February 25, 2015

Applied Optoelectronics Reports Fourth Quarter and Year 2014 Results

SUGAR LAND, Texas, Feb. 25, 2015 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (Nasdaq:AAOI), a leading provider of fiber-optic access network products for the internet data center, cable broadband and fiber-to-the-home markets, today announced financial results for its fourth quarter and year ended December 31, 2014.

"Fourth quarter revenue grew 53% year-over-year and we achieved record gross margin. As we reported in January, fourth quarter production was below our initial expectations due to a supply issue with an externally sourced optical sub-assembly for a new 40 Gbps data center transceiver," said Dr. Thompson Lin, Applied Optoelectronics, Inc. (AOI) founder and CEO. "Outside of this supply issue, demand for our data center products remained very high with sales inline with our expectations."

Dr. Lin continued, "Overall for the full year our total revenue grew 66%, driven primarily by our rapid expansion in the data center optical market. We are proud to have achieved this above market growth while also improving our gross margin and significantly increasing our net income."  

Fourth Quarter 2014 Financial Summary

  • Total revenue grew to $36.4 million, up 53% compared with $23.7 million in the fourth quarter 2013 and relatively unchanged compared with $36.5 million in the third quarter 2014.
     
  • GAAP gross margin was 33.7%, compared with 28.1% in the fourth quarter 2013 and 33.2% in the third quarter 2014. Non-GAAP gross margin increased to 36.0%, compared with 28.2% in the fourth quarter 2013 and 33.3% in the third quarter 2014.
     
  • GAAP net income was $0.7 million or $0.05 per diluted share, compared with a net loss of $0.5 million or a $0.04 loss per diluted share in the fourth quarter 2013 and net income of $1.6 million or $0.10 per diluted share in the third quarter 2014.
     
  • Non-GAAP net income was $4.0 million or $0.27 per diluted share, compared with a non-GAAP net income of $0.3 million or $0.02 per diluted share in the fourth quarter 2013 and non-GAAP net income of $3.1 million or $0.20 per diluted share in third quarter 2014.

Full Year 2014 Financial Summary

  • Total revenue grew to $130.4 million, up 66% compared with $78.4 million in 2013.
     
  • GAAP gross margin was 33.9%, compared with 29.4% in 2013. Non-GAAP gross margin was 34.6%, compared with 29.4% in 2013.
     
  • GAAP net income was $4.3 million or $0.28 per diluted share, compared with a net loss of $1.4 million or a $0.14 loss per diluted share in 2013. Non-GAAP net income was $10.4 million or $0.68 per diluted share, compared with a non-GAAP net income of $0.1 million or $0.01 per diluted share in 2013.
     
  • On December 31, 2014, cash, cash equivalents and short-term investments totaled $40.9 million, an increase from the December 31, 2013 balance of $30.8 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 2015 Business Outlook (+)

For the first quarter of 2015, the company currently expects:

  • Revenue in the range of $35.0 million to $36.5 million
  • Non-GAAP gross margin in the range of 34.0% to 35.0%
  • Non-GAAP net income in the range of $2.0 million to $3.2 million, and non-GAAP fully diluted earnings per share in the range of $0.13 to $0.21 using approximately 15.3 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, February 25, 2015 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its fourth quarter and year 2014 results and outlook for its first quarter of 2015. Open to the public, investors may access the call by dialing (719) 457-2648. 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 2788995.

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 data center, CATV 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 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 Q4 non-recurring expenses are items related to the relocation of our Taiwan plant and certain non-recurring expenses related to our fiber-to-the-home business. 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, 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.

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 data center, CATV broadband 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)
 December 31, 2014December 31, 2013
     
ASSETS  
CURRENT ASSETS    
Cash, Cash Equivalents and Short term investments  $ 40,873  $ 30,751
Accounts Receivable, Net  31,589  22,089
Inventories  33,780  19,608
Notes Receivable  980  -- 
Prepaid Expenses and Other Current Assets  6,017  5,488
Total Current Assets 113,239  77,936
     
Property, Plant And Equipment, Net  64,808  31,134
Land Use Rights, Net  930  959
Intangible Assets, net  3,833  851
Other Assets  860  177
TOTAL ASSETS $ 183,670  $ 111,057
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Accounts Payable  $ 30,799  $ 15,010
Accrued Expenses  6,940  4,515
Bank Acceptance Payable  1,271  2,347
Bank Loan-Short Term  8,205  13,260
Current Portion of Long Term Debt  1,386  3,925
Total Current Liabilities 48,601  39,057
     
Notes Payable and Long Term Debt  19,057  8,923
Other Long Term liabilities  1,000  -- 
TOTAL LIABILITIES 68,658  47,980
   
TOTAL STOCKHOLDERS' EQUITY 115,012  63,077
     
Total Liabilities, redeemable preferred stock and stockholders' equity $ 183,670  $ 111,057
 
 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
December 31,
Twelve Months Ended
December 31,
Revenue2014201320142013
 CATV  $ 14,749  $ 14,041  $ 47,389  $ 47,373
 Datacenter  14,923  5,910  64,453  19,386
 FTTH  5,663  1,603  13,591  4,377
 Other  1,056  2,190  5,016  7,288
Total Revenue  36,391  23,744  130,449  78,424
         
Total Cost of Goods Sold  24,132  17,068  86,203  55,396
         
Total Gross Profit  12,259  6,676  44,246  23,028
         
 Operating Expenses:         
 Research & Development   4,221  2,400  15,970  8,512
 Sales and Marketing   1,591  1,198  6,043  4,191
 General and administrative   5,131  3,375  17,095  10,632
Total Operating Expenses  10,943  6,973  39,108  23,335
         
