August 4, 2016

Applied Optoelectronics Reports Second Quarter 2016 Results

SUGAR LAND, Texas, Aug. 04, 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 second quarter ended June 30, 2016.

"We achieved top and bottom-line results well above our guidance and we are pleased with the progress we made during the quarter. Our results were driven by continued strong demand for our market-leading datacenter products, where we generated our fifth consecutive quarter of record revenue, and an improvement in demand for our CATV products," said Dr. Thompson Lin, Applied Optoelectronics, Inc. founder, president and CEO. "Our improved performance reflects our commitment to operational excellence and I am confident we are on the right path to build on our momentum in the datacenter and CATV markets and achieve our long-term financial objectives."

Second Quarter 2016 Financial Summary

  • Total revenue was $55.3 million, up 11% compared with $49.6 million in the second quarter 2015 and up 10% compared with $50.4 million in the first quarter of 2016.
     
  • GAAP gross margin was 31.3% compared with 33.7% in the second quarter 2015 and 28.3% in the first quarter of 2016. Non-GAAP gross margin was 31.4% compared with 33.7% in the second quarter 2015 and 28.3% in the first quarter of 2016.
     
  • GAAP net income was $0.6 million, or $0.03 per diluted share, compared with net income of $6.1 million, or $0.38 per diluted share in the second quarter 2015, and net loss of $1.3 million, or $0.08 per basic share in the first quarter of 2016.
     
  • Non-GAAP net income was $2.8 million, or $0.16 per diluted share, compared with non-GAAP net income of $6.1 million, or $0.38 per diluted share in the second quarter 2015, and non-GAAP net loss of $0.6 million, or $0.04 per basic share in the first quarter of 2016.

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 2016 Business Outlook (+)

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

  • Revenue in the range of $56 million to $59 million.
  • Non-GAAP gross margin in the range of 30.5% to 32%.
  • Non-GAAP net income in the range of $2.9 million to $3.8 million, and non-GAAP fully diluted earnings per share in the range of $0.16 to $0.21 using approximately 18.0 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, Aug. 4, 2016 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its second quarter results and outlook for its third 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 one hour after the call and will run for five business days and may be accessed by dialing (412) 317-0088 and entering passcode 10089194.

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 1Q16 to 2Q16 are certain consulting fees, items related to the relocation of our plant in Texas, and realized loss on the maturity of foreign currency investment. 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). 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, 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) 
  
 June 30, 2016  December 31, 2015 
    
ASSETS   
CURRENT ASSETS   
Cash, Cash Equivalents and Short term investments$  47,268 $  40,679  
Accounts Receivable, Net   41,536    38,775  
Inventories   59,833    66,238  
Other Receivables   2,069    4,121  
Prepaid Expenses and Other Current Assets   3,005    4,115  
Total Current Assets   153,711     153,928   
    
Property, Plant And Equipment, Net   136,828    109,699  
Land Use Rights, Net   825    854  
Intangible Assets, net   3,962     3,900  
Other Assets   6,040    5,094   
TOTAL ASSETS$   301,366  $   273,475   
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
    
CURRENT LIABILITIES   
Accounts Payable$  33,130 $  28,668  
Accrued Expenses   13,762    11,506  
Banker's Acceptance Payable   2,435    2,998  
Bank Loan-Short Term   21,525    27,316  
Current Portion of Long Term Debt   7,303    3,592  
Total Current Liabilities   78,155     74,080   
    
Notes Payable and Long Term Debt   56,040    33,997  
Other Long Term Liability   -     -   
TOTAL LIABILITIES   134,195     108,077   
    
STOCKHOLDERS' EQUITY   
Total Preferred Stock   -      -   
Common Stock   17    17  
Additional Paid-in Capital   235,338    233,336  
Cumulative Translation Adjustment   790    292  
Accumulated Deficit   (68,974)   (68,247) 
TOTAL STOCKHOLDERS' EQUITY   167,171     165,398   
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$   301,366  $   273,475   
    

 

 Applied Optoelectronics, Inc. 
Preliminary Condensed Consolidated Statements of Operations 
(In thousands, except per share data) 
(Unaudited) 
 Three Months Ended
Jun 30,
 Six Months Ended
Jun 30,
 
 Revenue  2016  2015   2016  2015  
 CATV $   9,521  $   16,428   $   17,252  $   28,442   
 Datacenter  41,280  29,610   80,260  45,926  
 FTTH  436  1,287    857  1,409  
 Other  4,017  2,307   7,307  4,089  
Total Revenue 55,254  49,632   105,676  79,866  
       
