February 24, 2016

Applied Optoelectronics Reports Fourth Quarter and Year 2015 Results

Awarded Three New 100G Datacenter Transceiver Design Wins

SUGAR LAND, Texas, Feb. 24, 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 fourth quarter and year ended December 31, 2015.

"We achieved another record year with strong growth in both revenue and net income. Fourth quarter revenue exceeded our expectations and grew 46% year-over-year driven by significantly higher than expected 100G datacenter transceiver shipments," said Dr. Thompson Lin, Applied Optoelectronics Inc. founder and CEO. "With our in-house laser manufacturing and high volume light engine production capacity, we were able to accelerate shipments to meet growing hyperscale datacenter customer demand and we shipped nearly 10,000 units of 100G long reach transceivers in the fourth quarter."

Lin continued, "In addition to the design wins we announced in November, we were awarded three additional 100G transceiver design wins from our existing customers. We are excited by our continued success in this important customer segment and believe we are well positioned to build on our momentum."

Fourth Quarter 2015 Financial Summary

  • Total revenue was $53.0 million, up 46% compared with $36.4 million in the fourth quarter 2014 and down 7% sequentially compared with $57.1 million in the third quarter 2015.
     
  • GAAP gross margin was 29.5% compared with 33.7% in the fourth quarter 2014 and 31.6% in the third quarter 2015. Non-GAAP gross margin was 29.5% compared with 36.0% in the fourth quarter 2014 and 31.7% in the third quarter 2015. Our fourth quarter gross margin was below the expected range due to a shift in product mix within the datacenter segment toward certain shorter-reach 40G transceivers that carried a lower gross margin. 
     
  • GAAP net income was $2.7 million, or $0.15 per diluted share, compared with net income of $0.7 million, or $0.05 per diluted share in the fourth quarter 2014, and net income of $2.7 million, or $0.16 per diluted share in the third quarter 2015.
     
  • Non-GAAP net income was $3.9 million, or $0.22 per diluted share, compared with non-GAAP net income of $4.0 million, or $0.27 per diluted share in the fourth quarter 2014, and non-GAAP net income of $6.7 million, or $0.40 per diluted share in the third quarter 2015.

             
Full Year 2015 Financial Summary

  • Total revenue grew to $189.9 million, up 46% compared with $130.4 million in 2014.
     
  • GAAP gross margin was 31.8% compared with 33.9% in 2014. Non-GAAP gross margin was 31.9% compared with 34.6% in 2014.
     
  • GAAP net income was $10.8 million, or $0.65 per diluted share, compared with net income of $4.3 million, or $0.28 per diluted share in 2014. Non-GAAP net income was $17.0 million, or $1.03 per diluted share, compared with non-GAAP net income of $10.4 million, or $0.68 per diluted share in 2014.
     
  • On December 31, 2015, cash, cash equivalents, short-term investments and restricted cash totaled $40.7 million, compared with the December 31, 2014 balance of $40.9 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 2016 Business Outlook (+)

For the first quarter of 2016, the company currently expects:

  • Revenue in the range of $50 million to $54 million
  • Non-GAAP gross margin in the range of 31.0% to 32.5%
  • Non-GAAP net income in the range of $3.8 million to $5.0 million, and non-GAAP fully diluted earnings per share in the range of $0.21 to $0.28 using approximately 17.8 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 24, 2016 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its fourth quarter and year 2015 results and outlook for its first 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 two hours after the call and will run for five business days and may be accessed by dialing (412)-317-0088 and entering passcode 10079684.

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 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 "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 4Q14 to 4Q15 are items related to the relocation of our Taiwan plant as well as certain consulting fees. 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. 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 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.
Preliminary Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 December 31, 2015December 31, 2014
   
ASSETS  
CURRENT ASSETS  
Cash, Cash Equivalents and Short term investments$  40,679 $  40,873 
Accounts Receivable, Net   38,775    31,589 
Inventories   66,238    33,780 
Notes Receivable   -    980 
Other Receivables   4,121    1,659 
Prepaid Expenses and Other Current Assets   4,115    4,358 
Total Current Assets   153,928     113,239  
   
Property, Plant And Equipment, Net   109,699    64,808 
Land Use Rights, Net   854    930 
Intangible Assets, Net   3,900    3,833 
Other Assets   5,094    860 
TOTAL ASSETS$   273,475  $   183,670  
   
LIABILITIES AND STOCKHOLDERS' EQUITY  
   
CURRENT LIABILITIES  
Accounts Payable$  27,548 $  30,799 
Accrued Expenses   12,626    6,940 
Banker's Acceptance Payable   2,998    1,271 
Bank Loan-Short Term   27,316    8,205 
Current Portion of Long Term Debt   3,592    1,386 
Total Current Liabilities   74,080     48,601  
   
Notes Payable and Long Term Debt   33,997    19,057 
Other Long Term Liability   -    1,000 
TOTAL LIABILITIES   108,077     68,658  
   
STOCKHOLDERS' EQUITY  
TOTAL STOCKHOLDERS' EQUITY   165,398     115,012  
   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$   273,475  $   183,670  
   

 