Operating Income (Loss) 1,316  (297) 5,138  (307)
         
 Other Income (Expense):         
 Interest Income   89  55  369  104
 Interest Expense   (50)  (200)  (326)  (1,125)
 Other Income   208  69  302  334
 Other Expense   (849)  (147)  (1,001)  (412)
Total Other Income (Expenses):  (602)  (223)  (656)  (1,099)
     
Net Income (loss) before Income Taxes 714  (520) 4,482  (1,406)
     
Income Tax  (12)  --   (199)  -- 
     
Net Income (loss)  $ 702  $ (520) $ 4,283  $ (1,406)
Net income (loss) per share attributable to common stockholders   
 basic   $ 0.05  $ (0.04)  $ 0.30  $ (0.14)
 diluted   $ 0.05  $ (0.04)  $ 0.28  $ (0.14)
         
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders     
 basic   14,819  12,631  14,307  9,965
 diluted   15,207  12,631  15,187  9,965
 
 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated NON GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
December 31,
Twelve Months Ended
December 31,
Revenue2014201320142013
 CATV  $ 14,749  $ 14,041  $ 47,389  $ 47,373
 Datacenter  14,923  5,910  64,453  19,386
 FTTH  5,663  1,603  13,591  4,377
 Other  1,056  2,190  5,016  7,288
Total Revenue  36,391  23,744  130,449  78,424
         
Total Cost of Goods Sold  23,308  17,052  85,317  55,340
         
Total Gross Profit  13,083  6,692  45,132  23,084
         
 Operating Expenses:         
 Research & Development   4,190  2,383  15,855  8,459
 Sales and Marketing   1,566  1,178  5,946  4,139
 General and administrative   3,762  2,718  13,419  9,622
Total Operating Expenses  9,518  6,279  35,220  22,220
         
Operating Income (Loss) 3,565  413  9,912  864
         
 Other Income (Expense):         
 Interest Income   89  55  369  104
 Interest Expense   (50)  (200)  (326)  (1,125)
 Other Income / Expense   453  7  601  264
Total Other Income (Expenses):  492  (138)  644  (757)
     
Net Income (loss) before Income Taxes 4,057  275  10,556  107
     
Income Tax  (12)  --   (199)  -- 
     
Net Income (loss)  $ 4,045  $ 275  $ 10,357  $ 107
Net income (loss) per share attributable to common stockholders   
 basic   $ 0.27  $ 0.02  $ 0.72  $ 0.01
 diluted   $ 0.27  $ 0.02  $ 0.68  $ 0.01
         
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders     
 basic   14,819  12,631  14,307  9,965
 diluted   15,207  13,291  15,187  10,626
 
 Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
         
 Three Months Ended December 31,Twelve Months Ended December 31,
 2014201320142013
GAAP total gross profit  $ 12,259  $ 6,676  $ 44,246  $ 23,028
Share-based compensation expense  27  16  89  56
Non Recurring expense  797  --   797  -- 
Non-GAAP income (loss) from gross profit  13,083  6,692  45,132  23,084
         
GAAP research and development expense  4,221  2,400  15,970  8,512
Share-based compensation expense  31  17  115  53
Non-GAAP research and development expense  4,190  2,383  15,855  8,459
         
GAAP sales and marketing expense  1,591  1,198  6,043  4,191
Share-based compensation expense  25  20  97  52
Non-GAAP sales and marketing expense  1,566  1,178  5,946  4,139
         
GAAP general and administrative expense  5,131  3,375  17,095  10,632
Share-based compensation expense  483  640  1,759  907
Amortization expense  98  17  356  68
Non Recurring expense  788  --   1,561  35
Non-GAAP general and administrative expense  3,762  2,718  13,419  9,622
     
GAAP total operating expense  10,943  6,973  39,108  23,335
Share-based compensation expense  539  677  1,971  1,012
Amortization expense  98  17  356  68
Non Recurring expense  788  --   1,561  35
Non-GAAP total operating expense  9,518  6,279  35,220  22,220
         
GAAP operating income (loss)  1,316  (297)  5,138  (307)
Share-based compensation expense  566  693  2,060  1,068
Amortization expense  98  17  356  68
Non Recurring expense  1,585  --   2,358  35
Non-GAAP operating income (loss)  3,565  413  9,912  864
         
GAAP other income (loss)  (602)  (223)  (656)  (1,099)
Unrealized exchange loss (gain)  1,094  85  1,300  342
Non-GAAP other income (loss)  492  (138)  644  (757)
         
GAAP net income (loss)  702  (520)  4,283  (1,406)
Amortization of intangible assets  98  17  356  68
Share-based compensation expense  566  693  2,060  1,068
Non Recurring charges  1,585  --   2,358  35
Unrealized exchange loss (gain)  1,094  85  1,300  342
Non-GAAP net income (loss)  4,045  275  10,357  107
         
GAAP net income (loss)  702  (520)  4,283  (1,406)
Amortization of intangible assets  98  17  356  68
Share-based compensation expense  566  693  2,060  1,068
Depreciation expense  1,722  954  5,813  3,339
Non Recurring charges  1,585  --   2,358  35
Unrealized exchange loss (gain)  1,094  85  1,300  342
Interest (income) expense, net  (39)  145  (43)  1,021
Taxes related to the above  12  --   199  -- 
Adjusted EBITDA  $ 5,740  $ 1,374  $ 16,326  $ 4,467
CONTACT: Investor Relations Contacts:

         

         The Blueshirt Group, Investor Relations

         Maria Riley

         +1-415-217-7722

         ir@ao-inc.com


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