Total Cost of Goods Sold 37,952  32,901   74,121  53,084  
       
Total Gross Profit 17,302  16,731   31,555  26,782  
        
 Operating Expenses:       
 Research & Development  7,814  4,701   16,210  9,506  
 Sales and Marketing  1,610  1,607   3,290  3,166  
 General and administrative   5,906  4,534   11,639   9,537  
Total Operating Expenses 15,330  10,842   31,139  22,209  
        
Operating Income (Loss) 1,972  5,889   416  4,573   
       
 Other Income (Expense):       
 Interest Income  65  80   166  154  
 Interest Expense  (450)  (300)  (851) (425) 
 Other Income (Expense)  (55) (132)  (53) 198  
 Foreign Exchange Gain (Loss)  (877) 687   (545)  1,049  
Total Other Income (Expense): (1,317) 335   (1,283) 976  
       
Net Income (Loss) before Income Taxes 655  6,224   (867) 5,549  
       
Income Tax Benefit (Expense) (52) (135)  140  (135) 
       
Net Income (Loss) 603  6,089   (727) 5,414  
  
 Net income (loss) per share attributable to common stockholders  
 basic $  0.04 $  0.41  $  (0.04)$  0.36  
 diluted $  0.03 $  0.38  $  (0.04)$  0.34  
       
 Weighted-average shares used to compute
  net income(loss)  per share attributable to
  common stockholders 
    
 basic  17,091  14,936   17,011  14,891  
 diluted  17,455  15,872   17,011  16,015  
       

 

 Applied Optoelectronics, Inc. 
Reconciliation of Statements of Operations under GAAP and Non-GAAP 
(In thousands) 
(Unaudited) 
 Three Months Ended
Jun 30,
 Six Months Ended
Jun 30,
 
  2016  2015   2016  2015  
GAAP total gross profit$  17,302 $  16,731  $  31,555 $  26,782  
Share-based compensation expense 50  19   87  35  
Non-GAAP income from gross profit 17,352  16,750   31,642  26,817  
       
GAAP research and development expense 7,814  4,701   16,210   9,506  
Share-based compensation expense 154  57   272  111  
Non-GAAP research and development expense 7,660  4,644   15,938  9,395  
       
GAAP sales and marketing expense 1,610  1,607   3,290  3,166  
Share-based compensation expense 95  54    168  104  
Non-GAAP sales and marketing expense 1,515  1,553   3,122  3,062  
       
GAAP general and administrative expense 5,906  4,534   11,639  9,537  
Share-based compensation expense  676  404   1,256  800  
Amortization expense 112  102   222  202  
Non-recurring expense 415  54   588  435  
Non-GAAP general and administrative expense 4,703  3,974   9,573  8,100  
       
GAAP total operating expense 15,330  10,842   31,139  22,209  
Share-based compensation expense 925  515   1,696  1,015  
Amortization expense 112  102    222  202  
Non-recurring expense  415  54   588  435  
Non-GAAP total operating expense 13,878  10,171   28,633  20,557  
       
GAAP operating income  1,972  5,889   416  4,573  
Share-based compensation expense 975  534   1,783  1,050  
Amortization expense 112  102   222  202  
Non-recurring expense 415  54   588  435  
Non-GAAP operating income 3,474  6,579   3,009  6,260  
       
GAAP other income (loss) (1,317) 335   (1,283)  976  
Loss (gain) from disposal of idle assets 40  0   40  0  
Unrealized exchange loss (gain) 42   (848)  (368) (892) 
Non-recurring expense 642  153   642  153  
Non-GAAP other income (loss) (593) (360)  (969) 237  
       
GAAP net income (loss) 603   6,089   (727) 5,414  
Amortization of intangible assets 112  102   222  202  
Share-based compensation expense 975  534   1,783  1,050  
Non-recurring charges 1,057  207   1,230  588  
Loss (gain) from disposal of idle assets 40  0   40  0  
Unrealized exchange loss (gain) 42  (848)  (368) (892) 
Non-GAAP net income 2,829  6,084   2,180  6,362  
       
GAAP net income (loss) 603  6,089   (727) 5,414  
Amortization of intangible assets  112  102   222  202  
Share-based compensation expense 975  534    1,783  1,050  
Depreciation expense  3,172  2,176   6,019  4,111  
Non-recurring charges 1,057  207   1,230  588  
Loss (gain) from disposal of idle assets 40  0   40  0  
Unrealized exchange loss (gain) 42  (848)  (368) (892) 
Interest (income) expense, net 385  220   685  271  
Taxes related to the above 52  135   (140) 135  
Adjusted EBITDA$  6,438 $  8,615  $  8,744 $  10,879  
       

 

Investor Relations Contacts:



The Blueshirt Group, Investor Relations

Maria Riley & Chelsea Lish

+1-415-217-7722

ir@ao-inc.com

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