 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  2015  2014   2015  2014  
 CATV $   11,000  $   14,749   $   53,675  $   47,389   
 Datacenter  38,769  14,923   123,286  64,453  
 FTTH  87  5,663   2,458  13,591  
 Other  3,096  1,056   10,484  5,016  
Total Revenue 52,952  36,391   189,903  130,449  
       
Total Cost of Goods Sold 37,334  24,132   129,450  86,203  
       
Total Gross Profit 15,618  12,259   60,453  44,246  
       
 Operating Expenses:       
 Research & Development  5,960  4,221   20,852  15,970  
 Sales and Marketing  1,633  1,591   6,381  6,043  
 General and administrative  5,271  5,131   19,771  17,095  
Total Operating Expenses 12,864  10,943   47,004  39,108  
       
Operating Income 2,754  1,316   13,449  5,138  
       
 Other Income (Expense):       
 Interest Income  92  89   328  369  
 Interest Expense  (242) (51)  (1,018) (326) 
 Other Income (Expense)  39  210   257  302  
 Foreign Exchange Gain (Loss)  (130) (851)  (1,848) (1,001) 
Total Other Income (Expenses): (241) (602)  (2,281) (656) 
       
Net Income before Income Taxes 2,513  714   11,168  4,482  
       
Income Tax Benefit (Expense) 166  (12)  (375) (199) 
       
Net Income 2,679  702   10,793  4,283  
  
 Net income per share attributable to common stockholders               
basic $  0.16 $  0.05  $  0.69 $  0.30  
diluted $  0.15 $  0.05  $  0.65 $  0.28  
       
 Weighted-average shares used to compute
  net income per share attributable to
  common stockholders 
    
basic  16,833  14,819   15,627  14,307  
diluted  17,691  15,207   16,533  15,187  
       

 

 Applied Optoelectronics, Inc. 
Reconciliation of Statements of Operations under GAAP and Non-GAAP 
(In thousands) 
(Unaudited) 
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 
  2015  2014   2015  2014  
GAAP total gross profit$  15,618 $  12,259  $  60,453 $  44,246  
Share-based compensation expense 18  27   70  89  
Non Recurring expense   -  797   45  797  
Non-GAAP income from gross profit 15,636  13,083   60,568  45,132  
       
GAAP research and development expense 5,960  4,221   20,852  15,970  
Share-based compensation expense 65  31   231  115  
Non-GAAP research and development expense 5,895  4,190   20,621  15,855  
       
GAAP sales and marketing expense 1,633  1,591   6,381  6,043  
Share-based compensation expense 55  25   217  97  
Non-GAAP sales and marketing expense 1,578  1,566   6,164  5,946  
       
GAAP general and administrative expense 5,271  5,131   19,771  17,095  
Share-based compensation expense 415  483   1,602  1,759  
Amortization expense 106  98   412  356  
Non Recurring expense 235  788   807  1,561  
Non-GAAP general and administrative expense 4,515  3,762   16,950  13,419  
       
GAAP total operating expense 12,864  10,943   47,004  39,108  
Share-based compensation expense 535  539   2,050  1,971  
Amortization expense 106  98   412  356  
Non Recurring expense 235  788   807  1,561  
Non-GAAP total operating expense 11,988  9,518   43,735  35,220  
       
GAAP operating income  2,754  1,316   13,449  5,138  
Share-based compensation expense 553  566   2,120  2,060  
Amortization expense 106  98   412  356  
Non Recurring expense 235  1,585   852  2,358  
Non-GAAP operating income 3,648  3,565   16,833  9,912  
       
GAAP other income (loss) (241) (602)  (2,281) (656) 
Loss (gain) from disposal of idle assets 54    -   54    -  
Unrealized exchange loss (gain) 299  1,094   2,567  1,300  
Non Recurring expense   -    -   153    -  
Non-GAAP other income (loss) 112  492   493  644  
       
GAAP net income  2,679  702   10,793  4,283  
Amortization of intangible assets 106  98   412  356  
Share-based compensation expense 553  566   2,120  2,060  
Non Recurring charges 235  1,585   1,005  2,358  
Loss (gain) from disposal of idle assets 54    -   54    -  
Unrealized exchange loss (gain) 299  1,094   2,567  1,300  
Non-GAAP net income 3,926  4,045   16,951  10,357  
       
GAAP net income  2,679  702   10,793  4,283  
Amortization of intangible assets 106  98   412  356  
Share-based compensation expense 553  566   2,120  2,060  
Depreciation expense 2,584  1,722   9,012  5,813  
Non recurring charges 235  1,585   1,005  2,358  
Loss (gain) from disposal of idle assets 54    -   54    -  
Unrealized exchange loss (gain) 299  1,094   2,567  1,300  
Interest (income) expense, net 150  (39)  690  (43) 
Tax (benefit) expense related to the above (166) 12   375  199  
Adjusted EBITDA$  6,494 $  5,740  $  27,028 $  16,326  
       

 


 

 

Investor Relations Contacts:

The Blueshirt Group, Investor Relations
Maria Riley
+1-415-217-7722                    
ir@ao-inc.com


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