expense  94  17    258  51
Non Recurring expense  773  --     773  34
Non-GAAP general and administrative expense  3,164  2,320    9,657  6,905
           
GAAP total operating expense  10,274  5,680    28,165  16,363
Share-based compensation expense  480  122    1,432  337
Amortization expense  94  17    258  51
Non Recurring expense  773  --     773  34
Non-GAAP total operating expense  8,927  5,541    25,702  15,941
           
GAAP operating income (loss)  1,872  641    3,822  (10)
Share-based compensation expense  487  135    1,494  376
Amortization expense  94  17    258  51
Non Recurring expense  773  --     773  34
Non-GAAP operating income (loss)  3,226  793    6,347  451
           
GAAP other income (loss)  (218)  (250)    (54)  (875)
Unrealized exchange loss (gain)  203  65    205  259
Non-GAAP other income (loss)  (15)  (185)    151  (616)
           
GAAP net income (loss)  1,577  391    3,581  (885)
Amortization of intangible assets  94  17    258  51
Share-based compensation expense  487  135    1,494  376
Non Recurring charges  773  --     773  34
Unrealized exchange loss (gain)  203  65    205  259
Non-GAAP net income (loss)  3,134  608    6,311  (165)
           
GAAP net income (loss)  1,577  391    3,581  (885)
Amortization of intangible assets  94  17    258  51
Share-based compensation expense  487  136    1,494  376
Depreciation expense  1,585  859    4,091  2,385
Non Recurring charges  773  --     773  34
Unrealized exchange loss (gain)  203  65    205  259
Interest (income) expense, net  (40)  308    (4)  876
Taxes related to the above  77  --     187  -- 
Adjusted EBITDA  $ 4,756  $ 1,776    $ 10,585  $ 3,096
CONTACT: Investor Relations Contacts:



         Applied Optoelectronics, Inc.

         Stefan J. Murry

         Chief Financial Officer

         ir@ao-inc.com



         The Blueshirt Group, Investor Relations

         Maria Riley

         +1-415-217-7722

         ir@ao-inc.com

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Source: Applied Optoelectronics, Inc.

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